The Supreme Court has held that an agreement to sell does not, by itself, confer ownership of immovable property, and a person cannot recover possession through a bare possession suit when a registered sale deed in another person’s favour creates a serious cloud over the asserted title.
The bench of Justice Aravind Kumar and Justice Vipul M. Pancholi upheld the rejection of a suit instituted by the legal heirs of the original allottee and found that the claim was barred by limitation, the original allottee had consciously abandoned his contractual obligations and requested transfer of the plot, and the plaintiffs had failed to seek the substantive relief necessary to challenge the subsequent registered conveyance.
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Sohan Singh became a member of the Nathu Ram Friends Colony Co-operative Housing Building Society in January 1950. An agreement to sell dated January 14, 1952, was subsequently executed in his favour. According to the plaintiffs, he paid ₹11,824 towards the sale consideration, besides other charges.
The agreement required him to construct a house within three years. Failure to fulfil this condition would result in loss of the right to obtain a sale of the plot.
The plaintiffs maintained that Sohan Singh had entrusted property-related matters and construction to his close associate, Sobha Singh. They alleged that the society subsequently transferred the property to Sobha Singh’s son, Gurbax Singh, through fraud and collusion.
The defence, however, relied on Sohan Singh’s letter dated October 4, 1954, expressing his inability to undertake construction and requesting the society to transfer the plot to Gurbax Singh. Acting on this request, the society approved the transfer. Gurbax Singh paid outstanding dues, constructed a two-storeyed house, and obtained a registered sale deed dated December 3, 1960.
After disputes arose, proceedings were initiated before the Registrar of Co-operative Societies. The society later instituted a civil suit in 1966 seeking a declaration affirming the validity of the sale deed and an injunction.
Sohan Singh’s legal heirs instituted their suit for possession and mesne profits in 1975. Both suits were consolidated. Although the society’s suit was eventually dismissed for default, the evidence recorded in it was preserved for adjudication of the heirs’ suit.
The trial court dismissed the possession suit on merits. The Delhi High Court affirmed that decision on February 2, 2012, and also held the claim barred by limitation. The heirs then approached the Supreme Court.
The Supreme Court rejected the contention that payment of consideration and execution of the 1952 agreement had made Sohan Singh the owner.
Applying Section 54 of the Transfer of Property Act, 1882, the Court explained that an agreement to sell records the terms on which a future sale is to take place. It does not itself create an interest in, or charge over, the property.
No registered sale deed had ever been executed in Sohan Singh’s favour. Further, he had expressly stated that he could not comply with the mandatory construction condition and had requested transfer to Gurbax Singh.
In these circumstances, the Court concluded that neither Sohan Singh nor those claiming through him could establish a subsisting proprietary right over the plot on the strength of the agreement.
A central issue was whether the plaintiffs could seek possession without challenging the registered sale deed supporting the defendant’s ownership.
Relying on Anathula Sudhakar v. P. Buchi Reddy, the Court distinguished between a mere denial of ownership and a substantial challenge supported by evidence.
Where a plaintiff has clear title and the defendant merely disputes it without any apparent legal foundation, a separate declaration may be unnecessary. However, where a rival registered document creates a serious cloud over the plaintiff’s asserted title, a bare possession claim is insufficient.
Here, Gurbax Singh relied on a registered sale deed, while the plaintiffs relied on an earlier agreement to sell. The Court held that the plaintiffs ought to have sought appropriate declaratory relief challenging the sale deed, or pursued specific performance of their agreement, subject to limitation.
Their possession suit could not succeed while leaving the rival registered conveyance unchallenged.
The Supreme Court also examined the limitation periods applicable to the different possible remedies.
For specific performance under Article 54 of the Limitation Act, the Court noted that the agreement fixed a three-year construction period ending on January 14, 1955. On that basis, the three-year period for seeking specific performance would have expired in January 1958.
Even if time were calculated from the plaintiffs’ asserted knowledge in 1963 that the society had conveyed the property to another person, the claim would still have become time-barred in 1966.
Similarly, a challenge to the sale deed under Article 59 had to be brought within three years of knowledge of the facts entitling the plaintiffs to seek its cancellation or setting aside. The suit filed in 1975 was beyond that period.
On recovery based on previous possession under Article 64, the Court found that Sohan Singh had voluntarily requested the transfer, rather than being dispossessed against his will. It further held that the claim failed even on alternative calculations of the twelve-year limitation period.
The Court also applied the principles of estoppel and acquiescence.
Sohan Singh’s written request had induced the society and Gurbax Singh to act. Gurbax Singh thereafter constructed the house and obtained the registered conveyance.
The Court found that Sohan Singh had neither revoked nor challenged the contents of his transfer request during his lifetime. His conduct amounted to a conscious abandonment of the construction obligation and acceptance of the consequent transfer.
His legal heirs could not subsequently assert rights inconsistent with the position he had deliberately adopted. The Court also found no cogent evidence establishing fraud in execution of the sale deed.
The plaintiffs’ reliance on part-performance under Section 53A of the Transfer of Property Act was also rejected.
The Court explained that the provision requires possession in part-performance of the contract, together with performance or willingness to perform the transferee’s contractual obligations.
The plaintiffs were admittedly out of possession, as demonstrated by their own prayer for recovery. Their predecessor had also expressly declined to fulfil the essential construction condition and requested transfer of the property.
The necessary requirements for invoking Section 53A were therefore absent.
The Supreme Court dismissed the appeal without any order as to costs.
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