Karnataka High Court
Smt Chowdamma vs Smt Meena A Jain on 19 April, 2024
Author: Krishna S Dixit
Bench: Krishna S Dixit
-1-
RFA No. 1920 of 2016
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF APRIL, 2024
PRESENT
THE HON'BLE MR JUSTICE KRISHNA S DIXIT
AND
THE HON'BLE MR JUSTICE C.M. POONACHA
RFA NO.1920 OF 2016 (SP)
BETWEEN:
1. SMT.CHOWDAMMA,
W/O LATE SHRI K H VENKATESH REDDY,
AGED ABOUT 75 YEARS,
OCC: HOUSEHOLD WORK.
2. SMT.B.N.VIJAYALAKSHMI,
W/O SHRI K V HANUMAPPA REDDY,
AGED ABOUT 55 YEARS,
OCC: HOUSEWIFE.
BOTH ARE R/AT NO.168A, NEW NO.8/1,
6TH CROSS ROAD, 1 'N' BLOCK,
RAJAJINAGAR, BENGALURU - 560 010.
(NOTE: DEFENDANTS 1 & 2 IN THE TRIAL COURT AND
APPELLANTS 1 AND 2 BEFORE THIS HON'BLE COURT)
...APPELLANTS
(BY SRI.K H SOMASHEKHARA., ADVOCATE FOR A1;
SRI.G.A.SRIKANTE GOWDA.,ADVOCATE FOR A2)
AND:
1. SMT.MEENA A JAIN,
W/O SHRI ASHOK R JAIN,
AGED ABOUT 47 YEARS,
2. SMT. DARPAN A JAIN,
W/O SHRI AMIT R JAIN,
AGED ABOUT 41 YEARS,
-2-
RFA No. 1920 of 2016
BOTH ARE RESIDING AT NO.401, III FLOOR,
PANCHASHEELA APARTMENTS, GANDHINAGAR,
BENGALURU - 560 009.
(NOTE: PLAINTIFFS 1 AND 2 IN THE TRIAL COURT AND
RESPONDENTS 1 AND 2 BEFORE THIS HON'BLE COURT)
...RESPONDENTS
(BY SRI.D N MANJUNATH.,ADVOCATE)
THIS RFA IS FILED UNDER ORDER XLI RULES 1 AND 2
R/W SEC.96 OF CPC., AGAINST THE JUDGEMENT AND DECREE
DATED 22.10.2016 PASSED IN O.S.NO.2688/2010 ON THE FILE
XVIII ADDL. CITY CIVIL AND SESSIONS JUDGE, AT
BENGALURU CITY, DECREEING THE SUIT FOR SPECIFIC
PERFORMANCE.
THIS RFA HAVING BEEN HEARD AND RESERVED FOR
ORDER, THIS DAY, KRISHNA S. DIXIT.J., PRONOUNCED THE
FOLLOWING:
JUDGEMENT
This Appeal by the Defendants calls in question a Judgement & Decree dated 22.10.2016 whereby respondents' specific performance suit in O.S.No.2688/2010 having been decreed, the appellants are directed to obtain an absolute sale deed comprising of subject property from the Bangalore Development Authority, and thereafter to execute & register a sale deed in their favour within thirty days and further deliver possession, failing which they can get the same done through the process of court. There is also a direction restraining the appellants "from alienating, mortgaging or -3- RFA No. 1920 of 2016 in any way dealing with the suit property ....". After service of notice, the respondent-defendants having entered appearance through their counsel resist the appeal.
II. FOUNDATIONAL FACTS:
(1) The subject house site admeasuring 40X60 sq.ft.
was originally allotted to one Mr.K.H.Venkatareddy way back in 1965 by CITB, a statutory body which is the predecessor the BDA, constituted under the provisions of the Bangalore Development Authority Act, 1976. The allottee having died, a formal allotment came to be made in favour of his widow Smt.Chowdamma who happens to be the first Appellant herein vide Allotment Letter dated 11.11.1993. She has put up residential structure comprising of ground & first floors. There is some marginal land adjoining the suit property, and that too happens to have been allotted to her.
