The Supreme Court has dismissed an appeal seeking specific performance of a property sale agreement, holding that the document was a sham transaction executed as security for a loan rather than a genuine agreement of sale.
The bench of Justices Prashant Kumar Mishra and Prasanna B. Varale upheld the decision of the High Court, which had earlier set aside a trial court decree granting specific performance in favour of the plaintiff, Muddam Raju Yadav.
The dispute arose from a registered agreement of sale dated June 4, 2002, concerning a residential property located at Medchal Village in Ranga Reddy District. Under the agreement, the total sale consideration was fixed at ₹13 lakh, out of which ₹6 lakh was allegedly paid as advance, with the remaining ₹7 lakh to be paid at the time of execution of the sale deed within 11 months.
The plaintiff contended that he was always ready and willing to pay the balance amount, but the defendants avoided executing the sale deed. After issuing a legal notice in April 2003 and receiving no response, he filed a suit seeking specific performance of the agreement.
The trial court accepted the plaintiff’s argument, noting that the defendants had not denied execution of the agreement and that the plaintiff had sufficient funds to complete the transaction. Accordingly, the trial court decreed the suit.
The defendants, however, maintained that the agreement was never intended to be a genuine sale transaction. According to them, the plaintiff—an alleged unlicensed money lender—had advanced a loan of ₹6 lakh. The sale agreement was executed merely as security for repayment of the loan.
They relied on a Memorandum of Understanding (MoU) executed on the same day as the sale agreement. The MoU recorded that the defendants would repay the loan within 12 months, after which the agreement would be cancelled and the original property documents returned.
The defendants further claimed to have made partial repayments of the loan, though disputes remained regarding acknowledgment of those payments.
The High Court accepted the defence and held that the MoU strongly indicated that the sale agreement was not a genuine contract for sale but a nominal document executed in connection with a loan transaction. It therefore set aside the trial court decree and dismissed the suit.
The Supreme Court examined the MoU and other surrounding circumstances and found that the High Court’s conclusion was justified.
The Court noted that the MoU and the sale agreement were executed on the same date, purchased from the same stamp vendor, and had identical witnesses, which supported the defendants’ version that both documents were part of a loan arrangement rather than an actual property sale.
The Bench further emphasized that specific performance is an equitable and discretionary remedy, and courts must evaluate the conduct of the parties before granting such relief.
It observed that the plaintiff had failed to disclose the existence of the MoU in the plaint, despite it being a material document connected to the transaction. This omission raised serious doubts about the bona fides of the claim.
The Court stated that when a party approaches the court without full disclosure of material facts, the equitable relief of specific performance should be denied.
Concluding that the plaintiff had not approached the court with clean hands and that the sale agreement appeared to be a security instrument linked to a loan transaction, the Supreme Court held that the High Court was correct in rejecting the claim for specific performance.
Case Details
Case Title: Muddam Raju Yadav Versus B. Raja Shanker (D)
Citation: JURISHOUR-296-SC-2026
Case No.: Civil Appeal No. 3255 Of 2026
Date: 10/03/2026
