Seller's Failure to Convert Leasehold Property No Bar to Buyer's Specific Performance Suit: Allahabad High Court
The Allahabad High Court upheld a specific performance decree against the daughters of a deceased vendor who failed in his lifetime to convert a Kanpur plot from leasehold to freehold before selling it to a hospital.
Justice Sandeep Jain, sitting singly at the Allahabad High Court, dismissed a first appeal filed under Section 96 of the Code of Civil Procedure by the daughters and legal heirs of the late Dharam Prakash Nangia, affirming a decree of specific performance passed on 21 March 2025 by the Civil Judge (Senior Division)/FTC, Kanpur Nagar in favour of Shivani Hospital Private Ltd. The hospital had agreed in 2012 to purchase a 1,352-square-yard residential plot in Sarvodaya Nagar, Kakadev, Kanpur for ₹5.25 crores. The seller died in 2015 without ever obtaining the freehold permission that was a condition precedent to the sale deed. The court found that the default lay entirely with the vendor's side, that the hospital had always remained ready and willing to pay the balance consideration, and that the defendants were bound by the agreement their father had executed.
The Agreement and the Dispute Before the Court
On 22 October 2012, Dharam Prakash Nangia executed a registered agreement to sell plot no. A-10, Block C, Sarvodaya Nagar, Kakadev, Kanpur Nagar in favour of Shivani Hospital Private Ltd. The agreement was registered on 7 November 2012 in the office of the Sub-Registrar, Zone 4, Kanpur Nagar. The total consideration was ₹5.25 crores. An earnest amount of ₹2 crores was paid at the time of execution through cheques. The remaining ₹3.25 crores was to be paid at the time of registration of the sale deed.
The agreement placed a specific obligation on Nangia: he was to get the leasehold property converted into freehold at his own expense, communicate that fact in writing to the hospital, and then execute the sale deed—all by December 2014. If he failed, the buyer was contractually entitled to approach the court for execution, and the legal heirs were expressly barred from raising objections regarding consideration.
Nangia never fulfilled that obligation. He moved an application before the Kanpur Development Authority (KDA) for freehold conversion only on 21 August 2014—barely four months before the December 2014 deadline. The KDA file was forwarded to the competent authority on 30 May 2015, but permission was not granted before Nangia died on 4 July 2015.
After Nangia's death, his daughters—Mimansa Nangia (defendant no. 1), Shailja Nangia (defendant no. 2, represented through her guardian) and Shahnaz Faisal @ Shivani Nangia @ Shibbu (defendant no. 3, who had converted to Islam and married)—became his legal heirs. Rather than proceeding with the sale, defendants no. 1 and 2 sent a legal notice on 28 August 2015 seeking cancellation of the agreement and return of the ₹2 crores earnest money. The hospital replied, insisting on the sale deed, and issued repeated notices calling the defendants to the Sub-Registrar's office on 3 November 2015, 5 December 2015 and 5 January 2016. The defendants failed to appear on any of those dates. The hospital's director, Dr Shivakant Mishra, along with advocate Ramakant Mishra (PW-2), attended on each occasion and obtained a certificate of attendance from the Sub-Registrar's office. The hospital then filed O.S. No. 50 of 2017 before the Civil Judge (Senior Division), Kanpur Nagar, and the trial court decreed the suit on 21 March 2025.
Issues Framed and the Trial Court's Findings
The trial court framed eight issues, covering execution of the agreement, the plaintiff's readiness and willingness, limitation, court fees, valuation of the suit, admissibility of PW-2's evidence, and Nangia's entitlement to execute the agreement at all.
On limitation, the trial court held that the agreement fixed December 2014 as the deadline for execution, so the suit filed on 17 January 2017 was within three years under Article 54 of the Limitation Act 1963. The court discarded the notarised time-extension document dated 21 December 2014 (paper no. 130-C) because the public notary Pankaj Agarwal (DW-6) denied signing it or affixing his seal on it, and because no attesting witness was examined. However, the trial court expressly held that the plaintiff's case did not depend on that document—the suit was within limitation even without it.
