Specific Performance Cannot Reward a Buyer Who Blows Hot and Cold: Supreme Court Denies Equitable Relief for Lack of Continuous Financial Readiness, Contradictory Pleadings and Creation of Third-Party Rights
Case Name: V.N.A.S. Chandran v. S. Venila and Others
Date of Judgment: 31 July 2026
Citation: 2026 INSC 776
Bench: Justice Prashant Kumar Mishra and Justice N.V. Anjaria
Held: The Supreme Court held that a purchaser seeking specific performance under the unamended Specific Relief Act, 1963 must establish continuous readiness and willingness to perform the contract at every material stage—from the execution of the agreement until the passing of the decree. Mere production of a demand draft at the appellate stage, several years after the transaction, cannot retrospectively prove that the purchaser possessed the financial capacity to pay the balance sale consideration when the obligation arose or when the suit was instituted.
The Court found that the purchasers had failed to prove the availability of funds. Two cheques issued by them had been dishonoured for insufficient funds, the memorandum relied upon for raising money did not demonstrate an actual transfer or availability of funds, and the relevant property was sold only after the institution of the suit. The subsequent production of a demand draft for ₹1.40 crore before the High Court in 2011 was therefore insufficient to establish continuous readiness and willingness.
The Court further held that specific performance is an equitable and discretionary remedy under the law applicable before the 2018 amendment. A plaintiff who adopts mutually destructive positions, initiates criminal proceedings seeking recovery of the advance while simultaneously pursuing specific performance, creates third-party rights before acquiring title, and fails to approach the court with clean hands may be denied the remedy even where a valid agreement to sell exists.
The Court also clarified that where an agreement does not confer a contractual right of unilateral termination upon the vendor, the purchaser may treat an unauthorised termination as repudiatory breach and sue for specific performance without separately seeking a declaration that the termination is invalid. Additionally, a respondent supporting an existing decree may challenge an adverse finding without filing cross-objections under Order XLI Rule 22 of the Code of Civil Procedure, provided no relief beyond the decree is sought.
Summary: The dispute arose from an agreement to sell dated 1 April 2004 concerning property measuring one acre and thirty-three cents at Church Hill Road, Udhagamandalam. The appellant, V.N.A.S. Chandran, agreed to sell the property to S. Venila for a recorded consideration of ₹2.25 crore. The vendor maintained that the real consideration was ₹2 crore and that the additional amount represented an arrangement intended to assist the purchasers in raising finance and included the husband’s commission.
On the same date, the vendor executed a general power of attorney in favour of Venila’s husband, V. Sowrirajan. The power authorised him to negotiate and execute sale documents, receive consideration, deliver possession and take steps for evicting occupants. Sowrirajan also executed an undertaking requiring him to remit to the vendor all amounts received from further dealings with the property until the balance consideration stood discharged.
The agreement provided that the transaction would be completed within sixty days from the setting aside of an ex parte preliminary decree passed in a pending partition suit. It also expressly stated that time was of the essence.
Three cheques of ₹25 lakh each were initially issued towards the sale consideration. One cheque was dishonoured for insufficient funds, though the amount was later paid in cash. Two additional cheques of ₹5 lakh each were subsequently issued, one of which was also dishonoured and later replaced by cash payments. The parties disputed whether the total advance paid was ₹85 lakh or ₹60 lakh.
While the principal agreement remained subsisting, Sowrirajan, acting under the power of attorney, entered into another agreement to sell the same property to R.P. Rajan for ₹1.50 crore and received an advance of ₹10 lakh. This resulted in separate litigation in which Rajan sought an injunction concerning the property.
After the ex parte decree in the partition suit was set aside, the vendor called upon the purchaser to pay the balance consideration within the contractual period. On the same day, he revoked the power of attorney, alleging its misuse in creating rights in favour of Rajan. The vendor later terminated the agreement, citing the purchasers’ failure to pay the balance consideration.
Venila and her husband instituted a suit seeking specific performance or, alternatively, recovery of ₹2 crore with interest. They claimed to have paid ₹85 lakh as advance, incurred expenditure in vacating tenants and engaging an architect, and taken steps to sell their Chennai properties to raise the balance amount.
The Trial Court found that ₹85 lakh had been paid and that no effective assignment in favour of Rajan had taken place. It nevertheless refused specific performance because of the purchasers’ inconsistent conduct. In particular, Sowrirajan had lodged a criminal complaint requesting the police to trace the vendor and recover the ₹85 lakh allegedly obtained through cheating. The Trial Court concluded that the purchasers were simultaneously seeking enforcement of the agreement in civil proceedings and recovery of the consideration in criminal proceedings and were therefore blowing hot and cold.
The Trial Court consequently ordered refund of ₹85 lakh with interest at 15 per cent per annum from the date of the suit until realisation. It also created a charge over the property under Section 55(6)(b) of the Transfer of Property Act, 1882.
The Madras High Court reversed the refusal of specific performance. It treated the purchaser’s criminal complaint as a counterblast to an earlier complaint filed by the vendor and held that seeking recovery in criminal proceedings did not amount to abandonment or waiver of the contractual remedy. It also accepted the purchasers’ financial readiness on the basis of a memorandum concerning the proposed sale of their Chennai properties and a demand draft of ₹1.40 crore produced before the High Court at the final hearing.
The Supreme Court disagreed with the High Court. It held that the purchasers were required to prove the availability of funds continuously and not merely produce money at a belated appellate stage. The dishonoured cheques, absence of money in their accounts, failure to disclose the alleged financing memorandum in the reply notice or plaint, and the fact that the Chennai properties were sold only after institution of the suit undermined their claim of financial readiness.
The Court also found the purchasers’ conduct irreconcilably inconsistent. In one proceeding, they asserted that the contractual rights had been assigned to Rajan with the vendor’s consent. In the specific-performance suit, they maintained that no assignment had occurred and that Venila alone continued to possess the contractual right to purchase the property.
The Court observed that if Sowrirajan entered into the sub-agreement as the vendor’s attorney, he attempted to alienate the property before title had passed to his wife and at a substantially lower price. Alternatively, if he acted on behalf of his wife, the transaction indicated an assignment of her rights. Either way, the creation of third-party rights before completion of the original purchase weighed against granting equitable relief.
The Court rejected the attempt to distance Venila from her husband’s criminal complaint. Sowrirajan was central to the transaction, being the power-of-attorney holder, signatory to the undertaking and the person managing the payments and subsequent dealings. Venila neither entered the witness box nor disowned his conduct. The plaintiffs could not present themselves as a single unit when advantageous and separate themselves when his conduct became detrimental.
The Supreme Court further considered the passage of more than two decades, the vendor’s advanced age and the death of Sowrirajan during the proceedings. It held that compelling transfer of the property after such an extraordinary delay would cause inequitable hardship and that justice required restoring the parties to their pre-transaction position.
Decision: The Supreme Court allowed the appeals, set aside the judgment and decree of the Madras High Court granting specific performance, and restored the Trial Court’s decree.
Accordingly, the plaintiffs remained entitled to a refund of the advance amount of ₹85 lakh with interest at 15 per cent per annum from the date of institution of the suit until realisation, secured by a charge over the suit property under Section 55(6)(b) of the Transfer of Property Act, 1882.
The Court also permitted the plaintiffs to withdraw the ₹1.40 crore deposited pursuant to the High Court’s decree, together with the interest accrued on the fixed deposit. No order as to costs was passed.