Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Mad) 5522

IN THE HIGH COURT OF JUDICATURE AT MADRAS
R.SAKTHIVEL, J.
Kamala - Appellant
Versus
Ayyasamy - Respondent
APPEAL SUIT NO. 170 OF 2019
Decided On : 18-08-2025

Advocates:
Advocate Appeared:
For the Appellant : Mr.R.Bharanidharan, M/s.D.Jagajothi
For the Respondent: Mr.B.Kumarasamy

A Sale Agreement deemed sham when proven to be only for securing a loan, allowing recovery of funds over specific performance.

Headnote:(A) Code of Civil Procedure, 1908 - Sections 96, Order XLI Rules 1 and 2 - Sale Agreement - Plaintiff claims specific performance of the contract dated January 29, 2014 for sale of property worth Rs.15,00,000/-; defendant alleges it was a sham document for securing a loan - Trial Court decreed in favor of plaintiff, determining contract valid - Issues framed were the intent of the Sale Agreement and whether specific performance should be enforced. (Paras 5, 12, 23)

(B) Specific Performance - The court found the Sale Agreement to be a sham, executed primarily as a security for a loan, thus negating the grounds for specific performance. Court stated that oral evidence can establish a document's sham nature despite its written terms per Sections 91 and 92 of the Indian Evidence Act. (Paras 17, 23)

Facts of the case:
The plaintiff and defendant entered into a Sale Agreement where the plaintiff paid Rs.10,00,000/- as an advance for the purchase of property, but the defendant later claimed it was intended as a loan security instead. Plaintiff filed a suit for specific performance after defendant refused to execute the Sale Deed. (Paras 3, 4, 8)

Findings of Court:
The Sale Agreement was determined to have been executed as a security for a loan transaction rather than an actual sale of property, and consequently, the plaintiff is entitled to a refund rather than specific performance. (Paras 23, 24)

Issues: The main issues addressed include the true intention behind the Sale Agreement and the validity of the claim for specific performance. (Paras 11, 12)

Ratio Decidendi: The court concluded that the Sale Agreement was intended as a security device and not as a genuine sale transaction, allowing the plaintiff to recover funds but denying specific performance based on the nature of the agreement. (Paras 20, 23)

Result: The Appeal Suit is partly allowed. The Trial Court's judgment is set aside. Defendant is ordered to refund Rs.10,00,000/- with 9% interest within 5 months. (Paras 24)

JUDGMENT :

Feeling aggrieved by the Judgment and Decree dated December 12, 2018 passed in O.S. No.20 of 2017 by the 'IV Additional District and Sessions Court, Bhavani' ['Trial Court' for brevity], the defendant therein has filed this Appeal Suit under Section 96 read with Order XLI Rules 1 and 2 of 'the Code of Civil Procedure, 1908 ' ['CPC' for short].

2. For the sake of convenience, hereinafter, the parties will be referred to as per their array in the Original Suit.

PLAINTIFF’S CASE

3. The Suit Properties together form a house site of a total extent of 1183 sq. ft., and absolutely belongs to defendant. On January 29, 2014, vide registered Sale Agreement dated January 29 2014, the defendant agreed to sell the Suit Properties to the plaintiff for a sale consideration of Rs.15,00,000/- (Rupees Fifteen Lakhs only), and on the same day itself, the defendant received a sum of Rs.10,00,000/- (Rupees Ten Lakhs only) as advance. As per the terms of Sale Agreement, plaintiff has to pay the balance sale consideration within four years from the date of execution of Sale Agreement and get the Sale Deed executed in his favour by the defendant. The time for specific performance was not considered as the essence of contract.

3.1. Ever since the date of Sale Agreement, the plaintiff has been always ready and willing to perform his part of contract, on the other hand, the defendant has been dodging and protracting to receive the balance sale consideration from the plaintiff and to perform his part of contract. From the date of Sale Agreement, despite plaintiff’s repeated oral demands, the defendant has been evading to perform her part of contract. When the plaintiff lastly orally contacted the defendant on October 14, 2017 for execution of Sale Deed, she refused and on the contrary, preferred a complaint before the Erode District Police against the plaintiff. Thereafter, on October 16, 2017, the defendant issued a legal notice to the plaintiff with false allegation that the above said transaction is only for loan. The plaintiff issued a reply notice to the defendant on November 7, 2017 expressing his readiness and willingness to purchase the Suit Properties. Though the defendant counsel received the said reply notice on November 8, 2017 she did not come forward to perform her part of contract.

3.2. On November 16, 2017, the plaintiff came to understand that the defendant is taking hectic attempts to alienate the Suit Properties to third parties. On November 16, 2017 itself, the defendant was trying to construct houses in the Suit Properties. Therefore, the plaintiff filed the present Suit seeking the relief of Specific Performance and an alternative prayer to direct the defendant to repay the advance amount with interest at the rate of 9% per annum from the date of Suit Agreement till actual realization and sought permanent injunction restraining the defendant from alienating or encumbering and constructing over the Suit Properties.

DEFENDANT'S CASE

4. The defendant filed written statement denying the allegations made by the plaintiff in the plaint. It is admitted that the Suit Properties are belonging to the defendant. The defendant borrowed a sum of Rs.3,00,000/- at the rate of Rs.2/- per Rs.100/- per month from one Rajamani and executed a Sale Agreement as a security. She paid a sum of Rs.6,000/- per month as interest to the said Rajamani. Then the defendant was in need of another sum of Rs.2,00,000/-. While so, the plaintiff approached the defendant offering financial assistance at the rate of Rs.1/- per Rs.100/- per month. The plaintiff settled the defendant’s debt of Rs.3,00,000/- with Rajamani and cancelled the Sale Agreement. The plaintiff further paid Rs.2,00,000/- to another person for the debts borrowed by the defendant. Then, the plaintiff and the defendant entered into the Suit Sale Agreement as a security for the sum of Rs.5,00,000/- that the defendant owes the plaintiff. The defendant has been paying interest to the plaintiff proper