(2) Despite there being no registered sale deed pursuant to Allotment Letters, the first Appellant transferred the subject property in favour of second -4- RFA No. 1920 of 2016 Appellant vide registered Gift Deed dated 26.04.2004 and accordingly entries have been updated in the Municipal Records. The second Appellant is none other than the daughter-in-law of first Appellant.
(3) There was an Agreement to Sell the subject property between the second Appellant and the Respondents herein. That was concluded on 21.05.2009 for a consideration of Rs.35,00,000/- which has been admittedly paid by the Respondent - Plaintiffs. It is registered also. It was stipulated between the parties that the vendors should obtain a regular sale deed at the hands of BDA within a period of thirty days. The sale deed was required to be executed within ninety days after the obtainment of sale deed. At this stage, it is relevant to mention that the Appellants got extended the time for compliance by drawing an Endorsement on the original Agreement itself.
(4) Since no efforts were made from the side of Appellants to secure the sale deed and thereafter to execute the conveyance, the Respondent - Plaintiffs got -5- RFA No. 1920 of 2016 issued a legal notice dated 22.09.2009 calling upon them to accomplish the deal. This was followed by a Rejoinder Notice dated 23.11.2009. Therefore, the Respondents filed the Suit for Specific Performance. The same was resisted by the Appellants by filing the Written Statement. The Court below framed six principal issues which read as under:
"(1) Whether the plaintiffs prove that the defendants entered in to an agreement to sell the suit schedule property in their favour for consideration of Rs.35 Lakhs and received entire sale consideration and execute registered agreement of sale dtd. 21.05.2009?
(2) Whether the defendants prove that the alleged agreement of sale dtd. 21.5.2009 is a fabricated document and they never agreed to sell the suit schedule property in favour of plaintiffs?
(3) Whether the defendants prove that the plaintiffs played frau in obtaining the alleged agreement of sale by falsely representing that the said document was only a mortgage deed?
(4) Whether the plaintiffs prove that they have always been ready and wiling to perform their part of contract?"
(5) On behalf of the Plaintiffs, one Mr. Amit R Jain i.e., their Attorney was examined as PW1. He is none -6- RFA No. 1920 of 2016 other than the husband of second Plaintiff. In his deposition, as many as 20 documents came to be marked as Exhibits P1 to P20 which inter alia included the Power of Attorney, Site Allotment Letter, Gift Deed, Agreement of Sale, Legal Notices. From the side of Defendants, Smt. B N Vijayalakshmi who is none other is the second Appellant herein came to be examined as DW1; in her deposition, five documents came to be marked as per Exhibits D1 to D5. They comprised of, Katha Extract, Katha Certificate, Gazette Notification & Genealogical Tree. III. Learned judge of the Court below having considered pleadings of the parties and weighed the evidentiary material placed on record has decreed the subject suit with costs, as under:
"It is further ordered and decreed that the defendants are directed to obtain absolute sale deed in respect of suit property from BDA within 60 days from the date of decree (22/10/2016) and thereafter to execute registered sale deed in favour of plaintiffs within 30 days an deliver possession to the plaintiffs. If the defendants failed to execute the same, the plaintiffs can get the sale deed execute through the process of court.-7- RFA No. 1920 of 2016
It is further ordered and decree that the defendants, any person or persons claiming through or under them are hereby restrained form alienation mortgaging or in any way dealing with the suit property in favour of third parties."
IV. Having heard the learned counsel for the parties and having perused the Appeal papers along with the LCR, we are inclined to grant indulgence in the matter as under
and for the following reasons:
a) The subject Agreement dated 21.05.2009 which is a registered document, is not in dispute. It is marked as Ex.P7. It mentions about the receipt of Rs.35,00,000/-
by the Appellants herein by way of full consideration for the intended sale. Subsequently, an Endorsement is made on 21.05.2010 on this Ex.P7 itself extending the period for execution of the sale deed upto 31.03.2010. This is separately marked as Ex.P8. Even this is admitted. Clause 29 of the Agreement read with Clause 31 provides for payment of a liquidated damages of Rs.35,00,000/- in addition to refunding the amount received, should the sale transaction not materialize. Ordinarily, such clauses do not occur when the transaction is for the purpose of -8- RFA No. 1920 of 2016 securing the repayment of loan. Therefore, the vehement submission of learned counsel for the Appellants that the subject Agreement was executed only by way of security for the repayment of the amount taken, is bit difficult to countenance. Therefore, we are not inclined to disturb the finding of the Court below to the same effect.
