Karnataka High Court
Clifford George Pinto vs M.R. Shenava And Ors. on 8 April, 2004
Equivalent citations: AIR2005KANT167, 2005(1)KARLJ458, AIR 2005 KARNATAKA 167, 2005 AIR - KANT. H. C. R. 316, (2005) 3 CURCC 498, (2005) 1 KANT LJ 458, (2005) 2 ICC 197, (2005) 1 KCCR 87, (2005) 1 CIVILCOURTC 704
Author: K. Sreedhar Rao
Bench: K. Sreedhar Rao
JUDGMENT K. Sreedhar Rao, J.
1. The appeal filed against the judgment and decree passed in O.S. No. 62 of 1984 on the file of Principal Civil Judge (Senior Division), Mangalore. The Trial Court disposed of the suits O.S. Nos. 62 of 1984 and 265 of 1983 by recording common evidence and common judgment.
2. The appellant is the plaintiff in O.S. No. 62 of 1984 filed for declaration that the sale deeds Exs. P. 1 and P. 2 executed by the first defendant are null and void and seek consequential relief of possession free from all encumbrances. The 4th defendant filed a separate suit O.S. No. 265 of 1983 against the second defendant for the relief of specific performance in respect of the property, which is a subject-matter of O.S. No. 62 of 1984.
3. The appellant in this proceeding will be referred to as plaintiff and the respondents would be referred to as defendants for convenient discussion.
4. According to the plaintiff the suit properties belonged to his mother Mrs. Aquis Pinto. After her demise, the plaintiff along with his father (defendant 5), sister (defendant 6) and brothers (defendants 7 to 9) succeeded to the property and they are all co-owners of the property. The suit property was mortgaged. The mortgagee had filed a suit in O.S. No. 22 of 1973 for recovery of the mortgage amount. The suit was decreed, the suit property was brought to sale for realisation of the decreetal debt.
5. The first defendant is an Advocate, who defended the interests of the plaintiff and defendants 5 to 7 in O.S. No. 22 of .1973. Mrs. Aquis Pinto found it difficult to manage the property, since her husband and children were all scattered and living at different places. Therefore, the 1st defendant was requested to negotiate and sell the property to third parties to avoid Court sale. The defendant 5 and defendants 7 and 8 executed the GPA in favour of the first defendant. The first defendant entered into an agreement with defendants 2 and 3. They insisted that the 1st defendant had to produce the powers of attorney of all the co-owners. Pursuant to which the plaintiff who is residing at Doha in Quotar executed power of attorney at Ex. D. 57 and the 6th defendant residing at Bombay executed power of attorney Ex. D. 56 in favour of the 1st defendant. The Ex. D. 57, power of attorney is prepared at Doha and sent by post to the first defendant. On the basis of powers of attorney the sale deeds Exs. P. 1 and P. 2 are executed.
6. It is the case of the plaintiff that the powers of attorney Exs. D. 56 and D. 57 authorised the first defendant to sell only Item No. 1 of the 'A' Schedule and not Item No. 2 of the 'A' Schedule. The powers of attorney Ex. D. 56 and Ex. D. 57 are tampered and interpolated to include Item No. 2 of the suit schedule. The 2nd defendant was aware of the forgery when he purchased the property. Therefore, it is contended that the sale deeds executed by the first defendant in favour of defendants 2 and 3 on the basis of forged power of attorney is null and void and the first defendant would not get any legal authority to effect of sale on the strength of the forged documents. It is further contended that the first defendant has misappropriated the sale consideration and has not accounted for the same to the plaintiff and other co-owners.
7. Defendants 1 to 4 contested the case, defendant 5 died immediately after filing of the suit and he had not filed the written statement. The defendants 6 to 9 support the case of the plaintiff.
8. Before filing of the suit, the second defendant entered into an agreement for sale in respect of a portion of the 'A' Schedule property. In that connection the 4th defendant filed a suit against the 2nd defendant in O.S. No. 265 of 1983 seeking specific performance of the contract. The suit is decreed. The execution proceedings are taken out by the 4th defendant, and the sale deed is obtained through Court. The plaintiff and other defendants are not parties in O.S. No. 265 of 1983. Nonetheless, both the suits are clubbed, common evidence is recorded and common judgment is rendered.
