Introduction
While specific performance remains one of the most direct ways of enforcing a contractual promise, it is not the only remedy available when a contract is breached. In appropriate circumstances, the law may instead offer and courts may consider alternative remedies that seek to compensate the aggrieved party, restore the position that existed before the breach, or otherwise address the consequences of non-performance. In this Part V, we turn our attention to these alternative remedies: the different forms they may take, the circumstances in which a court may lean towards granting one remedy over another, and the essential requisites that a claimant must satisfy to successfully seek them. More importantly, we will examine these principles through practical situations, where the choice of remedy often becomes as significant as the underlying breach itself, and where the distinction between a theoretically available remedy and a practically effective one truly comes into focus. The series will end with the conclusion of this part but before ending I would love to provide the Model Issues that arise for consideration in day to day suits claiming relief of specific performance of contract.
Alternative Remedies
Alternative Relief in Specific Performance Cases: When Should It Be Granted?
In the realm of contract law, specific performance is a powerful equitable remedy where courts order parties to fulfill their contractual obligations rather than merely paying damages. However, not every case warrants this relief. A common question arises: When should alternative relief be given in specific performance cases? This query often surfaces when plaintiffs seek enforcement of agreements for property sales or unique contracts but face hurdles like proving their own readiness to perform.
However, plaintiffs must meet strict criteria under Section 16(c) of the SRA, they must demonstrate continuous readiness and willingness to perform their part of the bargain. Failure here can doom the claim. As emphasized by the Supreme Court in U.N. Krishnamurthy v. A.M. Krishnamurthy, for a plaintiff to seek specific performance, they must demonstrate both readiness (capacity to perform) and willingness (conduct) to fulfill their contractual obligations. This is crucial for the court’s consideration of the relief sought. (2024 0 Supreme(Ker) 41)
If specific performance is denied, courts may turn to alternative relief under Section 22 of the SRA. This provision empowers judges to grant refunds of earnest money, deposits, or other compensation, if properly pleaded.
Court’s Discretion Under Section 22
Judges can decree alternative relief like earnest money refunds only if explicitly claimed in the plaint. The court has the discretion to grant alternative relief under Section 22 of the Specific Relief Act, 1963. This includes the option for a refund of earnest money or deposits if the claim for specific performance is denied. However, the plaintiff must explicitly claim this alternative relief in their plaint. (2024 0 Supreme(Ker) 41)
Refusal Due to Plaintiff’s Default
If the plaintiff fails to prove readiness and willingness, courts deny specific performance but may refund earnest money if pleaded. If the court finds that specific performance cannot be granted, it may provide alternative relief, such as a refund of any earnest money paid, provided that such a claim is included in the initial pleadings. (2024 0 Supreme(Ker) 41)
Defendant’s Valid Defenses
Unenforceable contracts (e.g., due to uncertainty, illegality, or time bars) lead to denial of specific performance, with alternatives considered.
Practical Problems
- Alternative Relief or Relief of refund of advance payment can’t be granted unless expressly mentioned in the pleadings or subsequently added through amendment
The Supreme Court clarified that a relief of refund for an ‘advance payment’ as part of the sale consideration cannot be allowed unless a prayer seeking such a relief was included in the plaint. The Court said that it would be impermissible for the Court to suo moto grant such a relief if not included in the plaint. The Court asserted that by way of an amendment to the pleadings, which can be sought at any stage of proceedings, the plaintiff can seek an alternative relief of refund as stated under Section 22(2) of the Specific Relief Act, 1963 (“SRA”).
“It is thus a settled position of law that the plaint may be amended at any stage of the proceedings to enable the plaintiff to seek an alternative relief, including that of refund of earnest money, and the courts have been vested with wide judicial discretion to permit such amendments. However, under Section 22 of the 1963 Act, the courts cannot grant such relief suo moto, since the inclusion of the prayer clause remains a sine qua non for the grant of such a relief. In other words, when an “appropriate case” exists for seeking the said relief under this provision, it must be specifically sought either in the original plaint or by way of an amendment.”
