Name of the case: K. Narendra Vs.  Riviera Apartments (P) Ltd. 1999(5) SCC 77

Court: The Supreme Court of India

Hon’ble Judges/Bench: S.V. Manohar and R.C. Lahoti, JJ.

FACTS

The plot of land in New Delhi, originally granted by the President of India to M/s Shiv Ram, Mahashaya Krishna, and K. Narendra (referred to as the appellants) in 1956, is at the center of this case. In 1972, the appellants entered into an agreement to sell and transfer all their rights, title, and interest in the property to the respondents in exchange for a monetary sum. As per the contract, the payment was made at the time of execution.

The agreement further stipulated that the appellants would encash a postdated cheque once the building plans for the proposed multi-storey building received approval from the NDMC (New Delhi Municipal Council) and the Land and Development Office. However, the appellants cashed the cheque before obtaining such approval. An application for an exemption to construct a multi-story building was submitted in 1976 but was informed that it would be rejected based on existing guidelines. Under the Act, the agreement to sell could be considered ineffective, and the required exemption for the appellant’s group housing scheme could be granted.

An order was issued under Section 20(1) (a) and Section 22 of the ULCRA (Urban Land Ceiling and Regulation Act), exempting excess vacant land from Chapter III of the Act, subject to certain conditions. In light of the lack of sanction and clearance, the appellants wrote to the respondents, urging them to honor their contractual obligations. Subsequently, a legal notice was sent.

Due to the respondents’ failure to obtain the necessary sanctions and clearances and the complications arising from the ULCRA, the appellant concluded that the agreement was invalid and unenforceable. They demanded that the respondents vacate a portion of the property within two weeks, warning of potential legal action if they failed to comply. Consequently, the appellant filed a lawsuit seeking a declaration of the agreement’s nullity, as well as a decree for possession of a portion of the land.

In response, the respondents filed a counterclaim seeking compensation, specific performance of the sale contract, and a mandatory injunction to compel the appellant to hand over vacant possession of the premises or a part of the existing building.

ISSUES

Issues raised relating to the fact that whether there was a complete transfer of possession from the appellant to the respondent of the property or not. The court was also made to decide whether breach of a contract taking place due to hardships of one of the parties of the contract is a valid ground for the court to not issue specific performance or not.

RULE

• Section 56 in The Indian Contract Act, 1872

“An agreement to do an act impossible in itself is void.

Contract to do an act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the nonperformance of the promise.”

• Doctrine of Comparative Hardship

The doctrine of comparative hardship is a legal principle used to address unforeseen difficulties or hardships that arise during the performance of a contract. It provides a framework for courts or arbitrators to consider the relative burdens faced by each party and determine a fair and equitable resolution. When strict adherence to the contract terms or legal rules would result in an unjust outcome, the doctrine allows for a more balanced approach by weighing the hardships and finding a reasonable compromise. Factors such as the nature and extent of the hardships, foreseeability of the events causing the hardship, efforts to mitigate the hardship, and the overall fairness of the proposed solution are considered.

ARGUMENTS

Respondents

Mr. Arun Mohan, Senior Counsel, appearing on behalf of the respondent submitted that first part of column (3) of Article 56 of the Limitation Act is not applicable to the facts of the present case as no date for performance was fixed in the agreements dated 25th July, 1972 and 26th July, 1972. He further submitted that the letter dated 16th August, 1975 (Exhibit P-11) cannot be construed as fixing time, for the agreements being bilateral, there could be no unilateral fixing of time. He submitted that if no time is fixed by the contract, it cannot be fixed by a document de horse the contract. 

Applellants

The appellants argued that the agreement they entered into with the respondents was invalid and unenforceable. They claimed that due to the respondents’ failure to obtain necessary sanctions and clearances, as well as complications arising from the Urban Land Ceiling and Regulation Act (ULCRA), the agreement was not valid. The appellants demanded that the respondents vacate a portion of the property within two weeks. Presumably, the appellants sought possession of that portion of the land to which they believed they were entitled under the agreement.

JUDGEMENT

The court clearly mentioned in this case that if the defendant has to go through hardships while performing a contract which was not foreseen by the defendant during non-performance of such contract, it does not cause any hardship to the plaintiff. This is one such circumstance under which the court can exercise discretion properly. But this discretion should be executed by the court only in relevant situations with sound reasonability and not arbitrary or irrationally. 

ANALYSIS

In the case of K. Narendra v. Riviera Apartments (P) Ltd., the Supreme Court of India considered the issue of whether the court could exercise discretion and refuse to decree specific performance of a contract in cases where the defendant faced hardships that were not foreseen during the performance of the contract, while the non-performance did not cause any hardship to the plaintiff.

The court observed that the doctrine of comparative hardship had been statutorily recognized in India. It recognized that if a contract’s performance resulted in hardships for the defendant that were not anticipated at the time of entering into the contract, while the plaintiff would not face any hardship in the event of non-performance, it could be a valid circumstance for the court to exercise discretion and refuse to grant specific performance.

This analysis implies that the court acknowledged the principle of comparative hardship in contract law. It recognized that there could be situations where the defendant’s performance of the contract would cause undue hardship, which was not initially contemplated by the defendant. In such cases, the court has the discretion to consider the hardships faced by the defendant and decide whether to decree specific performance or not. The court emphasized that this discretion should be exercised with reasonability and fairness, taking into account the circumstances of the case.

In the specific context of K. Narendra v. Riviera Apartments (P) Ltd., the court likely examined the hardships faced by the defendant in relation to the performance of the contract and evaluated whether it would be just and equitable to decree specific performance in light of those hardships. The case provides an important precedent for the court’s consideration of comparative hardship in determining specific performance, thereby ensuring fairness and equity in contractual disputes.

CONCLUSION

The case of K. Narendra v. Riviera Apartments (P) Ltd. involved a lease dispute for the construction of a residential building. The court addressed the transfer of possession and whether the defendant’s hardships could justify not granting specific performance. The judgment emphasized the principle of comparative hardship, allowing the court to exercise discretion if the defendant faced unforeseen difficulties while the plaintiff would not suffer from non-performance. This principle was legally recognized in India, highlighting the court’s commitment to fairness and reasonability in contractual disputes.

The analysis of the case underscores the court’s recognition of the importance of fairness and reasonability. It stressed the need for sound reasoning in the court’s discretion, avoiding arbitrary decisions. The court carefully evaluated the hardships faced by the defendant and assessed whether it would be just and equitable to enforce specific performance. Overall, the K. Narendra v. Riviera Apartments (P) Ltd. case establishes a significant precedent for the court’s consideration of comparative hardship, ensuring that contractual disputes are resolved fairly, taking into account the circumstances and hardships of the parties involved.

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