Kerala High Court
Yohannan And Anr. vs Harikrishnan Nair And Ors. on 25 July, 1991
Equivalent citations: AIR1992KER49, AIR 1992 KERALA 49, (1992) CIVILCOURTC 281
JUDGMENT P.K. Shamsuddin, J.
1. This appeal is filed against the judgment and decree of the Sub Court, Trivandrum in O.S. No. 287 of 1985. The suit is for specific performance of an agreement for sale.
2. Briefly stated the plaint averments are as follows : Defendants 1 and 2, who are the owners of plaint schedule property, agreed to sell the property to the plaintiffs for a consideration of Rs. 3,00,000/- and executed an agreement in their favour on 21-1-1985. An amount of Rs. 10,000/- was received by the defendants as advance. The sale was agreed to be complied within ten days. The agreement also provided that within the stipulated period building in the plaint schedule property should be demolished and the encumbrances on the property should be cleared off. The sale deed was got prepared by the plaintiff after purchasing necessary stamp paper on mutual consent. Plaintiffs and defendants sent to the Sub Registry Office to execute the sale deed but then the 3rd defendant came there and at his instigation, defendants 1 and 2 left the place without executing the sale deed. The plaintiffs were always ready and willing to perform their part of contract and the sale deed could not be completed as a result of breach of contract committed by the defendants. Hence the suit for specific performance of agreement for sale.
3. In the written statement filed by the defendants 1 and 2, they admitted that the plaint schedule property belonged to them. They however denied the receipt of advance of Rs. 10,000/-. According to them, the plaintiffs uncle Velayudhan Nair and his brother in law, Achuthan Nair approached the defendants and requested them to sell the plaint schedule property to the plaintiffs for a consideration of Rs. 1,25,000/ -. That was not acceded to by defendants 1 and 2. They told them that the property would not be sold for a consideration of less than Rs. 2 lakhs. They alleged that they improved the properties by planting rubber sapplings after availing loan from the Land Mortgage Bank, Trivandrum and Co-operative Land Mortgage Bank, Neyyattinkara. When they received notice from the Land Mortgage Bank, Neyyattinkara to pay the arrears due under the loan, they approached Velayudhan Nair and demanded Rs. 2,000/- by way of loan. He agreed to pay the amount provided they would execute a hypothecation deed in respect of the plaint schedule property. Achuthan Nair and the plaintiffs prepared a draft of the hypothecation deed and it was read over to defendants 1 and 2. However the original was prepared not as a hypothecation deed, but as an agreement. Defendants 1 and 2 happened to execute the same under the belief that the same in only a hypothecation deed. They were not aware of the contents of the document at the time of registration. They further averred that though the extent of the property was shown as 1 acre 25 cents, the actual extent on measurement is 1 acre 45 cents. The property was worth more than Rs. 2 lakhs. They denied that they had gone to the Sub Registry Office to execute the sale deed. The sale deed was got prepared by plaintiffs only to create evidence. They alleged that the 2nd plaintiff filed C.C. No. 1248 of 1985 before the Judicial Magistrate Court, Kattakkada complaining that they committed breach of agreement but they were discharged after finding that they were not guilty. According to them, they had no knowledge about the case filed by the 3rd defendant before the Munsiff's Court, Nedumangad as O.S. No. 355 of 1985. On these averments they contended that the suit is liable to be dismissed.
4. The 3rd defendant filed a written statement contending that the suit is not maintainable and that the suit was filed by the plaintiffs in collusion with the defendants 1 and 2. Defendants 1 and 2 agreed to sell the plaint schedule property to the 3rd defendant for a consideration of Rs.25,000/- and defendants executed an agreement on 21st May, 1985 after receiving an amount of Rs. 10.000/- as advance, and therefore the defendants had no right to execute another agreement to sell the property to plaintiffs. On knowing that there was such an agreement plaintiffs filed O.S. No. 355 of 1985 before the Munsiffs Court, Nedumangad as against defendants 1 and 2 seeking an order of injunction restraining the defendants from alienating the property. He had no knowledge whether defendants 1 and 2 had gone to the Sub Registry Office to execute the sale deed and in the circumstances, the plaintiffs were not entitled to any relief.
5. On a consideration of the evidence in the case the court below came to the conclusion that the agreement of sale set up by the plaintiff is true. In that view of the matter, a decree was passed by the lower court directing the plaintiffs to deposit the balance sale consideration of Rs. 20,000/- within one month from the date of decree, and also directed the defendants 1 and 2 to execute the sale deed in favour of the plaintiffs within one months after the date of deposit of sale consideration. In case of default, the plaintiffs are permitted to get the sale deed executed through court. Defendants are also directed to discharge the liabilities in respect of the plaint-schedule property incurred by them. In default, plaintiffs are allowed to discharge the same and to recover the amount from defendants 1 and 2 and their assets.