9. The plaintiff has filed an appeal against the dismissal of his suit in O.S. No. 62 of 1984 and has not preferred any appeal against the judgment and decree in O.S. No. 265 of 1983. Apparently, it may suggest an anomalous situation for the plaintiff for not preferring the appeal against the judgment and decree in O.S. No. 265 of 1983, which affects his interests. When both the suits are tried jointly, the plaintiff is deemed to have the notice of the adverse decree in O.S. No. 265 of 1983 although, he is not a party to the suit. The failure to file an appeal against the decree in O.S. No. 265 of 1983 apparently suggests a conflicting situation.
10. However, on thorough consideration, I find no legal impediment for the plaintiff in O.S. No. 62 of 1984, to maintain this appeal without preferring appeal against the decree in O.S. No. 265 of 1983, since he claims relief of possession free from all encumbrances from defendants 1 to 4. The sale deed obtained by the 4th defendant through Court in O.S. No. 265 of 1983 will be of no consequence in law as against the plaintiff, if he were to succeed in his suit. The reliefs prayed for in O.S. No. 62 of 1984 are comprehensive enough to effectively adjudicate the adverse claim of 4th defendant if any in this suit, notwithstanding the decree in O.S. No. 265 of 1983 and absence of appeal against that decree.
11. The contention of the Counsel for the plaintiff that the sale deed obtained by the 4th defendant through Court is hit by Section 52 of the Transfer of Property Act, 1882 is untenable. The suit filed by the 4th defendant for specific performance in O.S. No. 265 of 1983 is prior to the suit of the plaintiff. After the decree, through Court the 4th defendant has obtained sale deed. Section 52 of the Transfer of Property Act, 1882 would apply in a case where the sales are made by way of private negotiations and during the pendency of the suit. The facts on hand stand on a different footing and do not attract Section 52.
12. The Trial Court finds that the insertions in Ex. D. 56 and Ex. D. 57 are made by the 5th defendant and not by the first defendant. Therefore, the validity of the powers of attorney is not affected, the consequent sale made by the first defendant is valid in law. Thus dismissed the suit.
13. Sri Chaitanya Hegde, Counsel for the appellant contends that the tampering of Ex. D. 56 and Ex. D. 57 is evident to the naked eye. The inclusion of Item No. 2 of the 'A' Schedule in the powers of attorney is glaring. The second item in the power of attorney is typed by a different typewriter. The body of the contents of power of attorney refers to the subject-matter as property in a singular sense and not as properties in plural sense. The Ex. P. 121 and Ex. P. 122 are the attested photocopies taken at the time when the original was executed. The Item No. 2 of the 'A' Schedule is not found in the said attested photocopies. Therefore, argued that the powers of attorney at Ex. D. 56 and Ex. D. 57 are forged and tampered. Therefore, the entire document should fail as null and void.
14. The decision of the Privy Council in Nathu Lal and Ors. v. Mt. Gomti Kuar and Ors., AIR 1940 PC 160 : 67 Ind App 318, is relied on. At pages 163, 164 and 165 the following observations are made:
"The rule relating to the effect of material alterations in a deed made after its execution, by or with the consent of any party thereto, as it prevails in English Courts can be briefly summarised as follows:
If an alteration (by erasure, interlineation or otherwise) is made in a material part of a deed after its execution by or with the consent of any party thereto or person entitled thereunder, but, without the consent of the party or parties liable thereunder, the deed is thereby made void. The avoidance however is not ab initio or so as to nullify any conveyancing effect which the deed has already had; but only operates as from the time of such alteration and so as to prevent the person who has made or authorised the alteration and those claiming under him, from putting the deed in suit to enforce, against any party bound thereby who did not consent to the alteration, any obligation, covenant or promise thereby undertaken or made.
A material alteration is one which varies the rights, liabilities, or legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed.
The effect of making such an alteration without the consent of the party bound is exactly the same as that of cancelling the deed. The avoidance of the deed is not retrospective and does not revest or re-convey any estate or interest in property which passed under it. And the deed may be put in evidence to prove that such estate or interest so passed or for any other purpose than to maintain an action to enforce some agreement therein contained".
