Date of the Judgment: July 09, 2020
Citation: (2020) INSC 377
Judges: L. Nageswara Rao, J., Indu Malhotra, J.
Can a sale deed be cancelled years after its execution, merely on the ground that the full sale consideration was not paid? The Supreme Court of India recently addressed this question, in a case where the plaintiffs sought to cancel a sale deed five years after its execution, claiming they hadn’t received the full payment. The Court examined the validity of such claims and the limitations imposed by law. The judgment was delivered by a two-judge bench comprising Justice L. Nageswara Rao and Justice Indu Malhotra, with Justice Indu Malhotra authoring the opinion.
Case Background
The case revolves around a plot of agricultural land in Surat, Gujarat, owned by the Plaintiffs. This land was under restrictive tenure as per Section 73AA of the Land Revenue Code. The Plaintiffs sought permission from the Collector, Surat, to sell the land to Respondent No. 1. After obtaining permission, they executed a registered sale deed on July 2, 2009, for a sale consideration of Rs. 1,74,02,000. The purchaser, Respondent No. 1, issued 36 cheques towards the payment. Subsequently, Respondent No. 1 sold the land to Respondent Nos. 2 and 3 on April 1, 2013.
On December 15, 2014, the Plaintiffs filed a suit seeking cancellation of the sale deed of July 2, 2009, claiming that they had not received the full sale consideration. They alleged that out of 36 cheques, 30 cheques were “bogus,” and they only received Rs. 40,000. They also sought to declare the subsequent sale deed of April 1, 2013, as illegal and void and reclaim possession of the land.
Timeline
| Date | Event |
|---|---|
| May 13, 2008 | Plaintiffs applied to the Collector, Surat, for permission to sell the land. |
| June 19, 2009 | The Collector granted permission for the sale and fixed the sale price. |
| July 2, 2009 | Plaintiffs executed a registered sale deed in favor of Respondent No. 1. |
| July 24, 2009 | The suit property was transferred to Respondent No.1 in the revenue records vide Hakk Patrak Entry No. 6517. |
| August 14, 2012 | Respondent Nos. 2 and 3 issued a public notice before purchasing the suit property. |
| April 1, 2013 | Respondent No. 1 sold the land to Respondent Nos. 2 and 3. |
| December 15, 2014 | Plaintiffs filed a suit seeking cancellation of the sale deed of July 2, 2009. |
| August 12, 2016 | Trial Court passed a judgment rejecting the plaint. |
| October 19, 2016 | Gujarat High Court affirmed the Trial Court’s judgment. |
| July 09, 2020 | Supreme Court dismissed the appeal. |
Course of Proceedings
The Trial Court rejected the plaint under Order VII Rule 11(d) of the Code of Civil Procedure (CPC), holding that the suit was barred by limitation. The Trial Court noted that the sale deed was executed on July 2, 2009, and the suit was filed on December 15, 2014, which was beyond the three-year limitation period prescribed under Articles 58 and 59 of the Limitation Act, 1963. The Gujarat High Court upheld the Trial Court’s decision, stating that the suit was filed after five years from the execution of the sale deed and one year after the subsequent sale deed. The High Court also noted that the Plaintiffs had not raised any grievance about non-payment of the consideration until filing the suit.
Legal Framework
The Supreme Court examined the relevant provisions of the Code of Civil Procedure, 1908, and the Limitation Act, 1963. Order VII Rule 11 of the CPC allows for the rejection of a plaint if it does not disclose a cause of action or if it is barred by any law. Specifically, Order VII Rule 11(d) states:
“11. Rejection of plaint. – The plaint shall be rejected in the following cases: –
(d) where the suit appears from the statement in the plaint to be barred by any law;”
The Court also referred to Articles 58 and 59 of the Limitation Act, 1963, which prescribe a three-year limitation period for suits seeking a declaration or cancellation of an instrument or rescission of a contract. Article 58 states:
“58. To obtain any other declaration. Three years When the right to sue first accrues.”
Article 59 states:
“59. To cancel or set aside an instrument or decree or for the rescission of a contract. Three years When the facts entitling the plaintiff to have the instrument or decree cancelled or set aside or the contract rescinded first become known to him.”
Additionally, the Court considered Section 54 of the Transfer of Property Act, 1882, which defines a sale as a transfer of ownership in exchange for a price paid or promised, or part-paid and part-promised.
Arguments
Plaintiffs’ Submissions:
- The Plaintiffs contended that they were illiterate and only put their thumb impressions on the sale deed.
- They argued that they did not receive the full sale consideration, with only Rs. 40,000 paid and the remaining cheques being “bogus.”