The Court further observed that the Appellant failed to utilize the remedy under Section 22(2) SRA, which allows for amendment of the plaint at any stage of the suit to include such a relief. In view of the above, the Court observed that since the Appellant neither paid the balance sale consideration nor fulfilled the terms of the agreement to sell, a specific prayer for refund of the advance payment was necessary to claim such relief. (K.R. SURESH VERSUS R. POORNIMA & ORS., 2025 LiveLaw (SC) 522)
2. In the absence of specific pleadings can earnest money be refunded and damages be granted where suit for specific performance is denied
A recent order from the Supreme Court of India in Special Leave Petition (C) No. 25246/2023, which delves into the nuanced application of Section 12(3) of the Specific Relief Act, 1963. The judgment clarifies the circumstances under which a plaintiff, in a suit for specific performance of an agreement to sell, can be granted alternative relief in the form of a refund of earnest money and damages, particularly when specific performance is denied due to minor variations in the property. The Supreme Court focused its analysis on the interpretation and scope of Section 12(3) of the Specific Relief Act, 1963. This section provides that:
“Where a party to a contract for the sale or lease of immovable property cannot enforce specific performance of the whole of the contract, he may obtain specific performance of so much of the contract as can be performed, and also compensation for the deficiency in performance by the other party.”
The Court considered whether the High Court erred in granting relief under this provision. It noted that the High Court had granted the refund of earnest money of Rs. 20,00,000/- along with interest at 12% per annum. This aligns with the principle that even if specific performance of the entire contract is not possible or desirable, the court can still provide alternative relief.
The Court referred to its previous judgment in Surinder Singh v. Kapoor Singh (Dead), which discussed the scope of Section 12(3) of the Specific Relief Act. Crucially, the Court addressed the argument that the claim for alternative relief was not made at the trial stage or was not explicitly incorporated in the plaint. Citing Ram Niwas v. Smt. Omkari and another AIR 1983 All 310, the Court held that “relinquishment could be made at any stage of the litigation including the appellate stage.” This implies that the claim for alternative relief under Section 12(3) is not strictly confined to initial pleadings or the trial stage and can be entertained even for the first time in appeal. The Court explicitly stated that the claim for benefit under Section 12(3) could not be rejected simply because it was not made at the trial stage or not incorporated in the plaint. The Supreme Court dismissed the Special Leave Petition, thereby affirming the judgment and order passed by the High Court of Judicature at Madras. The Court upheld the High Court’s decision to deny specific performance but grant the alternative relief of refund of the earnest money (Rs. 20,00,000/-) with accumulated interest at 12% per annum.
The key legal principle reinforced by this judgment is that under Section 12(3) of the Specific Relief Act, a court has the power to grant a refund of earnest money or damages as an alternative relief, even if specific performance of the whole contract is not decreed. Furthermore, this alternative relief can be sought and granted at any stage of the litigation, including the appellate stage, and does not require a specific initial pleading if the circumstances warrant it.
3. In those cases where alternative relief is ancillary and naturally flows from the main relief it is not required to be pleaded in the plaint
An express claim for alternative relief is not required when the relief sought is ancillary and naturally flows from a decree of specific performance of an agreement to sell, as clarified in the case of Manickam @ Thandapani vs Vasantha, 2022 LiveLaw (SC) 395.
In Manickam @ Thandapani vs Vasantha, the Court was dealing with the question of whether the executing court could deliver possession in execution of a decree where no specific prayer for possession had been made in a suit for specific performance. Answering in the affirmative, the Court said that since the delivery of possession is a necessary implication flowing from the execution of a decree, a specific prayer would not be required for the delivery of possession.
The Supreme Court in the above case held that Section 22(2) of the Specific Relief Act is only directory provision and the relief of possession is ancillary to the decree for specific performance and need not be specifically claimed. In this case, after obtaining a specific performance decree and execution of sale deed, the decree holder filed Execution Petition for directing the judgment debtor to put the decree-holders in possession of the property conveyed. This application was allowed by the Execution court. Later, allowing the petition filed by the Judgment debtor, in which he contended that no decree was granted to the decree holder in respect of delivery of possession and therefore the execution for delivery of possession is not maintainable. The Apex Court bench observed that even even under the Specific Relief Act, 1877, the position was that the relief of possession is ancillary to the decree for specific performance and need not be specifically claimed.
Referring to Section 22(2), it observed:
Section 22(2) of the Act, though is worded in negative language, “no relief under clause (a) or clause (b) of sub-section (1) shall be granted by the court unless it has been specifically claimed”, but the proviso takes out the mandatory nature from the substantive provision of sub-section (2) when the plaintiff is allowed to amend the plaint on such terms as may be just for including the plaint for such relief “at any stage of the proceeding”. “At any stage of the proceeding” would include the proceeding in suit or in appeal and also in execution. The proviso to sub-section (2) of Section 22 of the Act contemplates that the Court shall, at any stage of the proceedings, allow the plaintiff to amend the plaint on such terms as may be just for including a claim for such relief. The said proviso makes the provision directory as no penal consequences follow under sub-section (2) of Section 22. Therefore, sub-section (2) of Section 22 is a rule of prudence to ask for possession “in an appropriate case”. The appropriate case would not include a suit for specific performance simpliciter but may include a suit for partition or a suit when the decree is to be executed against a transferee. Sub section (2) cannot be said to be a mandatory provision as the power to claim relief at any stage of the proceeding makes sub-section (2) directory. Sub-section (2) is a matter of procedure to avoid multiplicity of proceedings. The procedural laws are handmaid of justice and cannot defeat the substantive rights.
