Karnataka High Court
K S Murahari Rao S/O Krishnoji Rao Sakre vs P J Ranganath S/O P Janardhanaiah on 22 August, 2024
-1-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF AUGUST, 2024
BEFORE
THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM
REGULAR FIRST APPEAL NO. 2014 OF 2005 (SP)
C/W
RFA CROSS OBJECTION NO. 27 OF 2009
IN REGULAR FIRST APPEAL NO. 2014 OF 2005:
BETWEEN:
1. K.S.MURAHARI RAO
S/O KRISHNOJI RAO SAKRE
AGED ABOUT 46 YEARS
M/S SHEETAL PLYWOODS
JANARDHANA COMPLEX,
D.NO.80/3, II MAIN ROAD,
AKKAMAHADEVI ROAD
P.J.EXTENSION,
DAVANAGERE-2
...APPELLANT
Digitally signed
by ALBHAGYA [BY SRI HAREESH BHANDARY T., ADVOCATE]
Location: HIGH
COURT OF AND:
KARNATAKA
1. P.J.RANGANATH
S/O P. JANARDHANAIAH
AGED ABOUT 57 YEARS
NO.80/3/65, 6TH MAIN,
BASAVESWARA CONVENTCORNER,
VIVEKANANDA EXTENSION
DAVANAGERE-577 005
(SINCE DECEASED BY HIS LEGAL
REPRESENTATIVES)
-2-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
1(a) SMT.SUNANDA
W/O P.J.RANGANATH
MAJOR,
R/AT H.NO.2961/55,
I FLOOR, 6TH MAIN,
SWAMY VIVEKANANDA EXTENSION
DAVANAGERE CITY
DAVANAGERE DISTRICT-577005.
1(b) SRI P.R.SUDHEER
S/O P.J.RANGANATH
MAJOR,
R/AT H.NO.2961/55,
I FLOOR, 6TH MAIN,
SWAMY VIVEKANANDA EXTENSION
DAVANAGERE CITY
DAVANAGERE DISTRICT-577005.
1(c) SRI P.R.JANARDHAN
S/O P.J.RANGANATH
MAJOR, R/AT H.NO.2961/55,
I FLOOR, 6TH MAIN,
SWAMY VIVEKANANDA EXTENSION
DAVANAGERE CITY
DAVANAGERE DISTRICT-577005.
(AMENDED VIDE COURT ORDER DATED 14.11.2022)
2. S.G. SIDDARTHA
S/O S.G.SOMASHEKARAPPA
AGED ABOUT 47 YEARS
R/O H.NO.2229, 6TH CROSS
M C C "A BLOCK
DAVANAGERE.
3. K.S.DEVARAJ
S/O K. SHIVALINGAPPA
MAJOR, R/O D.NO.1843/41,
ANJENAYA LAYOUT
DAVANAGERE.
(SINCE DEAD BY HIS LRS)
-3-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
3(a) SMT.PREMA DEVRAJ
W/O LATE K.S.DEVARAJ
ADULT,
RESIDING AT 1058/2016
7TH CROSS,
SIDDAVEERAPPA BADAVANE
DAVANAGERE-577004.
3(b) JAYAVIBHAVA D.,
S/O LATE K.S.DEVARAJ
AGED ABOUT 45 YEARS
RESIDING AT NO.403/4A
OPP. DR.MADHAV EYE HOSPITAL
P.J.EXTENSION
DAVANAGERE-577002.
(AMENDED VIDE COURT ORDER DATED 28.11.2023)
4. P.J.SHANKARA RAO
S/O P.JANARDHANAIAH
AGED ABOUT 77 YEARS
(ABHINANDAN)
H.NO.1926/24,
BANK COLONY,
SHAMANUR ROAD
DAVANAGERE-4.
...RESPONDENTS
[BY SRI VISHWANATH R. HEGDE, ADVOCATE FOR R1(a to c);
SRI B.S.SATYANANDA, ADVOCATE FOR R2, R3(a) AND R3(b)]
THIS RFA IS FILED UNDER SECTION 96 OF CPC,
AGAINST THE JUDGMENT AND DECREE DATED 23.7.2005
PASSED IN O.S.NO.191/98 ON THE FILE OF THE I ADDL. CIVIL
JUDGE (SR.DN) DAVANAGERE, PARTLY DECREEING THE SUIT
FOR SPECIFIC PERFORMANCE AND INJUNCTION.
