Supreme Court upholds specific performance decree, holds subsequent purchasers not bona fide and issues payment and possession directions

A bench of Justices J.B. Pardiwala and R. Mahadevan heard appeals by subsequent purchasers against a Karnataka High Court judgment that had set aside a trial court decree and granted specific performance of an agreement to sell (ATS) in favour of the original vendees. The appeals challenged the High Court’s finding that the subsequent purchasers were not “bona fide purchasers of the subject land for value without notice” and its directions to execute sale deeds in favour of the original vendees.

The Court dismissed the appeals and affirmed the High Court’s decree for specific performance while clarifying the law on unilateral termination of an agreement to sell. The Court held that the ATS executed on 28.04.2000 was not determinable in its nature and that the notice of termination dated 10.03.2003 was a unilateral repudiation which “was not only unilateral but also not bona fide and cannot be sustained.” The Court observed that the subsequent purchasers had been shown the termination notice and had not made reasonable enquiries; therefore they could not claim protection as transferees for value in good faith without notice. The Court, in its reasoning, observed: Background The dispute arose from an unregistered ATS dated 28.04.2000 for 354 acres in Basavanakoppa, Haveri (Karnataka) for Rs. 26,95,501 in which original vendees paid earnest money and later further sums aggregating to Rs. 8,12,500. A separate suit (OS No. 30/2001) and status quo order intervened; the original vendees attempted impleadment in that suit but their application was rejected and a writ was dismissed. On 10.03.2003 the original vendors served a Legal Notice of Termination citing pendency of litigation and the death of a co-vendor, calling on the vendees to “take back your earnest money and to treat the agreement of sale dt. 28.04.2000 as cancelled” and warning that failure to do so within one month would render the ATS “deemed to be cancelled.” The original vendees replied on 21.03.2003 asserting readiness and willingness, disputing termination and stating that they had performed material obligations including conversion and survey work. No refund of earnest money was made and no substantive rejoinder followed.

After the withdrawal of OS No. 30/2001 in February 2007 and the vacating of status quo, the original vendors executed sale deeds in favour of subsequent purchasers on 20.02.2007 and 02.03.2007. The original vendees then filed OS No. 36/2007 for specific performance. The trial court found the original vendees had paid Rs. 8,12,500, had been always ready and willing to perform, but held the subsequent purchasers to be bona fide purchasers and dismissed relief for specific performance while awarding refund with interest. The High Court reversed, found the subsequent purchasers had notice of the ATS and the termination notice, held the termination to be unilateral and not brought to a logical end, and decreed specific performance, directing the purchasers to execute sale deeds in favour of the original vendees and put them in possession upon payment of balance consideration. On appeal to this Court the Supreme Court upheld the High Court’s conclusions, distinguished precedents where purchaser’s own default led to valid termination, and reaffirmed that a unilateral, non‑bona fide termination of a non‑determinable ATS could not defeat specific performance. The Court dismissed the appeals and issued detailed directions: the subsequent purchasers were ordered to execute sale deeds in favour of the original vendees and give possession, subject to payment conditions; the original vendees were directed to pay the balance consideration of Rs. 18,83,001 with interest at 16% p.a. from the date of the ATS, and, in the exercise of equity, an additional sum of Rs. 5,00,00,000 within six months; the sale deeds and possession were to follow upon payment. The Court gave liberty to approach it in case of non‑compliance.

Case No.: CIVIL APPEAL NO. 13507–13508 OF 2025 (Arising out of Special Leave Petition (C) Nos. 29405-29406 of 2017) Case Title: K.S. Manjunath and Others … Appellants v. Moorasavirappa @ Muttanna Chennappa Batil (since deceased) by his LRs and Others … Respondents Appearances: For the Petitioner(s): Dr. Aditya Sondhi, Senior Counsel (for Subsequent Purchasers / Appellants) For the Respondent(s): Mr. Devadatt Kamat, Senior Counsel (for Original Vendees / Respondents)