In a landmark judgment, Hon'ble Supreme Court rejected a suit based on an unregistered agreement to sell, and on matter related to cash transaction above 2 lakh, HSC has Issued directions to courts and Income Tax authorities to flag such cases for scrutiny

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Case Summary: RBANMS Educational Institution v. B. Gunashekar & Anr.

Citation: 2025 INSC 490
Court: Supreme Court of India
Coram: Justice J.B. Pardiwala and Justice R. Mahadevan
Date of Judgment: 16 April 2025

Background & Facts

  • Appellant: RBANMS Educational Institution, a 150-year-old charitable trust in Bangalore.

  • Respondents: B. Gunashekar & another, claiming rights via an agreement to sell dated 10.04.2018 with alleged vendors (not parties to the suit).

  • Property Dispute: Respondents claimed rights in a property possessed by the appellant since 1905. They alleged the appellant was attempting to alienate the property and filed a suit for permanent injunction.

Litigation History

  • Trial Court: Rejected application under Order VII Rule 11 CPC for rejection of the plaint.

  • High Court: Dismissed revision petition.

  • Supreme Court: Appeal filed challenging both lower court orders.

Issues

  1. Whether a suit based solely on an agreement to sell (with no registered sale deed) against a third party is maintainable.

  2. Whether the plaint disclosed a cause of action or was barred by law under Order VII Rule 11(a) & (d) CPC.

  3. Whether the plaintiff had locus standi to maintain a suit for injunction without title or possession.

Key Legal Principles and Law Laid Down

1. Scope of Order VII Rule 11 CPC

  • Reiterated that Order VII Rule 11 is a threshold filter to reject suits that are barred by law or do not disclose a cause of action.

  • Courts must examine only plaint allegations (not defendant’s defence) but can also consider documents filed with plaint.

  • Courts must prevent abuse of process and clever drafting used to create illusion of cause of action.

2. No Right Conferred by Agreement to Sell

  • Section 54, Transfer of Property Act, 1882: An agreement to sell does not create any interest in property.

  • Protection under Section 53-A TPA applies only against the vendor, not third parties.

  • No privity of contract between the respondents and the appellant.

  • Key precedents cited:

    • Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra (2004) 8 SCC 614

    • Suraj Lamp & Industries v. State of Haryana (2012) 1 SCC 656

    • K. Basavarajappa v. Tax Recovery Commissioner (1996) 11 SCC 632

3. Maintainability of Bare Injunction Suit

  • A mere injunction suit is not maintainable when:

    • Title is in dispute.

    • Plaintiffs are not in possession.

    • Plaintiffs have no legal right in the property.

  • Section 41(j), Specific Relief Act, 1963 bars injunction when plaintiffs have no personal interest.

  • Cited: Jharkhand State Housing Board v. Didar Singh (2019) 17 SCC 692

4. Cash Transactions and Income Tax Law

  • Suit alleged Rs. 75 lakhs paid in cash in 2018 despite Section 269ST of Income Tax Act (introduced 2017) barring cash transactions above Rs. 2 lakhs.

  • Supreme Court found this highly suspicious, possibly indicating black money or illegality.

  • Issued directions to courts and Income Tax authorities to flag such cases for scrutiny.

Directions Issued by the Court (Para 18.1)

  1. All courts must inform jurisdictional Income Tax Departments if suits involve cash transactions exceeding Rs. 2,00,000/-.

  2. Sub-Registrars to notify I-T Departments of such claims in documents presented for registration.

  3. Income Tax Authorities to verify and investigate possible violations.

  4. State/UT Chief Secretaries to act against errant registering officers failing to report such transactions.

Findings & Holding

  • Plaintiffs had no legal right or enforceable interest in the property.

  • Suit was barred by law and failed to disclose a cause of action.

  • Action was deemed a champertous and speculative litigation, aimed at harassment and extortion.

  • Courts below erred in not rejecting the plaint.

Final Judgment

  • Appeal allowed.

  • Plaint in O.S. No. 25968 of 2018 rejected under Order VII Rule 11(a) and (d) CPC.

  • High Court and Trial Court orders set aside.

  • No costs imposed, but respondents cautioned against future misuse of judicial process.

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