The Apex Court in Dahiben vs. Arvindbhai Kalyanji Bhanusali (Gajra) (D) Thr Lrs (2020) 7 SCC 366 pronounced a landmark judgment on issues surrounding the cancellation of a sale deed, fraud, and non payment of part of the stipulated consideration.

The case is an authoritative precedent on the principles governing the cancellation of a sale deed, specifically related to non-payment of consideration and fraud. It underscores the need for solid and specific evidence when alleging fraud in sale of immovable property. The judgment also clarified the scope of Order VII Rule 11 of the CPC in rejecting frivolous or vague claims.

With due respect to the Hon'ble Apex Court, the said judgment in the case of Dahiben (supra) appears erroneous both on facts and in law. The Court & the Bar failed to refer to Section 55(4) of the Transfer of Property Act, 1882 which could have affected the outcome of the case. The inferences drawn on the admitted facts appear biased and preconceived.

The brief facts of the case are that the plaintiffs (Dahiben) sought the cancellation of the sale deed, claiming that the sale consideration had not been fully paid and that there had been fraudulent misrepresentation during the transaction. It is pertinent that the Petitioners are Tribals and they applied for permission under section 73AA of the Land Revenue Code of Gujarat to transfer of occupancy rights of tribals to tribals or non-tribals. The Collector after carrying out verification of the title of the Plaintiffs, permitted sale of the suit property, and fixed the sale price of the suit property as per the jantri issued by the State Government @ Rs. 2000/- per sq. mtr., which worked out to Rs. 1,74,02,000/-.

The said permission for the sale was subject to the terms and conditions contained in Section 73AA of the Land Revenue Code and it was specifically stipulated that the purchaser shall make the payment only by cheque(s) and reference of the said payment shall be made in the Sale Deed. It is relevant that in the purchaser issued 36 cheques for Rs.1,74,02,000 towards payment of the sale consideration in favour of the Plaintiffs, the details of which were set out in the said registered Sale Deed.

The Plaintiffs filed Special Civil Suit before the Principal Civil Judge, Surat against the original purchaser i.e. Respondent No. 1, and also impleaded the subsequent purchasers i.e. Respondent Nos. 2 and 3 as defendants pleading for cancellation of the Sale Deed & for declaration of the impugned sale deed as being illegal, void, ineffective and not binding on them on the ground that the sale consideration fixed by the Collector, had not been paid in entirety by purchaser/Respondent No. 1. It was also contended by the Plaintiffs that they were totally illiterate, and were not able to read and write and were only able to put their 3 thumb impression on the impugned Sale Deed.

It was also pleaded that the impugned Sale Deed was obtained without payment of full consideration and was therefore void. It was also averred that the Respondent No.1/ Purchaser had paid only Rs. 40,000 through 6 cheques, and remaining 30 cheques for Rs.1,73,62,000 were "bogus" cheques. The Plaintiffs prayed for cancellation of the impugned Sale Deed and also prayed for the restoration of physical possession of the suit property to the Plaintiffs.

The only argument of the Respondents was that the suit was barred by limitation and also that the plaint should be rejected under Order VII Rule 11 (a) and (d) of the CPC as being frivolous. The trial court noted that the Plaintiffs had in fact accepted and acknowledged the payment of the full sale consideration from Respondent No.1, through cheques which were issued prior to the execution of the Sale Deed. The Trial Court also noted that the Plaintiffs also failed to produce the returned cheques, their passbooks, bank statements, or any other document to support their averments in the plaint.

The Trial Court also drew the conclusion that the Plantiff did not raise any objection in the mutation proceedings. The Trial Court held that the period of limitation for filing the suit was 3 years from the date of execution of the Sale Deed but the suit was filed after a considerable delay and held that the suit of the Plaintiffs was barred by limitation and allowed the application under Order VII Rule 11(d) CPC.

The High Court of Gujarat also concurred with the findings of the Trial Court and held that the impugned Sale Deed could not be declared to be void, illegal, or ineffective.

