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Supreme Court of India
The Correspondence Rbanms Educational … vs B Gunashekar on 16 April, 2025
1
2025 INSC 490 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5200 OF 2025
(Arising from SLP (C) No. 13679 of 2022)
The Correspondence,
RBANMS Educational Institution ... Appellant
VERSUS
B. Gunashekar & Another ...Respondents
JUDGMENT
R. MAHADEVAN, J.
Leave granted.
2. The present appeal challenges the order dated 02.06.2022 passed by the
High Court of Karnataka at Bengaluru1 in Civil Revision Petition No.130 of 2021,
whereby the High Court dismissed the revision petition filed by the appellant
against the order of the trial Court dated 11.06.2021 rejecting their application
filed under Order VII Rule 11(a) and (d) of the Code of Civil Procedure, 1908 2
for rejection of the plaint.
Signature Not Verified
Digitally signed by
CHANDRESH
Date: 2025.04.16
16:42:55 IST
Reason:
1
Hereinafter referred to as “the High Court”
2
For short, “CPC”
2
3. On 12.08.2022, when the matter was taken up for consideration, this Court
has passed the following order:
“Issue notice, returnable in six weeks.
There will be stay of the operation of proceedings in OS No.25968 of 2018 pending
before the Court of XIII Addl. City Civil & Sessions Judge, MayoHall Unit,
Bengaluru (CCH-22) till the next date of hearing.”3.1. On 22.11.2024, the aforesaid interim order was extended by this Court and
is in force till date.
BRIEF FACTS
4. The appellant viz., R.B.A.N.M.S. Educational Institution, was established
in the year 1873 as a public charitable trust, dedicated to serving first-generation
learners from marginalized communities in urban Bangalore. In 1905, a
significant parcel of land, then known as ‘the Sappers Practice Ground,’ was
leased to the appellant. Subsequently, in 1929, this property was formally
conveyed to the appellant by the Municipal Commissioner of Civil and Military
Station of Bangalore. Since then, the appellant has been in continuous possession
of the said property, utilizing it for various educational purposes including
Pre-University Colleges, first-grade degree colleges, and sporting facilities
serving both their institutions and the youth of Bangalore.
5. The respondents filed a suit bearing O.S.No.25968 of 2018 against the
appellant, before the City Civil Court and Sessions Judge at Bangalore, seeking
permanent injunction restraining the appellant from creating any third-party
3
interest over the suit schedule property, based on an alleged agreement to sell
executed by the respondents and Ramesh S. Reddy with one Maheshwari
Ranganathan and others, in respect of the suit schedule property, on 10th April,
2018 for a sale consideration of Rs.9,00,00,000/-, for which, they claim to have
paid Rs.75,00,000/- as an advance payment. It was alleged in the plaint that the
appellant was trying to manipulate the title deeds of the suit schedule property
with an intention to alienate or dispose of the same to third parties.
6. After service of summons, the appellant filed an application bearing
I.A. No. 3 of 2018 under Order VII Rule 11(a) and (d) CPC, seeking rejection of
the plaint, inter alia stating that the respondents are only agreement holders and
not owners of the suit schedule property and that, mere execution of an agreement
to sell does not create or confer any right or interest in the property in favour of
the proposed purchasers.
7. The respondents filed their objections to the aforesaid application filed by
the appellant.
8. Upon hearing both sides, the trial Court rejected the aforesaid application
seeking rejection of the plaint on 03.06.2020. Challenging the same, the appellant
preferred C.R.P. No. 205 of 2020, which was allowed in part, by the High Court
vide order dated 19.11.2020. The operative portion of the order reads as under:
“The petition is allowed in part. The impugned order dated 3.6.2020 in
O.S.No.25968/2018 on the XIII Additional City Civil and Sessions Judge, Mayohall
4Unit, Bengaluru is set aside. The petitioner’s application filed under Order VII Rule
11(a) and (d) of Code of Civil Procedure is restored for reconsideration calling
upon the Civil Court to decide on merits of the application in accordance with law
in the light of the grounds urged in an expedited manner but within an outer limit
of three months from the date of first hearing after this order.”
9. Pursuant to the aforesaid order, the trial Court reconsidered the application
filed under Order VII Rule 11(a) and (d) CPC and ultimately, rejected the same,
on 11.06.2021. Aggrieved by the same, the appellant preferred Civil Revision
Petition No. 130 of 2021 before the High Court and the same also ended in
dismissal by the order impugned herein. Therefore, the appellant is before us with
the present appeal.
CONTENTIONS OF THE PARTIES
10. The learned counsel appearing for the appellant submitted that the alleged
agreement to sell, which forms the fundamental basis of the suit, cannot create
any interest in the suit schedule property as per Section 54 of the Transfer of
Property Act, 1882. In this regard, the learned counsel relied on the judgment in
Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra Dead throught LRs. & Anr.
3
, wherein, this Court held that a mere agreement to sell does not create any
interest in the property. This position was further reinforced in the judgment in
Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another4,
which reiterated that a contract for sale merely confers a limited right under
3
(2004) 8 SCC 614
4
(2012) 1 SCC 656
5
Section 53-A of the Transfer of Property Act, 1882. The learned counsel also
highlighted the practical application of this principle in K. Basavarajappa v. Tax
Recovery Commissioner, Bangalore & Others5, in which, it was held by this
Court that a proposed vendee with an agreement to sell lacks locus standi to
challenge third-party rights.
10.1. The learned counsel emphasized the suspicious circumstances surrounding
the alleged agreement to sell i.e., the purported vendors have not been made
parties to the suit, their addresses were conspicuously absent in the plaint, and the
entire advance payment of Rs.75 lakhs was claimed to have been made in cash
without any documentary proof. Additionally, the learned counsel invited our
attention to the respondents’ pattern of filing similar suits in respect of the other
valuable properties in Bangalore, suggesting a systematic attempt at land
grabbing through dubious agreements to sell.