Referring to the policy of the rule, Sir George Jessel observed in Suffell v. Bank of England, (1882)9 QBD 555 : 51 LJQB 401 : 47 LT 146 : 30 WR 932 : 46 JP 500, at p. 561:
"A man shall not take the chance of committing a fraud and when that fraud is detected, recover on the instrument as it was originally made. In such a case the law intervenes, and says that the deed thus altered no longer continues the same deed and that no person can maintain an action upon it. In reading that the other cases cited, I observe that it is nowhere said that the deed is void merely because it is the case of a deed, but because it is not the same deed. The deed is nothing more than an instrument or agreement under seal; and the principle of those cases is that any alteration in a material part of any instrument or agreement avoids it, because it thereby ceased to the same instrument. And this principle is founded on great good sense, because it tends to prevent the party in whose favour it is made from attempting to make any alteration in it. This principle, too, appears to me as applicable to one kind of instrument to another.
Is there anything in the principle or origin of this rule which makes it inapplicable to conditions prevailing in India? Their Lordships have no difficulty in answering the question in the negative. The rule is based on "great good sense". It is dictated by public policy and is independent of considerations of clime or race. It is consistent with the principles of equity and good conscience which have generally prevailed in India, unless they conflicted with Hindu or Mahomedan law. In their Lordships' opinion, there is no reason why the rule should not be made applicable to India. Their Lordships are not therefore surprised to find that the rule has in fact been adopted in Indian decisions which are numerous. It is enough to refer to a few, one from each of the important provinces: Subrahmania Ayyan v. Krishna Ayyan, (1900)23 Mad. 137, Mangal Sen v. Shankar Sahai, (1903)25 All. 580 (FB) : 1903 AWN 122 (FB), Gogun Chunder Ghose v. Dhuronidhur Mundul, (1881)7 Cal. 616 : (1881)9 CLR 257 and Namdev Jayram v. Swadeshi Vyapari Mandali Limited, AIR 1926 Bom. 491. Their Lordships are in complete accord with the views of Sir Richard Garth, C. J. where that eminent Judge, dealing with the argument that this rule belonged to the law of England and should not be made applicable to India, observed that he saw no reason why it should not and saw every reason why it should : Gogun Chunder Ghose's at page 619".
15. The ratio laid down by the Privy Council in Nathu Lal's case, is followed by the Supreme Court in Loonkaran Sethia v. Mr. Ivan E. John and Ors., the following observations are made:
"23. Question No. 5.-Before proceeding to determine this question, it would be well to advert to the legal position bearing on the matter. As aptly stated in paragraph 1378 of Volume 12 of Halsbur/s Laws of England (Fourth Edition) "if an alteration (by erasure, interlineation or otherwise) is made in a material part of a deed, after its execution, by or with the consent of any party to or person entitled under it, but without the consent of the party or parties liable under it, the deed is rendered void from the time of the alteration so as to prevent the person who has made or authorised the alteration, and those claiming under him, from putting the deed in suit to enforce against any party bound by it, who did not consent to the alteration, any obligation, covenant or promise thereby undertaken or made.
A material alteration, according to this authoritative work, is one which varies the rights, liabilities, or legal position of the parties as ascertained by the deed in its original state, or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or which may otherwise prejudice the party bound by the deed as originally executed.
The effect of making such an alteration without the consent of the party bound is exactly the same as that of cancelling the deed".
16. The factual finding of the Trial Court that the insertions are made by the 5th defendant and therefore, would not affect the validity of the powers of attorney, is an incorrect view and the entire approach and analysis of the Trial Court is faulty.
17. The ratio laid down by the Privy Council in Nathu Lal's case and of Supreme Court in Loonkaran Sothia's case has no application to the facts of the case. On the other hand, the facts on hand attract the provisions of Section 237 of the Contract Act, which reads thus:
"237. Liability of principal inducing belief that agent's unauthorised acts were authorised.-When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent's authority".
18. As between the agent and principal it can be said that the document is void. But on the basis of the said powers of attorney, if the agent has incurred obligations with the third parties, it should bind the principal.
19. The plaint makes hazy averments of the second defendant's knowledge of forgery, in the following words, found at the last lines of para II(f):
"The first defendant could not have misused the confidence reposed on him in this fashion and play fraud on the plaintiff. The above act of forgery committed by the first defendant, it appears was known to the 2nd defendant, for the 1st and 2nd defendants were a close associates, in the matter of realisations of fruit crops from the schedule property and they constituted one unit, as it were".
