After registration, the title would pass on to the transferee, non-payment of a part of the sale price would not affect the validity of the Sale Deed: Supreme Court

The SC on July 9, 2020 {DAHIBEN vs ARVINDBHAI KALYANJI BHANUSALI (GAJRA)(D) THR LRS & ORS.} held that the whole purpose of conferment of powers under Order VII Rule 11 (a) is to ensure that a litigation which is meaningless, and bound to prove abortive, should not be permitted to waste judicial time of the court.

It was held by the SC Bench, comprising of Justice L. Nageswara Rao & Justice Indu Malhotra, that the provision of Order VII Rule 11 is mandatory in nature. It was held that the plaint “shall” be rejected if any of the grounds specified in clause (a) to (e) are made out. It was held that 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 SC however also held that the power conferred on the court to terminate a civil action is, however, a drastic one, and the conditions enumerated in Order VII Rule 11 are required to be strictly adhered to.

The present appeal before the SC impugned Judgment and Order passed by a Division Bench of the Gujarat High Court, affirming the Order of the Trial Court, allowing the application under Order VII Rule 11(d), CPC holding that the suit filed by the Appellant and Respondent Nos. 9 to 13 herein ( referred to as the “Plaintiffs”) was barred by limitation.

The SC held that under Order VII Rule 11 CPC, a duty is cast on the Court to determine whether the plaint discloses a cause of action by scrutinizing the averments in the plaint, read in conjunction with the documents relied upon, or whether the suit is barred by any law. It was held that having regard to Order VII Rule 14 CPC, the documents filed alongwith the plaint, are required to be taken into consideration for deciding the application under Order VII Rule 11 (a). It was held that when a document referred to in the plaint, forms the basis of the plaint, it should be treated as a part of the plaint. 

It was held that in exercise of power under this provision, the Court would determine if the assertions made in the plaint are contrary to statutory law, or judicial dicta, for deciding whether a case for rejecting the plaint at the threshold is made out.

The SC held that 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. It was held that if by clever drafting of the plaint, it has created the illusion of a cause of action, it should be nipped in the bud, so that bogus litigation will end at the earliest stage.

It was held that the Limitation Act, 1963 prescribes a time-limit for the institution of all suits, appeals, and applications. It was held that Section 3 lays down that every suit instituted after the prescribed period, shall be dismissed even though limitation may not have been set up as a defence. It was held that if a suit is not covered by any specific article, then it would fall within the residuary article. 

The SC held that if a suit is based on multiple causes of action, the period of limitation will begin to run from the date when the right to sue first accrues. That is, if there are successive violations of the right, it would not give rise to a fresh cause of action, and the suit will be liable to be dismissed, if it is beyond the period of limitation counted from the date when the right to sue first accrued. It was held that the period of limitation prescribed under Articles 58 and 59 of the 1963 Act is three years, which commences from the date when the right to sue first accrues.

The SC held that in present lis if the case made out in the Plaint is to be believed, it would mean that almost 99% of the sale consideration i.e. Rs.1,73,62,000 allegedly remained unpaid throughout. It was held that it is, however inconceivable that if the payments had remained unpaid, the Plaintiffs would have remained completely silent for a period of over 5 and ½ years, without even issuing a legal notice for payment of the unpaid sale consideration, or instituting any proceeding for recovery of the amount, till the filing of the present suit in December 2014.

The Court held 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. It was held that 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. It was held that non-payment of a part of the sale price would not affect the validity of the sale. It was also held that 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.

It was held by the SC that even if the averments of the Plaintiffs are taken to be true, that the entire sale consideration had not in fact been paid, it could not be a ground for cancellation of the Sale Deed. It was held that the Plaintiffs may have other remedies in law for recovery of the balance consideration, but could not be granted the relief of cancellation of the registered Sale Deed. It was held that the suit filed by the Plaintiffs is vexatious, meritless, and does not disclose a right to sue. The plaint was liable to be rejected under Order VII Rule 11 (a).

It was held that the delay of over 5 and ½ years after the alleged cause of action arose in 2009, shows that the suit was clearly barred by limitation as per Article 59 of the Limitation Act, 1963. It was held that the suit was instituted on 15.12.2014, even though the alleged cause of action arose in 2009, when the last cheque was delivered to the Plaintiffs.

The Court held that the suit would be barred by limitation under Article 59 of the Limitation Act, if it was filed beyond three years of the execution of the registered deed.

The SC held that the High Court rightly affirmed the findings of the Trial Court, and held that the suit was barred by limitation, since it was filed beyond the period of limitation of three years.

In view of the aforesaid discussion, the present Civil Appeal was dismissed with costs of Rs. 1,00,000/- by the SC.