10.2. The learned counsel further pointed out impropriety of maintaining a pure
injunction suit where title itself is in dispute. Citing the decision of this court in
Jharkhand State Housing Board v. Didar Singh & Another6, the learned counsel
contended that when there is a cloud over title, a suit merely for injunction
without seeking declaration of title is not maintainable. Referring to the decision
in Premji Ratansey Shah & Others v. Union of India & Others7, the learned
5
(1996) 11 SCC 632
6
(2019) 17 SCC 692
7
(1994) 5 SCC 547
6
counsel contended that Section 41(h) and (j) of the Specific Relief Act, 1963, bars
grant of injunction when equally efficacious relief is available through other
means and when the plaintiffs have no personal interest in the property.
Ultimately, the learned counsel submitted that applying the ratio laid down in the
decision in T. Arivandandam v. T.V. Satyapal & Another8 to the facts of the
present case, the plaint is barred by law and does not disclose a right to sue against
the appellant herein on the basis of an agreement to sell executed by the
respondents, with third parties.
10.3. With these submissions and case laws, the learned counsel prayed that this
appeal will have to be allowed and the suit filed by the respondents deserves to
be rejected under Order VII Rule 11 CPC.
11. Per contra, the learned counsel appearing for the respondents would submit
that at the stage of considering an application under Order VII Rule 11 CPC, the
court must confine itself to the averments in the plaint without examining the
defense or other external materials. Placing reliance on the decisions in P.V. Guru
Raj Reddy v. P. Neeradha Reddy & Others9 and Soumitra Kumar Sen v. Shyamal
Kumar Sen & Others10, the learned counsel proceeded to argue that the plaint’s
8
(1977) 4 SCC 467
9
(2015) 8 SCC 331
10
(2018) 5 SCC 644
7
averments must be accepted as true at this stage, and the defendant’s objections
are immaterial.
11.1. According to the learned counsel, the suit was filed to protect the
respondents’ legitimate interests over the property in question under the
agreement to sell, apprehending alienation of the property by third parties.
Further, the learned counsel distinguished the decisions cited by the appellant,
particularly that in Rambhau Namdeo Gajre (supra) and contended that it was
decided after full trial and examination of evidence, unlike the present case where
the cause of action stems from the agreement itself. The learned counsel also
sought to differentiate the decision in T. Arivandandam (supra) noting that unlike
that case which involved vexatious litigation following lost eviction proceedings,
the present matter involved genuine rights under a registered agreement to sell.
The learned counsel further submitted that rejection of plaint is a drastic remedy
that should be exercised sparingly, only when the plaint is manifestly vexatious
and meritless; and that, the proper course would be for the appellant to file a
written statement and contest the suit on merits, rather than seeking rejection of
the plaint at the threshold.
11.2. It is further submitted that both the Courts below have examined the plaint
in the light of Order VII Rule 11 (a) CPC to ascertain that it does indeed make
out a valid cause of action, i.e., that the Respondents have acquired an interest in
the property by virtue of the agreement to sell dated 10.04.2018 and hence, if the
8
claim of the appellant is that they hold a valid title to the property, it is for them
to prove the same during trial.
11.3. The learned counsel also submitted that the appellant is misguided in
asserting that the provisions of Section 53-A of the Transfer of Property Act, 1882
act as a bar against parties or interlopers who are not party to the transaction
envisaged in that section. That apart, the decision in K. Basavarajappa (supra)
does not apply to the facts of the present case, for that the same was about whether
an agreement to sell will stand in the way of the property being sold under auction
for tax recovery purposes and the same cannot and should not be used as a device
to defeat the suit at the threshold.
11.4. Therefore, according to the learned counsel, the impugned order of the
High Court does not require any interference at the hands of this court.
DISCUSSION AND FINDINGS
12. We have heard the learned counsel appearing for both sides and perused
the materials available record.
13. Seemingly, the appellant institution’s journey began nearly 150 years ago,
and its possession of the disputed property dates back to 1905, when it was
initially leased and subsequently conveyed by the Commissioner of Civil and
Military Station of Bangalore. The present dispute arose when the respondents
9
filed a suit in O.S. No. 25968 of 2018 seeking permanent injunction against the
appellant. The respondents’ claim rests entirely on an agreement to sell dated
10.04.2018, purportedly executed by certain individuals who, notably, are not
parties to the suit. The appellant, confronted with this litigation, filed an
application under Order VII Rule 11(a) and (d) CPC seeking rejection of the
plaint. Both the trial court and the High Court rejected the said application filed
by the appellant. Hence, this appeal came to be filed by the appellant before us.
14. Let us first examine the scope and purpose of Order VII Rule 11 CPC11.
This Court in Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra) dead through
legal representatives12, explained in detail the applicable law for deciding the
application for rejection of the plaint. The relevant paragraphs of the said decision
are reproduced below:
“23.1 …
11
“11. Rejection of plaint.– The plaint shall be rejected in the following cases–
(a) where it does not disclose a cause of action;
(b) where the relief claimed in undervalued, and the plaintiff, on being required by the Court to correct
the valuation within a time to be fixed by the Court, fails to do so;
(c) where the relief claimed is properly valued but the plaint is written upon paper insufficiently
stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a
time to be fixed by the Court, fails to do so;
(d) where the suit appears from the statement in the plaint to be barred by any law;
(e) where it is not filed in duplicate;
(f) where the plaintiff fails to comply with the provisions of rule 9:
Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite
stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the
plaintiff was prevent by any cause of exceptional nature for correction the valuation or supplying the
requisite stamp-paper, as the case may be, within the time fixed by the Court and that refusal to extend
such time would cause grave injustice to the plaintiff.”
12
(2020) 7 SCC 366 : 2020 SCC OnLine SC 562
1023.2. The remedy under Order VII Rule 11 is an independent and special remedy,
wherein the Court is empowered to summarily dismiss a suit at the threshold,
without proceeding to record evidence, and conducting a trial, on the basis of the
evidence adduced, if it is satisfied that the action should be terminated on any of
the grounds contained in this provision.
23.3. The underlying object of Order VII Rule 11 (a) is that if in a suit, no cause of
action is disclosed, or the suit is barred by limitation under Rule 11 (d), the Court
would not permit the plaintiff to unnecessarily protract the proceedings in the suit.
In such a case, it would be necessary to put an end to the sham litigation, so that
further judicial time is not wasted.