The Apex Court dealt in detail with the law on Rejection of plaint as contemplated under Order VII Rule 11 CPC. In fact, this judgment is a treatise on Rejection of Plaint. The Court explained the ambit of Order VII Rule 11 thus:
11 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.

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.

The Court further explained the provision of Order VII Rule 11 thus:
12.10 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.

The Court dealt with the facts of the case and laid emphasis on the fact that the Plaintiffs have admitted the execution of the impugned registered Sale Deed dated 02.07.2009 in favour of Respondent No.1. On the submission of the Plaintiff that out of the total consideration of Rs.1,74,02,000, an amount of only Rs.40,000 was paid to them and the remaining 31 cheques mentioned in the Sale Deed for Rs.1,73,62,000 were "bogus" or "false" and remained unpaid, the Court relied on the covenants of the impugned sale deed wherein the Plaintiffs have expressly and unequivocally acknowledged that the entire sale consideration was "paid" by Purchaser/Respondent No.1 herein to the Plaintiffs. Thus, on the facts of the case, the Apex Court did not find any ground to interfere with the concurrent judgments of the Trial Court or the High Court.

As far as the legal position is concerned the Apex Court referred to Section 54 of the Transfer of Property Act, 1882 and the Apex Court judgment in Vidyadhar v. Manikrao & Anr.(1999) 3 SCC 573 which spelt that the words "price paid or promised or part paid and part promised" indicates that actual payment of the whole of the price at the time of the execution of the Sale Deed is not a sine qua non for completion of the sale.

The Court held thus:
Even if the whole of the price is not paid, but the document is executed, and thereafter registered, the sale would be complete, and the title would pass on to the transferee under the transaction. The non-payment of a part of the sale price would not affect the validity of the sale. Once the title in the property has already passed, even if the balance sale consideration is not paid, the sale could not be invalidated on this ground. In order to constitute a "sale", the parties must intend to transfer the ownership of the property, on the agreement to pay the price either in praesenti, or in future. The intention is to be gathered from the recitals of the sale deed, the conduct of the parties, and the evidence on record.

The Court rejected the plea of the Plaintiffs to place reliance on the Order of the Collector dated 19.06.2009 wherein the permission was granted subject to the fulfilment of certain conditions. According to clause 4 of the permission the purchaser of the land/property was required to make the payment of the price of the land by cheque and its reference shall require to be made in the Sale Deed.

The Court held that If the Plaintiffs had a genuine grievance of non-payment of the balance sale consideration, the Plaintiffs should have moved for revocation of the permission granted by the Collector by filing a complaint for the violation of the terms and conditions of the said permission. Accordingly, the Court found the conduct of the Plaintiffs reflected lack of bona fide.

The Court dismissed the Civil Appeal with a costs of Rs. 1,00,000/- and categorically held that the suit filed by the Plaintiffs was clearly an abuse of the process of the court and bereft of any merit.

Errors on Facts & their Interpretation:
The Apex Court failed to consider the facts of the case in Right perspective as enumerated below:

