Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
% Reserved on: 13 February, 2026
th
Pronounced on: 7 May, 2026
+ RFA 438/2025, CM APPL.29764/2025
SAYED NAIM SHAFI
(Deceased) Through his LRs
1. SAYED NAVED SHAFI
2. SAYED AZIZ SHAFI
Both S/o Late Sayed Saim Shafi
R/o 898, Nawab House,
Chatta Sheikh Mangloo
Jama Masjid, Delhi-110006.
….Appellants
Through: Mr. Sumant De, Mr. Rohit Kumar
Singh, Ms. Shweta Priyadarshini,
Mr. Nishi Singh and Ms. Bhagwati,
Advocates
VERSUS
1. ATA UR REHMAN
S/o Sh. Rafiq-Ur Rehman
R/o 898, Nawab House
Chatta Sheikh Mangloo
Jama Masjid, Delhi-110006.
2. SAYED SHUJA SHAFI
S/o Sayed Naim Shafi
R/o 207, Falak Avenue,
OPP. Anmol Farms, CC Canal Road,
Amber Tower Road
Sarjhej, Landmark Mariyam House
Ayesha Masjeed, Ahmedabad, Gujarat.
….Respondents
Through: Mr. R.K. Saini, Advocate
Signature Not Verified
RFA 438/2025 Page 1 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T
NEENA BANSAL KRISHNA, J.
1. Regular First Appeal under Section 96 read with Order 41 Rule 1
Code of Civil Procedure, 1908 ( Hereinafter referred to as „CPC‟ ) has been
filed by the Appellants / Defendants to challenge the Judgment and Decree
dated 25.01.2025 whereby, in the Suit of the Plaintiff for Specific
Performance, the Appellant / Defendant No.1 (since deceased) has been
directed to return the earnest money of Rs.10 Lakhs paid under the
Agreement to Sell.
2. The Plaintiff / Respondent No.1 had instituted a Civil Suit CS DJ
NO.615841/2016 for Specific Performance and Permanent Injunction .
3. The facts in brief, are that the Defendant / Appellant Sayed Naim
Shafi (since deceased), now represented by the Legal Heirs, was the owner
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of 1/3 undivided share in the property bearing No. 898, Chhatta Sheikh
Mangloo, Nawab House, Part-II, Jama Masjid, Delhi-110006 ( Hereinafter
referred to as „Suit Property‟ ). He entered into an Agreement to Sell dated
18.06.2013 ( hereinafter referred to as „ATS‟ ) with the Plaintiff / Respondent
No.1 Ata Ur Rehman, in respect of the Ground Floor admeasuring 230 sq.
yards and Roof over it forming part of the Suit Property for a sale
consideration of Rs.80 Lakhs. A sum of Rs.10 Lakhs as earnest money , was
paid to the Defendants in cash at the time of signing of Agreement to Sell.
4. The Defendant No. 2 Hijab Naeem Shafi , wife of Defendant No.1
Sayed Naeem Shafi , had an active hand in finalizing the deal and had
received the earnest money . The Agreement to Sell was executed in the
Signature Not Verified
RFA 438/2025 Page 2 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
presence of witnesses Sayed Shuja Shafi and Mohd. Irfan, and was signed,
and thumb impressions of both the Defendants, was put.
5. The Defendant No.1 agreed to execute the Sale Deed in respect of the
portion as mentioned in the Agreement to Sell after receiving the balance
sale consideration of Rs.70 Lakhs, on or before 17.12.2013 . It was further
agreed that at the time of execution of Sale Deed, the actual vacant
possession of the specified portion of the Suit Property, shall be handed over
to the Plaintiff. In case the Defendants refused to deliver the possession of
the Suit Property or refused to sign the Sale Deed in favour of the Plaintiff,
the Defendants were liable to return double the amount of earnest money .
The Defendants assured the Plaintiff that the Suit Property was free from all
kinds of encumbrances and the Defendant shall be liable for any loss or
damages, if suffered or sustained by the Plaintiff.
6. The Plaintiff, on or about 15.11.2013, approached the Defendants to
accept the balance sale consideration and to execute the Sale Deed.
However, they failed to respond properly and made some excuses. The
Plaintiff, from their behaviour, concluded that Defendants never intended to
receive the balance sale consideration and execute the Sale Deed.