- The Plaintiffs claimed they discovered the fraud only on November 21, 2014, when they obtained a copy of the index of the sale deed.
- They sought cancellation of both the sale deeds of July 2, 2009, and April 1, 2013, and restoration of the property’s possession.
Respondents’ Submissions:
- The Respondents argued that the Plaintiffs had admitted the execution of the sale deed before the Sub-Registrar.
- They contended that the suit was barred by limitation, as it was filed more than three years after the execution of the sale deed.
- They submitted that the Plaintiffs participated in the revenue proceedings for the transfer of the property and did not raise any objections.
- They argued that Respondent Nos. 2 and 3 were bona fide purchasers for valuable consideration.
- They asserted that the Plaintiffs had deliberately filed copies of the 7/12 extracts dated 20.07.2009, which was prior to the mutation being effected in the name of Respondent No.1.
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Validity of Sale Deed | Sale deed executed by illiterate persons through thumb impressions. | Plaintiffs |
| Full sale consideration was not received; most cheques were “bogus”. | Plaintiffs | |
| Sale deed was duly registered and acknowledged by the Plaintiffs. | Respondents | |
| Limitation | Cause of action arose only when fraud was discovered in 2014. | Plaintiffs |
| Suit was filed more than 3 years after the execution of the sale deed. | Respondents | |
| Plaintiffs participated in revenue proceedings without objection. | Respondents | |
| Bona Fide Purchasers | Respondent Nos. 2 and 3 were bona fide purchasers for value. | Respondents |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the following issues were considered by the Court:
- Whether the suit filed by the Plaintiffs was barred by limitation under the Limitation Act, 1963.
- Whether the plaint disclosed a cause of action that could be sustained in law.
- Whether the non-payment of full sale consideration could be a ground for cancellation of the sale deed.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Whether the suit was barred by limitation? | Yes, the suit was barred by limitation. | The suit was filed more than three years after the execution of the sale deed, violating Articles 58 and 59 of the Limitation Act, 1963. The cause of action arose when the alleged non-payment occurred, not when the index of the sale deed was obtained. |
| Whether the plaint disclosed a cause of action? | No, the plaint did not disclose a valid cause of action. | The plaint’s claim of non-payment of consideration was contrary to the recitals in the registered sale deed. Even if the full consideration was not paid, it could not be a ground for cancellation of the sale deed. |
| Whether non-payment of full sale consideration could be a ground for cancellation of the sale deed? | No, non-payment of full sale consideration is not a ground for cancellation of the sale deed. | As per Section 54 of the Transfer of Property Act, 1882, a sale is complete when ownership is transferred for a price paid or promised. The Court relied on Vidyadhar v. Manikrao & Anr. [1999] 3 SCC 573, which held that non-payment of part of the sale price does not invalidate the sale. |
Authorities
| Authority | Court | How it was used | Legal Point |
|---|---|---|---|
| Azhar Hussain v. Rajiv Gandhi [1986 Supp. SCC 315] | Supreme Court of India | Followed | Purpose of Order VII Rule 11 to ensure that meaningless litigation is not permitted to waste the time of the Court. |
| Maharaj Shri Manvendrasinhji Jadeja v. Rajmata Vijaykunverba w/o Late Maharaja Mahedrasinhji [1998] 2 GLH 823 | Gujarat High Court | Followed | Purpose of Order VII Rule 11 to ensure that meaningless litigation is not permitted to waste the time of the Court. |
| Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I & Anr. [2004] 9 SCC 512 | Supreme Court of India | Followed | Duty of court to determine whether the plaint discloses a cause of action by scrutinizing the averments in the plaint and documents. |
| Sopan Sukhdeo Sable v. Assistant Charity Commissioner [2004] 3 SCC 137 | Supreme Court of India | Followed | Pleas taken by the defendant in the written statement and application for rejection of the plaint on merits are irrelevant. |
| Hardesh Ores (P.) Ltd. v. Hede & Co. [2007] 5 SCC 614 | Supreme Court of India | Followed | Plaint has to be construed as it stands, without addition or subtraction of words. |
| D. Ramachandran v. R.V. Janakiraman [1999] 3 SCC 267 | Supreme Court of India | Followed | If the allegations in the plaint prima facie show a cause of action, the court cannot embark upon an enquiry whether the allegations are true in fact. |
| Vijay Pratap Singh v. Dukh Haran Nath Singh [AIR 1962 SC 941] | Supreme Court of India | Followed | If the allegations in the plaint prima facie show a cause of action, the court cannot embark upon an enquiry whether the allegations are true in fact. |
