When may court award compensation to plaintiff in suit for specific performance? Can relief of possession and partition be granted in such suits?

I. Compensation Under Section 21

The Two Situations for Award

Section 21 recognises two distinct situations in which compensation may be awarded. The first, under sub-section (2), is where the court finds that specific performance ought not to be granted, but that there is a valid subsisting contract which the defendant has broken and which has caused loss to the plaintiff. In such cases, the court shall award compensation in substitution for the decree it has declined to pass. The second situation, under sub-section (3), is where the court decides that specific performance ought to be granted, but that such performance alone would not suffice to satisfy the justice of the case — for example, where the defendant's delay has caused the plaintiff a measurable financial loss even apart from the failure to execute the deed. In those circumstances, compensation may be awarded in addition to specific performance.

A suit for specific performance by a purchaser, for instance, may attract a compensatory award in addition to the decree if the vendor's inordinate delay has deprived the plaintiff of rental income or profits he would have earned from the property between the date of breach and the date of eventual performance. As was held in S. Ramalingam Pillai v. G.R. Jagadammal (AIR 1957 AP 960), the measure of such compensation would ordinarily be the amount of profits the plaintiff would have received from the property between the date of breach and the date when the conveyance was actually executed and possession delivered.

The Critical Importance of Pleading

No compensation can be awarded under Section 21 unless the plaintiff has specifically claimed it in the plaint. This is the unambiguous mandate of sub-section (5). The provision, however, is humane in its operation: the court shall, at any stage of the proceeding, allow the plaintiff to amend his plaint to include a claim for compensation, on such terms as may be just. The Supreme Court clarified in Jagdish Singh v. Natthu Singh (AIR 1992 SC 1604) that this power of amendment is liberally exercisable when the plaintiff has not abandoned his claim for specific performance — because the amendment in that case falls squarely within the proviso to sub-section (5). A stricter, less liberal standard governs the case where the plaintiff seeks to abandon specific performance altogether and convert the suit into a pure action for damages, in which case the amendment falls under Order VI, Rule 17 of the CPC and different considerations apply.

It must also be borne in mind that the plaintiff who is not ready and willing to perform his part of the contract is not entitled to compensation. As the Privy Council authoritatively held in Ardeshir H. Mama v. Flora Sassoon (AIR 1928 PC 208), where the plaintiff by his own act makes specific performance impossible, he cannot invoke Section 21 to claim compensation. He has disabled himself from the remedy. The plaintiff who treats the contract as subsisting and sues for specific performance — maintaining that posture throughout — stands on an entirely different footing from one who has repudiated his own obligations.

The Governing Measure: Section 73 of the Contract Act

Sub-section (4) directs the court to assess compensation in accordance with the principles contained in Section 73 of the Indian Contract Act, 1872. This means the plaintiff must prove that he has actually suffered loss or damage. The compensation is assessed as the loss naturally arising in the usual course of things from the breach, or such loss as may reasonably have been in the contemplation of the parties as the probable result of the breach. The Supreme Court, in Jai Narain Parasrampuria v. Pushpa Devi Saraf (2006 7 SCC 756), while ordering compensation in lieu of specific performance, took into account post-litigation facts and the rise in property prices, acknowledging that the court of equity must evolve separate principles for the remedy of compensation that reflect the distinctive features of specific performance as distinguished from a common law action for breach.

The Explanation: Compensation Where Performance Has Become Impossible

One of the most significant innovations of the Indian Act over its English counterpart is the Explanation to Section 21. In England, under Lord Cairns' Act, a court of equity had no power to award compensation where specific performance had become impossible — for the jurisdiction was only to award damages "in addition to or in substitution for" specific performance, and if the latter remedy was unavailable, the former could not be accessed either. Indian law deliberately departed from this position. The Explanation provides that the circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by Section 21. In Jagdish Singh v. Natthu Singh (AIR 1992 SC 1604), the Supreme Court overruled the Nagpur High Court's contrary view and held firmly that where the contract, for no fault of the plaintiff, has become impossible of performance — as where the property is acquired by the government or sold to a third party during the pendency of the suit — the court may award compensation in lieu of the decree it is no longer able to pass. The Explanation is thus a statutory safeguard against a defendant profiting from his own breach by pointing to supervening impossibility that he himself may have caused.

