Karnataka High Court
Gowramma vs H.A.Ramachandra on 5 November, 2013
1 RSA No.835/2009
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 5TH DAY OF NOVEMBER, 2013
BEFORE
THE HON'BLE MR. JUSTICE A.S. PACHHAPURE
REGULAR SECOND APPEAL No.835 OF 2009
BETWEEN:
GOWRAMMA
W/O RANGASETTY
AGED ABOUT 45 YEARS
R/AT HANDITHAVALLI VILLAGE
RAVANDUR HOBLI
PERIYAPATNA TALUK
MYSORE DISTRICT-571 107.
... APPELLANT
(BY SRI: K SRINIVASA GOWDA, ADV)
AND:
H A RAMACHANDRA
S/O. ANNAIAHSETTY
AGED ABOUT 47 YEARS
AGRICULTURIST & CONTRACTOR
R/AT HANDITHAVALLI VILLAGE
RAVANDUR HOBLI
PERIYAPATNA TALUK
MYSORE DISTRICT-571 107.
... RESPONDENT
(BY SMT: SONA VAKKUND, ADV FOR
SRI: ROHITH GOWDA, ADV)
THIS RSA IS FILED UNDER SECTION 100 OF CPC
AGAINST THE JUDGMENT AND DECREE DATED 28.02.2009
PASSED IN RA NO.18/2007 ON THE FILE OF THE
2 RSA No.835/2009
PRESIDING OFFICER, FAST TRACK COURT-I, MYSORE,
DISMISSING THE APPEAL AND UPHELDING THE JUDGMENT
AND DECREE DATED 13.10.2006 PASSED IN OS
NO.92/2000 ON THE FILE OF THE CIVIL JUDGE
(SR.DN.) HUNSUR.
THIS RSA COMING ON FOR FINAL HEARING, THIS
DAY THE COURT DELIVERED THE FOLLOWING:
J U D G M E N T
The appellant has challenged the judgment and decree for specific performance of contract of sale granted in favour of the respondent and also dismissal of appeal against aforesaid decree by the First Appellate Court.
2. The facts relevant for the purpose of this appeal are as under:
Parties will be referred as per their rank before the Trial Court for the sake of convenience.
The respondent herein is the plaintiff who instituted the suit for specific performance of contract of sale dated 05.07.2000 said to have been executed by the respondent in his favour 3 RSA No.835/2009 agreeing to sell the suit property bearing Sy.No.3/2 of Handithavalli village described in the schedule to the plaint. The defendant is said to be the owner of suit property and for her necessity, entered into an agreement of sale for a sum of Rs.60,000/- on 05.07.2000. The sum of Rs.35,000/- was paid in advance. The defendant was to receive the remaining sale consideration at the time of registration of sale deed with the Sub Registrar. The plaintiff was ready and willing to perform his part of the contract and requested the defendant to execute the sale deed by receiving the remaining sale consideration. As the defendant went on postponing the matter for one or the other reason, the plaintiff issued a notice dated 22.09.2000 and as the defendant failed to perform her part of the contract despite the notice, he approached the Trial Court with the 4 RSA No.835/2009 present suit seeking a decree for specific performance of the aforesaid contract of sale.
The defendant appeared before the Trial Court and filed her written statement denying the allegation made and it is her specific contention that she never executed any sale agreement in favour of the plaintiff and not received the sum of Rs.35,000/- under the aforesaid sale agreement. She contended that the plaintiff is a close friend of her family and two years prior to the suit, he approached her husband and her son requesting to subscribe the signature to power of attorney as a witness and out of faith and confidence created by the plaintiff, they have subscribed the LTM and signature on the stamp paper. She is said to be illiterate and contended that the plaintiff has created false and fictitious document to grab the valuable property. On the aforesaid 5 RSA No.835/2009 grounds, she has sought for dismissal of the suit.
On the basis of these pleadings, the Trial Court framed the following issues:
"1. Whether the plaintiff proves that the defendant has executed an agreement of sale and received an advance amount of Rs.35,000/- on 15.07.2000?
