Supreme Court overturns High Court ruling on permanent injunction based on unregistered sale agreement: Balram Singh vs. Kelo Devi (2022) INSC 447

Date of the Judgment: 23 September 2022

Citation: (2022) INSC 447

Judges: M.R. Shah, J. and Krishna Murari, J.

Can an unregistered agreement to sell be the basis for a permanent injunction? The Supreme Court of India recently addressed this crucial question in a civil appeal. The Court examined whether a party could obtain a permanent injunction based on an unregistered agreement to sell, particularly when they could not obtain specific performance of the same agreement. The bench, comprising Justices M.R. Shah and Krishna Murari, delivered the judgment, with Justice M.R. Shah authoring the opinion.

Case Background

The case originated from a suit filed by Kelo Devi (the original plaintiff) seeking a permanent injunction against Balram Singh (the original defendant). Kelo Devi’s claim was based on an unregistered agreement to sell dated March 23, 1996. She sought to prevent Balram Singh from disturbing her possession of the suit property. Balram Singh, in turn, filed a counter-claim seeking possession of the same property.

The trial court dismissed Kelo Devi’s suit and allowed Balram Singh’s counter-claim, stating that Kelo Devi failed to prove the agreement to sell and her possession of the property. However, the first appellate court reversed this decision, granting the permanent injunction to Kelo Devi and dismissing Balram Singh’s counter-claim. The High Court of Judicature at Allahabad upheld the first appellate court’s decision, leading to the present appeal before the Supreme Court.

Timeline:

Course of Proceedings

The trial court initially dismissed the suit filed by Kelo Devi and allowed the counter-claim of Balram Singh, holding that Kelo Devi could not prove the agreement to sell or her possession. The first appellate court reversed this decision, granting a permanent injunction to Kelo Devi and dismissing Balram Singh’s counter-claim. The High Court of Judicature at Allahabad upheld the first appellate court’s decision, leading to the present appeal before the Supreme Court.

Legal Framework

The core legal issue revolves around the admissibility and evidentiary value of an unregistered agreement to sell. The Court noted that an unregistered agreement to sell is generally not admissible as evidence for substantive relief, such as specific performance. However, the question was whether it could be used for a collateral purpose, such as granting a permanent injunction.

Arguments

Arguments of the Appellant (Balram Singh):

• The appellant argued that the suit for permanent injunction was solely based on an unregistered agreement to sell dated 23.03.1996.
• The appellant contended that such an unregistered agreement is not admissible in evidence.
• The appellant submitted that the plaintiff cleverly avoided seeking specific performance, knowing that an unregistered agreement would not suffice for such a claim.
• The appellant asserted that if the plaintiff cannot obtain specific performance due to the unregistered nature of the agreement, they should not be granted a permanent injunction based on the same document.

Arguments of the Respondent (Kelo Devi):

• The respondent argued that an unregistered document can be used for collateral purposes.
• The respondent contended that the first appellate court and the High Court correctly granted a permanent injunction based on the unregistered agreement to sell for the collateral purpose of establishing possession.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issue was:

1. Whether a permanent injunction can be granted based on an unregistered agreement to sell, especially when the plaintiff cannot obtain specific performance of the agreement.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The judgment did not explicitly cite any cases or books. However, the court considered the general principle that an unregistered document can be used for collateral purposes, but clarified that this principle cannot be used to grant a relief that cannot be obtained directly.

Judgment

How each authority was viewed by the Court?

The court did not cite any specific authorities, but it considered the general principle that an unregistered document can be used for collateral purposes. However, the court clarified that this principle cannot be used to grant a relief that cannot be obtained directly. The court emphasized that the plaintiff cannot get a relief indirectly which otherwise he/she cannot get in a suit for substantive relief.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principle that a party cannot obtain a relief indirectly when they cannot obtain it directly. The Court noted that the plaintiff cleverly sought a permanent injunction to circumvent the fact that the agreement to sell was unregistered and could not be used to obtain specific performance. The Court emphasized that the plaintiff cannot get the relief by clever drafting. The Court also considered the fact that the defendant filed a counter-claim for possession, which was allowed by the trial court.

