Karnataka High Court
The Agricultural Produce Market ... vs M/S Shree Karthik Investments And on 6 February, 2014
Bench: K.L.Manjunath, Ravi Malimath
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 6TH DAY OF FEBRUARY 2014
PRESENT
THE HON'BLE MR.JUSTICE K.L.MANJUNATH
AND
THE HON'BLE MR.JUSTICE RAVI MALIMATH
REGULAR FIRST APPEAL NO.850 OF 2009
C/W
REGULAR FIRST APPEAL NO.892 OF 2009
RFA.No.850/2009:
BETWEEN:
The Agricultural Produce
Market Committee
RMC Yard, Shimoga City - 577 201
Represented by its
Secretary
Sri R.M.Patil
Major. ...APPELLANT
(By Sri B.G.Sridharan, Sr.Counsel for Sri A.C.Balaraj,
Advocate)
AND:
1. M/s.Shree Karthik
2
Investments and Financial
Corporation (Regd.)
Balraj Urs Road
Shimoga City - 577 201
Represented by its Kartha
Sri C.P.Sundar Raj
S/o Puttanna Setty
Major.
2. Lakshmana
S/o Durga Bovi
Major, R/o 1st Cross,
Hosamane Extension
Shimoga City - 577 201
3. Smt.Pandari Bai
W/o Lakshmana
Major
Household, R/o 1st Cross,
Hosamane Extension
Shimoga City - 577 201
4. The Chief Marketing
Officer, Presently
Re-designated at
Director of Agricultural
Marketing, No.16
Raj Bhavan Road,
Bangalore - 01. ...RESPONDENTS
(By Sri R.Gopal, Advocate for R1
Sri S.N.Sameer, Advocate for R2
R3-Served-absent
Sri Vasanth V.Fernandes, HCGP for R4)
*****
3
This RFA is filed under Section 96 r/w Order 41 Rule
5 of CPC, against the judgment and decree dated
18.04.2009 passed in OS.No.163/1997 on the file of the
Prl.Civil Judge (Sr.Dn.) and CJM, Shimoga, decreeing the
suit for recovery of money & permanent injunction.
RFA.NO.892/2009:
BETWEEN:
Smt.Pandari Bai
W/o Lakshmana
Household,
Residing at 1st Cross,
Hosamane Extension
Shimoga
Shimoga District - 577 201. ...APPELLANT
(By M/s.A.Nagarajappa & Associates, Advocates)
AND:
1. M/s.Shree Karthik
Investments and Financial
Corporation ®
Balraj Urs Road
Shimoga City
By Sri C.P.Sundar Raj
S/o C.V.Puttanna Setty.
2. Sri Lakshmana
S/o Durga Bovi
Residing at 1st Cross,
Hosamane Extension
Shimoga City
Shimoga District - 577 201
3. The Chief Marketing Officer
Bangalore City.
4
4. The Shimoga Agricultural
Produce Market Committee
RMC Yard
By its Secretary
Shimoga
Shimoga District - 577 201.
...RESPONDENTS
(By Sri R.Gopal, Advocate for R1
Sri B.G.Sridharan, Sr.Counsel for Sri A.C.Balaraj, Advocate
for R4
Sri S.N.Sameer, Advocate for R2
Sri Vasanth V.Fernandes, HCGP for R3)
*****
This RFA is filed under Section 96 of CPC, against the
judgment and decree dated 18.04.2009 passed in
OS.No.163/1997 on the file of the Prl. Civil Judge (Sr.Dn.)
& CJM, Shimoga, decreeing the suit for recovery of money.
These RFAs coming on for hearing this day,
K.L.Manjunath J., delivered the following:-
JUDGMENT
These appeals are filed by the appellants who were defendants O.S.No.163/1997 on the file of Principal Civil Judge(Senior Division) & CJM, Shimoga challenging the legality and the correctness of the Judgment & decree passed on 18th April, 2009, fastening the liability on them in respect of the loan borrowed by the 1st defendant from 5 the plaintiff finance Corporation. Therefore these appeals are heard together.
2. The parties would be referred to as per their rank before the trial Court. The appellant in RFA No.859/2009 was the defendant No.3 in the suit. The appellant in RFA No.892/2009 was defendant No.4 in the suit. The facts leading to these appeals are as hereunder:-
The plaintiff filed a suit against defendant No.1 for recovery of Rs.15,05,755/- together with interest at 24% per annum, requesting the Court to grant a joint decree against defendants 2 & 3 and also to restrain defendant No. 4 from alienating the suit schedule property standing in her name.
