Orissa High Court
The Orissa State Electricity Board vs Indian Metals & Ferro Alloys Ltd. on 27 April, 1990
Equivalent citations: AIR1991ORI59, AIR 1991 ORISSA 59, (1991) 1 LJR 553, (1990) 3 CURCC 476, (1990) 70 CUT LT 342
Author: G.B. Patnaik
Bench: G.B. Patnaik
JUDGMENT G.B. Patnaik, J.
1. Plaintiff is the appellant against the judgment and decree of the Subordinate Judge in a suit for refund of consideration money to the tune of Rupees 60,000/- that was paid to the defendant for purchasing 37.07 acres of land described in the plaint Schedule, as the defendant failed to execute the sale deed as it had no title over the said land.
2. Plaintiffs case, briefly stated, is that the defendant-Company which manufactures ferro-silicon in its factory at Theruvali in the district of Koraput negotiated with the plaintiff for supply of power. The plaintiffs officers intimated that in order to enable the plaintiff to supply power it would be necessary to establish a substation and requisite buildings for staff quarters and, therefore, some land would be necessary by them. The defendant agreed to sell 37.07 acres of land for a consideration of Rs.88,032/- which the defendant stated to be its leasehold property from the Government. The plaintiff paid a sum of Rs. 60,000/ - as advance having agreed to pay the balance sum of Rs. 28,032/- after execution of the sale deed andits registration. This payment was made by an accountpayee cheque dated 30th of March, 1967. The plaintiff took possession of the land and started constructing the buildings and the power station. On 19-12-1967, the Managing Director of the defendant-Company executed a sale deed in favour of the Secretary of the plaintiff, but the said deed could not be registered. The Collector, Koraput, by letter dated 9th of March, 1968, intimated the plaintiff that the defendant-Company had no title to the land in question and, therefore, the plaintiff would not got any title on the basis of the sale deed executed by the defendant-Company. Thereafter when the plaintiff requested the Managing Director of the defendant-Company to produce the documents in support of their title, the said Managing Director did not give any reply nor produced the title deed in favour of the defendant. On the other hand, the letter of the Managing Director of the defendant-Company to the Secretary to the Government in the Revenue Department, a copy of which was also forwarded to the plaintiff, dated 25-2-1970 indicates that he admitted that the defendant had no title over the land in question. As the defendant failed to execute the sale deed and get it registered and as the defendant had no title over the same, the plaintiff filed the suit for refund of the consideration money that was paid in advance to the defendant.
3. The defendant in its written statement takes the stand that it had never agreed to sell the disputed land to the plaintiff. On the other hand, it is the plaintiff who wanted to take possession of the land in question in order to enable the plaintiff to supply power to the defendant-Company. The defendant handed over possession of the land and the plaintiff continues to be in possession of the land. Therefore, according to the defendant the question of refund of the money advanced does not arise. It is also the stand of the defendant that the consideration money that was fixed is not the price of the land but a major part of it was the developmental cost of the land which the defendant had undertaken. In that view of the matter, the defendant prays that the suit must be dismissed.
4. On these pleadings the Subordinate Judge framed 4 issues and on issue No. 3, which is the main issue in the suit, came to the conclusion that the plaintiff was not entitled to recover Rs. 60,000/- or any part thereof. On issue No. 1 he came to the conclusion that the cause of action would arise only when the plaintiff was dispossessed and, therefore, the cause of action had not arisen. On issue No. 2, the Subordinate Judge had earlier held that the Court had the jurisdiction to entertain the suit, but in view of the findings on issues Nos. 1 and 3, the suit was dismissed. Hence the present appeal by the plaintiff.
5. Mr. Rath, the learned counsel appearing for the plaintiff-appellant, raises the following contentions, in challenging the judgment and decree of the Subordinate Judge:--
(i) The defendant having agreed to transfer the land in favour of the plaintiff by executing a sale deed and registering the same and having failed to perform the said contract as it had no title over the land in question, and admittedly having received the amount of Rs. 60,000/- is bound to refund the said consideration money;
(ii) The money that was paid was not for getting possession of the land, but for getting title over the land by virtue of a sale deed to be executed by the defendant. Since the defendant knew that it had no title over the land and yet entered into an agreement with the plaintiff to execute the sale deed, the contract is void and, therefore, the said defendant having received the sum of Rs. 60,000/- is bound to pay back the same.