On readiness and willingness, the trial court found the hospital's financial capacity proved through its bank statements and balance sheets, and concluded that the defendants were the defaulting party. It decreed specific performance, directing the hospital to pay the balance ₹2.84 crores within two months.
The defendants filed First Appeal No. 485 of 2025.
Arguments in the First Appeal
Senior counsel for the appellant-defendants, Shri Rahul Sahai, pressed several grounds. He argued that Section 16(c) of the Specific Relief Act 1963 imposes a continuous obligation on the plaintiff to aver and prove readiness and willingness from the date of the agreement through to the decree. Readiness, he submitted, means actual financial capacity, not merely a general assertion; willingness is judged from conduct throughout. He contended that the hospital's director went to the Sub-Registrar's office only with a cheque book and no cash or demand draft, which the Supreme Court in Basant Ram (D) thr Lr's and ors. v. Sukhbir Singh and ors. (CA 4667 of 2025) had held insufficient. He further argued that a cheque for ₹38 lakhs had been dishonoured due to insufficient funds, demonstrating financial incapacity.
Appellants also contended that paper no. 130-C was a forged document, and that a plaintiff who approaches the court with unclean hands and fraudulent documents cannot obtain specific performance—relying on S.P. Chengalvaraya Naidu (dead) by Lrs. v. Jagannath (dead) by Lrs. and others AIR 1994 SC 853. They argued undue influence arose from the doctor-patient relationship between Dr Shivakant Mishra and Nangia. They also relied on Section 32A of the Registration Act 1908, asserting that the authorised representative of the plaintiff company was mandatorily required to be present at the Sub-Registrar's office on the notified dates.
Senior counsel for the respondent-hospital, Shri Manish Goyal, countered that the obligation to obtain freehold permission rested entirely on the seller, who never fulfilled it in his lifetime. Neither Nangia nor the defendants ever communicated freehold conversion to the hospital. The hospital always remained ready. On finances, counsel noted the hospital had deposited ₹2.84 crores with the trial court on 29 May 2025. On Section 32A, he submitted that the UP amendment to the Registration Act does not replicate the Central provision making the buyer's presence mandatory, and that the Supreme Court in Aloka Bose v. Parmatma Devi and others (2009) 2 SCC 582 and Rattan Singh and others v. Nirmal Gill and others (2021) 15 SCC had confirmed that the vendee's signature on a sale deed is not mandatory.
How the Court Reasoned
Justice Sandeep Jain identified six questions for determination and addressed each in turn.
Execution of the agreement. Both DW-1 Mimansa Nangia and DW-2 Shahnaz Faisal admitted in their examination-in-chief that their father had executed the registered agreement to sell and received earnest money through cheques. DW-2 additionally admitted that after her father's death, Mimansa had transferred the ₹2 crores to her own bank accounts. The court held that execution was established beyond doubt.
Seller's default. The court recorded a firm finding that the freehold conversion was a condition precedent: the seller had to obtain permission from the KDA, communicate it in writing, and only then could the sale deed be executed. Nangia moved the KDA only on 21 August 2014, well within the contractual window but far too late to complete by December 2014. The KDA file was forwarded on 30 May 2015. Permission was never granted before his death on 4 July 2015. DW-1 admitted in cross-examination that she had no knowledge whether any amount had even been deposited with the KDA, and could not say whether conversion had been approved by December 2014. The court held that neither Nangia nor his heirs ever communicated freehold conversion to the hospital. That silence, compounded by the daughters' 28 August 2015 notice seeking to cancel the agreement—filed just before they applied for mutation of the property at the KDA on 11 September 2015—demonstrated the defendants' bad faith.
