Agreement of Sale by a Non-Owner Cannot Be Enforced in Specific Performance: Telangana High Court

“A person who has no title cannot transfer what he does not own — Ex.A1 agreement executed by an agreement-holder is not enforceable under law”, ruled a Division Bench of the Telangana High Court, in Dodda Gandhi Prasad v. Siripurapu Sudharshana Rao. The Court, while refusing the relief of specific performance, partially allowed the appeal by directing refund of ₹4.20 lakhs — the amount paid as advance — along with interest.

The Bench of Justice Abhinand Kumar Shavili and Justice Vakiti Ramakrishna Reddy held that no specific performance can be granted against a defendant who is merely an agreement-holder and not the owner of the property, especially when the title had not passed and the original owners were not even parties to the agreement.

The judgment clarified critical aspects of contract law, readiness and willingness, evidentiary burden, and the discretionary nature of equitable remedies under the Specific Relief Act, 1963, while reaffirming the settled law under Section 54 of the Transfer of Property Act, 1882.

“Ownership Cannot Pass Through Chains of Agreements Without a Registered Sale Deed”

At the heart of the dispute was an Agreement of Sale dated 11.02.2005 (Ex.A1), executed by the defendant in favour of the plaintiff for Ac.2-08 guntas of agricultural land. However, the defendant himself was only an agreement-holder, claiming to have purchased the property from previous agreement-holders, who had in turn only entered into an unregistered arrangement with the original owner — one Banoth Touriya.

The Court observed: “It is settled law that an agreement of sale in respect of immovable property does not convey title to the purchaser. Under Section 54 of the Transfer of Property Act, only a registered sale deed conveys ownership.”

The Court further noted that even Ex.A1 itself recited the absence of ownership in the hands of the defendant, and thus, "the plaintiff could not enforce a contract which sought to compel a non-owner to execute a sale deed."

Relying heavily on the Supreme Court’s authoritative ruling in Suraj Lamp & Industries v. State of Haryana, the Court reiterated:

“A contract for sale of immovable property does not, by itself, create any interest or charge on the property. Only a registered sale deed can transfer ownership.”

“Specific Performance is Not Automatic — Plaintiff Must Show Continuous Readiness and Willingness”

Another major ground for denying relief was the plaintiff’s failure to demonstrate his readiness and willingness, which is a statutory prerequisite under Section 16(c) of the Specific Relief Act.

The Court found that the plaintiff had not issued any legal notice prior to filing suit, and the telegraphic receipt (Ex.A2) was vague and unsubstantiated. In cross-examination, the plaintiff himself admitted that no notice was actually issued, rendering the claim of persistent readiness incredible.

Quoting from C.S. Venkatesh v. A.S.C. Murthy, the Court reaffirmed:

“The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. If the plaintiff fails to either aver or prove the same, he must fail.”

Further, the Court cited U.N. Krishnamurthy v. A.M. Krishnamurthy to emphasise that a plaintiff must plead and prove financial capacity or the means to raise funds to discharge obligations under the contract.

“The plaintiff must show not just an intent but the capacity to perform. Here, such proof is conspicuously absent.”

“Original Owners Not Necessary Parties When Agreement is Unenforceable”

The trial court had held the suit was bad for non-joinder of necessary parties, particularly the original owner and prior agreement-holders. But the High Court disagreed, stating:

“In a suit for specific performance, only parties to the contract or those claiming under them are necessary. When the agreement is itself unenforceable, impleading original owners is legally irrelevant.”

Relying on the Supreme Court’s holding in Kasturi v. Iyyamperumal, the Court reiterated that no privity of contract existed between the plaintiff and the original owner or the previous agreement-holders. The agreement under Ex.A1 could not bind them, and hence “they are neither proper nor necessary parties”.

“Refund of Advance Money Is Legally Justified — Equitable Relief Substituted with Monetary Relief”

Though specific performance was denied, the Court held that the plaintiff had proved payment of ₹4,20,000, based on the agreement and corroborated oral evidence. The Court noted that Ex.A1 itself contained a refund clause and that the defendant’s denial of receipt was evasive and self-contradictory.

The Court stressed:

“An acknowledgment of payment under a written agreement constitutes valid and admissible evidence. Once produced, the burden shifts to the defendant to rebut — which he has failed to do.”

Under Section 22 of the Specific Relief Act, a court is empowered to grant refund of advance consideration, even if specific performance is refused. The Court accepted the alternate plea and directed the defendant to refund ₹4.20 lakhs with 9% interest up to suit and 6% interest thereafter.

“A Person Who Lacks Title Cannot Promise to Transfer Ownership — Equity Cannot Override Law”

Summing up the legal principle, the Court observed:

“The very foundation of specific performance is a valid and enforceable contract. When the executant is not a title-holder and has no authority to convey, no equitable relief can be granted.”

Justice Vakiti Ramakrishna Reddy, delivering the judgment for the Bench, concluded:

“Even if the agreement is proved, the defendant had no title, and thus, no enforceable obligation arises in law. The plaintiff’s equitable claim must fail, though his monetary claim stands vindicated.”

Conclusion: Specific Performance Refused, Advance Amount Ordered to Be Refunded With Interest

The Telangana High Court partly allowed the appeal, affirming the trial court’s refusal of specific performance, but reversing its denial of refund. The defendant was directed to refund the sum of ₹4.20 lakhs with interest, while all other reliefs and costs were denied.

“Specific performance is not granted merely because a contract exists — the Court must ensure that legality, capacity, and equity align,” the Court reiterated, reinforcing the importance of lawful title and readiness in real estate transactions.

Date of Decision: 07.10.2025