According to the plaint averments defendant No.1 is a PWD contractor. He was entrusted with the work of the 3rd defendant. The 1st defendant had no money to execute 6 the work entrusted to him by the 3rd defendant. Therefore defendant no.1 approached the plaintiff to advance the loan subject to the condition that from out of the running bills payable by the 3rd defendant loan would discharged.
Accordingly, a Power of Attorney came to be executed by the 1st defendant in favour of the plaintiff on 6-10-1995 wherein the 1st defendant authorised the plaintiff to draw the amount payable by the 3rd defendant in regard to the work executed by the 1st defendant. The execution of Power of Attorney was also brought to the notice of the 3rd defendant and an acknowledgement has been issued by the 3rd defendant by making an endorsement on the Power of Attorney. According to the plaint averments defendant no.1 had borrowed a sum of Rs.1,50,000/- on 26-7-1994 promising to repay the same with interest at 24% per annum and the said amount was borrowed by defendant No.1 prior to the execution of the Power of Attorney and subsequently he also borrowed the loan on different occasions as detailed in para-2 of the plaint 7 amounting to Rs.12,00,000/-, the details of which are as stated in para-5 of the plaint and based on the Power of Attorney certain payments were also made to the plaintiff by the 3rd defendant. Later the 1st defendant got issued a notice cancelling the Power of Attorney executed by him in favour of the plaintiff and requested the 3rd defendant not to make any payment to the plaintiff for which a detailed reply was sent by the plaintiff marking a copy to the 3rd defendant requesting the 3rd defendant not to make any payment to the 1st defendant.
3. It was contended that the Power of Attorney executed by the 1st defendant in favour of the plaintiff is an irrevocable Power of Attorney coupled with interest and that the 1st defendant had no right to revoke the Power of Attorney and any revocation made by the 1st defendant does not bind the plaintiff so also the 3rd defendant and that the 3rd defendant was required to make the payment to the plaintiff and not to the 1st defendant. 8
4. It is also the case of the plaintiff that inspite of the reply and the notice sent by the plaintiff, the 3rd defendant made payment to plaintiff No.1 and any payment made by the 3rd defendant to the 1st defendant does not amount to valid payment and therefore the 3rd defendant is liable to pay the same to the plaintiff.
5. It is also the case of the plaintiff that defendant No.1 by investing his money has purchased the suit schedule property in the name of his wife-defendant no.4. Till the amount payable to the plaintiff is discharged by the 1st defendant, the 1st and 4th defendants cannot alienate the suit property. In the circumstances the plaintiff also requested the trial court to grant perpetual injunction restraining defendants 1 & 4 from alienating the suit schedule property.
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6. Before instituting the present suit the plaintiff had also filed O.S.No.503/1996 against defendants 1 & 4 restraining them from alienating the suit property. A separate suit was also filed against defendants 1 & 2 seeking a decree to restrain defendants 1 & 2 No.3 from making any payment to the 1st defendant. Both these suits have been withdrawn since the amount was paid by the 3rd defendant to the 1st defendant.
7. The suit was contested by all the defendants. The 1st defendant had set up his own defence. He denied the loan borrowed by him from the 1st defendant as claimed in the suit. According to him, he had borrowed only Rs.2,00,000/- and it was repaid by the 3rd defendant to the plaintiff pursuant to the Power of Attorney. He requested the Court to dismiss the suit. The second defendant did not contest the suit. The 3rd defendant contested the matter by filing a written statement denying its liability. According to the 3rd defendant, the Power of 10 Attorney executed by the 1st defendant in favour of the plaintiff is not an iirrevocable Power of Attorney coupled with interest and that the 3rd defendant did not agree to indemnify the plaintiff in the event of any payment made by the 3rd defendant to the 1st defendant. It is also the case of the 3rd defendant that it has acted upon the revocation of Power of Attorney by the 1st defendant executed in favour of the plaintiff. The defendant further contended that in view of the revocation of the Power of Attorney the 3rd defendant was obliged to make payment to the 1st defendant who had executed the work entrusted by it to the 1st defendant contending that there is no privity of contract between the 3rd defendant and the plaintiff and requested the court to dismiss the suit.
8. The 4th defendant filed a separate written statement. According to her, the suit property is not purchased by her out of the income of the 1st defendant and it is her sthreedhana property. The property was 11 purchased by her in her individual capacity and thereafter she has put up a construction by borrowing loan from LIC and has been discharging the loan on her own. Therefore she requested the Court to dismiss the suit.
