Supreme Court Declares Sale Deeds Void for Lack of Consideration: Kewal Krishan vs. Rajesh Kumar (22 November 2021)

Introduction

Date of the Judgment: 22 November 2021

Citation: 2021 INSC 732

Judges: Justice Ajay Rastogi and Justice Abhay S. Oka

Can a sale of property be valid if no money actually changes hands? The Supreme Court of India recently tackled this question in a case involving a property dispute between two brothers. The core issue revolved around whether sale deeds executed without any actual payment of consideration are legally valid and can transfer ownership of property. The judgment was delivered by a bench comprising Justice Ajay Rastogi and Justice Abhay S. Oka, with the opinion authored by Justice Abhay S. Oka.

Case Background

The case involves a property dispute between two brothers, Kewal Krishan (the appellant) and Sudarshan Kumar (one of the respondents). In 1976, they jointly acquired the suit properties through two sale deeds dated 12th August 1976 and 19th October 1976. On 28th March 1980, Kewal Krishan executed a power of attorney in favor of Sudarshan Kumar. Subsequently, on 10th April 1981, Sudarshan Kumar, acting as the attorney, executed two sale deeds. One was in favor of his minor sons for a consideration of Rs. 5,500, and the other was in favor of his wife for Rs. 6,875, transferring parts of the jointly owned property.

In 1983, Kewal Krishan filed two separate suits against Sudarshan Kumar, his wife, and his sons, initially seeking an injunction to prevent them from interfering with his possession and from alienating his share in the suit properties. Later, the plaints were amended to include a prayer for a declaration that the power of attorney and the sale deeds were null and void. Additionally, the appellant sought a share in the compensation awarded for a tube well on the property.

Timeline

Course of Proceedings

The Trial Court dismissed the suits, holding that Sudarshan Kumar was the exclusive owner of the suit properties and that Kewal Krishan was merely a benamidar. The Trial Court upheld the validity of the power of attorney and the sale deeds executed by Sudarshan Kumar.

On appeal, the District Court partly allowed the appeals, holding that both Kewal Krishan and Sudarshan Kumar were joint owners of the suit properties. The District Court also held that the sale deeds dated 10th April 1981 were without consideration and therefore, void. The District Court decreed the suit by granting joint possession and setting aside the sale deeds dated 10th April 1981. However, the prayer for compensation regarding the tube well was rejected.

The High Court overturned the District Court’s decision, holding that the suits for declaration of invalidity of the sale deeds were barred by limitation and that the sale deeds were valid. The High Court directed Sudarshan Kumar to pay Kewal Krishan’s share in the consideration shown under the sale deeds with 12% interest.

Legal Framework

The Supreme Court referred to Section 54 of the Transfer of Property Act, 1882, which defines a “sale” as:

“54. “Sale” defined.—“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.”

The Court emphasized that a sale of immovable property must be for a price, which may be paid, promised, or partly paid and partly promised. The payment of a price is an essential component of a valid sale. According to the Court, a sale deed executed without any payment of price, and without any provision for future payment, is not a sale in the eyes of the law and is therefore void.

Arguments

Appellant’s Arguments:

• The appellant argued that the sale deeds dated 10th April 1981 were void because no consideration was paid by the purchasers (Sudarshan Kumar’s minor sons and wife).
• The appellant contended that the sale transactions were sham, as the properties were sold at a very low price compared to their market value.
• It was argued that the purchasers had no source of income at the time of the sale, making it impossible for them to have paid the stated consideration.
• The appellant asserted that the suit for injunction was based on his title as a joint owner and that the sale deeds, being void, did not affect his ownership.
• The appellant submitted that it was not necessary to amend the plaint to seek a declaration regarding the invalidity of the sale deeds as they were void from the beginning.

Respondents’ Arguments:

• The respondents argued that the appellant had accepted Sudarshan Kumar’s sole ownership of the suit properties in a letter dated 5th April 1980 and had agreed to transfer the properties to him.
• They contended that the prayers for declaration regarding the sale deeds and power of attorney were barred by limitation since they were added through amendment in November 1985.
• The respondents submitted that without a declaration regarding the invalidity of the sale deeds, the appellant could not claim any relief.
• The respondents argued that the appellant did not discharge his initial burden by not stepping into the witness box.
• The respondents submitted that the issue whether the purchasers under the sale deeds were the bona fide purchasers was redundant.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

1. Whether the sale deeds dated 10th April 1981 were valid, considering that no actual payment of consideration was proven.
2. Whether it was necessary for the appellant to seek a specific declaration regarding the invalidity of the sale deeds, given that the original plaints contained pleadings that the sale deeds were void.
3. Whether the prayers for declaration, incorporated by way of amendment, were barred by limitation.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following legal provision:

• Section 54 of the Transfer of Property Act, 1882: This section defines a “sale” and specifies that it must involve a transfer of ownership in exchange for a price paid or promised.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the lack of evidence of consideration for the sale deeds. The Court emphasized that a sale must involve a price, either paid, promised, or partly paid and partly promised. The absence of any evidence of payment by the purchasers, coupled with the fact that the purchasers were the minor sons and wife of Sudarshan Kumar who had no independent source of income, led the Court to conclude that the sale deeds were sham and void.

The Court also noted that the original plaints contained specific pleadings that the sale deeds were void, which meant that there was no need for an amendment to seek a declaration. The Court rejected the argument of limitation, stating that a void document need not be challenged by claiming a declaration.

Logical Reasoning

Key Takeaways

• A sale deed without consideration is void and does not transfer ownership of immovable property.
• If a document is void, it is not necessary to seek a formal declaration of its invalidity.
• The issue of limitation does not arise for challenging a void document.
• The burden of proof lies on the party claiming a valid sale to prove payment of consideration.

Directions

The Supreme Court set aside the High Court’s judgment and restored the District Court’s decree, which granted joint possession of the suit properties to the appellant along with Sudarshan Kumar.

Specific Amendments Analysis

There was no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that a sale deed executed without consideration is void ab initio and does not transfer any title. This judgment reinforces the established legal position under Section 54 of the Transfer of Property Act, 1882, that a sale must involve a price.

Conclusion

In the case of Kewal Krishan vs. Rajesh Kumar & Ors., the Supreme Court held that the sale deeds executed by Sudarshan Kumar in favor of his minor sons and wife were void due to the absence of any consideration. The Court emphasized that a sale, as defined under Section 54 of the Transfer of Property Act, 1882, requires a price. The judgment underscores the importance of actual payment or promise of payment for a valid sale and clarifies that a void document does not require a formal declaration of invalidity. The Supreme Court restored the District Court’s decree, granting joint possession of the suit properties to the appellant.