Specific Performance of Development Agreement- Supreme Court Enumerates Conditions to be Satisfied by Developer

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1958

February 15, 2019

In the case, the Supreme Court was confronted with the issue of specific performance of a development agreement. The Court in the case analysed the conditions as enumerated under Section 14(3)(c) of the Specific Relief Act to arrive at the conclusion whether the developer in the case was barred to institute a suit for specific performance of development agreement between himself and the owner of property.

Case name: Sushil Kumar Agarwal vs Meenakshi Sadhu

In the case, the Appellant who is a builder, instituted a suit for specific performance of development agreement, against the respondents, who are owners of the premises.

According to the agreement the owners had approached the appellant for construction of a building on the land based on terms agreed between the parties.

The issue that fell for consideration before the Supreme Court was whether Section 14(3) (c) of the Specific Relief Act, 1963 is a bar to a suit by a developer for specific performance of a development agreement between himself and the owner of the property?

What does Section 14(3)(c) of Specific Relief Act say?

The statutory provision under Section 14 stipulates the contracts which are not specifically enforceable. Sub-section (3) bars specific performance of contract for construction of any building subject to conditions as under:

  • That building or other work is described in the contract to determine the exact nature of the building or work;
  • That the plaintiff (herein the builder) has a substantial interest in the performance of the contract; and
  • That the defendant has obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.

In order to arrive at a conclusion, the Supreme Court analysed whether the conditions as stipulated in Section 14(3) (c) of the Act had been fulfilled by the terms of the impugned developer agreement.

Thus, the Court stated that the condition under Section 14(3) (c) (i) of the Act is that the building described in the contract is sufficiently precise to enable the court to determine the exact nature of the building or work. To examine this condition, the Court referred to the relevant clauses of the agreement and concluded that the exact amount of remuneration payable by the owner to the contractor was not to be found in the agreement and that the agreement between the parties was is vague due to which the Court couldn’t determine the exact nature of the building or work. Hence, the first condition was not fulfilled.

According to the second condition, the Plaintiff (herein the builder) shall have a substantial interest in the performance of the contract and the interest should be of such a nature that compensation in money for non-performance of the contract is not an adequate relief. In this context, the Court noted that the intent of the section is to make a distinction between cases where a breach of an agreement can be remedied by means of compensation in terms of money and those cases where no other remedy other than specific performance will afford adequate relief.

In view of the aforesaid, the Court was of the view that the case of the developer was that the incurred an expenditure of ₹ 18,41,000/- towards clearing outstanding dues and miscellaneous expenses. Thus, the alleged losses incurred by the Plaintiff could be quantified and the Plaintiff could be provided recompense for the losses allegedly incurred by payment of adequate compensation in the form of money. Thus, even the second condition could not be satisfied by the developer.

In view of the aforesaid, the Supreme Court ruled that specific performance of contract by the developer could not be granted in the case.

The entire case can be accessed here.