Punjab-Haryana High Court
Nazam Singh & Another vs Rakesh Kumar on 15 February, 2012
Equivalent citations: AIR 2012 PUNJAB AND HARYANA 86, (2012) 2 CIVILCOURTC 621 (2012) 2 PUN LR 562, (2012) 2 PUN LR 562
Author: G.S.Sandhawalia
Bench: G.S.Sandhawalia
RSA No.5151 of 2011 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
RSA No.5151 of 2011(O & M)
Date of decision:15.02.2012
Nazam Singh & another ...Appellants
Versus
Rakesh Kumar ....Respondent
RSA No.3864 of 2011(O & M)
Date of decision:15.02.2012
Rakesh Kumar ...Appellant
Versus
Nazam Singh & another ....Respondents
CORAM: HON'BLE MR. JUSTICE G.S.SANDHAWALIA
Present: Mr.Naresh Jain, Advocate for the appellants,
(in RSA No.5151 of 2011),
Mr.Sherry K.Singla, Advocate for the appellant,
(in RSA No.3864 of 2011).
******
1. Whether Reporters of Local Newspapers may be allowed to see the judgment?
2. To be referred to the Reporters or not?
3. Whether the judgment should be reported in the Digest?
****** G.S.SANDHAWALIA J.
CM No.15017-C of 2011 (in RSA No.5151 of 2011) Application for exemption from filing certified copy of the impugned decree and judgment dated 10.08.2010 is allowed in view of the averments made in the application which is duly supported by an affidavit. CM No.15018-C of 2011 (in RSA No.5151 of 2011) Application for condonation of 38 days of delay in filing the appeal is allowed in view of the averments made in the application which is duly supported by an affidavit.
RSA No.5151 of 2011 2RSA No.5151 of 2011
This order shall dispose of two regular second appeals, i.e., RSA No.5151 of 2011 & RSA No.3864 of 2011 since both arise from the same judgment and decree of the lower appellate Court dated 20.05.2011. The lower appellate Court, while allowing the appeal of the defendants, has come to the conclusion that the defendants are liable to refund a sum of Rs.2 lacs along with 6% simple interest per annum from the date of the decree till its realisation instead of Rs.4 lacs which was double the amount as per the judgment and decree of the trial Court dated 10.08.2010. RSA No.5151 of 2011 has been filed by the defendants who are aggrieved against the judgment partly allowing the appeal by the lower appellate Court whereas RSA No.3864 of 2011 has been filed by the plaintiff wherein he is aggrieved against the reduction in the amount of refund to Rs.2 lacs from Rs.4 lacs as originally granted. The facts of the case have been taken from RSA No.5151 of 2011. The question of law that arises for consideration of this Court is:
Whether the lower appellate Court failed to take into consideration the liability of the defendants to pay interest from the date of agreement once it was directing refund of the earnest money in view of the provisions of Section 65 of the Contract Act, 1872?
