Village Land, Earnest Money, and Income Tax

 What a seller should know before filing ITR

Ramesh owned agricultural land in a village, outside the Nagarparishad limits. After holding it for more than 25 years, he agreed to sell it and received earnest money from the buyer. He then asked the most practical question: should this amount be shown in the Income Tax Return? For rural agricultural land, the answer is usually no, because such land is not treated as a capital asset under section 2(14) of the Income Tax Act.

The important point is that the legal character of the land matters more than the label in the agreement. If the land is genuinely rural agricultural land and the documents support that position, the sale generally falls outside capital gains tax, and the advance received under the agreement is not taxable merely because it was received.

Ramesh’s Story

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Supreme court: Courts Must Notify Income Tax Dept. Of Rs. 2 Lakh And Above Cash Transaction Claims In Suits

However, when the Bill was passed, the permissible limit was capped under Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs. When a suit is filed claiming Rs. 75,00,000/- paid by cash, not only does is create a suspicion on the transaction, but also displays, a violation of law. Though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:

(A) Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any,

(B) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law,

(C) Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action,

(D) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs. 2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 5200 of 2025 

Decided On: 16.04.2025

The Correspondence, RBANMS Educational Institution Vs. B. Gunashekar and Ors.

Hon'ble Judges/Coram:

J.B. Pardiwala and R. Mahadevan, JJ.

Author: R. Mahadevan, J.

 Citation: 2025 INSC 490, MANU/SC/0492/2025

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Supreme Court Reinforces Property Law Principles: Agreement to Sell Cannot Create Rights Against Third Parties

 The Supreme Court of India's recent judgment in The Correspondence, RBANMS Educational Institution v. B. Gunashekar & Ors. (Civil Appeal No. 5200 of 2025) has significantly strengthened property law jurisprudence while providing crucial protection to charitable institutions from frivolous litigation. The two-judge bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan delivered this important ruling on April 16, 2025, addressing fundamental questions about the enforceability of agreements to sell against third parties.

Background: A 148-Year-Old Institution Under Siege

The case involved R.B.A.N.M.S. Educational Institution, a charitable trust established in 1873 to serve marginalized communities in Bangalore. The institution has been in continuous possession of the disputed property since 1905, when it was initially leased the "Sappers Practice Ground," which was formally conveyed to them by the Municipal Commissioner in 1929.

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Supreme court: Under which circumstances the party must pay stamp duty on agreement of sale treating it as Conveyance?

In the instant case, the agreement to sell executed between the Appellant and mother of the Respondent No. 1, specifically states that "this property is in your occupation on rental basis and it will not be part of the sale transaction. After completion of sale transaction, the possession of the said property will be given to you on the ownership basis. This makes it very clear that the suit property was occupied by the Appellant on a rental basis and it would not be a part of the sale transaction. Further, there was a clause, by which, timeline was given for execution of sale deed. Since the possession was admittedly given to the Appellant even before the date of agreement, implying acquisition of possessory rights protected Under Section 53A of the Transfer of Property Act, the same requires payment of proper stamp duty. As indicated above, the agreement to sell includes a Clause stating that physical possession had already been handed over to the Appellant, regardless of the basis of such possession. This satisfies the requirement to treat the instrument as a 'conveyance' within the meaning of Explanation I to Article 25 of Schedule I of Bombay Stamp Act, with only the formality of executing the sale deed remaining. Pertinently, it is to be pointed out that the Appellant filed a suit for specific performance of the agreement to sell against the Respondents; Respondent No. 1 filed a suit seeking eviction of the Appellant from the subject property; and both the suits are pending, which clearly establish the possession of the property by the Appellant. Therefore, the said document is liable for payment of stamp duty at the hands of the Appellant.  {Para 11}

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2549 of 2025.

Decided On: 14.02.2025

Ramesh Mishrimal Jain Vs. Avinash Vishwanath Patne and Ors.

Hon'ble Judges/Coram:

J.B. Pardiwala and R. Mahadevan, JJ.

Author: R. Mahadevan, J.

Citation: 2025 INSC 213, MANU/SC/0218/2025.

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Supreme Court: An agreement for sale in respect of an immovable property does not transfer title in favour of the purchaser under the agreement

 It is well settled that an agreement for sale in respect of an immovable property does not transfer title in favour of the purchaser under the agreement. In view of Section 54 of the Transfer of Property Act, 1882, an agreement for sale does not create any interest in the property. The only mode by which an immovable property worth more than Rs. 100/- (Rupees one hundred) can be sold is by a sale deed duly registered in accordance with the Indian Registration Act, 1908. {Para 6}

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. ... of 2025 (Arising out of Diary No. 38616 of 2018)

Date of Order: 07.01.2025

Indian Overseas Bank Vs. M.A.S. Subramanian and Ors.

Hon'ble Judges/Coram:

Abhay Shreeniwas Oka and Ujjal Bhuyan, JJ.

Citation: MANU/SCOR/07610/2025.

