J. Baskaran vs T.Pappa on 29 March, 2012

[Cites 19, Cited by 1]

Madras High Court

J. Baskaran vs T.Pappa on 29 March, 2012

2. The appellant/plaintiff filed the suit for specific performance of an agreement of sale, dated 20.8.1997 and that suit was dismissed and the Appeal filed by the appellant herein was also dismissed. Hence, this Second Appeal.

3. It is the case of the appellant/plaintiff that he entered into an agreement of sale, dated 20.8.1997 with the respondent, for purchasing the suit property for a sum of Rs.60,000/- and on the same date, advance of Rs.50,000/- was paid and acknowledged in the agreement of sale and for payment of balance sum of Rs.10,000/-, time was given upto 20.8.2000 and the appellant was ready and willing to pay the balance sale consideration and offered that amount to the respondent. As the respondent was dragging on the matter, the appellant sent a notice, dated 21.7.2000, informing the respondent his readiness and willingness to get the sale deed executed and requested the respondent to come and execute the sale deed, after receiving the balance sale consideration. As the respondent did not come forward, the suit was filed for specific performance of agreement of sale.

4. The respondent contested the suit stating that she never executed any agreement of sale, as alleged by the appellant and she was a Subscriber in a Chit Company, viz., Vetri Murugan Finance run by the appellant and she owed certain amounts to the said Finance Company and to secure that amount, the appellant obtained her signature in various bond papers and misused those papers, as if, an agreement of sale was entered into between the parties and the document executed by her was only a security and it was never intended to be acted upon as an agreement of sale and the appellant also set up his brother-in-law P.Ramasamy, who also filed a suit in O.S.No.571 of 2004, on the file of the Principal District Munsif Court, Namakkal and she never received Rs.50,000/- from the appellant, either as a loan or as agreement of sale and hence, she is not liable to execute the sale deed.

5. The appellant examined three witnesses to prove his case and the respondent examined two witnesses, including herself to prove that she never executed the agreement of sale.

6. The Trial Court, on the basis of the oral and documentary evidence, held that the agreement of sale, dated 20.08.1997 was not executed by the respondent and the respondent proved that the agreement of sale was executed as security towards the lability payable to the Finance Company and it was only a loan transaction or given as security and the appellant did not prove his readiness and willingness to perform his part of the contract and therefore the appellant is not entitled to the decree for specific performance and dismissed the suit.

7.The First Appellate Court also confirmed the findings of the Trial Court and dismissed the Appeal.

8. Mr.N.Manokaran, the learned counsel appearing for the appellant submitted that both the Courts below erred in holding that Ex.A.2 was not an agreement of sale and it was not executed by the respondent knowing fully well about the contents and it was a loan transaction and hence, he submitted that the judgment passed by the Courts below calls for interference.

9. The learned counsel for the appellant further submitted that the respondent is also not entitled to plead that the agreement of sale was executed as security and under the document, no amount was received. The respondent is estopped from taking such a plea, by virtue of Section 92 of the Evidence Act. The learned counsel further submitted that once the respondent fails to prove that Ex.A.2 is a loan transaction and not an agreement of sale, the appellant is entitled to the relief of specific performance and time is not essence of contract in respect of immovable property and as per the agreement of sale, 3 years' time was prescribed for paying the balance sale consideration and before the expiry of the 3 years period, notice was issued by the appellant and immediately, thereafter, the suit was filed by him and hence, the appellant proved that he was ever ready and willing to perform his part of the contract. Considering all these aspects the Courts below ought to have decreed the suit and hence, the Second Appeal is liable to be allowed.

10. The learned counsel for the appellant relied upon the judgments reported in (2010) 5 M.L.J. 899 in the case of [ D.Ananda Moorthy Vs. P.Chandrakala], (2009) 2 TNCJ 527 Mad in the case of [T.G.Pongiannan Vs. K.M.Natarajan and another ], (2011) 3 MWN (Civil) 74 in the case of [ Dhandapani Vs. Balamurugan ], in support of his contention that Section 92 of the Evidence Act is a bar to the respondent to take a plea that Ex.A.2 is only a loan transaction and not an agreement of sale.

11. The learned counsel for the appellant further submitted that when the respondent fails to prove that the transaction was only a loan transaction and the document was executed only as security, the appellant/plaintiff is entitled to the relief of specific performance and in support of his contention, the learned counsel relied upon the judgments reported in (2010) 7 S.C.C. 717 in the case of [Laxman Tatyaba Kankate and another Vs. Taramati Harishchandra Ddhatrak], (2007) 10 S.C.C. 231 in the case of [P.S.Ranakrishna Reddy Vs. M.K.Bhagyalakshmi and another] and (2010) 5 C.T.C. 653 in the case of [ A.Natarajan and two others Vs. Chitra Mills].

