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1988 Supreme(AP) 524

Andhra Pradesh High Court
Judges : M.N.RAO
Y.V.Narasimha Sarma - Appellant
Versus
Soorampalli Appalaraju - Respondent
A.S. No. 887/82
Decided On : 12-05-88
Advocates Appeared :
Mr. C. Poornaiah,Mr. K.V. Subrahmanya Narsu

Headnote:SPECIFIC RELIEF ACT and Transfer of Property Act, Sec. 54 Suit for specific performance on basis of oral agreement of sale Burden of proof lies on Plaintiff Duty of the Court - Stated.

       Held : Under Section 54 of the Transfer of Property Act, it is not necessary that an agreement of sale should be in writing. There is no prohibition against oral contracts for sale. In every case where party comes up with a plea of oral contract of sale it is the duty of the Court to scrutinize the evidence very carefully before accepting that plea. When valuable properties are involved normally the parties do not conclude the bargain by oral arrangement but when a party comes to the Court pleading that he is entitled to a specific performance based on an alleged oral contract for sale the burden lies heavily upon him to establish by acceptable and cogent evidence what he pleaded. This rigorous test is warranted in order to prevent this miscarriage of justice.

       A.S. Allowed

Judgement Key Points

Key Points: - The judgment holds that under Section 54, an agreement of sale need not be in writing; oral contracts for sale are permissible, but require rigorous scrutiny of evidence. (!) - When a party pleads an oral contract for sale, he bears a heavy burden to prove the agreement with cogent evidence, especially in cases involving valuable properties. (!) - The court must scrutinize the evidence carefully to determine whether a concluded contract exists, balancing negotiations, advances, and subsequent higher offers. (!) (!) (!) - The trial court’s decree for specific performance based on an alleged oral contract was set aside; the appellate court found no concluded oral contract on 16-11-79 and concluded the later written contract with defendants 2 and 3 (Exs. B-1 to B-3) precluded enforcement of an oral agreement. (!) (!) - The evidence showed negotiations on 16-11-79 did not amount to a concluded contract, given lack of agreed advance and willingness to sell at a lower price in the presence of higher offers. (!) (!) (!) - The judgment cites established authority on evaluating oral contracts, emphasizing that execution of further agreements (in writing) or higher offers can indicate the absence of a concluded oral contract. (!) - The appellate court ultimately allowed the appeal, setting aside the trial court’s decree without costs, thereby denying specific performance on the basis of the alleged oral contract. (!)

What is the status of an oral contract for sale under Section 54 of the Transfer of Property Act, and what burden of proof does it impose on the plaintiff?

What factors must be scrutinized by the court when a party pleads an oral contract for sale of property, and how do higher offers impact the validity of such an oral agreement?

What test should the court apply to determine whether an oral contract for sale has been concluded, and what conclusions did the Andhra Pradesh High Court reach in this case?


M. N. RAO, J.

( 1 ) IN the suit from out cf which this appel arises, the plaintiff, respondent herein, sought a decree against the appellants herein who are deiendants 1 to 3 for specific performance of an oral contract for sale entered into on 16-11-79 for purchase cf the suit property comprising a terraced and tiled house with an appurterant vacant site of about two and half acres situate at Dasannapeta, Vizianagaram town belonging to the first defendant. The plaintiff asked for an alternative relief by way of a decree for rs. 75,000/- towards damages. The plaintiff and defendants 2 and 3 are residents of Vizianagaram. The first defendant, the owner of the suit property is a resident of Anandapuram village about 20 Kms. from Vizianagaram. The case of the plaintiff as averred in the plaint is that the first defendant offered to sell the suit house to him through P. W-2 Simhambhatla laksbminadha Rao alias Sidhanthi of Vizianagaram and so they both went to Anandapuram on 7-11-79, met the first defendant at his house and enquired about the sale of the suit property. The first defendant promised that he would come to Vizianagaram on 10-11-79 and finalise the transaction. He came to Vizianagaram on 10-1-79 to the house of P. W-2 and had preliminary negotiations, and fixed the date 16-11-79 "for completion of the sale negotiation. " On 16-11-79 at about 2 P. M. , the plaintiff and the first defendant met at the house of P. W-2 Sidhanthi. The first defendant finally agreed to sell the suit property for Rs. 75,000/-and when the plaintiff offered and advance of Rs. 2,000/- the fust defendant stated that the plaintiff would come to his house at Anandapuram along with P. W-2 on 21-11-79 "pay him an advance of Rs. 20,000/- or Rs. 25,000/-" and asked the plaintiff to bring to non-judicial stamp papers worth Rs. 5/- each for drafting formal agreement of sale (locally known as Kraya Puroni) in duplicate. To this suggestion, the plaintiff replied that he cannot adjust more than Rs. 20,000/- by that day and the first defendant agreed to the same. It was further averred that on 18-11-79 the first defendant came to Vizianagaram and sent word to the plaintiff through PW-2 Sidhanthi that the amount of rs. 20,000/- may be brought either in currency notes of the denominations of ten each or fifty or alternatively by means of a draft drawn en the Co-operative central Bank. Vizianagaram in favour of the 1st defendant. On 21-11-79, the plaintiff obtained a demand draft for Rs. 20,000/- on the said bank and proceeded to Anandapur village along with PW-2 in a taxi taking with him two non-judicial stamp papers. When they met the first defendant at his house at 3 PM on 21-11-79, the latter insisted upon payment of Rs. 25,000/- as advance instead of Rs. 20,000/- as earlier agreed to. The plaintiff stated that he would adjust the additional sum of Rs. 5,000/- within a few hours and requested the first defendant to come along with him to Vizianagaram where the money would be paid. Alternatively he offered to bring that sum from Vizianagaram in a few hours by rushing there in the same taxi. It was alleged that because of the mischievous intervention of defendants 2 and 3 who meanwhile perhaps made higher officers, the first defendant evaded to execute the agreement of sale and receive the advance. The plaintiff got issued a registered notice Ex. A-4 on 22-11-79 through his advocate to which a reply notice Ex. A-8 was sent by the first defendant stating that there was no oral agreement for sale on 16-11-79 and that he entered into an agreement of sale with defendants 2 and 3 agreeing to convey the property and obtained an advance of Rs. 30,000/ -. After issuing a rejoinder Ex. A-9 to the first defendant making a copy of the same to the defendants 2 and 3, the suit was instituted stating that the plaintiff was always willing and ready to perform his part of the contract, and defendants 2 and 3 are not at all bona fide purchasers for valuable consideration and a
















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