Whereas, the plaintiff makes a detour in evidence and states in the following manner in para 17 of the examination-in-chief:
"Defendant 2 had only a petty business. Defendants 2 and 3 had no means to purchase the properties under two sale deeds. The defendants 2 and 3 are the tools in the hands of defendant 1. Defendants 2 and 3 are name lenders for defendant 1. The defendant 1 brought the two sale deeds for his benefit only".
20. The evidence of P.W. 1 does not spell out knowledge and complicity of the 2nd defendant. In the cross-examination of the second defendant-D.W. 3 nothing is elicited or suggested to show that he had complicity in the act of forgery committed by the first defendant or had knowledge of forgery in any manner. Therefore, from the facts and evidence it is evident that the plaintiff has not made out any case of complicity or knowledge on the part of defendants 2 and 3 regarding tampering and forgery of Ex. D. 56 and Ex. D. 57. The evidence of P.W. 3 on the other hand discloses that the defendants 2 and 3 were assured by the first and 5th defendants and their relatives. They also consulted the lawyer before purchasing the property. In that view of the matter, the contention that the second defendant nastily purchased without scrutiny of the original document of title is an untenable argument.
21. The contention that the sale made by the 1st defendant if any shall be valid only to the extent of first item of Ex. D. 56 and Ex. D. 57 in view of the forgery is untenable. In the present case, the provisions of Section 237 of the Contract Act would apply. The Indian Contract Act by "Pollock and Mulla" at pages 927 and 928 the following observations are made:
Section 237 of the Contract Act deals with the case where there is relationship of principal and agent, and the agent has acted without authority of the principal. The principal is bound by the unauthorised acts of the agent if by words or conduct he induces a third party to believe that the unauthorised acts of the agent are within the scope of the agent's authority. "Good faith requires that the principal shall be held bound by the acts of the agent within the scope of his general authority, for he has held him out to the public as competent to do the acts and to bind him thereby": S.A. and 127. "If a person authorises another to assume the apparent right of authority is the real authority ... It is clear that he (the agent) may bind his principal within the limits of the authority with which he has been apparently clothed by the principal in respect of the subject-matter; and there would be no safety in mercantile transactions if he could not. . . . If the owner of a horse send it to a repository of sale, can it be implied that he sent it thither for any other purpose than that of sale? Or if one sends goods to an auction room, can it be supposed that he sent them thither merely for safe custody?" Similarly, where a transaction undertaken by an agent on behalf of his principal is within his express authority the principal is bound without regard to the agent's motives, and inquiry whether the agent was abusing his authority for his own purposes is not admissible. A clerk of a Co-operative, Credit Society functioning as a clerk of the Society was held to have ostensible authority to receive payments and an agent of the Society to act as such.
"The Supreme Court of Pakistan has held that any limitation on the authority of an agent does not affect the rights of third parties who are unaware of the restrictions and if the circumstances are such as to confer an apparent authority on the agent.
If an agent is entrusted with the disposal of negotiable securities or instruments, and he disposes of them by sale or pledge or otherwise, contrary to the orders of his principal to a bona fide holder without notice, the principal cannot reclaim them".
22. The provisions of Section 237 envisage that if the principal by his words or conduct induces third persons to believe that the acts and obligations are within the scope of agent's authority, it would bind the principal. In the present case, the plaintiff has constituted the first defendant as his power of attorney executing Ex. D. 57 may be to deal with only one item of the property. The said conduct takes the case squarely within the scope of the words "principal by his act induces such third persons". The plaintiff to his peril has chosen unscrupulous person as his power of attorney and allowed scope for manipulation and forgery by the power of attorney. The defendants 2 and 3 without the knowledge of forgery and fraud, going by the apparent tenor of Ex. D. 57, bona fidely purchased the property assuming that the first defendant was within the scope to deal with the properties, therefore, the transaction binds the plaintiff.
23. It is a case of the first defendant playing fraud against his principal and also against the defendants 2 and 3. In such a case, the equity should favour and remedy the grievance of the third party and not the principal, who may also be a victim of fraud, since, the principal by his own actions and lapses allowed a situation of this kind to occur.
24. In view of the facts and circumstances stated above, I find that the plaintiff has failed to prove the acts of fraud on the part of defendants 2 and 3. The provisions of Section 237 of the Indian Contract Act would apply, the sale affected under Exs. P. 1 and P. 2 would bind the plaintiff. The judgment and decree of the Trial Court is confirmed although not for the reasons stated therein but for the reasons stated above. Accordingly, the appeal is dismissed. The parties to bear their own costs.