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Supreme Court: Agreement For Sale Doesn't Transfer Title Or Create Interest In Property :

It is well settled that an agreement for sale in

respect of an immovable property does not transfer title in

favour of the purchaser under the agreement. In view of

Section 54 of the Transfer of Property Act, 1882, an

agreement for sale does not create any interest in the

property. The only mode by which an immovable property worth

more than Rs.100/- (Rupees one hundred) can be sold is by a

sale deed duly registered in accordance with the Indian

Registration Act, 1908. {Para 6}

 IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NOS. OF 2025

(Arising out of Diary No.38616 of 2018)

INDIAN OVERSEAS BANK  Vs.  M.A.S SUBRAMANIAN & ORS.

Dated: January 07, 2025.

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Supreme Court: Whether one plaintiff is entitled to get decree in suit for specific performance of contract if co-plaintiff is not willing to get specific performance?

 ON QUESTION - (f)

19. Now, the question is whether the Plaintiffs were entitled to a decree for specific performance. In his deposition, the first Plaintiff has proved the service of notice of demand to the first Defendant. The suit is filed within limitation, and the Defendants did not raise a plea of delay and laches. There are concurrent findings of the three Courts on the issue of the readiness and willingness shown by the first Plaintiff. There is no reason to disturb the said findings. Now, the question is, what is the effect of the failure of the second Plaintiff to support the first Plaintiff and his conduct of supporting the Defendants? In the facts of the case, the answer lies in the submissions made by the second to fourth Defendants before the High Court. In paragraph 9 of the judgment, the High Court has recorded the following submissions made by the counsel for the second to fourth Defendants:

9. The learned Senior Counsel for the Appellants submitted that the Plaintiff No. 2 Murari Singh did not file the suit nor had signed the vakalatnama and that the said Plaintiff had admitted this fact in his deposition, consequently, the suit was not maintainable. It was further submitted that the percentage of share between the Plaintiffs were not defined in the agreement to sell and, consequently, Under Section 45 of the Transfer of Property Act, the Plaintiffs would be deemed to have equal shares, namely, 50 percent. The learned Senior Counsel for the Appellants contended that since Murari Singh did not institute the suit, the decree for specific performance for the whole land, which was undivided could not have been decreed by the trial court and, consequently, to that extent, the decree passed by the trial court was erroneous. ...............................................................

(emphasis added)

20. In our view, as the second Plaintiff was not interested in getting the specific performance, the decree ought to have been restricted to the undivided one-half share in the suit property in favour of only the first Plaintiff.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 6782 of 2013

Decided On: 09.07.2024

Maharaj Singh and Ors. Vs. Karan Singh (Dead) thr. L.Rs. and Ors.

Hon'ble Judges/Coram:

Abhay Shreeniwas Oka and Sanjay Karol, JJ.

Author: Abhay Shreeniwas Oka, J.

Citation: MANU/SC/0587/2024,2024 INSC 491.

Read full Judgment here: Click here.

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Supreme Court: Plaintiff in suit for specific performance of contract Need Not Seek Cancellation Of Subsequent Sale Deed Executed With Prior Knowledge Of Agreement To Sell

A bench of two Hon'ble Judges has rendered this decision. Unfortunately, the attention of the Bench was not invited to binding precedent in the form of a decision of a larger bench in the case of Lala Durga Prasad and Ors. MANU/SC/0008/1953 : (1953) 2 SCC 509. Hence, the decision in the case of B. Vijaya Bharathi   MANU/SC/1032/2017 : 2017:INSC:734 : (2018) 11 SCC 761 is not a binding precedent. Therefore, there was no requirement to make a prayer in the plaint for cancellation or setting aside the subsequent sale deeds.

16. Clause (a) to (c) of Section 19 of the Specific Relief Act read thus:

19. Relief against parties and persons claiming under them by subsequent title.- Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-

(a) either party thereto;

(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;

(c) any person claiming under a title which, though prior to the contract and known to the Plaintiff, might have been displaced by the Defendant;

(d).........................................................

(e) .........................................................

(emphasis added)

In view of Clause (b) of Section 19, the Defendants who are claiming under the sale deeds executed after the execution of the suit agreement can be subjected to a decree of specific performance as the suit agreement can be enforced specifically against such Defendants unless they are bona-fide purchasers without the notice of the original contract. When, in a given case, the Defendants, who are subsequent purchasers, fail to prove that they entered into the sale deed in good faith and without notice of the suit agreement, in view of Section 19(b), a decree for specific performance can be passed against such Defendants. Therefore, in such a case where Section 19(b) is applicable, under the decree of specific performance, the subsequent purchasers can be directed to execute the sale deed along with the original vendor. There is no necessity to pray for the cancellation of the subsequent sale deeds.

 IN THE SUPREME COURT OF INDIA

Civil Appeal No. 6782 of 2013

Decided On: 09.07.2024

Maharaj Singh and Ors. Vs. Karan Singh (Dead) thr. L.Rs. and Ors.

