Contract to sell or let property by one who has no title not specifically enforceable under the Specific Relief Act

Introduction

In India, Specific Relief Act was initially enacted in 1877 based on the doctrines advanced by the English Equity Courts. Upon the recommendations of the Law Commission of India, the earlier act was repealed and later, the new act came into force. Now, the law regarding specific performance is enshrined under the Specific Relief Act, 1963 [1]. It is the Act no. 47 of 1963 and is enacted with the purpose of defining and amending the law relating to all kinds of specific relief. This Act is an important aspect of the Civil law. Among other things, this Act covers aspects relating to performance of contracts as well as injunctive reliefs which can be claimed and granted.

When a contract is breached, the general remedy available to the aggrieved person is compensation or damages of the loss suffered. In this case, as per the provisions of Section 73-75 of the Indian Contract Act, 1872 [2], a civil suit is filed against the guilty party who has made the default in performance of his duty or contractual obligation. Though sometimes, monetary compensation does not satisfy the plaintiff and hence, he may ask for specific relief. Here’s when the Act comes into the picture. The Specific Relief Act provides various kinds of Specific relief which are Recovery of possession of property, Specific performance of contracts, Rectification of instruments, Rescission of contracts, Cancellation of Instruments, Declaratory decrees and Injunction.

Specific Performance of Contracts enforceable

A contract is a legal and enforceable agreement based upon sufficient consideration to do or not to do a particular act. Now, the party upon whom this contractual obligation rests must not fail to discharge the said obligation. In case he fails, the other party has the right to sue him for the performance of the contract. This is known as ‘Specific Performance’. When the damages are not an adequate remedy, order of specific performance is granted. However, like all equitable remedies, such orders are discretionary in nature and hence, the availability of this remedy depends on the circumstances of the case. Specific performance is awarded at the court’s discretion when they perceive that damages will be inadequate compensation. It is deemed as an extraordinary remedy.

Section 10 of the Specific relief Act, 1963 lays down the following conditions where specific performance of the contract is enforceable:

A. When there exists no standard for ascertaining the actual damage: It is the case where the plaintiff is unable to determine the amount of loss that is suffered by him. If the damage caused to the plaintiff by the breach of contract is ascertainable, then the remedy of Specific performance of the contract is not available to him. For instance, if a person enters into a contract for the purchase of an artwork by a dead artist which is the only one in the market and value of the same is unascertainable, then he is entitled to the remedy of specific performance.

In Banwari Lal Agarwala v. Ram Swarup Agarwala [3], it was held that the plaintiff tenant was entitled to a decree of specific performance contract where it is impossible to arrive at a legal measure of damages at all or with any sufficient degree of certainty at least.

B. When monetary compensation is not adequate relief: The compensation of money would not provide adequate relief in the following cases-

  • In cases where the subject matter of the contract is an immovable property.
  • In cases where the subject matter of the contract is a movable property and,
  • Such property or goods are not an ordinary article of commerce which could be easily sold or purchased in the market.
  • The article in question is of special value or interest to the plaintiff.
  • The article in question is of such nature that is not easily available in the market.
  • In cases where the property or goods are held by the defendant as an agent or trustee of the plaintiff.

In the case of Jainarain v. Surajmal [4], the court held that if shares are limited in number and are not ordinarily available in the market, a decree for the specific performance of the contract of sale of such shares shall be granted.

In the case of Ram Karan V. Govind Lal [5], there was an agreement for the sale of an agricultural land. The buyer had paid full consideration but the seller avoided executing the sale deed. The buyer then brought an action for specific performance of the contract. The court held that the case would come under the ambit of Section 10 of the Act.

Contracts not specifically enforceable

Section 14 of the Act states the contracts which cannot be specifically enforced, which are-

  • Where the monetary compensation is adequate relief (Rambai v. Khimji) [6]
  • Where a contract runs into numerous detail (Robinson v. Davison) [7]
  • Where a contracts involve personal skill (Bansi Sah  v. Krishna Chandra) [8]
  • Where the contract is of determinable nature (Jamahir Sao v. Satrughna Sonar) [9]
  • Where the contract involves the performance of a continuous duty which the court cannot supervise (Central Bank Yeotmal v. Vyankatesh) [10]
  • Contracts of construction (Her Highness Maharani Shantidevi P. Gaikwak V. Savjibhai Haribahi Patel) [11]
  • Contracts for Arbitration

Contract to sell or let property by one who has no title not specifically enforceable

Section 17 of the Specific Relief Act, 1963 states that a contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or a lessor who

  1. knowing himself not to have any title to the property, has contracted to sell or let the said property;
  2. though he entered into the contract believing that he had a good title to the property in question, cannot at the time fixed by the parties or by the court for the completion of the sale or letting, give the purchaser or lessee a title which is free from reasonable doubt.

