Introduction

The Full and Final (F&F) Settlement is one of the most important steps in concluding an employment relationship in India. Whether an employee resigns, is terminated, retires, or completes a fixed-term contract, the employer is legally obligated to clear all dues within a reasonable and statutorily compliant timeline. However, in 2025, delayed F&F settlements remain one of the most common grievances raised by employees across sectors — from IT and startups to manufacturing, retail, and contract-based industries.

Delayed payments cause not only financial uncertainty but also emotional strain. They may interfere with an individual’s ability to transition to a new job, settle pending bills, or meet essential personal commitments. Fortunately, Indian labour laws—backed by statutory provisions, government notifications, and judicial precedents—provide strong protection to employees facing delayed wage settlements.

What Is Full and Final Settlement?

Full and Final Settlement refers to the process of clearing all financial obligations owed by an employer to an employee at the end of the employment relationship. It is the employer’s legal responsibility to calculate, verify, and release all monetary dues that have accumulated during the employment tenure.

In simple terms, F&F settlement ensures that the employee receives everything that is legally due for the period of employment—without any unjustified deduction or delay.

When Is F&F Applicable?

1. Resignation (voluntary exit)

2. Termination (with or without cause)

3. Layoff or retrenchment

4. Retirement

5. End of a fixed-term contract

6. Mutual separation agreements

Across all categories, the employer is bound by law to release dues within a reasonable period.

Key Components of Full and Final Settlement

F&F settlement typically includes several financial components. Each component may be governed by specific statutory provisions:

1. Unpaid Salary

Includes:

1. Salary for days worked in the final month

2. Overtime (if applicable)

3. Any performance-linked or variable pay components accrued and due

Payment must be calculated proportionately based on the number of days worked.

2. Leave Encashment

Employees are entitled to encash unused earned or privilege leave as per:

1. Company policy

2. Factories Act, 1948 (for factories)

3. Shops & Establishments Act (for other establishments)

Casual and sick leaves typically do not qualify for encashment unless company policy allows.

3. Gratuity

Governed by the Payment of Gratuity Act, 1972
Eligibility: Minimum 5 years of continuous service
Time limit for payment: Within 30 days of exit
Delay beyond this attracts mandatory interest.

4. Bonus

Under the Payment of Bonus Act, 1965, eligible employees must receive any unpaid bonus for the completed financial year or for a proportionate period.

5. Provident Fund (PF)

Employers must:

1. Update PF records

2. Deposit pending contributions

3. Issue forms enabling withdrawal or transfer under EPF rules

6. Reimbursements

Pending reimbursements include:

1. Travel expenses

2. Business-related costs

3. Medical reimbursements

4. Any approved expenses backed by bills

7. Deductions

Employers may make legitimate deductions for:

1. Notice period recovery

2. Salary advances

3. Unreturned company assets

However, deductions must be legal, justified, and supported with documented proof. Unilateral or punitive deductions are prohibited.

Timeline for Full and Final Settlement (India – 2025)

While individual companies may follow internal timelines, labour laws provide clear guidance.

1. Statutory Timelines

1. Payment of Wages Act, 1936

   Section 5(3): Wages must be paid within two working days of termination.

2. Gratuity must be paid within 30 days.

3. Bonus must be settled within eight months from the end of the financial year.

4. Many Shops and Establishments Acts across states mandate payment within 30 days.

2. Industry Practice (Non-statutory)

Most companies follow a 30–45 day window for the complete F&F settlement, which includes:

1. Department clearances

2. Payroll verification

3. Managerial approvals

4. Final audit

3.3 Typical F&F Timeline Breakdown

Total duration: 7–17 days, usually within 30–45 days.

When Delay Becomes Illegal

A delay is considered legally unreasonable when:

1. It crosses 45 days without valid justification

2. Employer stops responding

3. Employer withholds payment due to disputes unrelated to wages

4. Deductions are unexplained or arbitrary

In such cases, the employee can take immediate legal action.

Common Issues in Full and Final Settlement

Employees frequently face the following challenges:

1. Delay in Payment

Often justified using:

1. Administrative bottlenecks

2. “Approval pending”

3. Payroll cycle delays

However, prolonged delays violate statutory obligations.

2. Unauthorised Deductions

Common examples:

1. Deductions for unserved notice period without considering leave balance

2. Deductions for training costs without agreement

3. Deductions for alleged performance issues

4. Deductions exceeding statutory limits

3. Withholding F&F for Non-return of Assets

F&F cannot be withheld entirely because of asset disputes; only proportional deduction is allowed.

4. Partial Payments

Employers may release a part of the dues but hold back the remaining amount, often without explanation.

5. Non-communication

Lack of clarity, no breakup of settlement, and no response to emails are common employee grievances.

6. Withholding Relieving Letter

Although relieving letters are not mandatory under law, withholding them to deny F&F payment is unethical and may be challenged.

Laws Governing Full and Final Settlement in India

Several important laws protect employees. Each is explained below:

1. Payment of Wages Act, 1936

1. Ensures timely payment of wages.

2. Section 5: Full dues must be paid within two working days of termination.

3. Unauthorised deductions are prohibited.

4. Employers may face fines or prosecution for willful non-payment.

2. Industrial Disputes Act, 1947

Applicable mainly to “workmen” such as:

1. Technical staff

2. Skilled workers

3. Support staff

Key protection:

Section 33C(2): Employee may approach the Labour Court to recover unpaid wages, bonuses, or any money due.

The Labour Court can:

1. Determine the payable amount

2. Order payment with interest

3. Enforce compliance

3. Payment of Gratuity Act, 1972

1. Gratuity must be paid within 30 days.

2. Delay attracts simple interest.

3. Non-payment or underpayment is punishable.

4. Payment of Bonus Act, 1965

1. Ensures statutory bonuses for eligible employees.

2. Bonus dues must be included in F&F.

5. EPF & MP Act, 1952

Employers must:

1. Deposit pending contributions

2. Update PF records

3. Facilitate PF withdrawal

Failure to deposit contributions is a serious offence.