6. In this appeal, learned counsel for the appellant has challenged the findings. Ext. A1 is the agreement for sale. The defendants admitted that the signatures contained therein are their signatures. However, their case is that they executed Ext. Al under the impression that it is deed of hypothecation.
Defendants have not admitted receipt of any amount from the plaintiffs. It would be difficult to conceive that they would execute the document and get it registered without receiving any consideration. They have no case that the consideration for the alleged hypothecation was received by them.
7. Plaintiffs have examined P Ws. 1 to 4 to prove their case. PW 1 is the 1 st plaintiff. He deposed that defendants 1 and 2 executed Ext. Al after fully knowing its contents, that the agreement was to sell the plaint schedule property for Rs. 30.000/- and that it was got registered. He further stated that the defendants 1 and 2 signed the document and he paid Rs. I0,000/- as advance, that on the date of the agreement, defendants 1 and 2 appeared before the Sub Registry and the Registrar enquired to them whether they received the advance of Rs. 10,000/- and whether they agreed to sell the property and that defendants 1 and 2 replied in the affirmative. He further deposed that before the original agreement was signed the contents of the document were read out to defendants. He stated that he was always ready and willing to take the document on payment of balance consideration. He testified that defendants 1 and 2 had taken loan from the Land Mortgage Bank and they entrusted to him the receipts Exts. A2 series issued by the Bank. He further stated that they (plaintiffs and defendants) had gone to the document writer's office and he entrusted necessary amount for purchase of stamp papers to the document writer and arranged to prepare the draft of the document. He stated that defendants 1 and 2 came to the office of the document writer and the sale deed Ext. A3 was prepared and all of them went to the Registrar's Office, and at that stage the 3rd defendant came there and called defendants I and 2 out of the office and took them away and thereafter they did not turn up. He further stated that the third defendant is the brother of the 2nd defendant, the wife of the 1 st defendant. Though he was cross-examined at length nothing has been brought out in the course of cross-examination to discredit the veracity of testimony of this witness.
8. PW 2 is the document writer, who prepared Ext. A1. He stated that defendants I and 2 put their signatures in Ext. Al after the contents of Ext. Al were read out to them by him and he saw them signing the document.
9. PW 3 is an attesting witness to Ext. Al. He stated that he knows the agreement between the plaintiffs and the defendants for sale of the plaint schedule property for a sum of Rs.30,000/-, that the agreement was prepared in the office of the document writer, PW 2 and that after the preparation of the document, contents were read out to the defendants and he heard the same. He further stated that on the date of agreement the 1st plaintiff gave Rs. 10.000/- to the 1st defendant as advance.
10. In the cross-examination PW3 admitted that the 1st plaintiff is the brother of his son-in-law. On the basis of this, learned counsel for the appellant argued that he is an interested witness and that his testimony should be rejected on that ground. Nothing has been brought out in the cross-examination to show that his version is untrue. Merely on the ground the plaintiffs' son-in-law is his brother, his evidence is not liable to be rejected if it is found otherwise acceptable. His evidence appeared to me truthful.
11. PW4 is the scribe of Ext. Al. He stated that he prepared Ext. Al and both the defendants were present when it was prepared and the contents were read out to them. He also stated that on that day an amount of Rs. 10,000/- was paid towards advance. Ext. A3 also is in his handwriting and both the defendants were present when it was prepared and the contents were read out to them. He also spoke of appearance of another person and escape of defendants from the scene. His evidence also corroborated the evidence of PWs. 1 to 4.
12. As against this DWs. 1 to 3 were examined. DW 1 is 1st defendant himself. He stated that he has studied only up to IIIrd Standard, but he used to put the signature in English and Ext. B3 to B6 are the hypothecation deeds executed by him and his wife for the purpose of availing loans from the Land Mortgage Bank. According to him, he did not agree to sell the property to the plaintiffs. He admitted that he and his wife have signed Ext. A1. He further stated that he asked for a loan of Rs. 2,000/ - from Velayudhan Nair, who is the uncle of plaintiffs. Velayudhan Nair asked him to execute a hypothecation bond and he agreed to do so. He went to the Land Mortgage Bank in the car of 1st plaintiff and remitted Rs. 835/- and odd. The 1st plaintiff gave about Rs. 60/- towards expenses for execution of hypothecation deed and told him that hypothecation deed should be executed next day. The receipt for remittance in the Bank was taken by the 1st plaintiff. He entrusted one Dharmarajan to prepare the draft of the hypothecation deed and he prepared the same. Before he went to Velayudhan Nair's ration shop, the 1st plaintiff and Velayudhan Nair came to his house and told him that they had already prepared the draft and asked him to accompany them for registration. He further slated that the draft, which was read out to him was a hypothecation deed and he and his wife signed Ext. Al under the belief that it is a hypothecation deed. Though he stated that he got a draft prepared by Dharmarajan he did not produce the same in the court. Dharmarajan was also not examined before the court. Apart from the highly interested testimony of DW 1, there is nothing to substantiate the version given by him. The 2nd defendant has not gone to the witness box to controvert the evidence that both the defendants signed the document only after the contents of Ext. A1 were read out to him.
