Is Non-Payment – A Ground for Cancellation of Sale Deed?
Critical Analysis: Dahiben vs Arvind Bhai Kalyanji Bhanusali
Mere non payment of the full amount of consideration cannot be held as a ground for cancellation of sale deed. The judgment passed by the Hon’ble Supreme Court in the case of Dahiben vs Arvindbhai Kalyanji Bhanusali (Gajra) (D) Thr Lrs & ors [ (2020) SCC Online SC 469].
Table of Content:
- Introduction
- Critical Analysis of Dahiben vs Arvind Bhai Kalyan ji Bhanusali
- Background of the case
- Issues Framed
- Judgment passed
- Conclusion
- Case Laws:
- Baijnatyh Singh vs Paltu & ors. [(1908) ILR 30]
- Vidyadhar vs Manik Rao & Anr. [(1999) 3 SCC 573]
Introduction
Section 54 of the Transfer of Property act, 1882 defines the term sale. According to this transfer of property act, 1882 sale means a transfer of title and ownership of a property in lieu of consideration either price wholly paid or it is promised to be paid or it can either be partly paid and partly promised to pay.
Section 54 of the transfer of property act, 1882 reads as follow:
Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.”
Apart from the definition of the word sale the act also deals with the procedure to describe how to make a sale. Sale can be done in respect of the moveable and immovable property. A sale of the moveable property can be done either with registration or by mere offer and acceptance as governed by the rules and provisions laid under the sales of goods act, 1930. Whereas a sale of immovable property shall be done with proper registration and documentation by following the procedure laid down under transfer of property act, 1882 read along with the registration act, 1908.
A sale of immovable property shall be done with a proper contract made between the seller and buyer and the contract must be a valid contract under section 5 of the Indian Contract Act and the sale must be executed in such a manner and upon such terms and conditions which is settled between the parties under the contract for sale.
Further section 55 (4) (b) of the transfer of property act, 1882 laid down that the seller is entitled to receive the interest on the unpaid amount if the possession of the property is given by the seller to the buyer before paying the consideration amount fully. In Baijnatyh Singh vs Paltu & ors. [(1908) ILR 30] the Division Bench of the Allahabad High Court held that the contract for sale cannot be defeated merely on the ground for non payment of consideration sale amount and it also doesn’t stop the transfer of ownership from vendor to the purchaser but the purchaser is entitled to maintain a suit for possession in such a case.
Mere non payment of the full amount of consideration cannot be held as a ground for cancellation of sale deed. The judgment passed by the Hon’ble Supreme Court in the case of Dahiben vs Arvindbhai Kalyanji Bhanusali (Gajra) (D) Thr Lrs & ors [ (2020) SCC Online SC 469].
Background of the case
In the instant case, there is agricultural land situated in the village Mota Varaccha, in the sub-district of the city of Surat, Gujarat. The said land belongs to the plaintiff in this case. The concerned land had been fallen under the restrictive tenure provided in section 73AA of the land revenue code. The plaintiff filed an application to sell the said agricultural land to respondent no. 1 of this case. The application was made before the collector of that district.
The collector upon receiving the application gives his approval to the said sale transaction and fixes the sale consideration amount as per the jantri issued by the state government. The collector also specifies the payment made by the buyer of the said property is in the form of cheques and detail of such payment must be provided in the sale deed. After the completion of all the formalities, the plaintiff sold his property to respondent no. 1.
Respondent no. 1 make the payment for the said property by issuing 36 cheques in the name of the plaintiff and the same was mentioned in the sale deed. Further the respondent no. 1 subsequently sold the said property to respondent no. 2 and respondent no. 3 of the instant case. And thereby the plaintiff brings an action against respondent no. 1 also joined respondent no. 2 and respondent no. 3 in the same suit. The plaintiff claimed that respondent no. 1, that is, the original [purchaser has not made the complete payment for the said property as fixed by the collector and therefore, the sale deed become ineffective and respondent no. 1 is not entitled to sell this property subsequently to any other person.
Issues framed
In the instant case, the issue raised before the court was that whether a sale deed becomes ineffective and declared cancelled on non payment of the part of the sale consideration price?
The contention of the parties
The argument of the petitioner:
- The petitioner contended that as respondent no. 1 didn’t make the complete payment for the said property as fixed by the collector and therefore the sale deed must be held ineffective and as the consequence, the sale must be held cancelled. The petitioner further stated that out of the 36 cheques issued by respondent no. 1 for the payment of the sale price 30 cheques are proven to be fake and hence the plaintiff only paid Rs 40,000 by issuing only 6 cheques out of those 36 cheques.
Arguments of the respondents
- Respondent no. 2 and respondent no. 3 who are impleaded as the party in the instant case filed an application before the court for the dismissal of the plaint under Order 7 rule 11 (a) and rule 11 (d) of the code of civil procedure, 1908.
- The respondents contended that no cause of action has been disclosed in the plaint and hence it is covered under the bar of order 7 rule 11 (a) of the code of civil procedure, 1908.
- Further the respondent takes a plea of defines under law of limitation by arguing that the said suit was barred under the limitation act, 1963.
The decision of the court
By relying on its own judgment in the case of Vidyadhar vs Manik Rao & Anr. [(1999) 3 SCC 573] the court stated that the wordings “price paid or promised or part-paid and part-promised” used in section 54 of the transfer of property act depicts that the complete payment is not required to be shown while executing the sale deed.
The court further added that to execute the sale deed it is not necessary that the complete payment has been made and the vendor cannot invalidate the sale by contending that the buyer has not made the full payment. The transfer of ownership must be completed and the sale deed must be executed as the sale of immovable property will be governed by the provisions of the transfer of property act and the act provides that the sale must be executed on the promise to pay consideration in present or in the future. The court stated that the plaintiff can opt for other options to recover the balance amount of consideration instead of cancelling the sale deed as it is not legally valid to cancel the sale deed as part payment of the total consideration has already been made and are on record.
The Supreme Court had disposed of the matter by dismissing the claims of the petitioner and also levy the cost of Rs. 1, 00,000 on the petitioner that has to be paid by him to respondent no. 2 and respondent no. 3. And this shall be paid by the petitioner to the concerned respondents within the period of twelve months which is started from the date of this judgment.
Conclusion
From the above case analysis, we can conclude that the definition provided under the transfer of property act, 1882 itself provides that completion of payment before the execution of sale deed is not necessary and a sale cannot be held cancelled or ineffective due to such defect. But with that, it must be kept in mind that the document for the sale must show the intent of the buyer to pay the amount in the future date and if such an intention is not provided in the documents then such deed shall be considered to be void. There is a clear distinction between an intention to pay and an intention to defraud and in such a situation where the buyer is showing its intention to deceive the vendor then such a situation section 55 of the transfer of property act, 1882 comes as a rescue according to which the vendor can charge upon the remaining amount of the sale consideration.