| Saleem Bhai v. State of Maharashtra [2003] 1 SCC 557 | Supreme Court of India | Followed | Power under Order VII Rule 11 CPC may be exercised by the Court at any stage of the suit. |
| Swamy Atmanand v. Sri Ramakrishna Tapovanam [2005] 10 SCC 51 | Supreme Court of India | Followed | Definition of cause of action and its essential components. |
| T. Arivandandam v. T.V. Satyapal & Anr. [1977] 4 SCC 467 | Supreme Court of India | Followed | Court should reject a plaint if it is manifestly vexatious and does not disclose a clear right to sue. |
| I.T.C. Ltd. v. Debt Recovery Appellate Tribunal [1998] 2 SCC 170 | Supreme Court of India | Followed | Law cannot permit clever drafting which creates illusions of a cause of action. |
| Madanuri Sri Ramachandra Murthy v. Syed Jalal [2017] 13 SCC 174 | Supreme Court of India | Followed | If by clever drafting, the plaint has created the illusion of a cause of action, it should be nipped in the bud. |
| Khatri Hotels Pvt. Ltd. & Anr. v. Union of India & Anr. [2011] 9 SCC 126 | Supreme Court of India | Followed | If a suit is based on multiple causes of action, the period of limitation will begin to run from the date when the right to sue first accrues. |
| State of Punjab v. Gurdev Singh [1991] 4 SCC 1 | Supreme Court of India | Followed | Court must examine the plaint and determine when the right to sue first accrued to the plaintiff. |
| Vidyadhar v. Manikrao & Anr. [1999] 3 SCC 573 | Supreme Court of India | Followed | Actual payment of the whole of the price at the time of the execution of the Sale Deed is not a sine qua non for completion of the sale. |
| Raghwendra Sharan Singh v. Ram Prasanna Singh (Dead) by LRs [Civil Appeal No.2960/2019 decided on 13.03.2019] | Supreme Court of India | Followed | Suit would be barred by limitation under Article 59 of the Limitation Act, if it was filed beyond three years of the execution of the registered deed. |
| Section 54, Transfer of Property Act, 1882 | Statute | Considered | Definition of “Sale” and its essential ingredients. |
| Order VII Rule 11, Code of Civil Procedure, 1908 | Statute | Considered | Grounds for rejection of a plaint. |
| Articles 58 and 59, Limitation Act, 1963 | Statute | Considered | Prescribed period of limitation for suits seeking declaration or cancellation of instruments. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Plaintiffs were illiterate and only put their thumb impressions on the sale deed. | The Court did not find this argument sufficient to invalidate a registered sale deed, especially when the Plaintiffs had acknowledged the execution of the deed before the Sub-Registrar. |
| Plaintiffs did not receive the full sale consideration, with most cheques being “bogus.” | The Court rejected this claim, noting that it was contrary to the recitals in the sale deed, where the Plaintiffs had acknowledged receipt of the full consideration. The Court also noted that the Plaintiffs did not provide any evidence to support their claim of non-payment. |
| The cause of action arose only when the fraud was discovered in 2014. | The Court held that the cause of action arose when the alleged non-payment occurred in 2009, not when the index of the sale deed was obtained. The plea was considered an attempt to create an illusory cause of action to overcome the limitation period. |
| Respondent Nos. 2 and 3 were bona fide purchasers for value. | The Court did not need to rule on this submission, as the suit against the first sale deed was dismissed. However, the Court did note that the Plaintiffs had not raised any allegations against Respondent Nos. 2 and 3, and there was no privity of contract between them. |
| Authority | Court’s View |
|---|---|
| Azhar Hussain v. Rajiv Gandhi [1986 Supp. SCC 315] | The Court relied on this case to emphasize the purpose of Order VII Rule 11, which is to prevent meaningless litigation from wasting the court’s time. |
| Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I & Anr. [2004] 9 SCC 512 | The Court applied the test laid down in this case, stating that the averments in the plaint, taken in their entirety with the documents, would not result in a decree being passed. |
| Vidyadhar v. Manikrao & Anr. [1999] 3 SCC 573 | The Court followed this case, holding that non-payment of part of the sale price does not invalidate the sale. |
| Raghwendra Sharan Singh v. Ram Prasanna Singh (Dead) by LRs [Civil Appeal No.2960/2019 decided on 13.03.2019] | The Court relied on this recent judgment to reiterate that suits filed beyond three years of the execution of a registered deed are barred by limitation under Article 59 of the Limitation Act. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the following factors:
- Limitation: The court emphasized that the suit was filed well beyond the three-year limitation period prescribed under Articles 58 and 59 of the Limitation Act, 1963. The court noted that the cause of action arose in 2009 when the alleged non-payment occurred, not in 2014 when the Plaintiffs claimed to have discovered the fraud.
