Andhra HC (Pre-Telangana)
B. Anjaneyulu vs V.G. Raghunathan on 22 November, 1994
Equivalent citations: 1995(1)ALT131
Author: B.S. Raikote
Bench: B.S. Raikote
JUDGMENT B.S. Raikote, J.
1. This is a defendant's appeal challenging the judgment and decree dated 4-3-1992 passed in O.S. No. 261/1988 on the file of Addl. Subordinate Judge, Rangareddy District, at Saroornagar. The Court below decreed the suit filed by the respondent/plaintiff for specific performance of the contract.
2. For the sake of convenience, the parties herein are referred to as they are arrayed in the lower Court.
3. The learned Counsel for the appellant-defendant strenuously contended that the impugned judgment and decree passed by the Court below are not only contrary to law but also contrary to the evidence on record. On the other hand, the learned Counsel appearing for the respondent-plaintiff supported the decree and judgment of the lower Court.
4. In order to appreciate the rival contentions in the appeal, it would be necessary to state the facts of the case.
5. The respondent-plaintiff filed a suit for specific performance of the contract alleging that the appellant-defendant has executed an agreement of sale on 9-11-1986 agreeing to sell a plot bearing No. 222 in Survey No. 218/1 situated at Defence Housing Co-operative Society, Ramakrishnapuram, Malkajigiri, Hyderabad, for a consideration of Rs. 52,000/- on the terms and conditions set out in the said agreement. He alleged in the plaint that as per the agreement, the defendant received a sum of Rs. 10,000/- out of total sale consideration of Rs. 52,000/- and the balance was payable at the time of the registration. It is the further case of the plaintiff that according to the agreement, the defendant had to obtain necessary permission and certificate Under Section 26 of Urban Land Ceiling Act for the sale of the plot in question in favour of the plaintiff. He further averred that he met the defendant several times for obtaining the Urban Land Ceiling Clearance Certificate (hereinafter called the 'U.L.C. Clearance Certificate'). The defendant also promised him that he would get the U.L.C. Certificate and no encumbrance certificate, since the plaintiff wants to avail loan facility from his office. He stated that on this assurance of the defendant that he was ready to sell the plot in question, the plaintiff applied for the loan from his office. The plaintiff further averred in the plaint that in fact, he pursued the applications filed by the defendant for permission under the Urban Land Ceiling Act and the concerned authorities issued permission under L.Dis. So. O & C.A.U.L.C. No. 81 /2612/2686, dt.24-7-1987. By mistake the permission was granted for an area of 315 sq. yards, but the defendant had agreed to sell 350 sq. yards. It was in those circumstances, the defendant at the request of the plaintiff, filed another application on 7-8-1987 and the Competent Authority issued another rectified U.L.C. Clearance Certificate, vide Order No. 1/2612/ 2686, dt.27-8-1987 rectifying the mistake regarding the extent of land permitted to be sold showing at 350 sq. yards instead of 315 sq. yards. The plaintiff further stated that immediately after the issue of the said Certificate, he sent a telegram to the defendant informing the receipt of these U.L.C. Clearance Certificates. He also sent a letter dated 3-9-1987 confirming the receipt of U.L.C. Clearance certificates and requested the defendant to intimate the probable date for execution of the registered sale deed. The defendant did not give reply to his letter dated 3-9-1987. In those circumstances, the plaintiff got issued a legal notice dated 10th November, 1987 through his advocate, for which the defendant did not give any reply. The plaintiff also got published a public notice in Deccan Chronicle on 10-10-1987stating that the property in question was the subject matter of an agreement of sale in favour of the plaintiff and no person could endeavour to buy it. After the publication of that notice in Deccan Chronicle, the defendant issued a reply through his advocate to the legal notice got issued by the plaintiff on 10-9-1987. In the reply given by the defendant through his counsel, he admitted the execution of the agreement of sale and receipt of Rs. 10,000/-, but, however, he refused to execute the sale deed on the ground that under bye-law Nos. 5 and 11 of Defence Housing Co-operative Society (DR) Ltd., the suit property could not be transferred to the plaintiff, since the plaintiff was not a defence ersonnel. Regarding this aspect, the plaintiff contended that this fact that there was such restriction in the bye-laws of defence Housing Co-op. Society was not made to him at any point of time and for the first time in the reply notice given by the defendant through his counsel, this plea has been taken up, only with an ulterior motive to refuse to execute the sale deed in pursuance of the agreement of sale in question. The plaintiff has been always ready and willing to pay the balance sale consideration of Rs. 42,000/- on the execution of the registered sale deed by the defendant in his favour. He further stated that in furtherance of the agreement of sale, the plaintiff has not been put in possession of the schedule property.
