Balancing Equities in Specific Performance Suits: Judicial Perspectives on Deposit of Balance Sale Consideration

Specific performance is a discretionary remedy in contract law, often invoked in real estate transactions, to compel the defendant to complete the sale and deliver the land. A recurring issue in such suits is whether courts require plaintiffs to deposit the balance sale consideration. The balance sale consideration is the remaining amount of the purchase price that the plaintiff must pay after any advance payment. Courts sometimes ask for this deposit to ensure the plaintiff is serious and financially capable of fulfilling its obligation under the contract. This article explores judicial perspectives on this issue, focusing on how courts balance equity and assess readiness and willingness to complete the sale as per the terms of the contract and under Section 16(c) of the Specific Relief Act, 1963 (“Act”).

Section 16(c) of the Act governs the requirement of readiness and willingness by the plaintiff. The explanation to this section clarifies that tender or deposit of consideration is not mandatory unless directed by the court. This provision preserves judicial discretion and prevents rigid procedural requirements from obstructingsubstantive justice.

Judicial Trends

1.              As a Condition for Maintain ability of the Suit

The Supreme Court has held that deposit of balance sale consideration is not a condition for the maintainability of a suit for specific performance.^[1] The Explanation to Section 16(c) of the Act clarifies that tender or deposit is not essential unless specifically directed by the court. It is emphasized that maintainability hinges on the plaintiff’s averments and not on actual deposit.

2.             As a Test of Readiness and Willingness

In order to test the plaintiff’s financial capacity, the courts in the past have directed deposit of consideration. However, this is exercised rarely and only when the court has doubts about the plaintiff's genuineness to conclude the contract.^[2]

3.             As a Condition for Interim Relief

The Courts frequently direct deposit as a condition for granting interim relief restraining the defendant from dealing with the property during the pendency of the suit. This approach is observed as a means to balance the equities between the parties involved.^[3]

In Kalawati vs. Rakesh Kumar^[4], the Supreme Court noted that requiring the plaintiff to deposit the balance amount was meant to balance equities, as the defendants were restrained from dealing with their property during the case. The plaintiff was not informed that it was essential for it to deposit the amount in the Court to show their readiness and willingness within the meaning of Section 16(c) of the Act or that inference of non-readiness and willingness shall be drawn from non-deposit.

The court clarified that even if the plaintiff had failed to deposit, the only consequence thereof would have been vacation of stay and not dismissal of the suit for specific performance.

4.             At the Time of Final Decree

At the stage of final decree, courts typically direct plaintiffs to deposit the balance consideration within a stipulated time. Non-compliance can lead to cancellation of the decree or resale of the property to the defendant under Section 28 of the Act, reinforcing the conditional nature of specific performance.^[5]

PracticalImplications and Considerations

The primary justification given by courts for directing deposit is to balance equities between parties. While the plaintiff seeks to freeze the defendant's ability to deal with the property through the doctrine of lis pendens (a rule that prevents property from being sold while a lawsuit concerning the property is ongoing), the defendant may face economic hardship by being unable to utilize the property or its value during the pendency of the suit. The Delhi High Court in Mohan Overseas emphasized that while the doctrine of lis pendens protects the plaintiff's interests, it can cause significant hardship to the defendant whose property is tied up for the duration of the litigation. Directing the deposit of the balance consideration can help balance these competing interests.^[6]

Another rationale is to protect defendants from frivolous litigation by ensuring that plaintiffs who claim readiness and willingness actually have the financial capacity to complete the transaction. In Kalawati v.Rakesh Kumar,^[7] the Supreme Court affirmed the Trial Court's finding that the plaintiff did not have the means to pay the balance consideration and was not ready and willing to perform his part of the contract at all times, noting that he did not have sufficient resources to purchase the disputed land.

Nonetheless, acritical consideration is to refrain from rewriting contractual relations. The Bombay High Court has emphasized that requiring a deposit without corresponding delivery of possession or title could amount to the court rewriting the contract, which is beyond its jurisdiction in specific performance suits.^[8]

Therefore, there are practical difficulties in both approaches. If deposit is routinely required, plaintiffs may face financial hardship with funds tied up for years during litigation. If deposit is rarely required, defendants may face the prospect of property being frozen through lis pendens without any assurance that the plaintiff can actually complete the transaction. In Vikas Aggarwalvs. Bal Krishna Gupta,^[9] the court observed that in many cases, a plaintiff may have arranged for financing of the purchase that is contingent on getting title to the property, making it difficult or impossible to deposit the full amount in advance.

Conclusion

While the Supreme Court has established that readiness and willingness must be proven throughout the relevant period, it has not laid down a uniform rule regarding when courts should direct deposit of the balance consideration during the pendency of a suit. The Delhi High Court has evolved a position that such direction can be made as a condition for interim relief or to balance equities, but not as a matter of routine. The Bombay High Court has taken a stronger position against routine direction for deposit, emphasizing that it would unfairly require the plaintiff to perform obligations without receiving corresponding benefits.

The Bombay High Court’s position against routinely directing deposit of balance sale consideration in specific performance suits is both legally sound and practically necessary. Requiring plaintiffs to deposit the entire consideration without a corresponding obligation on the defendant to deliver possession or title, risks judicially rewriting the contract, an act that courts are expressly barred from undertaking. Such a direction not only distorts the contractual balance but also undermines the statutory framework of the Act, which does not mandate deposit unless the court deems it necessary. By resisting a blanket approach and insisting on case specific discretion, the Bombay High Court preserves the integrity of contractual obligations and ensures that judicial intervention does not override the parties’ originalintent or impose undue financial burdens on plaintiffs, especially when financing is contingent on title transfer.

Ultimately, a rigid insistence on deposit risks distorting the balance of equities and undermining the very remedy the law seeks to provide. Judicial discretion, exercised with sensitivity to contractual terms and practical realities, remains the most effective safeguard against such outcomes.

References

[1] Boramma Vs. Krishna Gowda (2000) 9 SCC 214.

[2] U.N.Krishnamurthy (Since Deceased) Thr. Lrs. Vs. A.M. Krishnamurthy, AIR 2022 SC3361.

[3] Sabh Infrastructures Ltd. Vs. Jayshree Bagley, MANU/DE/3377/2009, FAO (OS) No.583/09.

[4] Kalawati Vs. Rakesh Kumar and Ors, AIR 2018 SC 960.

[5] Chanda (Dead) through Lrs. v. Rattni and Ors, AIR 2007 SC 1514.

[6] Mohan Overseas P. Ltd. and Ors. Vs. Goyal Tin and General Industries and Ors., 2010DLT 484.

[7] Kalawati Vs. Rakesh Kumar and Ors, AIR 2018 SC 960.

[8] Gaurishankar Govardhandas Todi Vs. Ever shine Homes Pvt. Ltd. MANU/MH/1473/2008, Appeal From Order No. 1109 of 2005 with Civil Application No. 1363 of 2005.

[9] Vikas Aggarwal vs. Bal Krishna Gupta, MANU/DE/1161/2014, CS(OS)2353/2013.

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