Supreme Court Clarifies Rejection of Plaint in Property Dispute Cases Based on Agreement to Sell: Correspondence, RBANMS Educational Institution vs. B. Gunashekar (2025) INSC 490 (16 April 2025)

Introduction

Date of the Judgment: April 16, 2025

Citation: 2025 INSC 490

Judges: Hon’ble Mr. Justice J.B. Pardiwala and Hon’ble Mr. Justice R. Mahadevan

Can a suit for injunction be maintained based solely on an agreement to sell, especially against a third party in possession of the property? The Supreme Court of India addressed this critical question in the case of The Correspondence, RBANMS Educational Institution vs. B. Gunashekar & Another. The court clarified the circumstances under which a plaint can be rejected under Order VII Rule 11 of the Code of Civil Procedure (CPC), particularly in disputes arising from agreements to sell immovable property. This judgment underscores the importance of registered sale deeds in establishing property rights and the limitations of agreements to sell in conferring enforceable rights against third parties.

The bench comprised Hon’ble Mr. Justice J.B. Pardiwala and Hon’ble Mr. Justice R. Mahadevan, who delivered the judgment.

Case Background

The case revolves around a property dispute involving R.B.A.N.M.S. Educational Institution (the appellant) and B. Gunashekar & Another (the respondents). The appellant, a public charitable trust established in 1873, has been in possession of a significant parcel of land in Bangalore since 1905, which was formally conveyed to them in 1929. This land has been used for various educational purposes, including colleges and sporting facilities.

In 2018, the respondents filed a suit (O.S.No.25968 of 2018) against the appellant, seeking a permanent injunction to restrain the appellant from creating any third-party interest in the property. The respondents based their claim on an alleged agreement to sell, executed on April 10, 2018, by the respondents and Ramesh S. Reddy with Maheshwari Ranganathan and others, for a sale consideration of Rs. 9,00,00,000, with an advance payment of Rs. 75,00,000. The respondents alleged that the appellant was attempting to manipulate the title deeds to alienate or dispose of the property to third parties.

The appellant responded by filing an application under Order VII Rule 11(a) and (d) of the CPC, seeking rejection of the plaint on the grounds that the respondents were merely agreement holders and not the owners of the property, and that an agreement to sell does not create any right or interest in the property.

Timeline

Course of Proceedings

Initially, the trial court rejected the appellant’s application for rejection of the plaint on June 3, 2020. The appellant then challenged this decision before the High Court of Karnataka at Bengaluru in C.R.P. No. 205 of 2020. The High Court allowed the revision petition in part on November 19, 2020, setting aside the trial court’s order and directing it to reconsider the application under Order VII Rule 11(a) and (d) of the CPC. The High Court instructed the trial court to decide the matter on its merits within three months.

Following the High Court’s direction, the trial court reconsidered the application but again rejected it on June 11, 2021. Aggrieved by this, the appellant filed Civil Revision Petition No. 130 of 2021 before the High Court, which was also dismissed. Consequently, the appellant appealed to the Supreme Court.

Legal Framework

The legal framework relevant to this case includes:

• Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC): This provision outlines the grounds for rejecting a plaint. The appellant specifically invoked clauses (a) and (d), which state that the plaint shall be rejected “(a) where it does not disclose a cause of action; (d) where the suit appears from the statement in the plaint to be barred by any law.”
• Section 54 of the Transfer of Property Act, 1882: This section defines “Sale” and states that “A contract for the sale of immovable property does not, of itself, create any interest in or charge on such property.”
• Section 53-A of the Transfer of Property Act, 1882: This section provides protection for a transferee who has taken possession of property pursuant to an agreement to sell, provided certain conditions are met.
• Section 41(h) and (j) of the Specific Relief Act, 1963: These sections bar the grant of an injunction when an equally efficacious relief is available through other means and when the plaintiffs have no personal interest in the property.
• Section 269ST of the Income Tax Act: Introduced in 2017, this section restricts cash transactions exceeding Rs. 2,00,000 to curb black money.
• Section 271DA of the Income Tax Act: This section imposes a penalty for receiving amounts in contravention of Section 269ST.

