A) ABSTRACT / HEADNOTE

The Correspondence, RBANMS Educational Institution v. B. Gunashekar & Another (Civil Appeal No. 5200 of 2025) is a Supreme Court decision addressing the scope of Order VII Rule 11 CPC in suits founded solely on agreements to sell and the legal consequences when such suits are pressed against third parties who claim independent title and long possession.

The Court examined whether a plaint based on an agreement to sell where the vendors are not parties, the purchaser has not obtained a registered sale deed, and only an advance (allegedly in cash) was paid discloses a cause of action against a defendant who has been in continuous possession of the property for over a century.

The Bench reiterated settled principles under Section 54 and Section 53-A of the Transfer of Property Act, 1882, the law on part-performance, and the well-settled test for rejection of plaint under Order VII r.11(a) & (d) CPC, holding that an agreement to sell confers only personal rights against the vendor (and limited protection under s.53-A in specified circumstances) and does not create enforceable rights against third parties in possession or ownership.

The Court found multiple incurable defects in the plaint lack of privity with the vendor, absence of possession by plaintiffs, omission of vendors as parties, failure to seek declaratory relief when title is in dispute, and suspicious cash payment above statutory caps and therefore held the plaint liable to be rejected under Ord. VII r.11(a) & (d). The Court further issued directions for courts, registrars and income-tax authorities to notify and verify large cash consideration claims in civil filings to guard against evasion of s.269ST of the Income-tax Act, 1961.

Keywords: Agreement to sell immovable property; Rejection of plaint (Ord. VII r.11); Section 54 TPA; Section 53-A TPA; 269ST Income-tax Act.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The Correspondence raises a paradigmatic civil-procedure and property law issue: whether a plaint that rests exclusively on an agreement to sell entered into between the plaintiffs (agreement-holders) and certain vendors, but not between the plaintiffs and the defendant-in-possession discloses a maintainable cause of action against the defendant, such that the suit must survive a threshold challenge under Order VII r.11(a) & (d) CPC.

The appellant, R.B.A.N.M.S. Educational Institution, is a 19th-century charitable trust that has been in uninterrupted possession of the disputed land since 1905, formally conveyed in 1929; the respondents filed O.S. No. 25968 of 2018 seeking a permanent injunction to restrain the appellant from creating third-party interests in the property on the basis of an alleged agreement to sell dated 10 April 2018 and an asserted advance payment of Rs.75,00,000/-.

The appellant challenged maintainability by way of I.A. No. 3 of 2018 under Ord. VII r.11(a) & (d) asserting that the agreement to sell gives only personal rights against the vendor (under s.54 TPA) and in any event the plaintiffs lack privity and are not in possession (so s.53-A protection cannot be invoked against third parties). The trial court dismissed the rejection application; on partial High Court review the matter was remanded for reconsideration, but ultimately both trial court and High Court rejected the application again, prompting this appeal.

The Supreme Court considered prior authorities and procedural standards for rejection of plaints, the interplay between s.54 and s.53-A TPA, the Specific Relief Act’s bar to injunctions when title is contested, and the public interest dimension when alleged cash transactions exceed statutory caps under s.269ST of the Income-tax Act. The Court’s factual premise long settled possession by the appellant, lack of sale deed in favour of respondents, vendors not parties, and cash consideration claim framed the legal analysis which led to dismissal of the suit at threshold.

D) FACTS OF THE CASE

The material facts were succinct. R.B.A.N.M.S. Educational Institution (appellant) is a public charitable trust established in 1873, in continuous occupation and use of the subject property since 1905, with formal conveyance by the Municipal Commissioner in 1929; the property has been used for educational purposes and sporting facilities by the institution for decades.

On 10 April 2018, the respondents claim to have executed an agreement to sell with certain alleged vendors (including one Ramesh S. Reddy and Maheshwari Ranganathan and others) over the suit schedule property for a consideration of Rs.9,00,00,000/-, whereupon the respondents allege they paid Rs.75,00,000/- as advance in cash and were threatened by the appellant’s attempt to alienate the property to third parties.

The respondents did not implead the vendors as parties in their suit. Following service, the appellant filed I.A. No. 3 of 2018 under Ord. VII r.11(a) & (d) seeking rejection of the plaint on the ground that the agreement to sell could not transfer any enforceable interest vis-à-vis third parties under Section 54 and only limited remedies (e.g., suit against vendor for specific performance or limited protection under s.53-A if conditions are met) were available.

The trial court initially rejected the rejection application; the High Court in C.R.P. restored the application for reconsideration and directed expedited disposal; the trial court again rejected, and the High Court dismissed the revision, prompting appeal to this Court.

Important factual threads that weighed with the Court included:

(i) absence of privity between respondents and appellant;

(ii) vendors not sued;

(iii) respondents not in possession;

(iv) long established possession by appellant (since 1905);

(v) alleged cash payment of Rs.75,00,000/- which raises statutory and public-policy concerns under s.269ST;

(vi) pattern of similar suits by respondents on other properties suggesting speculative litigation.