13. The court below which had occasion to watch the demeanour of the witnesses had chosen to believe the testimony of PWs. 1 to 4 and to disbelieve the evidence of DW 1. It is the defendant's case in their written statement that Velayudban Nair approached the 1st defendant to sell the plaint schedule property to him and his offer was rejected by 1st defendant and due to this enmity an agreement was created fraudulently and got executed by playing fraud on defendants. Admittedly defendants had larger liabilities and it is most unlikely that in such a situation the defendants would execute a hypothecation deed for an amount of Rs. 2,000/- in respect of the plaint schedule property having an extent of 1 acre 25 cents.
14. When execution of Ext. Al is admitted it is for the defendants to substantiate their plea that it was brought by fraud. No evidence has been adduced except the oral testimony of DW 1 to which I have already referred.
15. In order to prove that the value of the plaint schedule property would be more than Rs. 30,000/- the defendants produced Exts. B1 and B2. The vendor in Ext. B1 sale deed was examined as DW 2 and he stated that 25 cents of property was sold for a consideration of Rs. 11,500/- Centage value will come to Rs. 460/-. The property sold is garden land. He admitted during cross-examination that he was residing two kilometres away from the disputed property, and that he had no knowledge as to the ownership or the lie of the properties adjoining the plaint schedule property. There is no acceptable evidence to show that both the properties are comparable. Ext. B2 is a certified copy of another sale deed executed in March, 1985. Under that document 15 cents of property was sold for a consideration of Rs. 15,000/-. No person connected with the transaction was examined to prove the contents of the document or the comparable nature of the property and therefore Ext. B2 is not helpful to show that the consideration shown in Ext. A1 is incredibly low as alleged by the defendant. A Commissioner was deputed in the property and she expressed her opinion the market value would come to Rs. 1,200/- per cent. She was examined as PW 5 and no data was given by her to show that the reported value is correct. Ext. C1 was prepared on 24-10-1987. The agreement was on 24-7-1985. In the meanwhile rubber sapplings in the property would have grown and the value of the property would have consequently increased. It is also pertinent to note that the property was purchased by the defendants in 1961 for a total consideration of Rs. 1,500/-.
16. The agreement Ext. Al was executed on 24-7-1985. On 29-7-1985 the 3rd defendant filed a suit for injunction restraining the defendants from alienating the property. The allegation in the plaint which is marked as Ext. All was that the 3rd defendant had entered into an agreement with defendants 1 and 2 whereby defendants 1 and 2 agreed to sell the property to the 3rd defendant for a consideration of Rs. 25,000/: and that thereafter the defendants 1 and 2 were trying alienating the property. As I have indicated above, the 3rd defendant is none other than the brother of the 1st defendant and if the testimony of PW 1 and other plaintiffs' witnesses is believed it was third defendant who took away defendants 1 and 2 when they came for registration of sale deed. The suit was not contested and an exparte decree was passed restraining the defendants 1 & 2 from alienating the property. Ext. A6 is the judgment, Ext. A7 is the copy of injunction petition, Ext. A8 is the decree and Ext. A10 is the B diary in that suit. It is pertinent to note that though in this suit the 3rd defendant is aparty he did not examine himself. There is no difficulty to come to the conclusion that the decree obtained in the suit was a collusive one. Ext. A10 shows that defendants 1 and 2 herein did not make any appearance and they were made ex parte and the plaintiffs therein filed an affidavit and suit was decreed as prayed for based on the affidavit. There was Criminal prosecution C.C. No. 1248 of 1988 against defendants initiated by the plaintiffs. Ext. A 12 is the Vakalath filed in that case and it shows that defendants 1 to 3 engaged the same counsel. Exts. A14 and A15 are the bail bonds executed by defendants 1 to 3 in those cases and that would show that the same counsel appeared for defendants 1 to 3 in connection with bail. It is also pertinent that against the decree in O.S. No. 333 of 1985 defendants 1 and 2 did not file any appeal. Ext. A9 is the alleged agreement dated 21-5-1985 executed in favour of 3rd defendant by defendants I and 2 agreeing to sell the plaint property to him for a consideration of Rs. 25,000/-. Though the 3rd defendant filed a written statement in this case he did not participate in the proceedings. All these circumstances lead to the irresistible conclusion that Ext. A6 judgment and Ext. A8 decree were brought into existence by fraud and collusion.