9. Based on the above pleadings the following issues were framed by the trial court:-
ISSUES
1. "Whether plaintiff proves that the defendant No.1 borrowed a sum of Rs.13,00,000-00 from him, in connection with the construction work taken by him with defendant No.3, APMC, Shimoga and thereby by way of Irrevocable power of attorney, authorizes the plaintiff to collect the amount in respect of the contract work, taken by him with defendant No.3, as contended??
2. Whether plaintiff further proves that the defendant No.1 obtained a loan of Rs.1,50,000-00 on 26.1.1994 on execution of on demand promissory note, by agreeing 12 to repay the same along with interest at the rate of 24% p.a. as contended?
3. Whether the plaintiff further proves that, in view of the execution of irrevocable power of attorney, dated 6.10.1995 in his favour by defendant No.1, is entitled to recover total amount in respect of the work done by defendant No.1 to 3, as contended?
4. Whether the plaintiff further proves that, defendant No.1 is due in a sum of Rs.15,04,604-00 on the date of suit, as contended in Para No.6 of the plaint?
5. Whether the plaintiff is entitled for decree for recovery of Rs.15,05,750-00 against the defendant No.1 to 3 jointly and severally along with the future interest at the rate of 24% p.a as claimed in this case?
6. Whether the plaintiff is entitled for permanent injunction sought for?
7. What order or decree?"
To prove their respective contentions 5 witnesses were examined on behalf of the plaintiffs. Amongst them, P.W.1 is the partner of the firm. The plaintiff also relied upon Exs. 13 P-1 to 18. On behalf of the defendants 5 witnesses were examined and the defendants relied upon Exs.D-1 to D-45 and the documents summoned from the Commissioner were marked as C-1, C-1a. The trial Court after considering the entire evidence held Issue Nos. 1 to 6 in affirmative and decreed the suit. Challenging the legality and the correctness of the Judgment & decree of the trial court these appeals are preferred.
10. The 1st defendant who has suffered a decree has not challenged the Judgment & decree of the trial Court. Therefore the Judgment has become final and conclusive so far as it relates to the 1st defendant who is the borrower of the loan from the plaintiff. These two appeals are concerning the 3rd and 4th defendants. The prayer in the appeal filed by the 3rd respondent is to set aside the Judgment & decree passed in O.S. No.163/1997 since the direction issued by the trial court is not based on proper appreciation of oral and documentary evidence. 14 According to the appellant there was no privity of contract between the plaintiff, the 1st defendant along with the 3rd defendant. There is no tripartite agreement between the plaintiff, 1st defendant and the 3rd defendant. Defendant No.3 did not agree to make the payment to the plaintiff in respect of the loan borrowed before borrowing it from the plaintiff in the event of any payment made by it to the 1st defendant in connection with the contract work. According to the appellant in view of the revocation of Power of Attorney the 3rd defendant was obliged to make the payment to these contractors. Accordingly the payment is made. It is also the case of the appellant that there is no agreement entered into between the 3rd defendant and the plaintiff stating that the 3rd defendant would not make the payment to the 1st defendant without the consent of the plaintiff and in the event of such breach the 3rd defendant never agreed to reimburse the amount claimed by the plaintiff. According to the appellant mere production of the copy of the Power of Attorney to the knowledge of the 15 appellant does not amount to privity of contract between the plaintiff and the 3rd defendant and there is no liability fastened on the 3rd defendant. In the circumstances, the appellant requests the Court to allow the appeal.
11. So far as the appeal filed by the 4th defendant is concerned the specific case is that the trial court had no jurisdiction to restrain a lawful owner from alienating her property. According to her the suit schedule property is her Shtreedhana property and she has constructed a building by borrowing the loan from LIC and no contribution is made by the 1st defendant to acquire said property. When it is her self acquired property she cannot be prevented from exercising the ownership. The trial Court without giving any finding on the question of the manner in which the property is acquired by her has erroneously granted a decree of permanent injunction and the same requires to be interfered with by this court. 16
12. Per contra, Mr.Gopal, the learned counsel appearing for the plaintiff-respondent No.1 relying upon Section 73 and Section 202 of the Contract Act submits that the 3rd defendant having taken note of the Power of Attorney executed by the 1st defendant in favour of the plaintiff is required to indemnify the loss caused to the plaintiff on account of the payment made by the 3rd defendant to the 1st defendant. It is also contended that Ex.P-9 the Power of Attorney amounts to indemnity bond and the same has to be treated as an agreement between the plaintiff and the 3rd defendant.
13. He further submits that on account of the breach committed by the 3rd defendant the trial court is justified in granting the decree. He further submits that since the 4th defendant had no independent income of her own the trial court is also justified in granting the decree for perpetual injunction restraining defendant No.4 from 17 alienating the suit schedule property till the loan is discharged by her husband-the 1st defendant.