7. The Plaintiffs thus, sent a Legal Notice dated 18.11.2013 through his
Counsel, to the Defendants for execution of the Sale Deed. However, the
Defendants avoided receiving the Legal Notice, which was returned back
with the endorsement “ information delivered and unclaimed ”.
8. The Plaintiff asserted that he was always ready and willing to perform
his part of the Contract of the Agreement to Sell. Hence, he filed a Suit for
Specific Performance of the Agreement to Sell dated 18.06.2013, and also
sought Permanent Injunction for restraining the Defendants from
Signature Not Verified
RFA 438/2025 Page 3 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
creating Third Party Rights in the Suit Property .
9. The Defendants in their Written Statement, denied all the
averments made in the Plaint. It was claimed that the Suit was vexatious
and was without cause of action, which had been filed only to harass the
Defendants and it amounted to gross abuse of process of law. The only
intention of the Plaintiff in filing the Suit was to arm twist the Defendants
and derive undue benefit, to which they were not legally entitled. The
Defendants claimed that the Agreement to Sell was obtained by fraud and by
misrepresentation. No Agreement to Sell had ever been executed by the
Defendants, in respect of the Suit Property .
10. It was explained that Mr. Sayed Naim Shafi , Sayed Saeed Shafi, and
Mr. Sayed Saleem Shafi represented through his legal representatives i.e.,
Smt. Zeenat S. Shafi (wife), Syed Ariz Shafi (son), and Anam Ayesha Shafi
(daughter), were the co-owners of the Suit Property and were in joint
possession. Civil Suit No.413/1968 was filed inter-se the parties for
Partition, which was decreed vide Judgment dated 17.12.1968, and all three
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brothers were declared as co-owners entitled to 1/3 share each in the Suit
Property. Thereafter, Sayed Saleem Shafi died on 11.09.1993. By the rules
of Succession, the undivided share of Mr. Sayed Saleem Shafi devolved
upon his legal heirs .
11. It was claimed that Plaintiff / Respondent No.1, Sh. Ata Ur Rehman
along with Respondent No.2 Sayed Shuja Shafi , son of the Defendant,
hatched a conspiracy and cheated the Defendant. They fraudulently and by
misrepresentation, got the Agreement to Sell executed. The Defendants
denied having received any part of sale consideration in respect of the
transaction. It was alleged that the Defendants had lodged a Complaint dated
Signature Not Verified
RFA 438/2025 Page 4 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
14.10.2013 with the SHO, P.S. Jama Masjid against the Plaintiff and his
son, Respondent No. 2 Sayed Shuja Shafifor fraud, cheating and
misrepresentation and to declare that the Agreement to Sell was an outcome
of fraud and thereby, non-est and not binding.
12. It was further stated that at the time of issuance the Notice of the
present Suit, the Plaintiff was directed to deposit the balance sale
consideration within four weeks, but he failed to do so, making it
abundantly clear that he was neither ready nor willing to perform his part of
the Contract.
13. The Defendants further asserted that the Suit Property was never
partitioned by metes and bounds . There was no division of the Suit Property
in any manner and no specific portion of the joint property could be claimed
by any of the three co-owners. The three co-owners continued to reside in
the Suit Property and are in joint occupation. The Agreement to Sell
purported to a defined portion on the Ground Floor, which could not have
been the subject matter of the Agreement to Sell, as there was no defined
share of Defendant in the Suit Property.
14. It was further stated that the Plaintiff had earlier filed Suit No.
178/2013 titled as „ Praveen Naaz & Ors. v. Sayed Aziz Shafi & Ors. ‟ stating
himself to be the guardian of the Plaintiffs, namely Master Mohd. Areeb and
Master Mohd. Saim , being his children. The Plaintiff was also a Defendant
in CS (OS) No. 1798/2013 , titled as „ Sayed Ariz Shafi v. Sayed Naim Shafi ‟
wherein he had filed his Written Statement. These two litigations had not
been disclosed by the Plaintiff, in the present Suit.
15. It was further claimed that allegedly, the entire payment was made to
the Defendant in cash , but it is not proved either by the Receipt or
Signature Not Verified
RFA 438/2025 Page 5 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
acknowledgment on behalf of the Defendants. In fact, the amount of Rs.10
Lakhs was never received by the Defendants.