The brief facts of the case are that the parties entered into an agreement dated 07.04.2005 wherein the appellants herein along with their brother, Hakam Singh, agreed to sell 2 kanals 2 marlas of land being co-owners of land measuring 9 kanals 7 marlas comprising in khewat khatauani No.18/20, khasra No.178(7-6) khewat khatauni No.19/21, khasra No.178/1(2-1) situated in village Bharu. The defendants were the co-owners to the extent of 42/187 share out of the total land as detailed RSA No.5151 of 2011 3 above. As per the terms of the contract, the defendants promised to get the revenue records corrected and received a sum of Rs.2 lacs as earnest money and Hakam Singh and Nazam Singh signed the same in token of its correctness and Harbans Singh put his thumb impression on it. The agreement was also attested by witness, Harbhajan Singh. The last date for getting the sale deed executed was 30.08.2005 and the defendants had promised that they would put the plaintiff into possession of the suit land on the date of execution of the sale deed. The agreement also contained a stipulation that the owner would be liable to pay double the amount of earnest money if they failed to execute the sale deed within the stipulated time and the amount would be forfeited if the vendee failed to perform his part of the agreement. The allegation of the plaintiff is that due to defect in the revenue records, the defendants showed their inability to execute the sale deed in favour of the plaintiff and the defendants executed writing on the back of the original agreement whereas there was an admission that there was a defect in the revenue records and hence the sale deed could not be executed and they promised that they would get the revenue records corrected on or before 31.10.2005 and after getting the records corrected, they would execute the sale deed as per the terms and conditions of the agreement. The said writing was also explained to the defendants and they had put their thumb impression on the said writing in the presence of the marginal witnesses. It was alleged that the defendants failed to get the revenue records corrected and thus failed to perform their part of contract and other co-sharers who are in possession of the land in question threatened the plaintiff that they will indulge in ill means to take the possession and that he should prepare himself for facing the consequences, RSA No.5151 of 2011 4 and therefore, the plaintiff abandoned his claim of the specific performance of the contract and was entitled to recovery of a sum of Rs.4 lacs which is double the amount of earnest money as settled between the parties. The plaintiff had called upon the defendants and requested them so many times by taking the marginal witnesses along with him requiring them to get the revenue records corrected but the defendants having failed to do so, the plaintiff served the defendants with a registered notice dated 27.12.2005 asking them to pay a sum of Rs.4 lacs which was double the amount of earnest money. The defendants sent its reply on 09.01.2006 wherein they refused to admit the claim of the plaintiff, and thereafter, the present suit has been filed seeking the relief of the recovery of double amount of the earnest money.
The defendants, in their written statement, admitted that they are co-owners out of the land measuring 9 kanal 7marlas and 42/187 share out of 9 kanal 7 marlas land and are in possession of their share. The fact that the defendants ever promised to get the revenue records corrected was denied on the ground that there was no defect in the revenue records and the promise to get the same corrected did not arise. The execution of the agreement to sell and receiving a sum of Rs.2 lacs as earnest money from the plaintiff were admitted. The extension of time on the back of the agreement was alleged to have been arrived at only because the plaintiff had failed to arrange the balance amount of the sale consideration, and therefore, the plaintiff had asked the defendants to extend the date of execution of the sale deed and on the asking of the plaintiff, the defendants extended the date up-to 30.10.2005. It was alleged that the defendants are illiterate and rustic villagers and taking the benefit of the illiteracy, the plaintiff had RSA No.5151 of 2011 5 manipulated the writing on the back of the agreement. The witnesses of the writing were the henchmen of the plaintiff and in view of no defect in the revenue records, the question of getting the same corrected did not arise. Accordingly, it was contended that it was the plaintiff who failed to perform his part of the contract and a false story has been put-forward by the plaintiff. The plaintiff's right to recover Rs.4 lacs was thus without any basis as he had not followed the terms of the agreement and the defendants had also gone to the office of the Sub-Registrar on 31.10.2005 to perform their part of the contract but the plaintiff did not come present on the said date and they waited the whole day there and also filed an affidavit before the Sub-Registrar/Executive Magistrate, Gidderbaha and got marked their presence. Accordingly, it was pleaded that the plaintiff, having failed to perform his part of the contract, his earnest money is to be forfeited. The legal notice served upon the defendants had been duly replied through their counsel and the plaintiff had no right to ask the defendants to pay a sum of Rs.4 lacs. On the basis of the pleadings, following issues were framed:
1. Whether the plaintiff is entitled to recover Rs.4,00,000/- on the basis of agreement dated 6.04.2005? OPP
2. Whether the present suit is not maintainable in the present form? OPD
3. Whether the plaintiff is estopped from filing the present suit by his own act and conduct? OPD
4. Relief.
After taking into consideration the pleadings of the parties and the evidence on record, the trial Court, vide judgment and decree dated 10.08.2010, came to the conclusion that the defendants had agreed to sell their 42/187 share of their total land measuring 9 kanals 7 marlas in favour of the plaintiff and they had entered into agreement dated 07.04.2005 RSA No.5151 of 2011 6 (Exhibit P4) and received Rs.2 lacs in cash. The sale deed was to be executed and registered in favour of the plaintiff up-to 30.08.2005 and in case of default, they were to return double the amount of the earnest money and in case the vendee defaulted in performance of his part of agreement, the earnest money shall stand forfeited in favour of the vendors.
