Supreme Court Upholds Specific Performance of 1986 Oral Sale Agreement

The Supreme Court of India, in a recent judgment in Manjit Singh & Anr. v. Darshana Devi & Ors., upheld the specific performance of an oral sale agreement from 1986. The ruling affirms that an oral contract for property sale, if sufficiently proven, can be enforced under the law, dismissing the appeals of subsequent purchasers who failed to establish themselves as bona fide buyers.

Background of the Case

The case originated from a suit filed by Darshana Devi (Respondent No.1), who sought specific performance of an unregistered oral agreement to sell a piece of land. She claimed that the landowner, Bishan Singh, had agreed to sell the property to her in 1986. However, before completing the sale, Bishan Singh transferred the land to Manjit Singh and another defendant through a registered sale deed on August 29, 1986.

In response, Darshana Devi filed a civil suit for specific performance in 1987, asserting that the transfer to the subsequent buyers was illegal. The trial court ruled in her favor, directing the enforcement of the sale agreement. The subsequent purchasers, Manjit Singh and the other defendant, appealed against the ruling. While the district appellate court overturned the trial court’s judgment, Darshana Devi challenged the decision in the Punjab & Haryana High Court, which reinstated the trial court’s decree. This led the appellants to file the present appeal before the Supreme Court.

Supreme Court’s Observations

The Supreme Court examined the facts and legal provisions governing specific performance of contracts. The key observations were:

The existence of an oral sale agreement can be proved through witness testimony and supporting documents.
The subsequent purchasers, Manjit Singh and the other defendant, could not be considered bona fide purchasers under Section 19(b) of the Specific Relief Act, 1963.
The appellants failed to demonstrate that they had purchased the land in good faith without knowledge of the prior agreement.
Section 19 of the Specific Relief Act protects bona fide purchasers for value, but the burden of proving good faith is on the buyer.
Failure to inquire about the title and possession of the original party (Darshana Devi) indicated that the appellants had knowledge of the existing agreement.

The Court stated:
“Specific performance of an oral agreement can be enforced if credible evidence establishes its existence and the conduct of the parties supports its validity. Mere absence of a registered document does not negate the contract.”

Key Arguments by the Parties

Petitioners’ Arguments (Manjit Singh & Anr.):

They purchased the property through a validly registered sale deed.
They were not aware of any prior agreement between Bishan Singh and Darshana Devi.
The trial court’s decision was based on weak evidence and should not be enforced.
The relief of specific performance should not be granted when alternative monetary compensation is possible.

Respondents’ Arguments (Darshana Devi & Ors.):

The oral agreement was legally valid and supported by witness testimony.
The appellants had knowledge of the prior agreement but proceeded with the transaction to defeat her legal rights.
They failed to conduct due diligence before purchasing the land.
Specific performance was the appropriate remedy, as the property held unique value.

Supreme Court’s Final Judgment

The Supreme Court ruled:

The judgment of the High Court was upheld, and the appeal by the subsequent purchasers was dismissed.
The appellants were not bona fide purchasers as they failed to prove good faith in acquiring the property.
Specific performance of the oral agreement was justified as per the evidence presented.
The respondents were entitled to execute the decree for the transfer of the property.
Section 19 of the Specific Relief Act does not protect subsequent purchasers who fail to verify existing agreements.

The Court stated:
“A party claiming to be a bona fide purchaser must prove due diligence in verifying ownership and existing agreements. Failure to do so negates their defense under Section 19(b) of the Specific Relief Act.”

Impact and Significance

This ruling reinforces legal principles regarding specific performance and bona fide purchasers. Key takeaways include:

Oral agreements for property sales can be enforced if supported by strong evidence.
Subsequent buyers must conduct due diligence before purchasing properties.
Section 19(b) of the Specific Relief Act places the burden on buyers to prove good faith.
Courts will enforce specific performance when a party has been wrongfully deprived of property rights.

Conclusion

The Supreme Court’s ruling in this case upholds the principle that valid sale agreements must be honored, even if they are oral. The decision highlights the responsibilities of buyers to verify property titles and existing agreements before purchase. By enforcing specific performance, the judgment ensures fairness in property transactions and prevents parties from using subsequent sales to defeat legitimate claims. This ruling will serve as an important precedent for similar disputes involving oral sale agreements and property rights.

Petitioner Name: Manjit Singh & Anr..
Respondent Name: Darshana Devi & Ors..
Judgment By: Justice J.B. Pardiwala, Justice R. Mahadevan.
Place Of Incident: Punjab.
Judgment Date: 21-11-2024.

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