Kapilaben & Ors. v. Ashok Kumar Jayantilal Sheth Through POA Gopalbhai Madhusudan Patel & Ors.
Background
A property owner and his relatives had agreed in 1986 to sell land in Vadodara to one set of buyers ("original vendees"), who paid earnest money but never paid the balance consideration even after a Town Planning Scheme affecting the land was finalised. The original vendees later also entered separate 1987 agreements for the same property with other buyers (the respondents), who sued for specific performance when the sale did not go through. The Gujarat High Court had ruled in favour of the 1987-agreement buyers (respondents), prompting the original owner's heirs/defendants to appeal to the Supreme Court.
Decision Breakdown
The Supreme Court held that the original 1986 vendees never acquired enforceable rights because they failed to pay the balance consideration within the time fixed, and had in effect abandoned the 1986 agreement (including by withdrawing a related suit). Since the 1987 agreements depended on the original vendees validly holding rights under the 1986 agreement, those later agreements were void and unenforceable under Sections 32 and 35 of the Contract Act, and specific performance could not be granted to the respondents. However, finding that the appellants and original vendees appeared to have colluded to frustrate the 1987 buyers, the Court invoked Section 53 of the Contract Act and ordered the original vendees (not the appellants, who had no direct contractual privity) to pay Rs. 1,80,000 with 9% interest as compensation to the respondents. The appeals were thus partly allowed, setting aside the High Court's judgment, while restoring the trial court's findings and awarding compensation as an equitable remedy.
Lesson Learnt
A buyer under a property sale agreement who fails to pay the agreed price within the stipulated time, or effectively abandons the deal, cannot later enforce that agreement, and anyone claiming rights through such a buyer inherits the same weakness; courts may still award monetary compensation (rather than specific performance) where there is evidence that a seller colluded to defeat a genuine buyer's rights.