17. I have already held that there is no evidence to show that the consideration showed in Ext. Al is inadequate. Even assuming that it is on the low side that cannot be a reason to decline the relief of specific performance. Explanation 1 of Section 20 of the Specific Relief Act reads as follows :
"Mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an unfair advantage within the meaning of Clause (a) or hardship within the meaning of Clause (b)."
See also Surjeet Singh v. Kartar Singh AIR 1988 Punj and Hary 53.
18. It is next argued by learned counsel for appellant that in view of the decree passed in O.S. No. 333 of 1985 the agreement Ext. Al, even if it be true, is frustrated. No such plea has been taken in the written statement and no such ground has been taken in the appeal. Even so, I shall consider that contention also.
19. Section 44 of the Evidence Act says that "any party to a suit or other proceeding may show that any judgment, order or decree which is relevant u/Section 40, 41 or 42, and which has been proved by the adverse party, was delivered by a Court not competent to deliver it, or was obtained by fraud or collusion." It is the party who alleges fraud or collusion who has to prove that the judgment, order or decree was delivered by a court not competent to deliver it or was obtained by fraud or collusion.
20. Wharton's Law Lexicon, 14th Edition, defines the word 'Collusion' as follows :
"Collusion, to unite in the same play or game, and thus to unite for the purposes of fraud or deception, an agreement or compact between two or more persons to do some act in order to prejudice a third person, or for some improper purpose. Collusion in judicial proceedings is a secret agreement between two persons that the one should institute a suit against the other, in order to obtain the decision of a judicial tribunal for some sinister purpose, and appears to be of two kinds : (1) When the facts put forward as the foundation of the sentence of the Court do not exist; (2) When they exist, but have been corruptly preconcerted for the express purpose of obtaining the sentence. In either case the judgment obtained by such collusion is a nullity."
21. Slroud's Judicial Dictionary, 5th Edition, defines the word 'Collusion' as follows:
"Collusion only signifies, agreeing together" (per Bramwell B., Gill v. Continental Gas Co., (1872) LR 7 Ex 332 (337). So, of Section 1, C. 51, Consolidated Statutes of British Columbia, which nullified judgments, etc., of insolvents obtained "by Collusion," which meant, "by agreement or acting in concert".
Similarly Corpus Juris, Secundum, page 210 defines the word 'Collusion' as follows :
"A secret agreement by two or more persons for a fraudulent, unlawful, or wrongful purpose, generally understood as indicating fraud, although it has also been said that "collusion" docs not necessarily imply fraud.
Collusion in judicial proceedings has been defined as an agreement between two or more persons unlawfully to defraud a person of his rights by the forms of law, or to obtain an object forbidden by law, as, for example, where two persons apparently in a hostile position, or having conflicting interests, by arrangement do some act in order to injure a third person, or to deceive a court, or by keeping back evidence of what would be a good answer, or by agreeing to set up a false case. The term has been said to imply absence of a real controversy, and usually fraud; but collusion is also possible in a meritorious case, although less frequently practised."
22. Dealing with Section 45 of the Evidence Act it is stated at page 936 of Law of Evidence in India by Woodroff and Amir Ali, 11th Edition.
"Fraud is an extrinsic collateral act, which vitiates the most solemn proceedings of Courts of Justice. A judgment obtained by fraud or collusion, even, it seems, a judgment of the House of Lords, may be treated as a nullity."
23. In Sarawathy Amma v. Bhaskara Pillai (1987) I Ker LT (SN) 47 (S.A. 264 of 1981) this Court had occasion to consider the effect of collusive and fraudulent judicial proceedings and this court observed as follows:
"Collusive and fraudulent proceedings are entirely different from each other. In a collusive judicial proceeding the action itself may be on the basis of secret arrangements between the individuals or groups arrayed apparently on opposite sides. Object will be to obtain a judicial decision for some sinister purpose. In such cases the claims may be fictitious and the contest may be unreal. The parties may be interested only in making a show of contest in order to obtain a judicial pronouncement with the object of confounding third parties. The decree in such cases will only be a mask having only the semblance of a Judicial determination. On the other hand in a fraudulent proceeding there will be a real and earnest contest. The claim in such cases may be untrue, but the claimant may manage to obtain the verdict of the court in his favour by practising some sort of fraud on court invariably without affording opportunity to the opponent or the court to realise the fraud. The judicial proceedings in such cases may be started with the object of injuring the opponent and therefore there cannot be any question of collusion. In order to avoid a decree on the ground of fraud, the fraud must be extrinsic to the proceedings before the Judge."