1. That the Plaintiffs were Tribals and were totally illiterate.
2. That the Plaintiffs just affixed their thumb impressions on the sale deed without understanding the contents and implications of the same.
3. That the Purchaser applied permission under Section 73AA of the Land Revenue Code for Transfer of their interest in their land and as customary the Tribal uneducated sellers just put their thumb impressions as per the instructions of the purchaser.
4. That the Court lost sight of the fact that it is customary that the purchaser takes the seller to the scribe/deed writer who prepares the sale deed on instructions from the purchaser and in no case explains the contents/covenants to the seller in vernacular language.
5. That there are chances that the balance 31 cheques were never handed over by the purchaser to the Plaintiffs.
6. That no objection letters & affidavits of the seller are as a matter of fact prepared and got signed at the time of execution of sale deed and the plaintiffs had no occasion to raise objections in this regard.
7. That although the onus to prove non-receipt of the cheques lay with the plaintiffs, the Apex Court could have asked the Purchaser/Respondent no. 1 to produce his bank statement to prove that the cheques enumerated in the impugned sale deed had been debited from his account and credited to the bank account of the Plaintiffs.
8. That it is pertinent that under Section 269 T of the Income Tax Act, no payments can be made other than account payee cheques and therefore those cheques would have been debited through banking channel in the bank accounts of the Respondent no. 1.
9. That the Apex Court is under bounden duty to do Substantial Justice and should have ascertained the correct facts and not acted on mere presumptions.
10. That the imposition of cost of Rs. 1,00,000/- on the plaintiffs is ample proof that the Court had a conviction that the case of the plaintiffs was false, fabricated and an afterthought although this was never proved in any Court.
11. That regarding the delay in the institution of suit beyond the statutory period of 3 years as mandated in Articles 58 and 59 of the Schedule to the 1963 Act, the said delay could have been very well be condoned under Section 5 of the Limitation Act looking the glaring facts of the case.

Legal Flaws in the Judgment:
It is amazing that neither the Bar cited nor the Bench considered the important provision of the Transfer of Property Act, 1882 which would have impacted the outcome of the case. It would be trite to refer to Section 55(4)(b) of The Transfer Of Property Act, 1882 which reads as under:

(4)The seller is entitled—(a)to the rents and profits of the property till the ownership thereof passes to the buyer;(b)where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer,any transferee without consideration or any transferee with notice of the non-payment, for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part from the date on which possession has been delivered.

Before deliberating further, it is relevant that the expression used in the clause (b) is charge and is akin to creation lien on the demised property to the extent of unpaid consideration and accrued interest.

It is appropriate to refer to Apex Court in the case of Vidhyadhar vs Manikrao & Anr. (1999) 3 SCC 573 wherein the Court observed thus:
41. Clause (b) extracted above provides that where the ownership of the property is transferred to the buyer before payment of the whole of the sale price, the vendor is entitled to a charge on that property for the amount of the sale price as also for interest thereon from the date of delivery of possession. Originally, there was no provision with regard to the date from which interest would be payable on the amount of unpaid purchase money.

The Special Committee which suggested an amendment in this Section gave the following reason:
This clause is also silent as to the date from which the interest on the unpaid purchase money should run. It seems fair that it should run from the date when the buyer is put in possession.

42. It was on the recommendation of the Special Committee that the words from the date on which possession has been delivered were inserted into this clause by Section 17 of the Transfer of Property (Amendment) Act, 1929 (XX of 1929).

43. This clause obviously applies to a situation where the ownership in the property has passed to the buyer before the whole of the purchase money was paid to the seller or the vendor. What is contained in this clause is based on the English Doctrine of Equitable Lien as propounded by Baron Rolfe in Goode and Anr. v. Burton (1847) 74 RR 633 : 1 Ex. 189. This clause confers statutory recognition on the English Doctrine of Equitable Lien. As pointed out by the Privy Council in Webb and Anr. v. Macpherson 30 Indian Appeals 238, the statutory charge under this paragraph is inflexible.

The charge does not entitle the seller to retain possession of the property as against the buyer but it positively gives him a right to enforce the charge by suit. (See: Venkataperumal Naidu v. Rathnasabhapathi Chettiar ; Shobhalal Shyamlal Kunni v. Sidhelal Halkelal Bania AIR (1939) Nagpur 210 and Basalingaya Revanshiddappa v. Chinnaya Karibasappa AIR (1932) Bombay 247.

It would be apropos to reproduce the following extract from a commentary on section 55(4)(b) which reads thus:
Section 55(4)(b) brings us to the interesting topic of liens. At common law, a lien was a right to possess and retain property1 until some charge attaching to it is paid or discharged; in equity, however, there are liens recognised whose existence is not known to common law. They are wholly independent of the possession of the thing to which they are attached.

