20 October 2023

 LEGAL UPDATE | ANALYSING LIMITATION PERIOD IN A SPECIFIC PERFORMANCE SUIT

The Hon’ble Supreme Court recently in the matter of A. Valliammai v. K.P. Murali and Others vide order dated 12 September 2023, clarified the limitation period that is applicable while filing a suit for specific performance of a contract under Article 54 of Part II of the Schedule to the Limitation Act, 1963 (Limitation Act). The Supreme Court held that in the event that there is no time fixed for Specific Performance of a contract, then the limitation period runs from the date on which the plaintiff has notice of the defendant’s refusal to perform his part of Contract.

BACKGROUND

A. Valliammai, the appellant, was the owner of 11 acres of land located in Tiruchirapalli district, India. She inherited this land from her late husband, Ayyamperumal. A land sale agreement was made between A. Valliammai and K. Sriram in 1988 for the sale of the 11-acre property. The sale was set at a rate of Rs. 2,95,000 per acre, and an advance payment of Rs. 1,00,000 was made. The balance sale consideration was to be paid within one year, with a later extension of six months. Disputes arose regarding the sale, including disagreements over the land's allocation to a trust and the timing of the sale. Legal notices were exchanged between the parties, with K. Sriram demanding the execution of the sale deed, which A. Valliammai refused. A suit for permanent injunction was filed by K. Sriram to restrain A. Valliammai from selling the property or creating any third party rights. A. Valliammai contested the suit. A temporary injunction order was issued in favour of K. Sriram, but the suit was later dismissed. K. Sriram subsequently assigned his rights under the sale agreement to K.P. Murali and S.P. Duraisamy. K.P. Murali and S.P. Duraisamy filed a suit for specific performance in 1995, and the case went through various legal proceedings.

ISSUE

A central issue in the case was whether the suit for specific performance was barred by the statute of limitations.

HELD

A suit for specific performance of a contract must be filed within the applicable limitation period, which is determined based on the date when the plaintiff has notice that the performance of the contract has been refused. When calculating the limitation period for particular performance lawsuits, two possible scenarios are described in Article 54 of Part II of the Schedule to the Limitation Act. First off, the limitation period for filing the lawsuit is three years from the date that is set for the contract’s execution. Alternatively, the three-year limitation period starts when the plaintiff learns of the defendant’s refusal to execute/perform, if a date is not mentioned.

In this specific case, the Court found that the limitation period began when the defendant refused to perform the contract, which was evident from the exchange of written notices and the filing of a suit for injunction by the plaintiff. As a result, the plaintiff’s suit for specific performance, filed after the limitation period, was barred by limitation. The Court also rejected various arguments related to constructive res judicata, the effect of allotment of property to a trust, and the need for the disposal of another pending suit as conditions for specific performance.

In the present case, the suit for specific performance was filed out of the limitation period and K.P. Murali and S.P. Duraisamy were not entitled to a decree allowing the suit. The Court however, using powers conferred under Article 142 of the Constitution of India, directed A. Valliammai to pay Rs 50,00,000/- (Rupees Fifty Lakhs Only) to K.P. Murali and S.P. Duraisamy. The Court also directed that in case Rs 50,00,000/- is not paid by A. Valliammai within 6 (six) months, she shall be liable to pay interest @ 8% per annum on Rs 50,00,000/- from the date of this judgment till the date on which the payment is actually made.

MHCO Comment:

The Division bench of the Supreme Court has further clarified that the period of limitation for specific performance of a contract when no time is fixed, runs from the date on which the plaintiff has notice of refusal to perform by the defendant. Further, it has also recognized that the Court has to determine the date on which the plaintiff had notice of refusal on part of the defendant to perform the contract.

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