Hon'ble Judges/Coram:

Abhay Shreeniwas Oka and Sanjay Karol, JJ.

Author: Abhay Shreeniwas Oka, J.

Citation: MANU/SC/0587/2024,2024 INSC 491.

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Madras HC: It is not necessary to examine attesting witness to prove agreement of sale

 If the revisions are allowed and the prayers are granted, the plaintiff will only prove that the signatures are of the attesting witnesses. As per Sections 68 to 71 of the Indian Evidence Act, the proof of the signatures of the attesting witnesses is necessary only when the document is required by law to be so attested. In case, the document does not require attestation, Sections 68 to 71 would be of no avail. This is clear from Section 72 of the Indian Evidence Act. {Para 17}

18. As per Section 72 of the Indian Evidence Act, an attested document, that is not required to be attested, would have to be proved as if it were unattested. An agreement of sale is not a document which requires attestation. Therefore, the proof that would be required as per Section 72 would be dehors the attestation in the said document. If that be the position of law, then by proving the signatures of the attesting witnesses, it does not take the plaintiff anywhere.

IN THE HIGH COURT OF MADRAS

C.R.P. (PD) Nos. 2927, 2930 of 2022, 

Decided On: 08.08.2024

S. Suresh Vs. K. Vijayalakshmi and Ors.

Hon'ble Judges/Coram:

V. Lakshminarayanan, J.

Citation: MANU/TN/4585/2024.

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Whether the court can grant temporary injunction in suit for specific performance of contract if vendor pleads that agreement of sale was executed under coercion?

 In the instant case, the defendant has not

denied the execution of the agreement to sell dated

07.05.2022 but has contended that the agreement to sell

was entered into under coercion. However, the defendant

had kept the money received under the agreement of Rs.10

lakh in her account for more than 5 months. Thus, prima

facie agreement cannot be said to be under coercion as

there is no steps taken by the defendant to return the

amount, rather the defendant has kept money in her

account and effect thereto is to be examined before the trial

court and thus no interference is called for at this stage, in

the order passed by the trial Court. {Para 31}

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT AURANGABAD

APPEAL FROM ORDER NO. 25 OF 2023

Smt. Manisha w/o. Balkrushna Kode, Vs Shri. Madanlal s/o. Uttamchand Desarda,

CORAM : ARUN R. PEDNEKER, J.

Pronounced on : 02.08.2023

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Whether Will(Before Death Of Testator) Or General Power Of Attorney(GPA) Can Confer Title In Immovable Property?

 It goes without saying that the power of attorney executed by the Defendant-Appellant is of no consequence as on the strength of said power of attorney, neither sale deed has been executed nor any action pursuant thereof has been taken by the power of attorney holder which may confer title upon the Plaintiff-Respondent. Non-execution of any document by the general power of attorney holder consequent to it renders the said general power of attorney useless. {Para 12}

13. Similarly, the will dated 10.04.2002 executed by the Defendant-Appellant in favour of the Plaintiff-Respondent is meaningless as the will, if any, comes into effect only after the death of the executant and not before it. It has no force till the testator or the person making it dies. The said stage has not arrived in the present case and, therefore, even the aforesaid will in no way confers any right upon the Plaintiff-Respondent.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 7527-7528 of 2012

Decided On: 02.06.2023

Ghanshyam  Vs. Yogendra Rathi

Hon'ble Judges/Coram:

Dipankar Datta and Pankaj Mithal, JJ.

Author: Pankaj Mithal, J.

Citation: MANU/SC/0642/2023.

Read full Judgment here: Click here

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Whether the court can protect the possession of a person who is claiming title to an immovable property based on an agreement of sale?

No doubt, agreement to sell is not a document of title or a deed of transfer of property by sale and as such, may not confer absolute title upon the Plaintiff-Respondent over the suit property in view of Section 54 of the Transfer of Property Act, 1882, nonetheless, the agreement to sell, the payment of entire sale consideration as mentioned in the agreement itself and corroborated by the receipt of its payment and the fact that the Plaintiff-Respondent was put in possession of the suit property in accordance with law as is also established by the possession memo on record, goes to prove that the Plaintiff-Respondent is de-facto having possessory rights over the suit property in part performance of the agreement to sell. This possessory right of the Plaintiff-Respondent is not liable to be disturbed by the transferer, i.e., the Defendant-Appellant. 

10. In the wake of the finding that the above-mentioned documents have not been fraudulently obtained or have not been manipulated, treating the said documents to be duly executed and as genuine, one thing is clear that the Plaintiff-Respondent is in a settled possession of the suit property at least in part performance of the agreement which cannot be disturbed or disputed by the transferer, i.e., the Defendant-Appellant.

IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 7527-7528 of 2012

Decided On: 02.06.2023

Ghanshyam  Vs. Yogendra Rathi

Hon'ble Judges/Coram:

Dipankar Datta and Pankaj Mithal, JJ.

