Subsequent Conduct Substantiating Oral Understanding Is Grounds For Specific Performance: Madras High Court - 2025-06-23

Madras High Court Upholds Oral Agreement for Property Reconveyance, Citing Subsequent Conduct of Defendants

CHENNAI: The Madras High Court, in a significant ruling on property law, has decreed a suit for specific performance based on an oral understanding between parties. Justice K.KUMARESH BABU held that the subsequent actions of the defendants, particularly the execution of sale deeds by two of them, served as compelling evidence to substantiate the plaintiff's claim of an unwritten agreement for reconveyance of property.

The Court granted the decree in favor of M/S.Crescent Housing P Ltd against the legal heirs of M. Jamaludeen and others, directing them to execute sale deeds for their respective undivided shares in a property as per the oral understanding.

Background of the Dispute

The case revolves around a property development project where the plaintiff, M/S.Crescent Housing P Ltd, was nominated by its sister concern, M/s.Pioneer Building Syndicate Pvt., Ltd., which had entered into a Memorandum of Understanding with the original landowners.

The property was divided into 200,000 undivided shares (UDS). While the plaintiff acquired 157,000 UDS (78.5%), the remaining 43,000 UDS (21.5%) were transferred to the defendants, who were family members of the original owners.

The plaintiff's central claim was that this transfer of 21.5% UDS to the defendants was a temporary arrangement based on an oral understanding. It was agreed that the defendants would reconvey these shares to the plaintiff upon the payment of the balance sale consideration.

Plaintiff’s Arguments

Mr. P.R. Raman, learned Senior Counsel for the plaintiff, argued that the oral understanding was the cornerstone of the transaction. He presented several key pieces of evidence to support this claim: -

Subsequent Payments: The plaintiff made payments to the defendants after the 1995 property transfers, evidenced by over 230 payment vouchers and cheques (Ex.P.96). This conduct, the plaintiff argued, was inconsistent with a final sale to the defendants and pointed towards an ongoing obligation. -

Subsequent Sale Deeds: Crucially, two of the defendants (the 5th and 10th), even after being set ex-parte in the current suit, executed sale deeds (Ex.P.98 & Ex.P.99) in favor of the plaintiff. -

Recitals in Deeds: The recitals within these subsequent sale deeds explicitly mentioned the oral understanding and acknowledged that the plaintiff had fulfilled its commitments, obligating the defendants to reconvey the property.

Court’s Reasoning and Decision

The defendants, despite initially being represented, failed to file a written statement and were eventually set ex-parte, meaning the plaintiff's claims went uncontested.

Justice K.KUMARESH BABU found the plaintiff's evidence persuasive. The Court highlighted that while the original sale deeds in favor of the defendants did not mention any condition for reconveyance, the subsequent actions of the defendants themselves provided the necessary proof.

In its judgment, the Court observed:

"A perusal of Ex.P.98 and Ex.P.99 would explicitly spell out an oral understanding that had been arrived between the plaintiffs and the defendants. The said Exhibits exemplifies such oral understanding."

The Court noted that the defendants were aware of the proceedings but chose not to contest them. The fact that two defendants proceeded to execute sale deeds in line with the alleged oral agreement, even after the suit was filed, was deemed powerful corroboration of the plaintiff's case.

Final Verdict

The High Court decreed the suit for specific performance against the remaining defendants (D3, D4, D6, D7, D9, D11, D12 & D14). It directed them to execute the necessary sale deeds in favor of the plaintiff within 12 weeks. The Court warned that should they fail to comply, the Registrar of the High Court would be authorized to execute the deeds on their behalf. The suit against the 5th and 10th defendants was deemed infructuous as they had already executed the sale deeds.