In this civil appeal, the Supreme Court of India addressed the legality of concurrent decrees granting specific performance based solely on an oral agreement. The Supreme Court allowed the appeal, setting aside both the Trial Court and High Court judgments. The bench held that the subsequent suit for specific performance was fundamentally not maintainable under the rigours of Order II Rule 2 of the Code of Civil Procedure, 1908 (CPC), because the plaintiff had previously filed and withdrawn a suit for permanent injunction without seeking leave of the court to reserve the claim for specific performance. Furthermore, the Court ruled that the plaintiff failed to meet the heavy burden of proof required to establish a concluded oral contract, noting critical inconsistencies in pleadings, lack of proper corporate authorization, and unencashed advance instruments.
- Maintainability and Order II Rule 2 CPC: The Court emphasized that when a plaintiff files a suit for a lesser relief (such as a permanent injunction) while a broader cause of action for specific performance has already accrued, omitting to claim specific performance or failing to obtain leave of the court at the time of institution bars a subsequent suit under Order II Rule 2. A subsequent withdrawal of the first suit with a general liberty to file afresh does not cure the initial defect of failing to seek leave under Order II Rule 2.
- Strict Proof for Oral Contracts: Reaffirming precedents like Brij Mohan and Nanjappa, the Court reiterated that while a suit for specific performance can legally be based on an oral agreement, a heavy burden lies on the plaintiff to provide strict proof of a concluded contract where vital and fundamental terms were settled. Mere inferences or evasive/dishonest testimonies from defence witnesses cannot be used to fill gaps in the plaintiff’s case.
- Discrepancies and Evidence: The record revealed shifting stances across plaints regarding the number of meetings, dates of refusal, and identities of participants. Crucially, a large advance cheque of Rs. 5 crores was never presented to the bank for encashment, indicating that the parties never finalized or acted upon a concluded contract.
- Inadmissibility of Hearsay and Status: The testimony of high-ranking political figures or independent witnesses cannot substitute for lack of formal pleadings or direct legal authorization. The involvement of a family member (son-in-law) lacking official capacity or authorization from the company board cannot bind a corporate entity under Section 46 of the Companies Act, 1956.
- Final Outcome: The Supreme Court concluded that the concurrent findings of the lower courts were perverse. The appeal was allowed, and the suit for specific performance was dismissed with parties bearing their own costs.
