Specific Performance | Sale Agreement to Cheat Stamp Duty Is Void, But Buyer Still Gets Money Back: Madras High Court

"Object/Intention Behind Executing Two Such Agreements Is Unlawful As It Defeats The Provisions Of Law And Causes Loss To The Exchequer", In a landmark ruling that carries a stern warning for parties who execute dual sale agreements to evade stamp duty and registration charges, the Madras High Court on April 10, 2026 held that both agreements — the registered one showing a lower price and the unregistered one showing the real price — are void as being against public policy under Section 23 of the Indian Contract Act, 1872. However, in a significant exercise of equitable jurisdiction, the Court simultaneously awarded a money decree of Rs. 17,00,000 to the buyer-assignee, refusing to allow the seller's legal heirs to walk away with the money while hiding behind the very illegality they themselves had created.

Justice R. Sakthivel delivered a nuanced judgment that validates the assignment of contractual rights, overturns the Trial Court's finding on the genuineness of payment receipts, voids the sale agreements on public policy grounds, and yet grants monetary relief to prevent unjust enrichment — all in a single suit arising from an agricultural land transaction dating back to 2003.

Background of the Case

One Sivaraman entered into two sale agreements with R. Veeran on the very same day — January 6, 2003 — for the purchase of 8 acres of agricultural land in Salem district. The first agreement was registered, showing a sale price of Rs. 50,000 per acre (total Rs. 4,00,000), with Rs. 2,00,000 paid as advance. The second agreement was left unregistered, showing the actual agreed price of Rs. 2,82,000 per acre — nearly six times higher. Both parties openly admitted that the lower price in the registered agreement was fictitious and that the real transaction price was the higher one stated in the unregistered document. The clear and admitted purpose was to reduce the stamp duty and registration charges payable to the government.

Subsequently, Sivaraman paid further amounts of Rs. 6,00,000 on February 5, 2003 and Rs. 9,00,000 on April 3, 2003 as part sale consideration under receipts Ex-A.3 and Ex-A.4. On April 21, 2003, Sivaraman assigned both agreements along with the payment receipts to the plaintiff M. Sathish Kumar for Rs. 17,00,000 and delivered possession.

When the original defendant R. Veeran refused to execute the sale deed, Sathish Kumar filed O.S. No. 163 of 2004 before the III Additional District Court, Salem, seeking specific performance. Veeran died during the pendency of the suit and his legal heirs were substituted. The Trial Court partly decreed the suit — denying specific performance but granting refund of only Rs. 2,00,000, having disbelieved the payment receipts for Rs. 6,00,000 and Rs. 9,00,000 as fabricated. Aggrieved by the limited relief, the plaintiff appealed.

Legal Issues

The High Court framed six points for consideration: the validity of the assignment and privity of contract between the plaintiff-assignee and the original defendant; the genuineness of payment receipts Ex-A.3 and Ex-A.4; whether the unregistered sale agreement was void as against public policy; the entitlement to specific performance; the claim for permanent injunction; and whether the Trial Court's decree warranted interference.

Court's Observations and Judgment

On Assignment and Privity of Contract

The defendants contended that since the original agreement was between Sivaraman and R. Veeran, the plaintiff-assignee had no privity of contract and could not maintain the suit. Justice Sakthivel rejected this contention by closely examining both agreements, which expressly stipulated that the sale deed was to be executed in favour of Sivaraman "or his nominees." Neither agreement was a personal contract, and neither contained any clause prohibiting assignment.

Relying on the Supreme Court's decision in Habiba Khatoon v. Ubaidul Huq, (1997) 7 SCC 452 and the Privy Council's ruling in Sakalaguna Nayudu v. Chinna Munnuswami Nayakar, AIR 1928 PC 174, the Court held that assignment is the rule and non-assignability the exception, which must be expressly or impliedly established from the contract. "Specific performance of contract may be granted to the assignee in the absence of express or implied contrary intention against such an assignment in the contract." Since no such prohibition existed, the assignment by Sivaraman in favour of the plaintiff was valid and privity of contract stood established.