2. Whether the plaintiff proves that he is always ready and willing to perform his part of contract?
3. Whether the plaintiff is entitled for specific performance of contract?
4. Whether the defendant proves that the alleged suit document was created and concocted document as contended in para 9 of the written statement?
5. What decree or order?"6 RSA No.835/2009
During the evidence, the plaintiff was examined himself as PW1 and 3 witnesses as PWs.2 to 4 and the documents Exs.P1 to P4 were marked. The defendant examined herself as DW1, but no documents were got marked. The Trial Court after hearing the counsel and on appreciation of the evidence on record, decreed the suit. Aggrieved by the judgment and decree, she preferred an appeal in RA No.18/2007. The said appeal came to be dismissed by the First Appellate Court on merits. Aggrieved by the concurrent findings of the Courts below, the present appeal is filed.
3. At the time of admission, the following substantial question of law has been raised:
"Are the judgments of the Trial Court and Appellate Court decreeing the suit for specific performance of the agreement to sell dated 15.07.2000 is sustainable in the 7 RSA No.835/2009 absence of considering the pleadings of the defendant regarding herself and other grounds required to be considered under Section 20 of the Specific Relief Act?"
4. I have heard learned Counsel for both the parties.
5. It is the contention of learned Counsel for the appellant that the Courts below have overlooked the provision of Section 20 of Specific Relief Act and in view of the specific clause in the sale agreement about the refund of sale consideration with penalty, the Courts below did not consider this clause incorporated in the document and thereby committed an illegality in decreeing the suit for specific performance. It is also his contention that when there is an option for the defendant to refund the earnest money with penalty, the Courts below ought not to have called upon her 8 RSA No.835/2009 to execute the sale deed and at the most, they could have granted a decree in terms of the aforesaid clause in the sale agreement.
6. On the other hand, it is the contention of learned Counsel for the respondent that the clause incorporated in the document is to facilitate the defendant to execute the sale deed and it is not an option for the defendant to refund the earnest money. It is also his contention that the general rule is to grant specific performance and as both the Courts below have taken into consideration the provision of Section 20 of the Specific Relief Act and having held that the defendant has taken a false defence on the proof of agreement of sale, they have rightly granted a decree in favour of the plaintiff.
7. Learned Counsel for the appellant has invited the attention of this Court to the contents of Ex.P1 - the sale agreement. It is 9 RSA No.835/2009 relevant to note that both the Courts below have held that this agreement Ex.P1 has been proved. There is no dispute raised by the appellant so far as the genuineness of the document is concerned. Perusal of this agreement would indicate that defendant agrees that she would execute the sale deed in terms of the agreement and that she is bound to do so. It is further stated that "if I fail to execute the sale deed for any such reason, I am ready to refund the advance amount of Rs.35,000/- with penalty i.e., by paying a total sum of Rs.70,000/- as fine"
(kannada version stated in English). It is further stated in the agreement that on the date of execution of agreement, the possession of property is given to the plaintiff. So according to the contention of learned Counsel for the appellant, the aforesaid clause in the agreement is an option to the defendant either to execute the sale deed or to refund the 10 RSA No.835/2009 earnest money with equal amount of fine of Rs.35,000/- i.e., by paying a total sum of Rs.70,000/- as fine.
8. On this aspect of the matter, learned Counsel for the appellant has placed reliance on the Division Bench decision of this Court reported in ILR 1992 KAR 2224 (B R Mulani Vs A B Ashwathnarayana). This Court having taken into consideration the provision of Section 20 of the Specific Relief Act was of the opinion that in a case, where the agreement itself gives an option, in other words, when the parties themselves agree to the effect that it would be open to the vendors either to repay the money advanced under the agreement or to sell the suit property and the parties have understood the agreement in that manner and conducted themselves in conformity with such option, whether it would be just and proper for the Court to exercise its equity jurisdiction in 11 RSA No.835/2009 favour of the plaintiff and direct the vendors to execute a sale deed. It held that in such a case, it would not be just and appropriate to grant a decree for specific performance as it would be contrary to the terms of agreement and it would take away the right of prospective vendor to exercise his option and pay off the amount and thereby save the property.
