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Specific Performance of an Agreement to Sell

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On 22/03/2022, A Division Bench of Hon’ble Supreme Court of India in Civil Appeal No. 1991 of 2022 titled Kirpal Kaur & Anr. Vs. Ritesh & Ors. has observed and held that merely because in the document the purpose of sale of the property was stated to be for the marriage expenses, the document which otherwise can be said to be an agreement to sell, will not become a loan agreement and/or security document, wherein, one Gurmeet Singh, predecessor-in-interest of the defendants, the owner and in possession of land admeasuring 8 kanals, executed an agreement to sell in favour of one Jai Parkash, predecessor-in-interest of the plaintiffs for a sale consideration of 4 Lakh Rupees. 

An amount of 3 Lakhs and 50 Thousand was paid as earnest money to the said Gurmeet Singh. In the agreement, it was also stated that if the vendor fails to perform his part of the agreement, then the vendee would be entitled to double the earnest money or in the alternative, to get the sale deed executed and registered through the Court. 


After some time, the defendants totally denied the execution of the agreement to sell by Gurmeet Singh. They also denied having received an amount of Rs.3,50,000/- mentioned in the agreement to sell. The plaintiffs instituted the suit, for specific performance and for possession along with consequential relief of permanent injunction.


Trial Court’s Opinion and Judgment

The learned trial Court, though held that the agreement was validly executed between Gurmeet Singh and Jai Parkash, for a sale consideration and though held that Rs.3,50,000/- was indeed paid by Jai Prakash to Gurmeet Singh, nevertheless denied the relief of specific performance by observing that the agreement, may have been executed as a security document for repayment of a loan. Therefore, instead of granting the relief of specific performance, the learned trial Court passed a decree for return of earnest money along with interest at the rate of 6% per annum by way of an alternative relief.


First Appellate Court’s Judgment

Being aggrieved and dissatisfied with the said judgment and decree, Plaintiffs preferred an appeal before the first appellate court. The first appellate Court allowed the appeal and set aside the said judgment and decree 


Second Appellate Court’s Judgment

Being aggrieved and dissatisfied with the judgment and order passed by the first appellate Court, appellants/defendants preferred a regular second appeal before the High Court, which was dismissed by the High Court and gave rise to filing of SLP before Hon’ble Supreme Court. 


Hon’ble Supreme Court’s Opinion and Judgment

The Hon’ble Supreme Court observed and held that “the trial court refused to grant the relief of specific performance solely on the ground that the agreement might have been executed as a security document for repayment of loan. However, as observed hereinabove, even the trial Court also specifically held that the agreement was validly executed between Gurmeet Singh and Jai Parkash for a sale consideration. The plaintiffs preferred the appeal before the first appellate Court against refusal to pass a decree for specific performance. The defendants did not prefer any appeal before the first appellate Court against the findings recorded by the trial Court on execution of the agreement and on payment of part sale consideration. Therefore, the findings recorded by the trial Court that the agreement was validly executed for a sale consideration has attained finality.”


Further, the Hon’ble Court has held that “on reading the entire agreement, it cannot be said that the agreement can be said to be a loan agreement and/or security document. Merely because in the document the purpose of sale of the property was stated to be for the marriage expenses, the document which otherwise can be said to be an agreement to sell, will not become a loan agreement and/or security document. If the agreement as a whole is read, we find that it is an agreement to sell.” 


Further, Hon’ble Court has held that “the decree for specific performance is rightly passed by the first appellate Court, which is rightly confirmed by the High Court. In the facts and circumstances, clauses (a) & (c) of Section 20 of the Specific Relief Act shall not be applicable and/or attracted. 


Further, Hon’ble Supreme Court has directed the original plaintiffs to pay additional Rs. 3,50,000/- to the appellants/original defendants, over and above the balance sale consideration of Rs. 50,000/- and further directed that on such payment original defendants/appellants shall execute the sale deed in favour of respondents/original plaintiffs.
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