In a recent judgment dated 12.09.2023, the Supreme Court of India provided clarity on the limitation period for the specific performance of contracts when no specific time is set for their execution. The court emphasized that the limitation period, as outlined in Article 54 of Part II of the Schedule to the Limitation Act, 1963, commences from the date the plaintiff is notified of the defendant’s refusal to honor the contract.
Article 54 delineates that if a specific date is set for the performance of a contract, the limitation period for filing a suit for its specific performance is three years from that predetermined date. However, in scenarios where no date is fixed, the limitation period extends to three years from the moment the plaintiff is informed that the defendant has declined to perform the contract.
Elaborating on this, the bench comprising Justice Sanjiv Khanna and Justice Bela Trivedi referred to a previous judgment, Pachanan Dhara and Others v. Monmatha Nath Maity. They highlighted that when no time is stipulated for the contract’s performance, it becomes imperative for the court to ascertain the exact date the plaintiff was made aware of the defendant’s refusal to execute the contract.
The context for this clarification arose from a 1995 case where the respondents initiated a suit for specific performance based on a sale agreement. The appellant contested the suit on various grounds, including the limitation aspect. Both the Trial Court and the High Court ruled in favor of specific performance. However, the matter escalated to the Supreme Court on appeal.
To resolve the limitation dispute, the Supreme Court endeavored to pinpoint when the respondents were informed of the appellant’s refusal to perform. The court observed that the limitation period began in 1991 when the 3rd respondent initiated an injunction suit. The appellant’s 1991 responses to the 3rd respondent were deemed adequate written notice of the appellant’s reluctance to uphold the agreement. Consequently, the court deduced that the 1995 specific performance suit was already time-barred when filed.
The court firmly stated,
“The limitation period of three years under the second part of Article 54, which is from the date when the party had notice of the refusal by the other side, had expired when the suit for specific performance was filed on 27.09.1995.”
The judgment concluded by overturning the High Court’s decision, asserting that the specific performance suit was
“clearly and without doubt barred by limitation.”
Case Title: A. Valliammai V. K.P. Murali, Civil Appeal No. 5342 of 2023