This Court while taking into consideration an agreement in the aforesaid case considered the principle laid down by the Apex Court in a decision reported in AIR 1973 SC 2457 (M L Devender Singh and Others Vs Syed Khaja). So far as penal clauses in the agreement are concerned, the following three classifications were made:
"(i) Where the sum mentioned is strictly a penalty - a sum named by way of securing the performance of the contract, as the penalty is a bond;12 RSA No.835/2009
(ii) Where the sum named is to be paid as liquidated damages for a breach of the contract; and
(iii) Where the sum named is an amount the payment of which may be substituted for the performance of the act at the election of the persons by whom the money is to be paid to the act done."
9. Learned Counsel for the appellant would contend that the 3rd clause aforesaid would apply to the facts on hand and he submits that the defendant had agreed to refund the earnest money with penalty in substitution of the specific performance of the agreement. Perusal of the judgment would reveal that in case if the stipulated payment comes under either of the two first mentioned classes, the Court will enforce the contract, if in other respects it can and ought to be enforced, just in the same way as a contract not to do a 13 RSA No.835/2009 particular act, with a penalty added to secure its performance. So it is necessary to find out as to whether the stipulation incorporated in the agreement Ex.P1 would fall either in class (1) or (2) or (3) and then decide as to whether there is an option for the defendant to repay the amount with penalty in substitution of her duty to perform her part of the contract by executing the sale deed.
10. It is relevant to note that in the written statement filed by the appellant in the Trial Court, the very execution of document is disputed. The defendant has taken a specific contention that she never agreed to sell the property nor executed sale agreement and that the document was obtained by the plaintiff by playing fraud and causing misrepresentation. But considering this agreement which has been proved on the evidence adduced by the parties and as both the Courts have held that Ex.P1 has 14 RSA No.835/2009 been proved, the only exercise that has to be made by this Court is whether stipulation is an option for the defendant or stipulation falls under clause (1) or (2) of the aforesaid judgment of this Court. The suit property was agreed to be sold for a total consideration of Rs.60,000/- and a sum of Rs.35,000/- was paid on the date of agreement. The plaintiff came in possession of the suit property on the basis of Ex.P1 itself.
11. So far as execution of sale deed is concerned, the terms incorporated thereon are very much clear. The defendant was to execute the sale deed by receiving remaining sale consideration of Rs.25,000/-. There is no dispute that plaintiff was always ready and willing to perform his part of the contract by paying a sum of Rs.25,000/-. What the defendant stated in the agreement is that she is bound to execute the sale deed and for any reason if she 15 RSA No.835/2009 fails to execute the sale deed, she would pay the penalty equivalent to the earnest money and that she is bound by this stipulation. No provision is made in the agreement relating to the duties of the parties in case if the penalty is paid by the executor of the document. In what way the possession is to be taken from the person who is in possession under the agreement is not stated. There is also nothing in the agreement to say that it is an option for the party executing the document to pay the penalty and thereby refused to execute the sale deed. Hence, it cannot be said that clause relating to payment of penalty gives any option to the defendant not to execute the sale deed. It would indicate that it is penalty clause incorporated in the document to facilitate the party to execute the sale deed and therefore the stipulation does not fall within the class III of the classes enumerated in the judgment of 16 RSA No.835/2009 this court referred to supra. Hence I am of the opinion that the principle laid down by this Court in the aforesaid judgment is not applicable to the facts of hand.
12. Counsel for the appellant also relies upon the decision of Apex Court reported in 1999(7) Scale 57 (Dada Rao and another Vs Ramrao and Others). In the aforesaid judgment, agreement was to the effect that if either the seller refused to sell or the purchaser refused to buy, it was provided that in addition to the earnest money of Rs.1,000/-, a sum of Rs.500/- was to be given back to the purchaser. It was also said in the agreement that sale deed was to be executed only if both the parties agreed to do so and that in the event of anyone of them resiling for the same, there was no question of the other party being compelled to go ahead with the execution of sale deed. The Apex Court held that it was an option given to the parties in an 17 RSA No.835/2009 agreement and therefore, it is proper to refund the amount of Rs.1,000/- with penalty of Rs.500/-. This principle also does not apply to the facts for the reason aforesaid.
