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SUPREME COURT OF INDIA
Prashant Kumar Mishra, Prasanna B. Varale, JJ.
Muddam Raju Yadav – Appellant
Versus
B. Raja Shanker (D) Through Lrs. & Ors. – Respondents
Civil Appeal No. 3255 of 2026 (Arising Out Of S.L.P. (Civil) No. 6453 of 2024)
Decided On : 10-03-2026
Specific Relief Act, 1963 – Section 16(c) – Agreement to Sell – Suit for Specific Performance – In a suit for specific performance, conduct of parties is significant as it assists Court in evaluating evidence to find out bonafides of parties at the time of execution of agreement – Even a slight doubt in mind of Court that plaintiff was not acting bonafidely and that material facts, having bearing on agreement, have been withheld in agreement itself and from Court also, equitable and discretionary relief has to be denied – Plaintiff having withheld MoU, present was a fit case for denial of relief of specific performance – High Court has rightly allowed appeal preferred by respondent(s)/defendant(s) to set aside judgment and decree passed by Trial Court. (Paras 12 and 13)
Facts of the case:
Present Appeal is preferred by appellant/plaintiff whose suit for specific performance of agreement of sale dated 4.6.2002 was decreed by Trial Court. However, in appeal by respondent(s)/defendant(s), High Court has set aside judgment and decree of Trial Court. Resultantly, suit filed by appellant/plaintiff stands dismissed.
Findings of Court:
Although Exhibit B-1, photocopy of receipt executed by plaintiff while receiving a sum of Rs.1,00,000/ (Rupees One Lakh) towards repayment of loan from defendant(s), has been found not admissible and, hence, cannot be relied upon, yet execution of MoU clearly makes out a very strong probable case to prove that subject agreement was a sham and nominal document.
Result : Appeal dismissed.
The Supreme Court dismissed the appellant/plaintiff's appeal against the High Court's order setting aside the Trial Court's decree for specific performance of a registered sale agreement dated 4.6.2002 for a house property in Medchal Village, Ranga Reddy District, with a total consideration of Rs.13 lakhs (Rs.6 lakhs paid as advance). (!) (!) (!) (!)
Plaintiff's Case: The plaintiff claimed readiness and willingness to pay the balance Rs.7 lakhs within 11 months, issued a legal notice on 25.4.2003, and filed the suit when defendants failed to execute the sale deed. Trial evidence included the agreement (Ex. A-1), no-objection letter from defendants' sons (Ex. A-2), legal notice (Ex. A-3), and bank statement (Ex. A-7) showing funds. (!) (!) (!) (!) (!)
Defendants' Case: The agreement was a sham document securing a Rs.6 lakh hand loan from the plaintiff (an alleged unlicensed moneylender), evidenced by a contemporaneous Memorandum of Understanding (MoU, Ex. B-2) dated 4.6.2002. Under the MoU, defendants could repay the loan within 12 months to retrieve title deeds and cancel the agreement; otherwise, property transfer would occur at market value. Partial repayments (Rs.1 lakh receipt, Ex. B-1; others unacknowledged) supported this. The agreement's low sale price below market value was also noted. (!) (!)
Trial Court: Decreed specific performance, finding no denial of agreement execution, notice receipt, and plaintiff's readiness via bank funds. (!)
High Court: Reversed, holding the MoU (Ex. B-2) proved the agreement was sham/nominal. (!) (!)
Supreme Court's Reasoning: Upheld High Court. The MoU (Ex. B-2), on matching stamp paper (doc. no. 47663) from the same vendor as the no-objection letter (Ex. A-2, doc. no. 47662), same date (4.6.2002), and witnesses, strongly probablized the loan-security defense. Though Ex. B-1 (photocopy receipt) was inadmissible, MoU sufficed. Plaintiff's suppression of MoU (unmentioned in plaint) showed unclean hands, warranting denial of discretionary specific performance relief, as conduct and withheld facts cast doubt on bona fides. (!) (!) (!) (!) (!)
Outcome: Appeal dismissed; suit stands dismissed. (!)
JUDGMENT :
PRASHANT KUMAR MISHRA, J.
1. Leave granted.
2. The present Appeal is preferred by the appellant/plaintiff whose suit for specific performance of agreement of sale dated 4.6.2002 was decreed by the Trial Court. However, in appeal by the respondent(s)/defendant(s), the High Court has set aside the judgment and decree of the Trial Court. Resultantly, the suit filed by the appellant/plaintiff stands dismissed.