Arguments

Arguments of the Appellant

• The alleged agreement to sell cannot create any interest in the property as per Section 54 of the Transfer of Property Act, 1882.
  • Reliance on Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra Dead through LRs. & Anr. [(2004) 8 SCC 614], where the Supreme Court held that a mere agreement to sell does not create any interest in the property.
  • Reliance on Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another [(2012) 1 SCC 656], which reiterated that a contract for sale merely confers a limited right under Section 53-A of the Transfer of Property Act, 1882.
  • Reliance on K. Basavarajappa v. Tax Recovery Commissioner, Bangalore & Others [(1996) 11 SCC 632], in which the Supreme Court held that a proposed vendee with an agreement to sell lacks locus standi to challenge third-party rights.
• Suspicious circumstances surrounding the alleged agreement to sell:
  • The purported vendors have not been made parties to the suit.
  • Their addresses were conspicuously absent in the plaint.
  • The entire advance payment of Rs. 75 lakhs was claimed to have been made in cash without any documentary proof.
• Impropriety of maintaining a pure injunction suit where title itself is in dispute.
  • Reliance on Jharkhand State Housing Board v. Didar Singh & Another [(2019) 17 SCC 692], arguing that when there is a cloud over title, a suit merely for injunction without seeking declaration of title is not maintainable.
  • Reliance on Premji Ratansey Shah & Others v. Union of India & Others [(1994) 5 SCC 547], contending that Section 41(h) and (j) of the Specific Relief Act, 1963, bars the grant of injunction when equally efficacious relief is available through other means and when the plaintiffs have no personal interest in the property.
• The plaint is barred by law and does not disclose a right to sue against the appellant based on an agreement to sell executed by the respondents with third parties.
  • Reliance on T. Arivandandam v. T.V. Satyapal & Another [(1977) 4 SCC 467].

Arguments of the Respondents

• At the stage of considering an application under Order VII Rule 11 CPC, the court must confine itself to the averments in the plaint without examining the defense or other external materials.
  • Reliance on P.V. Guru Raj Reddy v. P. Neeradha Reddy & Others [(2015) 8 SCC 331].
  • Reliance on Soumitra Kumar Sen v. Shyamal Kumar Sen & Others [(2018) 5 SCC 644], arguing that the plaint’s averments must be accepted as true at this stage, and the defendant’s objections are immaterial.
• The suit was filed to protect the respondents’ legitimate interests over the property in question under the agreement to sell, apprehending alienation of the property by third parties.
• Distinguishing the decisions cited by the appellant, particularly Rambhau Namdeo Gajre, contending that it was decided after full trial and examination of evidence, unlike the present case where the cause of action stems from the agreement itself.
• Differentiating the decision in T. Arivandandam, noting that unlike that case which involved vexatious litigation following lost eviction proceedings, the present matter involved genuine rights under a registered agreement to sell.
• Rejection of plaint is a drastic remedy that should be exercised sparingly, only when the plaint is manifestly vexatious and meritless; the proper course would be for the appellant to file a written statement and contest the suit on merits, rather than seeking rejection of the plaint at the threshold.
• Both the Courts below have examined the plaint in the light of Order VII Rule 11 (a) CPC to ascertain that it does indeed make out a valid cause of action, i.e., that the Respondents have acquired an interest in the property by virtue of the agreement to sell dated 10.04.2018.
• The appellant is misguided in asserting that the provisions of Section 53-A of the Transfer of Property Act, 1882 act as a bar against parties or interlopers who are not party to the transaction envisaged in that section.
• The decision in K. Basavarajappa does not apply to the facts of the present case, as it concerned whether an agreement to sell would stand in the way of the property being sold under auction for tax recovery purposes.

Submissions Categorized by Main Submissions

Issues Framed by the Supreme Court

1. Whether the plaint ought to have been rejected under Order VII Rule 11(a) and (d) CPC, particularly in the context of a suit filed based on an agreement to sell against third parties in possession.