16. Furthermore, as per the recitals of Agreement to Sell, the sale was
only for a period of six months and, therefore, the Contract was completely
violative of Contract Act and was not enforceable . Moreover, the period
under the Agreement to Sell was to commence from 18.06.2013 and thereby
the same had lapsed and expired and, therefore, the Plaintiff was not entitled
to Specific Performance of Agreement to Sell.
17. Moreover, the Plaintiff had shown his residential address as that of
the Suit Property, which is completely erroneous as Plaintiff is not residing
in the part of theSuit Property. In fact, the said portion of the Suit Property
is lying locked and none has an access to it. The Plaintiff has been trying
hard to break open and illegally occupy the Suit Property. There is no
material to show that the Plaintiff is in possession of the Suit Property.
18. It is also asserted that the Plaintiff was never ready and willing to
abide by his part of Agreement to Sell and had no proof of having the
balance sale consideration of Rs.70 Lakhs in his possession.
19. On merits , all the averments made in the Plaint, were denied. It was,
therefore, claimed that the Suit be dismissed.
20. The Replication was filed by the Plaintiff to the Written Statement ,
wherein he reaffirmed the averments made in the Plaint and denied the
allegations made by the Defendants in the Written Statement.
21. Issues on the pleadings were framed on 12.03.2015 as under:
“(i) Whether the parties entered into a binding and
valid Agreement to Sell regarding Suit Property bearing
No.898, Nawab House, Chatta Sheikh, Mangaloo, Delhi-
110006? OPP
Signature Not Verified
RFA 438/2025 Page 6 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
(ii) If answer to the above issue is in the affirmative
whether the plaintiff has been ready and willing to
perform his part of Contract? OPP
(iii) Whether the plaintiffs have fraudulently got
executed blank papers from the defendant and misused
them for preparing the Agreement to Sell? OPD
(iv) If the answer to the above issue is in favour of
the plaintiff, whether the plaintiff is entitled to a decree of
specific performance of the Agreement? OPP
(v) Whether the defendant is only a co-owner of the
suit property? If so, its effect? OPD
(vi) Relief.”
22. The Plaintiff examined himself as PW1 , and PW2 Mohd. Irfan , PW3
Mohd. Zahid and PW4 Muzarrat Hushain, in support of his case.
23. The legal heirs of Defendants examined DW1 Syed Naved Shafi . All
the witnesses deposed in respect of their respective pleadings.
24. The learned District Judge in the impugned Judgment, observed the
execution of the Agreement to Sell dated 18.06.2013 was proved and it was
a fact, not disputed. The only defence taken by the Defendants / Appellants
was that it was an act of fraud , misrepresentation and collusion between the
Plaintiff and his own son Sayed Shuja Shafi .
25. However, on appreciation of the evidence, learned District Judge
noted that there was aside from a bald assertion that there were a collusion
and fraud, no details of any kind were disclosed and, therefore, the defence
of avoiding the Agreement to Sell on the ground of fraud, was rejected .
However, it was observed that the Agreement to Sell was specifically in
respect of Ground Floor portion of the property in question, when in fact the
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Defendants had an undivided 1/3 share in the entire property, and he could
not have possibly sold a specific part of the Suit Property i.e., the Ground
Signature Not Verified
RFA 438/2025 Page 7 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
Floor to the Plaintiff and on this ground, the Agreement to Sell was held to
be vitiated .
26. Specific performance was, declined on the grounds of the Appellant /
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Defendant merely holding an undivided 1/3 share in the unpartitioned Suit
Property, rendering the transfer of the defined ground floor and roof portion
incompetent. Also, the Plaintiff / Respondent failed to establish his readiness
and willingness qua the balance consideration of Rs. 70 Lakhs, for the
execution of the Agreement to Sell.
27. It was, therefore, concluded that the Plaintiffs were not entitled to the
Specific Performance of Agreement to Sell dated 18.06.2013. However, it
was held that though the earnest money of Rs.10 Lakhs were paid in cash,
but the payment was clearly recorded in the Agreement to Sell which had
the signatures of the Defendants. It was thus, held that the cash payment of
Rs.10 Lakhs as earnest money was made to the Defendants which they are
liable to return to the Plaintiffs, but considering the totality of
circumstances it was held that the Plaintiff was not entitled to any interest.
