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V.S. Ramakrishnan vs P.M. Muhammed Ali

Civil Appeal · 2022 INSC 1189Decided 9 Nov 2022
Civil Appeal Nos. 8050-8051 of 2022
M.R. Shah · M.M. Sundresh

Background

The appellant (buyer) entered an agreement to sell with the respondent (seller) in 2005 for land in Kerala, paying Rs. 1 crore as earnest money: Rs. 65 lakh in cash and Rs. 35 lakh by post-dated cheque. The cheque bounced because the seller's bank account had been attached by the Income Tax Department during a raid, not for lack of funds. The seller terminated the contract for non-payment, while the buyer maintained he was ready and offered to pay the Rs. 35 lakh in cash, which the seller refused. The buyer sued for specific performance; the Trial Court dismissed that relief (though ordering refund of the advance with interest) on the ground the buyer lacked sufficient funds to pay the balance, and the Kerala High Court went further, holding there was no concluded contract at all because the bounced cheque meant part-consideration was never actually paid.

Decision Breakdown

The Supreme Court disagreed with the High Court's reasoning that the cheque was "worthless". It was dishonoured only because of an attachment order following an IT raid, not for insufficient funds, so tendering it could not be equated to no payment at all. Separately, the Court found the Trial Court had erred procedurally: it decided the buyer lacked "readiness and willingness" to perform without ever framing a specific issue on that question or giving the parties notice to lead evidence on it, even though no such issue was originally framed. Since readiness and willingness is central to a specific-performance suit, both parties must get a fair chance to lead evidence on it. The Court set aside both the High Court's and Trial Court's judgments and remitted the case to the Trial Court to frame a specific issue on readiness and willingness, let both sides lead evidence, and decide the suit afresh within twelve months.

Lesson Learnt

In a suit for specific performance, a court cannot decide against a party on their "readiness and willingness" to perform the contract without first framing that as a specific issue and letting both sides present evidence on it, skipping this procedural step is grounds for the judgment to be overturned.

Official source (sci.gov.in)View Judgment (PDF)

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