Madhya Pradesh High Court
Kamrunnisa Widow Of Mirza Beg vs Pramod Kumar Gupta on 12 July, 1996
Equivalent citations: AIR1997MP106, AIR 1997 MADHYA PRADESH 106
JUDGMENT S.C. Pandey, J.
1. This is an appeal filed by the defendant, challenging the decree passed by the lower Appellate, Court under Section 100 of the Code of Civil Procedure. The trial Court had dismissed Civil Suit No. 92-A/91 filed by the respondent. The lower Appellate Court allowed the appeal of the respondent and granted a decree for specific performance of contract against the appellant in respect of 1 /6th share of property detailed in the plaint-map.
2. In order to appreciate the controversy involved in the suit, it is necessary to give a short version of facts on which the parties went to trial. The respondent, inter alia, pleaded that there was a written agreement dated 23-10-1978 between the respondent and the appellant in respect of the property shown in the schedule annexed to the plaint. The agreement dated 23-10-1978 purported to be a contract of sale whereby the appellant agreed to sell the entire plot received by her as result of the decree of the Court in Civil Suit No. 15-A/77, Kamrunissa v. Sophiya, to which she was one of the litigating parties. It was alleged that the agreement for sale showed the consideration to be Rs. 13,000/ -of which the appellant had already received Rs. 3,500/-. The respondent pleaded in the plaint that the area of the property shown in the plaint map was 3975 square feet. Out of this area the appellant was awarded 1/6th share by the decree passed- in Civil Suit No. 15-A/77. This l/6th of the total area of the plot would be 497 square feet. The market value of this plot was alleged to be Rs. 6163/-. It was further stated in the plaint that the respondent, after delivery of judgment dated 4-4-1985, in First Appeal No. 75/79, arising out of judgment and decree in Civil Suit No. 15.-A/77, approached the appellant for fulfilment of her promise, according to the aforesaid agreement. He was repulsed. Thereupon, the respondent served the notice by registered post through his counsel arid when the appellant did not show any interest in the deal, he filed Civil jSuit. No.92-A/91 against, the appellant.
3. A careful scan of the plaint shows that the respondent has not specifically asserted that he was ready and willing to perform his part of constract after Civil Suit No. 15-A/77 was finally decided in appeal by the High Court. The inference, of readiness and Willingness is left to be drawn from the conduct of the respondent in accordance with the pleading made by the respondent that he approached the appellant after 4-4-1985 for getting the sale deed executed,, and there after by the fact that he served a registered notice through his counsel. Even so, there is no specific averment to the effect that the respondent was ready and willing to perform his part of contract on the date of the suit by paying the balance of price. That apart, the plea of respondent that the market value of the plot of 497 square feet would be Rs.6163/- shows that the respondent was seeking proportionate reduction in price. This plea rings in the mind of the Court different kind of bells.
4. The plea of appellant in the written statement was that there was no contract of sale on 23-10-1978 as per Ex. P-2. According to her, the transaction was out and out a transaction for loan. It was not disputed by the appellant that she took Rs. 3500/- from the respondent but she asserted that she took merely a loan and executed document dated 23-10-1978, Ex. P-2, as a security for loan That document was not meant to be acted upon, it was claimed that suit property was worth Rs. 80,000/- in the year 1978 and the value of said property had hiked to Rs. two lakhs at the time of filing of the suit. For the reasons aforesaid, the suit property could not be sold for Rs. 13,000/-. It was also claimed that the agreement was invalid as it was a contingent contract. The appellant, further resisted the suit of the respondent by saying that since the share of the appellant was not determined and, therefore, the suit; was not maintainable. The rest of the allegations made in the plaint were denied.
5. The trial Court dismissed the suit holding that the transaction in question, was a loan transaction. The agreement dated 23-10-1978 could not be declared invalid or void ab initio merely because it was based on a contingent event. It was also held that the appellant did not execute registered sale deed despite the demand made by the respondent. The Suit was held to be beyond pecuniary jurisdiction. Thus, the suit was dismissed mainly on the ground that :the agreement dated 23-10-1978 did not represent the true transaction as it was executed soley by way of security for loan of Rs. 3500/-.