23.4. In Azhar Hussain v. Rajiv Gandhi13 this Court held that the whole purpose of
conferment of powers under this provision is to ensure that a litigation which is
meaningless, and bound to prove abortive, should not be permitted to waste judicial
time of the court, in the following words : (SCC p.324, para 12)
“12. …The whole purpose of conferment of such power is to ensure that a
litigation which is meaningless, and bound to prove abortive should not be
permitted to occupy the time of the Court, and exercise the mind of the
respondent. The sword of Damocles need not be kept hanging over his
head unnecessarily without point or purpose. Even in an ordinary civil
litigation, the Court readily exercises the power to reject a plaint, if it does
not disclose any cause of action.”
23.5. The power conferred on the court to terminate a civil action is, however, a
drastic one, and the conditions enumerated in Order VII Rule 11 are required to be
strictly adhered to.
23.6. Under Order VII Rule 11, a duty is cast on the Court to determine whether
the plaint discloses a cause of action by scrutinizing the averments in the plaint14
read in conjunction with the documents relied upon, or whether the suit is barred
by any law.
23.7. Order VII Rule 14(1) provides for production of documents, on which the
plaintiff places reliance in his suit, which reads as under:
“14.Production of document on which plaintiff sues or relies.– (1)Where
a plaintiff sues upon a document or relies upon document in his possession
or power in support of his claim, he shall enter such documents in a list,
and shall produce it in Court when the plaint is presented by him and shall,13
1986 Supp SCC 315. Followed in Manvendrasinhji Ranjitsinhji Jadeja v. Vijaykunverba, 1998 SCC
OnLine Guj 281 : (1998) 2 GLH 823
14
Liverpool & London S.P. & I Assn. Ltd. V. M.V. Sea Success I, (2004) 9 SCC 512
11at the same time deliver the document and a copy thereof, to be filed with
the plaint.
(2)Where any such document is not in the possession or power of the
plaintiff, he shall, wherever possible, state in whose possession or power
it is.
(3)A document which ought to be produced in Court by the plaintiff when
the plaint is presented, or to be entered in the list to be added or annexed
to the plaint but is not produced or entered accordingly, shall not, without
the leave of the Court, be received in evidence on his behalf at the hearing
of the suit.
(4)Nothing in this rule shall apply to document produced for the cross
examination of the plaintiff’s witnesses, or, handed over to a witness
merely to refresh his memory.”
(emphasis supplied)23.8. Having regard to Order VII Rule 14 CPC, the documents filed alongwith the
plaint, are required to be taken into consideration for deciding the application
under Order VII Rule 11(a). When a document referred to in the plaint, forms the
basis of the plaint, it should be treated as a part of the plaint.
23.9. In exercise of power under this provision, the Court would determine if the
assertions made in the plaint are contrary to statutory law, or judicial dicta, for
deciding whether a case for rejecting the plaint at the threshold is made out.
23.10. At this stage, the pleas taken by the defendant in the written statement and
application for rejection of the plaint on the merits, would be irrelevant, and cannot
be adverted to, or taken into consideration15.
23.11. The test for exercising the power under Order VII Rule 11 is that if the
averments made in the plaint are taken in entirety, in conjunction with the
documents relied upon, would the same result in a decree being passed. This test
was laid down in Liverpool & London S.P. & I Assn. Ltd. v. M.V.Sea Success
I which reads as : (SCC p.562, para 139)
“139. Whether a plaint discloses a cause of action or not is essentially a
question of fact. But whether it does or does not must be found out from
reading the plaint itself. For the said purpose, the averments made in the
plaint in their entirety must be held to be correct. The test is as to whether
if the averments made in the plaint are taken to be correct in their entirety,
a decree would be passed.”
15
Sopan Sukhdeo Sable v. Charity Commr., (2004) 3 SCC 137
12
23.12. In Hardesh Ores (P.) Ltd. v. Hede & Co.16 the Court further held that it is
not permissible to cull out a sentence or a passage, and to read it in isolation. It is
the substance, and not merely the form, which has to be looked into. The plaint has
to be construed as it stands, without addition or subtraction of words. If the
allegations in the plaint prima facie show a cause of action, the court cannot
embark upon an enquiry whether the allegations are true in fact. D.Ramachandran
v. R.V.Janakiraman17.
23.13. If on a meaningful reading of the plaint, it is found that the suit is manifestly
vexatious and without any merit, and does not disclose a right to sue, the court
would be justified in exercising the power under Order VII Rule 11 CPC.
23.14. The power under Order VII Rule 11 CPC may be exercised by the Court at
any stage of the suit, either before registering the plaint, or after issuing summons
to the defendant, or before conclusion of the trial, as held by this Court in the
judgment of Saleem Bhai v. State of Maharashtra18. The plea that once issues are
framed, the matter must necessarily go to trial was repelled by this Court in Azhar
Hussain (supra).
23.15. The provision of Order VII Rule 11 is mandatory in nature. It states that the
plaint “shall” be rejected if any of the grounds specified in clause (a) to (e) are
made out. If the Court finds that the plaint does not disclose a cause of action, or
that the suit is barred by any law, the Court has no option, but to reject the plaint.
24. “Cause of action” means every fact which would be necessary for the plaintiff
to prove, if traversed, in order to support his right to judgment. It consists of a
bundle of material facts, which are necessary for the plaintiff to prove in order to
entitle him to the reliefs claimed in the suit.
24.1. In Swamy Atmanand v. Sri Ramakrishna Tapovanam19 this Court held:
“24. A cause of action, thus, means every fact, which if traversed, it would
be necessary for the plaintiff to prove an order to support his right to a
judgment of the court. In other words, it is a bundle of facts, which taken
with the law applicable to them gives the plaintiff a right to relief against
the defendant. It must include some act done by the defendant since in the
absence of such an act, no cause of action can possibly accrue. It is not
limited to the actual infringement of the right sued on but includes all the
material facts on which it is founded”
(emphasis supplied)16
(2007) 5 SCC 614
17
(1999) 3 SCC 267
18
(2003) 1 SCC 557
19
(2005) 10 SCC 51
1324.2. In T. Arivandandam v. T.V. Satyapal20 this Court held that while considering
an application under Order VII Rule 11 CPC what is required to be decided is
whether the plaint discloses a real cause of action, or something purely illusory, in
the following words: (SCC p. 470, para 5)
“5. …The learned Munsif must remember that if on a meaningful – not
formal – reading of the plaint it is manifestly vexatious, and meritless, in
the sense of not disclosing a clear right to sue, he should exercise his
power under Order VII, Rule 11 C.P.C. taking care to see that the ground
mentioned therein is fulfilled. And, if clever drafting has created the
illusion of a cause of action, nip it in the bud at the first hearing …”
(emphasis supplied)24.3. Subsequently, in I.T.C. Ltd. v. Debt Recovery Appellate Tribunal21 this Court
held that law cannot permit clever drafting which creates illusions of a cause of
action. What is required is that a clear right must be made out in the plaint.