-4-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
IN RFA CROSS OBJECTION NO. 27 OF 2009:
BETWEEN:
1. P.J.RANGANATH
S/O P.JANARDHANAIAH
SINCE DECEASED BY HIS LRS.
1(a) SMT.SUNANDA
W/O P.J.RANGANATH
AGED ABOUT 76 YEARS
R/AT H.NO.2961/55,
I FLOOR, 6TH MAIN,
SWAMY VIVEKANANDA EXTENSION
DAVANAGERE CITY
DAVANAGERE DISTRICT-577005.
1(b) SRI P.R.SUDHEER
S/O P.J.RANGANATH
AGED ABOUT 56 YEARS
NO.63, AMEYA, 1ST CROSS
2ND MAIN, BCMC LAYOUT
KANAKAPURA ROAD
DAVANAGERE-560109.
1(c) SRI P.R.JANARDHAN
S/O P.J.RANGANATH
AGED ABOUT 51 YEARS
NO.7, DHARMASRI,
8TH CROSS, 3RD MAIN,
HANUMANTHANAGAR
BANGALORE-560019.
(AMENDED VIDE COURT ORDER DATED 06.06.2023)
...CROSS OBJECTORS
[BY SRI VISHWANATH R. HEGDE, ADVOCATE]
-5-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
AND:
1. K.S.MURAHARI RAO
S/O KRISHNOJI RAO SAKRE,
AGED ABOUT 50 YEARS,
M/S. SHEETAL PLYWOODS,
JANARDHANA COMPLEX,
D.NO.80/3, II MAIN ROAD,
AKKAMAHADEVI ROAD,
P.J. EXTENSION,
DAVANAGERE-02.
2. S.G.SIDDARTHA
S/O S.G.SOMASHEKARAPPA
AGED ABOUT 36 YEARS
R/O. H.NO.2229,
6TH CROSS,
M.C.C. "A" BLOCK,
DAVANAGERE-01.
3. K.S.DEVARAJ
S/O K. SHIVALINGAPPA
SINCE DEAD BY HIS LRS
3(a) SMT.PREMA DEVRAJ
W/O LATE K.S.DEVARAJ
AGED ABOUT 68 YEARS
NO.1058/16, 7TH CROSS,
SIDDAVEERAPPA BADAVANE
DAVANAGERE-577004.
3(b) JAYAVIBHAVA D.,
S/O LATE K.S.DEVARAJ
AGED ABOUT 48 YEARS
RESIDING AT NO.403/4A
OPP. DR.MODI EYE HOSPITAL
P.J.EXTENSION
DAVANAGERE-577002.
(AMENDED VIDE COURT ORDER DATED 22.08.2024)
-6-
NC: 2024:KHC:34118
RFA No. 2014 of 2005
C/W RFA.CROB No. 27 of 2009
4. P.J. SHANKARA RAO
S/O P. JANARDHANAIAH
AGED ABOUT 67 YEARS,
R/AT H.NO.1926/24,
BANK COLONY,
SHAMANUR ROAD,
DAVANAGERE.
...RESPONDENTS
[BY SRI HAREESH BHANDARY, ADVOCATE FOR R;
SRI B.S.SATYANANDA, ADVOCATE FOR R2, R3(a) AND R3(b)
VIDE COURT ORDER DATED 11.1.2011,
NOTICE TO R2 AND R4 IS DISPENSED WITH]
THIS RFA CROB IN RSA NO.2014 OF 2005 IS FILED
UNDER ORDER 41 RULE 22 CPC, PRAYING TO SET ASIDE THE
JUDGMENT AND DECREE DATED 23.7.2005 PASSED BY THE
COURT OF I ADDL. CIVIL JUDGE (SR. DN.), DAVANAGERE IN
O.S.NO.191/1998.
THIS RFA AND RFA CROB COMING ON FOR HEARING
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM
ORAL JUDGMENT
The captioned appeal in RFA.No.2014/2005 is filed by the unsuccessful plaintiff who has challenged the dismissal decree passed in a suit for specific performance in O.S.No.191/1998. Defendant No.1 has filed cross appeal -7- NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 in RFA.Crob.No.27/2009 assailing the decree for refund of Rs.1,45,000/- with interest at the rate of 24% per annum.
