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Synopsis

The Supreme Court has said agreement to sell is not a conveyance and it does not transfer ownership rights or confers any title. 

A bench of Justices Vikram Nath and Rajesh Bindal allowed an appeal filed by Munishamappa against the Karnataka High Court's order, which dismissed the suit for specific performance of a contract in second appeal by respondents M Rama Reddy and others.

As per facts of the case, the appellant and the respondents on September 25, 1990 entered into an agreement to sell with regard to a property in question and entire consideration of Rs 23,000 was paid. The possession of the property was also handed over.

The agreement to sell was executed as there was a prohibition on the sale due to bar contained in Section 5 of the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act, 1996.

At the time of the execution of the agreement to sell, there was a serious likelihood of the repeal of the Fragmentation Act, which on February 05, 1991 stood repealed.

Thereafter, the appellant requested the respondents to execute the sale deed, which was refused on August 28, 2001.

The appellant then instituted the suit for specific performance on October 01, 2001. The trial court on September 28, 2004 dismissed it, holding the execution of the agreement to sell was doubtful and the suit was filed beyond the period of limitation.

In regular first appeal, the suit was decreed, holding it was within the limitation period, and the appellant had proved the execution of the agreement to sell.

On second appeal, the High Court on November 10, 2010 declared that the agreement to sell was in violation of the Fragmentation Act, and therefore void. 

The apex court, however, found there was no issue framed with respect to the violation of the Fragmentation Act, and it was not pleaded in the written statement filed by the respondent. The defence taken by the respondent was that he never executed the agreement to sell. However, in his deposition during the cross-examination, he admitted to his signatures on the agreement to sell. 

"Thus, in the absence of any issue framed, and given that neither party has pleaded any violation of Section 5 of the Fragmentation Act, the High Court apparently fell in error in holding that agreement to sell was in violation of Section 5 of the Fragmentation Act," the bench said.

Holding that the agreement to sell is not a conveyance; it does not transfer ownership rights or confers any title, the bench said, " What is prohibited or barred under the Fragmentation Act was the lease/sale/conveyance or transfer of rights. Therefore, the agreement to sell cannot be said to be barred under the Fragmentation Act."

Court further noted that the appellant filed the suit for specific performance after the repeal of the Fragmentation Act and the suit could have been decreed without there being any violation to the law once the Fragmentation Act itself had been repealed in February 1991. 

"Further, the High Court did not hold that the suit was barred by Section 5 of the Limitation Act. The First Appeal Court had considered this aspect and having decided the said issue in favour of the appellant, we need not go into that question at this stage," the bench said. 

The bench also pointed out what is further noticeable is that the respondents received the full consideration and had also transferred the possession of the property in question, as such other defences may not be available to them. Even the issue of readiness and willingness on the part of the appellant would not be relevant, the court added.

The bench thus set aside the HC judgment and restored the decision of the first appellate court decreeing the suit of the appellant.

Case Title: MUNISHAMAPPA vs. M RAMA REDDY & ORS