12. The learned counsel also relied upon the judgment reported in (2007) 7 S.C.C. 534 in the case of [ Aniglase Yohannan Vs. Ramlatha and others ] in support of his contention that when the appellant/plaintiff was ready and willing to perform his part of the contract, he is entitled to the relief of specific performance and relied upon the judgment reported in (2008) 11 S.C.C. 45 in the case of [ Silvey and others Vs. Arun Varghese and another ] for the proposition that the conduct of the defendant in taking a false plea has to be taken into consideration, while decreeing or denying the relief of specific performance.

13. Mr.R.Subramanian, the learned counsel appearing for the respondent submitted that the Courts below, rightly appreciated the recitals in the agreement of sale and the time given for payment of balance sale consideration of Rs.10,000/-, out of the total consideration of Rs.60,000/-, and held that the agreement of sale was not executed by the respondent and it was only a loan transaction or given as security, for the loan payable towards Vetri Murugan Finance Company. The Courts below also rightly exercised its discretion under Section 20 of the Specific Relief Act and held that the agreement, was not executed by the respondent with an intention of executing the sale agreement and it was only a loan transaction and the conduct of the appellant would also prove that he was not ready and willing to perform his part of the contract and rightly dismissed the suit. The learned counsel relied upon the following three reported judgments in support of his contentions:-

i) (2010) 10 S.C.C. 512 in the case of [ Man Kaur (dead) by Lrs. Vs. Hartar Singh Sangha] ,

ii) (2007) 1 L.W. 309 in the case of [ Kamireddi Sattiaraju and another Vs. Kandamuri Boolaeswari ] and

iii)(2011) 6 M.L.J. 149 S.C. in the case of [ Saradamani Kandappan Vs. S.Rajalakshmi ].

14. Having regard to the arguments put forth by the learned counsel on either side and having regard to the pleadings, the following substantial questions of law arise for consideration:-

i) Whether the respondent proved that Ex.A.2 was executed only as security or meant to be a loan transaction and it was not intended to be considered as agreement of sale ?

ii) Whether the Courts below were right in holding that the appellant has proved his readiness and willingness to perform his part of the contract?

iii) Whether the Courts below were right in exercising the discretion vested with them under Section 20 of the Specific Relief Act?

15. It is seen from the agreement of sale-Ex.A.2 that the sale consideration was fixed at Rs.60,000/- and advance of Rs.50,000/- was paid and the balance amount of Rs.10,000/- was to be paid on or before 20.08.2000 and whenever the appellant was ready and willing to pay the balance sale consideration and asked the respondent to execute the sale deed, the respondent should execute the sale deed, and in the event of refusal by the respondent to execute the sale deed, the appellant can file the suit to enforce the agreement of sale. Hence, for a sale consideration of Rs.60,000/-, Rs,50,000/- was paid and for the payment of balance amount of Rs.10,000/- three years' time was given and no explanation has been given by the appellant, while examined as P.W.1 for giving three years' time for payment of balance sum of Rs.10,000/- . In the evidence, the appellant has stated that three years period was provided, as he was not having the means to pay the balance sum of Rs.10,000/-. Therefore, as per the admission of P.W.1, he was not having means to pay Rs.10,000/- and for that purpose three year' time was given.

16. Therefore, having regard to the time of three years provided in the agreement of sale, for payment of balance sale consideration, which represents only 1/6th of the sale consideration, we will have to see whether the transaction is really an agreement of sale, as spoken to by the appellant or it is only a loan transaction or security transaction, as contended by the respondent.

17. The learned counsel for the appellant submitted that having signed the document Ex.A.2, it is not open to the respondent to vary the terms of the contract and that is prohibited under Section 92 of the Evidence Act and relied upon the judgments reported in (2010) 5 M.L.J. 889 ( supra) and (2009) 2 TNCJ 527 Mad ( supra) and (2011) 3 MWN ( Civil) 74 (supra).

