Karnataka High Court
M Narayanaswamy S/O M C Kondaiah vs S Narasimhappa S/O Somala Sheshappa on 15 February, 2018
Author: S.Sujatha
Bench: S.Sujatha
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 15TH DAY OF FEBRUARY, 2018
BEFORE
THE HON'BLE MRS. JUSTICE S.SUJATHA
REGULAR SECOND APPEAL No.100087/2015 (SP)
BETWEEN:
1. M NARAYANASWAMY S/O M C KONDAIAH
AGE: 64 YEARS, OCC: RETIRED,
R/O. D.NO.12-A, WARD NO.16,
VENKATESWARA NAGAR,
BELLARY-583101.
... APPELLANT
BY SRI. B S KAMATE, ADV.)
AND:
1. S NARASIMHAPPA S/O SOMALA SHESHAPPA
AGE: 47 YEARS, OCC: AGRICULTURE,
R/O. Y.BUDIHAL VILLAGE AND (POST),
NOW R/AT.GOULERAHATTI,
OPP: CENTRAL KSRTC BUS-STAND,
NEAR HULIGEMMA TEMPLE,
BALLARI-4583101.
...RESPONDENT
(BY SRI. B SHARANABASAVA, ADV.)
THIS RSA FILED U/S.100 OF CPC, AGAINST THE
JUDGEMENT & DECREE DTD:15.11.2014 PASSED IN
R.A.NO.4/2012 ON THE FILE OF THE SECOND ADDITIONAL
SENIOR CIVIL JUDGE, AT BELLARY, PARTLY ALLOWING THE
APPEAL, AND SETTING ASIDE THE JUDGMENT AND DECREE
DTD:05.12.2011 AND THE DECREE PASSED IN O.S.NO.693/2008
ON THE FILE OF THE I ADDITIONAL CIVIL JUDGE AT BELLARY,
DECREEING THE SUIT FILED FOR SPECIFIC PERFORMANCE OF
AGREEMENT AND FOR PERMANENT INJUNCTION.
THIS APPEAL COMING ON FOR FINAL HERAING THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
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JUDGMENT
This appeal is directed against the judgment and decree passed in RA No.4/2012, dated 15.11.2014 on the file of II Addl. Senior Civil Judge, Bellary (for short, 'the lower appellate court'), whereby the appeal is partly allowed, setting aside the judgment and decree passed by the I Addl. Civil Judge & JMFC, Bellary (for short 'the trial Court) in OS No.693/2008 dated 5.12.2011.
2. For the sake of convenience, the parties are referred to as per their status before the trial Court.
3. The plaintiff has filed OS No.693/2008 for specific performance of agreement, permanent injunction and for delivery of possession of the suit property. The pliant averments are that the defendant agreed to sell suit property for family necessity and executed an agreement of sale dated 22.12.2007 for sale consideration of Rs.2,50,000/- received advance amount of Rs.2,20,000/- and agreed to receive the balance amount of Rs.30,000/- 3 on or before 30.08.2008 and to execute the registered sale deed. The plaintiff issued legal notice calling upon the defendant to execute the sale deed but in vain. Hence, constrained to file the suit.
4. On service of summons, the defendant appeared and filed written statement denying the plaint averments. The trial Court after careful appreciation of the material on record, decreed the suit of the plaintiff. Aggrieved by the judgment and decree of the trial Court, the defendant preferred an appeal. The lower appellate Court set-aside the judgment and decree of the trial Court partly allowed the appeal, directing the defendant to pay Rs.2,20,000/- to the plaintiff with interest at 12% per annum from 19.08.2008 till the realization of the said amount within 60 days from the date of the judgment. Being aggrieved by the same, the plaintiff is in second appeal.
5. This appeal was admitted by this Court to consider the following substantial questions of law: 4
i) Whether the lower appellate Court is justified in reversing the judgment and decree of the trial Court, holding that Ex.P1 is a security document and not agreement, when the defendant appeared before the Sub-Registrar and was registered by the Sub-Registrar?
ii) Whether lower appellate Court is justified in reversing the judgment and decree of the trial Court, when the defendant, who is examined as DW1, has specifically stated on oath that the contents of Ex.P1 are true and correct?
iii) Whether the lower appellate Court is justified in reversing the judgment and decree of the trial Court in the facts and circumstances of the present case?
