Demand of additional consideration after execution of Sale Deed

Cancellation of sale due to non utilization:

In the first instance, it needs to be emphasised that there is no such condition of completion of construction within a period of two years in the sale deed. Such a condition was only in the allotment letter. However, after the said allotment, the appellant- Corporation not only received entire consideration but executed the sale deeds as well. In the sale deeds no such condition was stipulated. Therefore, the High Court is right in holding that after the sale of the property by the appellant-Corporation to the respondents, whereby the respondents acquired absolute marketable title to the property, the appellant-Corporation had no right to insist on the conditions mentioned in the allotment letter, which cease to have any effect after the execution of the sale deed.

Rights and duties of buyers and sellers:

Section 55 of the Transfer of Property Act deals with rights and liabilities of buyer and seller. As per this provision, when the buyer discharges obligations and seller passes/conveys the ownership of the property, the contract is concluded. Thereafter, the liabilities, obligations and rights, if any, between the buyer and seller would be governed by other provisions of the Contract Act and the Specific Relief Act, on the execution of the sale deed. The seller cannot unilaterally cancel the conveyance or sale.

Section 32 of the Transfer of Property Act provides is that “in order that a condition that an interest shall cease to exist may be valid, it is necessary, that the event to which it relates be one which could legally constitute the condition of the creation of an interest”. If the condition is invalid, it cannot be set up as a condition precedent for crystallization of the interest created. The condition that the industrial unit shall be established within a specified period failing which the interest shall cease, is a valid condition.

However, in the instant case, there was no such stipulation in the agreement to sell or the sale deed. It was in the allotment letter. On the contrary, insofar as clause 7 of the sale deeds executed is concerned, the only condition imposed is that the purchaser shall use the land for the purpose of putting up a factory or factories duly permitted by the competent authority and for no other purpose. This makes all the difference.

Hence demand of 50% of market value due to delay in commencement of construction, held to be rightly quashed.

[Source: APIIC Ltd. vs. S.N. Ashok Kumar decided by SC on April 10, 2018]
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