The trial Court, after examining the record, came to the conclusion that as per the jamabandi (Exhibit P12), the defendants were shown as owners of the joint land but were no-where covered in the column of possession and once they were not in possession of any part of the land, therefore, the question of delivery of physical possession to the vendee was not possible and also since the time was extended till 31.10.2005 to get the defect removed in the revenue record. Accordingly, it was held that the plaintiff was justified in not coming on the final date to the office of the Sub-Registrar as the defendants could not deliver the possession and had failed to prove that they were ready and willing to execute the agreement to sell and the default lay on their part. Accordingly, on issue No.2, it was held that the suit was maintainable and there was no defect since the defendants were not in physical possession of the land measuring 2 kanals 2 marlas, and accordingly, the plaintiff was held entitled to get double the amount of the earnest money of Rs.2 lacs which came to Rs.4 lacs and the plaintiff was held entitled to recover the future interest at the rate of 6% per annum from the date of the decree, i.e., 10.08.2010 till the date of the actual realisation of the decreetal amount and the rate of interest was to be calculated as simple interest from 10.08.2010, i.e., the date of decree.
The defendants, aggrieved against the said judgement and decree, filed an appeal before the lower appellate Court. The lower RSA No.5151 of 2011 7 appellate Court came to the conclusion that while extending the time, the penal clause, as agreed between both the parties, stood waived and it was the plaintiff himself who had got the time extended, and therefore, could not press in the penal clause. The lower appellate Court came to the conclusion that since the original agreement (Exhibit P4) did not provide any clause or condition of specific land to the plaintiff by the defendants and this clause regarding possession of exclusive land had been inserted vide Exhibit P2. Thus, there was alteration in the original agreement, and therefore, the defendants could not be said to be the defaulting party and due to the alteration in the agreement, the question of granting double amount of the earnest money or forfeiture of the earnest money as agreed between the parties did not arise. It was, accordingly, held that the plaintiff had showed his readiness and willingness and the fact that due to impossibility of handing over to the plaintiff exclusive possession of the property in question, the sale deed could not be executed. Accordingly, keeping in view the provisions of Section 65 of the Contract Act, 1872, lower appellate Court came to the conclusion that since the contract had become void and any person who has received any advantage of the contract is bound to restore and make the refund to the person from whom he has received it. Accordingly, the judgment and decree of the trial Court was modified and it was held that the plaintiff had proved that due to the non-fulfillment of the terms and conditions of the contract executed on 07.04.2005, the sale deed could not be executed and the plaintiff was entitled to the refund of amount of earnest money, i.e., Rs.2 lacs along with 6% as simple interest per annum from the date of decree till its realisation, from the defendant, and accordingly, partly allowed the appeal.
RSA No.5151 of 2011 8
Counsel for the defendant-appellants has contended that the plaintiff has never pleaded or built any case that the defendants were not in possession and they could not hand-over the possession and the trial Court has built a new case altogether for the plaintiff. It was also alleged that the jamabandi/revenue records had been seen by the plaintiff and he was well aware as to who was in possession and the readiness and willingness of the defendants was proved since they had got their presence marked from the Sub-Registrar on that day, i.e., 31.10.2005, and thereafter, even sent a reply to the legal notice on 09.01.2006. Accordingly, the defendants were well within their rights to forfeit the sum of Rs.2 lacs.