24. A careful analysis of the evidence in this case would show that Ext. A6 and Ext. A8 are brought out by secret arrangements between the defendants 1 to 3 for purpose of defeating the plaintiffs. There is not even a contest in the case, not to speak of real contest. Based on the principle embodied in Section 44 of the Evidence Act, it follows that Ext. A6 and Ext. A8 are a nullity, and that cannot stand in the way of the court in granting relief to the plaintiffs.
25. Another contention raised by learned counsel for the appellant is that u/ Section 20 of the Specific Relief Act the jurisdiction to decree specific performance is a discretionary one and that the court is not bound to grant relief merely because it is lawful to do so. However it can be seen from Section itself that 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. The cases in which the court may properly exercise discretion not to decree specific performance has been enumerated in Sub-Section (2). They are (a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into area such that the contract, though not avoidable, gives the plaintiff an unfair advantage over the defendant; or (b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; (c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance. The counsel for appellant has not pointed how the Appellants' case would come within the ambit of Clauses (a) to (c) of Sub-Section (2). Counsel for the appellants however contended that the appellants are staying in the house in the plaint schedule property and that hardship would be caused to the appellant if the contract is enforced. It cannot be found that such hardship was not foreseen when the contract was entered so as to bring the case within the ambit of Clause (b). The respondents also have not shown the circumstances under which the contracts were entered so as to make it inequitable to enforce the contract. No doubt the above guidelines are illustrative in nature and are not intended to be exhaustive and that there may be field unoccupied by the three clauses as pointed by the Supreme Court in Mademsettu Satyanarayana v. G. Yelloji Rao, AIR 1965 SC 1405.
26. Explanation 1 of Sub-Section (2) specifically states that mere inadequacy of consideration, or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not be deemed to constitute an Unfair advantage Within the meaning of Clause
(a) or hardship within the meaning of Clause
(b). Explanation 2 says that the question whether the performance of a contract would involve hardship on the defendant within the meaning of Clause (b) shall, except in cases where the hardship has resulted from any act of plaintiff, subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract.
27. In this context it would be profitable to refer to the observations of the Supreme Court in Valiammal Rangarao Ramachar v. Muthukumaraswamy Gounder (1982) 3 SCC 508 referring to the conduct of parties to an agreement for sale:
"The High Court was, therefore, correct in assessing the whole situation when it said that after the solemn agreement with the original plaintiff the vendor took different steps to defeat the same which impelled the plaintiff to seek the assistance of the court a few days prior to the date of registration of the sale deed. After evaluating the other circumstances appearing in evidence the High Court recorded a conclusion that the plaintiff was always ready and willing to perform his part of the contract and looking specifically to the conduct of the vendor in this case where apparently he appears to be a party to a forgery of a document, though we do not say so, but certainly a forged document appears to have been used in a judicial proceeding we see no reason to take a different view which will have to be based on the testimony of defendant 1 which fails to carry conviction."
28. I have already referrewd to the steps taken by defendants 1 and 2 to defeat the plaintiff after entering into a contract with the plaintiffs for sale of this property. In my view this is a case where the court has to exercise discretion in favour of the plaintiffs and grant relief as specific performance.
29. Learned counsel for the appellants pointed out that only 10 days' time is stipulated in Ext. Al agreement and registration of such an agreement raises great suspicion. P. W. 1 stated that he thought that a registered agreement should be executed as he was making payment of advance towards consideration. Another point raised by counsel for the appellants is that they were prosecuted for cheating and breach of trust and were acquitted. The contract is of civil nature and the circumstance that the criminal court found that no criminal breach of trust or cheating is committed is no reason to deny relief for specific performance to the appellants.
Finally the counsel for the appellants argued that though the extent of the property according to his document of title is only 1 acre 25 cents on the actual measurement it is seen as 1 acre and 45 cents. There is no evidence to substantiate this contention. Learned counsel for the respondents fairly conceded that the respondents want a decree only for the extent agreed to in Ext. Al. He also fairly stated that though decree provided for recovery from defendants 1 and 2 of the amounts required for discharging the liabilities created by them on the property before the suit, his clients are prepared to forego that right. I record this statement and modify the decree to that extent.
In the result, Appeal is dismissed subject to the above modification. The parties will bear their respective costs.