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Non Payment Of Part Of Sale Consideration Is Not A Ground For Cancellation Of Registered Sale Deed: SC [Read Judgment]

9 July 2020 11:59 AM GMT
Non Payment Of Part Of Sale Consideration Is Not A Ground For Cancellation Of Registered Sale Deed: SC [Read Judgment]
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The Supreme Court has observed that non payment of a part of sale consideration is not a ground for cancellation of a registered Sale Deed.

The Court was considering the appeal filed against the order of the Gujarat High Court, which had affirmed the Order of the Trial Court, allowing the application filed by defendants under Order VII Rule 11(d), CPC holding that the suit filed by the Plaintiff was barred by limitation. The Suit was for cancellation of the sale deed (which was executed more than five years ago) on the ground that the sale consideration fixed by the Collector, had not been paid in entirety by the defendant. The period of limitation for a suit seeking a relief of cancellation of sale deed is three years, which commences from the date when the right to sue first accrues.

In its judgment dismissing the appeal, the Apex Court bench comprising of Justices L. Nageswara Rao and Indu Malhotra summarizes the law applicable for deciding an application under Order VII Rule 11 CPC.

Referring to the judgment in Vidyadhar v. Manikrao (1999) 3 SCC 573 and Section 54 of the Transfer of Property Act, 1882, the court said 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 under the transaction. 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. In order to constitute a "sale", the parties must intend to transfer the ownership of the property, on the agreement to pay the price either in praesenti, or in future. The intention is to be gathered from the recitals of the sale deed, the conduct of the parties, and the evidence on record. In view of the law laid down by this Court, even if the averments of the Plaintiffs are taken to be true, that the entire sale consideration had not in fact been paid, it could not be a ground for cancellation of the Sale Deed. The Plaintiffs may have other remedies in law for recovery of the balance consideration, but could not be granted the relief of cancellation of the registered Sale Deed."

The Court noted that the plaintiffs have averred that the period of limitation commenced on 21.11.2014, when they obtained a copy of the index of the Sale Deed dated 02.07.2009. In this regard, the bench said:

The plea taken in the plaint that they learnt of the alleged fraud in 2014, on receipt of the index of the Sale Deed, is wholly misconceived, since the receipt of the index would not constitute the cause of action for filing the suit. On a reading of the plaint, it is clear that the cause of action arose on the non-payment of the bulk of the sale consideration, which event occurred in the year 2009. The plea taken by the Plaintiffs is to create an illusory cause of action, so as to overcome the period of limitation. The plea raised is rejected as being meritless and devoid of any truth.

Dismissing the appeal by imposing costs of Rs. 1 Lakh on appellant, the court observed that the conduct of the Plaintiffs in not taking recourse to legal action for over a period of 5 and ½ years from the execution of the Sale Deed in 2009, for payment of the balance sale consideration, also reflects that the institution of the present suit is an after-thought.  


Case no.: CIVIL APPEAL NO. 9519 OF 2019

Coram: Justices L. Nageswara Rao and Indu Malhotra

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