The plaintiff-respondent, in the cross-appeal, to the contrary, argued that the trial Court was justified in allowing the refund of double the amount and rather the interest should have been from the date of agreement itself as it was a contractual transaction and in view of Section 34 of the Code of Civil Procedure, the plaintiff was entitled to interest at the market rate. Reliance was placed upon A.C.Arulappan Vs. Smt.Ahalya Naik (2001) 6 SCC 600, C.K.Sasankan Vs. The Dhanalakshmi Bank Ltd. AIR 2009 SC 3171 & Surjit Kaur Vs. Naurata Singh & another (2000) 7 SCC 0379. Perusal of the pleadings by the parties goes on to show that the plaintiff was alleging that there was defect in the revenue record as per the plaint but the exact defect has not been highlighted and the only allegation is that the record had to be corrected in the revenue records and the defendants had failed to perform their part of the contract. Even Rakesh Kumar, plaintiff(PW2) has alleged that the defendants had promised that they would put the plaintiff in possession of the land as detailed above and execute the sale deed. But, neither in his affidavit, submitted by way of RSA No.5151 of 2011 9 evidence, he has alleged that there was a defect of such a nature whereby the defendants were not in a position to put him in possession. In fact, there is an allegation that there are other co-sharers in possession of the suit land and they had threatened the plaintiff not to take possession. In order to rebut this, the defendants have examined Gurmail Singh to prove their presence on 31.10.2005, who in his affidavit, has alleged that the defendants were in possession of the land as co-sharers. In cross-examination, he has stated that his land is situated at a distance of 1 ½ kms from the suit property and he has not seen the jamabandi and khasra girdhawari of the suit land and that it was a big chunk of land consisting of many co-sharers and he could not show in whose name the khasra girdhawari is converted regarding the suit land. Nazam Singh, DW3, in his affidavit, has also mentioned that he is co-sharer of the land measuring 2 kanals 2 marlas and there was no defect in the revenue records. However, in cross-examination, it has come out that there are total of 9 co-sharers of the suit land including the defendants and he did not know the total size of the land out of which they had agreed to sell the suit land but had only agreed to sell their shares which was only 2 kanals 2 marlas out of 9 kanals 7 marlas for a total sum of Rs.5,45,000/- and in his statement, he has also stated that the suit land was not in possession of the defendants and there was no question of delivering the possession of the suit land in favour of the plaintiff. In his statement, he also stated that there was no need to get the revenue record corrected and neither they made any effort to make the revenue record corrected. The fact that they were not in possession of the suit property also spilled out though he denied that Surjit Kaur, Gurcharan Singh, Sukhcharan Singh and Nacchatar Singh are in possession of the suit property as co-sharers and that RSA No.5151 of 2011 10 they had never agreed to get the khasra girdhawari corrected in their name before extension of sale deed.
A perusal of the notice dated 27.12.2005 (Exhibit P5) would also show that the plaintiff was only harping on the inability to execute the sale deed in his favour for the want of defect in the revenue records. This defect in the revenue record was never specified and neither it was alleged in the plaint that due to any defect, the defendants were not in position to give physical possession of the property in question or of their share. The agreement(Exhibit P4) specifies that for 2 kanals 2 marlas, the rate was fixed at Rs.5,45,000/- and in pursuance of that, a sum of Rs.2 lacs had been given. It would thus be clear that the plaintiff had to arrange the balance amount of the sale consideration at the said rate and due to the fact that the defendants were not in possession of the land, though owners as per the revenue records and as per his own pleadings, due to the threat given by the co-owners, was not ready and willing to execute the agreement, and accordingly, sought time for execution of the agreement on the ground that the defendant would get the revenue record corrected and the defendants thumb marked on the back of the agreement(Exhibit D2) wherein it was mentioned that the revenue records would be corrected. The relevant extract of the endorsement on the back to the agreement, duly translated, is reported as under:
"We, Hakam Singh, Nazam Singh and Harbans Singh sons of Chet Singh, son of Jaimal Singh are residentsof Bharu, Tehsil Gidderbaha, District Muktsar. We had executed an agreement in respect of land measuring 2 kanal 2 marlas in favour of Rakesh Kumar son of Sarup Dev and Rikhi Ram and date in the same was fixed for 30.08.2005 for getting the sale deed registered. As there was defect/error in respect of numbers of old land, so we fixed date 31.10.2005 for RSA No.5151 of 2011 11 correction of numbers and getting the sale deed registered. The party purchasing is also ready/agree to this date. Now, it is our responsibility to get the numbers corrected on 31.10.2005 and get the sale deed registered.
