The Calcutta High Court has affirmed that agreements for sale of immovable property executed in 1987 remain enforceable even if unregistered, provided no statutory prohibition existed at the time of execution, and that foreign ownership alone does not invalidate such contracts where the defendant is an Indian citizen. The judgment clarifies critical thresholds for specific performance, including limitation, coercion, and financial readiness.
Background & Facts
The Dispute
The dispute centers on six agreements for sale dated 5th August 1987, executed between Defendant Nos. 1 and 2 (mother and daughter) as vendors and Plaintiffs Nos. 1 to 4 as purchasers, concerning undivided 1/4th shares in two contiguous properties at 215 and 217 Netaji Subhas Chandra Bose Road, Tollygunge, Kolkata. The properties, totaling 34 cottah, were inherited by the defendants after the death of the sole owner on 30.01.1987. The Plaintiffs, through their company Defendant No. 3, sought to develop the premises and entered into separate agreements for sale and construction. The Plaintiffs paid earnest money totaling Rs. 42,000 via twelve banker’s cheques on 4th August 1987. The Defendant No. 3 also paid Rs. 10,000 as security deposit under the development agreement on 7th August 1987.
Key Facts
- Defendant No. 1 is a Japanese citizen by birth; Defendant No. 2 is an Indian citizen.
- The six sale agreements each specified consideration amounts: Rs. 5,33,000 for shares in 215 and Rs. 5,98,500 for shares in 217.
- All agreements were executed on non-judicial stamp paper of Rs. 5/- and were unregistered.
- On 17.08.1987, the defendants executed and registered two powers of attorney in favor of Defendant No. 3, authorizing it to negotiate with tenants and obtain vacant possession.
- The Plaintiffs appointed an architect, prepared building plans, and submitted them to Kolkata Municipal Corporation for sanction.
- On 25.10.1995, Defendant No. 1 (Ext. Q) wrote to the Plaintiffs indicating she would no longer participate in the project and suggested proceeding with Defendant No. 2.
- On 5.12.1995, Defendant No. 2 allegedly refused to perform the agreements, though this letter was not produced in evidence.
- The Plaintiffs filed the suit on 6.06.1996, which was initially returned for presentation to the appropriate court and later transferred to the Calcutta High Court under Clause 13 of the Letters Patent 1865 via ALP No. 36 of 1998.
- Defendant No. 1 settled the suit and a consent decree was passed on 24.09.2014.
Procedural History
- 30.08.1996: Suit returned by Calcutta High Court for presentation to District Court.
- 06.06.1996: Original suit filed in Calcutta High Court as Suit No. 137 of 1996.
- 1996: Suit re-filed before 8th Assistant District Judge, Alipore as Title Suit No. 91 of 1996.
- 18.02.1999: Transfer order passed by Calcutta High Court under Clause 13 of Letters Patent 1865.
- 05.08.1987: Execution of six sale agreements and one development agreement.
- 17.08.1987: Registration of powers of attorney in favor of Defendant No. 3.
- 25.10.1995: Defendant No. 1’s letter (Ext. Q) refusing to proceed.
- 05.12.1995: Alleged refusal letter by Defendant No. 2 (not produced).
- 24.09.2014: Consent decree passed against Defendant No. 1.
- 24.04.2026: Judgment delivered by Justice Sugato Majumdar.
The Parties' Positions
Plaintiffs: Asserted readiness and willingness to perform, cited performance through architectural planning, amalgamation of plots, and payment of earnest money. Argued that the agreements were valid, not void for non-registration (as laws were not retrospective), and that Defendant No. 2’s defense of coercion was unsubstantiated.
Defendant No. 2: Contended that the agreements were void due to coercion, undue influence, non-registration, and violation of FERA 1973. Denied receiving any consideration. Alleged she was induced to sign blank papers by her mother and her advocate. Claimed the suit was barred by limitation and that performance of the development agreement was a precondition for enforceability of the sale agreements.
Relief Sought
The Plaintiffs sought specific performance of the six sale agreements dated 5.08.1987, directing Defendant No. 2 to execute conveyance deeds for the respective shares against payment of consideration. They also sought costs and any other relief deemed fit by the Court.
The Legal Issue
The central questions were: (1) Whether the six unregistered sale agreements executed in 1987 are enforceable despite subsequent statutory requirements for registration? (2) Whether the consent of a foreign national vendor invalidates the agreement under FERA 1973 when the defendant against whom enforcement is sought is an Indian citizen? (3) Whether the defense of coercion and undue influence, unchallenged for over seven years and unaccompanied by avoidance, defeats enforceability? (4) Whether the Plaintiffs’ readiness and willingness to perform must be proven by depositing balance consideration in court?