18. In the above three cases, the learned Judges, having regard to the facts of those cases held that the agreement of sale was executed and the defendant failed to prove that it is a loan transaction or it was given as security. In the judgment reported in (2009) 2 TNCJ 527 Mad (supra) the learned Judge relied upon the judgment of the Hon'ble Supreme Court reported in A.I.R. (2000) S.C. 426 : (2000) 1 S.C.C. 434 in the case of (Ishwar Dass Jain Vs. Sohan Lan ) wherein, the Hon'ble Supreme Court has held that it is permissible to a party to a deed to contend that the deed was not intended to be acted upon, but, was only a sham document and the bar arises only when the document is relied upon and its terms are sought to be varied and contradicted. The oral evidence is admissible to show that the document executed was never intended to operate as an agreement, and the parties intended some other document.

19. Similarly, in the judgment reported in (2011) 3 MWN ( Civil) 74 (supra) the learned Single Judge of this Court, relied upon the judgment reported in A.I.R. (1982) S.C. 20 in the case of [Ganga Bai Vs. Chhabubai], wherein, the same principle, as stated above was reiterated. Further, in the judgment reported in (2007) 1 L.W. 309 ( supra), the Hon'ble Division Bench of this Court, after relying upon the judgments reported in (2003) 6 S.C.C. 595 in the case of [ Roop Kumar Vs. Mohan Thedani] and (2004) 4 S.C.C. 794 in the case of [Parvinder Singh Vs. Renue Gautam], held that the parties are entitled to lead evidence that the deed was never intended to be acted upon and it was a sham document.

20. Therefore, having regard to the law laid down by the Hon'ble Supreme Court as well as by this Court in the judgments referred to supra, it cannot be contended by the appellant that the respondent is not entitled to plead and prove that the document was not intended to be acted upon as agreement of sale, and it was only a loan transaction. Once it is held that the respondent is entitled to plead and prove the document was not intended to be acted upon as agreement of sale, we will have see whether the respondent has proved that it is only a loan transaction. Before going into that aspect, I would like to make it clear that the respondent is the defendant and the burden of proof is not so severe, as that of the plaintiff and it is enough if the respondent/defendant is able to prove preponderance of probability to substantiate her case and she need not prove her case, as that of the appellant/plaintiff.

21. It is the specific case of the respondent that the appellant is the Director of Vetri Murugan Finance and she was having dealing with that Finance Company and she owed certain amounts in respect of the chit transaction and therefore, the appellant obtained her signature in various stamped papers and used some of the papers in the name of his brother-in- law and also in his name, as if, the agreement of sale was entered into between the respondent and the appellant. The respondent also marked Ex.B-2 series to prove transaction with the said Finance Company. It is also admitted that the appellant's brother-in-law P.Ramasamy filed a suit in O.S.No.571 of 2004, against the respondent for specific performance of an agreement of sale, even though, that document was not marked in this case.

22. Further, having regard to the sale consideration fixed, the advance paid and time fixed for payment of balance sale consideration, one can easily infer that Ex.A.2 could not have been intended to be acted upon as agreement of sale. In this context, the judgment reported in (1997) 9 S.C.C. 634 in the case of [ Tejram Vs. Patirambhau ] is relevant. In that case, having regard to the similar set of facts, the Hon'ble Supreme Court held that the agreement in reality was only a money transaction and therefore, the respondent was not entitled to the relief of specific performance. In that reported case, out of the sale consideration of Rs.50,000/-, Rs.48,000/- was received and one year time was given for payment of Rs.2,000/-. In such circumstances, it was held by the Hon'ble Supreme Court that it was only a loan transaction and cannot be construed as agreement of sale.

23. In this case also, out of the total sale consideration of Rs.60,000/-, Rs.50,000/- was paid and for the payment of balance sum of Rs.10,000/- three years period was prescribed and therefore, in my opinion, Ex.A.2 was not intended to be an agreement of sale and it must have been executed only as security or as a loan transaction.

24. As stated supra, the respondent had proved that she had dealing with the Vetri Murugan Finance, by marking Ex.B.2 series, and the brother-in-law of the appellant also filed the suit for specific performance of agreement of sale and therefore, the respondent has proved that preponderance of probabilities and that would only lead to the conclusion that Ex.A.2 was not intended to be acted upon as agreement of sale and it was given only as security or as loan transaction.

25. The Courts below, after properly appreciating the consideration fixed, advance paid and the time fixed for payment of balance sale consideration, rightly held that Ex.A.2 was not intended to be acted upon as agreement of sale and it was given as security. According to me, the findings of the Courts below are correct and calls for no interference. Hence, the substantial question of law No.1, is answered in favour of the respondent and against the appellant.

