{"id":354466,"date":"2025-07-24T18:00:55","date_gmt":"2025-07-24T12:30:55","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=354466"},"modified":"2025-07-25T17:13:50","modified_gmt":"2025-07-25T11:43:50","slug":"del-hc-monthly-rent-payment-not-sale-consideration","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/24\/del-hc-monthly-rent-payment-not-sale-consideration\/","title":{"rendered":"Monthly rent payment cannot be accepted as sale consideration, without proper justification: Delhi High Court"},"content":{"rendered":"
\n

Delhi High Court:<\/span> While deciding a plaint for declaration of joint title\/ownership for the suit property and permanent injunction against the defendants from asserting any rights in the suit property, from interfering with the peaceful possession of the plaintiffs, A Single Judge Bench of Manmeet Pritam Singh Arora, J.*<\/span>, dismissed the plaint under Order 7 Rule 11 (a) and (d)<\/a> of Civil Procedure Code, 1908<\/a> (\u2018CPC\u2019) for being without cause of action and barred by limitation.<\/p>\n

The Court stated that plaintiffs\u2019 submission that the payment of monthly rent of Rs. 22,000 under the registered lease deed was allegedly towards instalment of sale consideration was again a plea impermissible and inadmissible in law. The plaint failed to explain the justification for paying sale consideration camouflaged as rent. The Court presumed that this would have also been done to avoid tax liability. This modus of payment of sale consideration is not permissible in law and, therefore, on a demurer could not be accepted as legal proof of payment of sale consideration.<\/p>\n

Background:<\/h3>\n

In the present case, the plaintiffs and the defendants were family members, being descendants of common ancestor, who had five sons and four daughters. One Jinender was Defendant 1\u2019s husband and father of Defendants 2 and 3. Whereas, one Vinod was Plaintiff 2\u2019s husband and father of Plaintiffs 3 to 5.<\/p>\n

As per the averments made in the plaint, the suit property was allotted to one Jinender by the Delhi Development Authority in 1974, with possession handed over and a perpetual lease deed executed in his favour in 1979. Jinender took a loan from a Bank, which was repaid by his relatives, Vinod and Ajay, under an oral agreement that they would invest in and acquire the property.<\/p>\n

In 1982, Jinender purportedly sold the property to Vinod and Ajay through unregistered customary documents. Disputes arose when the remaining payment wasn\u2019t made, leading to a fresh valuation in 1987 at Rs. 14,00,000\/-. After Vinod\u2019s death in 1987, a partnership firm, VK Jain & Associates, was formed with Ajay and others, which agreed to pay Rs. 13,20,000\/- through monthly payments of Rs. 22,000\/- for five years under a registered Lease Deed, which was considered part of the sale price, not rent.<\/p>\n

A total of Rs. 13,62,000\/- was claimed to have been paid, and a No-Objection Certificate was issued by Jinender in 1997. After his death, Defendants 1 to 3 (his successors) issued a legal notice in 2023 demanding possession and arrears of rent and subsequently mutated their names in revenue records based on the 1989 Lease Deed. The plaintiffs then asserted their ownership and filed the present suit, while defendants filed a separate suit seeking possession and arrears.<\/p>\n

Case Analysis and Decision<\/h3>\n

The Court, after hearing both sides and reviewing the plaint, found that the plaintiffs primarily sought a declaration of title over the suit property based on unregistered Agreement to Sell (ATS), Special Power of Attorney, Affidavit, and Will, and a registered receipt (\u2018customary documents\u2019). These documents were only available as photocopies, with the originals stated to be lost. Though the plaintiffs claimed to be in possession, they acknowledged a registered lease deed dated 21-3-1989 executed by the original owner, Jinender, permitting the said occupation. However, the Court noted contradictions in the plaint, including the discrepancy between the ATS amount and the actual consideration claimed. The plaint was silent with respect to the non-disclosure of agreed consideration in 1982 ATS. The Court presumed that the absence of a reason for not disclosing the higher amount in the ATS, and the lack of explanation for payment of sale consideration disguised as rent was likely to evade taxes. This supression made the 1982 ATS illegal , and was against the public policy as per, Section 23<\/a> of the Contract Act, 1872<\/a>.<\/p>\n

