Non-Payment of Balance Consideration Does Not Invalidate a Registered Sale Deed: Supreme Court

F Facts

The dispute arose from two sale deeds executed on 10 March 1975. The original plaintiffs, a son and his mother, had liabilities towards financial institutions and government departments. According to their case, the original defendant initially offered to arrange a purchaser for their properties. When the proposed purchaser withdrew, the defendant himself agreed to purchase the two properties.

The consideration fixed for each property was ₹7,000. At the time of execution of the respective sale deeds, ₹2,500 per property was paid.

The remaining ₹4,500 under each sale deed was retained by the defendant with an obligation to use that amount for discharging the plaintiffs’ outstanding liabilities towards the concerned institutions and government departments.

Thus, the sale deeds themselves disclosed that the entire consideration had not been paid at the time of execution. They recorded a transaction in which consideration was partly paid and partly promised to be applied towards the plaintiffs’ debts.

Subsequent Agreements

The defendant failed to discharge the liabilities as promised. Following demands by the plaintiffs, further agreements were executed. In relation to one property, the defendant agreed to hand over the remaining ₹4,500, while in relation to the other he assumed responsibility for repayment of the government loans.

Before the Trial Court, the sale deeds were exhibited as Exhibits 66 and 67, while the subsequent agreements were marked as Exhibits 60 and 63.

Suit Filed in 1984

When the defendant still failed to fulfil the payment obligations, the plaintiffs instituted a suit in 1984. They sought:

• a declaration that the two sale deeds were void and inoperative;
• cancellation of the sale deeds;
• a declaration that the plaintiffs continued to be owners of the properties; and
• a permanent injunction against the defendant.

I Issue

In simpler terms: does non-payment of the balance sale consideration invalidate the transfer of title, or does it merely give the seller a right to recover the unpaid price?

R Ratio Decidendi

The Supreme Court relied principally upon:

• Vidhyadhar v. Manikrao & Anr., (1999) 3 SCC 573
• Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra), through Legal Representatives & Ors., (2020) 7 SCC 366

Section 54 recognises a sale as a transfer of ownership in exchange for a price which may be “paid or promised or part-paid and part-promised.”

Therefore, actual payment of the whole price at the moment of execution is not a sine qua non for completion of the sale.

A Analysis

1. The Sale Deeds Themselves Contemplated Part-Payment

This was not a case where the sale deeds falsely recorded receipt of the entire consideration. The documents themselves disclosed that only ₹2,500 had been paid under each transaction and that ₹4,500 remained with the purchaser for discharge of specified liabilities.

The parties therefore knowingly executed the conveyances on a part-paid and part-promised basis, a mode of sale expressly contemplated by Section 54.

2. Subsequent Agreements Confirmed the Debt, Not the Cancellation of Sale

The subsequent agreements strengthened the plaintiffs’ case that money remained payable by the defendant. But they did not establish that title had never passed.

The Supreme Court treated these documents as evidence of a continuing monetary obligation rather than as instruments making payment of the balance a condition precedent to transfer of ownership.

3. The High Court Drew the Wrong Legal Consequence

The Supreme Court accepted the argument that the High Court had not necessarily undertaken an impermissible fresh appreciation of the evidence. The fundamental error was instead in the legal consequence it attached to the established fact of non-payment.

Even if the balance consideration was admittedly unpaid, that fact did not convert a completed registered conveyance into a void transaction.

4. Recovery, Not Cancellation, Was the Appropriate Remedy

The Court held that the plaintiffs could have sought recovery of the unpaid balance consideration. Their entitlement to money did not justify cancellation of sale deeds which had already transferred ownership.

The Court also noticed that the subsequent agreements were executed in 1975 and 1976 whereas the suit was instituted only in 1984, observing that an issue of limitation would also arise in relation to recovery.

The appeal, however, was not decided by laying down a separate ratio on limitation.

5. Validity of Title and Possession Were Treated Separately

An important aspect of the judgment is that the Supreme Court did not disturb the possession then held by the plaintiffs’ legal heirs merely because it upheld the validity of the sale deeds.

The Court stated that if the appellants wished to obtain possession, they would have to pay the balance sale consideration together with interest from 10 March 1975, calculated at the rate charged to the plaintiffs by their creditors, and thereafter seek possession.

C Conclusion

The Supreme Court allowed the appeal, set aside the High Court’s judgment and restored the judgment of the Trial Court as affirmed by the First Appellate Court.

The two registered sale deeds dated 10 March 1975 could not be cancelled merely because the remaining consideration had not subsequently been paid.

At the same time, the Court did not disturb the possession of the plaintiffs’ legal heirs. The appellants would have to satisfy the outstanding balance consideration with the stipulated interest before seeking possession.