b) The above being said, we are not inclined to uphold the Decree for Specific Performance because:
admittedly, the value of site along with the building is about Rs.1.03 Crore, going by the Guideline Value Notification which is vouched by Ex.D4. In the cross-
examination, when it was suggested to the PW1 that value of suit property was much more than that i.e., Rs.3 to 4 crore, he only feigned ignorance. That cannot be taken as the denial. The vehement submission of learned counsel for the Respondent - Plaintiffs that what should be the consideration for a transaction is left to the contracting parties and Court cannot rewrite their arrangement, is true as a broad proposition. This view gains support from the decision of Apex Court in FERRODOUS ESTATES (PVT.) -9- RFA No. 1920 of 2016 LTD vs. P GOPIRATHNAM (DEAD) AND OTHERS, 2020 SCC OnLine SC 825, is also true. Inadequacy of consideration ordinarily does not figure as a factor in adjudging the validity of a transaction.
c) Admittedly, what is paid by way of consideration is Rs.35 lakh only when value of the property even going by the Guideline Value Notification is more than a crore rupees. In other words, the agreed price roughly comes to 1/3rd of Guideline Value, (including the value of a two storey building). It needs no research to know that the market value of any property is almost invariably much more than the Guideline Value;
governments notify guideline value only for the purpose of securing the adequate stamp duty. These Notifications are not regularly revised. In the case at hand, the guideline values were prescribed by the 2007 Notification whereas, the agreement of the year 2009. Every year the value of property in real estate market escalates, is a matter of common knowledge. What has been paid by way of
- 10 -RFA No. 1920 of 2016
consideration is about 20% of the market value. Its being too inadequate, shocks our conscience.
d) Inadequacy of consideration does not affect validity of a contract, is true. But certainly, it can be a ground for denying the decree for specific performance.
The authorities on inadequacy of consideration as a ground for refusing specific performance are not easy to reconcile. Specific performance may be refused where inadequacy of consideration is coupled with some other factor not necessarily amounting to fraud or other invalidating cause at law. It may be refused on the ground of inadequacy of consideration even though the circumstances do not readily justify rescinding of a contract. CHITTY ON CONTRACTS, 27th Edition, Sweet and Maxwell, Volume 1 at paragraph 27-018 writes as under:
"General. Specific performance is a discretionary remedy. It may be refused although the contract is binding at law and cannot be impeached on some specific equitable ground (such as undue influence); although damages are not an adequate remedy; and although the contract does not fall within the group of contracts, discussed
- 11 -RFA No. 1920 of 2016
above, which will not be specifically enforced. But the discretion to refuse specific performance is "not an arbitrary . . . discretion but one to be governed as far as possible by fixed rules and principles." In particular, the court may refuse to order specific performance on the grounds to be discussed in the following paragraphs. Its discretion to refuse specific performance on such grounds cannot be excluded by the terms of the contract."
Similarly, the same author says at paras 27-019:
"...specific performance may also be refused where the cost of performance to the defendant is wholly out of proportion to the benefit which performance will confer on the plaintiff..."