6. The lower Appellate Court set aside the judgment and decree of the trial Court holding that the suit was within the pecuniary jurisdiction of the trial Court and that the agreement dated 23-10-1978 was a real contract of sale enforceable by a decree for specific performance as claimed by the respondent. Accordingly, it decreed the suit to the extent of 1/6th share of the appellant on payment of the balance of consideration to the appellant.
7. This appeal was admitted by this Court on the following substantial questions of law:--
"(1) Whether in view of the evidence, apparent from Ex. P-l and Ex. P-2 the defendant had taken money in instalments, on different dates and different years, as she required to meet the civil litigation which was pending at that time and, therefore, the agreements Ex. P-l and Ex.P-2do not appear to be the agreements for contract of sale ?
(2) Whether the lower appellate Court wrongly held that Ex. P-l and Ex. P-2 do not amount to security for repayment of loan?
(3) Whether the learned lower appellate Court has misread the pleadings of the parties in this case?"
8. During the course of argument it appeared to this Court that a fair-reading of agreements Ex. P-l, dated 6-12-1973 and Ex. P-2, dated 23-10-1978 showed that nature of these agreements was champertous and, therefore, the case was adjourned for next date so that counsel for parties may address the Court on the point. Thereafter, the parties were heard on all questions including the question of champerty. This Court, therefore, frames following additional substantial questions of law as per proviso to Section 100(5) of the Code of Civil Procedure :--
(4) Whether the agreement dated 23-10-1978, Ex. P-2, is champertous in nature and for this reasons, it cannot be enforced against the appellant ?
(5) Whether the respondent was entitled to a decree of specific performance of the contract in view of his pleadings ?
9. The learned counsel for the appellant, Shri A. Usmani, argued that it is apparent from Ex. P-l and Ex. P-2; and the evidence led by the parties that the trial Court was right in its conclusion that the transaction, in question, could not be a real contract for sale. The agreement dated 23-10-1978 was executed merely for securing the loan transaction. Moreover, such a transaction was no enfoce-able as it was champertous in nature. The learned counsel for the appellant further argued that the suit for specific performance was not maintainable as there was no specific plea of readiness and willingness to perform his part of contract by the respondent in his plaint. According to the counsel for the appellant, it was mandatory upon the appellant to plead and prove readiness and willingness to perform his part of contract. Moreover, the contract of sale, so called, was not for any specific part of property but to the result of the litigation. The learned counsel for the appellant also drew the attention of this Court to paragraphs 16 and 17 (as numbered by the trial Court) of evidence of the respondent and submitted that the following points' emerged from his cross-examination :--
(1) That the respondent had admitted that he had advanced money to the husband of appellant from time to time.
(2) The respondent shows his ignorance about the cases in which appellant Kamrunnisa was involved.
(3) The agreement was not written immediately after oral talk.
(4) The dependence of respondent upon his father, as admittedly, he did not know anything about the agreements, in question.
The learned counsel for the appellant submitted that the finding recorded by the Court-below is vitiated as the lower appellate Court ignored the vital piece of evidence in favour of the appellant. The counsel urged further that the market value was more than a lakh and such transaction could not be enforced by a decree of specific performance as it was unconscionable. The learned counsel for the appellant urged that discretion to grant the decree prayed for should not be exercised in favour of the respondent.
10. The learned counsel for the respondent stoutly detended the judgment of lower Appellate Court. He urged that he lower Appellate Court was right in granting a decree. The transaction evidenced vide Ex. P-2, was not a loan transaction. Initially, it may have been a loan transaction but by Ex. P-2 the debt was converted into consideration for agreement to sell. This method was properly valid in law. He submitted that transaction was enforceable as champertous agreement are not opposed to public policy. He also urged that respondent was ready and willing to perform his part of the-contract.
11. The most important thing that has to be borne in mind that the respondent, in his plaint, did not plead a word about Ex. P-l. It purports to be an agreement to sell a plot on Eastern side, as shown in the plaint-map, measuring 30' x 35' out of the property which is only the subject-matter of the Civil Suit No. 1-A of 1973. This agreement is dated 6-12-1973. Since the respondent thought this document is the evidence of payment of money to the appellant, it was proved by him. On the date the agreement was executed, the respondent received Rs. 700/-. Then we find an endorsements on Ex. P-l, signed by the appellant from time to time acknowledging the receipt of further money by way of advance. On 31-12-1974 it is said that Rs. 300/- was received towards earnest money. Thereafter, on 16-8-1975,16-2-1974 and 28-7-1976 the appellant is said to have received Rs.500/-, Rs. 900/- and Rs.200/- on the respective dates.
