A Registered Sale Deed Cannot Be Canceled on Non-Payment of a Part of Sale Consideration

A Registered Sale Deed Cannot Be Canceled on Non-Payment of a Part of Sale Consideration

The Supreme Court of India in a landmark decision in the case of Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra) (D) Thr LRs & Ors. [Civil Appeal No. 9519 of 2019] held that the actual payment of the whole consideration at the time of execution of the sale deed is not a sine qua non for completion of the sale.

he Appellant was the owner of an agricultural land in the sub-district of Surat ("said land"). The said land was under restrictive tenure and hence the Appellant filed an application before the Collector to obtain permission for sale of the said land to the Respondent No. 1. The sale price of the said land was fixed at a total consideration of ₹1,74,02,000/- (Rupees One Crore Seventy-Four Lakhs Two Thousand Only). The said land was sold to the Respondent No. 1 vide a registered Sale Deed dated 2nd July, 2009. The Respondent No. 1 issued 36 cheques for the total consideration amount in favor of the Appellant. Thereafter, the said land was sold by the Respondent No. 1 to Respondent Nos. 2 and 3 vide a registered Sale Deed dated 1st April, 2013 for a total consideration of ₹2,01,00,000/- (Rupees Two Crores One Lakh Only). The Appellant filed a Special Civil Suit before the Principal Civil Judge, Surat against the Respondent Nos. 1, 2 and 3 praying for the Sale Deed dated 2nd July, 2009 to be canceled and for declaring the subsequent Sale Deed dated 1st April, 2013 as illegal, void and ineffective on the ground that the Respondent No. 1 had not paid the sale consideration in full. The Appellant contended that out of the 36 cheques, 30 were "bogus" cheques.

The Respondent Nos. 2 and 3 filed an Application for rejection of the plaint under Order VII Rule 11 (a) and (d) of the Civil Procedure Code ("the Application") on the grounds that the suit was barred by limitation and no cause of action had been disclosed in the plaint. The Trial Court allowed the Application and held that the Suit was barred by limitation since, as per Articles 58 and 59 of the Limitation Act, the Suit for cancellation of the Sale Deed dated 2nd July, 2009 should have been filed by 2012 (within 3 years) and not on 15th December, 2014. The cause of action had arisen when the Respondent No. 1 had issued false or bogus cheques to the Appellant in 2009. It further held that had the Appellant not been able to encash 30 cheques, a complaint ought to have been filed, or proceedings initiated for recovery of the unpaid sale consideration. There was nothing on record to show that the Appellant had made any complaint in this regard for a period of five years. The Appellant filed an appeal before the Division Bench of the Gujarat High Court which affirmed the findings of the Trial Court. Aggrieved by the order of the Division Bench, the Appellant challenged the same before the Apex Court.

ISSUES:

The issues raised before the Apex Court were whether the Appellant was within the period of limitation to cancel the Sale Deed and whether non-payment of the full consideration amount could be grounds for cancelation of the registered Sale Deed.

SUBMISSIONS:

The Appellant submitted that the Suit had been filed within the period of limitation as the Appellant realized the alleged fraud committed by Respondent No. 1 only on 21st November, 2014. The Appellant had admitted the execution of the Sale Deed dated 2nd July, 2009 in favor of the Respondent No. 1 before the Sub-Registrar, Surat. The only dispute sought to be raised by the Appellant was that they had not received a part of the sale consideration and hence the Sale Deeds should be canceled.

The Respondents on the other hand submitted that pursuant to the registration of the Sale Deed dated 2nd July, 2009, the Appellant had participated in the proceedings before the revenue officer for transfer of the said land in the revenue records in favor of the Respondent No. 1. Respondent Nos. 2 and 3 stated that they had purchased the said land from the Respondent No. 1 vide Sale Deed dated 1st April, 2013 after verifying the title and inspecting the revenue records.

JUDGMENT:

The Apex Court, in its Judgment, briefly touched upon the law applicable for deciding the Application and held that the underlying object of Order VII Rule 11 (a) is that if in a suit, no cause of action is disclosed, or the suit is barred by limitation under Rule 11 (d), the court would not permit the Plaintiff to unnecessarily protract the proceedings in the suit. In such a case, it would be necessary to put an end to the sham litigation, so that further judicial time is not wasted. The Court reiterated the rationale held in Azhar Hussain v. Rajiv Gandhi¹ that:

"12. …The whole purpose of conferment of such power is to ensure that a litigation which is meaningless, and bound to prove abortive should not be permitted to occupy the time of the Court, and exercise the mind of the respondent. The sword of Damocles need not be kept hanging over his head unnecessarily without point or purpose. Even if an ordinary civil litigation, the Court readily exercises the power to reject a plaint, if it does not disclose any cause of action."

The Court ascertained that the averments in the Plaint were completely contrary to the recitals in the Sale Deed dated 2nd July, 2009 in as much as the Sale Deed contained an express clause that the entire sale consideration was paid by the Respondent No. 1 to the Appellant. The Apex Court relied upon the case of Vidyadhar v. Manikrao & Anr.² to reiterate the words appearing in Section 54 of the Transfer of Property Act, 1882 "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. Hence, even if the averments of the Appellant are taken to be true that the entire sale consideration had in fact not been paid, it could not be a ground for the cancelation of the Sale Deed. The Appellant had other remedies in law for recovery of the balance amount. The court further noted that the Appellant had filed the Suit after a period of five and a half years and hence, while relying on the decision in Raghwendra Sharan Singh v. Ram Prasanna Singh, it was held that the Suit would be barred by limitation under Article 59 of the Limitation Act.³

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.