Sale Deed – Part payment of the sale price would not affect the validity of the sale of property

 

1.    Section 54 of the Transfer of Property Act, 1882 defines Sale as under.

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

      The above definition of “sale” indicates that there must be a transfer of ownership from one person to another i.e. transfer of all rights and interest in the property, which was possessed by the transferor to the transferee. The transferor cannot retain any part of the interest or right in the property, or else it would not be a sale. The definition further indicates that the transfer of ownership has to be made for a “price paid or promised or part paid and part promised”. Price therefore, constitutes an essential ingredient of the transaction of sale.

2.    The Hon’ble Supreme Court in its recent Judgment dated 9^th July, 2020 in Civil Appeal No. 9519 has thrown light on the Sale of Property and part payment of the sale price.

        Brief Facts of the Case: -

3.    The Appellant sold the suit property to Defendant No. 1 vide registered Sale Deed dated 2^nd July, 2009.  The Defendant No. 1 issued 36 cheques for Rs.1,74,02,000/- towards payment of the sale consideration in favour of the Appellant, the details of which were mentioned in the registered Sale Deed dated 2^nd July, 2009. The Defendant No. 1 subsequently sold the suit property to Defendant Nos. 2 and 3 vide registered Sale Deed dated 1^st April, 2013.

4.    The Appellant filed the Civil Suit on 15^th December, 2014 against the Defendants before the Principal Civil Judge, Surat alleging that the sale consideration had not been paid in entirety by Defendant No. 1 and that the Sale Deed dated 2^nd July, 2009 was obtained without payment of full consideration. The Appellant further alleged that the Defendant No. 1 had paid only Rs. 40,000 through 6 cheques, and remaining 30 cheques for Rs.1,73,62,000 were “bogus” cheques.  The Appellant prayed that the Sale Deed dated 2^nd July, 2009 be cancelled and declared as being illegal, void, ineffective and not binding on them and also prayed that the subsequent Sale Deed dated 1^st April, 2013 be declared as illegal, void and ineffective; and, the physical possession of the suit property be restored to the Appellant.

5.    The Defendant Nos. 2 & 3 filed an Application for Rejection of the Plaint under Order VII Rule 11 (a) and (d) of the CPC, contending that the suit filed by the Appellant was barred by the period of limitation, and that no cause of action had been disclosed in the plaint.

6.   The Hon’ble Supreme Court has relied upon its earlier Judgment in the case between Vidyadhar Vs.  Manikrao & Anr. The key observations of the Hon’ble Supreme Court in the said Judgment are as under.

(i)    Even if the whole of the price is not paid, but the document is executed, and thereafter registered, the sale would be complete, and the title would pass on to the transferee under the transaction.

(ii)    The non-payment of a part of the sale price would not affect the validity of the sale. Once the title in the property has already passed, even if the balance sale consideration is not paid, the sale could not be invalidated on this ground.

(iii)    In order to constitute a “sale”, the parties must intend to transfer the ownership of the property, on the agreement to pay the price either in praesenti, or in future. The intention is to be gathered from the recitals of the sale deed, the conduct of the parties, and the evidence on record.

7.    The Hon’ble Supreme Court has held that even if the averments of the Appellant 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 Appellant may have other remedies in law for recovery of the balance consideration, but could not be granted the relief of cancellation of the registered Sale Deed.