24.4. If, however, by clever drafting of the plaint, it has created the illusion of a
cause of action, this Court in Madanuri Sri Ramachandra Murthy v. Syed Jalal22
held that it should be nipped in the bud, so that bogus litigation will end at the
earliest stage. The Court must be vigilant against any camouflage or suppression,
and determine whether the litigation is utterly vexatious, and an abuse of the
process of the court.
…..
28. A three-Judge Bench of this Court in State of Punjab v. Gurdev Singh23 held
that the Court must examine the plaint and determine when the right to sue first
accrued to the plaintiff, and whether on the assumed facts, the plaint is within time.
The words “right to sue” means the right to seek relief by means of legal
proceedings. The right to sue accrues only when the cause of action arises. The suit
must be instituted when the right asserted in the suit is infringed, or when there is
a clear and unequivocal threat to infringe such right by the defendant against whom
the suit is instituted. Order VII Rule 11(d) provides that where a suit appears from
the averments in the plaint to be barred by any law, the plaint shall be rejected.”
20
(1977) 4 SCC 467
21
(1998) 2 SCC 170
22
(2017) 13 SCC 174
23
(1991) 4 SCC 1 : 1991 SCC (L&S) 1082
14
14.1. Thus, it is clear that the above provision viz., Order VII Rule 11 CPC serves
as a crucial filter in civil litigation, enabling courts to terminate proceedings at
the threshold where the plaintiff’s case, even if accepted in its entirety, fails to
disclose any cause of action or is barred by law, either express or by implication.
The scope of Order VII Rule 11 CPC and the authority of the courts is well settled
in law. There is a bounden duty on the Court to discern and identify fictitious suit,
which on the face of it would be barred, but for the clever pleadings disclosing a
cause of action, that is surreal. Generally, sub-clauses (a) and (d) are stand alone
grounds, that can be raised by the defendant in a suit. However, it cannot be ruled
out that under certain circumstances, clauses (a) and (d) can be mutually
inclusive. For instances, when clever drafting veils the implied bar to disclose the
cause of action; it then becomes the duty of the Court to lift the veil and expose
the bar to reject the suit at the threshold. The power to reject a plaint under this
provision is not merely procedural but substantive, aimed at preventing abuse of
the judicial process and ensuring that court time is not wasted on fictitious claims
failing to disclose any cause of action to sustain the suit or barred by law.
Therefore, the appeal before us requires careful consideration of the scope of
rejection of the plaint under Order VII Rule 11 CPC, particularly, in the context
of the suit filed based on an agreement to sell against third parties in possession.
15. Order VII Rule 11(a) CPC mandates rejection of the plaint where it does
not disclose a cause of action. In Om Prakash Srivastava v. Union of India &
15
Another24, this Court pointed out that cause of action means every fact which, if
traversed, would be necessary for the plaintiff to prove in order to support their
right to judgment. It consists of bundle of facts which narrate the circumstances
and the reasons for filing such suit. It is the foundation on which the entire suit
would rest. Therefore, it goes without saying that merely including a paragraph
on cause of action is not sufficient but rather, on a meaningful reading of the
plaint and the documents, it must disclose a cause of action. The plaint should
contain such cause of action that discloses all the necessary facts required in law
to sustain the suit and not mere statements of fact which fail to disclose a legal
right of the plaintiff to sue and breach or violation by the defendant(s). It is
pertinent to note here that even if a right is found, unless there is a violation or
breach of that right by the defendant, the cause of action should be deemed to be
unreal. This is where the substantive laws like Specific Relief Act, 1963, Contract
Act, 1872, and Transfer of Property Act, 1882, come into operation. A pure
question of law that can be decided at the early stage of litigation, ought to be
decided at the earliest stage. In the present case, the respondents’ claim based on
an agreement to sell. The legal effect of such an agreement must be examined in
light of Section 54 of the Transfer of Property Act, 1882, which explicitly states
that a contract for the sale of immovable property does not, of itself, create any
24
(2006) 6 SCC 207
16
interest in or charge on such property. This principle has been consistently upheld
by this Court in the following judgments:
(i) Rambhau Namdeo Gajre (supra)
“13. The agreement to sell does not create an interest of the proposed vendee in
the suit property. As per Section 54 of the Act, the title in immovable property
valued at more than Rs 100 can be conveyed only by executing a registered sale
deed. Section 54 specifically provides that a contract for sale of immovable
property is a contract evidencing the fact that the sale of such property shall take
place on the terms settled between the parties, but does not, of itself, create any
interest in or charge on such property. It is not disputed before us that the suit land
sought to be conveyed is of the value of more than Rs 100. Therefore, unless there
was a registered document of sale in favour of Pishorrilal (the proposed transferee)
the title of the suit land continued to vest in Narayan Bapuji Dhotra (original
plaintiff) and remain in his ownership. This point was examined in detail by this
Court in State of U.P. v. District Judge [(1997) 1 SCC 496] and it was held thus :
(SCC pp. 499-500, para 7)
“7. Having given our anxious consideration to the rival contentions we
find that the High Court with respect had patently erred in taking the view
that because of Section 53-A of the Transfer of Property Act the proposed
transferees of the land had acquired an interest in the lands which would
result in exclusion of these lands from the computation of the holding of
the tenure-holder transferor on the appointed day. It is obvious that an
agreement to sell creates no interest in land. As per Section 54 of the
Transfer of Property Act, the property in the land gets conveyed only by
registered sale deed. It is not in dispute that the lands sought to be covered
were having value of more than Rs 100. Therefore, unless there was a
registered document of sale in favour of the proposed transferee
agreement-holders, the title of the lands would not get divested from the
vendor and would remain in his ownership. There is no dispute on this
aspect. However, strong reliance was placed by learned counsel for
Respondent 3 on Section 53-A of the Transfer of Property Act. We fail to
appreciate how that section can at all be relevant against the third party
like the appellant State. That section provides for a shield of protection to
the proposed transferee to remain in possession against the original owner
who has agreed to sell these lands to the transferee if the proposed
17transferee satisfies other conditions of Section 53-A. That protection is
available as a shield only against the transferor, the proposed vendor, and
would disentitle him from disturbing the possession of the proposed
transferees who are put in possession pursuant to such an agreement. But
that has nothing to do with the ownership of the proposed transferor who
remains full owner of the said lands till they are legally conveyed by sale
deed to the proposed transferees. Such a right to protect possession
against the proposed vendor cannot be pressed in service against a third
party like the appellant State when it seeks to enforce the provisions of the
Act against the tenure-holder, proposed transferor of these lands.”