6. Shops and Establishments Acts (State-specific)

Most states mandate:

1. Issuing service certificates

2. Timely settlement of wages

3. Prohibition of unfair labour practices

States like Karnataka, Maharashtra, Delhi, and Tamil Nadu regulate settlement timelines more strictly.

7. Indian Contract Act, 1872

For employees in managerial, administrative, or supervisory roles, contract law governs employment.

Delayed F&F settlement is considered:

1. Breach of contract

2. Failure of consideration

Employees can pursue civil remedies for recovery.

Legal Remedies Available to Employees

There are multiple authoritative legal paths depending on the employee category, nature of dispute, and amount.

1. File a Complaint with the Labour Commissioner

This is one of the most effective remedies.

Process:

1. Submit written complaint with supporting documentation.

2. Labour Officer initiates conciliation.

3. Employer receives a summons.

4. Matter is discussed for amicable resolution.

The Commissioner can:

1. Direct employer to clear dues

2. Recommend prosecution

3. Order compliance under relevant labour laws

This remedy is cost-effective and fast.

2. Approach the Labour Court or Industrial Tribunal

Applicable primarily to “workmen”.

Under Section 33C(2):

Employee can claim:

1. Unpaid salary

2. Bonus

3. Leave encashment

4. Any monetary dues

The Labour Court functions like an executing court, quantifying and ordering payment.

3. File a Civil Suit for Recovery

Applicable to:

1. Managers

2. Senior executives

3. Supervisors

4. White-collar professionals not covered under ID Act

Under the Civil Procedure Code and Contract Act, employees can recover:

1. Unpaid dues

2. Compensation

3. Interest for delay

4. Legal costs

4. File a Complaint Under the Payment of Wages Act

If the employee is eligible under this Act, they can file an application under Section 15 for:

1. Non-payment

2. Unauthorised deduction

The authority can impose penalties and order payment.

5. Alternative Dispute Resolution (ADR)

ADR includes:

1. Arbitration

2. Mediation

3. Conciliation

Many modern employment contracts include arbitration clauses.
ADR is faster than court proceedings and promotes amicable settlement.

6. Complaint Under Shops & Establishments Act

For employees in private offices, retail, IT companies, or commercial establishments, the state’s S&E Act applies.

Labour Inspectors or Deputy Commissioners have the authority to:

1. Issue show-cause notices

2. Penalise employers for violations

3. Order settlement of dues

Step-by-Step Procedure for Legal Action

A structured escalation process increases the success of settlement.

Step 1: Formal Written Request to Employer

1. Send an email or letter to HR.

2. Request settlement breakup and expected date.

3. Maintain a digital trail.

Step 2: Internal Grievance Escalation

If no response:

1. Escalate to senior HR

2. Escalate to operations/head of department

3. Refer to internal grievance committee (if available)

Step 3: Issue a Legal Notice

Through an advocate:

1. Demand payment within 7–15 days

2. Cite relevant laws

3. Mention legal consequences

Legal notices often prompt employers to comply.

Step 4: File Complaint with Labour Commissioner

Submit:

1. Appointment letter

2. Resignation letter

3. Payslips

4. Settlement statement (if provided)

5. Communication record

Conciliation hearings generally resolve the matter quickly.

Step 5: Approach Labour Court or Civil Court

If conciliation fails:

1. File claim for recovery

2. Include payment due with interest

3. Submit all evidence

Courts can direct immediate payment.

Step 6: Enforcement of Court Order

If employer still does not comply:

1. Attach company bank accounts

2. Attach movable and immovable property

3. Garnishee orders (direct bank to release payment)

Courts have extensive powers to enforce compliance.

Possible Penalties on Employers

Employers delaying F&F settlement may face:

1. Penalties Under Payment of Wages Act

1. Fine up to ₹7,500

2. In rare cases, imprisonment up to 6 months

2. Interest on Delayed Payment

Mandatory under the Gratuity Act.

3. Compensation

Courts may award compensation for:

1. Mental harassment

2. Financial hardships

3. Unfair labour practice

4. Labour Department Action

Includes:

1. Show cause notices

2. Inspections

3. Orders to release dues

5. Reputational Damage

Non-compliance affects employer credibility, especially in sectors relying on employee trust.

Precautions to Prevent Settlement Disputes

Employees can proactively avoid disputes through:

1. Maintain Documentation

Retain:

1. Offer letter

2. Appointment letter

3. Payslips

4. Increment letters

5. Email records

2. Serve Proper Notice Period

This avoids notice-period recovery disputes.

3. Complete Exit Formalities Promptly

Return assets, fill forms, and collect clearance receipts.

4. Request Written Confirmation

Seek written confirmation on:

1. Last working day

2. Notice period waiver

3. Settlement timeline

5. Keep Digital Evidence

Screenshots, emails, and HR acknowledgements are essential in legal proceedings.

Role of Labour Authorities and Courts

Labour authorities ensure strict compliance with wage laws.

1. Labour Department

1. Conciliation

2. Investigation

3. Enforcing orders

4. Penal action

2. Labour Courts

For workmen:

1. Fast-track adjudication

2. Recovery orders

3. Interest and compensation

3. Civil Courts

For non-workmen:

1. Contractual claims

2. Compensation

3. Execution proceedings

4. Appellate Authorities

If dissatisfied with lower orders, employees can appeal to higher authorities or High Courts.

Recent Trends and Observations (2024–2025)

11.1 Increasing F&F Disputes in Startups

High attrition rates and funding challenges have caused delays in many startups.

2. More Employees Using Online Grievance Portals

States like Maharashtra, Delhi, Karnataka, and Telangana allow online filing of wage-related complaints.

