1
HONOURABLE SRI JUSTICE P. NAVEEN RAO
AND
HONOURABLE SRI JUSTICE J. SREENIVAS RAO
COM.CA.No. 48 OF 2019
J U D G M E N T : { Per the Hon'ble Sri Justice J. Sreenivas Rao }
The appellants are the defendants in the suit. The respondent/plaintiff
filed a suit in O.S.No.48 of 2014 on the file of the Court of XXIV-Additional Chief Judge, City Civil Court, Hyderabad, seeking the following reliefs :
(i) decree be passed ordering the defendants to pay the amount due for an total amount of Rs.3,74,62,500=00 (Rs.Three Crores Seventy Four Lakhs, Sixtytwo Thousand and Five Hundred only) being aggregate of principal amount of Rs.2,50,00,000=00 (Rs.Two Crores and Fifty Lakhs only) and Rs.1,24,62,500=00 (Rs. One Crore Twenty Four Lakhs Sixty Two Thousand Five Hundred only) being the interest @ 18% per annum for the period from 11/04/2011 till 18/01/2014.
(ii) Interest @ 18% on the total amount of Rs.3,74,62,500=00 (Rs.Three Crores Seventy four Lakhs Sixty two thousand and Five Hundred only) from the date of decree till the date of payment.
(iii) cost of the suit be awarded.
2. The said suit, O.S.No.48 of 2014 was transferred to the Commercial Court-cum-XXIV-Additional Chief Judge, City Civil Court, Hyderabad for trial and disposal of commercial disputes at Hyderabad and the same was re- numbered as COS.No.14 of 2016.
3. Plaint averments :
3.1 The plaintiff averred in the suit that the plaintiff Company is a reputed construction company having expertise in developing residential and 2 commercial units and has also undertaken various infrastructure development projects in India and further averred that the defendants approached the plaintiff by representing that Defendant No.1, his son and daughter i.e., defendants 2 and 3 respectively were the absolute owners of suit schedule property; i.e., the land admeasuring Ac: 33-00 gts., in survey No.696 situated at Janwada village, Shankerpally Mandal, Ranga Reddy district (schedule land) and further averred that the defendants expressed their intention to sell the above schedule land to the plaintiff for a total sale consideration of Rs.25,00,000=00 ( Rs. Twenty Five Crores only) and requested to enter into an agreement of sale. The defendants represented that the schedule land is not a protected land for catchment nor was same covered within the ambit of G.O.Ms.No.111, M.A. dated 08-03-1996. The defendants further informed that except for obtaining certain necessary permits/approvals/licenses for covering the schedule land for residential purpose in the form of high rise apartments, villas, golf club, I.T. park etcetra (approvals) from the concerned authorities the above schedule land was un-encumbered and same can be conveyed and further averred that the plaintiff informed the defendants that unless all the approvals and consents were obtained no agreement of sale could be executed. At that stage the defendants requested the plaintiff to give him an amount of Rs.2,50,00,000=00 (Rs. Two Crores and Fifty Lakhs only) as loan, so as to enable the defendants to obtain all the approvals required for the construction of high rise 3 apartments, residential units etc., that would facilitate the sale of the schedule land and the plaintiff agreed to give the above said amount, accordingly the plaintiff and defendants have entered into Memorandum of Understanding, dated 10-02-2011 (hereinafter called as "MoU" ) 3.2 It is stated that as per the MOU the defendants were required to obtain all the approvals and consent within a period of 60 days from the date of MOU and in the event the defendants fails to obtain the approvals, the defendant shall repay the loan within a period of 15 days from the expiry of the said 60th day, failure of which, the defendants shall be jointly and severally liable to pay an interest on the loan amount @ 18% per annum, from the 61st day.
3.3 It is further stated that the plaintiff as per MOU the plaintiff had given a loan of Rs.2,50,00,000=00 through a issuing a cheque bearing No.631065, dated 10-2-2011 of HSBC Bank. The said cheque issued in favour of defendant No.1 was presented and the same was cleared on 12-2-2011. As per clause 1 of the MOU, the defendant No.1 was authorised by defendants 2 and 3 to execute a demand promissory note. Accordingly, defendant No.1 thereby executed a promissory note dated 10-2-2011 in favour of plaintiff. The defendants agreed that they shall be jointly and severally liable for the loan amount and agreed to pay the same on demand together with an interest @ 18% p.a. 4 3.4 It is further averred by the plaintiff that the plaintiff not being satisfied with steps taken by the defendants for obtaining the required approvals within 60 days and further noticing various objections being made in print media had negatived the proposal. The plaintiff then made a demand on the defendants for the repayment of the said loan amount. The defendant No.1 in response to such demand made by plaintiff issued cheque bearing No.509558, dated 26-4-2011 for the entire loan amount of Rs.2,50,00,000=00 drawn on the Indian Overseas Bank, Jubilee Hills SPB Branch, Hyderabad with a covering letter admitting that the said cheque is given in repayment of loan availed.