28. Consequently, the Suit of the Plaintiff for Specific Performance was
dismissed, but the Defendants were directed to return the amount of Rs.10
lakhs .
29. Aggrieved by the Judgment dated 25.01.2025, the Appellants have
preferred the present Appeal.
30. The grounds of challenge are that there was no legal basis to prove
the payment of earnest money, and the conclusion of the learned District
Judge was based on conjectures and presumptions. There was no credible
evidence or document to corroborate that the earnest money had in fact,
been paid to the Defendants. Furthermore, the Plaintiff had failed to show
Signature Not Verified
RFA 438/2025 Page 8 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
his creditworthiness to pay a sum of Rs.10 Lakhs at the time of execution of
the Agreement to Sell dated 18.06.2013, despite which the Trial Court has
taken a contradictory stand. From the plain reading of the Agreement to Sell
itself, it emerges that it was only suggestive of payment of earnest money in
cash. There were no Income Tax records produced to corroborate this
payment of Rs. 10 Lakhs in cash. Furthermore, Income Tax prohibits any
transaction of more than 20,000/- in cash.
31. Moreover, the Plaintiff had failed to place on record, the necessary
documents such as Bank Statements or credits in his account or loan or
credit being taken from the third party, though not limited to Financial
Institutions etc. , Despite all this, the refund of Rs.10 Lakhs has been allowed
to the Plaintiff / Respondent No.1.
32. Though, the Plaintiff had examined two witnesses to prove that Rs.5
Lakhs and Rs.2 Lakhs respectively were taken from them, but their
testimony was not believable. Moreover, the Plaintiff had admitted in his
cross-examination that he was planning to pay the Defendant No.1 the
balance amount, only after selling his property at Daryaganj , which had not
been sold till 2024. Therefore, it is evident that Plaintiff had no money or
any capacity to pay the sale consideration.
33. Reliance is placed on Jitender Kumar vs. Vijender Kumar, 2018 SCC
OnLine Del 12315, wherein it was held that the Suit for Specific
Performance and in the alternative, relief of damages, is based on the
principle that the seller is guilty of breach of Contract and not the proposed
purchaser. The Plaintiff should have had the financial capacity and should
be in a position to perform his Agreement to Sell.
34. Secondly, entitlement of damages under Section 73 of the Indian
Signature Not Verified
RFA 438/2025 Page 9 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
Contract Act, 1872 can only be if it is shown that there was a specific higher
price of the subject property being paid in the market price, on the date fixed
for specific performance. Hence, it is submitted that the impugned Judgment
is liable to be set aside.
Submissions heard and record perused.
35. The Appellant is aggrieved by the Judgment wherein he has been
directed to refund the sum of Rs.10 Lakhs that were allegedly paid by the
Plaintiff as earnest money, at the time of entering into the Agreement to
Sell.
36. The controversy in the present Appeal thus, distils to the propriety of
the aforesaid refund decree. The following issues arise for determination:
i. Whether the Agreement to Sell dated 18.06.2013 was vitiated
by fraud and misrepresentation;
ii. Whether Rs. 10,00,000/- was paid thereunder as earnest
money; and,
iii. Whether the Plaintiff / Respondent was entitled to the refund
thereof, regard being to the co-ownership, un-partitioned
status and contract stipulations?
I. Whether the Agreement to Sell dated 18.06.2013 was Vitiated by
Fraud and Misrepresentation:
37. The Agreement to Sell dated 18.06.2013 Ex. PW1/2, was executed ,
which was denied by the Defendants.
Signature Not Verified
RFA 438/2025 Page 10 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
38. The Defendant/ Appellant, in support of his assertion, examined DW1
Sh. Syed Naved Shafi , who had deposed that the Agreement to Sell in fact,
was never executed as per law and his father Sh. Sayed Naim Shafi never
intended to transfer any right in favour of the Plaintiff with respect to the
Suit Property, under any circumstances. He denied that Plaintiff had ever
offered any amount towards the alleged sale consideration of Rs.80 Lakhs
and denied that his father ever received Rs.10 Lakhs.
39. However, DW1 in his cross-examination admitted that the Agreement
to Sell dated 18.06.2013 was pertaining to the year 2013 and was not
executed in his presence, as he was in Mumbai. Therefore, his evidence is in
the realm of hearsay and therefore, inadmissible. Moreover, the line of
defence is not that the Agreement was not signed by Defendant, but that it
was vitiated by fraud, thereby admitting that the Agreement was indeed
executed.
