The Supreme Court of India has ruled that a suit for specific performance of a cancelled agreement to sell is not legally maintainable unless the plaintiff also seeks a declaration that the cancellation is invalid. This landmark decision emphasizes the need for a valid and existing contract before a court can enforce its performance.

The case, Sangita Sinha vs Bhawana Bhardwaj & Others, was heard by a bench comprising Justice Dipankar Datta and Justice Manmohan, and the judgment was delivered on March 27, 2024.

Background of the Case:

The dispute arose when the seller, Bhawana Bhardwaj, cancelled an agreement to sell a property dated January 25, 2008, and returned the buyer's earnest money through four demand drafts. Despite this, the buyer, Sangita Sinha, filed a suit for specific performance on May 5, 2008, seeking the enforcement of the sale agreement.

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The twist came when the buyer encashed the demand drafts sent along with the cancellation letter dated February 7, 2008—but did not challenge the cancellation itself in her pleadings.

Both the Trial Court and the High Court ruled in favor of the buyer, prompting the seller to approach the Supreme Court. The key legal question was:

“Can a suit for specific performance of a cancelled agreement be maintained without challenging the cancellation?”The Supreme Court said no.

Quoting the bench:

“This Court is of the opinion that absent a prayer for declaratory relief that termination/cancellation of the agreement is bad in law, a suit for specific performance is not maintainable.”

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The Court stressed that for specific performance to be granted, the agreement must still be valid and enforceable. If a seller cancels the agreement, the buyer must first seek a declaration under Section 34 of the Specific Relief Act to invalidate that cancellation.

“The seller had admittedly issued a letter dated 7th February 2008 cancelling the Agreement to Sell... Even though the demand drafts were encashed later in July 2008, it was incumbent upon the buyer to seek a declaration that the cancellation is bad in law.”

This means once a contract is cancelled, it ceases to exist in the eyes of the law. To revive or enforce it, the buyer must get a judicial declaration that the cancellation was invalid.

The Court cited I.S. Sikandar (Dead) by LRs. v. K. Subramani and Others (2013) 15 SCC 27, affirming the same legal principle:

“In the absence of a prayer for declaratory relief that the termination of the agreement is bad in law, the suit for specific performance is not maintainable.”

Additionally, it referred to R. Kandasamy (Since Dead) & Ors. v. T.R.K. Sarawathy & Anr., reaffirming the High Court’s power to examine jurisdictional facts in an appeal—even if the trial court didn’t address them.

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The Supreme Court allowed the appeal and set aside the High Court's decision. It held that the lower courts had erred in granting specific performance without there being a valid and existing agreement at the time of filing the suit.

“Since in the present case, the seller had issued a letter cancelling the agreement prior to the institution of the suit, the same constitutes a jurisdictional fact... the respondent is not entitled to the relief of specific performance.”

Case Title: SANGITA SINHA VERSUS BHAWANA BHARDWAJ AND ORS.

Appearance:

For Petitioner(s): Mr. S. B. Upadhyay, Sr. Adv. Ms. Indu Kaul, Adv. Mr. Rajiv Kumar Sinha, AOR Mr. Raj Kumar, Adv. Mr. Abhinav Kathuria, Adv.

For Respondent(s): Mr. Mungeshwar Sahoo, Sr. Adv. Mr. Samrandra Kumar, Adv. Mr. Vivek Kumar Srivastva, Adv. Mr. Pawan Kumar, Adv. Mr. Ravi Bhushan Upadhyay, Adv. Mr. Ramesh Kumar Mishra, Adv. Mr. Shivam Tiwary, Adv. Mr. Vishal Arun Mishra, AOR Mr. Ardhendumauli Kumar Prasad, Sr. Adv. Mr. Ramesh Kumar Mishra, AOR Mr. Shivam Tiwary, Adv. Ms. Anusha Rathore, Adv. Mr. Shivank S. Singh, Adv.