3. Automation of Payroll Systems

Companies are increasingly adopting automated payroll to eliminate manual errors.

4. Growing Awareness of Employee Rights

More employees are aware of statutory protections and legal remedies.

5. Labour Code Reforms

Though yet to be fully implemented nationwide, the upcoming Labour Codes aim to standardize wage timelines.

Conclusion

Full and Final Settlement is not merely a procedural formality—it is a statutory right of every employee.
Indian labour laws impose clear obligations on employers to release all dues promptly and transparently. When an employer fails to do so, employees have multiple legal remedies ranging from conciliation to court-directed recovery.

By understanding:

1. what F&F includes,

2. the legally accepted timelines, and

3. the full set of remedies available under Indian law,

employees can assert their rights confidently and protect themselves from financial and emotional hardship.

Timely settlements promote ethical employment practices and strengthen workplace trust. Awareness, documentation, and early action remain the most effective tools for ensuring a smooth and compliant exit process.

Introduction

In real estate transactions, an “Agreement to Sell” (ATS) is often the first step: the vendor promises to sell immovable property to the vendee on specified terms and the vendee promises or shows readiness to pay the balance consideration and complete the formalities (sale deed, registration, delivery of possession). Over decades, Indian courts have developed extensive jurisprudence on when an ATS may be enforced (via a suit for specific performance) and when it may be cancelled, rescinded or determined.

A recurring question is: Can one party simply “unilaterally” terminate an ATS (i.e., one party cancels the agreement) if the contract does not contain a clause permitting such termination? The new Supreme Court ruling answers this in the negative — unilateral termination is invalid if the contract is non-determinable (i.e., it does not itself allow termination) and the vendee can directly move for specific performance without first filing a separate declaratory suit to challenge the termination.

This article explains that ruling, the legal background, its significance, practical implications for property transactions and how parties must approach ATSs going forward.

What is an Agreement to Sell and its legal significance

An Agreement to Sell is a contract under the Indian Contract Act, 1872 and may also be enforced under the Specific Relief Act, 1963 (SRA). While it is not the final sale deed, it is a binding commitment by the parties: the vendor to sell and the vendee to buy, subject to fulfilment of conditions (payment of balance, obtaining approvals etc.).

Once the vendee shows readiness and willingness to perform, Indian courts frequently grant relief of specific performance under the SRA, compelling the vendor to execute the sale deed and transfer the property. The relevant sections are Sections 14-18 of the SRA (on specific performance) and Sections 27-31 (on declaratory relief/rescission).

From a practical viewpoint:

1. The ATS gives the vendee rights (e.g., to insist on performance, to seek refund of earnest money and/or damages if conditions are not met).

2. The vendor is obligated to abide by the terms (unless the contract allows a right of termination, or time is of the essence, or there is a default by the vendee).

3. If the vendor refuses to perform, the vendee may file a suit for specific performance (or alternately for refund + damages).

Given this framework, a vendor may sometimes attempt to terminate the ATS unilaterally (for example by issuing a “termination notice” or “cancellation letter”). The key question is: Is such termination legally valid, particularly when the contract itself does not provide a termination clause?

The Supreme Court ruling: Key facts and ratio

Facts of the case

In the case of K. S. Manjunath & Ors. vs. Moora­savirappa @ Muttanna Chennappa Batil (Deceased) by his LRs & Ors. (2025) (hereafter “Manjunath case”), the following facts arose:

1. On 28 April 2000, an ATS was executed for sale of about 354 acres of agricultural land in Basavanakoppa village, Haveri district, Karnataka. The sale consideration was approx. ₹26.95 lakh and an advance of about ₹9.45 lakh (or ₹2 lakh in some reports) had been paid.

2. The vendor later issued a letter in 2003 unilaterally terminating the ATS, citing reasons such as a “status quo order” in a litigation and death of one vendor. Subsequently the land was sold to third parties in 2007.

3. The vendees filed a suit for specific performance. The trial court initially rejected it and granted refund and damages. The High Court reversed, directed sale deed execution in their favour and held subsequent purchasers were not bona fide. On appeal to SC, the judgment of High Court was affirmed.

Ratio (legal principle)

The Supreme Court held:

1. A party cannot unilaterally terminate an ATS that is non-determinable unless the contract itself expressly allows such termination (i.e., is determinable in nature under Section 14 of the SRA).

2. If the contract gives no right to terminate unilaterally (or that right has been waived) and one party still does so, then that termination is in fact a breach by repudiation, and the non-terminating party can directly seek specific performance without first seeking a declaration that the termination was bad in law.

3. Placing the burden on the vendee to first challenge the termination would unfairly allow every suit for specific performance to be frustrated by the vendor raising unilateral termination as a defense. The Court observed that if unilateral termination were permitted simply because the vender says “I cancel”, then the vendee, even after performing his obligations, is forced to fight an extra battle.

4. The burden of approaching the court for a declaration lies primarily with the party who claims there was valid termination/rescission (the terminating party) — though the Court underscored that this is not mandatory in all circumstances.

The Court summarised six key principles:

1. Unilateral termination of an agreement to sell by one party is impermissible in law except where the agreement is itself determinable under Section 14 of the SRA.

2. If such unilateral termination of a non-determinable agreement is allowed as a defence, virtually any suit for specific performance can be frustrated by that device.

3. Where a party claims valid reasons to terminate or rescind, it is more appropriate that the terminating party approaches the court for declaration of such termination, rather than casting the burden on the non-terminating party.

4. That does not mean the non-terminating party must always first sue for declaratory relief—once unilateral termination is shown to be non-bona fide and without contractual basis, the vendee may proceed directly for specific performance.

5. If the contract gives no termination right and unilateral termination is effected, it is a repudiation. The vendee’s suit for specific performance can proceed.