(emphasis supplied)There was no agreement between the appellant and the respondent in connection
with the suit land. The doctrine of part-performance could have been availed of by
Pishorrilal against his proposed vendor subject, of course, to the fulfilment of the
conditions mentioned above. It could not be availed of by the appellant against the
respondent with whom he has no privity of contract. The appellant has been put in
possession of the suit land on the basis of an agreement of sale not by the
respondent but by Pishorrilal, therefore, the privity of contract is between
Pishorrilal and the appellant and not between the appellant and the respondent.
The doctrine of part-performance as contemplated in Section 53-A can be availed
of by the proposed transferee against his transferor or any person claiming under
him and not against a third person with whom he does not have a privity of
contract.”
(ii) Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another25, wherein,
this Court comprehensively examined the nature of rights created by an
agreement to sell and concluded that such agreements create, at best, a personal
right enforceable against the vendor. The relevant paragraphs read as under:
“16. Section 54 of TP Act makes it clear that a contract of sale, that is, an
agreement of sale does not, of itself, create any interest in or charge on such
property. This Court in Narandas Karsondas v. S.A. Kamtam and Anr. (1977) 3
SCC 247, observed: (SCC pp.254-55, paras 32-33 & 37)
“32. A contract of sale does not of itself create any interest in, or charge
on, the property. This is expressly declared in Section 54 of the25
(2012) 1 SCC 656
18Transfer of Property Act. See Rambaran Prasad v. Ram Mohit Hazra
[1967]1 SCR 293. The fiduciary character of the personal obligation
created by a contract for sale is recognised in Section 3 of the Specific
Relief Act, 1963, and in Section 91 of the Trusts Act. The personal
obligation created by a contract of sale is described in Section 40 of
the Transfer of Property Act as an obligation arising out of contract
and annexed to the ownership of property, but not amounting to an
interest or easement therein.
33. In India, the word `transfer’ is defined with reference to the word
`convey’. The word `conveys’ in Section 5 of Transfer of Property Act
is used in the wider sense of conveying ownership…
37….that only on execution of conveyance, ownership passes from one
party to another….”
17. In Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004 (8) SCC 614]
this Court held:
“10. Protection provided under Section 53-A of the Act to the proposed
transferee is a shield only against the transferor. It disentitles the
transferor from disturbing the possession of the proposed transferee
who is put in possession in pursuance to such an agreement. It has
nothing to do with the ownership of the proposed transferor who
remains full owner of the property till it is legally conveyed by
executing a registered sale deed in favour of the transferee. Such a right
to protect possession against the proposed vendor cannot be pressed in
service against a third party.”
18. It is thus clear that a transfer of immovable property by way of sale can only
be by a deed of conveyance (sale deed). In the absence of a deed of conveyance
(duly stamped and registered as required by law), no right, title or interest in an
immovable property can be transferred.
19. Any contract of sale (agreement to sell) which is not a registered deed of
conveyance (deed of sale) would fall short of the requirements of Sections 54 and
55 of the TP Act and will not confer any title nor transfer any interest in an
immovable property (except to the limited right granted under Section 53-A of the
TP Act). According to the TP Act, an agreement of sale, whether with possession
or without possession, is not a conveyance. Section 54 of the TP Act enacts that
sale of immovable property can be made only by a registered instrument and an
agreement of sale does not create any interest or charge on its subject-matter.”
19
(iii) Cosmos Co. Operative Bank Ltd v. Central Bank of India & Ors26
“25. The observations made by this Court in Suraj Lamp (supra) in paras 16 and
19 are also relevant.
…..
26. Suraj Lamp (supra) later came to be referred to and relied upon by this Court
in Shakeel Ahmed v. Syed Akhlaq Hussain, 2023 SCC OnLine SC 1526 wherein
the Court after referring to its earlier judgment held that the person relying upon
the customary documents cannot claim to be the owner of the immovable property
and consequently not maintain any claims against a third-party. The relevant
paras read as under:—
“10. Having considered the submissions at the outset, it is to be emphasized that
irrespective of what was decided in the case of Suraj Lamps and Industries (supra)
the fact remains that no title could be transferred with respect to immovable
properties on the basis of an unregistered Agreement to Sell or on the basis of an
unregistered General Power of Attorney. The Registration Act, 1908 clearly
provides that a document which requires compulsory registration under the Act,
would not confer any right, much less a legally enforceable right to approach a
Court of Law on its basis. Even if these documents i.e. the Agreement to Sell and
the Power of Attorney were registered, still it could not be said that the respondent
would have acquired title over the property in question. At best, on the basis of
the registered agreement to sell, he could have claimed relief of specific
performance in appropriate proceedings. In this regard, reference may be made
to sections 17 and 49 of the Registration Act and section 54 of the Transfer of
Property Act, 1882.
11. Law is well settled that no right, title or interest in immovable property can
be conferred without a registered document. Even the judgment of this Court in
the case of Suraj Lamps & Industries (supra) lays down the same proposition.
Reference may also be made to the following judgments of this Court:
(i). Ameer Minhaj v. Deirdre Elizabeth (Wright) Issar (2018) 7 SCC 639
(ii). Balram Singh v. Kelo Devi Civil Appeal No. 6733 of 2022
(iii). Paul Rubber Industries Private Limited v. Amit Chand Mitra, SLP(C) No.
