Bombay High Court Upholds Trial Court Decision: Refuses to Reject Property Dispute Suit Under Order VII Rule 11 CPC, Citing Triable Issues Over Competing Sale Deeds and Alleged Injunction Violations

Court’s Decision:

The Bombay High Court dismissed the civil revision application (CRA) challenging the trial court’s decision to reject an application under Order VII Rule 11 of the Code of Civil Procedure (CPC). The Court held that the plaint disclosed a prima facie cause of action and raised “triable issues” that necessitated a detailed trial. The High Court emphasized that factual disputes surrounding the validity of multiple property transactions and the implications of an existing injunction order required adjudication on merits through evidence.

Facts:

1. Nature of the Dispute: The plaintiffs initiated a suit seeking the cancellation of a registered sale deed dated May 28, 2018, executed between Defendant Nos. 1 and 3-5. The suit also sought an injunction restraining these defendants from claiming ownership or possession of the suit property.
2. Plaintiffs’ Transactions:
   • The plaintiffs relied on a registered agreement for sale dated July 24, 2014, executed between Defendant No. 2 (as the Power of Attorney holder for Defendant No. 1) and the plaintiffs. This agreement specified a consideration of ₹1 crore, out of which ₹31 lakh was paid upfront through vouchers.
   • Subsequently, on June 28, 2018, the plaintiffs executed a registered sale deed with Defendant No. 2, claiming payment of the remaining ₹69 lakh.
3. Defendants’ Transactions:
   • Defendant No. 1 executed another agreement for sale on September 21, 2016, directly with Defendant Nos. 3-5, for a consideration of ₹2.15 crore. On May 28, 2018, a registered sale deed was executed between these parties, claiming that ₹2.15 crore was paid, though documentary evidence suggested a shortfall in payments.
4. Injunction Order: The plaintiffs referred to an injunction order passed on June 30, 2016, in a separate suit, which restrained Defendant No. 1 from transferring the suit property. This order was acknowledged in the defendants’ transactions but was allegedly violated by the sale deed executed in favor of Defendant Nos. 3-5.
5. Allegation of Collusion: The plaintiffs alleged collusion between Defendant No. 1 and Defendant Nos. 3-5 to undermine their prior agreement for sale and rights in the property.

Issues:

1. Whether the registered agreement for sale and subsequent sale deed in favor of the plaintiffs confer a stronger legal claim to the property.
2. Whether the injunction order invalidates subsequent transactions, particularly the sale deed executed in favor of Defendant Nos. 3-5.
3. Whether the plaint disclosed a cause of action warranting a trial, or if it was liable for rejection under Order VII Rule 11 CPC.
4. Whether the alleged shortfall in consideration paid by Defendant Nos. 3-5 affects the validity of their sale deed.

Petitioner’s Arguments:

• The agreement for sale in favor of the plaintiffs was without possession and did not create legal rights or title under Section 54 of the Transfer of Property Act, 1882.
• The sale deed executed in favor of Defendant Nos. 3-5 preceded the plaintiffs’ sale deed and, therefore, had legal primacy.
• The injunction order applied to all subsequent transactions, including those involving the plaintiffs, rendering their claims baseless.
• Plaintiffs failed to seek specific performance of their agreement and instead sought only cancellation of the defendants’ sale deed, which was legally untenable.

Respondent’s Arguments:

• The plaintiffs argued that their agreement for sale, being executed and registered prior to the defendants’ transactions, created enforceable rights.
• The injunction order expressly restrained Defendant No. 1 from transferring the property, rendering all subsequent transactions, including the defendants’ sale deed, null and void.
• The sale deed executed in favor of Defendant Nos. 3-5 was marked by inconsistencies and a failure to disclose the complete payment of consideration.

Analysis of the Law:

1. Order VII Rule 11 CPC: This provision empowers courts to reject a plaint if it fails to disclose a cause of action. The High Court emphasized that the plaint must be read in its entirety, along with the supporting documents, to determine whether a cause of action is apparent.
2. Transfer of Property Act, 1882:
   • Section 54 specifies that an agreement for sale does not confer ownership rights or possession unless followed by a registered sale deed.
   • The plaintiffs relied on Section 43 (doctrine of feeding the estoppel), arguing that their agreement created prior rights over the property.
3. Precedent:
   • The Court referred to Dahiben v. Arvindbhai Kalyanji Bhanushali and Tej Bahadur v. Narendra Modi, highlighting that disputes involving mixed questions of law and fact are unsuitable for rejection at the preliminary stage.

Precedent Analysis:

The Court distinguished between legal ownership created through a registered sale deed and equitable claims arising from an agreement for sale. It observed that factual disputes surrounding payment shortfalls, acknowledgment of the injunction order, and allegations of collusion could only be resolved through a trial.

Court’s Reasoning:

• The trial court correctly held that the plaintiffs had raised triable issues concerning the validity of the defendants’ sale deed and the effect of the injunction order.
• Documentary inconsistencies, such as discrepancies in payment schedules and acknowledgment of the injunction order, further necessitated a detailed inquiry.
• The Court observed that rejecting the plaint at this stage would preclude a fair resolution of these disputes.

Conclusion:

The High Court dismissed the CRA, upholding the trial court’s decision to allow the suit to proceed. It directed the trial court to expedite the hearing, considering the lapse of substantial time since the filing of the suit.

Implications:

This judgment reaffirms the judiciary’s cautious approach in rejecting suits at the threshold. It underscores the need for detailed trials in cases involving complex property disputes, injunction orders, and allegations of collusion. The decision highlights the interplay between procedural and substantive law, emphasizing the protection of parties’ rights through a fair adjudicatory process.

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