These facts taken in conjunction with statutory prescriptions and precedents became decisive in the Court’s determination that the plaint failed to disclose a legal cause of action against the appellant.

E) LEGAL ISSUES RAISED

i. Whether a plaint founded solely on an agreement to sell — without impleading the vendors and without a registered sale deed — discloses a cause of action against a third party who is in long possession and claims title, such that the plaint must survive Order VII r.11(a) & (d) CPC?

ii. Whether a proposed transferee under an agreement to sell can maintain a pure suit for injunction against a third party in possession, without obtaining a declaratory relief on title or demonstrating possession/part-performance entitling protection under s.53-A of the Transfer of Property Act?

iii. Whether the courts should refer alleged cash consideration above Rs.2,00,000/- in civil pleadings to the Income-tax authorities under s.269ST for verification and possible action?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The counsels for Petitioner / Appellant submitted that the agreement to sell cannot create any transferable interest enforceable against third parties by virtue of Section 54 TPA; the respondents had no privity with the appellant, vendors were neither parties nor their addresses disclosed, and the remedy of the respondents, if any, lay only against their vendors (e.g., suit for specific performance) and not against a third party in possession.

Reliance was placed on Rambhau Namdeo Gajre, Suraj Lamp, and K. Basavarajappa to show that agreements to sell create only personal obligations and limited shields under s.53-A, not title against third parties. The appellant emphasised that the respondents were not in possession, and the appellant’s century-long possession made a suit for bare injunction untenable under s.41(j) Specific Relief Act and precedents such as Jharkhand State Housing Board.

The appellant further pointed to suspicious circumstances large cash advance of Rs.75 lakhs in alleged breach of s.269ST and submitted that such indicia bolster the position that the plaint was champertous or speculative and should be rejected at threshold under Ord. VII r.11.

G) RESPONDENT’S ARGUMENTS

i. The counsels for Respondent submitted that at the threshold stage under Ord. VII r.11, the court must accept plaint averments as true and not delve into defense or external materials; therefore the plaint asserting an agreement to sell and payment prima facie discloses cause of action and is maintainable.

They relied on P.V. Guru Raj Reddy and Soumitra Kumar Sen to state that rejection is drastic and should be rare; any factual dispute must be resolved at trial. The respondents argued their agreement was registered and created enforceable rights against third parties or that factual matrix would show part-performance/possession sufficient to invoke s.53-A, and claimed that the authorities cited by appellant were distinguishable.

They contended that the High Court and trial court correctly declined to reject the plaint.

H) JUDGMENT

The Supreme Court allowed the appeal and held that the plaint should have been rejected under Order VII r.11(a) & (d) CPC. The Court first elaborated the scope of Ord. VII r.11 as a substantive filter designed to terminate sham or legally barred litigation at the threshold; courts must perform a meaningful reading of the plaint together with documents filed under Ord. VII r.14 and cannot be blind to settled statutory law or binding precedent that demonstrates the plaint fails to disclose a cause of action.

The Court reiterated the three-part test: accept averments as true for purpose of the rule, but ask whether on that reading a decree could be passed; examine documents annexed to plaint; and determine whether the suit is barred by law. The Court invoked Dahiben (Gajra), Azhar Hussain, Liverpool & London S.P. & I Assn. v. M.V. Sea Success I, and other authorities to frame the standard.

Applying law to facts, the Court held that:

(i) Section 54 makes clear that an agreement to sell does not of itself create any interest in immovable property and title passes only on execution of a registered sale deed;

(ii) Section 53-A offers a limited shield of protection only against the transferor (vendor) and not against third parties with independent title or possession;

(iii) the respondents lacked privity with vendors and did not allege that they were in possession such as would attract s.53-A protection;

(iv) the plaint failed to seek a declaratory relief when title was in dispute and instead sought a bare injunction, contrary to s.41(h)/(j) Specific Relief Act and precedents;

(v) the vendors were not parties and the respondents therefore had no personal interest against the appellant to sustain injunctive relief;

(vi) the alleged cash payment of Rs.75 lakhs in the plaint raised a statutory and public-policy concern under s.269ST Income-tax Act, strengthening inference of suspicious/Champertous litigation. The Court concluded these defects went to the root of the case, were incurable and barred by law therefore the plaint did not disclose cause of action and was liable to be rejected.

The High Court’s contrary approach treating the matter as mixed question of fact and law requiring trial was held to ignore settled law and the Court’s duty under Ord. VII r.11 to nip sham suits in the bud.

The Court also issued directions that civil courts should notify Income-tax authorities where pleadings assert cash consideration ≥ Rs.2,00,000/-, registrars should circulate the directions and registration officers inform tax authorities upon seeing such documents, and disciplinary consequences for registrars failing to do so may be pursued.