(iii) The Subordinate Judge erred in law in coming to the conclusion that the cause of action had not arisen as the plaintiff had not been dispossessed, since the amount paid was not for possessing the land over which the defendant has no title, but for getting title over the land by virtue of a sale deed from the defendant. That not having been done, the conclusion that there is no cause of action for the suit is wholly erroneous,
6. Mr. Das appearing on behalf of the defendant-respondent, on the other hand, vehemently argues that the agreement in question was not for transferring the land but for giving possession to the plaintiff. That possession having been given and the plaintiff having continued in possession, the question of refund of consideration does not arise. Mr. Das also argues that the consideration that was fixed was not as the price of the land but a major part of it represents the developmental cost of the land in question and, therefore, the question of refund of Rs. 60,000/- does not arise.
7. In view of the stands taken by counsel for parties, the following questions arise for our consideration:--
(i) What was the agreement between the parties? Was it for sale of 37.07 acres of land or for merely giving possession of the land?
(ii) Has that agreement become void as the defendant did not have title over the land to pass on to the plaintiff?
(iii) Is the defendant bound to deliver the plaintiff the amount received by it having received the advantage under a void agreement?
(iv) Is the conclusion of the Subordinate Judge that there was no cause of action for the suit tenable in law?
We would now examine the necessary materials on record and answer the points in seriatim.
8. Coming to the first question as to what was the agreement between the parties, the plaintiff categorically states in the plaint that the defendant through its Managing Director agreed to sell 37.07 acres of land at a cost of Rs. 88,032/ -. The defendant in parargaph 6 of its written statement, however, denies the said assertion and states that the defendant-Company never agreed to sell the disputed area. P.W. 2 in his evidence has stated that the Managing Director required Rs. 60,000/- as advance to be paid to him as the price of 37.07 acres of land and a sale deed was prepared on 19-12-1967 which was signed by the Manager of the defendant-Company, but the same could not be registered as it was revealed that the land did not belong to the defendant. He has also stated in his evidence that from the letter of the Collector he could know that the defendant had no title on the land in question. Though the positive case of the plaintiff was that the Managing Director of the defendant-Company had agreed to sell the land for the price in question, but the said Managing Director has not been examined as a witness. Even D.W. 4 examined on behalf of the defendant who was an employee of the defendant in paragraph 3 of his evidence-in-chief states that the price of the land proposed to be sold to the plaintiff was fixed taking into account the land Salami as per the premium paid to the Government and proportionate improvement cost. The Managing Director in his letter dated 25th of February, 1970, to the Secretary to the Government in the Revenue Department, exhibited as Ext. 5, had indicated that the Government had not executed the lease in their favour as the defendant-Company had committed an irregularity in transferring the land to the State Electricity Board to the extent of 37.07 acres without approval and/ or sanction of the State Government. In that letter also it was indicated that the State Electricity Board paid a sum of Rs. 60,000/-and a deed of transfer was executed by the defendant in favour of the Board. In that letter the Managing Director had suggested that the 37.07 acres of land which had been transferred to the State Electricity Board might be deleted from the Company's leasehold and the Collector, Koraput, might be directed to execute a lease deed in favour of the Board and the Board should be directed to take, lease directly from the Government and the transfer entered upon by the Company would be cancelled. The Managing Director of the defendant-Company in his letter dated 4th of August, 1966, exhibited as Ext. F/4, clearly stated that though the real valuation of the land of 37 acres was much more than Rs. 94,680/-, but under the special circumstances, the defendant was agreeable to transfer the land at a consolidated price of Rs. 94,680 / -. It was further stated in the said letter :--
"The amount payable by you, however, for 37 acres of land was reconsidered by us and we are agreeable to transfer the land to the Board at a consolidated price of Rs. 88,032/ - The letter of the defendant dated September 14, 1966, addressed to the executive Engineer of the plaintiff, exhibited as Ext. F/6, also clearly states that the Board has finalised with Dr. B.D. Panda, Managing Director, Indian Metals & Ferro Alloys Ltd. the consideration for 37 acres of land at a cost of Rs. 88,032/ -. In view of the aforesaid oral and documentary evidence on record, we have no hesitation in coming to the conclusion that the agreement, between the plaintiff and the defendant was for sale of the land in question by the defendant to the plaintiff for a consideration of Rs. 88,032/ - and the defence stand that the Company never agreed to sell the disputed land is on the face of it untenable.