26. Even assuming that Ex.A.2 was intended to be acted upon as agreement of sale, as contended by the appellant, we will have to see whether the appellant is entitled to the relief of specific performance. It is a settled legal position of law that in all cases of specific performances, the plaintiff must plead and prove that he is ready and willing to perform his part of the contract and there is no laches on his part in approaching the Court. The plaintiff must come to the Court, within a reasonable time and must prove that he has got means to pay the balance sale consideration. In this case, the appellant/plaintiff has admitted in evidence that three years period was provided, as he was not having means to pay Rs.10,000/- immediately. Therefore, having regard to the admission of the appellant, that on the date of the agreement of sale, he was not having means to pay Rs.10,000/- and a reading of Clause in the agreement of sale would make it clear that the appellant can enforce the specific performance of the agreement at any time within the period of three years. It is only stated in the agreement of sale that, if the appellant/plaintiff is prepared to pay the balance sale consideration at any time before 20.08.2000 and inform the respondent/defendant to receive the amount and execute the sale deed, the respondent/defendant should come and execute the sale deed, failing which, the appellant/plaintiff would enforce the agreement, by filing a suit. The appellant/plaintiff asked the respondent/defendant to execute the sale deed only at the fag-end of 3 years. The appellant further admitted that no action was taken by him till date he sent notice on 26.7.2000 and no reason was stated for not filing the suit or issuing any notice within that 3 years period, as provided in the agreement of sale.

27. Therefore, the evidence of P.W.1. would only prove that he was not ready and willing to perform his part of the contract either on account of lack of means to mobilize Rs.10,000/- or, on the ground that, it was only a loan transaction and not an agreement of sale and therefore, he waited for the respondent to repay the loan of Rs.50,000/- mentioned as advance in the agreement of sale.

28. Therefore, having regard to the fact that no steps were taken by the appellant for more than three years from the date of agreement of sale, to enforce the agreement of sale, especially, when the respondent refused to execute the sale deed, evenafter the demand made by the appellant would only prove that the appellant was not ready and willing to perform his part of the contract.

29. In the judgment reported in (2005) 7 S.C.C. 534 ( supra), the Hon'ble Supreme Court has held as follows:-

" Lord Campbell in Cork v. Ambergate etc. and Railway Co., (1851) 117 ER 1229 observed that in common sense the meaning of such an averment of readiness and willingness must be that the non-completion of the contract was not the fault of the plaintiffs, and that they were disposed and able to complete it had it not been renounced by the defendant.

The basic principle behind Section 16(c) read with Explanation (ii) is that any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemishless throughout entitling him to the specific relief. The provision imposes a personal bar. The Court is to grant relief on the basis of the conduct of the person seeking relief. If the pleadings manifest that the conduct of the plaintiff entitles him to get the relief on perusal of the plaint he should not be denied the relief."

30. In the judgment reported in (2011) 6 M.L.J. 45 149 SC ( supra) the Hon'ble Supreme Court held as follows:-

25.The reality arising from this economic change cannot continue to be ignored in deciding cases relating to specific performance. The steep increase in prices is a circumstance which makes it inequitable to grant the relief of specific performance where the purchaser does not take steps to complete the sale within the agreed period, and the vendor has not been responsible for any delay or non-performance. A purchaser can no longer take shelter under the principle that time is not of essence in performance of contracts relating to immovable property, to cover his delays, laches, breaches and `non-readiness'. The precedents from an era, when high inflation was unknown, holding that time is not of the essence of the contract in regard to immovable properties, may no longer apply, not because the principle laid down therein is unsound or erroneous, but the circumstances that existed when the said principle was evolved, no longer exist. In these days of galloping increases in prices of immovable properties, to hold that a vendor who took an earnest money of say about 10% of the sale price and agreed for three months or four months as the period for performance, did not intend that time should be the essence, will be a cruel joke on him, and will result in injustice. Adding to the misery is the delay in disposal of cases relating to specific performance, as suits and appeals therefrom routinely take two to three decades to attain finality. As a result, an owner agreeing to sell a property for Rs.One lakh and received Rs.Ten Thousand as advance may be required to execute a sale deed a quarter century later by receiving the remaining Rs.Ninety Thousand, when the property value has risen to a crore of rupees..

28. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanadam (supra) : (i) Courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored.

(ii) Courts will apply greater scrutiny and strictness when considering whether the purchaser was `ready and willing' to perform his part of the contract.

(iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. Courts will also `frown' upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance. The three year period is intended to assist purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part performance, where equity shifts in favour of the purchaser.