Holding, thus the bench observed that, in this case, the decree-holder cannot be nonsuited for the reason that such relief was not granted in the decree for specific relief.
4. In what kind of suits the relief of possession has to be claimed separately
The expression “at any stage of proceeding” is wide enough to allow the plaintiffs to seek relief of possession even at the appellate stage or in execution even if such prayer was required to be claimed. The circumstances where relief of possession may be necessary such as in a suit for partition or in a case of separate possession where the property conveyed is a joint property.
5. Saving possession in a suit for recovery of possession
Possession obtained under part performance of contract can be defended by a transferee in a suit for recovery of possession even if he has not preferred suit for specific performance of agreement to sale within limitation (Shrimant Shamrao Suryavanshi And … vs Pralhad Bhairoba Suryavanshi (D), AIR 2002 SUPREME COURT 960)
Issue Decided
Whether in a suit brought by a transferor for recovery of possession of the suit property, a defendant transferee can defend or protect his possession over the suit property obtained in pursuance of a part performance on an agreement to sell under Section 53 A of the Transfer of Property Act (hereinafter referred to as ‘the Act’), even if a suit for specific performance of an agreement to sell has barred by limitation”. There are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53 A of the Act. The necessary conditions are:
1) there must be a contract to transfer for consideration any immovable property;
2) the contract must be in writing, signed by the transferor, or by someone on his behalf;
3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained;
4) the transferee must in part performance of the contract take possession of the property, or of any part thereof;
5) the transferee must have done some act in furtherance of the contract; and
6) the transferee must have performed or be willing to perform his part of the contract.
If the conditions enumerated above are complied with, the law of limitation does not come in the way of a defendant taking plea under Section 53A of the Act to protect his possession of the suit property even though a suit for specific performance of a contract has barred by limitation. The matter may be examined from another angle. The established rule of limitation is that law of limitation is not applicable to a plea taken in defence unless expressly a provision is made in the statute. The law of limitation applies to the suits and applications. The various articles of the Limitation Act show that they do not apply to a defence taken by a defendant in a suit. Thus, the law of limitation bars only an action in a court of law. In fact, what the Limitation Act does is, to take away the remedy of a plaintiff to enforce his rights by bringing an action in a court of law, but it does not place any restriction to a defendant to put forward any defence though such defence as a claim made by him may be barred by limitation and cannot be enforced in a court of law. On the said principle, a defendant in a suit can put forward any defence though such defence may not be enforceable in a court of law, being barred by limitation.
In M.K. Venkatachari & Ors. vs. I.A.R. Arunachalam Pillai & Ors. AIR 1967 Madras, 410, it was held, thus:
“that defence to limitation is a creature of a positive law and, therefore, cannot be extended to cases which do not strictly fall within the enactment. It is an established canon of construction of law of limitation not to enlarge the scope of statutory provisions of limitation by analogy or logic”.
It is, therefore, manifest that the Limitation Act does not extinguish a defence, but only bars the remedy. Since the period of limitation bars a suit for specific performance of a contract, if brought after the period of limitation, it is open to a defendant in a suit for recovery of possession brought by a transferor to take a plea in defence of part performance of the contract to protect his possession, though he may not able to enforce that right through a suit or action.
In the present case, it is not disputed that the transferee has taken possession over the property in part performance of the contract. It is also not disputed that the transferee has not brought any suit for specific performance of the agreement to sell within the period of limitation. It is also not disputed that the transferee was always and still ready and willing to perform his part of the contract.
Model issues
- Execution of agreement between the parties.
- Defendant having valid title to pass on.
- Plaintiff being ready and willing to perform his part of the contract from the date of agreement.
- Declaration that contract was Wrongfully terminated by the defendant.
- After proving above points if the suit includes relief of injunction- Whether defendant is about to sale or alienate his property in favour of third party.
- If property already sold or alienated, whether it was during the subsistence of previous agreement and the subsequent transferee has notice of it and he is not a good faith transferee without notice.
- Declaration of subsequent transfer as non-binding.
- Alternative or further reliefs if any claimed.