6. Learned counsel Sri. B.S. Kamate, appearing for the appellant/plaintiff submitted that the plaintiff had issued a notice on 19.08.2008 calling upon the defendant to execute the sale deed, pursuant to the sale agreement dated 22.12.2007 (Ex.P1), since the time frame stipulated in Ex.P1 was on or before 30.08.2008.
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7. In response to the said notice, the defendant has issued reply/legal notice dated 25.02.2008 marked as Ex.D3 that Ex.P1 executed by defendant No.1 is not an agreement of sale, but it is only a nominal document by way of security for having borrowed the loan. The lower appellate Court has failed to appreciate the evidence and material on record properly and in a prospective manner, while reversing the judgment and decree of the trial Court. The decision arrived at by the lower appellate Court that the transaction under the agreement of sale (Ex.P1) is the security document and not an agreement of sale of the suit property, only relying upon previous agreement of sale which was cancelled ignoring the fresh agreement of sale entered into between the parties is unsustainable in law. It was argued that the lower appellate Court having accepted and held that the plaintiff established the execution of the agreement of sale dated 22.12.2007 is not justified in reversing the judgment and decree of the trail Court. Thus, it was argued that the judgment and decree 6 passed by the Trial Court is based on conjectures and surmises.
8. Inviting the attention of this Court to the additional issue framed by the Trial Court and finding on the same inasmuch as whether the defendant proves that he received loan amount from the plaintiff on 31.12.2004 and for security of such loan, he has executed a security document, but, the plaintiff concocted the said document, as agreement of sale deed dated 22.12.2007 and as such the said document is not binding upon the defendant, it was argued that no recitals are forthcoming in Ex.D1, registered agreement of sale dated 31.12.2004 as security for loan amount. Even Ex.P1 does not indicate that the transaction involved was a loan transaction and not an agreement of sale. Ex.D2 cancellation of the earlier agreement of sale dated 31.12.2004 denotes that both parties by mutual consent agreed to cancel the earlier agreement of sale and entered into a fresh agreement. The contents of Ex.P1 makes it clear that the defendant had 7 agreed to sell the suit property and it was not executed as security to the loan amount.
9. Learned counsel further submits that there was no specific denial in the written statement inasmuch as the execution of the agreement of sale as security towards loan amount. Evasive denial in the written statement would disentitle the defendant to take a stance denying the execution of the sale agreement rather to consider the same as loan transaction. Learned counsel submitted that the plaintiff has examined one of the attesting witnesses as PW1 and scribe as PW3 producing the registered agreement of sale at Ex.P1. In such circumstances, the lower appellate Court reversing the judgment of the trial Court is untenable.
10. In support of his contentions, learned counsel placed reliance on the following judgments:
i) Sushil Kumar Vs. Rakesh Kumar, AIR
2004 SC 230.
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ii) Gobind Ram Vs. Gian Chand, (2000)7 SCC
548.
iii) Manasa Housing Co-operative Society Ltd.
Vs. Marikellaiah & Ors., AIR 2006 KAR
273.
11. Learned counsel Sri. B. Sharanabasava, appearing for the defendant/respondent submitted that the subject matter of the suit consists of irrigated land measuring 4 acres 23 cents. First agreement of sale was executed by the defendant in favour of the plaintiff on 29.12.2004 for sale consideration of Rs.1,60,000/-, which was also loan transaction. A sum of Rs.1,50,000/- was paid, since there was a balance amount of Rs.10,000/-. The said agreement of sale was cancelled on 22.12.2007(Ex.D2) and on the same day, Ex.P1 registered agreement of sale was executed for sale consideration of Rs.2,50,000/- towards the loan amount paid as earnest money of Rs.2,20,000/-. Legal notice was issued to the plaintiff to collect the said amount and to return the sale agreement. 9
12. Learned counsel referring to para-12 of the written statement submitted that specific defence was raised in the written statement as regards the plaintiff engaged in money lending business, the defendant requested him to sanction the loan amount for which the plaintiff agreed and insisted for security of loan amount. The defendant executed the agreement of sale on the same day which is not an agreement of sale, but only a nominal document by way of security for having borrowed the loan amount by the plaintiff. The reference was also made to the admission of the plaintiff that he had filed other two suits in Bellary Court of the same nature against one Sri. Asim and another against Sri. Rajesh to demonstrate that the plaintiff was engaged in the business of lending loan to various other persons taking security of loan amount by way of agreement of sale. It was further contended that the subject matter of the suit property is an irrigated land wherein paddy crop was cultivated as admitted by PW1. 10
13. It was submitted that the loan transaction was wrongly considered as agreement of sale by the Trial Court without appreciating the evidence in a right perspective. The same having reconsidered by the lower appellate Court, the judgment and decree of the Trial Court has been reversed partly allowing the appeal in directing the defendant to refund of Rs.2,20,000/- with interest at 12% per annum. The said amount has been deposited by the defendant before the lower appellate Court.
