Can a Seller Keep Token Money and Refuse to Sell?

Sughar Singh entered into a written agreement on October 10, 1976 to buy land in Mathura for Rs.56,000. He paid Rs.25,000 at the time of execution. The agreement required the registered sale deed to be executed within two years. The vendor was his father-in-law, which made the later breach especially personal.

The vendor twice asked for more time. Sughar Singh paid Rs.8,000 on September 30, 1978 and Rs.7,000 on September 29, 1981. By the last extension, Rs.40,000 of the Rs.56,000 price had been paid. The vendor had agreed in writing that the remaining Rs.16,000 would be paid when the sale deed was executed. Instead, on June 23, 1984, he executed a sale deed in favour of four later purchasers.

The trial court found that the original agreement existed, that both extensions were proved and that the four later purchasers knew about Sughar Singh's agreement. It also doubted whether they had paid genuine consideration. On February 7, 1987, it directed the vendor to execute the sale deed after obtaining an income tax certificate from the Income Tax Department and on receipt of the Rs.16,000 balance. It also directed the four later purchasers to be parties to that sale deed. The case then passed through decades of appeals, culminating in the Allahabad High Court setting aside the decree on September 9, 2010.

The High Court reversed on two grounds: that the plaint lacked the specific averments required by Section 16(c), and that specific performance was discretionary under Section 20 rather than automatic. The first ground included complaints that the plaint did not use the exact statutory formula and did not expressly say the vendor was told to attend the Sub-Registrar. The later purchasers separately argued that their years of possession should defeat the suit.

Section 16(c) of the Specific Relief Act requires a buyer suing for specific performance to allege that he has performed, or has always been ready and willing to perform, his part of the contract. The High Court treated that requirement as a demand for particular words, relying on the wording of Forms 47 and 48 in the Code of Civil Procedure. It also relied on the word "still" and said that a general plea of readiness was not enough.

The judgment referred to Syed Dastagir v. T.R. Gopalakrishna Setty for the construction of this requirement. The pleading must be read as a whole. Section 16(c) requires substance, not one mechanical phrase. Where a plaint and evidence show repeated payment, written extensions obtained at the vendor's request and an express promise to pay the balance at registration, readiness and willingness have been pleaded in spirit.

The judgment also relied on C.S. Venkatesh v. A.S.C. Murthy for deciding readiness and willingness from the buyer's conduct before and after the suit. That authority distinguishes between producing ready cash and proving that the buyer has the means to generate the unpaid consideration.

The High Court also interfered with concurrent findings of fact recorded by the trial court and the first appellate court. Under Section 100 of the Code of Civil Procedure, a second appeal can ordinarily interfere only when those findings are perverse or contrary to the evidence. The Supreme Court found that they were neither. Finally, the High Court treated Section 20 as a ground for refusing relief, although no issue on Section 20 had been framed by any court below. The Supreme Court cautioned that the discretion must be exercised soundly, reasonably and judiciously, and noted that the later insertion of Section 10(a) can be a guide to that discretion while leaving open whether Section 10(a) applies retrospectively or to pending proceedings.

The Court restored the 1987 decree and ordered the seller’s legal representatives and the four later purchasers to execute the sale deed within four weeks and hand over vacant possession. Its reasoning is now central to disputes involving token money, part payment and refusal to register.

Two principles flow from that holding:

• A seller cannot exploit technical pleading defects when the plaint, documents and payment history together establish that the buyer was ready and willing to complete the transaction.
• Withholding specific performance from a ready and willing buyer would give a premium to the seller's dishonest conduct, particularly where the later purchasers knew of the earlier agreement, their consideration was doubtful and long-drawn litigation deprived the buyer of possession.

These token advance rules are not a receipt test. They turn on a proved agreement, a credible payment trail and the buyer's continuing ability and willingness to pay the balance. For the validity of a registered sale agreement and when it gets expired, the Court's answer is fact-specific: the agreement's own deadline and any proved extension control.

• Gather the complete written trail first. Preserve the original agreement, every extension document and proof of each payment. In Sughar Singh, the payments of Rs.25,000, Rs.8,000 and Rs.7,000, plus the written undertaking to accept Rs.16,000 at registration, were decisive.
• Send a written demand before suing. Ask the seller to attend the Sub-Registrar on a fixed date, execute the sale deed and deliver possession. Prove that the demand was communicated, as Sughar Singh did through his advocate.
• File a civil suit for specific performance in the competent civil court where the property is situated. If the original seller has died, join his legal representatives. If a later sale deed has been executed, join those purchasers as defendants and lead evidence showing their knowledge or defective consideration.
• Avoid the key mistake from this judgment. Do not assume that a signed agreement and a token receipt are enough, or that pleading is purely a technical exercise. Plead readiness and willingness in substance, prove your means to pay the balance and create a dated paper trail from demand through litigation.