15774 of 2022.
12. The embargo put on registration of documents would not override the
statutory provision so as to confer title on the basis of unregistered documents
with respect to immovable property. Once this is the settled position, the
respondent could not have maintained the suit for possession and mesne profits
against the appellant, who was admittedly in possession of the property in
question whether as an owner or a licensee.
26
2025 SCC OnLine SC 352
20
13. The argument advanced on behalf of the respondent that the judgment in Suraj
Lamps & Industries (supra) would be prospective is also misplaced. The
requirement of compulsory registration and effect on non-registration emanates
from the statutes, in particular the Registration Act and the Transfer of Property
Act. The ratio in Suraj Lamps & Industries (supra) only approves the provisions
in the two enactments. Earlier judgments of this Court have taken the same view.”
15.1. Undoubtedly, a sale deed, which amounts to conveyance, has to be a
registered document, as mandated under Section 17 of the Registration Act, 1908.
On the other hand, an agreement for sale, which also requires to be registered,
does not amount to a conveyance as it is merely a contractual document, by which
one party, namely the vendor, agrees or assures or promises to convey the property
described in the schedule of such agreement to the other party, namely the
purchaser, upon the latter performing his part of the obligation under the
agreement fully and in time. Section 54 of the Transfer of Property Act, 1882
explicitly lays down that a contract for sale will not confer any right or interest.
Section 53-A of the Transfer of Property Act, 1882 offers protection only to a
proposed transferee who has part performed his part of the promise and has been
put into possession, against the actions of transferor, acting against the interest of
the transferee. For the proposed transferee to seek any protection against the
transferor, he must have either performed his part of obligation in full or in part.
The applicability of Section 53-A of the Transfer of Property Act, 1882 is subject
to certain conditions viz., (a) the agreement must be in writing with the owner of
the property or in other words, the transferor must be either the owner or his aut
21
horised representative, (b) the transferee must have been put into possession or
must have acted in furtherance of the agreement and made some developments,
(c) the protection under Section 53-A is not an exemption to Section 52 of the
Transfer of Property Act, 1882 or in other words, a transferee, put into possession
with the knowledge of a pending lis, is not entitled to any protection, (d) the
transferee must be in possession when the lis is initiated against his transferor and
must be willing to perform the remaining part of his obligation, (e) the transferee
must be entitled to seek specific performance or in other words, must not be
barred by any of the provisions of the Specific Relief Act, 1963 from seeking such
performance. The protection under Section 53-A is not available against a third
party who may have an adversarial claim against the vendor. Therefore, unless
and until the sale deed is executed, the purchaser is not vested with any right, title
or interest in the property except to the limited extent of seeking specific
performance from his vendor. An agreement for sale does not confer any right to
the purchaser to file a suit against a third party who is either the owner or in
possession, or who claims to be the owner and to be in possession. In such cases,
the vendor will have to approach the court and not the proposed transferee.
15.2. In the present case, juxtaposing the above legal principles to the facts of
the case, we find that the respondents’ claim suffers from multiple fatal defects
that go to the root of the case, which are as follows:
22
15.2.1. First, there is no privity between the respondents and the appellant.
The agreement to sell, is not between the parties to the suit. According to
Section 7 of the Transfer of Property Act, 1882, only the owner, or any person
authorised by him, can transfer the property. We have already held that an
agreement to sell does not confer any right on the proposed purchaser under the
agreement. Therefore, as a natural corollary, any right, until the sale deed is
executed, will vest only with the owner, or in other words, the vendor to take
necessary action to protect his interest in the property. According to the
respondents, the property belongs to the vendors and according to the appellant,
the property vests in them. Since the respondents are not divested any right by
virtue of the agreement, they cannot sustain the suit as they would not have any
locus. Consequently, they also cannot seek any declaration in respect of the title
of the vendors. But when the title is under a cloud, it is necessary that a declaration
be sought as laid down by this Court in the judgment in Anathula Sudhakar v. P.
Buchi Reddy (Dead) by LRs and others27. Therefore, the suit at the instance of the
respondents/plaintiffs is not maintainable and only the vendors could have
approached the court for a relief of declaration. In the present case, strangely,
the vendors are not arrayed as parties to even support any semblance of right
sought by the respondents/plaintiffs, which we found not to be in existence.
Further, the respondents/plaintiffs claim to have paid the entire consideration of
27
AIR 2008 SC 2033 : MANU/SC/7376/2008
23
Rs.75,00,000/- in cash, despite the introduction of Section 269ST to the Income
Tax Act in 2017 and the corresponding amendment to Section 271 DA.
As held by us, the agreement can only create rights against the proposed vendors
and not against third parties like the appellant herein. As the agreement to sell
does not create any transferable interest or title in the property in favour of the
respondents/ plaintiffs, as per Section 54 of the Transfer of Property Act, 1882,
we hold that the attempt of the plaintiffs to disclose the cause of action through
clever drafting, based solely on an agreement to sell, must fail, as such disclosure
cannot be restricted to mere statement of facts but must disclose a legal right to
sue.
15.2.2. Secondly, and perhaps more fundamentally, as we have seen and
held above, the respondents have no legal right that can be enforced against the
appellant as their claim is impliedly barred by virtue of Section 54 of the Transfer
of Property Act, 1882. Their remedy, if any, lies against their proposed vendors.
The plaint averments remain silent regarding the execution of a registered sale
deed in favour of the respondents, which alone can confer a valid right on them
to file a suit against the appellant as held by us earlier. Another, remedy available
to them is to institute a suit against the vendors for specific performance. This
principle was clearly established in K. Basavarajappa (supra), wherein this Court
held that an agreement holder lacks locus standi to maintain actions against third
parties. The relevant paragraph of the said judgment is extracted below:
24
“8. … By mere agreement to sell the appellant got no interest in the property put
to auction to enable him to apply for setting aside such auction under Rule 60 and
especially when his transaction was hit by Rule 16(1) read with Rules 51 and 48.
