Permissive Possession Under Agreement to Sell Cannot Lead to Adverse Possession: Punjab & Haryana High Court

On October 4, 2024, the Punjab and Haryana High Court ruled in Surinder Kumar Kuthiala v. Ram Pal (RSA No. 820 of 1991) that permissive possession under an agreement to sell cannot evolve into adverse possession without clear, hostile intent. The judgment clarified that, in cases where possession is held under an agreement to sell, any claim of adverse possession requires a distinct and overt act signaling hostile intent, which must be continuous and open to the owner’s knowledge.

The plaintiffs in this appeal sought possession of land they had previously agreed to sell to the defendant and others. The defendant, who had received possession in 1967, argued that after a 1968 cancellation notice by the plaintiffs, his continued possession became adverse. Both the Trial Court and the Appellate Court accepted this argument, dismissing the plaintiffs' suit based on adverse possession.

Justice Pankaj Jain emphasized that permissive possession arising under an agreement to sell does not automatically convert to adverse possession. Key findings included:

No Automatic Adverse Possession in Permissive Arrangements: The Court held that possession under an agreement to sell is inherently permissive and cannot transform into adverse possession unless the vendee explicitly disclaims the original owner’s title and asserts hostile possession.

Legal Principle of Restitution: The Court highlighted that if a contract becomes void, as alleged by the defendant due to frustration, the vendee is obligated under Section 65 of the Contract Act to return the benefits acquired. Since the defendant maintained possession based on an agreement to sell, he was required to restore the land if the agreement became void.

High Standard of Proof for Adverse Possession: Referring to Mohan Lal v. Mirza Abdul Gaffar, the Court reiterated that adverse possession claims must demonstrate continuous, public hostility toward the owner's title, supported by overt actions that leave no doubt regarding the intent to dispossess.

"Permissive possession under an agreement to sell requires the possessor to abandon the initial permissive basis and adopt a clear hostile stance, proven through consistent and open acts adverse to the true owner's interest," the Court observed.

The High Court overturned the lower courts’ rulings and decreed the suit in favor of the plaintiffs, affirming their right to reclaim possession. The judgment underscores that permissive possession cannot become adverse without a clear and hostile claim to ownership.

Date of Decision: October 4, 2024

Surinder Kumar Vs Ram Pal