40. The Appellant then asserted that the Agreement to Sell was sham and
was made in hurry , because the sale was claimed to be only for six months
thus, the contract was unenforceable. DW1 deposed that Md. Irfan was an
associate of Plaintiff and was his accomplice in fraud played by him, and in
fact, it was never executed. He further asserted that the Plaintiff along with
his younger brother, had hatched the conspiracy to cheat his father, who
never received any money.
41. From the evidence of DW-1 , it emerges that he has not denied the
signatures of his father on the Agreement to Sell, but has challenged its
validity . The first reason for so claiming is that the Agreement was
executed in haste, and that the sale was only for six months and was not
enforceable.
Signature Not Verified
RFA 438/2025 Page 11 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
42. However, this argument is built on a hyper technical ground, since the
holistic reading of the Agreement shows that six months were stipulated for
execution of Sale Deed and it did not define the period of validity of Sale
Deed, as has been projected. Moreover, there is no explanation of the
circumstances to define this alleged haste or the circumstances for execution
of Sale Deed within six months. In fact, this interpretation is antithetical to
the concept of sale.
43. The next main ground is that the Agreement was a result of fraud and
misrepresentation, by his own son, Shuja Shafi who had colluded with the
Plaintiff, and the Agreement to Sell was fraudulent. Aside from bald
assertions of there being fraud and misrepresentation, not an iota of evidence
was led to explain what was the fraud or the misrepresentation was
committed by the Plaintiff.
44. The reason for alleging this defence, is evident as faced with a
situation wherein his own son Shuja Shafi was a witness to this Agreement
to Sell, there was no other escape from the Agreement, except to
conveniently take a plea of fraud and collusion by his own son with the
Plaintiff, which is neither supported by the circumstances defining the fraud
nor by any evidence whatsoever. In fact, the son being a witness, is a
testimony to the genuineness of the Agreement.
45. The learned District Judge, therefore, rightly concluded that the
evidence of the Plaintiffs coupled with the evidence of the Defendant, proved
that the Agreement to Sell Ex. PW1/2 was duly executed by the Appellant
in favour of the Plaintiffs and no fraud or misrepresentation on the part of
Plaintiffs could be proved .
46. The Agreement to Sell dated 18.06.2013 stands duly proved as a
Signature Not Verified
RFA 438/2025 Page 12 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
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genuine and binding contract, untainted by fraud, misrepresentation, or
collusion.
II. Whether Rs.10,00,000/- were Paid under the Agreement to Sell:
47. The next aspect for consideration is whether Rs. 10 Lakhs was paid
thereunder as earnest money , as contended by the Respondent and
acknowledged therein. This is assailed by the Appellants on grounds of non-
payment, source of money not explained and the validity of cash transaction.
48. The Appellant had contended that, in fact, no such payment of
Rs.10,00,000/- was ever received by the Defendant No. 2, wife of the
Appellant No.1.
49. In the said Agreement to Sell, it was specifically mentioned that the
consideration of Rs.10 Lakhs in cash, had been received by the Appellant
from the Plaintiff at the time of signing of Agreement to Sell, as an advance
/ earnest money
50. The learned District Judge rightly observed that Defendant No.1 /
Appellant No.1 was not an illiterate person and while signing the document,
was well aware of the contents of the Agreement to Sell . Moreover, while
denying having received the earnest money, the original Defendant failed to
step into the witness box; he being the best witness to prove that he had not
received any amount. Despite he being alive, only his son DW1 Syed Naved
Shafi had stepped into the witness box, who admittedly was not present at
the time of execution of Agreement to Sell and was in Mumbai .
51. The testimony of DW1 denying of receipt of Rs. 10 Lakhs was,
therefore, nothing but hearsay. The DW1 Syed Naved Shafi, who was the
Signature Not Verified
RFA 438/2025 Page 13 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
best witness, despite being available, did not step into the witness box
thereby leading to an adverse inference of his not stepping into the witness
box .
52. The Appellant also challenged the cash payment of Rs. 10,00,000/-,
on the ground that the source of income was not explained by the Plaintiff .
