Legal Review and Analysis of K S Manjunath & Others vs Moorasavirappa & Others 2025 INSC 1298

In-Short

Case: K.S. Manjunath & Others vs. Moorasavirappa & Others (2025 INSC 1298)A suit for specific performance is maintainable without seeking a declaration against unilateral termination if the contract is non-determinable. A subsequent purchaser, who had notice of a prior agreement and failed to make inquiries, is not a bona fide purchaser.

1. Heading of the Judgment

K.S. Manjunath & Others vs. Moorasavirappa & Others
Citation: 2025 INSC 1298 (Civil Appeal Nos. 13507-13508 of 2025)
Court: Supreme Court of India
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan

2. Related Laws and Sections

This judgment extensively interprets and applies the following statutory provisions:

• Specific Relief Act, 1963:
  Section 14(1)(c): Pertains to contracts that are "in their nature determinable" and thus not specifically enforceable.
  Section 16(c): Mandates that a plaintiff seeking specific performance must aver and prove a continuous "readiness and willingness" to perform their part of the contract.
  Section 19(b): Protects a "transferee for value who has paid his money in good faith and without notice of the original contract" from a suit for specific performance.

• Limitation Act, 1963:
  Article 54: Prescribes a three-year limitation period for filing a suit for specific performance.

• General Clauses Act, 1897:
  Section 3(22): Defines "good faith" as an act done honestly, irrespective of negligence.

• Transfer of Property Act, 1882:
  Section 3: Defines "notice," including actual, constructive, and imputed notice.

3. Basic Judgment Details

• Parties:
  Appellants: K.S. Manjunath & Others (Subsequent Purchasers who bought the property after the original agreement).
  Respondents: Moorasavirappa & Others, including the Original Vendees (the initial buyers) and the Original Vendors (the sellers).

• Subject Matter: An Agreement to Sell (ATS) dated 28.04.2000 concerning 354 acres of agricultural land in Karnataka.

• Procedural History:
  Trial Court: Dismissed the suit for specific performance but granted alternative relief of refund of earnest money with damages.
  High Court: Allowed the appeal, decreed specific performance, and held the subsequent purchasers were not bona fide.
  Supreme Court: Heard the appeal filed by the subsequent purchasers.

4. Core Principles and Analysis of the Judgment

The Supreme Court's judgment addresses several pivotal legal issues, which form the core of its analysis.

A. Unilateral Termination of a Contract and the Need for a Declaratory Relief

The Issue: Whether a suit for specific performance is maintainable if the plaintiff does not specifically seek a declaration that the defendant's unilateral termination of the agreement is invalid.

The Supreme Court's Analysis and Ruling:
The Court conducted an in-depth analysis of its precedents, notably distinguishing I.S. Sikandar (Dead) by LRs v. K. Subramani & Ors. (2013) and Sangita Sinha v. Bhawana Bhardwaj (2025). It synthesized the legal position as follows:

• General Rule: A plaintiff can directly sue for specific performance without challenging a unilateral termination if the contract is non-determinable and the termination is a mere repudiatory breach.

• Burden of Seeking Declaration: The burden to seek a court's declaration regarding the validity of the termination lies on the party who terminated the contract, not the aggrieved party. Placing this burden on the plaintiff would allow defendants to frustrate every suit for specific performance by issuing a termination notice.

• Determinable vs. Non-Determinable Contracts: A contract is "determinable in nature" (under Section 14 of the Specific Relief Act) only if it can be terminated at the "sweet will" of a party, without cause or reason (e.g., a partnership at will). A contract that can be terminated only for a specific breach by the other party is not considered determinable for this purpose.

• Application to the Present Case: The ATS contained no clause allowing for unilateral termination. The vendors terminated it citing external factors (pending litigation and death of a co-vendor) over which the buyers had no control. The Court held this was an invalid, unilateral repudiation. Since the termination was of a non-determinable contract and was not bona fide, the Original Vendees were not required to seek a declaration of its invalidity, and their suit for specific performance was maintainable.

B. Bona Fides of the Subsequent Purchasers

The Issue: Whether the appellants were "bona fide purchasers for value without notice" entitled to protection under Section 19(b) of the Specific Relief Act, 1963.

The Supreme Court's Analysis and Ruling:
The Court held that the subsequent purchasers were not bona fide purchasers. Key reasons included:

• Admitted Notice: The subsequent purchasers admitted that the original vendors had shown them the termination notice dated 10.03.2003. This notice itself contained detailed particulars of the prior ATS, including the names of the original vendees, the earnest money paid, and the property description.

• Constructive Notice: The Court emphasized that "notice" under Section 19(b) includes constructive notice. A prudent purchaser, upon seeing the termination notice, would have been put on an inquiry to verify its validity. They should have contacted the original vendees (whose addresses were in the notice) to confirm if the agreement was truly terminated and if the earnest money was refunded. Their failure to make this inquiry amounted to "willful abstention," fixing them with constructive notice of the original vendees' rights.

• Lack of Good Faith: "Good faith" requires both honesty and due care and attention. By proceeding with the purchase despite having knowledge of the prior ATS and without making basic inquiries, the subsequent purchasers failed to act with due care. Their conduct was not honest, and they could not claim the protection of Section 19(b).

C. Readiness and Willingness of the Original Vendees

The Issue: Whether the original vendees had proved their continuous "readiness and willingness" to perform their part of the contract as mandated by Section 16(c) of the Specific Relief Act.

The Supreme Court's Analysis and Ruling:
The Court affirmed the concurrent findings of the Trial Court and High Court, holding that the original vendees were always ready and willing. This was evidenced by:

• They had paid a substantial sum of Rs. 8,12,500/- to the vendors.

• They performed the vendors' obligations by getting the land converted from new tenure to old tenure and relocating the tenants.

• They immediately rebutted the termination notice, asserting their readiness to perform.

• They filed the suit for specific performance promptly after the impediment (the prior suit) was removed.

5. Final Outcome and Supreme Court's Directions

The Supreme Court dismissed the appeals filed by the subsequent purchasers and upheld the High Court's decree for specific performance, with modifications to balance the equities.

The Court issued the following final directions:

1. The Appellants (Subsequent Purchasers) are directed to execute the sale deed and hand over vacant possession of the subject land to the Original Vendees within six months.

2. The Original Vendees are directed to pay the following to the Appellants within six months:
   The balance sale consideration of Rs. 18,83,001/- with interest at 16% per annum from the date of the ATS (28.04.2000).
   An additional amount of Rs. 5,00,00,000/- (Five Crore Rupees) to do "substantial justice," acknowledging that the subsequent purchasers have held the property for about 18 years.

3. The execution of the sale deed and transfer of possession are conditional upon the receipt of the above payments by the subsequent purchasers.

6. MCQs Based on the Judgment

Question 1 According to the Supreme Court's judgment in K.S. Manjunath vs. Moorasavirappa, when is a suit for specific performance of a contract maintainable even if the plaintiff has not sought a declaratory relief challenging its termination?
a) Only if the contract is registered.
b) When the termination was unilateral and the contract is non-determinable in nature.
c) Only if the plaintiff is a minor.
d) When the defendant has already sold the property to a third party.

Question 2 For a subsequent purchaser to claim protection as a "bona fide purchaser" under Section 19(b) of the Specific Relief Act, 1963, which of the following conditions must be satisfied?
a) The purchaser must be a relative of the original seller.
b) The purchaser must have paid a price higher than the market value.
c) The purchaser must have paid the money in good faith and without notice of the original contract.
d) The purchaser must have been in possession of the property for over 12 years.