Sd/- Harbans Singh Sd/- Nazam Singh Sd/- Hakam Singh
(with his thumb (With his thumb (With his thumb
impression) impression) impression)
Girdhari Lal son of Roshan Witness
Gidderbaha Ramji Dass
son of Paras
Sd/- Girdhari lal Sd/- Ramji Dass
(in English) (in English)"
The failure on the part of the defendants to get the revenue records corrected led to the filing of the present suit. The lower appellate Court was justified in applying the provisions of Section 65 of the Contract Act, 1872 as in the original agreement also, as the plaintiff, with open eyes, had himself qua the endorsement, got it modified to get the revenue records rectified. Once the parties themselves had altered the terms and conditions of the original agreement, then they could not enforce the clause of penalty amount in case the defendants did not get the defect removed in the revenue records and neither could the defendants plead that they were liable to forfeit the amount. The said endorsement reproduced above was proved by examining PW1, Ramji Dass, witness to the same, and therefore, the contention of the defendants that the same was got effected by the plaintiff on account of manipulation and taking benefit of their illiteracy cannot be accepted since the defendants did not produce any evidence to that effect that the thumb impressions on the endorsement were taken by misrepresentation. The submission of the counsel for the respondents in the cross-appeal is that he is entitled to interest at a higher rate from the date of RSA No.5151 of 2011 12 deposit is with merit. Sections 65 & 70 of the Contract Act, 1972 provides that any person who receives any advantage under any contract, he is bound to restore such advantage to the person from whom he has received it. Section 65 & 70 reads as under:
"65. Obligation of person who has received advantage under void agreement, or contract that becomes void. - When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from who he received it.
70. Obligation of person enjoying benefit of non-gratuitous act. - Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."
Hon'ble Supreme Court in State of Rajasthan Vs Associated Stone Industries (Kotah) Ltd. AIR 1985 (SC) 466 has held that any party who has taken advantage of any contract is bound to restore the same. The relevant part of the judgment reads as under:
"We do not have the slightest doubt that net profits realised by the Company as a result of all its various business activities can never be the measure of the compensation to be awarded under Section 65 of the Contract Act. It is not as if Section 65 of the Contract Act works in one direction only. If one party to the contract is asked to disgorge the advantage received by him under a void contract so too the other party to the void contract may ask him to restore the advantage received by him. The restoration of advantage and the payment of compensation has necessarily to be mutual. In Firm Govindram Seksaria v. Edward Radbone AIR 1948 P.C. 56, the Privy council pointed out that the result of Section 65, Contract Act was that each of the parties became RSA No.5151 of 2011 13 bound to restore to the other any advantage which the restoring party has received under the Contract."
This Court has followed the said view in a similar situation where a agreement for specific performance was discovered to be void and could not be specifically performed in view of the fact that the land could not be transferred under the rules in Swaran Singh Vs. Balwant Singh 2004 (3) PLR 54. Accordingly, it was held that the person who has received the amount is bound to restore the same along with interest on the principle of equitable doctrine of restitution. The relevant part of the said judgment reads as under:
7. It has also been found as a fact that the plaintiff-
respondent had paid Rs. 1,50,000/- to the defendant-appellant on 12.5.1998 and Rs. 25,000/- on 13.5.1999 when the date of execution of the sale-deed was extended. The defendant- appellant has been using the amount and compensation under Section 70 of the Contract Act deserves to be awarded. The Additional District Judge has committed no wrong by awarding compensation in the form of interest at the rate of 12% per annum on the amount of Rs. 1,50,000/- w.e.f.