Arguments Presented
For the Appellant/Petitioner
The Plaintiffs’ counsel argued that at the time of execution in 1987, registration of agreements for sale was not mandatory under the Registration Act, 1908. The 2001 amendment introducing Section 17(1A) had no retrospective effect. They cited A.E.G. Carapiet v. A.Y. Derderian to establish that steps taken towards performance (architectural plans, amalgamation, POA registration) constituted sufficient part-performance. They emphasized that Defendant No. 1’s consent decree in 2014, after FERA’s repeal in 1999, validated the transaction’s legality. The Plaintiffs’ readiness was established through their conduct, including payment of 50% of consideration and pursuit of municipal approvals.
For the Respondent/State
Defendant No. 2’s counsel contended that the agreements were void ab initio under Section 31 of FERA 1973, which prohibited foreign nationals from acquiring immovable property without RBI permission. He argued that non-registration rendered the agreements unenforceable under the Transfer of Property Act and that the defense of coercion was substantiated by the Defendant’s testimony and lack of independent legal advice. He relied on Vijay Kumar v. Om Prakash to assert that financial capacity must be proven by depositing balance consideration in court, and that mere averments in the plaint were insufficient.
The Court's Analysis
The Court undertook a meticulous analysis of statutory timelines, evidentiary credibility, and equitable principles. It held that the 2001 amendment to the Registration Act, which made registration mandatory for agreements to transfer immovable property, could not apply retrospectively to agreements executed in 1987. The Court observed:
"The law governing the enforceability of a contract is the law in force at the time of its execution. Subsequent statutory changes, absent express retrospective operation, cannot invalidate prior agreements."
Regarding FERA, the Court distinguished between the vendor’s status and the defendant against whom enforcement is sought. It held:
"The restriction under Section 31 of FERA applied to acquisition by foreign nationals, not to the enforceability of agreements against Indian citizens. The consent decree against Defendant No. 1, passed after FERA’s repeal, further negates any lingering illegality."
On the issue of coercion and undue influence, the Court found the defense legally and factually unsustainable. The Defendant No. 2 admitted signing the agreements and later appearing before the Registrar to register the power of attorney. She never sought to avoid the agreements within the limitation period, nor did she file a counter-claim. The Court noted:
"An agreement voidable for coercion or undue influence remains enforceable until avoided. Avoidance must be affirmative, timely, and pleaded. Silence for over seven years, coupled with conduct inconsistent with avoidance, extinguishes the right to rescind."
On financial readiness, the Court rejected the rigid requirement of depositing balance consideration. It held that Vijay Kumar did not lay down a mandatory rule but emphasized contextual assessment. The Court observed:
"The Plaintiffs paid 50% of the consideration, undertook substantial steps towards development, and secured a conveyance from Defendant No. 1. These acts, coupled with unchallenged averments in the plaint, satisfy Section 16(c) of the Specific Relief Act."
The Court also dismissed the argument that performance of the development agreement was a precondition for the sale agreements, noting no such condition was stipulated in the documents.
The Verdict
The Plaintiffs succeeded. The Court granted specific performance of the six sale agreements dated 5.08.1987, directing Defendant No. 2 to execute conveyance deeds for the respective shares against payment of the agreed consideration. The Court appointed Mr. Goutam Mukherjee, an empaneled Chartered Valuer, to determine the current market value of the properties, with the valuation report to be submitted by 17.06.2026. The cost of valuation shall be borne by the Plaintiffs. The suit is decreed in full, subject to payment of the valuation-determined consideration.
What This Means For Similar Cases
Non-Registration Does Not Invalidate Pre-2001 Agreements
- Practitioners may enforce unregistered agreements for sale executed before 20.10.2001, provided they were valid under the law at the time of execution.
- The 2001 amendment to Section 17(1A) of the Registration Act is prospective only; it cannot be invoked to invalidate prior contracts.
- Part-performance (e.g., payment, possession, planning, POA registration) remains a strong evidentiary pillar for specific performance.
Foreign National Vendor ≠ Invalid Contract Against Indian Defendant
- A sale agreement involving a foreign national vendor is not void if the defendant against whom enforcement is sought is an Indian citizen.
- FERA restrictions apply to acquisition by foreign nationals, not to the enforceability of contracts against local parties.
- Consent decrees passed after repeal of FERA (1999) validate the transaction’s legality retroactively.
Coercion Must Be Affirmatively Avoided to Invalidate Agreements
- Mere allegations of coercion or undue influence without timely avoidance (within limitation) are insufficient.
- Conduct inconsistent with avoidance - such as registering POAs or accepting payments - waives the right to rescind.
- Courts will not permit parties to sit on rights for over seven years and then invoke voidability as a defense.
Financial Readiness Can Be Inferred from Conduct
- Deposit of balance consideration in court is not mandatory under Section 16(c) of the Specific Relief Act.
- Readiness and willingness may be inferred from partial payment, steps taken towards performance, and unchallenged pleadings.
- The burden shifts to the defendant to disprove readiness with credible evidence, not mere denial.