31. In the judgment reported in (2010) 7 S.C.C. 717 ( supra) the Hon'ble Supreme Court held as follows:-

1. It will also be useful to refer to the provisions of Section 20 of the Act which vests the Court with a wide discretion either to decree the suit for specific performance or to decline the same. Reference in this regard can also be made to the case of Bal Krishna v. Bhagwan Das [(2008) 12 SCC 145], where this Court held as under :-

13. ........The compliance with the requirement of Section 16(c) is mandatory and in the absence of proof of the same that the plaintiff has been ready and willing to perform his part of the contract suit cannot succeed. The first requirement is that he must aver in plaint and thereafter prove those averments made in the plaint. The plaintiff's readiness and willingness must be in accordance with the terms of the agreement. The readiness and willingness of the plaintiff to perform the essential part of the contract would be required to be demonstrated by him from the institution of the suit till it is culminated into decree of the court.

14. It is also settled by various decisions of this Court that by virtue of Section 20 of the Act, the relief for specific performance lies in the discretion of the court and the court is not bound to grant such relief merely because it is lawful to do so. The exercise of the discretion to order specific performance would require the court to satisfy itself that the circumstances are such that it is equitable to grant decree for specific performance of the contract. While exercising the discretion, the court would take into consideration the circumstances of the case, the conduct of parties, and their respective interests under the contract. No specific performance of a contract, though it is not vitiated by fraud or misrepresentation, can be granted if it would give an unfair advantage to the plaintiff and where the performance of the contract would involve some hardship on the defendant, which he did not foresee. In other words, the court's discretion to grant specific performance is not exercised if the contract is not equal and fair, although the contract is not void." Similar view was taken by this Court in the case of Mohammadia Cooperative Building Society Ltd. v. Lakshmi Srinivasa Cooperative Building Society Ltd. & Ors. [(2008) 7 SCC 310], where the Court reiterated the principle that jurisdiction of the Court to grant specific performance is discretionary and role of the plaintiff is one of the most important factor to be taken into consideration. We may also notice that in the case of P.V. Joseph's son Mathew v. N. Kuruvila's Son [AIR 1987 SC 2328], this Court further cautioned that while exercising discretionary jurisdiction in terms of Section 20 of the Act, the Court should meticulously consider all facts and circumstances of the case. The Court is expected to take care to see that the process of the Court is not used as an instrument of oppression giving an unfair advantage to the plaintiff as opposed to the defendant in the suit.

32. In the judgment reported in (2007) 6 M.L.J. 1505 S.C., in the case of [ Banshilal Soni Vs. Kastoor Chand Begani ], it has been held by the Hon'ble Supreme Court that if there was no demand or notice for nearly 20 months, after the execution of the sale agreement, it cannot be stated that the person was ready and willing to perform his part of the contract.

33. Therefore, having regard to the above facts, that the appellant/plaintiff was not having means to pay balance sale consideration of Rs.10,000/- immediately, and the appellant did not come forward and no steps were taken by him to enforce the agreement for nearly 3 years would only prove that the appellant was not willing to perform his part of the contract and he was guilty of laches and it would lead to the only conclusion that he did not intend to enforce the agreement of sale, as it was given only as security and not intended to be acted upon as agreement of sale.

34. Therefore, the substantial question of law No.2. is answered against the appellant. Hence, even assuming that Ex.A.2, the agreement of sale is a genuine document, having regard to the fact that the appellant was not ready and willing to perform his part of the contract, he is not entitled to the relief of specific performance. Under Section 20 of the Specific Relief Act, the grant of relief of specific performance is purely discretionary and even though, the plaintiff is entitled, as per the terms of the contract to the relief of specific performance, the Court need not grant such relief.

35. In this case, as stated supra, the agreement of sale was not intended to be acted upon and it was only the loan transaction and that is evident from the recitals regarding the consideration, advance paid and the period prescribed for payment of balance sale consideration and the appellant also proved that he was not ready and willing to perform his part of the contract, even after refusal by the respondent to execute the sale deed and having regard to the escalation of price, it would be unfair to compel the respondent to execute the sale deed in favour of the appellant/plaintiff, after a elapse of 3 years from the date of agreement of sale. Hence, the substantial question of law No.3 is also answered against the appellant and I hold that the Courts below rightly exercised their discretion in dismissing the suit.

36. In the result, the judgments and decrees of the Courts below are confirmed and the Second Appeal is dismissed. No costs. Consequently, connected Miscellaneous Petition is closed.

29.03.2012 sd Index : yes/no Internet : yes/no To

1.The Subordinate Court, Namakkal

2.The Additional District Munsif, Namakkal.

R.S.Ramanathan,J., sd Pre delivery judgment in S.A.No.710 of 2011 29.03.2012

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