6. The defendant contested the suit by filing a written statement practically reiterating what was his stand in his reply notice given through his counsel. In the written statement, the defendant admitted the execution of the said agreement,of sale and receipt of Rs. 10,000/- as advance as part of the sale consideration. The defendant further stated that he purchased the property from the society called 'the Defence Housing Co-operative Society (O.R.) Limited registered under the Co-operative Societies Act, 1964. By himself being a defence officer, he was a member of that co-operative society and the said society sold the suit schedule property to him by a registered sale deed. He further contended that under Bye-law No. 5, only a defence personnel or his widow would be eligible to become a member of the Defence Housing Cooperative Society (O.R.) Limited and under bye-law No. 11, no member shall be permitted to transfer any share or interest held by him without the permission of the society in question. On this basis, he contended that he cannot execute the sale deed in view of the prohibition provided in bye-law Nos. 5 and 11 of the bye-laws of the society. He contended that the plaintiff being not a defence personnel is not qualified to become a member of the said co-operative society nor is entitled to purchase the plot in question. He further contended that the plaintiff had suppressed the fact that he was not a defence personnel and in fact, he has himself represented before him while executing the agreement of sale that he was a defence personnel and on that misrepresentation, he got the said agreement of sale executed in his favour on 9-11-1986. He further stated that he has informed the restriction provided under bye-laws Nos. 5 and 11 of the Society to the plaintiff at the time of execution of the agreement of sale on 9-11-1986. The defendant further contended that1 in view of the condition No. 1 in the agreement that if the Certificates were not obtained within 45 days from the date of the agreement dated 9-11-1986, advance amount of Rs. 10,000/- was liable to be refunded to the plaintiff and accordingly, he requested the plaintiff to receive back Rs. 10,000/-. But without heeding his request, the plaintiff has proceeded to obtain the U.L.C. Clearance Certificate at his own risk instead of getting the agreement of sale cancelled. He further contended that there is no modification in the bye-laws of the society or the policy of the Society that the plots purchased by the members of the society could be sold to other persons, who were not defence personnel. The defendant further contended that all these facts were brought to the notice of the plaintiff in his reply notice dated 19-10-1987 got issued through his counsel. Therefore, he pleaded in the written statement that there was no cause of action for filing the suit for specific performance. He contended that the plaintiff is not entitled to the decree for specific performance of the contract as per the bye-laws of the society. He stated that he was ready to refund Rs. 10,000/- received by him towards part of the sale consideration as an advance.
7. On the basis of these pleadings of tine plaintiff and the defendant, the lower Court raised the following issues:
(1) Whether the plaintiff is entitled for specific performance of the agreement of sale dated 9-11-1986?
(2) To what relief?
8. On behalf of the plaintiff, P.Ws. 1 and 2 were examined and Exs.A-1 to A-16 were marked. On behalf of the defendant, D.Ws. 1 to 4 were examined and Exs.D-1 to B-6 were marked.
9. On an appreciation of the evidence, the Court below decreed the suit in favour of the plaintiff. Hence, it is the defendant, who is aggrieved by the said judgment and decree, preferred this appeal.