9. Coming to the second question, materials are in abundance to establish that the defendant had no title in respect to the land in question. Even in the written statement of the defendant, it has been stated that the Managing Director of the defendant-Company had never represented to the plaintiffs officials regarding the title of the land with the Company. Even in the written statement the defendant never asserted that it had acquired any title over the land in question. The letter of the Managing Director under Ext. 5 fully establishes the fact that the defendant had no title over the land in question and that is why it was suggested by the defendant that the Government might grant lease in favour of the defendant excluding the 37.07 seres of land which by that time had been sold by the defendant to the plaintiff. It was also suggested in the said letter that the Board might be directed to take lease of the land directly from the Government and the transfer deed between the plaintiff and the defendant should be cancelled. This Ext. 5 contains an unequivocal admission of the defendant that it had no title over 37.07 acres of land which it had agreed to sell to the plaintiff and which is the subject-matter of dispute in the present case, the letter of the Collector, Koraput, an receipt of which the plaintiff had intimated the defendant under Ext. 3 clearly indicates that the said Collector, Koraput, reported that the land in question had not been transferred in favour of the Indian Metals & Ferro Alloys limited and as such the said Company had no title over the land in question. This being the position, our answer to the second question is that the defendant had no title over the land in question; knowing fully well that it had no title, the defendant-Company had agreed to sell the land to the plaintiff and, in fact, executed a sale deed which could not be registered; and the contract in question is void since the defendant could not have passed on title over a piece of land over which it itself had not acquired any title.
10. Coming to the third question, the obligation arising out of section 65 of the Contract Act would squarely apply to the facts and circumstances of the present case. Section 65 embodies a well-known rule of equity. It provides for restitution of or compensation for any advantage received under an agreement which becomes void. The defendant having entered into an agreement with the plaintiff to transfer a land measuring 37.07 acres and having accepted Rs. 60,000/-towards part payment of the consideration money and the said agreement being void as the defendant had no title over the land in question, the defendant is bound to pay the money it has received from the plaintiff. Section 56 of the Contract Act also would apply to the facts of the present case, the contract having become impossible by reason of the fact that the defendant had no title and the State did not grant the lease in favour of the defendant and the principle of paying back the advantage received under Section 65 applies also to a case which falls within the ambit of S. 56. The parties having agreed for the transfer of the land in question consideration of which was fixed at Rs. 88,032/- and the defendant having received Rs. 60,000 / - as advance and having failed to execute a sale deed as agreed upon, is bound to pay back the advance money to the plaintiff. We would accordingly answer the third question that in the facts and circumstances of the present case, the defendant was bound to pay the sum of Rs. 60,000/- which it had received from the plaintiff.
11. So far as the fourth question is concerned, the Subordinate Judge committed gross error in coming to the conclusion that the cause of action for the suit would arise only when the plaintiff was dispossessed. This conclusion is upon the obvious assumption that the agreement between the parties was that the defendant would give possession to the plaintiff and would receive the consideration amount on that score. In view of our conclusion that the agreement between the parties was that the defendant would transfer 37.07 acres of land in favour of the plaintiff and the consideration price of that was fixed at Rs. 88,032/-, the moment the defendant failed to execute and register the deed and transfer the land, the cause of action arose for the suit and setting aside the finding of the Subordinate Judge on this score, we hold that the cause of action did arise for the suit.
12. There is no dispute between the parties that the plaintiff did. pay a sum of Rs. 60,000/- to the defendant. In fact, the defendant also admits the same and the evidence on record is voluminous to that effect. In view of our conclusions on the four questions passed, as above, this first appeal must succeed and plaintiffs suit must be decreed. The judgment and decree of the Subordinate Judge are accordingly set aside and the plaintiffs suit is decreed. The First Appeal is allowed with costs. The decretal amount will carry interest at the rate of six per cent per annum from 30th of March, 1967, on which day the amount was paid till the same is actually realised.
J.M. Mahapatra, J.
13. I agree.