2. For the sake of convenience, the parties are referred to as per their rank before the trial Court.
3. The facts leading to the case are as under:
Plaintiff instituted a suit against defendants seeking the relief of specific performance of contract. The plaintiff claims that defendant No.1 offered to sell the suit property for a sale consideration of Rs.1,45,000/- and accordingly, executed an agreement on 8.2.1997 by receiving an advance amount of Rs.25,000/-. Plaintiff further claims that it was agreed that sale transaction will be completed within a period of six months. Plaintiff contends that he was a tenant and defendant No.1 was collecting rents through bank cheques. Plaintiff has further contended that defendant No.1 has further received a sum of Rs.50,000/-, which is subsequent to the suit agreement. Thereafter, defendant No.1 sought for extension of time to -8- NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 register the sale deed on the premise that he is required to clear the bank loan.
Plaintiff claims that he was ever ready and willing to perform his part of the contract under the sale agreement dated 8.2.1997. Plaintiff further alleged that defendant No.1 executed one more agreement in favour of defendant No.3 and this lead to filing of the injunction suit by defendant No.3 wherein defendant No.3 obtained an exparte order of temporary injunction against defendant No.1 from alienating the suit schedule property. Plaintiff having come to know about the filing of the suit got himself impleaded. However, defendant No.3 reported that the matter is settled out of Court and filed a memo and withdrew the suit. Plaintiff claims that it is only in the second week of November 1998, he came to know that defendant No.1 has executed a registered sale deed on 17.10.1998. Hence, the present suit.
Defendant No.2 who is the contesting defendant filed written statement and stoutly denied the entire averments made in the plaint. Defendant No.2 asserts that his -9- NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 agreement was prior to plaintiff's agreement and therefore, contended that on 24.03.1996, defendant No.1 agreed to sell the suit schedule property and has executed agreement on 24.03.1996. Defendant No.2 further contended that defendant No.1 on agreeing to the terms and conditions of the agreement has concluded the transactions by executing sale deed on 17.10.1998 and hence, prayed for dismissal of the suit.
Defendant No.1 who is the owner has also filed written statement and has contested the suit. Defendant No.1 has admitted that plaintiff is his tenant and is collecting rent from the plaintiff. Defendant No.1 further admitted the receipt of Rs.50,000/- by way of cheque, but, however, disputed that this amount was not towards sale consideration. Defendant No.1 admitted the filing of the suit by defendant No.3 in O.S.No.563/1997. Defendant No.1 admitted the transaction with defendant No.2 and also acknowledged the receipt of advance amount of Rs.30,000/- and executed agreement to sell in favour of defendant No.2 on 24.03.1996. Defendant No.1, however,
- 10 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 disputed the transaction with plaintiff and contended that he had availed loan of Rs.1,00,000/- from the plaintiff and therefore, by way of security a nominal agreement was executed by him.
The Trial Court based on pleadings of the parties in all framed eight issues and two additional issues. While answering issue Nos.1 to 4 in the affirmative, Trial Court held that plaintiff has succeeded in proving the agreement dated 08.02.1997. However, while answering issue No.6 and additional issue No.1 in the affirmative, Trial Court recorded a finding that defendant No.2 has succeeded in substantiating that defendant No.1 executed an agreement to sell on 24.03.1996 and subsequently received entire sale consideration and executed sale deed in favour of defendant No.2 on 17.10.1998. Trial Court having held the sale transaction between defendant No.1 and defendant No.2 as valid and genuine declined to grant larger relief of specific performance of contract. On the contrary, Trial Court partly decreed the suit thereby
- 11 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 directing defendant No.1 to return the advance amount of Rs.1,45,000/- with interest at the rate of 24% per annum.
The plaintiff challenging the denial of larger relief of specific performance of contract has filed appeal in RFA.No.2014/2005. Defendant No.1 assailing the decree for refund of Rs.1,45,000/- with interest at the rate of 24% per annum has filed cross appeal in RFA.Crob.No.27/2009.
4. Heard learned counsel in RFA.No.2014/2005. I have given my anxious consideration to the pleadings, oral and documentary evidence let in by the plaintiff and defendant Nos.1 and 2. The following points would arise for my consideration:
1) Whether the judgment and decree of the Trial Court in ordering refund of advance amount suffers from perversity and warrants interference at the hands of this Court?
2) Whether the Trial Court was justified in declining to grant larger relief of specific performance of contract?