6. In such event, the ATS remains subsisting and enforceable.

Why the ruling matters: Practical significance

Reinforces contractual sanctity

One of the key take-aways is the reinforcement of the principle that contracts must be honoured, especially in property transactions. If the ATS does not provide a termination clause, one cannot simply cancel it at one’s whim. This provides greater certainty and fairness to vendees who rely on the agreement.

Protection for genuine vendees

Often, a vendee pays advance/earnest money and takes steps (obtaining loan, approvals, relocating tenants, etc.). If the vendor later tries to cancel unilaterally without justification, the vendee has clear protection under this judgment: the vendee can proceed for specific performance directly, rather than first fighting a separate declaratory suit.

Prevents misuse of termination as defense

The Court flagged that allowing unilateral termination as a defense would open the flood-gates: every vendor could say “I cancel” and stop the suit, forcing the vendee to first get a declaration. That invites delay, expense and uncertainty. The ruling plugs that gap.

Clarifies when termination may be permissible

The judgment does not say termination can never happen. If the contract is determinable in nature (i.e., contains a clause that the vendor may rescind/terminate or the contract by its nature allows termination), then unilateral termination might be valid under Section 14 of the SRA. Parties and lawyers must examine whether the ATS contains such a clause.

Impact on subsequent purchasers

As the judgment also discusses (see § 19(b) below), if a vendor unilaterally terminates the ATS and sells to a third party, the original vendee may still enforce their rights. A subsequent purchaser may not claim bona fide purchaser protection if they had notice of the ATS or should have made inquiry. Thus the ruling strengthens the original vendee’s position against subsequent transfers.

Legal framework: What the law says

Specific Relief Act, 1963

• Section 14: Deals with non-determinable contracts (contracts not determinable by the parties by notice) and determinable contracts (contracts the parties may terminate by notice). If contract is determinable, one party may serve notice to determine the contract; if non-determinable, specific performance is ordinarily available when the vendee shows readiness and willingness.

• Sections 14-18: Relate to the remedy of specific performance. Key prerequisites: valid contract, performance by plaintiff, readiness & willingness, no bar under Section 20.

• Sections 27-31: Deal with relief by way of declaration, rescission and cancellation of contracts.

In the Manjunath case the Court emphasised the interplay: if contract is non-determinable (i.e., no right of unilateral termination), then termination letter becomes repudiation and vendee can directly rely on Sections 14–18 for specific performance.

Indian Contract Act, 1872

While the SRA provides the specific performance remedy, the Contract Act supplies general contract law principles: offer, acceptance, consideration, capacity, contract enforcement, breach, etc. A termination that is not permitted by the contract may amount to a breach of contract under the Contract Act.

Bona fide purchaser protection – Section 19(b) of SRA

Section 19(b) provides protection to a “transferee for value without notice” of the prior contract. The Manjunath judgment also addresses this: since the vendor attempted a unilateral termination and sold to third parties, the subsequent purchasers sought protection under 19(b). The SC held that since the termination was unilateral and the purchasers had notice (actual or constructive) of the prior ATS, they could not claim protection.

Thus the inter-play: vendor cannot terminate unilaterally and then sell to a third party expecting that the third party will be protected—if the third party knew (or should have known) of the prior ATS, protection fails.

When is unilateral termination valid – the “determinable contract” exception

The ruling makes clear that unilateral termination is valid only in limited circumstances: when the contract itself is determinable by its nature, or contains an express termination or rescission clause. If the ATS says “vendor may terminate by giving X days’ notice” or “time is of the essence, and in event of purchaser default vendor may rescind”, then the contract is determinable and termination is likely valid (subject to other conditions). The Court said: “except in cases where the agreement itself is determinable in nature in terms of Section 14.”

Key features to check in a determinable contract:

1. A clause expressly giving one party (usually the vendor) the option to determine/terminate the agreement (e.g., default clause, time-essence clause, waiver of purchaser rights).

2. A stipulation that time is of the essence and the vendee must complete by a certain date or lose rights.

3. Provisions for “governing in case of default” and “termination by notice” language.

If none of these exist and the ATS is silent or says simply “we agree to sell on terms set out”, then the ATS is non-determinable and the unilateral termination is invalid.

Who bears the burden? Declaration vs direct suit for specific performance

One important procedural clarification: Earlier case-law (for example, I.S. Sikandar (Dead) by LRs v. K. Subramani & Ors. (2013) 15 SCC 27) held that if an ATS has been terminated, a suit for specific performance may not be maintainable unless the vendee also prays for declaration that the termination was void.

However, the 2025 Supreme Court ruling departs from that rigid approach in respect of non-determinable ATSs. The Court observed:

“If a contract itself gives no right to unilaterally terminate the contract … and a party still terminates the contract unilaterally, then that termination would amount to a breach by repudiation and the non-terminating party can directly seek specific performance without first seeking a declaration.”

In other words:

1. If termination was within contractual rights (determinable), then a declaration suit or challenge may be required.

2. But if termination is invalid (non-determinable contract, no right to terminate unilaterally) then the vendee need not first sue for a declaration; he can directly invoke specific performance.

The Court added that burden to show the termination was valid lies with the terminating party (vendor) who raises termination as a defence. “Where a party claims to have valid reasons to terminate … it should ideally approach the court for a declaration.”

Hence, for practitioners: In drafting or litigating ATS disputes, it is critical to examine the nature of the contract (determinable or not) and frame the relief accordingly.

What the vendee (buyer) must do: Readiness and willingness, maintaining eligibility

Even when termination is invalid, the vendee must still satisfy the classic prerequisites for specific performance:

1. Existence of a valid and enforceable contract (ATS).

2. The vendee must have performed or is willing and able to perform his part (payment of balance consideration, meeting conditions, etc.).

3. The vendor must be in default or refusing to perform (not time or other barrier).

4. The relief must be grantable (not barred by Section 20 of SRA or other equitable defence).

In the Manjunath case the original vendees had shown readiness and willingness and the High Court’s decree was affirmed by SC.

