Not every terminable contract is determinable to resist specific performance: Supreme Court clarifies

The law governing specific performance of contracts that are “in their nature determinable” has undergone significant clarification over the last three decades, moving from a broad, text-based exclusion in Section 14 of the Specific Relief Act, 1963, to a more careful inquiry grounded in contractual structure and the parties’ right to terminate ‘at will’ as opposed to ‘for cause’.

The Supreme Court’s decision last year in KS Manjunath and Ors. v. Moorasavirappa in Civil Appeal No. 13507-13508 of 2025, consolidates and clarifies the law surrounding the test of determinability, espoused by various courts and lays down the test in sufficiently clear terms. Contracts that permit termination without reference to default, event or cause are determinable. Contracts that allow termination only for cause (or reasons) are not in their nature determinable and may be specifically enforced.

Section 14(1)(c) of the Specific Relief Act, 1963 (as it stood prior to the 2018 amendment) excluded from specific performance “a contract which is in its nature determinable.” This very provision is retained in Section 14(1)(d) of the Specific Relief Act, 1963, post the 2018 amendment. The classic authority for construing whether a contract is “determinable” is the Supreme Court’s decision in Indian Oil Corporation v. Amritsar Gas Service, (1991) 1 SCC 533, where the agreement expressly permitted termination on 30 days’ notice without cause and the Court held that such an agreement was determinable in nature and hence not specifically enforceable.

The Indian Oil decision thus establishes a significant principle - where the contract itself confers upon a party an unfettered right to terminate at will, a court of equity will not grant specific performance. To do so would be futile, as the promisor could immediately exercise their contractual power of termination, thereby rendering the decree nugatory.

Post Indian Oil, several High Courts have sought to further streamline the position on the test of determinability. The Kerala High Court, in TO Abraham v. Jose Thomas, 2017 SCC OnLine Ker 19872, while deciding an issue on specific performance of an agreement for sale of shares held that for a contract to be treated as determinable, it must be shown that the wordings of the contract allow either party, at their own will, to end the contract without providing any reasons.

The Madras High Court, in A Murugan and Ors. v. Rainbow Foundation Ltd. and Ors., 2019 SCC OnLine Mad 37961, offered a further classification of contracts for the purposes of test of “determinability”: (i) inherently revocable relationships (e.g. partnerships at will) (ii) “without cause” termination clauses; (iii) forthwith “for cause” termination, (iv) termination “for cause” with notice and cure, and (v) contracts with no termination clause but terminable for breach of a condition but not a warranty. The Court found the agreements in (i), (ii) and (iii) categories to be non-determinable and therefore capable of specific performance.

Similarly, the Bombay High Court, in Narendra Hirawat & Co. v. Sholay Media Entertainment Pvt. Ltd., (2020) SCC OnLine Bom 391, held that “determinable” means terminable “at the sweet will” of a party, without reference to breach or any external event - again emphasizing a unilateral, no-fault termination as the essential test of determinability. This position was also more recently reiterated by the Court in Kheoni Ventures (P) Ltd. v. Rozeus Airport Retail Ltd., 2024 SCC OnLine Bom 773, where it observed that to arrive at a finding on whether a contract is determinable or not, it must be ascertained whether the parties have a right to terminate on their own, without the occurrence of any contingency and without assigning any reason.  

However, the Delhi High Court, in a plethora of decisions, adopted a different, inconsistent and contradictory approach. For instance, in Rajasthan Breweries Ltd. v. Stroh Brewery Co., 2000 SCC OnLine Del 481, a Division Bench of the Delhi High Court adopted a stringent approach and held that where an agreement specified certain events allowing either party to terminate, the agreement was determinable in nature and therefore not capable of specific performance. The High Court went one step further and held that even if there was no termination clause in an agreement, the nature of the agreement, which was a private commercial transaction, permitted termination without assigning any reason by serving a reasonable notice. The Court held that even if the termination was eventually held to be wrongful, the only remedy would be to seek compensation and not specific performance.

Similarly, the Delhi High Court in Turnaround Logistics (P) Ltd. v. Jet Airways (India) Ltd. & Ors., 2007 SCC OnLine Del 2085, held that not only voidable contracts but also contracts which are terminable on the occurrence of a particular event, are determinable in nature.

Even more recently, the Delhi High Court in Inter Ads Exhibition (P) Ltd. v. Busworld International, 2020 SCC OnLine Del 351 and Ksheeraabd Construction Pvt. Ltd. v. National Highways and Infrastructure Development Corporation Ltd., 2023 SCC OnLine Del 3156, the Delhi High Court has maintained that Section 14(d) of the Specific Relief Act, 1963 is not limited to only those agreements which can be terminated at will without assigning any reason.

At the same time, the Delhi High Court, in other decisions such as DLF Home Developers Ltd. v. Shipra Estate Ltd., 2021 SCC OnLine Del 4902 and Affordable Infrastructure & Housings Projects (P) Ltd. v. Segrow Bio Technics India (P) Ltd., 2022 SCC OnLine Del 4436, has adopted a more lenient position, in line with the Bombay, Madras and Kerala High Courts, by inter alia holding that where an agreement cannot be terminated by a party so long as the other party remains ready and willing to perform its part of the agreement, such a contract cannot be said to be determinable in nature and can be specifically performed.

The Supreme Court’s decision in KS Manjunath appears to have settled the law on the question of “determinability”. The case concerned a dispute arising out of an agreement for the sale of property executed in April 2000. The prospective purchasers had paid an advance sum and undertaken substantial steps towards completing the transaction, including obtaining land use conversion and arranging for the relocation of existing tenants. Notwithstanding these efforts, the vendors purported to terminate the agreement unilaterally, citing pending litigation and the death of a co-vendor as grounds for doing so, before proceeding to sell the property to third parties. The original purchasers instituted proceedings seeking specific performance. Following protracted litigation, the Supreme Court upheld the decree of the Karnataka High Court, which had granted specific performance and directed the execution of a sale deed in favour of the original purchasers.

The main issue before the Supreme Court was whether the agreement for sale was “in its nature determinable” for the relief of specific performance to be rejected. The Court, while referring to the numerous authorities on the issue, including the ones set out hereinabove, clarified the meaning and application of “determinability” as follows: not all terminable contracts are “determinable." A contract is determinable only if a party can terminate it at its sweet will, without assigning any reason or cause, even where the other party is ready and willing to perform the agreement. Contracts that are terminable only upon breach or occurrence of specified events are not determinable in nature, and can be specifically performed. The Court held that the agreement for sale in this case was not determinable as it did not contain any clause permitting unilateral termination and could not be terminated so long as the original purchasers remained ready and willing to perform their obligations.   

The Supreme Court’s ruling in KS Manjunath provides much-needed clarity on the scope of “determinability” under the Specific Relief Act, 1963. By underscoring that only contracts terminable at will without cause fall within Section 14(1)(d), the judgment curtails a common procedural tactic where defendants prematurely defeat specific performance claims through unilateral termination notices. For practitioners, this decision reinforces that agreements, particularly agreements for sale, without unilateral termination rights, remain specifically enforceable.

About the authors: Atika Vaz is a Partner and Anumeha Karnatak is a Principal Associate at Shardul Amarchand Mangaldas & Co.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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