- 12 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009
3) Whether the Trial Court was justified in awarding 24% interest while ordering refund of Rs.1,30,000/- to the plaintiff?
My findings on Point Nos.1 and 2:
5. Upon careful scrutiny of the material on record, the plaintiff's entitlement to specific performance depends on several settled principles of law. In this case, while the plaintiff has successfully proved the execution of the agreement to sell dated 08.02.1997 and the payment of the advance amount, this alone does not warrant a decree for specific performance. The Supreme Court in Nathulal v. Phoolchand1 emphasized that specific performance is a discretionary relief, and the Court must balance the equities of the case before exercising its discretion in favour of the plaintiff.
6. In the present matter, it is undisputed that the agreement in favour of defendant No.2 was executed on 1 (1970) 2 SCC 120
- 13 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 24.03.1996, which predates the plaintiff's agreement, and defendant No.2 had secured a sale deed on 17.10.1998. Additionally, the suit for specific performance was filed by the plaintiff only on 14.12.1998, after the sale deed was already executed in favour of defendant No.2. These facts cannot be overlooked while determining whether the plaintiff is entitled to the relief sought.
7. Moreover, the Hon'ble Supreme Court in K.S. Vidyanadam v. Vairavan2, has held that delay in seeking specific performance can be fatal, especially where the rights of third parties have intervened. Here, the sale deed in favour of defendant No.2 was completed before the filing of the suit, and defendant No.2 has subsequently taken possession of the property through ejectment proceedings. Granting specific performance to the plaintiff would, therefore, unjustly prejudice the rights of defendant No.2, who is in lawful possession. 2 (1997) 3 SCC 1
- 14 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009
8. Considering the principles laid down by the Hon'ble Supreme Court and the equities involved in this case, it is evident that the plaintiff is not entitled to specific performance. While there is evidence of a valid agreement with defendant No.1, the Court cannot ignore the prior and concluded transaction between defendant No.1 and defendant No.2.
9. The plaintiff has failed to substantiate the allegation that the transaction between defendant No.1 and defendant No.2 was collusive or fraudulent. The Supreme Court in R.K. Mohammed Ubaidullah v. Hajee C. Abdul Wahab3, held that allegations of fraud must be proved by cogent evidence and cannot be based on mere suspicion or conjecture.
10. In the present case, while the plaintiff has argued that the sale deed executed by defendant No.1 in favour of defendant No.2 was intended to defraud the plaintiff, the evidence does not support this claim. The 3 (2000) 6 SCC 402
- 15 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 agreement between defendant No.1 and defendant No.2 is prior in time, and the sale deed was executed before the institution of the plaintiff's suit. Furthermore, the execution of the sale deed in favour of defendant No.2 has been followed by a suit for ejectment, which has already been decreed, and possession has been recovered from the plaintiff.
11. The fact that defendant No.3, a consenting witness, signed the transaction further weakens the plaintiff's claim of collusion. As per the Hon'ble Supreme Court's ruling in Premji Ratansey Shah v. Union of India4, when a party who is privy to the transaction does not object to it, the Court must take it as a strong indication of the transaction's genuineness unless there is concrete evidence to the contrary. The plaintiff has not provided such evidence.
12. Thus, in light of the settled principles, including the Hon'ble Supreme Court's emphasis in Zarina Siddiqui 4 (1994) 5 SCC 547
- 16 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 v. A. Ramalingam5, on proving fraud beyond doubt, it is clear that the plaintiff has not successfully demonstrated that the transaction between defendant No.1 and defendant No.2 was collusive. Therefore, the findings of the Trial Court, which declined the relief of specific performance, stand correct and do not require interference.
13. For the reasons stated supra, point Nos.1 and 2 are answered in the negative and affirmative respectively. My findings on Point No.3:
14. Upon a thorough examination of the material on record, it is necessary to address the issue of whether the Trial Court exceeded its jurisdiction in awarding interest at 24% per annum, contrary to the provisions of Section 34 of the CPC. Section 34, CPC, grants discretion to the Courts in awarding interest but limits it to a reasonable percentage, typically not exceeding 6% to 9%, unless 5 (2015) 1 SCC 705
- 17 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 there are compelling circumstances. The Hon'ble Supreme Court, in Central Bank of India v. Ravindra6, clarified that while Section 34 grants the Courts discretion, the exercise of this discretion must align with the facts and circumstances of each case, particularly where equity demands a departure from standard rates.