12.5.1998 and on an amount of Rs. 1,75,000/- w.e.f.
13.5.1999 till the date of decree when a further sum of Rs. 25,000/- was paid. Future interest at the rate of 6% per annum has also been awarded till the date of payment. This view is fully supported by the observations of the Supreme Court in the case of Mulamchand (supra). In the case of Mulamchand (supra) the agreement to sell was found to be void as it contravened Article 291(1) of the Constitution which is mandatory in character. Even then the principle of compensation envisaged by Section 70 of the Contract Act was applied and restitution was ordered. The observations of their Lordships in this regard read as under:-
"The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific RSA No.5151 of 2011 14 performance of the contract nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under Section 70, it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution,"
The argument of the learned counsel that the agreement to sell is against the public policy as envisaged by Section 23 of the Contract Act and, therefore, it is void ab initio and no restitution of earnest money could be ordered, cannot be accepted because it would result into unconscionable gains to the defendant-appellant besides being against the principles of equity. Moreover, the expression "public policy" is a unruly horse and it is not proper to devise hew heads of public policy. The Supreme Court in Gherulal Parakh v. Mahadeodas Maiya, A.I.R. 1959 S.C. 781 has observed that public policy is an illusive concept and untrustworthy guide. Similarly, it has been advised not to devise new head of public policy. Reference in this regard may be made to Nai Lata Jute Mills Ltd. v. Khajaliram Nagannath, A.I.R. 1968 S.C. 522. In the present case the agreement has been discovered to be void on account of Rule 7 of the Rules. Enforcement of that part has been declined by both the Courts below. The agreement has. been held to be void to that extent. In any case by ordering restitution, the court is not enforcing any part of the agreement to sell which might be against public policy as envisaged by Section 23 of the Contract Act."
In the present case, the plaintiff is only seeking the relief of recovery of the earnest money along with double amount of the earnest money but in view of the conduct of the parties themselves where they have altered the terms of the agreement, and therefore, both of them are not RSA No.5151 of 2011 15 entitled to rely upon the penalty provision, the lower appellate Court has wrongly applied the interest element at the rate of 6% per annum from the date of decree, i.e., 10.08.2010. Once the defendants continued to keep the amount of Rs.2 lacs with them and they were liable to refund the same, then the interest would be from the date of the agreement, i.e., 07.04.2005 at the rate of 12% per annum in view of the dicta laid down in Surjit Kaur's case (supra) till the date of decree of the trial Court, i.e., 10.08.2010, and thereafter, at the rate of 6% per annum till recovery. In the case of A.C.Arulappan(supra), the issue of Section 20 of the Specific Relief Act, 1963 was being considered and while holding that the respondents were not entitled to decree of specific performance, it was held that he should be entitled to the interest @ 14% per annum from the date of payment. Similarly, in the case of Surjit Kaur(supra), the Hon'ble Apex Court came to the conclusion, in a suit for specific performance, that since alternative relief was being awarded, interest @ 12% per annum was given as compensation.
Accordingly, the question of law formulated above is answered in favour of the plaintiff and he is held liable for refund of the sum of Rs.2 lacs along with interest at the rate of 12% per annum from the date of payment, i.e., 07.04.2005 till the date of decree, i.e., 10.08.2010 and further interest at the rate of 6% per annum thereafter. Accordingly, RSA No.3864 of 2011 is partly allowed regarding the interest element and the judgment of the lower appellate Court is modified to that extent. The appeal filed by the defendant, i.e., RSA No.5151 of 2011 is dismissed.
(G.S.SANDHAWALIA) JUDGE 15.02.2012 sailesh