Author: Pankaj Mithal, J.

Citation: MANU/SC/0642/2023

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Can the tenant refuse to pay rent in the absence of a specific clause in that regard in the sale agreement?

It is settled position of law that an agreement holder who is the tenant of the property should continue to pay the rent, unless there is a specific clause in the sale agreement that the tenant need not pay the rent from the date of sale agreement. Hence, the contention of the learned counsel for the petitioner that the jural relationship of the landlord and tenant had got terminated due to the sale agreement is not legally sustainable. {Para 8}

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

C.R.P.(MD).No.323 of 2023 and CMP(MD).No.1537 of 2023

K.Jeyakumar  Vs L.Arunachalam 

CORAM

 MR.JUSTICE R.VIJAYAKUMAR

DELIVERED ON: 13 .02.2023

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Whether step mother can execute agreement of sale regarding immovable property as karta if she has inherited it alongwith her step daughters from her husband?

There is no dispute about the fact that the suit properties were the separate properties of Dajiba. After his demise somewhere

in the year 1966-67 his widow i.e. defendant no.1 and daughters,

who are the plaintiffs simultaneously succeeded to his estate in view of Section 8 of the Hindu Succession Act. However, in view of provision of Section 19 of that Act, all these heirs of Dajiba would inherit as tenants in common and not as joint tenants. Once such a devolution is understood, the matter becomes clear like a day light. The very theory of existence of a karta and legal necessity presupposes that the sharers are joint, which is not the case in the matter in hand. By virtue of such mode of succession by the widow and four daughters of Dajiba receiving the suit properties as his heirs, they take their individual shares as tenants in common. In the bsence of the suit properties being joint, therefore, there was no question of the step mother - defendant no.1 acting as a manager or karta of the family. She, therefore, had no right to deal with the suit properties even for legal necessity.It has been held that under Hindu Law coparcenership is a necessary qualification for becoming a manager of joint Hindu family and since a widow cannot be a coparcener she is not legally entitled to become a manager. 

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT AURANGABAD

SECOND APPEAL NO.1648 OF 2005

Kamalabai  Vitthalrao Jadhav Vs Darubai W/o. Dajiba

CORAM : MANGESH S. PATIL, J.

Pronounced on : 31-03-2022

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How to ascertain limitation in the suit for rescission of contract?

  This takes me to the issue regarding limitation. It is quite clear that by a specific prayer the appellant was seeking to rescind the agreement and consequently, the suit would be governed by article 59 from the Schedule to the Limitation Act, 1963 which prescribes for a period of limitation of three years from the date when facts which entitle the appellant to have the contract set aside or rescinded became known to him. Admittedly, apart from the dispute regarding payment of the balance amount of consideration and keeping aside the issue regarding the readiness and willingness, the appellant had served the respondent first notice on 10.07.1979 (Exh. 53) and the second notice on 10.06.1985 (Exh. 34). Attempt is being made to demonstrate on behalf of the appellant that since the respondent did not give response to the latter notice (Exh. 34), the period of limitation would begin to run from that day. The suit was filed within three years, on 04.07.1985, from the date of this notice and therefore it was within limitation. {para 22}

23. As has been rightly pointed out by the lower appellate court it is the first date when the plaintiff became entitled to rescind the contract would be the date from which the period of three years is to be counted. Going by the recitals in the notice dated 10.06.1979 (Exh. 53) the appellant had specifically put the respondent to notice that unless the balance amount of consideration of Rs. 5500/- was paid within a month and the sale-deed was not got registered, the transaction was to come to an end and the earnest money would stand forfeited. If such was the scenario, at the most one month after this notice when the respondent had not obliged by paying the balance amount of consideration and had not taken steps to get the sale deed registered, the appellant ought to have filed the suit seeking rescission of the contract within three years after lapse of one month after the notice dated 10.07.1979 and to be precise latest by 09.08.1982. The suit was filed on 04.07.1985 and was clearly barred by limitation. The observation and the conclusions of the lower appellate court in this regard are certainly legal.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT AURANGABAD

SECOND APPEAL NO. 247 OF 1992

WITH CA/11710/2016

Kishan s/o Gajananrao Ghorpade Vs Shivaji s/o Sarjerao Thombre,

CORAM : MANGESH S. PATIL, J.

PRONOUNCED ON: 21.03.2022.

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Whether the court can grant specific performance of a contract to the plaintiff if the development authority has leased the land to the defendant to construct his house?

