Legal Review and Analysis of Subhash Aggarwal vs Mahender Pal Chhabra & Anr 2026 INSC 11
Case Synopsis
Case: Subhash Aggarwal vs Mahender Pal Chhabra & Anr., 2026 INSC 11
Synopsis: The Supreme Court denied specific performance of a sale agreement due to the buyer's failure to prove financial readiness. However, ruling that simple forfeiture of earnest money would unjustly enrich the sellers as both parties were at fault, the Court used its extraordinary equitable power to direct the sellers to pay Rs. 3 Crores to the buyer as restitution, settling the 17-year-old dispute.
1. Heading of the Judgment
Case Name: Subhash Aggarwal vs Mahender Pal Chhabra & Anr.
Citation: 2026 INSC 11
Court: Supreme Court of India
Judges: Justice Vikram Nath and Justice Sandeep Mehta
Date: 5th January 2026
2. Related Laws and Sections
The judgment primarily deals with the principles governing the grant of specific performance under contract law.
Specific Relief Act, 1963:
Section 16(c): Mandates that a plaintiff seeking specific performance must aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract.Indian Contract Act, 1872:
Principles relating to earnest money and forfeiture.Core Legal Principles: The discretionary and equitable nature of the remedy of specific performance; the concept of "readiness and willingness"; and the principle of restitution to prevent unjust enrichment.
3. Basic Judgment Details
Facts of the Case
The appellant (plaintiff) entered into an Agreement to Sell dated 22.01.2008 with the respondents (defendants) to purchase a property in Delhi for Rs. 6.11 Crores.
A sum of Rs. 90 lakhs (Rs. 60 lakhs as earnest money and Rs. 30 lakhs as part payment) was paid by the appellant.
The appellant filed a suit for specific performance after the respondents allegedly failed to fulfill their obligations (like obtaining mutation and conversion from leasehold to freehold).
The Trial Court decreed the suit in favour of the appellant. The High Court, in an appeal, initially dismissed it but was remanded by the Supreme Court. Upon fresh consideration, the High Court set aside the decree, dismissed the suit for specific performance, allowed forfeiture of the earnest money (Rs. 60 lakhs), but ordered refund of the additional Rs. 30 lakhs with interest.
The appellant appealed to the Supreme Court against the denial of specific performance.
Issues Before the Supreme Court
Whether the appellant had sufficiently proved his "readiness and willingness" to perform his part of the contract, as required for granting specific performance?
What is the appropriate equitable relief in a situation where both parties to the agreement are at fault and specific performance is deemed inequitable due to a long lapse of time?
Ratio Decidendi (Court’s Reasoning)
Failure to Prove Readiness and Willingness: The Supreme Court agreed with the High Court's finding that the appellant failed to prove his continuous readiness and willingness. Crucially, he could not demonstrate the financial capacity to pay the balance consideration of Rs. 5.21 Crores on the due date (10.05.2008) and did not even visit the Sub-Registrar's office on that date.
Discretionary and Equitable Nature of Relief: The Court reiterated that specific performance is a discretionary and equitable remedy. Considering the facts—particularly the passage of over 17 years since the agreement and the failure of both parties (the respondents also defaulted on their obligations)—granting specific performance was no longer an equitable relief.
Equity to Prevent Unjust Enrichment: The Court held that while forfeiture of earnest money is permissible upon a buyer's default, in this case, allowing the respondents to forfeit the entire Rs. 60 lakhs would result in an "equitable windfall" or unjust enrichment, especially since both parties shared fault.
Exercise of Equitable Jurisdiction for Restitution: To do complete justice and adjust the equities, the Supreme Court exercised its plenary jurisdiction under Article 142 of the Constitution. It modified the High Court's order and directed the respondents to pay a lump sum of Rs. 3 Crores to the appellant. This amount was deemed to provide full restitution to the appellant for his payments and the long-drawn litigation, while finally settling the protracted dispute.
4. Core Principle of the Judgment
Title: Equity Over Strict Remedy: Balancing Fault and Restitution in Specific Performance
Main Issue
The core legal issue was determining the fate of a suit for specific performance where the plaintiff fails to conclusively prove his financial readiness, but the defendants are also in breach, and an inordinate delay makes the primary remedy inequitable.
Supreme Court’s Analysis and Holding
This judgment highlights the Supreme Court's role as a court of equity, especially in complex contractual disputes where strict legal remedies may lead to unjust outcomes.
The Court's analysis proceeded on two pivotal fronts:
Rigorous Scrutiny of "Readiness and Willingness": The Court affirmed that proving "readiness" is not a mere formality. It requires tangible evidence of financial capability at the crucial time. The appellant's failure to furnish such proof, coupled with his absence on the date set for execution, was fatal to his claim for the specific performance of the contract. This upholds the sanctity of the requirement under Section 16(c) of the Specific Relief Act.
Equitable Intervention Where Law is Inadequate: The seminal contribution of this judgment lies in its second step. The Court refused to let the matter end with a simple dismissal of the suit and forfeiture of earnest money. Recognizing shared blame and the oppressive consequence of mere forfeiture after 17 years, the Court moved beyond conventional remedies. It crafted a restitution-based equitable solution aimed at:
Preventing Unjust Enrichment: Preventing the sellers from unfairly retaining a large sum due solely to the buyer's technical default.
Compensating for Detriment: Acknowledging the buyer's substantial payment and the opportunity cost/litigation trauma over nearly two decades.
Bringing Finality: Imposing a clean, conclusive financial settlement to end the dispute.
The ruling underscores that while specific performance is not a matter of right, the court's equitable jurisdiction is dynamic. It can be invoked to fashion a fair remedy that balances the faults of both parties, ensures neither gains an unfair advantage, and delivers substantive justice where a standard legal outcome would be harsh or disproportionate. The power under Article 142 is thus a tool for holistic justice, not limited by the strictures of the relief originally claimed.
5. Final Outcome
The Supreme Court partly allowed the appeal. It upheld the High Court's denial of specific performance. However, it set aside the High Court's order regarding forfeiture and refund. Instead, it directed the respondents to pay a lump sum of Rs. 3 Crores to the appellant within four weeks, thereby modifying the High Court's judgment.
6. MCQ Questions Based on the Judgment
Question 1: In Subhash Aggarwal vs Mahender Pal Chhabra & Anr. (2026 INSC 11), the Supreme Court denied the decree for specific performance primarily because?
A. The sale agreement was not registered.
B. The plaintiff failed to prove his continuous readiness and willingness, specifically his financial capacity to pay the balance amount on the due date.
C. The defendants had a better title to the property.
D. The suit property was involved in other litigation.
Question 2: The Supreme Court directed the respondents to pay Rs. 3 Crores to the appellant by exercising its jurisdiction under Article 142. What was the primary equitable principle behind this direction?
A. To punish the respondents for breach of contract.
B. To enforce the original agreement to sell.
C. To prevent unjust enrichment of the respondents and provide restitution to the appellant, given the shared fault and prolonged litigation.
D. To compensate the appellant for mental harassment.