The Court stated that the plaintiffs\u2019 submission that the payment of monthly rent of Rs. 22,000\/- under the registered lease deed was allegedly towards instalment of sale consideration was again a plea impermissible and inadmissible in law. The plaint failed to explain the justification for paying sale consideration camouflaged as rent. Presumably, this would have also been done to avoid tax liability. This modus of payment of sale consideration is not permissible in law and, therefore, on a demurer could not be accepted as legal proof of payment of sale consideration.<\/p>\n

The Court stated that the customary sale documents relied on by the plaintiffs did not entitle them to seek a declaratory title in law, as such customary documents do not create any title in favour of the proposed Vendees in law. The Court referred to Shakil Ahmed v. Syed Akhlaq Hussain<\/span>, (2023) 20 SCC 655<\/a>, wherein it was reiterated that no right\/title\/interest in an immovable property could be created or transferred in favour of a proposed buyer without a registered document as contemplated in Section 54<\/a> of the Transfer of Property Act, 1882<\/a> (\u2018TP Act\u2019).<\/p>\n

Referring to several judicial pronouncements, the Court stated that to acquire title, the plaintiff, who holds the ATS must seek specific performance against the defendant seeking execution of a sale deed as contemplated under Section 54<\/a> of the TP Act<\/a>, in accordance with law. The plaintiff could not overcome this requirement of law by seeking a relief of declaration.<\/p>\n

The Court stated that the plaintiffs had made no averment whatsoever, averring about any instance which led them to believe that they might get dispossessed (without due process) at the behest of the defendants. Additionally, the plaintiffs have no ownership rights in the suit property based on the 1982 ATS and the customary documents. Additionally, the Court observed that the suit was filed only after the defendants filed an application under Order 7 Rule 6<\/a> CPC<\/a>, suggesting the plaintiffs\u2019 intent was to obstruct those proceedings, rendering the present suit not bona fide<\/span>.<\/p>\n

Thus, the Court rejected the plaint under Order 7 Rule 11(a) and (d)<\/a> CPC<\/a> for lack of cause of action and being barred by limitation.<\/p>\n

[Amit Jain v. Anila Jain, 2025 SCC OnLine Del 4720<\/a>, decided on 4-7-2025<\/span>]<\/p>\n

*Judgement authored by- Justice Manmeet Pritam Singh Arora<\/span><\/strong><\/p>\n

\n

Advocates who appeared in this case:<\/p>\n

For the Plaintiffs:<\/span> Kunal Tandon, Sr. Advocate with Amandeep Singh, Natasha and Pawan Kant Singh, Advocates.<\/p>\n

For the Defendants:<\/span> O. P. Aggarwal, Advocates<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Court presumed that the absence of a reason for not disclosing the higher amount in the Agreement to Sell (‘ATS’), and the lack of explanation for payment of sale consideration disguised as rent is likely to evade taxes. This suppression made the 1982 ATS illegal, and against the public policy as per, Section 23 of the Contract Act, 1872.<\/p>\n","protected":false},"author":67011,"featured_media":354475,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[50100,38393,2543,68839,85918,14201,85919,20341],"class_list":["post-354466","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-contract-act-1872","tag-declaration-of-title","tag-Delhi_High_Court","tag-justice-manmeet-pritam-singh-arora","tag-monthly-rent-payment","tag-permanent-injunction","tag-rent-payment-not-sale-consideration","tag-sale-consideration"],"yoast_head":"\nMonthly rent payment not sale consideration: Del HC|SCC Times<\/title>\n<meta name=\"description\" content=\"Delhi High Court stated that monthly rent payment 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