53. To explain the source of payment, the Plaintiff/Respondent had
examined PW3 Md. Zahid , who was running the show in front of the shop of
the Plaintiff, who had deposed that he was running a friendly Committee,
from where he had the money and paid Rs.5 Lakhs to the Plaintiff, on
18.06.2013.
54. The other witness examined by the Plaintiff was PW4 Muzarrat
Hushain , who had deposed that he had given a loan of Rs.2 Lakhs to the
Plaintiff while he admitted that he was earning about Rs.5,000/- per day
from selling fast food, i.e., sabji kachori, etc., since the last 25-30 years.
55. The learned District Judge observed that once a person is working for
such a long time, for him to have Rs.2 Lakhs in savings cannot be doubted
and, therefore, his testimony that he had given a loan of Rs.2 Lakhs, could
not be disbelieved. More than the testimony of PW3 and PW4 about having
given the money to the Plaintiff to pay to the Appellant No.1 as earnest
money, what was of significance was that the Agreement to Sell was proved
to be signed by the Appellant No.1, wherein the payment was expressly
recorded and the Receipt of the same, was admitted and acknowledged.
56. The Appellant also tried to question the payment of Rs.10,00,000/- by
asserting that the cash transactions of such huge amounts, is not permissible
under law.
Signature Not Verified
RFA 438/2025 Page 14 of 23
Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
57. Much has been contended by claiming that no Income-Tax Returns
have been proved to establish this payment of Rs.10,00,000/-. The
Respondent may not have produced the Income-Tax Returns, but as already
discussed above, he had produced cogent evidence in proof of having given
Rs.10,00,000/- to the Appellant. Mere non-filing of Income-Tax Returns,
cannot be a ground to discard the positive evidence, which has been led by
the Respondent by examining the witnesses to prove that he had taken the
money from them to pay Rs.10,00,000/-. In any case, non-filing of Income-
Tax Returns may entail penalty under the Income-Tax Returns Act but per
se cannot be a ground to disbelieve the payment of Rs.10,00,000/-.
58. The learned District Judge thus, rightly concluded that Rs.10 Lakhs
was received by the Appellant at the time of execution of Agreement to Sell,
through the Appellant‟s signatures on the Agreement acknowledging
receipt, supplemented by the witness testimony, and adverse inference
against non-examination of the original defendant.
III. Whether the Respondent / Plaintiff was Entitled to Refund of
Rs.10,00,000/-:
59. The next question, which arises is whether the Appellants are liable to
refund of Rs.10 lakhs, which is the alternative prayer made by Plaintiff /
Respondent Ata Ur Rehman in his Plaint.
60. In order to ascertain this aspect, it is pertinent to refer the Agreement
to Sell Ex.PW1/2, which was proved to have been executed between the
parties. In the said Agreement to Sell, it was noted that the total sale
consideration under the Agreement to Sell was Rs. 80 Lakhs, out of which,
Signature Not Verified
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Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
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Rs.10 Lakhs were paid in cash, while the balance Rs. 70 Lakhs were agreed
to be paid, on or before 17.12.2013.
61. To determine whether the Respondents have been rightly allowed the
refund of the earnest money in the sum of Rs. 10 Lakhs , it is pertinent to
note that there is a distinction between the term Advance / Earnest money
though, in the present Agreement to Sell they have been used conjointly.
62. The term “ Advance Money” means money forming part of the
consideration of an Agreement paid before the same, becomes fully payable.
On the other hand, “ Earnest Money” means the sum of money given for the
purpose of binding a contract which is forfeited in case the contract does not
materialise.
63. In the case of Videocon Properties Ltd. v. Bhalchandra Laboratories,
(2004) 3 SCC 711, it was observed that it is not the description by words
used in the agreement only that would be determinative of the character of
the sum, but really the intention of parties and surrounding circumstances
as well, that have to be looked into and what may be called an advance may
really be a deposit or earnest money and vice-versa. The earnest money
serves two purposes of being part-payment of the purchase money and also
security for the performance of the contract by the party concerned.
64. This concept was explained in the case of Satish Batra v. Sudhir
Rawal , (2013) 1 SCC 345, wherein the fundamental principles as narrated in
Videocon Properties Ltd. (supra) were reiterated. It was also held that the
part-payment of purchase price cannot be forfeited, unless it is a guarantee
for the due performance of the contract. In other words, if the payment is
made only towards part-payment of consideration and not intended as
earnest money, then the forfeiture clause shall not apply. This principle was
Signature Not Verified
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Digitally Signed By:ANIL
KUMAR BHATT
Signing Date:12.05.2026
16:26:40
re-affirmed and reconfirmed in the case of DDA v. Grihsthapana Coop.