12. It appears that Ex. P-l dated 6-12-1973 was proved to form the foundation-stone for proving the contents of Ex. P-2, dated 23-10-1978. Without expressly taking the plea of novation of contract, the respondent sought to prove that the appellant received Rs. 2600/- prior to entering into a contract of sale dated 23-10-1978. It appears to be the case of the respondent that on 23-10-1978 a fresh agreement was executed when the appellant required a further sum of Rs. 700/ -. Thus, taking into account Rs.2800/- previously received by the appellant, the agreement Ex. P-2, dated 23-10-1978 incorporates those facts and creates a fresh agreement. It is clearly the law that the parties can enter into an agreement wherein such a time barred debt can form a consideration for doing something different. The respondent cannot be faulted on this account. However, a fair and despas-sionate reading of Ex. P-l, dated 6-12-1973 strikes to the mind a recurring future that this money was being advanced to finance the litigation. The agreement, Ex. P-l and the endorsements do not leave any room for doubt, uncertainty or ambiguity. This inference is further confirmed by Ex. P-2, dated 23-10-1978 wherein it is stated that she had taken money for financing Civil Suit No. 1-A of 1973 and there was another suit pending, registered as C. Section No. 1530/77. The agreement states:--
^^mijksDr bdjkjukek rk- 6&12&73 fy[k] nsus ds i'pkn esa nksuksa nhokuh ekeys dh iSjoh ds fy;s eq- :- 1900@& :i;s ¼méhl lkS½ tks djkjukek 6&12&73 ds iq'r ij ntZ gS rFkk blds vykos :-
900@& :i;s ¼ukS lkS QDr½ le; le; ij Jh izeksn dqekj xqIrk ls fy;k vHkh rd ,sls dqy tqeyk :] 3500@& :i;s ¼iSrhl lkS :i;s½ bdjkjukek ds isVs crkSj ,MokUl ds fey pqdk gSA**
13. From the aforesaid facts, which are not in dispute, the question that arises, for determination is whether the agreement dated 23-10-1978' Ex. P-2, is void because it is champertous in nature. What is a champertous agreement ? It is an agreement to finance litigation and to'' share the fruits thereof. There is no special enactment in India barring such an agreement. For this reason, in our country, the champertous agreements have to be examined by the Courts under Section 23 of the Contract Act. It is now settled law in India-that these agreements, by themselves, are not, illegal in the sense, that they are immoral or opposed to public, policy. However, if the Court finds that a particular agreement is opposed to principle of equity and good conscience or unconscienable and extortionate in itself, then the 'Courts would not enforce it. In other words, when such agreement is not made with a view to help persons to tide over their financial difficulties arising as aconsequence of unequal litigation, but with a view to take advantage from the predicament of the persons involved in the litigation, the Court may refuse to accept it. In the case of Lala Ram Samp v. Court of Wards through Deputy Commissioner, Delhi, AIR 1940 PC 19, the opinion of the Privy Council was given by Sir George Rankin as follows:--
"Champertous transactions are in their essence speculative and the fairness or otherwise of a particular bargain is almost always open to some debate...."
It was further observed that:--
".... In applying the principle that "a fair agreement to supply funds f o carry on a suit in consideration of having a share in the property, if recovered, ought not to be regarded as being, per se', opposed to public policy 41A 23 at p. 47, it is essential to have regard not merely to the value of the property claimed but to the commercial value of the claim. This has to be estimated by the parties in advance of the result; and where they have weighed the probabilities in a manner, which has not operated unfairly it is more reasonable to regard this as confirming their shrewd estimate of the chances than to condemn the agreement outright as unfair, by reason only of the possibility that a great gain to the claimant would have had to be shared with the financier. Though it is clearly not conclusive, the proportion to be retained by the claimant is an important matter to be considered when judging of the fairness of a bargain made at a time when the result of the litigation is problematical. The uncertainties of litigation are proverbial; and if the financier must needs risk losing his money he may well be allowed some chance of exceptional advantage......."
