The Madras High Court has clarified that a company struck off under the Companies Act can continue litigation concerning contractual obligations but refuses specific performance where the purchaser failed to establish a genuine survey, timely action, and sustained willingness to complete the transaction.
The Court held that despite the dissolution of M/s.Amarkantak Orchards Pvt Ltd. and M/s.Amarkantak Farms Pvt Ltd., the appeal remained maintainable under Section 250 of the Companies Act, 2013 because it concerned the discharge and enforcement of obligations arising from a contract. Although the agreement fixed 22 July 2005 as the date for completion, the vendors continued discussions and entertained requests for extension even after the deadline, showing that they had not treated the stipulated date as inflexible.
The Court found that the purchaser’s conduct was inconsistent with the requirements of Section 16(c) of the Specific Relief Act. There was no reliable evidence showing that the alleged shortage in land extent was communicated to the vendors or that the purchaser consistently pursued completion of the transaction.
The Court held that the document relied upon to show that only 205.15 acres were available lacked essential survey particulars, contained discrepancies in survey numbers, and appeared to have been created for the litigation. Since the agreement in favour of the purchaser was unregistered and there was no evidence that subsequent buyers had notice of it, the Court held that the later purchasers were bona fide purchasers for value without notice of the earlier agreement.
Briefly, the dispute arose from an agreement of sale dated April 21, 2005 executed between the land-owning companies, namely Amarkantak Orchards Pvt Ltd vs P.A Joseph, through their authorised power agent, and the original plaintiff, P.A. Joseph, for the purchase of more than 300 acres of land spread across several villages. The sale price was fixed at Rs. 16,250 per acre.
The plaintiff paid Rs. 10 lakhs as advance on the date of agreement and another Rs. 20 lakhs on May 05, 2005. The agreement required the plaintiff to conduct a survey at his own cost to ascertain the actual extent available for sale before execution of the final sale deed.
The plaintiff claimed that after conducting a survey, only about 205.15 acres were found available instead of the more than 300 acres mentioned in the agreement. According to him, he was always ready and willing to purchase the available extent by paying the proportionate balance consideration. He alleged that the vendors failed to execute the sale deed and subsequently sold portions of the property to third parties. Based on these assertions, he filed a suit for specific performance.
The Trial Court accepted the plaintiff’s case, held that possession had been handed over, found that time was not the essence of the contract, concluded that the plaintiff was ready and willing to perform his obligations, and decreed the suit for specific performance.
The Division Bench comprising Justice M. Dhandapani and Justice N. Dilip Kumar considered whether the appeal could continue after the defendant companies had been struck off from the Register of Companies under Section 248(5) of the Companies Act, 2013. The Court held that even though a company ceases to operate after dissolution, Section 250 preserves its capacity to continue proceedings relating to realization of dues or discharge of liabilities and obligations. Since the litigation concerned enforcement of contractual obligations arising from a sale agreement, the appeal remained maintainable despite the companies having been struck off.
On the issue of time being the essence of the contract, the Court observed that although the agreement fixed July 22, 2005 for completion of the transaction, the conduct of the parties showed otherwise. The vendors continued meetings and discussions with the plaintiff even after the stipulated date and never issued any contemporaneous notice terminating the agreement solely on the ground of expiry of time. Therefore, the Court held that time was not treated as the essence of the contract.
However, the Court found serious deficiencies in the plaintiff’s case regarding readiness and willingness. It noted that although the plaintiff claimed the survey had been completed on June 23, 2005, and only 205.15 acres were available, there was no credible evidence showing that this information was ever communicated to the landowners. The legal notice issued by the plaintiff in July 2006 did not mention any survey, shortage of land, possession, or the alleged reduced extent of 205.15 acres. Instead, it demanded execution of the sale deed for the entire extent originally mentioned in the agreement.
The Court further found that the alleged survey report could not be relied upon. The document did not contain details normally found in a survey report, such as dates, methods adopted, participation of parties, or correlation with the survey numbers contained in the agreement. Several survey numbers mentioned in the agreement were absent from the report, while some entries in the report did not form part of the agreement at all. The Court concluded that survey report was not a genuine survey report and appeared to have been created subsequently for the purpose of litigation.
The Court also observed that the plaintiff waited for more than a year after the alleged survey before issuing a legal notice. Such prolonged inaction, coupled with the absence of supporting documents, undermined his claim of continuous readiness and willingness. Specific performance being an equitable and discretionary remedy, the plaintiff was required to prove continuous readiness and willingness from the date of agreement until decree, which he failed to do.
Regarding possession, the Court held that mere permission to enter the property for conducting a survey could not be equated with delivery of possession under the agreement. The plaintiff produced no independent evidence to show that possession had actually been handed over or that he had made improvements to the property. On the other hand, the subsequent purchasers produced title deeds, pattas, revenue records, and tax receipts supporting their possession and enjoyment of the lands.
The Court also disagreed with the Trial Court’s finding against the subsequent purchasers. It held that the agreement in favour of the plaintiff was unregistered, no public notice had been issued about it, and there was no evidence showing that the subsequent purchasers were aware of the earlier agreement. Accordingly, the Court held that defendants 5 to 7 were bona fide purchasers for value without notice of the plaintiff’s agreement.