14. I have given my anxious consideration to the arguments advanced at the Bar and perused the material on record.
15. The plaintiff by filing this appeal has sought for relief of specific performance of the contract. It is the argument of the plaintiff that no specific defence was taken in the written statement. Order VIII Rule 5 of CPC mandates that the defendant is required to deny or dispute the statements made in the plaint categorically, as an evasive 11 denial would amount to an admission of the allegation made in the plant. The Hon'ble Apex Court while dealing with this issue in the case of Sushil Kumar (supra). observed that once it is held that the statement made in petition have not been specifically denied or deemed to have been admitted, and, thus, no evidence contrary thereto or inconsistent therewith could have been permitted to be laid.
16. To appreciate the arguments of the plaintiff in the light of the judgment of the Hon'ble Apex Court in the case of Sushil Kumar (supra), defence taken by the defendant in the written statement is analysed. Para-12 of the written statement reads thus:
"12. Without prejudice to any contents raised in the above, this defendant begs to submit as under:
a. The plaintiff and defendant are well known to each other. The plaintiff is doing money lending business and as such the defendant 12 approached the plaintiff and requested him to sanction sum loan amount and for which the plaintiff agreed and insisted the defendant to execute registered sale agreement for security of loan amount. For which the plaintiff got received an agreement of sale from the defendant on 31.12.2004 for a sum of Rs.1,60,000/-. Out of the said amount the plaintiff only paid Rs.1,36,500/-
to the defendant by deducting the sum interest amount at 36% per annum.
Thereafter the defendant paid interest to the plaintiff at 36% per annum on the principal amount upto 22/12/2006. Thereafter the plaintiff again insisted the defendant to execute another sale agreement by closing the earlier sale agreement amount dated 31.12.2004. Moreover the plaintiff calculated the total principal and interest and show around figure amount of Rs.2,50,000/-.
b. Due to failure of the crop and as well as fluxation of crops price in the market, the defendant expressed his inability to pay the said amount as calculated by the plaintiff. For which the defendant approached the 13 plaintiff on 22/12/2007 and borrowed a sum of Rs.2,20,000/- by way of cash from the plaintiff towards adjustment of the earlier due amount and the same was adjusted to the earlier loan amount of the Plaintiff. At the time of borrowing loan on 22/12/2007 the plaintiff insisted the defendant to execute agreement of sale in his favour for the purpose of security for having borrowed the loan amount and as such the defendant executed an agreement of sale on the same day. But, the document executed by the defendant is not an agreement of sale and it is only a nominal document by way of security for having borrowed the loan by him. The document relied by the plaintiff is sham and the same is received by the plaintiff for security purpose and as such the alleged agreement produced by the plaintiff is un- enforceable in law and the plaintiff is not entitled any relief for specific performance of contract of agreement of sale. The defendant is herewith producing the all alleged sale agreements for kind perusal of the Hon'ble Court.
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c. The defendant number of occasions approached the plaintiff and requested him to receive the balance amount by canceling the registered sale agreement dated 22/12/2007 in favour of the defendant, since the document is not acted upon and only nominal document, but for the reasons best known to the plaintiff, he postpone the same one or other reason and with an intention to knock down the valuable property of defendant, the plaintiff misutilised the said alleged agreement of sale which was executed by the defendant only for security purpose towards the loan amount which borrowed by him from the plaintiff.
d. The defendant got issued notice to the plaintiff on 25/08/2008 calling upon him to receive balance loan amount and cancel the registered agreement dated 22/12/2007. Though the plaintiff received the said notice, but, he failed to cancel the registered sale agreement and moreover the plaintiff did not chosen to reply the same. The office copy of the lawyer notice issued by the defendant 15 and postal receipts are herewith filed for kind perusal.
