Specific Performance, Time of Essence and the Subsequent Purchaser

Time is not presumed to be of the essence in a contract for sale of immovable property. Section 55 of the Contract Act makes time of the essence only where the parties expressly so intend, or where the nature of the property and the circumstances show that delay would defeat the object. The original clause fixes four months but makes the payment 'subject to Priya obtaining a bank loan'. That clause contemplates some flexibility and makes the timeline dependent on a third-party sanction. Amit's WhatsApp message of 'I will not wait beyond 15 December' could convert time into the essence from that date, but only if it gave Priya a reasonable opportunity to perform. A notice making time of the essence must be clear and must not be a sudden ultimatum after accepting a further deposit of ₹3 lakh. The acceptance of that deposit is inconsistent with an immediate repudiation; it may amount to an extension subject to the new deadline.

Readiness and willingness under Section 16(c) is a mandatory condition. The plaintiff must not only plead it but prove it by conduct and capacity. Priya paid ₹5 lakh and later ₹3 lakh, which shows initial bona fides. But the bank sanctioned only ₹28 lakh, leaving a gap of ₹12 lakh. She does not show how she proposed to bridge that gap. The failure to deposit the balance in court is not fatal by itself, but it is a relevant circumstance. Her explanation that Amit withheld the original title deed is potentially valid, because a purchaser cannot obtain a loan without clear title. But Priya knew the deed was pledged; she should have shown her efforts to arrange alternative funds or to compel production. The court must decide whether she was continuously ready from the date of the contract to the date of the decree, not merely willing in her pleadings. If the gap in funds was never bridged and the deadline passed, specific performance should be refused; if Amit's own default caused the loan delay, her readiness may be accepted.

Section 19(b) of the Specific Relief Act protects a transferee for value who has paid his money in good faith and without notice of the original contract. The burden is on the subsequent purchaser to prove that he is a bona fide purchaser for value without notice. Rakesh paid ₹45 lakh, which is more than the contract price of ₹40 lakh, and there is no indication that he knew of Priya's agreement. If he purchased after making reasonable inquiry and without actual or constructive notice, specific performance cannot be enforced against him. Priya's remedy would then be compensation against Amit.

If Rakesh had notice-actual or constructive-of Priya's prior contract, the protection is lost. Notice may be proved by the existence of Priya's possession, by the earlier agreement being known in the locality, or by the circumstances of the sale. The sale deed in Rakesh's favour is registered, but registration only gives constructive notice of the sale, not of a prior unregistered agreement. Priya's agreement is in writing but unregistered; registration is not necessary for a contract, but it affects notice. The court must also consider whether the sale to Rakesh was a bona fide transaction or a device by Amit to defeat Priya's claim. The timing-20 December, shortly after the deadline-and the higher price are relevant but not conclusive.

If specific performance is refused because Rakesh is protected, Priya cannot recover the house from him. She can sue Amit for refund of ₹8 lakh and damages for breach. If the court finds that Rakesh had notice, it may decree specific performance and direct Amit and Rakesh to execute the sale deed in Priya's favour, subject to her paying the balance. The court should frame an issue on Rakesh's good faith and notice and place the burden on him.

If the court finds that Priya was not ready and willing, the suit for specific performance must be dismissed under Section 16(c). But that does not necessarily leave her without a remedy. Section 21 of the Specific Relief Act permits the court, in a suit for specific performance, to award compensation for the breach of contract, either in addition to or in substitution of specific performance. The plaintiff must have claimed compensation or the court must consider it just in the circumstances. Priya can also file a separate suit for damages under Section 73 of the Contract Act, subject to limitation. The earnest money and the additional ₹3 lakh are recoverable unless the contract provides for forfeiture, and even a forfeiture clause is subject to the court's power to relieve against penalty under Section 74 of the Contract Act if the amount is unreasonable.

If the court grants specific performance, it should impose conditions that protect both parties. Priya must deposit the balance sale consideration-₹32 lakh if the ₹8 lakh already paid is adjusted-within a fixed time. The court may direct that the amount be deposited before the sale deed is executed and that Amit simultaneously produce the original title deed and execute the deed. If Amit's bank has a charge on the property, the court should direct redemption of that charge from the sale consideration. Rakesh's rights must be dealt with: if he is not a bona fide purchaser, he may be directed to join in the conveyance or to deliver possession. The court should also consider whether Priya is entitled to interest or costs for the delay. Specific performance is not automatic after the 2018 amendment; it remains subject to Section 16(c), and the court must satisfy itself that the plaintiff has come with clean hands and is ready to perform her part.