13. Learned Counsel for the respondent relies upon the decision of Apex Court reported in (2012) 5 SCC 403 (Prakash Chandra Vs Narayan). The Apex Court considering the provision of Section 20(2)(b) of the Specific Relief Act, held that the discretion can be exercised only when the defendant takes a defence of hardship and brings on record the evidence in support of such defence. It is also held that the question of hardship is one of fact in respect of which Court must frame an issue. Furthermore, reliance is placed on the decision of this Court reported in 1999(3) Kar.L.J. 677 (Y N Gopala Rao Vs D R Laxminarayana and Others). This Court considered the burden relating to the payment of adequate 18 RSA No.835/2009 compensation in money by a party opposing enforcement of contract. It also held that:
"Plaintiff-appellant had merely claimed alternative relief as damage. That in case he is held not to be entitled to the decree for specific performance. This cannot be said to have rebutted the presumption available to the appellant under Explanation (i) to Section 10. It was claimed only as an alternative relief, if the decree for specific performance of contract to sell could not be granted. But defendant in this case did not admit or insist upon that relief if the contrary is established, instead, he alleged that plaintiff is not entitled for any relief. Mentioning of Rs.4,000/- in the relief clause as the alternative relief, it cannot be said that as plaintiff had claimed as alternative relief and demanded Rs.4,000/- only in total for that amount the compensation is adequate relief...... Specific Relief Act, 1963, as per 19 RSA No.835/2009 Section 21 provides that plaintiff may also claim compensation for the breach either in addition or in substitution of such performance. No defence has been raised by the defendant on this ground that compensation is adequate relief in the present case. When this plea has not been taken in the Court below, it firstly not bound to the defendant to raise it at this stage and then if it is raised, it is without substance."
14. Considering the principle aforesaid, now it would be clear that the defendant has taken a contention about her inability to execute the sale deed. She must take up a specific contention that she would be put to greater hardship in case if she is to execute the sale deed. Unfortunately, no such defence has been raised by the defendant in her written statement. Whatever contention that has been raised is about a false and fictitious document 20 RSA No.835/2009 having been obtained by the plaintiff by playing fraud and misrepresentation. The Trial Court has also not framed any issue on the point solely for the reason that there was no such defence by the appellant. So in case, if the sale deed is not to be executed in terms of the agreement at Ex.P1, what loss that can be caused to the defendant is not stated. It is also not her defence that there is such clause in the agreement and under this clause, the refund of earnest money with penalty of Rs.35,000/- would be just and proper considering the damages if any payable in case if she is not to execute the sale deed. So when such defence was not taken by the defendant, such a question cannot be raised for the first time in second appeal.
15. Whenever any contract of sale is entered into between the parties, generally it has to be enforced in terms of the contract. If any exception has to be made, it is for the 21 RSA No.835/2009 defendant to contend and prove such exception. When the defendant has made promise to execute the sale deed and received the advance amount by handing over the possession of the property to the plaintiff with a clause to pay the penalty, the clause would be to facilitate the parties to enforce the terms of contract, such stipulation is not an option given to the defendant in an agreement. It is for this reason that both the Courts below have granted a decree of specific performance in favour of the plaintiff as he deserves such a decree and both the Courts have taken into consideration the discretion vested in the Court under Section 20 of the Specific Relief Act.
16. In the circumstances, I do not find any justifiable ground to refuse specific performance. Hence, I answer the substantial question of law in 'Affirmative' holding that the decree of the Courts below granting specific 22 RSA No.835/2009 performance is sustainable in the absence of pleadings by the defendant.
Consequently, the appeal fails and it is accordingly dismissed.
Sd/-
JUDGE *bgn/-