Group Housing Society Ltd., 1995 Supp (1) SCC 751.
65. Now, coming to the Agreement to Sell, its Clause 4, stated as under :
4. That if the first party will refuse to deliver the possession of
the said property unto the second party and refuse to signing
/registration sale deed and all other necessary documents of
the said property in favor of the second party, then the first
party will pay the double amount of the said advance/earnest
money to the second party similarly if the second party will fail
to pay the remaining balance amount of the said property to the
first party within the stipulated period, then advance earnest
money shall stand forfeited.
66. Applying the aforesaid principles, it is evident from Clause 4 of the
Agreement to Sell, that the parties themselves used the term advance and
earnest in the alternative. From the comprehensive reading of Agreement to
Sell and also considering the amount that was paid, it is evident that in fact,
it was an advance money and not an earnest money.
67. The next question which arises for consideration is whether the
Appellant / Seller failed to perform his part of the Agreement and
consequently, became liable for return of earnest money.
68. In the present case, admittedly, Defendant No. 1 entered into the
Agreement to Sell to sell in regard to the ground floor of the property in
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which he had 1/3 undivided share.
Signature Not Verified
RFA 438/2025 Page 17 of 23
Digitally Signed By:ANIL
KUMAR BHATT
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69. The question of law which arises is firstly, whether he could have
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entered into Agreement to Sell in respect of his undivided 1/3 share in the
property in question; and secondly , whether he could define the undivided
share to be sold, as the ground floor and roof of the property in question.
These questions are pertinent to ascertain the question of refund of the
money, received under the Agreement to Sell.
70. In this regard, reference is made to Section 44 of the Transfer of
Property Act , 1872 , ( hereinafter referred to as „TPA‟ ) which reads as
follows:
44. Transfer by one co-owner .—
Where one of two or more co-owners of immoveable property
legally competent in that behalf transfers his share of such
property or any interest therein, the transferee acquires as to
such share or interest , and so far as is necessary to give, effect
to the transfer, the transferor‟s right to joint possession or
other common or part enjoyment of the property, and to
enforce a partition of the same, but subject to the conditions
and liabilities affecting at the date of the transfer, the share or
interest so transferred.
Where the transferee of a share of a dwelling-house belonging
to an undivided family is not a member of the family, nothing in
this section shall be deemed to entitle him to joint possession or
other common or part enjoyment of the house.
71. Section 44 TPA explicitly recognizes the right of a co-sharer to sell
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his undivided share in the property and the purchaser enters into his shoes
and may seek identification of his individual share, through a partition.
72. This aspect finds its endorsement in the case of Kartar Singh vs.
Harjinder Singh & Ors., (1990) 3 SCC 517, wherein the dispute arose from
a written agreement for sale concerning a jointly owned property. It was
held that the Agreement could be enforced against the executing co-owner
to the extent of his own share.
73. Similarly, in Maharaja Singh & Ors. vs. Karan Singh (D) thr. L.Rs. &
Ors., AIR 2024 SC 3328, arising out of a registered Agreement for Sale and
a Suit for Specific Performance, theApex Court restricted the Decree to the
vendor‟s one-half undivided share, in the Suit Property.
74. The legal position is thus, well-settled that where property is held
jointly and remains unpartitioned, each co-owner has a legal right in the
undivided interest in the whole. He is therefore, entitled to sell his
undivided share to third party, and such Agreement is valid to the
extent of his undivided share in the Property.
75. The second and more problematic aspect is whether despite the
property being joint, the co-owner can sell any defined portion in the jointly
held property.
76. In M.V.S. Manikayala Rao v. M. Narasimhaswami and Ors., [1966] 1
SCR 628, the Apex Court stated as follows:
“Now, it is well settled that the purchaser of a coparcener's
undivided interest in the joint family property, is not
entitled to possession of what he had purchased . His only
right is to sue for partition of the property and ask forallotment
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to him of that which, on partition , might be found to fall to the
shareof the coparcener whose share he had purchased.”
