Analysis: SC on Cancellation of Registered Sale Deed

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Recently, a Division Bench of the Hon’ble Supreme Court, in Dahiben v. Arvindbhai Kalyanji Bhanusali, held that non-payment of complete sale consideration cannot be a ground for the cancellation of the Registered Sale Deed. The case came before the Hon’ble Court after the Trial Court and Gujarat High Court allowed the application filed by the Respondents and held that the suit was barred by limitation. The Court, relying on various provisions and circumstances allowed the application under Order VII Rule 11(d) of Code of Civil Procedure, 1908 (hereby Order VII Rule 11) and dismissed the appeal.

The Plaintiff were in ownership of a plot of agricultural land which they decided to sell to the Respondents through a Sale Deed. However, the Plaintiff argued that the full payment of the sale consideration had not been made by the Respondents and it was inter-alia that the Court be pleaded to cancel the Sale Deed. The Plaintiff further, claimed the physical possession of the suit property to be restored to them. The Respondents on the other hand, contended that the plaint did not disclose any cause of action and was barred by the limitation, both of which are grounds for rejection of a Plaint under Order VII Rule 11, CPC.

Rejection of Plaint Barred by Limitation

Order VII Rule 11 of the Code of Civil Procedure, lays down an exhaustive list of technical limitations which can cause a plaint to be rejected. The provision empowers the Court to reject a plaint if it fails inter-alia, to disclose any cause of action, or is barred by limitation, without going into the merits of the case at all. The given case before the court was pertaining to the cancellation of a Registered Sale Deed on similar grounds. Dismissing the Appeal, the Apex Court held that as per Articles 58 and 59 of the Limitation Act, 1963, the limitation period for the cancellation of an instrument or rescission of a contract is three years commencing from the date when the right to sue first accrues;which the Plaintiff failed to observe and therefore, the plaint filed was time-barred.

Intention of the parties is a sine qua non for the completion of sale

The Court analysed the averments made in the plaint and opined that in case where the full amount of consideration of sale has not been paid by the purchaser, the seller cannot revoke the ownership. Referring to the Section 54 of the Transfer of Property Act, 1882, the Court held that transfer of ownership is a condition which is prerequisite to constitute a ‘sale’. The ownership has to be absolute, i.e. the transfers of rights and interests possessed by the transferor should be absolutely transferred to the transferee without any reservation. Moreover, the Section also talks about the “price paid or promised or part paid and part promised” for a successful transfer. Therefore, in terms of the language of the provision, the Court held that if the payment is not complete and the Sale Deed has been executed, the sale is considered to be complete and the transferee gets the ownership of the property.

The Court established that the condition sine qua non for the transfer of ownership and completion of the sale is the intention of the Parties. The terms of the Sale Deed, the conduct of the parties and the records have to be examined to gather the intention behind the Agreement and if they confirm that the intentions of the parties were to execute the transfer, then the Sale Deed stands as valid, even though the entire sale consideration may not have been paid.

Observing the conduct of the Plaintiff and the documents submitted by them, the Court held that since they did not complain of any non-payment issue for more than five years, the plaint appears to be an after-thought. The Bench said that the Plaintiff has other recourses and remedies under the law to receive the full payment, but cancellation of the Registered Sale Deed is not one of them.

The Appeal was dismissed and the Plaint was rejected under Order VII Rule 11(a)&(d) i.e. for being vexatious and time-barred.

Author’s Analysis

In Kaliaperumal vs. Rajagopal the Apex Court held, “If the intention of parties was that title should pass on execution and registration, title would pass to the purchaser even if the sale price or part thereof is not paid. In the event of non-payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is only to sue for the balance price.” A similar approach has been taken by the Court in the case at hand which primarily protects the interests of both the Parties involved. The need to establish the presence of intention for executing a sale deed keeps the vendee away from exploiting the vendor and exercising any undue influence on him. On the other hand, it also keeps a check on the foul play of the vendor who might distort facts and cancel the Registered Sale Deed as per her whims and fancies causing major inconvenience to the vendee.

Further, although the Court made the assurance that there are other remedies provided by the law to extract the balance consideration, measures like a ceiling period should be devised to prevent the unreasonable delay in payment and to curb the emotional and financial trauma it causes to the vendor who is not allowed to cancel the Sale Deed after execution. This might help in striking a balance between the rights of the Parties.

Conclusion

Given that such disputes occur very often in these sales transactions, the judgement of the bench summarized the application of Order VII Rule 11 and of Section 54 of the Transfer of Property Act, 1882 that govern such transfer and it is imperative to note that when intention vis à vis cause of action is disputed; the revenue records, the record maintained by the Collector, the transaction details and the conduct of the parties can be examined at the very threshold and to enable the Court to summarily dismiss the suit without proceeding with a meritless claim.  

Author: Ananya Bajpai from West Bengal National University of Juridical Sciences (NUJS), Kolkata.

Editor: Astha Garg, Junior Editor, Lexlife India

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