Financial Capacity and Specific Performance: A Landmark Judgment by the Supreme Court Of India

In a recent landmark judgment by the Supreme Court Of India, the case of financial capacity and specific performance in property transactions was carefully examined. The emphasis on proving readiness and willingness to perform a contract, backed by concrete evidence, was underscored in this ruling. Stay tuned to explore the nuances of this significant decision by the highest court in the country.


  • Appellant relied on the same loan application number for approval of Rs.50 lakhs as a home loan to purchase the property.
  • Evidence was led by the parties involved in the case.
  • Appellant’s husband was in occupation of the residential premises on rent paid by his employer since September 2002.
  • A loan of Rs.13 lakhs was sanctioned for application No 777-2415523.
  • Legal notice was served and relevant documents were agreed to be executed.
  • Appellant was found entitled to Rs.1 lakh with interest.
  • Appellant failed to pay 25% of the total consideration amount, making the agreement not enforceable.
  • Loan application was downsized to Rs.13 lakhs for a property other than the suit property.
  • Appellant declared having sufficient funds to complete the transaction in her favor.
  • Suit for specific performance was filed after the agreement of purchase.
  • Loan of Rs.50 lakhs was approved but not disbursed due to the unsigned agreement.
  • Appellant proved readiness and willingness to perform her part of the contract.
  • Appellant and her husband were found to have deposed falsely regarding their financial capacity, which casts doubt on their readiness and willingness to perform the agreement.
  • The High Court dismissed the first appeal on July 17, 2018, affirming the Trial Court’s findings.
  • Oral statements on financial capacity cannot be deemed as proof of financial capacity by the courts.
  • The High Court did not consider the lack of cross-examination on financial capacity as a favorable argument.
  • The Trial Court found that the appellant was not entitled to specific performance but granted a recovery decree of Rs.1 lakh with 15% interest per annum from the date of the Agreement.
  • Initially, the High Court noted a discrepancy in the loan amount sanctioned for the property but later corrected the error.
  • The defendants took possession of the property after filing a suit for possession against the tenant, who was the appellant’s husband’s employer and failed to vacate the property after the lease period expired.
  • Self-serving averments in the appellant and her husband’s affidavit were deemed insufficient to prove financial capacity.
  • The appellant’s payment of Rs.1 lakh, being only 2% of the total sale consideration, led to the High Court’s decision that she was not entitled to discretionary specific performance.
  • The Trial Court, on February 28, 2018, dismissed the suit due to the appellant’s failure to prove readiness and willingness to perform the contract.

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  • Mr. Narender Hooda, senior counsel for the respondents, argued against the appellant’s appeal, stating that it seeks a reappreciation of evidence under Article 136 of the Constitution of India.
  • The appellant, in response, contended that she had previously obtained a loan of Rs.13 lakhs for purchasing a flat in Ghaziabad and has demonstrated her ability to pay the remaining sale amount.
  • In the case of A. Kanthamani v. Nasreen Ahmed, the judgment was referenced by the appellant’s counsel.
  • The counsel argued that readiness and willingness does not require the appellant to have the entire amount in hard cash or in the bank, but rather the capacity to pay
  • Financial capacity to pay was emphasized as the key factor in establishing readiness and willingness.

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  • Appellant’s readiness and willingness to perform the contract hinge solely on the approval of a loan by ICICI on July 30, 2004.
  • The appellant’s argument that the approval of the loan by ICICI and their substantial income prove their capacity to pay lacks corroborating evidence and is deemed self-serving.
  • The appellant failed to provide any income tax records or bank statements to support their claim of financial capacity to perform the contract.
  • ICICI required an Agreement to Sell to be executed between the parties on a stamp paper of Rs.50/- before disbursing the loan, which was not fulfilled by the appellant.
  • The Court found no merit in the present appeals as there was no substantial question of law of general importance, and the findings of fact were not interfered with even upon reappreciation of evidence.
  • The judgment in the cited case emphasized the discretionary nature of the relief for specific performance, which was not granted due to the lack of execution of an agreement on stamp paper.
  • The statement regarding the appellant and her husband’s income of Rs.80 lakhs per annum was considered mere assertion without any supporting documentary evidence.
  • The finding recorded by the High Court regarding the financial capacity of the appellant was not deemed to be illegal.
  • Mere assessment of financial capacity by the bank for a previous loan did not prove the appellant’s readiness and willingness to fulfill the contract.

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  • Appeals dismissed
  • Rs. 3.5 crores to be returned to the appellant along with interest accrued
  • Amount was deposited as per court order dated November 19, 2018
  • Amount was invested in FDR
  • Return of amount to be done as per rules


Case Number: C.A. No.-007268-007269 / 2019

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