Financial capacity of the plaintiff. The court examined the hospital's balance sheets for financial years 2012-13 through 2015-16. Total assets grew from ₹3.69 crores in 2012-13 to ₹5.33 crores in 2015-16, against a balance consideration of ₹2.84 crores. The court found the plaintiff adequately capitalised throughout. It also found that the ₹38-lakh cheque, though dishonoured on 11 December 2012, was honoured on 17 December 2012—a fact admitted by DW-2 in cross-examination. The fact that Nangia neither gave notice about the dishonoured cheque nor moved to cancel the agreement confirmed he had received the full ₹2 crores earnest money. The hospital had additionally paid ₹41 lakhs through four further cheques between March 2014 and February 2015 towards freehold expenses demanded by Nangia.
On the requirement to carry cash or a demand draft to the Sub-Registrar's office, the court applied the ratio from Faquir Chand and another v. Sudesh Kumari (2006) 12 SCC 146 and Krishan Gopal v. Gurmeet Kaur (Dead) thr. Lrs. & ors. 2025 SCC OnLine SC 1438: readiness and willingness is assessed in spirit and substance, not mechanical form; a plaintiff need not carry cash so long as financial capacity is demonstrated. The hospital had ₹3.25 crores in its account, with the balance payable through cheques. A certificate of attendance from the Sub-Registrar's office for 5 January 2016 was on record. The court distinguished Basant Ram on facts, noting that here documentary evidence of financial capacity and attendance was placed on record.
Undue influence and inadequate consideration. The defendants' principal argument was that the property was worth ₹10.91 crores in 2012 but sold for only ₹5.25 crores, proving domination. The court rejected the valuation report of DW-5 Mohd. Minaz Jaffrey as unreliable: he had not inspected the house from inside, had valued it at ₹72,000 per square yard against a prevailing circle rate of ₹26,000–₹30,000 per square metre, and had prepared his report in 2023 on request of defendant no. 3. Computing at the 2012-13 circle rate of ₹30,000 per square metre over 1,130.41 square metres, the land alone came to approximately ₹3.40 crores; the agreed consideration of ₹5.25 crores for the entire property including construction exceeded that figure. There was no basis for the claim of undervaluation. On the doctor-patient relationship, DW-4 Rohit Handa admitted in cross-examination that Nangia was treated at Excel Hospital, Kanpur Nagar; that Dr Shivakant Mishra is a surgeon; and that Somnath Handa, one of the witnesses to the agreement, had never been a patient of Dr Mishra and had signed willingly. No documentary evidence of a professional treatment relationship was produced.
The disputed notarised document. The court declined to treat the failure to prove paper no. 130-C as proof of fraud. The trial court had simply held the document unproved in law—no attesting witness examined, notary denied signing it—but had not found it fabricated. More significantly, the notary had not been cross-examined on why his seals appeared on the document, whether an FIR had been lodged for theft or loss of seals, or how an unauthorised person could have affixed them. The court held that since the suit was within limitation even without that document, and since the document benefited Nangia rather than the hospital (by giving the seller more time), no adverse inference of fraud could be drawn against the hospital. Section 16(b) of the Specific Relief Act 1963 was held inapplicable.
Section 32A of the Registration Act. The court reproduced both the Central text of Section 32A—which mandates presence and fingerprints of buyer and seller—and the UP State text, which instead requires true copies of documents presented for registration and says nothing about the buyer's physical presence. Following the Supreme Court's guidance in Asset Reconstruction Company (India) Ltd. v. S.P. Velayutham & ors. (2022) 8 SCC 210 that State amendments must govern interpretation for that State, the court held that the hospital's physical presence at the Sub-Registrar's office was not mandatory under the UP Act. In any event, Dr Mishra and PW-2 had remained present from morning to evening on the relevant dates.
Outcome
Justice Sandeep Jain dismissed First Appeal No. 485 of 2025 with costs throughout by judgment delivered on 6 May 2026. The impugned judgment and decree of the Civil Judge (Senior Division)/FTC, Kanpur Nagar dated 21 March 2025 was affirmed. The defendants were directed to execute the sale deed of the disputed property within one month in favour of Shivani Hospital Private Ltd., receiving the balance consideration of ₹2.84 crores from the trial court, where it had already been deposited by the hospital on 29 May 2025. If the defendants failed to do so within that period, the hospital was held at liberty to get the sale deed executed through the court in accordance with law.