Yes—Madras High Court affirms Supreme Court precedents in Roop Kumar and R. Janakiraman that Sections 91/92 do not bar proof of a document’s sham character; sale agreement treated as security for loan, specific performance refused, refund directed (Property & Evidence Law).
Summary
| Category | Data |
|---|---|
| Case Name | AS/170/2019 of KAMALA Vs AYYASAMY |
| CNR | HCMA010395372019 |
| Date of Registration | 11-03-2019 |
| Decision Date | 18-08-2025 |
| Disposal Nature | PARTLY ALLOWED |
| Judgment Author | HONOURABLE MR. JUSTICE R. SAKTHIVEL |
| Court | Madras High Court |
| Bench | Single-Judge |
| Precedent Value | Affirms Supreme Court precedents on scope of Sections 91/92 Evidence Act |
| Overrules / Affirms | Affirms |
| Type of Law | Civil – Property & Evidence |
| Questions of Law |
|
| Ratio Decidendi |
The Court held that a registered sale agreement may be shown to be a sham security for a loan by oral evidence notwithstanding Sections 91 and 92 of the Evidence Act; the bar in Section 92 applies only to varying the terms of a contract, not disproving the transaction itself; substantial advance payment coupled with an unexplained long performance period and house-tax receipts raised a preponderance pointing to a loan; the trial court’s specific-performance decree was set aside and refund of the advance (₹10 lakhs) with interest was directed; charge on property created to secure refund. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Applied Supreme Court clarifications on Sections 91 and 92 to admit oral evidence that a registered deed was sham; analyzed house-tax receipts, description of property as vacant land, inordinate performance period and D.W.3 testimony to conclude preponderance in favor of loan characterization. |
| Facts as Summarised by the Court | Parties executed a registered “Sale Agreement” on 29 Jan 2014 with ₹10 lakhs advance; plaintiff sued for specific performance when defendant refused deed; defendant pleaded it was security for ₹5 lakhs loan; trial court granted performance; appeal contested true nature of agreement. |
| Citations | 2025 MHC 1987 (Mad) Neutral Citation |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts within Madras High Court jurisdiction |
| Persuasive For | Other High Courts |
| Overrules | – |
| Distinguishes | – |
| Follows | Roop Kumar v. Mohan Thedani; R. Janakiraman v. State |
What’s New / What Lawyers Should Note
- Registered sale agreements can be impugned as sham security documents via oral evidence despite being lodged under Sections 91/92 Evidence Act.
- Section 92’s exclusionary bar applies only to altering terms of an instrument, not to disproving its genuine intent.
- A large advance payment plus an unexplained lengthy performance period may indicate a loan-security purpose.
- House-tax receipts and prior similar security agreements (with Rajamani) can support recharacterization.
- Madras HC’s reasoning is binding on subordinate courts within its jurisdiction when Sections 91/92 issues arise.
Summary of Legal Reasoning
- Burden & Admission: Execution of registered agreement (Ex-A.1) admitted; initial burden on plaintiff discharged—agreement produced.
- Evidence of Sham: Defendant led oral evidence (D.W.3) and house-tax receipts to show the property was occupied and the deed served only as security for loans.
- Performance Period Suspicion: 2/3 advance paid upfront but four-year performance window unexplained—unlikely in a genuine sale.
- Sections 91/92 Analysis: Supreme Court (Roop Kumar; Janakiraman) holds Sections 91/92 do not bar oral evidence that a document was never intended to operate as written.
- Recharacterization: Preponderance of probabilities favored security-loan characterization; the agreement was sham.
- Relief: Specific performance set aside; defendant directed to refund ₹10 lakhs with 9% p.a. interest; charge created on property for recovery; costs awarded.
Arguments by the Parties
Appellant / Defendant (Petitioner)
- Ex-A.1 was a nominal document securing a loan, not a genuine sale.
- No need for four-year window when ₹10 lakhs (2/3 sale price) paid as advance; demonstrates security purpose.
- Title remained with defendant; plaintiff did not object to defendant’s bank loan and construction.
- Reliance on Madras HC precedents limiting sale-agreement use.
Respondent / Plaintiff
- Ex-A.1 is a registered sale agreement—conclusive under Sections 91/92 Evidence Act; oral evidence barred.
- Always ready and willing: demanded performance on 14 Oct 2017, issued reply notice, deposited balance ₹5 lakhs.
- Trial court rightly granted specific performance; no interference warranted.
Factual Background
Kamala and Ayyasamy executed a registered Sale Agreement on 29 Jan 2014 for a house site at ₹15 lakhs, with ₹10 lakhs advance. Kamala (plaintiff) claimed readiness to pay the balance and sought specific performance when Ayyasamy (defendant) refused to execute the sale deed. The defendant contended the document was a security for loans totaling ₹5 lakhs, paid interest, and that the plaintiff was barred from introducing oral evidence. The trial court decreed specific performance; the defendant appealed.
Statutory Analysis
- Section 91, Indian Evidence Act: Best-evidence rule—written documents are primary, but parol evidence may prove non-execution or fraud.
- Section 92, Indian Evidence Act: Bars oral evidence to vary terms of a deed but does not bar evidence that the deed was sham or not intended to operate as written.
- Section 96 & Order XLI Rules 1–2, CPC: First Appeal jurisdiction—civil appellate standard to re-examine findings on record.
Alert Indicators
- ✔ Precedent Followed – Confirms Roop Kumar and Janakiraman on Sections 91/92
- 📅 Time-Sensitive – Watch for long performance periods as indicative of security intent
Citations
- 2025 MHC 1987 (Mad) (Neutral Citation)
- Roop Kumar v. Mohan Thedani, (2003) 6 SCC 595
- R. Janakiraman v. State, (2006) 1 SCC 697
- Gangabai v. Chhabubai, (1982) 1 SCC 4
- Tyagaraja Mudaliyar v. Vedathanni, AIR 1936 PC 70