Unregistered Sale Agreements Cannot Be Basis for Specific Performance or Injunction: Madras High Court Upholds First Appellate Court’s Decision”

Possession of Original Documents Indicates Refund of Consideration: Madras High Court dismissed the appeal filed by the legal representatives of S.R.K. Jayachandran, upholding the judgment of the First Appellate Court. The court refused specific performance of an unregistered sale agreement, ruling that the plaintiff’s conduct and lack of evidence negated the equitable relief sought under the Specific Relief Act, 1963.

Presiding over the case, Justice R. Sakthivel held: "A plaintiff’s delay, failure to produce original documents, and inability to rebut presumptions under Section 114(i) of the Indian Evidence Act disentitle them from equitable remedies. The First Appellate Court's reliance on this principle is legally sound and does not warrant interference."

The court also affirmed that post-amendment, Section 53-A of the Transfer of Property Act bars claims for injunctions based on unregistered sale agreements.

The plaintiff, S.R.K. Jayachandran, had entered into a sale agreement with the defendants on February 2, 2005, for ₹6,00,000. The plaintiff claimed that he had paid the entire consideration, was handed over possession of the property, and was given a General Power of Attorney by the defendants. However, the defendants revoked the power of attorney, claimed they had refunded the consideration (along with ₹3,00,000 as damages), and alleged that the plaintiff voluntarily rescinded the agreement.

While the Trial Court ruled in favor of the plaintiff, the First Appellate Court reversed this decision, leading to the present second appeal.

The Madras High Court upheld the First Appellate Court’s finding that the plaintiff had failed to discharge the burden of proof regarding the transaction. The court noted that the original sale agreement and power of attorney were in possession of the defendants, and the plaintiff could not provide a satisfactory explanation for this. Relying on Section 114(i) of the Indian Evidence Act, the court stated:
"The possession of the original documents by the defendants raises a presumption that the plaintiff received the refund of consideration. The plaintiff failed to rebut this presumption, leading to the conclusion that there was no enforceable agreement."

The court rejected the plaintiff’s contention that the defendants sought the documents for perusal, noting that such an explanation defied common prudence.

“Equity Denied Due to Plaintiff’s Conduct”
The court emphasized that specific performance under the Specific Relief Act, 1963, is a discretionary remedy grounded in equity. It held that the plaintiff’s delay in filing the suit, failure to explain possession of original documents by the defendants, and lack of readiness to perform his part of the contract disentitled him to relief. Justice Sakthivel observed:
"The plaintiff’s conduct, including the unexplained delay of two years in filing the suit after allegedly handing over the documents, creates doubt about the veracity of his claim and negates the equitable relief sought."

"Bar Under Section 53-A of Transfer of Property Act"
The court noted that the sale agreement in question was unregistered, and the plaintiff could not establish possession of the property under the agreement. The court ruled that:
"After the 2001 amendment to Section 53-A of the Transfer of Property Act, unregistered sale agreements do not confer any right to seek protection or injunction based on possession."

The court also found that there was no documentary evidence to support the plaintiff’s claim of possession.

“Compliance with Order XLI Rule 31 of CPC”
The plaintiff argued that the First Appellate Court failed to comply with Order XLI Rule 31 of the Code of Civil Procedure, 1908, which mandates that judgments must address all points for determination with reasons. However, the High Court dismissed this contention, holding:
"The First Appellate Court framed the necessary points for consideration, provided reasons for reversing the Trial Court, and considered the evidence in light of legal principles. There is no procedural violation."

“Suit Timely Filed But Plaintiff Failed to Prove Readiness and Willingness”
While acknowledging that the suit was filed within the limitation period under Article 54 of the Limitation Act, 1963, the court emphasized that mere timeliness did not entitle the plaintiff to relief. The plaintiff’s inability to prove his readiness and willingness to perform the contract was fatal to his case.

The Madras High Court dismissed the second appeal, holding: "The plaintiff’s failure to establish his case, coupled with the defendants’ possession of original documents and the equitable considerations under the Specific Relief Act, bars the grant of specific performance or injunction. The First Appellate Court’s judgment is sound and requires no interference."

The court reiterated the principle that: "Equity aids the vigilant, not those who sleep on their rights."
 

Date of Decision: January 2, 2025