In support of this proposition, he cites TITO vs. WADDELL (No.2) [1977] Ch.106, 326.
e) The discretion to deny specific performance of contract was vested in the courts under section 20 of the Specific Relief Act, 1963, in the pre-amendment regime. While granting a Decree for Specific Performance, Courts do exercise discretion in accord with the rules of reason & justice. What the Apex Court observed in K.NARENDRA vs. RAVIERA APARTMENTS (P) LTD., (1999) 5 SCC 77 at para 29, is worth adverting to:
- 12 -RFA No. 1920 of 2016
"Section 20 of the Specific Relief Act, 1963 provides that the jurisdiction to decree specific performance is discretionary and the court is not bound to grant such relief merely because it is lawful to do so; the discretion of the court is not arbitrary but sound and reasonable guided by judicial principles and capable of correction by a court of appeal. Performance of the contract involving some hardship on the defendant which he did not foresee while non-performance involving no such hardship on the plaintiff, is one of the circumstances in which the court may properly exercise discretion not to decree specific performance. The doctrine of comparative hardship has been thus statutorily recognized in India. However, mere inadequacy of consideration or the mere fact that the contract is onerous to the defendant or improvident in its nature , shall not constitute an unfair advantage to the plaintiff over the defendant or unforseeable hardship on the defendant. The principle underlying Section 20 has been summed up by this Court in Lourdu Mari David and others vs. Louis Chinnaya Arogiaswamy and others. AIR 1996 SC 2814 by stating that the decree for specific performance is in the discretion of the Court but the discretion should not be used arbitrarily; the discretion should be exercised on sound principles of law capable of correction by an appellate court."
This aspect of law has not been duly considered by the court below while granting the impugned judgment & decree for specific performance of the agreement in question.
- 13 -
RFA No. 1920 of 2016
f) There is another reason for us to upset the impugned Decree for Specific Performance. As already mentioned above, Clause 29 r/w Clause 31 of the Agreement to Sell (Ex.P7) specifically provides for the payment of liquidated damages in a sum of Rs.35 lakh. No reasons are assigned by the Court below for not invoking these Clauses and thereby awarding the damages along with refund of the amount received by the Appellants. In our considered view, this aspect of the matter ought to have been dealt with by the Court below and had it been done, arguably the Decree for Specific Performance would not have been given. Thus, there is an added infirmity in the impugned Judgement & Decree.
g) Above apart, there is yet another reason for turning down the Decree for Specific Performance: the Appellants have filed a Memo undertaking to pay to the Respondent - Plaintiffs a sum of Rs.1.40 crore which would include the amount that was received by them, the liquidated damages stipulated by the parties and something more than that. The said Memo dated 05.03.2024 reads as under:
- 14 -RFA No. 1920 of 2016
"The Appellants submit that they received a loan amount of Rs.35,00,000/- (Rs.Thirty five lakhs) from plaintiff/Respondent on 21.05.2009 and they undertake to repay the said amount of Rs.35,00.000/- and pay additional amount of Rs.1,05,00,000/- (Rs.One Crore five lakhs) as interest for delay in repaying said amount.
The Appellants submit that in total, they undertake to pay a sum of Rs.1,40,00,000/- (one crore forty lakhs) to Respondents within a period of 2 months in equal installments. The Appellant pray this Hon'ble Court to consider this memo and allow appeal as they have agreed to pay aforesaid amount in the interest of justice and equity."
h) In all fairness, we would have ordered the refund of money with commercial rate of interest and further, the liquidated damages in a sum of Rs.35 lakh, in lieu of the claim for the specific performance of the Agreement in question, as has been stipulated by the parties. The Appellants have taken up an unconscionable stand that the subject Agreement was secured by fraud & forgery, which they could not establish. The fact that they admitted the endorsement at Ex.P8 whereby time for performance of the Agreement was elongated, belies such a contention. Added, they have retained a huge sum of Rs.35 lakh for about 15 years and made use of it to their
- 15 -
RFA No. 1920 of 2016benefit and to the detriment of the Plaintiffs. Therefore, as a complete package, they are liable to pay to the Respondent - Plaintiffs a sum of Rs.1.40 crore in a stipulated period, with a default clause.
In the above circumstances, this Appeal is partly favoured: the impugned Judgement & Decree are set at naught. In their lieu, the suit is decreed for the payment of Rs.1,40,00,000/- (Rupees One Crore & Forty Lakh) only to the Respondent - Plaintiffs within a period of eight weeks, failing which, the said Judgement & Decree shall revive on their own and become executable as if this appeal has been dismissed.
Costs made easy.
Sd/-
JUDGE Sd/-
JUDGE Snb/