14. Having heard the learned counsel appearing for the parties we have to consider the following points in this appeal:-
1) Whether the trial Court is justified in decreeing the suit against defendant No.3 holding that there is privity of contract between the plaintiff, the 1st defendant and the 3rd defendant?
2) Whether the decree of perpetual injunction granted by the Court below restraining the 4th defendant from alienating the suit property is required to be interfered with ?
15. The undisputed facts in these appeals are as follows:-
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The plaintiff is a partnership firm engaged in the finance business. The 1st defendant has borrowed loan from the plaintiff by executing an on demand promissory note. It is the specific case of the plaintiff that to ensure that the plaintiff's money is secured and recovered a Power of Attorney was executed by the 1st defendant to receive the amount payable by the 3rd defendant to the 1st defendant in respect of the work executed by the 1st defendant entrusted to him by the 3rd defendant. The Power of Attorney is an unregistered Power of Attorney. It is drawn on a stamp paper of Rs.100/- executed before the Notary Public. Clause(1) of the Power of Attorney reads as hereunder:-
" 1. To collect all monies due to me by the Agricultural Produce Marketing Committee for contract work to be done by me for it."
Clause 7(d) of the Power of Attorney reads as hereunder:-
" that this Power of Attorney shall not be revoked and the agency of the finance shall not 19 terminate so long as any thing remains payable by the solely or jointly to the finance by way of loan or otherwise."
Clause 7(e) of the Power of Attorney reads as hereunder:-
"that nothing herein contained shall prevent the finance at anytime for recovering their dues in such ways and manners as they think proper:"
The Power of Attorney was produced before the 3rd defendant. The Secretary of the 3rd defendant has made an endorsement at page No.4 of the Power of Attorney as hereunder:-
"The Power of Attorney stands registered in our books. The monies payable to Sri Laxman, Contractor will be paid to the Sree KARTHIK INVESTMENT AND FINANCIAL CORPORATION(R)., Nehru Road, Durgigudi, Shimoga for credit of the account of Sri 20 Laxman, Contractor, till we hear from the Finance to the contrary."
The entire case of the plaintiff against the 3rd defendant is based on this endorsement. Whether this endorsement can be considered as a privity of contract between the plaintiff and the 3rd defendant and if any breach is committed by the 3rd defendant inspite of such an endorsement whether it would give rise to a cause of action for the plaintiff to recover the amount from the 3rd defendant in respect of the loan advanced by the plaintiff to the first defendant . The learned counsel appearing for the respondent relying upon Section 73 of the Contract Act contends that in view of the endorsement the plaintiff is entitled to proceed against the 3rd defendant. He also relied upon Section 202 of the Contract Act. We feel it appropriate to quote Section 73 & 202 of the Contract Act.
"73. Compensation for loss or damage caused by breach of contract.-When a contract has been broken, the party who suffers by such 21 breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract.- When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."22
"202. Termination of agency, where agent has an interest in subject-matter.- Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest."
Upon reading of Section 73 of the Contract Act we are of the view that Section 73 of the Contract Act does not attract to the facts & circumstances of this case. Section 73 can be pressed into service if a loss is caused on account of the breach of contract and the aggrieved person can file a suit claiming compensation. Similarly Section 202 is concerned under what circumstances an agency can be terminated and what is the effect of such termination of agency. As pointed out by Sri B.G.Sridharan, the learned counsel appearing for the 3rd defendant the endorsement made on Ex.P-9 cannot constitute a privity of contract wherein the 3rd defendant has agreed to make good the loss caused to the plaintiff in the event of the 3rd defendant 23 disbursing the amount to the 1st defendant. The endorsement only shows that the 3rd defendant has agreed to make the payment on behalf of the 1st defendant. But in the instant case, the payment shall be made pursuant to this endorsement by the 3rd defendant to the plaintiff till the Power of Attorney executed by the 1st defendant in favour of the plaintiff is not revoked. The Power of Attorney was revoked on 31-7-1996 as per Ex.P-10 wherein the 1st defendant by got issuing a legal notice to the plaintiff and to the 3rd defendant the Power of Attorney has been cancelled by him. Though the Power of Attorney has been cancelled by the 1st defendant on 31-7-1996 for the reasons best known to the plaintiff, did not pursue the remedy available to him by filing a suit challenging the order of revocation of Power of Attorney or by filing a suit against the 1st and 3rd defendants to restrain the 3rd defendant from making any payment to the 1st defendant. However a suit came to be filed at a belated stage after the entire payments were made by the 3rd defendant to 24 the plaintiff, the plaintiff has filed a suit in O.S.No.478/1996 and the same has been withdrawn by him as having become infructuous.