10. The learned Counsel for the appellant-defendant strenuously contended 'that though the appellant-defendant has admitted the execution of the agreement of sale in favour of the plaintiff/respondent herein, the plaintiff is not entitled for a decree for specific performance of the agreement of sale on two grounds:
(a) That as per the agreement, Ex. A-1, there is a violation of condition No. 1 of the agreement. Therefore, the plaintiff is not entitled for specific performance. Condition No. 1 states that the first party (defendant) to the agreement should take necessary action to complete the formalities for obtaining the U.L.C. Clearance Certificate within 45 days from the date of Ex.A-1 from the competent authority for the registration of the property in question. It is further contended that if the defendant fails to obtain the same within 45 days from the date of agreement of sale, the amount paid as advance by the second party (plaintiff) shall be refunded by tine defendant to the plaintiff within one week:
(b) That under bye-laws Nos. 5 and 11 of the Defence Co-operative Housing Society Limited, herein after called the 'society', from whom the defendant has purchased the property in question by becoming a member of the society, the defendant cannot transfer the property in question in favour of the plaintiff without the permission of the Managing Committee of the Society. On these two grounds, the learned Counsel for the appellant submitted that the suit of the plaintiff could not have been decreed for specific performance of the contract.
11. Let me examine the first contention of the appellant's counsel. One of the two conditions of the agreement of sale found under Ex.A-1 on which the reliance is placed by the appellant's Counsel reads as under:-
"The first party will take necessary action to complete the formalities for obtaining the Urban Land Ceiling clearance within 45 days from the date of this agreement from the competent authority for registration of the said property. If the first party fails to obtain the same within 45 days from the date of agreement, the amount paid as advance shall be refunded by the first party to the second party within one week."
12. From the reading of the above condition of Ex.A-1, it is clear that it is for the defendant to obtain necessary permission within 45 days from the date of execution of the agreement of sale and, in case, if he fails to do so, it is for the plaintiff to claim refund of the advance amount paid as part of tine sale consideration. Ex.A-1 is executed on 9-11-1986.
13. The defendant as D.W.I has stated that the said agreement of sale, Ex.A-1, was executed in the presence of two witnesses viz., Venkata Rao and Ramanadham, and P.W.2 was also present at that time; and that he received Rs. 10,000/- from the plaintiff as advance at the time of execution of Ex.A-1. According to his evidence, he applied for permission to the Urban Land Ceiling Authority with in a week from the date of agreement, but he could not secure the same on account of N.G.Os. strike. N.G.Os. strike went on nearly 45 days. He further deposed that he requested the plaintiff to get his amount refunded, but the plaintiff requested him to apply for permission once again to U.L.C. Authorities and in those circumstances, he again applied for permission on 27-4-1987.
14. The case of the plaintiff on tine other hand is that the defendant did not pursue the said application before the U.L.C. Authority. Since he wanted to avail the loan facility from his department, he pursued the same. But the U.L.C. Authority granted him permission in the first instance only for 315 sq. yards. Therefore, he again approached the U.L.C. Authority and got the permission with rectified orders for 350 sq. yards for which the defendant had executed Ex.A-1 in his favour. Immediately after receiving the U.L.C. Clearance Certificate, he sent a telegram Ex. A-7 to the defendant to execute the sale deed. He also got published in Deccan Chronicle a notice, Ex.A-13, to the effect that the property in question is agreed to be sold in his favour. Earlier to the above notice Ex.A-13, he had also issued a lawyer's notice to the defendant for executing the sale deed, but there was no reply. But it was only after Ex.A-13, the defendant gave a reply to his lawyer's notice. The reply notices issued on behalf of the defendant are Exs.B-2 and B-3. As stated in the reply notices, Exs.B-2 