The Supreme Court has held that a registered sale deed does not become void or invalid merely because the entire sale consideration was not paid at the time of execution. The Court clarified that once a sale deed is registered and title has passed to the purchaser, non-payment of the remaining consideration gives the seller a right to recover the balance amount, but does not by itself justify cancellation of the sale deed.
A Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran made the observation while allowing an appeal against a judgment of the Bombay High Court, Nagpur Bench.
“When a sale deed is registered, even upon part payment of the sale price, title would pass to the transferee.”
The Court further held that the appropriate remedy for non-payment of the remaining sale consideration is a money recovery suit, rather than a suit seeking cancellation of the registered sale deed.
Dispute Over Non-Payment of Balance Sale Consideration
The case arose out of two sale deeds executed by the original plaintiffs in favour of the original defendant.
The agreed sale consideration for each property was ₹7,000. At the time of execution of the sale deeds, the purchaser paid ₹2,500 for each property.
The remaining ₹4,500 for each property was retained by the purchaser for the purpose of clearing outstanding dues of the plaintiffs with various financial institutions and government departments.
The sale deeds themselves incorporated the arrangement regarding the balance consideration.
Subsequently, the plaintiffs instituted a suit seeking:
- Declaration that the sale deeds were void and inoperative;
- Cancellation of the sale deeds;
- Declaration of ownership over the properties; and
- Permanent injunction against the defendant.
Trial Court and First Appellate Court Rejected the Plaintiffs’ Case
The Trial Court dismissed the suit and refused to invalidate the sale deeds merely because the entire consideration had not been paid.
The First Appellate Court upheld the Trial Court’s findings.
The plaintiffs thereafter approached the Bombay High Court, Nagpur Bench, in a second appeal.
The High Court interfered with the concurrent findings of the Trial Court and First Appellate Court, following which the defendants approached the Supreme Court.
Supreme Court Restores Trial Court’s Decision
The Supreme Court allowed the appeal and restored the decision of the Trial Court.
The Court held that the sale deeds could not be treated as void merely because the balance consideration had remained unpaid.
The Bench observed:
“The sale deed executed with full knowledge of the part consideration alone having been passed, cannot be rendered void or inoperative merely because the balance consideration promised to be paid, which promise was incorporated in the sale deed, had not been complied with.”
The Court made it clear that the plaintiffs’ remedy was to seek recovery of the unpaid balance sale consideration, and not cancellation of the sale deeds.
Non-Payment Does Not Automatically Defeat Transfer of Title
The Supreme Court’s ruling reiterates an important principle concerning completed sales.
Where the parties have executed and registered a sale deed with knowledge that only part of the consideration has been paid, the subsequent failure to pay the remaining amount does not, by itself, undo the transfer of ownership.
The Court therefore distinguished between:
Non-payment of consideration:
This may give rise to a monetary claim for recovery.
Invalidity of the sale deed:
Non-payment alone does not automatically make the registered sale deed void.
Thus, a seller cannot ordinarily seek cancellation of a completed sale merely on the ground that the purchaser failed to pay the remaining consideration, particularly where the sale deed itself records the arrangement concerning the unpaid amount.
Balance Consideration to Be Paid With Interest
While allowing the appeal, the Supreme Court clarified that the appellants-defendants would be required to pay the balance sale consideration along with interest.
The Court also observed that the appellants could seek possession of the property, if they were otherwise entitled to do so.
At the same time, the Court did not disturb the existing position regarding possession, which had been maintained by the Trial Court and First Appellate Court.
See case
Raziya Begum & Ors. Vs. Nafisa Begum Abdul Hamid & Ors.
Appearance:
For Appellant(s) : Mr. Satyajit A. Desai, Adv. Mr. Sachin Patil, Adv. Mr. Pratik Kumar Singh, Adv. Mr. Sachin Singh, Adv. Mr. Shashank Upadhyay, Adv. Ms. Anagha S. Desai, AOR
For Respondent(s) : Mr. Farrukh Rasheed, AOR Ms. Shifa, Adv. Ms. Harshita Singhal, Adv.