The Andhra Pradesh High Court set aside a trial court order which rejected a 16-year-old suit for specific performance of a sale agreement, holding that disputed questions of whether agreement was a concluded contract, the person executing it could bind the other owners, and whether the property was sufficiently identified required trial.

The Court allowed the appeals filed by the plaintiff, restored the suit and directed him to deposit he balance sale consideration of ₹2.28 crore by the way of fixed deposits within 10 days. It also directed the trial court to dispose of the suit expeditiously, preferably within six months.

A Division Bench of Justice D. Ramesh and Justice Alapati Giridhar observed:

“The Court also prima facie finds that the agreement contains all essential terms as stated supra, it appears enforceable subject to proof of the same by the Plaintiff as per law, however, this disputed point is to be decided by the Trial Court after trial.

As rightly contended by the Plaintiff, the Trial Court did not consider the terms of the agreement or did not observe what is the material term or condition is missing to arrive this agreement is not concluded contract or to contend this agreement is not enforceable. But the Trial Court mainly relied on the principle that an agreement to execute another agreement is not enforceable without referring to the contents of the agreement, but proceeded to reject the plaint relying on the principle. The truth or otherwise of the case of the Plaintiff and contents of the agreement shall be decided after the trial”

In doing so, the Court held that while considering an application for rejection of a plaint under Order VII Rule 11 of the Code of Civil Procedure (CPC), the court must examine the plaint averments and the documents filed along with it. It cannot conduct a mini-trial or decide disputed questions of fact at that stage.

The dispute arose from an agreement of sale dated January 6, 2010, concerning 47.50 acres in Narasimhapuram and Markapuram. The plaintiff alleged that the first defendant managed the family properties. She had executed the agreement in her own handwriting, both for herself and on behalf of the other family members. This was allegedly done after discussing the transaction with them and obtaining their consent.

The agreed sale consideration was ₹2.38 crore. The plaintiff had paid ₹5 lakh as advance. Under the agreement, a further ₹55 lakh was payable by January 18, 2010, taking the first instalment to ₹60 lakh. The remaining ₹1.78 crore was payable within four months, after which a registered sale deed was to be executed.

The plaintiff claimed that he approached the first defendant on January 10, 2010, with the balance ₹55 lakh. However, she asked him to return later and subsequently sought more time. He then issued a telegram and legal notice calling upon the defendants to accept the balance consideration and execute the sale deed.

He later allegedly discovered that the first four defendants had executed nine registered documents in favour of other purchasers. These documents covered portions of the land and were allegedly executed to defeat his rights under the agreement. The plaintiff maintained that the entire 47.50 acres continued to exist as one compact block within the boundaries described in the plaint. He then filed the suit seeking specific performance.

The defendants sought rejection of the plaint under Order VII Rule 11 CPC. They contended that the January 6 document was merely an agreement to enter into a further agreement on January 18, 2010, and was not a concluded contract.

They also argued that the document did not identify the vendors and vendees or specify survey numbers and boundaries. They disputed the first defendant's authority to bind the other owners. They further raised objections concerning stamp duty, registration, non-compliance with Forms 47 and 48 of the CPC, and absence of a cause of action.

The trial court accepted these objections and rejected the plaint. The plaintiff challenged that order before the High Court.

Examining the agreement, the Bench noted that it specified the date of execution, extent and location of the property, sale consideration, payment schedule and obligation to execute a registered sale deed. It observed that the trial court had relied on the principle that an agreement to execute a further agreement was unenforceable. However, it had not examined the contents of the document or identified any essential term that remained unsettled.

Although the agreement did not specify survey numbers or boundaries, the plaint schedule described the property. The defendants had also not disputed the identity or ownership of the 47.50 acres in their applications. The Bench held that the sufficiency of the property description required adjudication after trial. It could not be decided while considering an application under Order VII Rule 11 CPC.

On the first defendant's authority to execute the agreement on behalf of the other owners, the Court noted the plaintiff's specific plea that she had discussed the transaction with the other family members and obtained their consent. Whether such consent had been given, and whether she was authorised to bind the other owners, required evidence.

The Bench also noted that the first defendant had not specifically denied in her affidavit or submissions that the agreement was in her handwriting, that she had signed it or that she had received the ₹5 lakh advance. It clarified, however, that the plaintiff would still have to prove the agreement and establish his entitlement to specific performance in accordance with law.

The Court observed that the plaintiff's case was that the agreement dated January 6, 2010, itself constituted a concluded contract. The defendants had not pointed out any essential term left unsettled or explained why a further agreement was required. The agreement prima facie contained the essential terms and appeared enforceable, subject to proof by the plaintiff. Its enforceability was, however, a matter to be decided by the trial court after trial.

The Bench also held that the objections concerning stamp duty, registration and non-compliance with Forms 47 and 48 of the CPC did not warrant rejection of the plaint at that stage. The defendants could raise those objections at the appropriate stage of the proceedings.

Noting that the suit had remained pending for about 16 years without trial, the Bench allowed the appeals, set aside the trial court's order and restored the suit. It directed the plaintiff to deposit the balance sale consideration of ₹2.28 crore by way of fixed deposits within 10 days. The deposit and interest accrued on it would be subject to the outcome of the suit.

The Court further directed that, in the event of the plaintiff failing to make the deposit, the defendants could seek permission from the trial court to deal with or alienate the property in accordance with Section 52 of the Transfer of Property Act.

The trial court was directed to dispose of the suit expeditiously, preferably within six months from receipt of the judgment. The parties were directed to cooperate, and the trial court was permitted to take appropriate steps, including imposing costs, in the event of either party failing to assist or causing delay.

The Bench clarified that its observations were confined to deciding the appeals and would not influence the trial court's adjudication of the suit on merits.

Counsel for Appellant: Mr. Sita Ram Chaparla

Counsel for the Respondents: Sri M.R.S. Srinivas