Section 17(2) states that as far as may be, the provisions shall also apply to contracts for the sale or hire of a movable property.

This section provides that any contract to sell or let property by a person who has no title is not specifically enforceable. In simple words, this section lays down that a person knowing himself not to have any title to the property has contracted to sell or let the property. Or, a person has contracted to sell or let the property and while entering into the contract such person believed that he had a good title to the property. Later, it is found that he has no title. Such a contract is not specifically enforceable in favour of the vendor or lessor. Section 17 (1) provides that above principles are applicable to immovable property. Further, Section 17(2) provides that the provisions of sub-section (1), as far as may be, shall also apply to the contracts for the sale or hire of movable property.

Contract law plays a fundamental role in the society as it is the basis of all commercial interactions and all legislations relating to trade & commerce. The conditions of enforceability of a contract are stated in Section 10 of the Indian Contract Act, 1872. If a person has no title, unless duly authorized by the owner, he cannot transfer any property. Hence, if the contract for sale or to let a property is made by a person having no title, then the sale is void and not enforceable even though such transferee believes that he has a title in the property. This essential principle of contract law is embodied in Section 17 of the Specific Relief Act.

In K. Narendra v. Riviera apartments (P) Ltd. [12], the court held that where a part of the property was inalienable because of being excess land under a ceiling legislation and another part was inalienable because of acquisition by the State, the buyer could not seek specific performance of such a contract with respect to the remaining portion of the property only.

Conclusion

Specific Relief is a remedy aiming at the exact fulfilment of an obligation. The Specific Relief Act, 1963, embodies the provisions regarding Specific performance of contracts. The remedy of specific performance is granted when the actual damages are not ascertainable or the damages are not an adequate relief. Section 17 of the Act lays down the provisions relating to contracts to sell or let property by one who has no title not specifically enforceable. Specific relief forms an important part of the Civil Law. It is an equitable relief granted at the discretion of the court in cases of breach of contract.

References

[1] THE SPECIFIC RELIEF ACT, 1963

[2] THE INDIAN CONTRACT ACT, 1872

[3] Banwari Lal Agarwala v. Ram Swarup Agarwala, AIR 1998 Pat 88

[4] Jainarain v. Surajmal, (1949) FLJ 216

[5] Ram Karan V. Govind Lal, AIR 1999 Raj 167

[6] Rambai v. Khimji, AIR 1950 Kutch 86

[7] Robinson v. Davison, (1871) LR 6 Ex 269

[8] Bansi Sah v. Krishna Chandra, AIR 1951 Pat 508

[9] Jamahir Sao V. Satrughna Sonar, AIR 1961 Pat 482

[10] Central Bank yeotmal v. Vyankatish, AIR 1949 Nag 286

[11] Her Highness Maharani Shantidevi P. Gaikwak V. Savjibhai Haribahi Patel, (2001) 5 SCC 101

[12] K. Narendra v. Riviera apartments (P) Ltd., AIR 1999 SC 2309

[13] Yash Kansal, ‘Specific Performance of Contract and its enforceability’ (IPLEADERS ONLINE BLOG, 16 June 2017) https://blog.ipleaders.in/when-specific-performance-of-contract-is-enforceable/

[14] Rukuvijay, ‘Specific Performance of Contract’ (LEGAL SERVICE INDIA E-JOURNAL) https://www.legalserviceindia.com/legal/article-8493-specific-performance-of-contract.html

[15] ‘Specific Relief Act, 1963’ (LAWYERS CLUB INDIA ONLINE, 2009) https://www.lawyersclubindia.com/articles/specific-relief-act-1963-1757.asp

[16]  C. R. Nanda Academy Facebook Page, ‘Section 17 of the Specific Relief Act, 1963’, 17 July 2020

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