It is advisable that the vendee:

1. Keep clear record of advance/earnest payment/part payment.

2. Be ready with bank statements, evidence of willingness (for example, remaining balance amount ready).

3. Ensure no material default (e.g., delay in payment if time is of the essence).

4. Note that the vendor’s unilateral termination letter will likely be seen as repudiation; the vendee must not treat it as final without consultation.

What the vendor (seller) must take care of

From the vendor’s perspective, this judgment means:

1. You cannot assume that issuing a unilateral termination letter ends the ATS unless the contract permits termination.

2. If you believe the ATS is terminable (due to purchaser default or a clause), you must act carefully: comply with clause, give notice, follow contract terms.

3. If the purchaser is ready and willing and there is no clause for termination, your attempted unilateral termination is likely invalid and you could be forced to execute sale deed under decree.

4. If you sell to a third party after purported termination, you risk the third party being held liable (if they had notice of the ATS) and you may face a suit for specific performance by original vendee.

5. Ensure that any termination or rescission is documented properly and preferably challenged/validated in court rather than simply assumed.

What third-party purchasers must beware of

The judgment also provides important guidance for subsequent purchasers of property where an ATS is in existence:

1. Under Section 19(b) of SRA, a subsequent purchaser may claim protection as a “transferee for value without notice” of the prior contract. But the Court held that if the original vendor attempted unilateral termination, that termination being invalid, the existence of the ATS continues. The subsequent purchaser cannot claim bona fide purchaser protection if they had actual or constructive notice of the ATS.

2. Even if the subsequent purchaser argues ignorance of the earlier ATS, the Court emphasised that when the termination notice itself was unilateral (and disclosed names & addresses of original vendees) the purchaser should have inquired further. Failure to do so may amount to constructive notice.

3. Thus, due diligence is critical: checking land records, verifying existing agreements to sell, asking the vendor for earlier documents, etc. Ignorance of an ATS will not always protect the purchaser if they failed to inquire when circumstances demanded it.

How to structure an ATS (and contractual drafting tips)

Given the risks under the new ruling, the following practical drafting tips emerge:

1. Termination/Rescission Clause: If the parties wish to allow termination, include a clear clause specifying when and how termination may be effected (e.g., purchaser’s default, vendor’s inability, force-majeure, time-essence clause).

2. Time‐essence clause: Specify dates for payment, sale deed execution, delivery of possession. If time is of the essence, then delay may permit termination.

3. Readiness & Willingness clause: Ensure the vendee commits to remaining ready and willing; vendor obtains assurances.

4. Notice of termination: If termination is possible, specify notice period, manner (registered letter, acknowledgment) and any refund/forfeiture mechanism.

5. Refund/forfeiture of earnest money: If vendor terminates, specify whether earnest money will be refunded or forfeited, and whether withdrawal is allowed.

6. Assignment clause: If vendor subsequently sells to a third party, specify how the ATS will be binding on successors and how notice to third parties will be given.

7. Registrability check: Ensure parties know when ATS needs registration (if at all) and any stamp duty/registration formalities.

8. Contingencies and approvals: If sale is subject to approvals (governmental, cooperative society, court orders, tenant relocation), define the condition precedent and timeline.

9. Conflict resolution clause: Provide for arbitration/mediation, jurisdiction, etc.

10. Legal compliance: Consider provisions for RERA (if applicable), land-use change, statutory compliance, etc.

Well‐drafted ATSs reduce litigation risk and clarify parties’ rights in case of disputes. The new ruling emphasises that in absence of termination clause, unilateral termination will not succeed.

Illustrative scenarios : What courts will decide

To better understand how this ruling plays out, consider the following hypothetical scenarios:

Scenario 1: Vendor and Vendee sign an ATS for property, payable in two instalments, with no termination clause. Vendee pays an earnest amount and obtains loan sanction. Vendor later issues a letter unilaterally terminating ATS citing “change of mind”. Vendee sues for specific performance.
– Under Manjunath ruling: ATS is non-determinable; termination invalid; vendee can directly sue for specific performance.
– Vendor cannot rely on termination as defence; must defend on other grounds (vendee default, time not of the essence, contract void).
– If vendee shows readiness & willingness, court likely grant decree for specific performance.

Scenario 2: ATS includes a clause: “If purchaser fails to pay the balance within 90 days, vendor may terminate this agreement by notice in writing.” Vendee fails to pay in time; vendor gives notice and cancels; vendor then sells to third party; vendee sues.
– Here ATS is determinable by contract (termination clause). Vendor’s termination may be valid if conditions met. Vendee may need to challenge termination via declaratory suit or show that vendor mis-applied the clause.
– If third party buys without notice, they may claim bona fide purchaser protection under Section 19(b). The Manjunath ruling does not automatically apply to determinable contracts.

Scenario 3: ATS is silent on termination, time for payment is 100 days but vendor imposes no explicit “time is of essence” clause. Vendee delays but eventually pays with extension; vendor issues cancellation letter saying “we cannot wait further.” Vendee sues.
– Under Manjunath, vendor cannot unilaterally cancel unless contract permitted termination; time-frame alone may not make contract determinable. The vendee may succeed, subject to readiness/willingness; vendor may try to argue delay was material but must prove default.
– Practical risk: vendor may defend on ground of default or delay, so vendee must show they were ready and willing, and vendor’s delay was unreasonably long or vendor waived time.

These scenarios show that the key questions courts will ask: Was ATS determinable? Was termination clause present? Did vendee perform or was ready & willing? Did vendor have basis to terminate? Any genuine default? Notice to third parties? Etc.

What practitioners should watch out for

Given this ruling, lawyers, legal advisers, property consultants should pay attention to:

• Vendor’s termination letter/notice: If unilateral, a warning sign that vendee may have rights despite vendor’s claim of cancellation.

