Fatehji & Company & Anr. v. L.M. Nagpal & Ors.
Background
In 1973, a firm that owned a Delhi property entered into a written agreement to sell it, with possession handed over immediately but the formal sale deed to be executed by December 1973. The sellers repeatedly sought extensions (the last expiring in February 1977) citing the need for government permission, which was never obtained. The buyers did not sue for specific performance until 1994, more than two decades later, claiming their cause of action only fully arose after 1991 when the sellers began evading them. The trial court rejected the suit outright as time-barred, but the Delhi High Court reversed that and restored the suit, prompting the sellers' appeal to the Supreme Court.
Decision Breakdown
The Supreme Court held that under Article 54 of the Limitation Act, a suit for specific performance must be filed within three years of the date fixed for performance, here, as extended, February 1977, regardless of whether the buyer was already in possession of the property or whether a government permission remained outstanding. It found that another intervening lawsuit challenging the sale, dismissed in 1989, gave the buyers yet another independent trigger date they also let lapse by more than three years. The vague claim of a recurring cause of action "after August 1991" was unsupported by any specifics in the pleadings. The Court held the High Court had committed manifest error in reviving a suit that was patently time-barred, set aside the High Court's judgment, and restored the trial court's order rejecting the plaint.
Lesson Learnt
A claim for specific performance of a property sale agreement must be brought within three years of the fixed performance date (or the date performance is clearly refused), being in possession of the property, or waiting for a pending government permission, does not extend that limitation clock, so delay can permanently forfeit an otherwise valid contractual right.