II. Reliefs of Possession and Partition Under Section 22

The Object: Avoiding Multiplicity of Suits

Before the 1963 Act, there was a sharp divergence of judicial opinion across High Courts on whether, in a suit for specific performance of a contract of sale, the court could also direct delivery of possession. Some High Courts took the strict view that the right to possession accrues only upon execution of the sale deed, and that a separate suit for possession was therefore necessary. Section 22 was enacted expressly to resolve this conflict. The legislature, acting on the recommendation of the Ninth Law Commission Report, took the view that a plaintiff who obtains a decree for specific performance should not be driven to yet another round of litigation merely to get possession of the very property he contracted to buy. Section 22 thus enacts, as the Supreme Court described in Babu Lal v. Hazari Lal Kishori Lal (AIR 1982 SC 818), a "rule of pleading" designed to prevent multiplicity of proceedings.

The Reliefs Available

Section 22(1) provides that any person suing for specific performance of a contract for the transfer of immovable property may, in an appropriate case, additionally ask for:

• Possession, or partition and separate possession, of the property; and

• Any other relief to which he may be entitled, including the refund of earnest money or deposit paid by him in case his claim for specific performance is refused.

Sub-section (2) qualifies this with an important rule: no relief under clauses (a) or (b) shall be granted by the court unless it has been specifically claimed. The proviso, however, mirrors Section 21 in its liberality — the court shall, at any stage of the proceeding, allow the plaintiff to amend the plaint to include any such claim, on just terms.

Possession: When Must It Be Specifically Claimed?

The expression "in an appropriate case" in sub-section (1) is significant. Where the defendant himself is in possession of the property agreed to be sold and the decree directs specific performance, the relief of possession is inherent in and necessarily flows from the decree itself — it need not be separately pleaded. This is because the vendor's obligation under Section 55(1)(f) of the Transfer of Property Act, 1882, to give possession to the buyer upon execution of the sale deed, is automatically attracted. In Babu Lal v. Hazari Lal Kishori Lal (AIR 1982 SC 818), the Supreme Court held that a decree for specific performance of a contract of sale includes everything incidental to completing the sale transaction and that a decree-holder is entitled to possession even from subsequent transferees where the decree was passed against them as well.

An "appropriate case" requiring a specific prayer for possession arises where the property is in the hands of a third party not party to the contract, or where it is jointly held by co-owners who are not all parties to the contract. In such situations, the bar of Section 22(2) operates, and possession cannot be directed without a specific claim. The court cannot grant possession at an interim stage, even if the entire consideration has been deposited.

Partition: A Distinctive Feature

Section 22 specifically confers power upon the court to pass a decree for partition and separate possession of the property in the same suit for specific performance. This is particularly significant in cases where a co-owner contracts to sell his undivided share of joint property. In P.C. Varghese v. Devaki Amma Balambika Devi (AIR 2006 SC 145), the Supreme Court held that a decree for partition and separate possession can be granted in addition to specific performance, though the proceeding for a final partition decree ordinarily commences after the sale deed in terms of the specific performance decree is executed and registered. The provision was designed precisely for the situation where a purchaser from a co-owner needs to obtain his defined share of the property — something he cannot achieve through the decree of specific performance alone — without the burden of filing a separate partition suit.

Refund of Earnest Money: An Alternative Relief

Clause (b) of sub-section (1) enables the plaintiff to claim refund of earnest money or deposit in case his claim for specific performance is refused. It is important to understand that this relief is an alternative to specific performance — it does not arise alongside it, but only in case the court declines the primary relief. A plaintiff may accept the decree of the trial court directing refund of part consideration and yet prefer an appeal to claim the greater relief of specific performance. The right to specific performance and the right to a refund in the alternative are not mutually exclusive as long as the plaintiff maintains his primary claim — he does not abandon specific performance merely by seeking the refund as an alternative. Equally, sub-section (3) makes clear that the power to grant refund under clause (b) is without prejudice to the court's power to award compensation under Section 21 — the two operate independently, addressing distinct kinds of loss.