Finally, while noting the public interest in protecting charitable institutions from speculative litigation and cautioning respondents about future abuse, the Court declined to impose exemplary costs at that stage but allowed the appeal and ordered rejection of the plaint. Operative directions and the dismissal/rejection of plaint were set out, and registrars/Chief Secretaries/Principal Chief Commissioner (Income-tax) were directed to circulate the judgment for compliance.

a. RATIO DECIDENDI

The decisive ratio is threefold:

(1) An agreement to sell does not of itself create any interest in immovable property under Section 54 TPA; at best it creates a personal right enforceable against the vendor and a limited shield under s.53-A in narrowly prescribed circumstances not a substantive title enforceable against third parties in possession.

(2) Order VII r.11 permits rejection of plaint where, on meaningful reading of the plaint and documents produced with it, the plaint fails to disclose a legal cause of action or is barred by law; clever drafting that creates illusion of cause of action must be nipped in the bud.

(3) Where title is in dispute and the plaintiff lacks personal, legally enforceable interest (no possession, vendors not parties, no registered sale deed), a mere suit for injunction without declaratory relief is not maintainable and is a fit case for rejection under Ord. VII r.11(a) & (d). The Court applied these principles and held the plaint liable to be rejected.

b. OBITER DICTA 

The judgment includes important observations in obiter which, though not necessary to the final disposition, bear persuasive force:

(i) public interest and protection of charitable institutions from speculative/extortionate litigation is a material consideration when courts exercise discretion on costs and threshold filtration;

(ii) where civil pleadings allege large cash consideration (≥ Rs.2,00,000/-) courts must inform Income-tax authorities under s.269ST and registrars/sub-registrars must similarly inform to enable audit and compliance;

(iii) Article 141 binds courts to apply binding precedents irrespective of the stage at which they are cited;

(iv) champertous or systematic patterns of litigation filed by parties across multiple properties attract judicial opprobrium and potential punitive measures. These observations set useful administrative and public-law guidance for lower courts and registration authorities.

c. GUIDELINES

1. When a plaint claims payment of cash ≥ Rs.2,00,000/- toward consideration for immovable property, the civil court shall intimate the fact to the jurisdictional Income-tax authority for verification and further action under law.

2. The jurisdictional Income-tax authority, on receiving such intimation, shall follow due process and investigate as per law.

3. The Sub-Registrar, upon receiving documents presented for registration claiming cash consideration ≥ Rs.2,00,000/-, shall intimate the same to the jurisdictional Income-tax authority.

4. Failure by registering authorities to intimate such transactions shall be reported to the Chief Secretary of the State/UT for appropriate disciplinary action.

5. Lower courts must, at the threshold under Order VII r.11, read the plaint meaningfully together with documents produced under r.14, and reject plaints that, while pleading facts, fail to disclose a legal right of plaintiffs to sue (i.e., are barred by s.54 or otherwise).

I) CONCLUSION & COMMENTS

On a careful interplay of statutory text, the Specific Relief Act and sustained precedent, the Supreme Court underscored that procedural filtration under Order VII r.11 is a substantive safeguard to prevent misuse of judicial time by sham or legally barred suits.

In matters where plaintiffs rely solely on agreements to sell without a registered sale deed, without possession or part-performance in favour of the transferee, and without impleading the vendor, courts must scrutinize whether any legally enforceable right exists against a third party in possession.

The judgment reaffirms that s.54 TPA is a bar to creating title by mere agreement and that s.53-A is a shield against one’s own vendor, not a sword against strangers. The Court’s practical directions linking civil procedure with income-tax enforcement respond to contemporary policy concerns about cash transactions and black money.

For practitioners, this decision is a stern reminder: pleadings must identify legal rights and the right parties; clever drafting cannot mask incurable legal bars; and threshold challenges under Ord. VII r.11 remain a potent, properly-used tool to prevent protracted, meritless litigation. The judgment will shape approach to suits based on agreements to sell and strengthen procedural vigilance across trial courts and registries.

J) REFERENCES

a. Important Cases Referred

1. Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra (Dead) through LRs. & Anr., (2004) 8 SCC 614.

2. Suraj Lamp & Industries (P) Ltd. v. State of Haryana & Another, (2012) 1 SCC 656.

3. K. Basavarajappa v. Tax Recovery Commissioner, Bangalore & Others, (1996) 11 SCC 632.

4. T. Arivandandam v. T.V. Satyapal & Another, (1977) 4 SCC 467.

5. Jharkhand State Housing Board v. Didar Singh & Another, (2019) 17 SCC 692.

6. Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra) (Dead) through LRs., (2020) 7 SCC 366.

7. Om Prakash Srivastava v. Union of India & Another, (2006) 6 SCC 207.

b. Important Statutes Referred

1. Code of Civil Procedure, 1908 — Order VII r.11(a), r.11(d), Order VII r.14.

2. Transfer of Property Act, 1882 — Sections 7, 40, 52, 53-A, 54.

3. Specific Relief Act, 1963 — Sections 34, 41(h), 41(j).

4. Income-tax Act, 1961 — Section 269ST & Section 271DA (penalty for receipt in cash above statutory limit).

5. Registration Act, 1908 — Sections 17, 49 (on compulsory registration of conveyance).