3.5 The plaintiff further stated that they issued a letter dated 13-10-2011 informing the defendants about the presentation of the said cheque No.509558 for realization of the loan amount and the reply on 19-10-2011 with false allegations and contrary to the MoU and the same was received on 29-10- 2011. In the meantime, the plaintiff presented the cheque on 20-10-2011 in their bank account and the same was returned dishonoured on the ground "stop payment - payment stopped by drawer".
It is further averred that the plaintiff issued notice under section 138 of Negotiable Instruments Act, 1881 on 05-11-2011 and the defendant No.1 issued reply notice on 29-11-2011 on a false allegation contrary to MoU. Thereupon the plaintiff filed a complaint, C.C.No.488 of 2012 before the XV Additional Judge-cum-XIX Additional Chief Metropolitan Magistrate, 5 Hyderabad. However, the said court dismissed the complaint on erroneous grounds vide its order dated 13-03-2013. Aggrieved by the said judgment the plaintiff has filed an appeal before IV-Additional Sessions Judge, Hyderabad and the same is pending.
It is further stated that the plaintiff had given a loan of Rs.2,50,00,000- 00 as per the MoU and the plaintiff is entitled to the relief sought in the suit.
4. Defendants averments :
4.1 In the said suit, the defendants have filed the written statement denying the allegations inter alia contending that the suit for recovery of money is not maintainable and they are not liable to pay the alleged amounts as claimed in the suit including interest. The said sums being "advance consideration" for the plaint schedule property, which sums were expended for obtaining the necessary land use conversion. The plaintiff having relinquished and given up the relief of specific performance now stands precluded from claiming it.
4.2 It is further contended that after the plaintiff company had evinced interest to purchase the schedule property and wanted to acquire it for its business purpose namely; construction of high rise apartments and villas, golf club I.T. parks etc., and required the defendants to obtain the necessary approvals from the concerned authorities for land use conversion, the defendants obtained the same incurring substantial expenditure both for statutory payments and incidental expense and further stated that the amount 6 of Rs.2,50,00,000-00 being paid for purchase of the plaint schedule property with the balance sale consideration of Rs.22,50,00,000=00 being payable subsequently. It is stated that there was never any question of defendants attempting to convince the plaintiff to enter into sale and not being successful as alleged. It is stated that all the terms for the sale of the plaint schedule property were finalised. The sale price was agreed to with a part of it being payable after the necessary approvals are obtained. It is stated that the said approvals were obtained and the plaintiff in fact caused a publication in the news papers of its intended purchase by way of public notice in vaarta, Telugu daily and The Indian Express, English daily dated 10-8-2011. It is stated that the said public notice was published after the necessary land conversion was obtained under G.O.Ms.No.293 Municipal Administration and Urban Development Department dated 26-7-2011 and the plaintiff has waived its right to seek specific performance of the said agreement by filing the present false suit for recovery of money not due and payable by the defendants.
4.3 It is further stated that the demand promissory note dated 10-2- 2011 was given for security purpose and the MoU cannot be looked into being inadmissible in evidence for want of stamp duty and registration, the promissory note cannot also be looked into. Secondly, the defendants having fulfilled their obligation of obtaining land conversion expending huge sums, the said sum is not repayable by the defendants. It is stated that the notice 7 dated 05-11-2011 under section 138 of the Negotiable Instruments Act was suitably replied to by reply notice dated 24-11-2011. It is stated that the institution of CC.No.488 of 2012 on the file of the Court of XV-Additional Judge-cum-XIX-Addl.Chief Metropolitan Magistrate, Hyderabad under section 138 of the Negotiable Instruments Act and the judgment passed on 13-3-2013 dismissing the same and the appeal filed by the plaintiff company are all a matter of record.