77. In Sidheshwar Mukherjee v. Bhubneshwar Prasad Narain Singh and
Ors ., MANU/SC/0089/1953: [1954]1SCR177, wherein this Court held as
under:
“All that (vendee) purchased at the execution sale, was the
undivided interest ofcoparcener in the joint property . He did not
acquire title to any defined share inthe property and was not entitled
to joint possession from the date of hispurchase. He could work-out
his rights only by a suit for partition and hisright to possession would
date from the period when a specificallotment was made in his
favour.”
78. The Supreme Court in the case of Sk. Golam Lalchand vs. Nandu Lal
Shaw & Ors., AIR 2024 SC 4193, held that the Sale Deed, in accordance
with Section 44 TPA , may be a valid document to the extent of the
respective share in the property.
79. Further reference is made to Ramdas vs. Sitabai & Ors., AIR 2009 SC
2735, MANU/SC/0910/2009, wherein the Hon‟ble Supreme Court held as
under:
“ 15. Without there being any physical formal partition of an
undivided landed property, a co-sharer cannot put a vendee in
possession although such a co-sharer may have a right to
transfer his undivided share.
...
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17. In view of the aforesaid position there could be no dispute
with regard to the fact that an undivided share of co-sharer
may be a subject matter of sale, but possession cannot be
handed over to the vendee, unless the property is partitioned by
metes and bounds amicably and through mutual settlement or
by a decree of the Court.”
80. The aforesaid Judgements have well explained that an Agreement to
Sell relating to an undivided share, is not per se, incapable of specific
enforcement, and a person having an undivided share in the property can sell
the same to the buyer. Though, it comes with the qualification that he cannot
define the portion of the property in the Agreement to Sell, since all the co-
owners are the joint owners of the property and none of the co-owners can
claim his right, title and interest in any specific portion of the property till
the partition is affected.
81. In this case, admittedly, the partition had yet not taken place and thus,
the Appellant could not have specifically entered into the Agreement to Sell
in respect of the Ground Floor and Roof. The Agreement to Sell, in the
present case, could at best have been specifically enforced only to the extent
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of the Defendant‟s undivided 1/3 share in the Suit Property, and the
purported transfer of the ground floor and roof was unenforceable in its
terms and required partition. The Defendant, possessing only an undivided
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1/3 share in the unpartitioned property, lacked the competency to transfer
exclusive title or possession of that specific portion.
82. Consequently, while the Agreement to Sell is not void entirely, the
Decree for Specific Performance can only be granted in respect of the
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Defendant‟s undivided 1/3 share, and not for the ground floor and roof as
a distinct physical entity.
83. In the circumstances, when the Respondent had bargained specifically
for Ground Floor and the Roof, which he cannot get, as the undivided share
was not partitioned, the relief for Specific Performance of Agreement to Sell
was rightly declined, but alternatively, Respondent was granted the refund
of his money paid under the Agreement to sell, by the learned District
Judge.
84. It would also be relevant to observe that the learned District Judge
concluded from the evidence, that the Plaintiff had failed to produce any
evidence to show his financial capacity to honour the Agreement . He was
even unable to deposit the balance sale consideration of Rs. 70 Lakhs in
compliance of the directions of the learned District Court at the time of
issuing of summons of the Suit. The learned District Judge had
comprehensively considered the evidence and found that the Plaintiff was
unable to produce any cogent evidence or the ideas or any other documents,
to prove that he had the requisite funds of Rs.70 Lakhs, to honour the
Agreement to Sell and thus, was unable to prove that he was ready and
willing to perform his part of the Agreement. However, the question of
readiness and willingness would have arisen, only if specific performance of
the Agreement to Sell dated 18.06.2013, was allowed .
85. Thus, considering the aforesaid circumstances, it can be easily
concluded that the Agreement to Sell could not have fructified into a Sale
Deed for a defined portion since no partition had taken place . Therefore, it
is held that the Appellants were liable to return the money taken by them
under the Agreement to Sell.
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Conclusion:
86. The Suit of the Plaintiff / Respondent for Recovery of Rs. 10 Lakhs
has, therefore, been rightly decreed in favour of the Respondent .
87. There is no merit in the present Appeal, which is hereby dismissed .
Pending Applications, if any, also stands disposed of.
(NEENA BANSAL KRISHNA)
JUDGE
MAY 7, 2026
va/n
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KUMAR BHATT
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