• Due diligence by purchasers: Upcoming buyers must check whether an ATS exists, whether any termination was genuine, whether the vendor has authority to transfer, and whether they are protected under Section 19(b).

• Drafting ATSs carefully: Avoid ambiguous “termination” language; clarify rights and obligations.

• Readiness & willingness evidence: Vendee must keep documentary proof (bank loans, payment receipts, correspondence, approvals).

• Time is of essence clauses: If parties intend time to be of essence, clearly draft it; avoid leaving to future dispute over default.

• Notice to third parties: If vendor wants to sell to third parties, ensure that existing ATSs are disclosed or extinguished by proper surrender/waiver, to avoid later enforcement.

• Registration and stamp duty: Even if ATS is unregistered, Indian courts have held certain effects. But registration may improve enforceability and transparency.

• Equitable defences and limitation: Vendor may still defend based on purchaser’s default, illegality, lack of capacity, misrepresentation or limitation, so vendeur’s suit is not automatic.

• Subsequent purchaser’s risk: Buying property after vendor issued cancellation is risky — the court emphasised that noticing a termination letter pointing to unilateral cancellation should trigger inquiry; failure may mean no bona fide purchaser protection.

Limitations and cautions: Not a blanket rule

While the Manjunath ruling is powerful, it is important to appreciate its boundaries:

1. It is explicitly restricted to non-determinable agreements to sell (i.e., ATSs without clause permitting termination). If the ATS is determinable, old jurisprudence applies and a declaration suit may still be necessary.

2. The vendee still has to show readiness & willingness; termination alone does not guarantee decree. If the vendee himself is in breach, vendor may justify termination and defend suit.

3. Though unilateral termination is invalid per this ruling, there may be other legally valid ways to rescind ATS (e.g., purchaser default, mutual cancellation, frustration, illegality). Vendor must look into these.

4. The ruling applies to the facts of the Indian Supreme Court; local High Court jurisprudence and facts may vary. Lawyers should examine whether earlier case-law on determinable/non-determinable ATS remains relevant in their jurisdiction.

5. Third-party purchasers may still be protected under Section 19(b) if they satisfy criteria (value, good faith, no notice) and did their due diligence. The ruling strengthens the standard of due diligence but does not eliminate bona fide purchaser protection altogether.

6. The ruling does not elaborate on every type of transaction (for example, development agreements, sale of flats under RERA, share transfers) – the specific nature of the contract may influence analysis (whether it is truly an ATS, conditions precedent, etc.).

Practical checklist for clients and advisors

For the Vendee (buyer under ATS):

1. Verify the ATS: date, parties, consideration, advance/earnest money, payment schedule, conditions (approvals, possession, etc.).

2. Check whether the ATS contains a termination clause or a “time is of essence” clause.

   1. If yes → contract may be determinable → termination may be valid → you may need to challenge termination via declaratory suit, show vendor mis-applied clause.

   2. If no → contract likely non-determinable → termination likely invalid → you may proceed for specific performance.

3. Maintain evidence of your performance or readiness: advance payment, loan sanction, approvals, etc.

4. If the vendor issues a termination/cancellation notice, do not assume it ends your rights — preserve position, consult lawyer.

5. If vendor sells to someone else, examine whether you were given notice, whether the third‐party purchaser had notice of the ATS, whether you can claim specific performance.

6. Act with stated timelines: do not sit on rights; limitation periods may apply for suit for specific performance (generally three years from breach/default).

7. Document communications: termination letters, vendor’s reasons, your correspondence of readiness & willingness.

For the Vendor (seller under ATS):

1. Before executing ATS, consider whether you may need flexibility; if yes, include termination clause and “time is of essence” provision.

2. If you believe purchaser is defaulting (delay in payment, failure of condition), follow the ATS clause for termination (give notice, wait for period, document purchaser’s default).

3. Avoid issuing a letter saying “Cancellation by change of mind / we cannot wait”. Such termination may be held invalid.

4. If you sell to a third party after attempted termination, ensure you address the prior ATS: either get release from vendee, refund earnest money, knockout original ATS by consent or ensure purchaser is bona fide and no notice of prior ATS.

5. Keep records of attempts to execute sale deed, possession, payment of balance, so you can show you were ready to perform.

6. If you intend to terminate but contract silent, consult legal advice: you risk suit for specific performance.

7. If there is tenant relocation, litigation or cooperative society approval pending (i.e., condition precedent), clearly document it — failure to do so may be held as vendor’s inability, not purchaser’s fault.

For Subsequent Purchaser (third-party buyer):

1. Before purchasing property, conduct thorough due diligence:

   1. Search land records for earlier ATS/agreements to sell, encumbrance certificate, registered/unregistered instruments.

   2. Check whether the vendor had issued any termination letter; if yes, examine whether termination was valid or merely unilateral.

   3. Ask vendor for copies of prior ATS, termination notices, correspondence with earlier vendee.

   4. If you find a termination letter referencing the ATS and names of vendees, treat it as red flag for “constructive notice”.

2. If you still proceed, try to purchase with clear title, ensure vendor gives covenant of no earlier claims, ask for release/wavier from earlier vendees if possible.

3. Note: If a court later holds the termination invalid, you may find yourself liable to perform the ATS, execute sale deed in favour of original vendee, and may lose your purchase.

Conclusion

The Supreme Court’s recent ruling in the Manjunath case marks a landmark clarification for property law in India: when an Agreement to Sell is non-determinable, a vendor cannot unilaterally terminate it simply by issuing a letter; such action would amount to repudiation, and the vendee may proceed directly for specific performance without first seeking a declaration.

This decision underscores several themes: the sanctity of contracts, protection for genuine vendees, the importance of fair dealing and the duty of subsequent purchasers to undertake proper enquiry. It also underscores the need for careful drafting of ATSs and the practical discipline required by practitioners advising clients in real estate transactions.

