TaxTMI 
TaxTMI 
2025 (4) TMI 1313
X X X X Extracts X X X X
X X X X Extracts X X X X
.... weeks. There will be stay of the operation of proceedings in OS No.25968 of 2018 pending before the Court of XIII Addl. City Civil & Sessions Judge, MayoHall Unit, Bengaluru (CCH-22) till the next date of hearing." 3.1. On 22.11.2024, the aforesaid interim order was extended by this Court and is in force till date. BRIEF FACTS 4. The appellant viz., R.B.A.N.M.S. Educational Institution, was established in the year 1873 as a public charitable trust, dedicated to serving first-generation learners from marginalized communities in urban Bangalore. In 1905, a significant parcel of land, then known as 'the Sappers Practice Ground,' was leased to the appellant. Subsequently, in 1929, this property was formally conveyed to the appellant by the Municipal Commissioner of Civil and Military Station of Bangalore. Since then, the appellant has been in continuous possession of the said property, utilizing it for various educational purposes including Pre-University Colleges, first-grade degree colleges, and sporting facilities serving both their institutions and the youth of Bangalore. 5. The respondents filed a suit bearing O.S.No.25968 of 2018 against the appellan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....same also ended in dismissal by the order impugned herein. Therefore, the appellant is before us with the present appeal. CONTENTIONS OF THE PARTIES 10. The learned counsel appearing for the appellant submitted that the alleged agreement to sell, which forms the fundamental basis of the suit, cannot create any interest in the suit schedule property as per Section 54 of the Transfer of Property Act, 1882. In this regard, the learned counsel relied on the judgment in Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra Dead throught LRs. & Anr. (2004) 8 SCC 614, wherein, this Court held that a mere agreement to sell does not create any interest in the property. This position was further reinforced in the judgment in Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another (2012) 1 SCC 656, which reiterated that a contract for sale merely confers a limited right under Section 53-A of the Transfer of Property Act, 1882. The learned counsel also highlighted the practical application of this principle in K. Basavarajappa v. Tax Recovery Commissioner, Bangalore & Others (1996) 11 SCC 632, in which, it was held by this Court that a proposed vendee with an agreement to sell lacks locus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Kumar Sen & Others (2018) 5 SCC 644, the learned counsel proceeded to argue that the plaint's averments must be accepted as true at this stage, and the defendant's objections are immaterial. 11.1. According to the learned counsel, the suit was filed to protect the respondents' legitimate interests over the property in question under the agreement to sell, apprehending alienation of the property by third parties. Further, the learned counsel distinguished the decisions cited by the appellant, particularly that in Rambhau Namdeo Gajre (supra) and contended that it was decided after full trial and examination of evidence, unlike the present case where the cause of action stems from the agreement itself. The learned counsel also sought to differentiate the decision in T. Arivandandam (supra) noting that unlike that case which involved vexatious litigation following lost eviction proceedings, the present matter involved genuine rights under a registered agreement to sell. The learned counsel further submitted that rejection of plaint is a drastic remedy that should be exercised sparingly, only when the plaint is manifestly vexatious and meritless; and that, the proper ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....first examine the scope and purpose of Order VII Rule 11 CPC "11. Rejection of plaint.- The plaint shall be rejected in the following cases- (a) where it does not disclose a cause of action; (b) where the relief claimed in undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so; (c) where the relief claimed is properly valued but the plaint is written upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so; (d) where the suit appears from the statement in the plaint to be barred by any law; (e) where it is not filed in duplicate; (f) where the plaintiff fails to comply with the provisions of rule 9: Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevent by any cause of exceptional nature for correction the valuation or supplying the requisite stamp-paper, as the case may be, within th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....termine whether the plaint discloses a cause of action by scrutinizing the averments in the plaint Liverpool & London S.P. & I Assn. Ltd. V. M.V. Sea Success I, (2004) 9 SCC 512 read in conjunction with the documents relied upon, or whether the suit is barred by any law. 23.7. Order VII Rule 14(1) provides for production of documents, on which the plaintiff places reliance in his suit, which reads as under: "14. Production of document on which plaintiff sues or relies.- (1)Where a plaintiff sues upon a document or relies upon document in his possession or power in support of his claim, he shall enter such documents in a list, and shall produce it in Court when the plaint is presented by him and shall, at the same time deliver the document and a copy thereof, to be filed with the plaint. (2)Where any such document is not in the possession or power of the plaintiff, he shall, wherever possible, state in whose possession or power it is. (3)A document which ought to be produced in Court by the plaintiff when the plaint is presented, or to be entered in the list to be added or annexed to the plaint but is not produced or entered accordingly, sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upon an enquiry whether the allegations are true in fact. D.Ramachandran v. R.V.Janakiraman (1999) 3 SCC 267. 