15. In the present case, though the interest awarded by the Trial Court is higher than the usual permissible rate, this Court finds sufficient justification for the same. Defendant No.1's conduct throughout the transaction has been grossly unfair and unreasonable, as evidenced by his deliberate suppression of material facts. Defendant No.1 executed three separate agreements, including the agreement with the plaintiff dated 08.02.1997, which is the subject matter of this cross appeal. The plaintiff, acting in good faith, invested Rs.1,30,000/- under the belief that the sale deed would be executed by defendant No.1.
6 (2002) 1 SCC 367
- 18 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009
16. The plaintiff's investment, which dates back to 1997, must be viewed in light of the economic realities of the time. The value of Rs.1,30,000/- in 1997 was substantial, and its present-day equivalent has drastically depreciated due to inflation and other economic factors. The Hon'ble Supreme Court in Alok Shanker Pandey v. Union of India7, recognized that compensation must account for the loss in the value of money over time. While Section 34 generally limits the awarding of interest, it is also well-settled that the Court has the discretion to grant a higher rate of interest in cases where equity and justice demand it.
17. Moreover, the argument advanced by the learned counsel for defendant No.1, that the award of 24% interest is excessive, must be evaluated against the background of defendant No.1's unfair conduct. The Hon'ble Supreme Court, in Secretary, Irrigation 7 (2007) 3 SCC 545
- 19 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 Department, Govt. of Orissa v. G.C. Roy8, held that where one party has wrongfully delayed or breached its obligations, the Court can exercise its discretion to award interest at a higher rate to ensure that the aggrieved party is adequately compensated. In this case, defendant No.1's actions not only delayed the plaintiff's legitimate claim but also created significant financial hardship for the plaintiff, who has been deprived of the use of the money for over two decades.
18. It is also relevant to note that the legal representatives of defendant No.1 have come on record, following the death of defendant No.1. The submission by the counsel for defendant No.1, that defendant No.1 became bankrupt and was a pauper at the time of his death, does not absolve the estate of its obligations. As the Hon'ble Supreme Court held in K. Madhava Reddy v. Maramreddy Veerayya9, the legal representatives of a 8 (1992) 1 SCC 508 9 (1997) 3 SCC 588
- 20 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 deceased party are bound by the liabilities of the deceased, particularly where those liabilities arise from transactions involving immovable property.
19. In this case, the plaintiff is likely to face a prolonged legal battle to recover the amount invested. Given the passage of time and the reduced value of the initial investment, the award of interest at 24% per annum, though higher than the usual statutory rate, serves the purpose of providing adequate compensation to the plaintiff. The Hon'ble Supreme Court in Ghaziabad Development Authority v. Balbir Singh10 emphasized the principle of restitution, holding that a party who has been wronged must be restored to the position they would have been in had the wrong not occurred. Here, the plaintiff's loss of both time and the value of money invested justifies the award of higher interest.
20. Thus, while the learned counsel for defendant No.1 is correct in pointing out that the interest awarded by 10 (2004) 5 SCC 65
- 21 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009 the Trial Court exceeds the general limit prescribed under Section 34 of the CPC, the peculiar facts of this case, including defendant No.1's conduct and the long delay in restitution, justify the Court's decision to uphold the award of 24% interest per annum.
21. In light of the Hon'ble Supreme Court's guidance in cases such as K.N. Dandapani v. Indian National Congress11, which reiterates that the Court's discretion under Section 34 must be exercised judiciously, this Court finds that the Trial Court did not err in awarding interest at a higher rate. The plaintiff has been deprived of his investment for an extensive period, and the loss suffered due to the depreciated value of money necessitates such a remedy.
22. Accordingly, point No. 3 is answered in the affirmative, and the award of 24% interest is upheld in the interest of justice and equity.
11
(2013) 4 SCC 456
- 22 -
NC: 2024:KHC:34118 RFA No. 2014 of 2005 C/W RFA.CROB No. 27 of 2009
23. For the foregoing reasons, this Court proceeds to pass the following:
ORDER RFA.No.2014/2005 filed by the plaintiff and RFA.Crob.No.27/2009 filed by defendant No.1 are dismissed.
SD/-
(SACHIN SHANKAR MAGADUM) JUDGE CA List No.: 1 Sl No.: 20