Madras High Court Denies Specific Performance, Orders Refund with Interest in Sale Agreement Dispute

Court finds Sale Agreement was security for a loan, not an actual property sale; orders refund of Rs. 10 lakh with interest  

In a significant judgment, the Madras High Court has ruled against granting specific performance in a case involving a disputed Sale Agreement, concluding that the agreement was intended as security for a loan rather than an actual sale of property. The court, presided over by Mr. R. Sakthivel, J., delivered its verdict on October 29, 2025, in the appeal suit brought by K. Ganesan against Ms. S. Selvi.  

The appellant, K. Ganesan, sought specific performance of a Sale Agreement dated July 2, 2014, which was purportedly for the sale of a property owned by the respondent, Ms. S. Selvi. Ganesan claimed to have paid an advance of Rs. 10,00,000 as part of the Rs. 15,00,000 sale consideration. However, the court found that the agreement was not intended for an actual sale but was executed as a security for a loan transaction.  

The court observed that the plaintiff, Ganesan, failed to prove the passing of the advance amount under the Sale Agreement, and the evidence suggested that the agreement was related to a financial transaction between the respondent’s husband and the plaintiff. Notably, a police complaint filed by Ganesan prior to the agreement’s execution alleged that the respondent’s husband owed him money. This complaint and the subsequent panchayat compromise supported the court's conclusion that the agreement was not an actual sale contract.  

The High Court also addressed the applicability of Sections 91 and 92 of the Indian Evidence Act, 1872, clarifying that these sections do not bar oral evidence from proving the true nature of the transaction. The court found that the oral evidence provided demonstrated that the registered agreement was a security for a loan rather than a genuine sale agreement.  

While denying the relief of specific performance, the court granted Ganesan an alternate relief of refunding the Rs. 10,00,000 advance amount with 7.5% interest per annum from the date of the suit until realization. Additionally, a charge was created on the suit property to facilitate recovery of the amount.  

This judgment underscores the court's emphasis on discerning the true nature of transactions and ensuring equitable relief, highlighting that registered agreements can be challenged and interpreted based on their actual intent and execution context.  

Bottom Line:

Specific Relief Act, 1963 - Relief of specific performance rejected - Registered Sale Agreement found to be a security for a loan transaction, not for the sale of property - Plaintiff entitled to alternate relief of refund of advance amount with interest.

Statutory provision(s): Specific Relief Act, 1963 Sections 20 and 16, Indian Evidence Act, 1872 Sections 91 and 92, Civil Procedure Code, 1908 Section 96 and Order XLI Rule 1.

K.Ganesan v. Ms.S.Selvi, (Madras) : Law Finder Doc Id # 2801141