Even earlier the Privy Council in the case of Sri Rajesh Vatsovaya Venkata Subhadrayyamma Jagatpati Bhadur Guru v. Shri Poosapati Venkatapati Raju Guru, AIR 1924 PC 162 had recognized the principle that champerty by itself shall not make an agreement illegal.
14. However, the decision in the case of Rajah Mokham Singh v. Rajah Rup Singh, (1892-93) 20 Ind App 127, is an authority for the proposition that a particular agreement financing litigation can be declared illegal as opposed to public policy, if it is not equitable and just. Sir Richard Couch, speaking for their Lordships of the Privy Council, quoted, with approval, the following passage from Ramcoomar Coondoo v. Chander Canta Mukerjee (1876) 4 Ind App 23 :--
"..... Their Lordships think it may properly be inferred from the decisions above referred to, and especially those of this tribunal, that a fair agreement to supply funds to carry on a suit in consideration of having a share of the property, if recovered, ought not to be regarded as being, per se, opposed to public policy. Indeed, cases may be easily supposed in which it would be in furtherance of right and justice, and necessary to resist oppression, that a suit or who had a just title to property, and no means except the property itself, should be assisted in this manner. But agreements of this kind 'ought to be carefully watched, and when found to be extortionate and unconscionable, so as to be inequitable against the party; or to be made, not with the bona fide object' of assisting a claim believed to be just, and of obtaining a reasonable recompense therefor, but for improper objects, as for the purpose of gambling in litigation, or of injuring or oppressing others by abetting and encouraging unrighteous suits, so as to be contrary to public policy, effect ought not' to be given to them."
It is not necessary to multiply the authorities for reason that the aforesaid two principles are well established.
15. Now, the only question remains to be' considered how does this principle of justice and equity apply to facts of the case, m hand. Although, the result of litigation is, speculative but nothing would satisfy, the conscience of the Court injustice and equity when as a consequence, of an agreement the financier gets the entire property won in hard fought litigation and the person who fought the litigation gets only the money under the agreement for financing the litigation. We should, therefore, ask the right question to get the right answer. What did the appellant gain? Was her effort worthwhile? It would be clear that in this particular case the appellant would not gain anything. Now, therefore, in terms of Ram Sarup's case (AIR 1940 PC 19) (supra) the financier' may be allowed to get some exceptional advantage, but he cannot be allowed to get the entire property. If this be permitted, the result would be absurd. The financier would get all because of his superior money power and the person who is fighting for his fight would be reduced to the position of less than an agent of the financier. That is to say, the total effect of such an agreement would be, as if that poor person is fighting a legal battle for and on behalf of the money lender. This is actually the case here. In fact, the intention of the respondent was made more clear by providing in Clause 5, appended to the agreement, that respondent shall have right to purchase, any other portion which would fall to her share in accordance with market value for the reason, the respondent was paying her more than market price. It has been pointed out in the case of Nuthaki Venkataswami v. Katta Nagi Reddy (died), AIR 1962 Andh Pra 457, Satyanarayana Raju, J,, who spoke for the Division Bench, that in Rajah Mokham Singh's case (1892-93 (20) Ind App 127) (supra), the Privy Council upheld the decree of Allahabad High Court, grafting refund of money advanced instead of a decree for specific performance in respect of only, 1/12th share of the entire property gained by the defendant. It was held that the gain' of financier was extortionate. In the case before the Division Bench of Andhra Pradesh High Court i.e. Nuthaki Venkataswami's case (AIR 1962 Andh Pra457) (supra),it was held in paragraph 20, as follows, :--
"(20) In the present case, however, the agreement provides that the plaintiff should get a3/4th share of the property, a proportion which is no decided case was held to be a fair and reasonable bargain."
16. This Court too, therefore, would hold that the agreement to purchase the entire 1 / 6th share of the appellant is against justice and equity and, therefore, no relief for specific performance of the contract should be grant ed to the respondent.