e. The defendant is an agriculturist and the entire family of defendant is depending on the income derived from the suit scheduled property. Moreover the defendant do not have any other property except the suit scheduled property.
f. Under the above said circumstances if the Hon'ble Court is not pleased to dismiss the suit of the plaintiff, the defendant and his family members will be put to great hardship and loss. If the Hon'ble Court may be come to conclusion that the plaintiff is entitled decree for earnest amount, in such an event the defendant praying the Hon'ble Court permit him to pay that amount by way of sum installments.
g. The suit of the plaintiff is not maintainable without seeking any alternative relief for refund of the earnest amount. On this ground alone the suit of the plaintiff is liable to be dismissed in limine.
h. Under the above said circumstances the suit filed by the plaintiff is not maintainable 16 either in law or on facts and circumstances of the case.
i. Therefore it is prayed that the Hon'ble Court may be pleased order for dismissed the suit of the plaintiff with costs in the interest of justice and equity."
17. It is the contention of the learned counsel for the plaintiff that in para-6 of the written statement, it was contended by the defendant that "the suit of the plaintiff is time barred; according to the specific case of the plaintiff that as per recitals of the agreement of sale, registered sale deed has to be executed on or before 30.08.2008 by the defendant; the plaintiff who claims that he was ready and willing to perform his part of agreement of sale has not shown his readiness and willingness within the stipulated period as per the alleged agreement of sale as well as the earlier alleged agreement of sale dated 31.12.2004."
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18. Thus, it was argued that the contentions of para-12 are inconsistent with the defence taken in para-6. This argument is wholly misconceived. In para-6, the defendant has unequivocally submitted that even if the version of the plaintiff taken to be true, it is submitted that the suit of the plaintiff is hopelessly time barred and so on. If para-6 of the written statement is read as a whole, it indicates that it is not the acceptance of the agreement of sale, but even if it is assumed to be an agreement of sale, the suit filed by the plaintiff is not maintainable, same cannot be treated as admission of the agreement of sale.
19. The written statement is not evasive as contended by the plaintiff as observed in para-12 of the written statement. Specific defence has been taken by the defendant that Ex.P1 was executed as security to the loan transaction. Ignoring this specific defence, it cannot be held that the defendant has admitted Ex.P1. 18
20. In the case of Manasa Housing Co-operative Society Ltd., (supra), the Division Bench of this Court has observed that inadequacy of the price or rise in the price, itself is not a ground, unless the respondents plead and prove that they would suffer greater hardship in case the decree for specific performance is granted. Grant of decree for specific performance cannot be refused when the party has proved an agreement of sale and also his readiness and willingness to perform his part of the contract and no evidence is produced by the respondents that they would be put to hardship.
21. The evidence on record shows that the defendant is an agriculturist, he possesses only the suit schedule property, except suit schedule property, he does not have any other landed property, he and his family members depending upon the suit schedule property. The suit schedule land is fertilized land and value of the said land 19 being higher, the question of alienating the property for Rs.2,50,000/- does not arise.
22. DW2 has deposed that the alleged sale agreement was executed by the defendant towards collateral security for the loan given by the plaintiff. Likewise DW3 has also deposed that in the year 2004, value of the suit property was about Rs.3 to 4 Lakhs per acre based on the sale reports of the adjoining lands. Hence, it is apparent that the evidence lead by the defendant proves that inadequacy of the price towards sale consideration would cause greater hardship in case decree for specific performance of the contract is granted. Hence, this argument of the plaintiff also fails.
23. The decision of the Hon'ble Apex Court in the case of Gobind Ram (supra) was held in the context of the appellant trying to wriggle out of the contract because of the escalation of the prices of real estate. The said judgment is not applicable to the present facts of the case, 20 since it was not the plea of the plaintiff in the proceedings before the Courts below that the escalation of the real estate price was the cause for the defendant to wriggle out of the contract between the parties.