23.13. If on a meaningful reading of the plaint, it is found that the suit is manifestly vexatious and without any merit, and does not disclose a right to sue, the court would be justified in exercising the power under Order VII Rule 11 CPC. 23.14. The power under Order VII Rule 11 CPC may be exercised by the Court at any stage of the suit, either before registering the plaint, or after issuing summons to the defendant, or before conclusion of the trial, as held by this Court in the judgment of Saleem Bhai v. State of Maharashtra (2003) 1 SCC 557. The plea that once issues are framed, the matter must necessarily go to trial was repelled by this Court in Azhar Hussain (supra). 23.15. 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. 24. "Cause of action" means ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... suppression, and determine whether the litigation is utterly vexatious, and an abuse of the process of the court. ..... 28. A three-Judge Bench of this Court in State of Punjab v. Gurdev Singh (1991) 4 SCC 1 : 1991 SCC (L&S) 1082 held that the Court must examine the plaint and determine when the right to sue first accrued to the plaintiff, and whether on the assumed facts, the plaint is within time. The words "right to sue" means the right to seek relief by means of legal proceedings. The right to sue accrues only when the cause of action arises. The suit must be instituted when the right asserted in the suit is infringed, or when there is a clear and unequivocal threat to infringe such right by the defendant against whom the suit is instituted. Order VII Rule 11(d) provides that where a suit appears from the averments in the plaint to be barred by any law, the plaint shall be rejected." 14.1. Thus, it is clear that the above provision viz., Order VII Rule 11 CPC serves as a crucial filter in civil litigation, enabling courts to terminate proceedings at the threshold where the plaintiff's case, even if accepted in its entirety, fails to disclose any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ight by the defendant, the cause of action should be deemed to be unreal. This is where the substantive laws like Specific Relief Act, 1963, Contract Act, 1872, and Transfer of Property Act, 1882, come into operation. A pure question of law that can be decided at the early stage of litigation, ought to be decided at the earliest stage. In the present case, the respondents' claim based on an agreement to sell. The legal effect of such an agreement must be examined in light of Section 54 of the Transfer of Property Act, 1882, which explicitly states that a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property. This principle has been consistently upheld by this Court in the following judgments: (i) Rambhau Namdeo Gajre (supra) "13. The agreement to sell does not create an interest of the proposed vendee in the suit property. As per Section 54 of the Act, the title in immovable property valued at more than Rs 100 can be conveyed only by executing a registered sale deed. Section 54 specifically provides that a contract for sale of immovable property is a contract evidencing the fact that the sale of such prope....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the said lands till they are legally conveyed by sale deed to the proposed transferees. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party like the appellant State when it seeks to enforce the provisions of the Act against the tenure-holder, proposed transferor of these lands." ( emphasis supplied ) There was no agreement between the appellant and the respondent in connection with the suit land. The doctrine of part-performance could have been availed of by Pishorrilal against his proposed vendor subject, of course, to the fulfilment of the conditions mentioned above. It could not be availed of by the appellant against the respondent with whom he has no privity of contract. The appellant has been put in possession of the suit land on the basis of an agreement of sale not by the respondent but by Pishorrilal, therefore, the privity of contract is between Pishorrilal and the appellant and not between the appellant and the respondent. The doctrine of part-performance as contemplated in Section 53-A can be availed of by the proposed transferee against his transferor or any person claiming under him and n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear that a transfer of immovable property by way of sale can only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred. 19. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of Sections 54 and 55 of the TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53-A of the TP Act). According to the TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of the TP Act enacts that sale of immovable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject-matter." (iii) Cosmos Co. Operative Bank Ltd v. Central Bank of India & Ors 2025 SCC OnLine SC 352 "25. The observations made by this Court in Suraj Lamp (supra) in paras 16 and 19 are also relevant. ..... 26. Suraj Lamp (supra) later came to be referred to an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion whether as an owner or a licensee. 