In effect: If you’re entering an ATS, check the termination clause (or absence thereof) carefully. If you’re a buyer whose vendor tries to cancel unilaterally, don’t assume termination is valid — seek advice. If you’re buying property from someone who has claimed to cancel an ATS, do your due diligence.

For legal professionals and property advisers, the ruling offers both a powerful tool for enforcing rights of vendees and a caution for vendors or buyers who may neglect contractual formalities. As with all legal matters, each case will turn on its facts — readiness & willingness, contract terms, vendor’s ability to perform, time-essence, etc. But the broad new principle is clear: unilateral termination without contractual basis will not easily stand.

Property disputes are among the most common legal conflicts in India. Whether between family members over ancestral property, between landlords and tenants, or between buyers and builders, these disagreements can quickly become complex.
One of the most effective and lawful ways to handle such disputes—before stepping into lengthy litigation—is by sending a legal notice.

A legal notice acts as an official warning, asserting your rights while giving the other party a final opportunity to settle the matter amicably. This detailed guide explains what a legal notice is, why it’s crucial in property disputes, and how to send one step by step, along with the relevant laws, format, documents required, and common mistakes to avoid.

Understanding a Legal Notice

A legal notice is a formal written communication sent by one person (the sender) to another (the recipient) to inform them about a legal grievance and demand action.
In property disputes, a legal notice typically outlines the sender’s ownership rights, the nature of the dispute, and what the sender expects—such as vacating premises, paying dues, or stopping an encroachment.

Key Characteristics of a Legal Notice:

1. Written and signed by an advocate on behalf of the client.

2. Clearly mentions facts, rights, and legal grounds.

3. Serves as evidence that an attempt was made to resolve the issue before court intervention.

Under Section 80 of the Code of Civil Procedure, 1908 (CPC), sending a legal notice is mandatory when filing a case against the government or a public official.
For private parties, it is not legally mandatory but highly advisable.

Why a Legal Notice Is Important in Property Disputes

A well-drafted legal notice serves several crucial purposes before initiating litigation:

1. Prevents Unnecessary Litigation
   Many disputes get resolved once the opposite party realizes the sender’s intent to take legal action.

2. Creates a Written Record
   The notice documents facts, ownership claims, and efforts made toward amicable settlement—this can later serve as strong evidence in court.

3. Demonstrates Good Faith
   Courts view the sender favorably if they tried to resolve the matter legally and peacefully before filing a lawsuit.

4. Ensures Clarity
   A formal notice explains issues, demands, and deadlines clearly—avoiding miscommunication.

5. Legal Requirement in Certain Cases
   If the dispute involves government land or property, sending a notice is a statutory requirement.

Common Types of Property Disputes in India

Understanding the nature of your dispute helps in drafting an accurate and effective legal notice.
Here are the most frequent categories of property disputes in India:

Each category may involve different laws, documents, and legal remedies.

Legal Provisions Governing Property Disputes

Property disputes are regulated by multiple laws in India.
Below are the most relevant statutes that often apply when sending a legal notice:

1. Code of Civil Procedure, 1908 (CPC)

• Section 9: Grants civil courts the power to try all civil disputes, including property matters.

• Order 7 Rule 1: Lists the contents required in a plaint when filing a suit.

• Section 80: Makes it mandatory to issue a notice before suing a public officer or the government.

2. Bharatiya Nyaya Sanhita, 2023 (BNS)

When property disputes involve criminal elements, such as trespass or damage, BNS provisions apply:

• Section 322: Criminal trespass.

• Section 327: Mischief causing property damage.

• Section 330: House trespass with intent to intimidate or insult.

3. Transfer of Property Act, 1882

Defines how ownership, sale, lease, or mortgage of property can legally transfer.
Helps identify rights and obligations between buyers, sellers, and lessees.

4. Specific Relief Act, 1963

1. Provides remedies for possession, boundaries, or ownership disputes.

2. Section 35: Allows injunctions to restrain unauthorized acts or protect ownership.

5. Registration Act, 1908 & Bharatiya Sakshya Adhiniyam, 2023

1. Registered deeds and certified documents are primary evidence in court.

2. Proper registration validates ownership and prevents forgery.

Step-by-Step Process to Send a Legal Notice for Property Dispute

Let’s look at the complete procedure from consultation to delivery:

Step 1: Consult a Qualified Lawyer

The first step is to contact an experienced property lawyer.
A lawyer examines:

1. Ownership documents

2. Nature of the dispute

3. Applicable laws

4. Strength of your case

The legal notice must be printed on the lawyer’s official letterhead, containing their name, address, and enrollment details for authenticity.

Step 2: Provide Complete Information to the Lawyer

You’ll need to provide:

1. Full names and addresses of both parties

2. Property details (address, boundaries, size, etc.)

3. Chronological account of the dispute

4. Copies of ownership or lease documents

5. Prior communication (letters, emails, or oral agreements)

6. Desired resolution (e.g., eviction, possession, payment)

7. Preferred response timeline (usually 15–30 days)

This information helps the lawyer create a factual and persuasive legal notice.

Step 3: Draft the Legal Notice

The lawyer drafts the notice using formal legal language.
A good notice is factual, assertive, and to the point.

Essential components:

1. Sender and Recipient Details
   Names, addresses, and contact details of both parties.

2. Subject Line
   Example: “Legal Notice Regarding Encroachment on Property Located at [Address]”.

3. Introduction
   Establishes who the sender is (owner, tenant, etc.) and mentions property documents.

4. Statement of Facts
   Chronological events that led to the dispute.

5. Legal Grounds
   Sections and laws supporting the sender’s claim.

6. Demand or Relief Sought
   The action expected from the recipient and deadline.

7. Consequences of Non-Compliance
   Indicates intent to file civil or criminal proceedings if unresolved.

8. Signature
   Signed by both the lawyer and client.

Step 4: Send the Notice

The notice should be sent using reliable and traceable methods:

• Registered Post with Acknowledgment Due (RPAD): Legally recognized and provides proof of delivery.