Consequently he could not be said to be having any legal interest to entitle him to
move such an application. Consequently no fault could be found with the decision
of the Division Bench of the High Court rejecting the entitlement of the appellant
to move such an application.”15.2.3. The contention of the learned counsel for the respondents that the
judgements relied upon by the appellant are not applicable, cannot be accepted
for the simple reason that the ratio laid down by this court, is applicable
irrespective of the stage at which it is relied upon. What is relevant is the ratio and
not the stage. Such contentions go against the spirit of Article 141 of the
Constitution of India. Once a ratio is laid down, the courts have to apply the ratio,
considering the facts of the case and once, found to be applicable, irrespective of
the stage, the same has to be applied, to throw out frivolous suits. There is no
gainsaying in contending that the other party must be put to undergo the ordeal of
entire trial, when the plaintiff’s claim is either barred by law or the plaint fails to
disclose a cause of action, as it would amount to abuse of process of law, wasting
the precious time of the courts. On the other hand, the judgments relied upon by
the respondents do not come into their aid as the judgments referred to by them
also lay down the proposition that the plaint can be rejected if on a meaningful
reading of it, fails to disclose a cause of action or is barred by law. In the present
case, from the facts, we also find this to be a case of champertous litigation,
between the plaintiffs and the vendors, who are not parties to the suit. Though
25champertous litigations have been recognized in our country to some extent by
way of amendment to CPC by certain states, considering the facts of the present
case and the averments in the plaint, we only find the litigation to be inequitable,
unconscionable or extortionate.
15.2.4. Further, the respondents are not in possession of the property.
Whereas, the appellant’s possession since 1905 is admitted in the plaint itself.
In such circumstances, where the plaintiffs are not in possession and the
defendant is in settled possession for over a century, a suit for bare injunction by
a proposed transferee is clearly not maintainable. Section 41(j) of the Specific
Relief Act, 1963 prohibits grant of injunction when the plaintiff has no personal
interest in the matter. In the present case, the respondents, being mere agreement
holders, have no personal interest in the suit schedule property that can be
enforced against third parties. The “personal interest” is to be understood in the
context of a legally enforceable right, as when there is a bar in law, the mere
existence of an interest in the outcome cannot give a right to sue. As held by us
above, no declaratory relief has been sought as contemplated under Section 34 of
the Specific Relief Act, 1963. This principle was clearly established in Jharkhand
State Housing Board (supra), in which, this Court emphasized that where title is
in dispute, a mere suit for injunction is not maintainable. The relevant portion of
the said judgment is reproduced hereunder:-
26
“11. It is well settled by catena of judgments of this Court that in each and every
case where the defendant disputes the title of the plaintiff it is not necessary that
in all those cases plaintiff has to seek the relief of declaration. A suit for mere
injunction does not lie only when the defendant raises a genuine dispute with
regard to title and when he raises a cloud over the title of the plaintiff, then
necessarily in those circumstances, plaintiff cannot maintain a suit for bare
injunction.”15.2.5. Yet another defect in the plaint is regarding the identity of the
property. The respondents/plaintiffs, as seen above, have admitted to the
possession of the appellant over the suit property. The plaint, on one hand, raises
a dispute as to whether the property claimed by the respondents is the same as
that possessed by the appellant, and on the other hand, seeks only a relief of
permanent injunction restraining the appellant/defendant from alienating the
property, without seeking a declaration affirming the title of their vendors. The
entitlement of the plaintiffs to the possession rests on the title of their vendors and
it is not an independent right. Without possession and without seeking a
declaration of title, not only is the suit barred but the cause of action is also
fictitious.
16. The High Court without noticing the above defects in the plaint, dismissed
the application filed by the appellant under Order VII Rule 11 CPC by observing
that the cause of action is a mixed question of fact and law and that the matter
requires trial. When the defects go to the root of the case, barred by law with
fictitious allegations and are incurable, no amount of evidence can salvage the
27plaintiffs’ case. Though an agreement to sell creates certain rights, these rights are
purely personal between the parties to the agreement and can only be enforced
against the vendors or, in limited circumstances, under Section 53A of the
Transfer of Property Act, 1882, against a subsequent transferee with notice, as
held by us above. They cannot be enforced against third parties who claim
independent title and possession. Therefore, the High Court’s observation that an
agreement to sell creates an “enforceable right” cannot be countenanced by us.
17. At the same time, we are conscious of principle that only averments in the
plaint are to be considered under Order VII Rule 11 CPC. While it is true that the
defendant’s defense is not to be considered at this stage, this does not mean that
the court must accept patently untenable claims or shut its eyes to settled
principles of law and put the parties to trial, even in cases which are barred and
the cause of action is fictitious. In T. Arivandandam (supra), this Court
emphasized that where the plaint is manifestly vexatious and meritless, courts
should exercise their power under Order VII Rule 11 CPC and not waste judicial
time on matters that are legally barred and frivolous. The present case falls
squarely within this principle.
18. In the instant case, admittedly, no sale was originally effected and only part
consideration was made, which was not even to the appellant, but rather to a third
party. Upon discovering that the property did not belong to the third party, the
respondents instituted a suit. It must be noted that the appellant has been in
28possession of the suit schedule property for several decades. Given these
circumstances, the trial court must have adopted a fair and balanced approach,
carefully weighing all relevant factors, considered the provisions of the Transfer
of Property Act, 1882 and the Specific Relief Act, 1963, but it did not do so. The
decision of the trial Court was also affirmed by the High Court. However, we
have to take into consideration that the respondents are in the habit of filing
similar suits in respect of other valuable properties in Bangalore, based on various
alleged agreements to sell, which do not confer any right to sue. On the other
hand, the appellant is a 148-year-old charitable trust serving marginalized
communities. The public interest implications of this case are significant
consideration. Such institutions must be protected from speculative litigation that
can drain their resources and impede their charitable work. Moreover, allowing
suits like the present one to proceed to trial, would not only waste judicial time
and resources, but also encourage similar speculative and extortionate litigations.
Hence, this is a fit case for the imposition of costs on the respondents under
Section 35A of the Civil Procedure Code, 1908. However, we refrain from doing
so at this stage. At the same time, the respondents are hereby cautioned that any
future misuse of the judicial process lacking in bonafides may invite strict action
including imposition of exemplary costs.