3. The sale agreement dated 4.6.2002 was in respect of house property bearing No.1-91/1 (Old No.1-17/2) constructed on Plot No.l admeasuring 406.33 square yards in Survey No. 1 situated at Medchal Village and Mandal, Ranga Reddy District. The agreement was for a total sale consideration of Rs.13,00,000/- (Rupees Thirteen Lakh) and defendant(s) had received a sum of Rs.6,00,000/- (Rupees Six Lakh) as advance. The agreement was registered on the same day with the Office of the Sub-Registrar, Medchal, Ranga Reddy District. As per the terms of agreement, the plaintiff had to pay the balance amount of sale consideration of Rs.7,00,000/- (Rupees Seven Lakh) to the defendant(s) at the time of execution of the sale deed within 11 months from the date of agreement. As per the plaintiff, he was always ready and willing to pay the balance amount of sale consideration; however, the defendant(s) avoided to receive the amount and execute the sale deed on one pretext or the other. The plaintiff issued a legal notice dated 25.4.2003 calling upon the defendant(s) to execute the sale deed. However, despite the receipt of legal notice, the defendant(s) neither submitted any reply nor executed the sale deed, necessitating filing of the subject suit.
4. According to the defendant(s), the plaintiff is an unlicensed money lender and he lent an amount of Rs.6,00,000/- (Rupees Six Lakh) towards hand loan to the defendant(s) holding the original sale deed of the defendant(s) in respect of the suit schedule property with an understanding that within 12 months from the date of the agreement, the defendant(s) would return Rs.6,00,000/- (Rupees Six Lakh) and the plaintiff would return the original title deeds and would also get the registered agreement cancelled. It was also agreed that in the event of non-discharge of the loan amount within 12 months, the defendant(s) would transfer the suit schedule property in favour of the plaintiff as per the prevalent market value, until which time, the plaintiff had undertaken and declared that he would not exercise any right, interest, title or claim over the suit property. The understanding was reduced into writing, signed by the plaintiff on the same day i.e., 4.6.2002 followed by the registered agreement of sale dated 4.6.2002 and, thus, the agreement was nothing but a sham and nominal document. Pursuant to the written understanding dated 4.6.2002, the plaintiff acknowledged the receipt of Rs.1,00,000/- (Rupees One Lakh) on 25.9.2002 towards part repayment of the loan amount, but successfully evaded to pass a receipt acknowledging the payment of Rs.1,50,000/- (Rupees One Lakh and Fifty Thousand) paid on two occasions in the months of the November and December 2002. When the defendant and his sons insisted for receipt of the said repayments of the loan amount, the plaintiff issued a legal notice presenting a new version that he was a bona fide purchaser on the strength of sale agreement and suppressing the true fact of loan transaction. It was, therefore, pleaded by the defendant(s) that as per the understanding, the sale consideration was determinable only after 12 months from the date of the agreement of sale and that too in the event of the defendant(s) failing to return the loan amount of Rs.6,00,000/- (Rupees Six Lakh) to the plaintiff. Thus, as per the defendant(s), the sale agreement is not enforceable, being a sham and nominal document. The defendant(s) also stated that the market value of the suit property was much higher than what has been quoted in the agreement.
5. In the course of trial, the p
Agreement to Sell – In a suit for specific performance, conduct of parties is significant as it assists Court in evaluating evidence to find out bonafides of parties at the time of execution of agree....
Admitted unregistered sale agreement enforceable if defendant fails to prove sham; plaintiff readiness via notice and deposit suffices for specific performance.
The court clarifies that subsequent conduct indicating unwillingness to perform a contract negates entitlement for specific performance, necessitating a return of advance amounts instead.
Sale agreement treated as loan security based on WhatsApp evidence and party conduct; appeal allowed with refund.
The court confirmed that an executed sale agreement constitutes a binding contractual obligation, dismissing claims that it functioned solely as a loan security.
A registered sale agreement may be deemed a loan transaction if its terms are inconsistent with a true sale, supported by the burden of proof on the party disputing its intended meaning.
The validity of a sale agreement is upheld where the plaintiff proves readiness to perform, and defenses lacking evidence do not suffice to challenge concurrent findings.
The court affirmed that a registered agreement for sale is binding unless the party asserting otherwise provides credible evidence to the contrary.
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