 In the facts of this case, the question would, therefore, be, as to whether the enforcement of the agreement to sell dated 17.11.1982, expressly or impliedly, lead to palpably defeat the law in question, which is contained in the Statutory Rules or is prohibited by the same. {Para 73}

74. A contract may expressly or impliedly, be prohibited by provisions of a law. The intentions of the parties do not salvage such a contract. [See AIR 1968 SCC 1328 (supra)]. What is involved in this case, may not be a mere case of a conditional decree for specific performance being granted as was the case in the line of decisions commencing with Motilal (supra) and ending with Ferrodous Estates (supra). The Rules contemplate a definite scheme. Land, which is acquired by the Public Authority, is meant to be utilised for the particular purpose. The object of the law is to invite applications from eligible persons, who are to be selected by a Committee and the sites are allotted to those eligible persons, so that the chosen ones are enabled to put up structures, which are meant to be residential houses. It is implicit in the Rules, and what is more, in the lease-cum-sale agreement, that the allottee, who is treated as a lessee under Rule 7, will remain in possession and, what is more, proceed to fulfil his obligation under the lease-cum-sale agreement and the Rules. The obligations of the allottee/lessee are unambiguous. He has held himself out to be in dire need of a plot of land for the purpose of constructing a residential building. He has to disclose his annual income and any other means indicating his capacity, not only to purchase the site applied for but also to construct the house. He has to respond to the query as to whether any member of the family, of which he is a member, owns or has been allotted a site or a house by the Board or any other Authority, within the area under jurisdiction of the Board. The applicant must, furthermore, disclose whether he already owns a house or house site in the city or outside the city. Whether the applicant’s wife, husband or minor child owns a house or house site, is another matter, he must disclose. Incorrect information in any of these matters, would entitle the Board to resume the site. Rule 11 specifically announces among the principles as relevant for selecting an applicant for allotment, the income of the applicant to build the house on the site for his residence. No doubt, it is not applicable to certain classes, which include the other backward classes. Rule 11(3) declares further that the number of years, the applicant has been waiting for allotment of a site, inter alia, as a relevant principle.

75. It may be true that as contended by Shri R. Basant, learned senior counsel for the respondent that despite the fact no building was put up by the allottee, the BDA has not deemed it fit to cancel the allotment. We gather the impression that the BDA has been lax in the pursuit of the lofty goals of the law. We do not pursue the matter further as BDA is not a party.

76. If the agreement between plaintiff and the first defendant is taken as it is and it is enforced, the following would be the consequences. The allotment to the first defendant was made on 04.04.1979. In fact, the first defendant was obliged, in law, to construct a residential building within two years under Rule 17(6). No doubt, the time could be extended thereunder. But, at the time, the agreement dated 17.11.1982 was entered into, the first defendant was already in breach. The result, however, of the agreement dated 17.11.1982, is as follows:
The first defendant would be liable to convey the right in the site to the plaintiff. The price would be Rs.50,000/- for the site, proceeding on the basis of the concurrent findings by the Court. This is on the supposition that the parties contemplated that the site would be conveyed after the period of ten years from the date of allotment upon the expiry of which alone, the allottee, viz., the first defendant would be entitled to the conveyance under Rule 17(7) of the Rules. It must be noticed that in fact, under the lease-cum-sale agreement and the Rules, what is contemplated is that on events leading up to the stage where the elements of Rule 17(7) are satisfied alone, a right or duty would accrue to the allottee/ lie upon the party. However, what is more important in the context of the facts of this case is the following facet.
Under the agreement, the parties contemplated and have expressly provided that the plaintiff was to be put in possession of the site on the date of the agreement, i.e., on 17.11.1982. Did the parties contemplate the construction of the building residential in nature, for the purpose of which, the site was allotted to the first defendant? Is it not a clear case where enforcing the agreement, as it is, would necessarily result in the first defendant not acting in accordance with lease-cumsale agreement, which, she entered into with the BDA and, what is even more crucially important, against the mandate of the law, as contained in the Rules, which contemplated that the allotment was made for the construction of a residential building by the allottee and the construction was to be completed within the period of two years or an extended period? The agreement between the parties contemplated giving a short shrift to the mandate of the law. This is clear from the fact that under the agreement, the first defendant was obliged to sell the site as it is. Construction of the building became a practical impossibility. The price, which was agreed upon, was qua the site alone. The consideration and the other terms of the agreement, in other words, ruled out the possibility of a residential building being constructed by the first defendant, who as the allottee, was, under the law, obliged to construct the building. Assuming for a moment that the construction was put up, which assumption must be premised on possession not being handed over to the plaintiff and which is contrary, not only to the terms of the agreement, but also pleading of the plaintiff and the consistent stand in the evidence adduced on behalf of the plaintiff and even proceeding, however, on the basis that as found by the Trial Court, that the plaintiff has failed to establish that possession was handed over to him on the date of agreement and that the possession continued with the first defendant, the terms of the agreement, which included, the price being fixed for conveying the right for the site, necessarily, would have the effect of freezing the first respondent in even attempting to put up a construction.

77. We, therefore, reject the contention of the plaintiff that there was nothing, which could have prevented putting up a building. The argument of plaintiff involves rewriting of the contract. This is different from a situation where an allottee, without being trammelled by an agreement, is unable to put up a building even for the whole of ten years and action is not taken under Rule 17(6) and yet conveyance is made in his favour under Rule 17(7). The direct impact of the agreement is that it compelled the party to abstain from performing its obligation in law apart from breaching the agreement with BDA. In other words, taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first respondent to put up the construction. The agreement to sell involved clearly terms which are impliedly prohibited by law in that the first defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The ‘sublime’ object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non-alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned.