and B-3, the execution of the agreement of sale dated 9-11-1986 as pleaded by the plaintiff, but it was stated that Ex.A-1 was entered into in favour of the plaintiff on a representation made by the plaintiff that he was a defence personnel. It is further stated in Exs.B-2 and B-3 that unless the plaintiff is a member of the society and unless permission of the society is obtained under bye-laws Nos. 5 and 11, a sale deed cannot be executed in favour of the plaintiff and as per the first condition, as stated supra, of the agreement, the plaintiff car. claim refund of a sum of Rs. 10,000/- and the agreement, Ex.A-1, shall stand cancelled. This aspect of the defendant's case is denied by the plaintiff both in his pleadings and in his evidence. What is to be noted in this case is that as per the first condition in Ex.A-1, it was for the defendant to obtain necessary permission from the U.L.C. authority and according to the explanation offered by the defendant that he could not obtain the same because there was N.G.Os. strike, whatever it may be, that part of the agreement was to be performed by the defendant. For his own either negligence or inability to get necessary certificate within 45 days of the agreement as contemplated, the defendant cannot insist upon the plaintiff to get the refund of Rs. 10,000/- from the defendant paid to him as a part of the sale consideration. In fact, as per the said condition, it was for the plaintiff to opt either for refund of Rs. 10,000/- or execution of the sale deed and it was not for the defendant to insist upon the plaintiff that he should receive the refund of Rs. 10,000/-. Condition No. 1 of Ex.A-1 could also be examined with reference to condition No. 2 of Ex.A-1, according to which if the 2nd party i.e., the plaintiff, failed to pay the balance amount of Rs. 42,000/- within 45 days from the date of receipt of U.L.C. Clearance Certificate, the first party i.e., defendant, would be entitled to forfeit the sum of Rs. 10,000/- paid towards advance. As per the second condition in Ex.A-1, aright was conferred on the defendant to forfeit the amount, if there was a default on the part of the plaintiff and from this condition also, it is clear that condition No. 1 provides a power or authority or option with the plaintiff, not with the defendant. Therefore, the defendant taking undue advantage of his negligence, default or ability, cannot compel the plaintiff to receive refund of Rs. 10,000/-. Thus, condition No. 1 does not confer any right on the defendant and hence, the first contention of the learned Counsel for the appellant that Ex.A-1 cannot be given specific performance cannot be accepted and accordingly, it is rejected.
15. The second contention of the learned Counsel for the appellant relates to bye-law Nos. 5 and 11 of the society. For the sake of convenience, those bye-laws are extracted as under:-
Bye-law No. 5:- MEMBERSHIP ELIGIBILITY:
"Any person who has attained majority and who is competent to contract and of sound mind and who is not a member of another building society working the same area and who is either serving at present or retired or released from the armed forces below the officers rank shall be eligible for admission as a member. Widows of armed forces personnel (other ranks) shall also be eligible for admission as members."
Bye-law No. 11: TRANSFER OF SHARES OR INTEREST OF A MEMBER: "
(a) No member shall be permitted to transfer any share or interest held by him unless:
(i) The member has held such share or interest for not less than cooperative year; and
(ii) Transfer is made to the person who has been admitted as member by the Managing Committee of the society; and
(b) The transfer shall not be operative unless and until:
(i) it is sanctioned by the Managing Committee; and
(ii) until the name of the transferee has been entered in the share transfer register or admission register."
16. From a reading of bye-law No. 5, it is clear that it makes certain persons eligible to become a member of the society. Bye-law No. 11 provides for transfer of shares or interest of a member of the society. From a reading of this bye-law No. 11, the only thing that comes out is, whenever any member wants to transfer his shares or his interest in the society as a member, the same can be done only with the sanction of Managing Committee. This bye-law No. 11 provides a restriction for the transfer of shares of a member of the society.
