In the Supreme Court of India, Civil Appellate Jurisdiction
Civil Appeal No. 10327 of 2011

MUNISHAMAPPA …………………………. APPELLANT(S)

Vs

M.RAMA REDDY & ORS. …………………….. RESPONDENT(S)

On 2nd November 2023, the Hon’ble Supreme Court held that an Agreement to sell is different from a sale deed. The Agreement to sell does not indicate conveyance of immovable property, only the sale deed does.

A look at the highlights of the case:

Facts of the case

1. Munishamappa (Purchaser) and Rama Reddy (Seller) entered into an Agreement to sell on 28th May 1990 for the sale of an immovable property for consideration of Rs. 23,000.
2. The entire consideration was paid by Munishamappa to Rama Reddy prior to the execution of the Agreement to sell. The possession of the property was handed over by Rama Reddy to Munishamappa prior to the execution of the Agreement to sell.
3. From the time of execution of Agreement to sell, Rama Reddy would have no rights on the immovable property and only Munishamappa would have all rights over the said immovable property.
4. At the time of the transaction having taken place, the Karnataka Prevention of Fragmentation and Consolidation of Holdings Act 1996 (“Fragmentation Act”) was in existence. The said Act prohibited / prevented fragmentation of agricultural holdings and provided for their consolidation in the State of Karnataka. The sale between the parties was prohibited under the Fragmentation Act.
5. The said Act was likely to be repealed and hence the Agreement to sell was executed. The sale deed would be executed after the repeal of the Fragmentation Act. The above facts were expressly contained in the agreement to sell dated 28th May 1990.
6. The Fragmentation Act was repealed thereafter in 1991. However, the sale deed was not executed despite several requests.
7. Munishamappa issued a legal notice in September 2001 seeking execution of the registered sale deed. However, the sale deed was not executed. In October 2001 he instituted a suit of specific performance of the Agreement to sell praying to the Court to direct Rama Reddy to execute a registered sale deed. However, the Trial Court dismissed the suit on the grounds of being barred by the Limitation Act. It questioned the validity of the agreement to sell.
8. Aggrieved, Munishamappa preferred an appeal in the First Appellate (High) Court. In 2008, the High Court held that the suit was not barred by limitation and also established the existence of the agreement to sell as admitted by both the parties. The First appellate Court set aside the order of the Trial Court in 2010. The Court was of the view that the case was not barred by limitation and was also convinced of the validity of the agreement to sell.
9. Aggrieved, Rama Reddy preferred a second appeal in the High Court. The order of the First Appellate Court was set aside on the ground that the agreement to sell was in violation of the Fragmentation Act.
10. Aggrieved, Munishamappa appealed against the order in the Hon’ble Supreme Court.

Issue(s)

Whether the Agreement to sell is violative of the Fragmentation Act?

Analysis / Judgment

In arriving at a judgment, the Hon’ble Apex observed that the issues framed by the Trial Court did not contain the question of the Agreement to sell being violative of the Fragmentation Act. In the absence of the issue being raised by either party, the High Court erred on passing the judgment that the Agreement to sell was violative of the Fragmentation Act.

In the course of the Judgment, the Supreme Court held that:

1. The Agreement to Sell is not a conveyance (i.e, transfer of rights). An Agreement to sell does not transfer ownership rights or confer any title. What was 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.
2. Munishamappa filed the suit for specific performance of the Agreement to sell after the repeal of the Fragmentation Act. The suit could have been decreed without violation of the Fragmentation Act since the Act itself was repealed.
3. The High Court itself held that the suit was not barred by the Limitation Act.
4. Rama Reddy received the entire consideration and transferred the possession, rights of the immovable property to Munishamappa. There was no dispute on the issue.

For the above stated reasons, the Hon’ble Supreme Court set aside the 2010 order (second appeal) of the High Court and upheld the 2008 judgment passed by the First appellate Court.

For full text of the Judgment:

https://main.sci.gov.in/supremecourt/2011/6758/6758_2011_11_114_47870_Order_02-Nov-2023.pdf