• Courier with Tracking Facility: Acceptable alternative if postal services are unavailable.

• Email (optional): For faster communication in commercial or urban cases.

Keep one copy for your own record and one in your lawyer’s file.

Step 5: Retain Proof of Delivery

Evidence of dispatch and delivery is crucial:

1. Postal receipt or courier slip.

2. Acknowledgment card signed by the recipient.

3. Tracking screenshot or postal record.

4. Even a returned envelope marked “refused” counts as constructive proof of delivery.

These proofs are often required in court to demonstrate compliance.

Step 6: Wait for Response

After receipt, the recipient may:

1. Accept the claims and comply.

2. Propose settlement through negotiation or mediation.

3. Deny the allegations.

4. Ignore the notice entirely.

Based on the response (or lack thereof), your lawyer will advise the next legal step.

Step 7: Initiate Legal Proceedings

If the recipient fails to act, you can initiate:

• Civil Suit: For possession, injunction, or damages.

• Criminal Complaint: If trespass or fraud is involved.

• Complaint to Local Authorities: For illegal construction or land misuse.

• Mediation: Courts often promote amicable settlements.

The legal notice and its proof of delivery serve as primary evidence in these proceedings.

Format of a Legal Notice for Property Dispute (Sample Template)

LEGAL NOTICE

Date: [Insert Date]

From:

[Sender’s Full Name]

[Address]

[Contact Number]

Through:

[Advocate’s Name]

[Law Firm Name, Address, Enrollment No.]

To:

[Recipient’s Full Name]

[Address]

Subject: Legal Notice Regarding Property Dispute at [Property Address]

Sir/Madam,

Under instructions from my client [Client’s Full Name], the lawful owner of the property located at [Address], I hereby issue this notice. That you have [state issue—e.g., illegally encroached, failed to vacate, or defaulted on rent]. Despite repeated requests, you have not rectified the matter. My client, therefore, demands that you [specific action—vacate premises/pay dues/stop construction] within 15 days from receipt of this notice. Failing this, my client shall be constrained to initiate appropriate legal proceedings—civil and/or criminal—at your sole risk and cost.

This notice is issued without prejudice to my client’s other legal rights.

Yours faithfully,

[Advocate’s Signature]

[Name, Enrollment No., Contact Details]

Documents Required While Sending a Legal Notice

Attach or refer to these documents for credibility:

1. Title/Ownership Documents – Sale deed, will, gift deed, or partition deed.

2. Encumbrance Certificate – Verifies no mortgage or loan on property.

3. Possession Proof – Rent receipts, possession letter, or utility bills.

4. Tax Receipts – Property tax or municipal records.

5. Photographs or Videos – Showing encroachment or construction.

6. Correspondence Records – Prior emails, letters, or verbal notices.

7. Survey Reports or Maps – Evidence of property boundaries.

8. Identity Proofs – Aadhar, PAN, or voter ID.

9. Witness Statements – Testimonies from neighbours or local officials.

Common Mistakes to Avoid While Sending a Legal Notice

Always ensure precision and professionalism.

What Happens After Sending a Legal Notice?

Once served, several outcomes are possible:

1. Amicable Settlement:
   Parties agree to resolve issues mutually through compromise or payment.

2. Written Reply:
   The recipient may send a reply or counter-notice through their lawyer.

3. No Response:
   You may proceed to court after the expiry of the notice period.

4. Mediation or Arbitration:
   Courts sometimes direct parties toward alternative dispute resolution before trial.

Regardless of the outcome, the notice shows your good faith effort and strengthens your legal stance.

Role of a Lawyer in Property Dispute Notices

A lawyer is indispensable throughout the process. They:

1. Analyse facts, documents, and ownership rights.

2. Draft a legally sound notice with correct legal citations.

3. Ensure it adheres to procedural laws.

4. Evaluate the recipient’s reply and advise next steps.

5. Represent you in court or during negotiation.

An advocate’s professional drafting can often lead to faster settlement without litigation.

How Long Does It Take to Resolve Property Disputes After a Legal Notice?

The timeline depends on the nature of the dispute and cooperation from the recipient:

• If amicably settled: Within a few weeks.

• If mediation/arbitration is required: 2–6 months.

• If litigation ensues: Several months to years depending on court backlog.

Sending a legal notice saves substantial time and cost compared to immediately filing a case.

Cost of Sending a Legal Notice

The overall cost depends on:

1. Advocate’s experience and professional fees.

2. Complexity and documentation involved.

3. Mode of dispatch (post or courier).

On average, the cost ranges between ₹1,500 – ₹5,000 for simple disputes, and higher for complex cases involving multiple properties or parties.

Benefits of Sending a Legal Notice Before Filing a Case

1. Encourages Settlement: Often leads to quick resolution without court interference.

2. Saves Time and Money: Litigation can be expensive and time-consuming.

3. Establishes Written Record: Can serve as critical evidence in later proceedings.

4. Shows Legal Preparedness: Demonstrates seriousness and awareness of rights.

5. Improves Negotiation Leverage: Creates pressure on the opposing party to act responsibly.

Conclusion

Sending a legal notice for a property dispute is a vital first step in safeguarding your rights under Indian law.
It communicates seriousness, documents your claim, and opens a window for peaceful resolution—often avoiding years of litigation.

To ensure effectiveness:

1. Consult a competent lawyer.

2. Provide full details and documents.

3. Follow correct format and delivery methods.

4. Keep proof of dispatch and delivery.

A well-drafted legal notice not only protects your legal interests but also sets the tone for a fair and lawful resolution.