18.1. Further, through the averments made in the plaint and in the agreement, the
respondents/plaintiffs have claimed to have paid huge sum towards consideration
29
by cash. It is pertinent to recall that Section 269ST of the Income Tax Act, was
introduced to curb black money by digitalising the transactions above
Rs.2,00,000/- and contemplating equal amount of penalty under Section 271DA
of the Act. As per the said provisions, action is to be taken on the recipient.
However, there is also an onus on the plaintiffs to disclose their source for such
huge cash. The Central Government thought it fit to cap the cash transactions
and move forwards towards digital economy to curb the dark economy which has
a drastic effect on the economy of the country. It will be useful to refer to the
Budget Speech during the introduction of the Finance Bill, 2017 and the extract
of the memo presented with the Finance Bill, 2017, which lay down the object:
Budget Speech:
“VII. DIGITAL ECONOMY
111. Promotion of a digital economy is an integral part of Government’s strategy
to clean the system and weed out corruption and black money. It has a
transformative impact in terms of greater formalisation of the economy and
mainstreaming of financial savings into the banking system. This, in turn, is
expected to energise private investment in the country through lower cost of credit.
India is now on the cusp of a massive digital revolution.
…..
Promoting Digital Economy
162. The Special Investigation Team (SIT) set up by the Government for black
money has suggested that no transaction above Rs.3 lakh should be permitted in
cash. The Government has decided to accept this proposal. Suitable amendment to
the Income-tax Act is proposed in the Finance Bill for enforcing this decision.”
Extract from Memo of Finance Bill, 2017
“Restriction on cash transactions
In India, the quantum of domestic black money is huge which adversely affects the
revenue of the Government creating are source crunch for its various welfare
programmes. Black money is generally transacted in cash and large amount of
unaccounted wealth is stored and used in form of cash.
30
In order to achieve the mission of the Government to move towards a less cash
economy to reduce generation and circulation of black money, it is proposed to
insert section 269ST in the Act to provide that no person shall receive an amount
of three lakh rupees or more,—
(a) in aggregate from a person in a day;
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or account payee bank draft or use of
electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply to
Government, any banking company, post office, savings bank or co-operative bank.
Further, it is proposed that such other persons or class of persons or receipts may
be notified by the Central Government, for reasons to be recorded in writing, on
whom the proposed restriction on cash transactions shall not apply. Transactions
of the nature referred to in section 269SS are proposed to be excluded from the
scope of the said section.
It is also proposed to insert new section 271DA in the Act to provide for levy of
penalty on a person who receives a sum in contravention of the provisions of the
proposed section 269ST. The penalty is proposed to be a sum equal to the amount
of such receipt. The said penalty shall however not be levied if the person proves
that there were good and sufficient reasons for such contravention. It is also
proposed that any such penalty shall be levied by the Joint Commissioner.
It is also proposed to consequentially amend the provisions of section 206C to omit
the provision relating to tax collection at source at the rate of one per cent. of sale
consideration on cash sale of jewellery exceeding five lakh rupees.
These amendments will take effect from 1st April 2017.”
However, when the Bill was passed, the permissible limit was capped under
Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs. When a suit is
filed claiming Rs.75,00,000/- paid by cash, not only does is create a suspicion on
the transaction, but also displays, a violation of law. Though the amendment has
come into effect from 01.04.2017, we find from the present litigation that the
same has not brought the desired change. When there is a law in place, the same
31
has to be enforced. Most times, such transactions go unnoticed or not brought to
the knowledge of the income tax authorities. It is settled position that ignorance
in fact is excusable but not the ignorance in law. Therefore, we deem it necessary
to issue the following directions:
(A) Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid
by cash towards any transaction, the courts must intimate the same to the
jurisdictional Income Tax Department to verify the transaction and the violation
of Section 269ST of the Income Tax Act, if any,
(B) Whenever, any such information is received either from the court or
otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by
following the due process in law,
(C) Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash
towards consideration for conveyance of any immovable property in a document
presented for registration, the jurisdictional Sub-Registrar shall intimate the same
to the jurisdictional Income Tax Authority who shall follow the due process in
law before taking any action,
(D) Whenever, it comes to the knowledge of any Income Tax Authority that a
sum of Rs. 2,00,000/- or above has been paid by way of consideration in any
transaction relating to any immovable property from any other source or during
the course of search or assessment proceedings, the failure of the registering
authority shall be brought to the knowledge of the Chief Secretary of the State/UT
32for initiating appropriate disciplinary action against such officer who failed to
intimate the transactions.
19. In light of the above discussion, we are of the firm view that the plaint
ought to have been rejected under Order VII Rule 11(a) and (d) CPC. Hence, the
orders passed by the High Court as well as the trial Court rejecting the application
filed by the appellant, cannot be sustained in law and deserve to be set aside.
CONCLUSION
20. In fine,
(i) This appeal is allowed.
(ii) The impugned judgment of the High Court dated 02.06.2022 and the
order of the trial Court dated 11.06.2021 are set aside.
(iii) As a sequel, the application filed under Order VII Rule 11(a) and (d)
CPC is allowed.
(iv) The plaint in O.S. No. 25968 of 2018 pending on the file of XIII
Additional City Civil and Sessions Judge, Mayohall Unit, Bengaluru, is
rejected.
(v) The directions given by us in paragraph 18.1 of this judgment shall be
intimated by the Registrars of the High Courts, the Chief Secretaries of the
States/Union Territories and the Principal Chief Commissioner of Income
33
Tax Department to the District Judiciary, the officials of the registration
department and the jurisdictional officers under the Income Tax
Department respectively, so as to facilitate the conduct of periodical audit.
(vi) The parties shall bear their respective costs throughout the
proceedings.
(vii) Miscellaneous Application(s), if any, shall stand disposed of.
21. The Registrar (Judicial) is directed to circulate a copy of this Judgment to
the Registrar General of all the High Courts, the Chief Secretaries of all the States
/ Union Territories, and the Principal Chief Commissioner of Income Tax
Department, enabling them to communicate the directions issued by this Court
for strict compliance.
…………………………J.
[J.B. Pardiwala]
…………………………J.
[R. Mahadevan]
NEW DELHI;
APRIL 16, 2025.
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