On the Genuineness of Payment Receipts

The defendants' case was that the receipts for Rs. 6,00,000 (Ex-A.3) and Rs. 9,00,000 (Ex-A.4) were fabricated using blank papers bearing the original defendant's signature, which had allegedly been given to the plaintiff's father during a money-lending transaction in 1996.

The High Court overturned the Trial Court's finding on this issue. Justice Sakthivel pointed out that the entire defence rested on the foundational allegation of a money-lending relationship between the original defendant and the plaintiff's father around 1996 — and this foundational fact was never proved. "The very factum of borrowal has not been established by the defendants. There is no evidence to show that the original defendant borrowed money from the plaintiff's father and in turn signed in blank papers and stamp papers."

Both receipts bore the original defendant's thumb impression as well as his signature, were duly stamped with one rupee revenue stamps, and were supported by the consistent and unchallenged testimony of three witnesses — P.W.1 (the plaintiff), P.W.2 (an attesting witness to both receipts), and P.W.3 (Sivaraman, the original agreement holder). Nothing was extracted in cross-examination to discredit their evidence. The Trial Court's finding that the receipts were fabricated was therefore set aside as unsustainable.

On Public Policy and Voidness of Both Agreements

This is the most significant legal holding of the judgment. The Court took note of the uncontested fact that both parties openly admitted executing two agreements on the same day — one registered at an artificially low price and the other unregistered at the true price — with the admitted purpose of minimizing stamp duty and registration charges payable to the government.

Invoking Section 23 of the Indian Contract Act, Justice Sakthivel held that while sale agreements for properties are ordinarily lawful, the object and intention behind these particular agreements rendered them void. "The contracts (Ex-A.1 and Ex-A.2) being agreement for sale of properties are ideally lawful. However, the object/intention behind entering into these two contracts is unlawful."

The Court was categorical: since the intention, if permitted, would defeat the provisions of law governing stamp duty and registration and cause direct financial loss to the public exchequer, both agreements — including even the registered one — stood voided under Section 23. "Both the Sale Agreements are against public policy and therefore, they are void. The plaintiff cannot enforce a void contract in the Court of law and the plaintiff is not entitled to the relief of specific performance."

On Permanent Injunction

The plaintiff's claim for permanent injunction also failed. The Court noted two independent reasons. First, even on the plaintiff's own pleadings, possession was not handed over pursuant to any registered document, which disentitles the claimant from protection under Section 53A of the Transfer of Property Act as amended by the Registration and Other Related Laws (Amendment) Act, 2001. Second, and more conclusively, the plaintiff himself admitted in his evidence that it was the defendants who were in actual possession and enjoyment of the suit properties. "The plaintiff is not in lawful possession of the suit properties and hence, he is not entitled to the relief of permanent injunction." The Trial Court's denial of injunction was affirmed.

On Money Decree and Unjust Enrichment

The most equitable dimension of the judgment lies in the Court's decision to grant a money decree despite refusing specific performance. Justice Sakthivel reasoned that while the agreements were void on account of an unlawful object, the money transactions themselves — Rs. 2,00,000 paid as advance under the agreements and Rs. 6,00,000 and Rs. 9,00,000 paid under the now-validated receipts, totalling Rs. 17,00,000 — were not independently tainted by any illegality.

To allow the defendants to retain this money while sheltering behind the voidness of the agreements would amount to unjust enrichment — a result equity cannot countenance. "If not allowed to recover the part consideration of Rs.17,00,000/- paid, it would amount to unjust enrichment in the hands of defendants." A money decree was accordingly passed for Rs. 17,00,000 with simple interest at 6% per annum from the date of suit till realisation, recoverable from the properties left behind by the original defendant. No order as to costs was made in either the original suit or the appeal.

The Appeal Suit was allowed in part. Reliefs of specific performance and permanent injunction were declined. Money decree passed in favour of the plaintiff for Rs. 17,00,000 with simple interest at 6% per annum from the date of suit till realisation from the estate of the original defendant.

Date of Decision: April 10, 2026