78. Going by the recital in the agreement entered into between the plaintiff and the first defendant, possession is handed over by the first defendant to the plaintiff. The original Possession Certificate is also said to be handed over to the plaintiff. The agreement, even according to the plaintiff, contemplated that within three months of conveyance of the site in favour of the first defendant, the first defendant was to convey her rights in the site to the plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law.

79. The illegality goes to the root of the matter. It is quite clear that the plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The plaintiff is confronted with it and he must face its consequences. The matter is clear. We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging stock.

Supreme Court

JUSTICE K. M. JOSEPH JUSTICE PAMIDIGHANTAM SRI NARASIMHA

G. T. GIRISH Vs. Y. SUBBA RAJU (D) BY LRs. & ANR.

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Should the court give the contract's specific performance to the plaintiff if he is relying on an agreement of sale prohibited by law?

 Salmond stated the law in these words at p. 352 of his Book (2nd Edn.):

“So if A employs B to commit a robbery, A cannot sue B for the proceeds. And the position would be the same if A were to vest property in B upon trust to carry out some fraudulent scheme: A could not sue B for an account of the profits. But if B, who is A's agent or trustee, receives on A's account money paid by C pursuant to an illegal contract between A and C the position is otherwise and A can recover the property from B, although he could not have claimed it from C. In such cases public policy requires that the rule of turpis causa shall be excluded by the more important and imperative rule that agents and trustees must faithfully perform the duties of their office.”
Williston in his Book on Contracts (Revised Edn.), Vol. VI, has discussed this matter at p. 5069, para 1785 and in paras 1771 to 1774, he has noted certain exceptional cases, and has observed as follows:
“If recovery is to be allowed by either partner or principal in any case, it must be where the illegality is of so light or venial a character that it is deemed more opposed to public policy to allow the defendant to violate his fiduciary relation with the plaintiff than to allow the plaintiff to gain the benefit of an illegal transaction.”
Even in India, certain exceptions to the rule of turpi causa have been accepted. Examples of those cases are found in Palaniyappa Chettiar v. Chockalingam Chettiar [(1920) ILR 44 Mad 334] and Bhola Nath v. Mul Chand [(1903) ILR 25 All 639].”

49. We may also notice the following statement by this Court in Kedar Nath Motani (supra):
“15. The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”

50. In Sita Ram v. Radhabai and others, AIR 1968 SC 534, this Court observed as follows:
“11. The principle that the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud is expressed in the maxim in pari deucto portior est conditio defendentis. But as stated in Anson's Principles of the English Law of Contracts, 22nd Edn., p. 343: there are exceptional cases in which a man will be relieved of the consequences of an illegal contract into which he has entered — cases to which the maxim does not apply. They fall into three classes: (a) where the illegal purpose has not yet been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it; (b) where the plaintiff is not in pari delicto with the defendant; (c) where the plaintiff does not have to rely on the illegality to make out his claim'.

51. In Narayanamma (supra), this Court was considering a Suit for specific performance, which was resisted on the ground that the agreement to sell was contrary to the provisions of the Statute. Section 61 of the Karnataka Land Reforms Act, 1961 provided that no land for which occupancy was granted, shall within 15 years of the order of the Tribunal, be transferred by sale, inter alia. A partition was permitted. Equally, a mortgage could be effected to secure a loan. Drawing support from Judgment of this Court in Kedar Nath (supra), this Court, inter alia, as follows:
“15. The three-Judge Bench of this Court, after referring to the aforesaid judgments, speaking through M. Hidayatullah, J. (as his Lordship then was), observes thus: (Kedar Nath Motani case [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] , AIR pp. 218-19, para 15)
“15. The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”
16. It could thus be seen, that this Court has held that the correct position of law is that, what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. This Court further held, that if the illegality is trivial or venial and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. It has further been held, that a strict view must be taken of the plaintiff's conduct and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. However, if the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose is achieved, then, unless it be of such a gross nature as to outrage the conscience of the Court, the plea of the defendant should not prevail.”