16. Mr. Gopal, the learned counsel appearing for the plaintiff admits that except the endorsement made on Ex.P-9 there is no other document entered into between the plaintiff and the 3rd defendant to show that on the promise made by the 3rd defendant that the loan was advanced by the plaintiff to the first defendant. The question is whether such an endorsement could be treated as a promise made by the 3rd defendant and whether the Power of Attorney could be treated as an irrevocable Power of Attorney coupled with interest.
17. Admittedly, the Power of Attorney is an unregistered document executed before the Notary Public. Mr.Gopal, the learned counsel appearing for the plaintiff contends that it is a Power of Attorney executed coupled 25 with interest. If a Power of Attorney is coupled with interest such a document is compulsorily registrable document under the Stamp Act. Merely because, a clause says that the document is an irrevocable Power of Attorney it cannot be treated as an irrevocable Power of Attorney. If the Power of Attorney is coupled with interest it requires the details of the amount payable by the 1st defendant to the plaintiff; and the extent of liability of the 1st defendant to the plaintiff by getting a Power of Attorney registered on the requisite stamp paper. In the absence of such an act by were using the word irrevocable Power of Attorney in one of the Clauses of Power of Attorney cannot be considered as the document is irrevocable Power of Attorney.
18. As stated supra, there is no separate agreement between the 3rd defendant and the plaintiff but there is also no agreement between the plaintiff, the 1st defendant and the 3rd defendant,. If the 3rd defendant for 26 any reasons agreed to make the payment on behalf of the 1st defendant in favour of the plaintiff the same cannot be a ground for the plaintiff to institute a suit against the 3rd defendant to recover the dues payable by the 1st defendant. Admittedly the 1st defendant has worked for the 3rd defendant as its contractor. The Power of Attorney executed by the 1st defendant has been revoked as per Ex.P-10 on 31-7-1996. If the plaintiff were to be a wiseman he would have filed a suit immediately to grant a decree for injunction restraining the 3rd defendant from making any further payment to the 1st defendant. In the absence of such suit or an order from a competent Court if the 3rd defendant has made the payment which was lawfully payable to the 1st defendant this Court cannot find fault with the action of the 3rd defendant in making the payment to the 1st defendant. The trial Court without appreciating the oral and documentary evidence properly has erroneously held that there is privity of contract between the plaintiff and the 3rd defendant and the 3rd 27 defendant is also answerable to the suit claim. In the circumstances we are of the opinion that Point No.1 formulated by us has to be answered in favour of the 3rd defendant/appellant.
19. So far as the finding of the trial Court on Issue Nos. 5 & 6 are concerned admittedly, the suit property is standing in the name of the 4th defendant. The 4th defendant is the wife of the 1st defendant. Merely because her husband has borrowed loan from the plaintiff; the property standing in the name of the 4th defendant cannot be the subject matter of the suit and no Court can prevent a lawful owner from alienating the property or to deal with the same as per her choice. On a perusal of the entire evidence let-in by the plaintiff there is nothing on record to show that the 4th defendant has acquired the property out of the money paid by the 1st defendant. It is her specific case that the site was purchased by her out of the funds giver by her father. The building is constructed by 28 borrowing the loan from LIC. She is discharging the loan. The katha stands in her name. The plaintiff has not filed any suit for declaration to declare that the suit schedule property as the property of the 1st defendant instead of seeking such a declaration the suit is filed only for a bare injunction to restrain the 4th defendant from alienating the property. The plaintiff has not sought for any charge on the property. The trial Court has also not created any charge on the said property. Without creating a charge there cannot be perpetual injunction restraining the lawful owner from alienating the property forever. The findings on Issue Nos. 5 & 6 by the Court below is perverse and no proper reasons are assigned to hold Issue Nos. 5 & 6 in affirmative. The trial Court has held Issue Nos. 5 & 6 in affirmative only on the ground that the 4th defendant did not step into the witness box. The burden of proving Issue Nos. 5 & 6 is not on the 4th defendant but it is on the plaintiff. When the plaintiff has not discharged the onus placed on it there was no necessity for the first defendant 29 to step into he witness box. In the circumstances we are of the view that the finding on Issue Nos. 5 & 6 are perverse and liable to b e set aside. In the result, both the appeals are fallowed. The Judgment & decree passed by the learned Civil Judge, (Seniior Division), Shimoga, in O.S.No.163/1997 dated 18th April 2009, are hereby set aside so far as the appellants defendants 2 & 4 before the trial court. The parties to bear their costs.
Sd/-
JUDGE Sd/-
JUDGE Rsk/-