17. It is not in dispute that the society in question was registered Under Section 4 of the A.P. Co-operative Societies Act, 1964, with the registration certificate issued Under Section 5; and Under Section 9 of the said Act, it is a body corporate with a right to acquire, hold and dispose of the property, to enter into contracts on its behalf and to institute and defend the suits or any other proceedings. From a reading of these sections, it is clear that the society having acquired some property sold the same to its members for constructing houses. Such house building cooperative society would be formed by any section of people having a common interest or object to acquire property for residential purposes, like Shop Employees Co-op. Housing Society, N.G.Os. Housing Co-operative Society, etc. In the instant case, incidentally, it is the co-operative society of the defence personnel. The object of any society is to acquire the property and dispose of the same in favour of its members after allotting it to him, so that a member has a site to construct his house. Thus, a person becomes the member of the society with the sole object of acquiring a house site for constructing a house and nothing more. Once the society has sold the property in favour of its member, the member becomes absolute owner of the property and he can transfer the same to whomsoever he likes and likewise any person can purchase it for his residential purposes. The learned Counsel for the appellant contends that bye-laws Nos. 5 and 11 prohibit the same. But, in my opinion, bye-law Nos. 5 and 11 absolutely have no relation with the right of a member of the society to alienate his property after he acquired the same from the society to some third party.
18. Bye-laws Nos. 5 and 11 of the Society imposes certain restrictions regarding transfer of shares or interest of the member of the society and it has nothing to do with the alienation of the property by a member to the third party. When the objects of these bye-laws were explained to the learned counsel for the appellant-defendant that these bye-laws Nos. 5 and 11 are only intended to provide a procedure for transfer of shares, he submitted that there is another bye-law i.e., bye-law No. 42(13) of the society which prohibits such alienation without the approval of the managing committee. But right from the time of issuing reply notices, Exs.B-2 and B-3, the only contention of the defendant was that bye-laws Nos. 5 and 11 do not permit him to sell the property in favour of the plaintiff and he did not plead any other bye-law. Therefore, it is not possible for me to permit the appellant's counsel to contend that there is some other bye-law in the society which prohibits such alienation by a member of the society to third party without permission of the managing committee. Assuming for the sake of argument that this contention is allowed to be raised at this stage without there being any evidence, without there being any opportunity and notice that there is some other bey-law which requires prior content of the managing committee before a member alienates the property in favour of any other member or any other person, such a bye-law, prima facie, would be illegal. 19. Section 10 of the Transfer of Property Act provides that where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void. Therefore, such 3 condition contemplated by bye-law on its members that a member after purchasing the property from the society cannot alienate the same without the permission of the managing committee of the society would be prima facie, illegal. Moreover, every citizen under the Constitution of India has a right under Article 300-A of the Constitution to property and such a right shall not be deprived unless it is in accordance with the Law. Whatever the right he has acquired to acquire the property bonafide, he shall not be deprived of. Moreover, under Article 19 of the Constitution, a citizen has a fundamental right to reside and settle down in any part of Indian Territory. If there should be any restriction on such a right, the same could be only by appropriate legislature i.e., either by the Parliament or the State Legislature. If there is a Law made by the appropriate legislature, the same could be examined, whether it is a reasonable restriction or otherwise. In the instant case, a bye-law is not a law and the same cannot restrict the rights of citizens. The Supreme Court in Co-operative Central Bank Ltd. and Ors. v. Additional Industrial Tribunal Andhra Pradesh, Hyderabad and Ors, . has held that a bye-law of the society is not law. It is only a matter of contract between the member and the society. Thus, it is clear that the bye-law of the society cannot be a Law within the meaning of Article 13 of the Constitution. From this, it is clear that a bye-law cannot take away the right of the member of the society to alienate the property by putting a condition that such a member shall take the permission of the society to alienate the property that he has acquired. Once the member acquires the property on the basis of a registered sale deed, he becomes the absolute owner of the property. One of the most important rights of a owner is a right to alienate the property. Therefore, the alleged bye-law, prima facie, would be void and not enforceable, particularly against the plaintiff, who is a bonafide purchaser without notice of the bye-laws and who is not a member of the society. The appellant-defendant contends that he has informed the plaintiff regarding the existence of bye-law Nos. 5 and 11, but the plaintiff denies the same. He contends that the defendant has never informed him about the bye-laws and about the alleged restrictions imposed against the non-defence personnel to enter into the transaction with the members of the said society. He contends that the defendant for the first time came forward with this theory when he issued the reply notices, Exs.B-2 and B-3. The plaintiff also further stated that he never represented that he belonged to defence personnel. He admits that he is a non-defence personnel. He further stated in his evidence that the defendant has projected this theory only after he got a notice published in Deccan Chronicle on 19-10-1987- In substance, he pleads that he was only a bonafide purchaser and he was not aware of those bye-laws.