It is in this context that there evolved the well-known doctrine of the courts of equity,2 that the vendor of land has a lien on the land for the amount of the purchase money, not only against the vendee himself and his heirs, but also against all subsequent purchasers having notice that the purchase money remains unpaid. This lien is independent of possession and attaches to the estate as a trust, equally whether it be actually conveyed or only be contracted to be conveyed.3

51.50. Story has thus stated the principle1 underlying the unpaid vendor's lien:
The principle upon which courts of equity have proceeded in establishing this lien, in the nature of a trust, is, that a person who has gotten the estate of another, ought not, in conscience, as between them, to be allowed to keep it, and not to pay the full consideration money. A third person, having full knowledge that the estate had been so obtained, ought not to be permitted to keep it without making such payment; for it attaches to him also, as a matter of conscience and duty. It would otherwise happen that the vendee might put another person into a position better than his own, with full notice of all the facts.2

Section 55(4)(b) thus ultimately owes its origin to the English Law of Equitable Liens.

In fact, the word lien is not accurate, because the vendor's equitable lien in England and also the charge under section 55(4)(b) are both non-possessory. They do not empower the seller to take or retain the possession of the property for non-payment. This aspect has been considered more often than once in Indian case law.3

Whatever right the vendor may have to refuse to give delivery until consideration is paid, he cannot take it back after once having given delivery.

Lien-Earlier case-The earliest English case, which clearly laid down the rule of equity, is found in Fludyer v. Cocker., (1805) 33 Er 10, There, in 1792, the defendant entered into contracts for the purchase of the estates of the Duke of Newcastle in three lots. Two of the lots were purchased by private contracts on the 7th of May and the 18th of July, the Duke of Newcastle covenanting to convey respectively on or before the 25th of June and the 18th of February following, the defendant covenanting to pay the purchase money at the time of executing the conveyance.

The defendant was let into possession of the premises comprised in those lots at midsummer and Christmas 1792 respectively. The 3rd lot was purchased by the defendant in July. In 1798, in answer to an application for the residue of the purchase money with interest, the defendant offered to pay the residue of the purchase money but refused to pay interest. On those facts, the Master of the Rolls made the following observations:-

At law the purchaser could not have the right to the estate, nor the vendor to the money, until the conveyance was executed. But that has nothing to do with the mode in which this Court executes the agreement. The purchaser might have said, he would not have anything to do with the estate, until he got a conveyance. But that is not the course he took. He enters into possession: an act, that generally amounts to a waiver even of objection to title. He proceeds upon the supposition that the contract will be executed and therefore agrees, that from that day he will treat it as if it was executed.

Conclusion:
The Apex Court, as the very name suggests is 'supreme' but not ' infallible'. Recently the Apex Court in the case of Gagan Banga vs The State Of West Bengal on 23 September, 2024 (2024 INSC 722) observed that Judges are also fallible and should not shy away from accepting mistakes and rectify them even after a case has been closed. The Apex Court referred to the SC judgment in V K Jain vs Delhi HC (2008) 17 SCC 538 and observed thus:

Our legal system acknowledges the fallibility of judges. Though this observation was made in the context of judges of the district judiciary, it would be equally applicable to those in higher echelons of the judicial hierarchy. As courts of record, it is necessary that constitutional courts recognise errors that may have crept into their judicial orders and rectify the same when called upon to do so.

Although the case of Dahiben is old but to do substantial justice, it is imperative that the Apex Court remands the matter to the District Court to ascertain the true facts and also apply the mandate of Section 55(4) (b) of the transfer of Property Act, 1882.

End Notes:

• Story Equity Jurisprudence, (1919), p. 515, para. 1219.
• See Mackreth v. Symmons, 15 Ves 339.
• AIR 1952 Mad 821.

References:

• Story Equity Jurisprudence, (1919), p. 214, para. 506.
• Story Equity Jurisprudence, (1919), p. 514, para. 1217.
• Story Equity Jurisprudence, (1919), p. 514, para. 1218.

Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]