24. Crucial question is whether the alleged agreement of sale Ex.P1 is an agreement of sale transaction. It is not in dispute that the plaintiff has suppressed the material fact of the earlier agreement of sale Ex.D2 executed in the year 2004 and cancellation of the same on 22.12.2007, the very same day when Ex.P1 was executed. It is also an admitted fact as could be discerned from the evidence of PW1 that he is lending loan to different parties and similar suits are also pending consideration before the competent Courts. Execution of earlier agreement of sale in the year 2004 and its cancellation in the year 2007, further executing a fresh agreement on the very same day for sale consideration of Rs.2,50,000/- with payment of earnest money of Rs.2,20,000/- would raise suspicion about the 21 nature of Ex.P1, moreover Ex.P1 being registered, nothing prevented the plaintiff to get the sale deed registered, if the major portion of the sale consideration was paid, balance being just minimum or negligible i.e., Rs.10,000/- being the balance amount in the earlier transaction and Rs.30,000/- in the present transaction. Thus, it can be inferred and concluded that Ex.P1 is a document executed as security for the loan transaction.
25. Section 20 of the Specific Relief Act, 1963 deals about the discretion as to decreeing specific performance which reads as under:
"20. Discretion as to decreeing specific performance.--
(1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but 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.22
(2) The following are cases in which the court may properly exercise discretion not to decree specific performance:--
(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 are such that the contract, though not voidable, 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; or
(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance.
Explanation 1.--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.-- 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 23 from any act of the plaintiff subsequent to the contract, be determined with reference to the circumstances existing at the time of the contract. (3) The court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance.
(4) The court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party."
26. Pollock & Mulla in their book on "The Indian Contract and Specific Relief Acts," [14th Edition, Volume II (LexisNexis Butterworths Wadhwa Publication at page 1999)] after referring to two cases of Bombay High Court reported in AIR 1945 Bom 481 (Jethalal Nanshah Modi Vs. Bachu) and AIR 1915 Bom 109 (Gangabai Vs. Sonabai), was pleased to observe that, "In exercising discretion, the Court should take into account the circumstances of the case, the conduct of the parties, and the respective interests under the 24 contract. An agreement which inflicts more injury upon the defendant than confers a benefit on the plaintiff will not be enforced."
27. The defendant being an agriculturist, he and his family members are depending upon the suit property for their livelihood. The same is not rebutted by the plaintiff, granting of specific performance would cause greater hardship to the defendant. Considering Section 20(2)(b) of the Specific Relief Act, 1963, which would attract for the facts of the present case, exercising of discretion would be in not to decree the specific performance. As such, the refusal by the lower appellate Court in awarding the specific performance of the contract, but in the alternative decreeing the suit only for refund of the earnest money with interest thereupon cannot be found fault with. However, considering the nature of transaction registered as agreement of sale with respect to a land property and the escalation in the prices of the land generally, interest 25 of the appellant/plaintiff would be protected by enhancing the rate of interest awarded by the lower appellate Court.
28. In Hemanta Mondal & others Vs. Ganesh Chandra Naskar reported in 2015 AIR SCW 6014 and in Ramesh Chand (dead) through Legal Representatives Vs. Asruddin (dead) through Legal Representatives reported in (2016) 1 SCC 653, in similar circumstance of the case where the Hon'ble Supreme Court found that instead of granting decree of specific performance, the plaintiff could be compensated by directing the defendant to pay reasonable and sufficient interest not accepting the lower rate of interest awarded by the lower appellate Court ordered payment of interest at the rate of 18% p.a.
29. Considering the facts and circumstances of the present case and the judicial pronouncements as narrated above, it is a fit case, where the plaintiff can be compensated by directing the defendant to pay a 26 reasonable and sufficient interest at the rate of 18% per annum, since the rate of interest at 12% per annum awarded by the lower appellate Court would be insufficient.
30. In the result, the following:
ORDER
i) Appeal is allowed in part.
ii) The judgment and decree of the lower appellate Court in RA No.4/2012 passed by II Addl. Senior Civil Judge, Bellary directing the defendant to pay Rs.2,20,000/- to the plaintiff with interest at 12% per annum from 19.08.2008 till realization of the said amount within 60 days from the date of the judgment is modified by enhancing and fixing the rate of interest at 18% per annum.
iii) Rest of the terms of the order passed by the lower appellate Court remains unaltered.
iv) On such deposit made by the
defendant/respondent, appellant is at
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liberty to withdraw the same subject to identification in accordance with law.
v) Balance amount shall be deposited by the defendant/respondent before the Trial Court within a period of four weeks from the date of receipt of certified copy of the order.
In view of disposal of the appeal, all the pending IAs are consigned to file.
(Sd/-) JUDGE JTR