13. The argument advanced on behalf of the respondent that the judgment in Suraj Lamps & Industries (supra) would be prospective is also misplaced. The requirement of compulsory registration and effect on non-registration emanates from the statutes, in particular the Registration Act and the Transfer of Property Act. The ratio in Suraj Lamps & Industries (supra) only approves the provisions in the two enactments. Earlier judgments of this Court have taken the same view." 15.1. Undoubtedly, a sale deed, which amounts to conveyance, has to be a registered document, as mandated under Section 17 of the Registration Act, 1908. On the other hand, an agreement for sale, which also requires to be registered, does not amount to a conveyance as it is merely a contractual document, by which one party, namely the vendor, agrees or assures or promises to convey the property described in the schedule of such agreement to the other party, namely the purchaser, upon the latter performing his part of the obligation under the agreement fully and in time. Section 54 of the Transfer of Property Act, 1882 explicitly lays down that a contract for sale ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not between the parties to the suit. According to Section 7 of the Transfer of Property Act, 1882, only the owner, or any person authorised by him, can transfer the property. We have already held that an agreement to sell does not confer any right on the proposed purchaser under the agreement. Therefore, as a natural corollary, any right, until the sale deed is executed, will vest only with the owner, or in other words, the vendor to take necessary action to protect his interest in the property. According to the respondents, the property belongs to the vendors and according to the appellant, the property vests in them. Since the respondents are not divested any right by virtue of the agreement, they cannot sustain the suit as they would not have any locus. Consequently, they also cannot seek any declaration in respect of the title of the vendors. But when the title is under a cloud, it is necessary that a declaration be sought as laid down by this Court in the judgment in Anathula Sudhakar v. P. Buchi Reddy (Dead) by LRs and others AIR 2008 SC 2033 : MANU/SC/7376/2008. Therefore, the suit at the instance of the respondents/plaintiffs is not maintainable and only the vendors could....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court rejecting the entitlement of the appellant to move such an application." 15.2.3. The contention of the learned counsel for the respondents that the judgements relied upon by the appellant are not applicable, cannot be accepted for the simple reason that the ratio laid down by this court, is applicable irrespective of the stage at which it is relied upon. What is relevant is the ratio and not the stage. Such contentions go against the spirit of Article 141 of the Constitution of India. Once a ratio is laid down, the courts have to apply the ratio, considering the facts of the case and once, found to be applicable, irrespective of the stage, the same has to be applied, to throw out frivolous suits. There is no gainsaying in contending that the other party must be put to undergo the ordeal of entire trial, when the plaintiff's claim is either barred by law or the plaint fails to disclose a cause of action, as it would amount to abuse of process of law, wasting the precious time of the courts. On the other hand, the judgments relied upon by the respondents do not come into their aid as the judgments referred to by them also lay down the proposition that the plaint can be reje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erty. The respondents/plaintiffs, as seen above, have admitted to the possession of the appellant over the suit property. The plaint, on one hand, raises a dispute as to whether the property claimed by the respondents is the same as that possessed by the appellant, and on the other hand, seeks only a relief of permanent injunction restraining the appellant/defendant from alienating the property, without seeking a declaration affirming the title of their vendors. The entitlement of the plaintiffs to the possession rests on the title of their vendors and it is not an independent right. Without possession and without seeking a declaration of title, not only is the suit barred but the cause of action is also fictitious. 16. The High Court without noticing the above defects in the plaint, dismissed the application filed by the appellant under Order VII Rule 11 CPC by observing that the cause of action is a mixed question of fact and law and that the matter requires trial. When the defects go to the root of the case, barred by law with fictitious allegations and are incurable, no amount of evidence can salvage the plaintiffs' case. Though an agreement to sell creates certain right....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st be protected from speculative litigation that can drain their resources and impede their charitable work. Moreover, allowing suits like the present one to proceed to trial, would not only waste judicial time and resources, but also encourage similar speculative and extortionate litigations. Hence, this is a fit case for the imposition of costs on the respondents under Section 35A of the Civil Procedure Code, 1908. However, we refrain from doing so at this stage. At the same time, the respondents are hereby cautioned that any future misuse of the judicial process lacking in bonafides may invite strict action including imposition of exemplary costs. 18.1. Further, through the averments made in the plaint and in the agreement, the respondents/plaintiffs have claimed to have paid huge sum towards consideration by cash. It is pertinent to recall that Section 269ST of the Income Tax Act, was introduced to curb black money by digitalising the transactions above Rs.2,00,000/- and contemplating equal amount of penalty under Section 271DA of the Act. As per the said provisions, action is to be taken on the recipient. However, there is also an onus on the plaintiffs to disclose their so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce, savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section. It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner. It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees. These amendments will take effect from 1st April 2017." However, whe....