52. In Narayanamma (supra), this Court further held as follows:
“24. The transaction between the late Bale Venkataramanappa and the plaintiff is not disputed. Initially the said Bale Venkataramanappa had executed a registered mortgage deed in favour of the plaintiff. Within a month, he entered into an agreement to sell wherein, the entire consideration for the transfer as well as handing over of the possession was acknowledged. It could thus be seen, that the transaction was nothing short of a transfer of property. Under Section 61 of the Reforms Act, there is a complete prohibition on such mortgage or transfer for a period of 15 years from the date of grant. Sub-section (1) of Section 61 of the Reforms Act begins with a non-obstante clause. It is thus clear that, the unambiguous legislative intent is that no such mortgage, transfer, sale, etc. would be permitted for a period of 15 years from the date of grant. Undisputedly, even according to the plaintiff, the grant is of the year 1983, as such, the transfer in question in the year 1990 is beyond any doubt within the prohibited period of 15 years. Sub-section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction.
25. Undisputedly, both, the predecessorin-title of the defendant(s) as well as the plaintiff, are confederates in this illegality. Both, the plaintiff and the predecessor-in-title of the defendant(s) can be said to be equally responsible for violation of law.
26. However, the ticklish question that arises in such a situation is:“the decision of this Court would weigh in side of which party”? As held by Hidayatullah, J. in Kedar Nath Motani [Kedar Nath Motani v. Prahlad Rai, (1960) 1 SCR 861 : AIR 1960 SC 213] , the question that would arise for consideration is as to whether the plaintiff can rest his claim without relying upon the illegal transaction or as to whether the plaintiff can rest his claim on something else without relying on the illegal transaction. Undisputedly, in the present case, the claim of the plaintiff is entirely based upon the agreement to sell dated 15- 5-1990, which is clearly hit by Section 61 of the Reforms Act. There is no other foundation for the claim of the plaintiff except the one based on the agreement to sell, which is hit by Section 61 of the Act. In such a case, as observed by Taylor, in his “Law of Evidence” which has been approved by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , although illegality is not pleaded by the defendant nor sought to be relied upon him by way of defence, yet the Court itself, upon the illegality appearing upon the evidence, will take notice of it, and will dismiss the action ex turpi causa non oritur actio i.e. no polluted hand shall touch the pure fountain of justice. Equally, as observed in Story's Equity Jurisprudence, which again is approved in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , where the parties are concerned with illegal agreements or other transactions, courts of equity following the rule of law as to participators in a common crime will not interpose to grant any relief, acting upon the maxim in pari delicto potior est conditio defendentis et possidentis.”

53. This Court in Narayanamma (supra) finally found as follows:
“28. Now, let us apply the other test laid down in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] . At the cost of repetition, both the parties are common participator in the illegality. In such a situation, the balance of justice would tilt in whose favour is the question. As held in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , if the decree is granted in favour of the plaintiff on the basis of an illegal agreement which is hit by a statute, it will be rendering an active assistance of the court in enforcing an agreement which is contrary to law. As against this, if the balance is tilted towards the defendants, no doubt that they would stand benefited even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering an assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , the first course would be clearly and patently inconsistent with the public interest whereas, the latter course is lesser injurious to public interest than the former.”

Supreme Court

JUSTICE K. M. JOSEPH JUSTICE PAMIDIGHANTAM SRI NARASIMHA

G. T. GIRISH Vs. Y. SUBBA RAJU (D) BY LRs. & ANR.

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Whether the transaction will be mortgage by conditional sale if two contemporaneous documents sale and agreement to is repurchase executed between the parties?

  It is further held therein that keeping in view the proviso to Section 58(c) if the sale and agreement to repurchase are embodied in separate documents then the transactions cannot be a mortgage by conditional sale irrespective of whether the documents are the contemporaneously executed. It is further held therein that even in the case of a single document the real character of the transaction is to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances and intention of the parties.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3506 OF 2010

Sopan (dead) through His L.R. Vs v Syed Nabi 

Author: A.S. Bopanna,J.

Dated: July 16, 2019

Citation: (2019)7SCC 635,2019 SCCONLINE SC 862

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Whether the sale agreement remains a stand-alone document if mentioned in the disputed Will, and obligations thereunder are purportedly passed on to the legatee?

 In our view, looking to the nature, purport and contents of these documents, time gap between the two is not of much relevance when examining the questions about their validity and genuineness; and in any case, the sale agreement (Ex. B-10) did not remain an independent or stand-alone document once it was found that this document was indeed mentioned in the disputed Will and the obligations thereunder were purportedly passed on to the legatee. Moreover, the Will also required the legatee to pay the debts of Annapurnamma. The defendants also suggested the indebtedness of Annapurnamma to be the reason for sale of the property in question.{Para 51.1. }

51.2. Putting all the things together, it is beyond cavil that indebtedness of Annapurnamma and her agreeing to sell the property to defendant 15 formed an integral part of the alleged Will. Therefore, the two documents could not have been segregated.

51.3. As noticed, the Trial Court as also the High Court have recorded concurrent findings that the document of Will (Ex. B-9) was a highly suspicious document and the propounders have failed to remove the suspicious circumstances. We are not suggesting that all such considerations against the Will in question would ipso facto apply to the agreement Ex. B-10 but, while examining preponderance of probabilities about existence of such an agreement for sale, the overall relationship of the parties, the beneficiaries of the alleged agreement and their conduct cannot be kept at bay. It gets perforce reiterated, that the alleged agreement is intertwined with the rejected Will because of the specific contents of the latter. Obviously, therefore, the repercussions of findings against genuineness of the Will are bound to impact the agreement too. In this view of the matter, the consideration of the High Court appears to be suffering from the fundamental error of approach.

