Narendra Jain vs Smt. Pushpa Jha And Others

G. S. Ahluwalia, J

Call for the record of Court below.

Appeal being arguable is admitted for final hearing.

Issue notice of this appeal on merits to respondents on payment of process fee by Speed Post mode within three working days.

Also heard on I.A. No. 2876/2026. This is an application for restraining the respondents from creating third-party right in any manner.

The Trial Court has denied the specific performance of contract, but has directed the defendants to refund the amount of Rs. 52,00,000/- along with interest as provided in clause (b) of paragraph 35 of impugned judgment.

It is submitted by counsel for appellant that in case if defendants sell the property, then he may suffer irreparable loss, and it may not be possible for appellant to even recover the amount of Rs. 52,00,000/-.

Considered the submission made by counsel for appellant.

In paragraph 8 of impugned judgment, it is mentioned that an amount of Rs. 2,00,000/- and an amount of Rs. 17,67,000/- were paid in cash, apart from the remaining amount, which was paid by cheque.

The Supreme Court in the case of The Correspondence, RBANMS Educational Institution v. B. Gunashekar & Another , decided on 16.04.2025 in Civil Appeal No. 5200/2025, has held as under:

"18.1. Further, through the averments made in the plaint and in the agreement, the respondents/plaintiffs have claimed to have paid huge sum towards consideration by cash. It is pertinent to recall that Section 269ST of the Income Tax Act, was introduced to curb black money by digitalising the transactions above Rs.2,00,000/- and contemplating equal amount of penalty under Section 271DA of the Act. As per the said provisions, action is to be taken on the recipient. However, there is also an onus on the plaintiffs to disclose their source for such huge cash. The Central Government thought it fit to cap the cash transactions and move forwards towards digital economy to curb the dark economy which has a drastic effect on the economy of the country. It will be useful to refer to the Budget Speech during the introduction of the Finance Bill, 2017 and the extract of the memo presented with the Finance Bill, 2017, which lay down the object:

Budget Speech:

“VII. DIGITAL ECONOMY

Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit. India is now on the cusp of a massive digital revolution.

…..

Promoting Digital Economy

The Special Investigation Team (SIT) set up by the Government for black money has suggested that no transaction above Rs.3 lakh should be permitted in cash. The Government has decided to accept this proposal. Suitable amendment to the Income-tax Act is proposed in the Finance Bill for enforcing this decision.”

Extract from Memo of Finance Bill, 2017

“Restriction on cash transactions

In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating are source crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.

In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more,—

(a) in aggregate from a person in a day;

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office, savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.

It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention.

It is also proposed that any such penalty shall be levied by the Joint Commissioner. It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees.

These amendments will take effect from 1st April 2017.”

However, when the Bill was passed, the permissible limit was capped under Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs. When a suit is filed claiming Rs.75,00,000/- paid by cash, not only does is create a suspicion on the transaction, but also displays, a violation of law. Though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:

(A) Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any,

(B) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law,

(C) Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action,

(D) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs. 2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions."

Accordingly, Principal Registrar of this Court is directed to send a photocopy of judgment and decree passed by the Court of Fourth District Judge, Shivpuri, District Shivpuri in Civil Suit No. 49-A/2024 to the jurisdictional income tax officer for necessary information and further action.

In view of Section 52 of Transfer of Property Act, it is clear that any third-party right created during the pendency of suit would be protected and the purchaser would be bound by decree, but in the present case, decree for specific performance of contract has been denied and an amount of Rs. 52,00,000/- has been directed to be refunded by defendants.

Under these circumstances, only question for consideration is that in case if defendants are restrained from alienating the suit property and if appeal is dismissed, then whether plaintiff would compensate the defendants or not?

It is submitted by counsel for appellant that only if an objection is raised by defendants, then plaintiff would consider as to whether any statement is to be made with regard to compensating the defendants for loss which they may suffer on account of non-execution of sale deed.

In view of statement made by counsel for appellant, it is directed that no third-party right shall be created unless and until entire amount of Rs. 52,00,000/- is refunded back to plaintiff along with interest as directed by the Trial Court.

Also issue notice of I.A. 2876/2026 to respondents on payment of process fee by Speed Post mode within three working days.

List this case for confirmation of stay on 23/06/2026.