SUPREME COURT OF INDIA — LAND STANDS SOLD EVEN WHEN PRICE IS NOT PAID

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An interesting judgement was pronounced by the supreme court today 9-7-2020. The court has clarified that in matters of sale of land, the payment of  actual  price will not be  considered as the arbiter determining sale. The sale of land as per the court follows the execution of the sale deed and what has been mentioned in it. Suggesting that sale occurs when ownership in the land is transferred and not when the entire price agreed on is paid.

FACTS

A land of old tenure, admeasuring approximately 8701 sq. mtrs. in Revenue village Mota Varachha, Sub-District Surat owned by the Plaintiff. The land was under restrictive tenure as per Section 73AA of the Land Revenue Code. The Plaintiffs filed an application dated 13.05.2008 before the Collector, Surat to obtain permission for selling the suit property to Respondent No.1/Defendant No.1, which was non-irrigated, and stated that they had no objection to the sale of the suit property. The Collector granted permission for the sale and stipulated that the purchaser make the payment by cheque for an amount of Rs. 1,74,02,000/- with the reference of the payment made in the Sale Deed.

Respondent No. 1 – purchaser, issued 36 cheques for Rs.1,74,02,000 towards payment of the sale consideration in favour of the Plaintiffs. The details of which were set out in the registered Sale Deed dated 02.07.2009. The deed clearly mentioned that the amounts had been received and the same was signed and executed by both parties. Later the Respondent No. 1 sold the suit property to Respondent Nos. 2 and 3 herein vide registered Sale Deed dated 01.04.2013, for a sale consideration of Rs. 2,01,00,000/.  The plaintiff all along had also participated in the mutation proceedings before the collector to allow the property to devolve to the Respondent no. 2&3 as well.

The plaintiff after a gap of 5 ½  years filed a suit for the cancellation of the sale deed claiming that Respondent no. 1 had not paid the entire amount that was agreed to as the various cheques issued in settlement if the price had been dishonoured. They alleged that a fraud had been committed against them. The plaintiffs who were illiterate could not understand that they had been palyed up while agreeing to sign the sale deed. Further  since a fraud had been played the sale deed so executed was illegal and liable to be cancelled.  

The lower courts rejected their claim on the grounds of limitation since the suit was time barred further no cause of action for filing the suit was shown. The courts had allowed Order 7 Rule 11 (a)&(d) Civil Procedure Code 1908 application of the respondents on the said two grounds. The same was challenged before the High court which agreed with the ruling of the lower court. Aggrieved the present appeal was brought before the Supreme Court.

REASONS GIVEN FOR THE JUDGEMENT

On the issue pertaining to the suit being time barred. The court relied on Sec 59 and 58 of The Limitation Act where the residuary nature of the section limited the filing of any suit claiming any form of “declaration” to be filed within 3 years of the day the cause of action to file such a suit first arose. While explaining the meaning of the terms “cause of action” the court relied on its earlier judgement and explained asunder:

 13.   “Cause of action” means every fact which would be necessary for the plaintiff to prove, if traversed, in order to support his right to judgment. It consists of a bundle of material facts, which are necessary for the plaintiff to prove in order to entitle him to the reliefs claimed in the suit.

The court went ahead to examine where the period of limitation were to calculated from and concluded that the time for calculating the period of limitation within sec 58 & 59 was when the cause of action first arose that is if there are claims of subsequent cause of actions then the period for calculating this period of limitation will be when the cause first arose:

“The words “right to sue” means the right to seek relief by means of legal proceedings. The right to sue accrues only when the cause of action arises. The suit must be instituted when the right asserted in the suit is infringed, or when there is a clear and unequivocal threat to infringe such right by the defendant against whom the suit is instituted.”……………………………….……….…………………“In Khatri Hotels Pvt. Ltd. & Anr. v. Union of India & Anr.,12 this Court held that the use of the word ‘first’ between the words ‘sue’ and ‘accrued’, would mean that if a suit is based on multiple causes of action, the period of limitation will begin to run from the date when the right to sue first accrues. That is, if there are successive violations of the right, it would not give rise to a fresh cause of action, and the suit will be liable to be dismissed, if it is beyond the period of limitation counted from the date when the right to sue first accrued.”

The plaintiffs had filed the suit after the lapse of over 5 ½ years after the cause of action actually arose that is on the date of executing the sale deed. The court therefore did not accept the contention of the plaintiff that the cause of action was  recurring and therefore fresh cause was given to file the suit.

SALE ON EXECUTING THE SALE DEED

The contention that was the main thrust of the argument advanced by the plaintiff/appellant was the fact that since the entire amount agreed to be paid in the sale deed was not paid, the sale,  per se was not complete. Further, as a fraud had been played, it was contended that the registered sale deed on the event of fraud was liable to be cancelled under law. The court however rejected this contention. The court took note of the fact that the recital in the “sale deed” stated unequivocally that the Respondent had “paid” the price to the plaintiff at the time of execution or signing the sale deed. The plaintiff/appellant had also admitted and never challenged the proposition that sale of the said land was proper viz-a viz the sale deed. Meaning thereby that the rights in the property of ownership had transferred on the date of execution (signing)of the sale deed. Further, the court found it difficult to believe that the plaintiff/appellant had even after having not received the entire sale consideration, kept quite about it for over 5.5 years.

The court clarified the law on sale of property by re-iterating that sale occurred when the rights in the property stand transferred through a sale deed, irrespective, of whether agreed sum is paid in present or on a future date either in part or on happening of an event. Sale was therefore affected at the time when parties signed the sale deed and got the same registered. The Court relied on the definition of “Sale” under Sec 54 of The Transfer of Property Act. The court held asunder: “ Section 54 of the Transfer of Property Act, 1882 provides as under :

54. ‘Sale’ defined.—‘Sale’ is a transfer of ownership in exchange for a price paid or promised or part-paid and part promised” …..…………………………………….The definition of “sale” indicates that there must be a transfer of ownership from one person to another i.e. transfer of all rights and interest in the property, which was possessed by the transferor to the transferee. The transferor cannot retain any part of the interest or right in the property, or else it would not be a sale. The definition further indicates that the transfer of ownership has to be made for a “price paid or promised or part paid and part promised”. …………….. In Vidyadhar v. Manikrao & Anr.14 this Court held that the words “price paid or promised or part paid and part promised” indicates that actual payment of the whole of the price at the time of the execution of the Sale Deed is not a sine qua non for completion of the sale. Even if the whole of the price is not paid, but the document is executed, and thereafter registered, the sale would be complete, and the title would pass on to the transferee The non-payment of a part of the sale price would not affect the validity of the sale. Once the title in the property has already passed, even if the balance sale  consideration is not paid, the sale could not be invalidated on this ground under the transaction. The non-payment of a part of the sale price would not affect the validity of the sale.

CONCLUSION

The court rejected the appeal and imposed a cost of INR 1,00,000 on the appellant payable to Respondent No. 2 & 3 for abusing the process of the court.

“16. The present suit filed by the Plaintiffs is clearly an abuse of the process of the court, and bereft of any merit”

See the judgement