 In the Supreme Court of India

(Before Sanjay Kishan Kaul, Dinesh Maheshwari and Hrishikesh Roy, JJ.)

Venigalla Koteswaramma  Vs Malampati Suryamba

Civil Appeal No. 9546 of 2013

Decided on January 19, 2021

Citation: 2021 SCC OnLine SC 26

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Whether tenant can acquire possessory right in tenanted premises under the oral agreement of sale?

 I have perused the judgment of the Trial Court. Trial Court has

decreed the suit on the ground that in the written statement the Appellant admitted payment of rental amount from time to time and did not claim that the status of the Appellant was severed as a tenant completely. Even assuming that the Appellant had entered into an agreement to sell for purchasing the suit property from the Respondent and had paid part consideration, at best, the Appellant could rely on the agreement for two purposes i.e. (i) file a suit for specific performance seeking execution of

the sale deed; and (ii) claim protection under Section 53A of the Act. It was also an admitted case that there was no written Agreement to Sell ever executed between the parties and the defence of the Appellant was based on an oral agreement. Based on the amendment to Section 17 of the Registration Act, whereby the Registration of an Agreement to Sell has been made compulsory as well as amendment to Section 53A of the Act

and the Indian Stamp Act, 1899, the Trial Court concluded that in the absence of a registered Agreement to Sell the Appellant could not claim protection under Section 53A of the Act. Based on the proposition of law laid down in Sudhir Sabharwal vs. Rajesh Pruthi 2014 AIR CC 2850 by this Court that mere Agreement to Sell of immovable property will not terminate the landlord-tenant relationship, the Trial Court was of the view

that no purpose would be served to put the matter to trial and passed the judgment, noting that while there was no admission, however, if thedefendant has no legal defence, then under Order XIV Rule 1(6) CPC, judgment can be straightaway passed.{Para 12}

14. Appellant in the written statement admitted that he was inducted as a tenant in the year 2013 vide a registered lease deed dated 09.09.2013 and also admitted the renewal of the lease till 2015. Appellant, however, set up an oral agreement to sell and also pleaded payment of Rs.30 Lakhs towards part consideration of the sale price.

15. The issue that arises before this Court is as to whether the

Appellant could claim retention of the suit property on the plea of an oral Agreement to Sell.

16. The answer to the above question in my view can only be against the Appellant. The legal position on this aspect is no longer res integra. Section 17 of the Registration Act was amended by the Registration and Other Related Laws (Amendment) Act, 2001, Act No.48 of 2001, by insertion of Section 1(A) therein and by virtue of the Amendment, registration of an Agreement to Sell has been made compulsory with effect from 24.09.2001. Section 17(1-A) reads as follows:-

“Section (1A). The documents containing contracts

to transfer for consideration, any immovable

property for the purpose of Section 53A of the

Transfer of Property Act, 1882 (4 of 1882) shall be

registered if they have been executed on or after the

commencement of the Registration and other

Related Laws (Amendment) Act, 2001 and if such

documents are not registered on or after such

commencement (i.e. w.e.f. 24.09.2001), then, they

shall have no effect for the purposes of the said

Section 53A.”

17. Therefore, a buyer cannot avail the benefit of Section 53A of the Act if the agreement to sell is not registered. When a tenant enters into an agreement to sell for buying the tenanted premises but the agreement to sell is not in conformity with law, the relationship continues as landlord tenant and while the tenant can seek specific performance, but he acquires no right to retain possession, till a sale deed is registered in his favour.

In view of the legal position that “mere agreement

to sell of immovable property does not create any

right in the property save the right to enforce the

said agreement” and in view of the preceding

discussion that “mere agreement of sale will not

terminate landlord- tenant relationship unless there

is specification to that effect in agreement itself”,

this Court is of the view defendant has not right to

occupy the said property.”

18. In Shiv Kumar vs. Sumit Gulati, RSA No.417/2015, decided on 04.12.2015, the Court held that when the defendant claims possession on the basis of an oral agreement to sell, the same cannot be recognized in view of the amended Section 53A of the Act. 

19. Significantly in the present case the relationship between the

parties as landlord-tenant is an admitted position. It is also admitted that the rent of the premises was over Rs.3,500/- as also that the Respondent terminated the lease by sending a notice under Section 106 of the Act. In view of the said position and in the absence of the alleged oral agreement being registered, the Trial Court has rightly passed a decree for recovery of the suit property and no infirmity can be found. The suit is pending on

other reliefs and shall be continued and adjudicated in accordance with law.

 IN THE HIGH COURT OF DELHI AT NEW DELHI

 RFA 272/2020 and CM 28819/2020, 28820/2020 and 28818/2020

PRASHANT GOYAL Vs INDRANIL WADHWA .

CORAM:

HON'BLE MS. JUSTICE JYOTI SINGH

Date of decision: 11.11.2020

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