20. As stated above, since the bye-law is not a law, there cannot be a presumption that everyone should know it. The plaintiff being a bona fide purchase for valuable consideration cannot be denied the execution of the sale deed on the basis of bye-laws Nos. 5 and 11 of the society. In similar circumstances, dealing with the law of pre-emption, the Constitution Bench of the Supreme Court in Bhati Ram v. Baij Nath Singh and Ors, . has held that the law of pre-emption as provided by the Rewa State Pre-emption Act was an unreasonable restriction on the fundamental rights conferred on the citizens. To quote:-
"But the Constitution now prohibits discrimination against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them under Article 15 and guarantees a right to every citizen to acquire, hold and dispose of property, subject only to restrictions which may be reasonable and in the interests of the general public. Though therefore the ostensible reason for pre-emption may be vicinage, the real reason behind the law was to prevent a stranger from acquiring property in any area which had been populated by a particular fraternity or class of people. In effect, therefore, the law of pre-emption based on vicinage was really meant to prevent strangers, i.e., people belonging to different religion, race, or caste, from acquiring property. Such division of society now into groups and exclusion of strangers from any locality cannot be considered reasonable; and the main reason therefore which sustained the law of preemption based on vicinage in previous times can have no force now and the law must be held to impose an unreasonable restriction on the right to acquire, hold and dispose of property as now guaranteed under Art.l9(l)(f), for it is impossible to see such restrictions as reasonable and in the interests of the general public in the state of society in the present day."
21. As stated above, assuming for the sake of argument that there should be any such restriction on the right of the citizen derogatory to the fundamental rights or even Section10 of the Transfer of Property Act on his power to dispose of the property, it must be by a law by appropriate legislature and not by way of bye-laws of the Housing Society. Therefore, the bye-laws of the Society which restricts such a power is illegal and void and therefore, with reference to bye-laws Nos. 5 and 11 or any other bye-laws of the society, the plaintiff cannot be denied the specific performance of the contract.
22. There is one more circumstance that there were other alienations in favour of the civilians, who were non-defence personnel and who have purchased the plots and constructed houses and their families are living in those houses. Some of those non-defence personnel, after constructing houses, have let out their houses to some third parties. According to the evidence of P.W.I (Plaintiff), at least 1/3 rd of the inhabitants of the said colony are civilians. The plaintiff also filed in to Court the other sale deeds executed by the allottees/ members of the society, in favour of non-defence personnel, vide Exs.A-4 to A-6.
23. In view of Exs.A-4 and (sic. to) A-6 and also in view of the admission of D.W.I (defendant) in his evidence that under these documents, Exs.A-4 to A-6, plots were sold by the defence personnel in favour of non-defence personnel, who have constructed houses and whose families are living there, it is clear that the society has never been serious about the bye-laws Nos. 5 and 11 or any other bye-law of the society. Moreover, these bye-laws, as stated above, cannot be applied to the facts of this case. There is no reason why the plaintiff should be discriminated to deny the purchase made by him when other civilian purchasers after purchasing the same have constructed houses and they are living with their families there. Hence, I am of the opinion that for these reasons and also for the reasons given by the lower Court, the lower Court has rightly held that Ex.A-1 is enforceable against the defendant and accordingly, it has decreed the suit. Therefore, the judgment and decree passed by the lower Court do not warrant any interference.
24. In the result, the appeal is dismissed, confirming the judgment and decree passed by the lower Court, but, in the circumstances of the case, without costs.