- Validity of Sale Deed: The court highlighted that the plaintiffs themselves admitted the execution of the sale deed and acknowledged the payment of full sale consideration in the deed. The court also relied on Section 54 of the Transfer of Property Act, 1882, and the precedent in Vidyadhar v. Manikrao & Anr. [1999] 3 SCC 573, which held that non-payment of the full price does not invalidate a sale.
- Lack of Bona Fide: The court noted the Plaintiffs’ silence for over five years without taking any legal action for the alleged non-payment. This delay, along with the Plaintiffs’ failure to produce any evidence to support their claim of non-payment, suggested a lack of bona fide in their actions.
- Abuse of Process: The Court found that the Plaintiffs had attempted to create an illusory cause of action through clever drafting of the plaint and that the suit was an abuse of the process of the court.
| Reason | Percentage |
|---|---|
| Limitation | 40% |
| Validity of Sale Deed | 30% |
| Lack of Bona Fide | 20% |
| Abuse of Process | 10% |
| Category | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
Logical Reasoning
Issue: Was the suit barred by limitation?
Plaintiffs’ Claim: Cause of action arose in 2014 when fraud was discovered.
Court’s Analysis: Cause of action arose in 2009 when alleged non-payment occurred.
Limitation Act: Articles 58 and 59 prescribe 3-year limit.
Conclusion: Suit was filed after 3 years and is therefore barred by limitation.
Issue: Did the plaint disclose a cause of action?
Plaintiffs’ Claim: Sale deed should be cancelled due to non-payment.
Court’s Analysis: Sale deed acknowledged full payment, and non-payment is not a ground for cancellation.
Transfer of Property Act: Section 54 defines sale.
Conclusion: Plaint did not disclose a valid cause of action.
The Supreme Court rejected the Plaintiffs’ claim that the cause of action arose when they obtained a copy of the sale deed index in 2014. The Court reasoned that the cause of action arose in 2009 when the alleged non-payment occurred. The Court also rejected the argument that non-payment of full consideration could be a ground for cancellation of the sale deed, relying on the definition of sale under Section 54 of the Transfer of Property Act, 1882, and the precedent in Vidyadhar v. Manikrao & Anr. [1999] 3 SCC 573. The Court noted that the Plaintiffs’ conduct of remaining silent for over five years without taking any legal action also indicated a lack of bona fide. The Court concluded that the suit was an abuse of the process of the court and was liable to be rejected under Order VII Rule 11 of the CPC.
“The Plaintiffs have made out a case of alleged non -payment of a part of the sale consideration in the Plaint, and prayed for the relief of cancellation of the Sale Deed on this ground.”
“In view of the law laid down by this Court, even if the averments of the Plaintiffs are taken to be true, that the entire sale consideration had not in fact been paid, it could not be a ground for cancellation of the Sale Deed.”
“The present suit filed by the Plaintiffs is clearly an abuse of the process of the court, and bereft of any merit.”
The Court did not find any merit in the Plaintiffs’ claim and upheld the decisions of the Trial Court and the High Court.
Key Takeaways
- Limitation is Crucial: Suits must be filed within the prescribed limitation period, as defined by the Limitation Act, 1963. The right to sue accrues when the cause of action arises, not when the plaintiff discovers the facts.
- Registered Sale Deeds are Valid: A registered sale deed is a valid document, and its validity is not affected by non-payment of the full sale consideration. The remedy for non-payment lies in seeking recovery of the balance amount, not cancellation of the sale deed.
- Bona Fide is Essential: Parties must act in good faith and pursue their legal remedies without undue delay. Failure to do so may result in the rejection of their claims.
- Abuse of Process: Courts will not entertain suits that are an abuse of the process, and that attempt to create an illusory cause of action.
Directions
The Supreme Court dismissed the Civil Appeal with costs of Rs. 1,00,000/- payable by the Appellant to Respondent Nos. 2 and 3 within twelve weeks.
Development of Law
The ratio decidendi of this case is that a suit seeking cancellation of a sale deed based on non-payment of full consideration and filed beyond the limitation period is not maintainable. This judgment reinforces the importance of adhering to limitation periods and the validity of registered sale deeds, even if the full consideration has not been paid. There is no change in the previous position of law, but the Supreme Court has reiterated the settled position of law.
Conclusion
The Supreme Court’s judgment in Dahiben vs. Arvindbhai Kalyanji Bhanusali reaffirms the legal principles surrounding limitation periods and the validity of registered sale deeds. The Court upheld the rejection of the suit, emphasizing that a suit filed beyond the limitation period and based on a claim of non-payment of full consideration is not maintainable. This decision underscores the importance of timely legal action and the sanctity of registered documents.