The Madras High Court has clarified that while an unregistered sale agreement can serve as valid evidence of a contract in a suit for specific performance, the plaintiff bears the affirmative burden of proving continuous readiness and willingness to perform their obligations under the agreement. This judgment reinforces the doctrinal requirement under Section 16(c) of the Specific Relief Act, 1963 and sets a clear evidentiary standard for plaintiffs seeking equitable relief in property disputes.
Background & Facts
The Dispute
The plaintiff, K.Eswaran, alleged that the first defendant, S.Janakiraman, entered into a written Sale Agreement on July 24, 2014, for the sale of a property in Mayiladuthurai for Rs.14,00,000, against an advance payment of Rs.3,00,000. The agreement stipulated execution of the sale deed within three months. The plaintiff claimed he was ready and willing to pay the balance amount but the defendant repeatedly delayed and later denied the transaction’s validity, asserting the agreement was merely a security for a loan.
Procedural History
- July 24, 2014: Sale Agreement (Ex-A.1) executed; Rs.3,00,000 paid as advance
- October 11, 2014: Plaintiff issued legal notice demanding performance
- October 20, 2014: Defendant replied, claiming agreement was security for Rs.3,00,000 loan
- January 24, 2020: Trial Court dismissed specific performance claim, held agreement was security, ordered refund of advance with interest
- 2021: Plaintiff filed First Appeal under Section 96 CPC
Relief Sought
The plaintiff sought specific performance of the Sale Agreement and, in the alternative, refund of Rs.3,00,000 with 12% interest from the date of suit. The defendant opposed both claims, arguing the agreement was unregistered and not intended as a sale.
The Legal Issue
The central question was whether an unregistered Sale Agreement can be enforced for specific performance under the Specific Relief Act, 1963, and whether the plaintiff’s mere assertion of readiness and willingness suffices, or whether concrete proof of financial capacity and intent is required under Section 16(c).
Arguments Presented
For the Appellant/Petitioner
Counsel for the plaintiff relied on R.Hemalatha v. Kasture to argue that unregistered agreements are admissible as evidence of contract under the proviso to Section 49(c) of the Registration Act. He contended that the plaintiff’s legal notice (Ex-A.2) and reply notice (Ex-A.4) established readiness and willingness. He further argued that deposit of balance consideration is not mandatory unless ordered by the court, citing R. Leela Ammal v. V. Gopal.
For the Respondent/State
Counsel for the defendant emphasized that the plaintiff failed to produce bank statements, income records, or any documentary proof of financial capacity to pay Rs.11,00,000. He relied on Umabai v. Nilkanth Dhondiba Chavan and Pappammal v. P. Ramasamy to argue that readiness and willingness must be proven throughout the contractual period, not merely asserted. He also highlighted the defendant’s own notice (Ex-B.1) as inconsistent with his written statement, but not sufficient to override the lack of evidentiary support.
The Court's Analysis
The Court undertook a two-pronged analysis. First, it examined the nature of Ex-A.1. Despite the defendant’s claim that the agreement was security for a loan, the Court found that the defendant’s own notice (Ex-B.1), marked by his side during cross-examination, explicitly stated:
"No.2 of you approached my client and offered to purchase the property of my client fixing the sale price at Rs.14 lakhs. My client agreed for the proposal and executed an agreement for sale on 24.7.2014 after receiving from No.2 of you the advance of Rs.3,00,000/-..."
This admission, the Court held, was binding and could not be retracted. The Court further affirmed that under the proviso to Section 49(c) of the Registration Act, as interpreted in R.Hemalatha, unregistered agreements are admissible in suits for specific performance, provided they do not fall under Section 17(1-A).
Second, the Court turned to Section 16(c) of the Specific Relief Act, which mandates that the plaintiff must prove readiness and willingness to perform. While the plaintiff had issued notices expressing intent, the Court found no corroborating evidence - no bank passbook, no fixed deposit statements, no income proof - to substantiate his capacity to pay Rs.11,00,000. The Court distinguished between mere assertion and evidentiary proof, holding that readiness and willingness cannot be inferred from pleadings alone.
The Court also corrected the Trial Court’s award of interest from the date of agreement, noting that in the absence of contractual terms, interest could only be awarded from the date of the suit, as prayed for by the plaintiff.
The Verdict
The plaintiff prevailed on the admissibility of the unregistered agreement, but lost on specific performance due to failure to prove readiness and willingness. The Madras High Court allowed the appeal in part, setting aside the specific performance decree but upholding the refund of Rs.3,00,000 with 12% interest from the date of the plaint until realization.
What This Means For Similar Cases
Unregistered Agreements Are Admissible, But Not Conclusive
- Practitioners must now treat unregistered sale agreements as prima facie evidence of contract, not as conclusive proof of intent to sell
- The burden shifts to the defendant to prove the document was intended as security, not sale
- Extrinsic evidence, including party conduct and communications, will be critical to establish true nature
Readiness and Willingness Requires Documentary Corroboration
- Oral testimony or legal notices alone are insufficient to satisfy Section 16(c)
- Plaintiffs must proactively submit bank statements, income tax returns, or financial affidavits demonstrating capacity to pay balance consideration
- Failure to do so will result in dismissal of specific performance claims, even if the agreement is valid
Interest Claims Must Align With Prayer
- Courts cannot grant interest beyond what is specifically prayed for in the plaint
- Where no contractual rate exists, interest from the date of suit is the default, not from the date of agreement
- Practitioners must draft prayers with precision to avoid judicial modification