Treatment of the Issue by the Court

Authorities

The Court relied on the following authorities:

Treatment of Authorities by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra Dead through LRs. & Anr. [(2004) 8 SCC 614]: The Court followed this authority, reiterating the principle that an agreement to sell does not create an interest in the property.
• Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another [(2012) 1 SCC 656]: The Court followed this authority, reinforcing that a contract for sale merely confers a limited right under Section 53-A of the Transfer of Property Act, 1882.
• K. Basavarajappa v. Tax Recovery Commissioner, Bangalore & Others [(1996) 11 SCC 632]: The Court followed this authority, applying the principle that a proposed vendee with an agreement to sell lacks locus standi to challenge third-party rights.
• Jharkhand State Housing Board v. Didar Singh & Another [(2019) 17 SCC 692]: The Court followed this authority, emphasizing that when there is a cloud over title, a suit merely for injunction without seeking declaration of title is not maintainable.
• Premji Ratansey Shah & Others v. Union of India & Others [(1994) 5 SCC 547]: The Court followed this authority, applying the principle that Section 41(h) and (j) of the Specific Relief Act, 1963, bars the grant of injunction when equally efficacious relief is available through other means and when the plaintiffs have no personal interest in the property.
• T. Arivandandam v. T.V. Satyapal & Another [(1977) 4 SCC 467]: The Court followed this authority, reiterating that where the plaint is manifestly vexatious and meritless, courts should exercise their power under Order VII Rule 11 CPC and not waste judicial time on matters that are legally barred and frivolous.
• P.V. Guru Raj Reddy v. P. Neeradha Reddy & Others [(2015) 8 SCC 331]: The Court distinguished this authority, acknowledging the principle that at the stage of considering an application under Order VII Rule 11 CPC, the court must confine itself to the averments in the plaint but clarified that this does not mean the court must accept patently untenable claims.
• Soumitra Kumar Sen v. Shyamal Kumar Sen & Others [(2018) 5 SCC 644]: The Court distinguished this authority, similar to P.V. Guru Raj Reddy, acknowledging the principle that the plaint’s averments must be accepted as true at this stage but clarified that this does not mean the court must accept patently untenable claims.
• Anathula Sudhakar v. P. Buchi Reddy (Dead) by LRs and others [AIR 2008 SC 2033]: The Court followed this authority, reiterating the principle that when the title is under a cloud, it is necessary that a declaration besought.
• Cosmos Co. Operative Bank Ltd v. Central Bank of India & Ors [2025 SCC OnLine SC 352]: The Court followed this authority, reiterating that no title could be transferred with respect to immovable properties on the basis of an unregistered Agreement to Sell or on the basis of an unregistered General Power of Attorney.
• Om Prakash Srivastava v. Union of India & Another [(2006) 6 SCC 207]: The Court followed this authority, reiterating that cause of action means every fact which, if traversed, would be necessary for the plaintiff to prove in order to support their right to judgment.
• Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra) dead through legal representatives [(2020) 7 SCC 366]: The Court followed the detailed explanation of the applicable law for deciding the application for rejection of the plaint.

Ratio Decidendi

A suit for permanent injunction based solely on an agreement to sell is not maintainable against a third party in possession of the property, especially when the agreement to sell does not create any interest in the property, and the plaintiff has not sought a declaration of title. Courts should exercise their power under Order VII Rule 11 CPC to reject such plaints that are manifestly vexatious and meritless.

Obiter Dicta

• The Court expressed concern about the increasing trend of filing suits based on agreements to sell, often with suspicious circumstances, aimed at creating speculative claims and harassing legitimate property owners.
• The Court highlighted the importance of registered sale deeds in establishing property rights and cautioned against relying solely on agreements to sell, which do not confer ownership rights.
• The Court emphasized the need for courts to be vigilant in scrutinizing plaints and exercising their power under Order VII Rule 11 CPC to prevent abuse of the legal process.

Final Order

In the result, the appeal succeeds and is hereby allowed. The impugned judgment and order passed by the High Court is set aside. The application filed by the appellant under Order VII Rule 11(a) and (d) of the CPC is allowed. The plaint stands rejected.

Dissenting Opinion (If Any)

There was no dissenting opinion in this case.

Conclusion

The Supreme Court’s judgment in The Correspondence, RBANMS Educational Institution vs. B. Gunashekar & Another clarifies the limitations of relying on agreements to sell in property disputes, particularly against third parties. The decision reinforces the importance of registered sale deeds and the need for plaintiffs to establish a clear legal right before seeking injunctive relief. This judgment serves as a reminder to lower courts to diligently scrutinize plaints and exercise their power under Order VII Rule 11 CPC to prevent the filing of frivolous and vexatious suits, thereby protecting legitimate property owners from unnecessary harassment and legal expenses. It also underscores the significance of seeking a declaration of title when there is a cloud over the title of the property.