Supreme Court Lays Down Specific Performance Suit’s Limitation Period Runs From Date For Performance & Not From Expiry Of Agreement’s Validity

Summary:

[1]The Supreme Court of India, in this case addressed an appeal concerning the specific performance of a contract related to the sale of land. The central issue was whether the suit for specific performance was barred by limitation. The Supreme Court set aside the judgments of the High Court and the First Appellate Court, which had decreed the suit in favor of the plaintiffs, and dismissed the suit based on limitation grounds. However, the Court ordered the defendants to return the amount paid by the plaintiffs with interest. It held that the limitation period for a specific performance suit will run from the date fixed for the performance and not from the expiry of the validity of the agreement.

Facts:

• The case revolves around a property dispute concerning Plot No. 2339, situated on Purulia Road, Kumhar Toli, Ranchi. This plot originally belonged to Kisun Ram, the grandfather of the appellants (Usha Devi and others). After his death, the land was subdivided among his heirs, with Plot No. 2339B of Khata No. 252 being allotted to Bihari Lal, the appellants’ father.

• On July 22, 1983, Bihari Lal entered into an agreement with the plaintiffs (Ram Kumar Singh and others) to sell Plot No. 2339B, along with its existing superstructure, for ₹70,000. As per the agreement, ₹1,000 was paid in advance, with the remaining ₹69,000 to be paid within nine months, following which the sale deed was to be executed. However, the sale deed was not executed within the agreed period, leading to the transaction remaining incomplete.

• On September 20, 1985, the plaintiffs claimed they paid the remaining balance of ₹69,000, and an endorsement was allegedly made on the original agreement, extending the deadline for the sale deed to November 30, 1985. Furthermore, the plaintiffs were reportedly given possession of the property by Bihari Lal at this time. Despite this, the sale deed was again not executed.

• Subsequently, on December 17, 1989, a fresh agreement was executed between Bihari Lal and the plaintiffs. This new agreement reflected a reduction in the land area to 9 katthas (from the initially stated 10 katthas) and increased the price from ₹7,000 to ₹9,000 per kattha, bringing the total sale consideration to ₹81,000. The plaintiffs paid an additional ₹10,000 upfront, leaving a balance of ₹1,000 to be paid upon the execution of the sale deed. The sale deed was to be executed by January 16, 1990. This agreement also included a clause stating that it would remain valid for five years from the date of execution.

• Despite these agreements, the sale deed was never executed, and Bihari Lal passed away in 1990. Following his death, the plaintiffs approached Bihari Lal’s heirs (the appellants) to complete the sale, but they refused. The plaintiffs then filed a suit for specific performance in September 1993.

• In their defense, the appellants argued that the agreements were forged and did not bear Bihari Lal’s genuine signatures. They also contended that the suit was barred by limitation, as it was filed beyond the three-year period from the date fixed for performance (January 16, 1990), making it time-barred under Article 54 of the Limitation Act, 1963. The defendants further raised issues regarding the ownership of the property and other procedural matters, but the primary contention was whether the suit was barred by limitation.

Issue:

1. Whether the suit for specific performance was barred by limitation under Article 54 of the Limitation Act, 1963, which prescribes a three-year period from the date fixed for performance?
2. Whether the agreements to sell were genuine or forged?
3. Whether the clause in the agreement stating that it would remain valid for five years could extend the limitation period?

Judgment:

• The Hon’ble Supreme Court noted that the following proceedings took place before the lower courts – The Trial Court dismissed the suit on 13.06.2004, holding it was barred by limitation. The plaintiffs appealed, and the First Appellate Court reversed the Trial Court’s decision, decreeing the suit and directing the defendants to execute the sale deed. The defendants filed a second appeal in the High Court, which was dismissed, upholding the First Appellate Court’s decision.
• Considering the decisions rendered by the lower courts and arguments advanced by the Appellant, the Supreme Court allowed the appeal and dismissed the suit for specific performance, finding it barred by limitation. The Court ruled that the limitation period of three years started from the date fixed for performance (16.01.1990) and expired on 16.01.1993. The suit, filed in September 1993, was beyond the limitation period. The Court rejected the argument that the clause extending the agreement’s validity for five years could extend the time for performance.
• The Court referenced K.S. Vidyanadam & Ors. v. Vairavan (1997) 3 SCC 1, which held that extending the agreement’s validity does not alter the limitation period for filing a suit for specific performance. The Court also cited R.K. Parvatharaj Gupta v. K.C. Jayadeva Reddy (2006) 2 SCC 428, reinforcing the principle that the limitation period starts from the date fixed for performance and finally, I.S. Sikandar v. K. Subramani & Ors. (2013) 15 SCC 27 was referenced, emphasizing the strict application of the limitation period in specific performance cases.
• Refund Order: The Supreme Court ordered the defendants to refund the ₹80,000 paid by the plaintiffs with 12% simple interest per annum from the date of payment until the amount is returned.

Analysis:

The Supreme Court’s decision highlighted the strict application of the Limitation Act, reaffirming that the limitation period for specific performance suits is mandatory and cannot be extended by agreement terms unless explicitly provided by law. The Court also distinguished between agreement validity and performance timelines, emphasizing that the agreement’s validity period does not automatically extend the performance timeline. The judgment demonstrates the Court’s balance of legal principles with equitable considerations, ordering a refund with interest to ensure the plaintiffs weren’t left without remedy. The decision has precedential impact, underscoring the importance of adhering to statutory limitations, clearly defining performance timelines in agreements, and promptly seeking legal remedies to avoid technical dismissals.

[1] https://ksandk.com/wp-content/uploads/usa-devi-v-ram-kumar-singh-validity-of-agreement-have-no-role-to-determine-the-period-of-limitation-554852.pdf
BEFORE THE HON’BLE SUPREME COURT

Usha Devi & Ors. v. Ram Kumar Singh & Ors.

Civil Appeal No. 8446 of 2024 arising out of SLP (C) No. 2997 of 2023

Judgment dated 5th August 2024