The Court reasoned that the plaintiff was essentially trying to achieve indirectly what they could not achieve directly. The Court stated, “Therefore, the plaintiff cannot get the relief even for permanent injunction on the basis of such an unregistered document/agreement to sell, more particularly when the defendant specifically filed the counter-claim for getting back the possession which was allowed by the learned trial Court.”

The Court further observed, “The plaintiff cleverly prayed for a relief of permanent injunction only and did not seek for the substantive relief of specific performance of the agreement to sell as the agreement to sell was an unregistered document and therefore on such unregistered document/agreement to sell, no decree for specific performance could have been passed. The plaintiff cannot get the relief by clever drafting.”

The Court concluded, “In view of the above and for the reasons stated above, both, the learned first appellate Court and the High Court have committed a grave error in passing a decree for permanent injunction in favour of the plaintiff as against the defendant and dismissing the counter-claim filed by the original defendant.”

Key Takeaways

• An unregistered agreement to sell cannot be the sole basis for obtaining a permanent injunction, especially when specific performance of the agreement is not possible.
• Courts will not allow parties to obtain indirectly what they cannot obtain directly through clever drafting.
• A counter-claim for possession can be allowed if the plaintiff’s claim is based on an inadmissible document.

Directions

The Supreme Court set aside the judgments of the High Court and the first appellate court. The Court restored the trial court’s decision, dismissing the suit for permanent injunction and allowing the counter-claim for possession.

Development of Law

The ratio decidendi of this case is that an unregistered agreement to sell cannot be used as the basis for a permanent injunction when specific performance of the agreement is not possible. This judgment reinforces the principle that parties cannot circumvent legal requirements through clever drafting and indirect means. It clarifies the limitations on the use of unregistered documents for collateral purposes, ensuring that such use does not undermine the substantive requirements of the law.

Conclusion

The Supreme Court’s decision in Balram Singh vs. Kelo Devi clarifies that an unregistered agreement to sell cannot be the basis for a permanent injunction when specific performance is not possible. The Court emphasized that parties cannot indirectly obtain a relief that they cannot obtain directly. This ruling reinforces the importance of registering sale agreements and prevents the circumvention of legal requirements through clever drafting.

Category:

• Civil Law
  • Agreements
  • Permanent Injunction
  • Unregistered Documents
• Specific Relief Act, 1963
  • Section 10, Specific Relief Act, 1963

FAQ

Q: Can I get a permanent injunction based on an unregistered sale agreement?

A: No, the Supreme Court has clarified that a permanent injunction cannot be granted solely based on an unregistered sale agreement, especially if you cannot obtain specific performance of that agreement.

Q: What does it mean that an unregistered document can be used for “collateral purposes”?

A: While an unregistered document may be used to prove a related fact, it cannot be used to claim a substantive relief that requires a registered document. For example, it cannot be used as a basis for a permanent injunction if specific performance is not possible.

Q: What is specific performance?

A: Specific performance is a legal remedy where a court orders a party to fulfill their obligations under a contract. In the context of a sale agreement, it would mean ordering the seller to transfer the property to the buyer.

Q: Why did the Supreme Court overturn the High Court’s decision?

A: The Supreme Court overturned the High Court’s decision because it found that the plaintiff was trying to use an unregistered agreement to obtain a permanent injunction, which is not permissible when specific performance is not possible. The court emphasized that parties cannot indirectly obtain a relief that they cannot obtain directly.

Q: What should I do if I have an unregistered sale agreement?

A: It is advisable to register your sale agreement to ensure it is legally valid and enforceable. An unregistered agreement can create legal hurdles and may not provide the protection you need.