17. There is another question to be answered. There is no specific averment in the plaint that the respondent was ready 'and willing to perform his part of contract. As already pointed out, the pleadings of respondent leave much to be desired. There is no averment in the plaint that respondent was ready and willing to perform his part of contract. It is now mandatory to take such A plea as provided in Section 16(c) of the Specific Relief Act, 1963. In the case of Ouseph Verghese v. Joseph Aley, (1969) 2 SCC 539, it was held that a suit for specific performance should conform to Forms 47 and 48 in 1st Schedule of Code of Civil Procedure. Moreover, the respondent had amended the plaint and asserted in paragraph 3 that the value of l/6th share would be Rs.6163/-. The respondent could not have reduced the value of indefinite share purchased by him for Rs. 13.000/- after its extent was declared to be 1/6th. The respondent Pramod Kumar could not say that he had purchased a specific share when the appellant's property was under litigation, He was bound to perform the agreement as it was. He could not reduce the value of the' share of the applicant. For this reason too, it is held that the respondent failed to plead that he was ready and willing to perform his part of contract.
18. Once it is held that the respondent's agreement was extortionate and the readiness and willingness of the respondent was not proved, this Court, in exercise of its discretion under Section 20 of Specific Relief Act, 1963, refuse to grant a decree for specific performance on either of the' grounds. Consequently, assuming that there was an agreement to sell on 23-10-78, it is held that respondent is not entitled to a decree for specific performance.
19. Hitherto it has been assumed by this Court' that there was a contract of sale. However, the Court may examine the alter-native' plea of the appellant that whole trans-action' Was a loan transaction and the agreement 'dated 23-10-78 was executed merely for security of loan. The plaint was silent about Ex.P-1, dated 6-12-73, but the respondent, who' entered the witness-box, proved it. He admitted in paragraph 10 that he would not be able to produce his account books, because the accounts were not kept in his shop on the date of execution of the agreement. However, he was unable to say from which date the accounts were being kept in his shop, because this fact could be better stated by his father. The witness says in paragraph 16 that first payment to Kamrunnisa was made in the year 1974. However, the earlier agreement was that of the year 1973 showing that Kamrunnisa received Rs. 700/- on 6-12-73. Then further he admitted that he was unaware about the cases pending in the Civil Court when the agreement was entered into. He admitted that he did not make any enquiry about pending litigation of Kamrunnisa. His cross-examination shows that he was blissfully ignorant about the cases and yet he entered into the agreement to purchase the property. He stated that the agreement was written after 15-20 days from the day of oral talks.
20. The lower Appeal Court has thus, ignored certain vital pieces of evidence and has accepted the evidence of respondent merely on its face value. The finding recorded by the lower Appeal Court is vitiated and is liable to be' interfered with as perverse. The payment of money to the appellant in instalments and the fact that the respondent did not try to know the value of property, he was likely to purchase, and further that he was not careful to know about litigation of the appellant shows that the entire transaction was a mere loan transaction. On this plea also the respondent is not' entitled to a decree of specific performance in the alternative.
21. The appellant, however, has not disputed in her written statement, that she had received Rs. 3.500/ - by way of loan. In view of this admission of the appellant, the respondent will be entitled to a money decree for Rs. 3,500/- with interest thereon from the date ,of firing of suit till realisation, at the rate of 6%(six per cent),per annum. For coming to this conclusion this Court relies on the case of Firm Sriniwas Ram Kumar v. Mahabir Prasad, AIR 1951 SC 177, which says that even if a plaintiff may not have claimed a relief, the Court can grant a decree on the facts admitted by the defendant.
22. The result is that this appeal succeeds and is allowed to the extent indicated above. The impugned decree dated 12th May, 1995, passed by the lower Appellate Court, granting specific performance of the contract of sale, against the appellant, is set aside. Instead, it is decreed that the respondent shall be entitled to recover Rs. 3.500/- (Rupees three thousand five hundred) from the appellant and shall also be entitled to recover interest thereon at the rate of 6% (six per cent) per annum from the date of institution of Civil Suit No. 92-A/91 till the date of realisation. The parties shall bear their own costs throughout. Counsel fee is fixed at Rs. 500/-(Rupees five hundred), if certified.