4.4 It is stated that there is no cause of action for filing the present suit. Whereas the alleged transactions took place are all situated at Kavuri Hills within Serilingampally Mandal, Ranga Reddy district and this court does not have jurisdiction to entertain the suit, the same is liable to be dismissed in limini.
5. Based on the above pleadings, the trial court has framed the following issues :
1) whether the plaintiff is entitled for recovery of money amounting to Rs.3,74,62,500=00 as prayed for ?
2) whether the plaintiff is entitled for interest as claimed for ?
3) whether there is a cause of action to file the suit ?
4) whether this court is having territorial jurisdiction to entertain the suit ?
5) whether the plaintiff is estopped from seeking repayment and interest on Rs.2,50,00,000-00 as pleaded in the written statement ?
6) To what relief ?8
6. For the sake of convenience, the parties are referred to as they were arrayed before the court below as "plaintiff" and "defendants".
7. On behalf of the plaintiff, PW-1 was examined and Exs.A-1 to A-18 documents were marked. On behalf of the defendants, DWs.1 and 2 were examined and Ex.B-1 was marked.
8. The trial court on consideration of the entire evidence placed on record, decreed the suit filed by the plaintiff holding that the plaintiff is entitled for recovery of amount of Rs.3,74,72,500=00 and also entitled for interest @ 18% p.a. on Rs.2,50,00,000=00 from the date of filing of the suit till the date of realization. The trial court further held that the plaintiff is also entitled to proportionate costs.
9. Challenging the judgment and decree dated 01-04-2019 passed in COS.No.14 of 2018 by the Judge, Commercial Court-cum-XXIV-Additional Chief Judge, City Civil Court, Hyderabad, the defendants preferred this present appeal.
10. Sri B.Chandrasen Reddy, learned Senior Counsel, for the defendants vehemently contended that the court below without properly considering the oral and documentary evidence placed on record and also without giving finding on each issue passed the judgment and decree, and the same is contrary to the settled principles of law. He further contended that the plaintiff-company has filed the suit by suppressing several material facts 9 including issuance of Ex.B-1 paper publication; and as such, the plaintiff is not entitled for the relief, sought in the suit especially the plaintiff has approached the court with unclean hands. The learned Senior Counsel further contended that the nature of the suit filed by the plaintiff is not a simple suit for recovery of amount and the alleged promissory note executed by the first defendant in pursuance of the memorandum of understanding dated 10-2-2011 only when the plaintiff had issued notice Ex.B-1 paper publication expressing his readiness and willingness to purchase the property covered under the memorandum of understanding; and thus, he is not entitled to file the suit for recovery of the aforesaid amount. The plaintiff ought to have file the suit for specific performance of agreement of sale. He further contended that the amounts given by the plaintiff in terms of the memorandum of understanding Ex.B-4 only. The plaintiff has filed a criminal case in C.C.No.488 of 2012 on the file of the Court of XXV-Additional Judge-cum-XIX Addl. Chief Metropolitan Magistrate, Hyderabad invoking section 138 of Negotiable Instruments Act, 1881 against the defendant No.1 for the very same amount of Rs.2,50,00,000=00 and the said C.C.No.488 of 2012 was dismissed by its order dated 13-03-2013 holding that the said amount was given by the plaintiff towards advance sale consideration but not a loan and the alleged cheque will not confer any right to the plaintiff to file criminal case invoking section 138 of Negotiable Instruments Act, 1881 and further held that the complainant has no right to recover advance sale consideration from the accused, as the 10 complainant has failed to discharge its obligation under memorandum of understanding; and therefore, the prosecution is able to establish the guilt of the accused beyond all reasonable doubt and the accused is entitled for acquittal and further contended that the trial court without taking into consideration of the above said judgment passed in C.C.No.488 of 2012 decreed the suit treating the transaction as a 'loan' , though the said amount was given to the defendants towards advance sale consideration. Hence, the suit filed by the plaintiff is not maintainable under law.
11. The learned Senior Counsel further contended that there is no cause of action against the defendants 2 and 3. Ex.A-6 promissory note executed by the first defendant only and the trial court ought not to have dismissed the suit against the defendants 2 and 3. He further contended that PW-1 was not a party to Ex.A-4 memorandum of understanding and in the absence of the principal, who signed Ex.B-4 document was entered into the witness-box and PW-1 has no personal knowledge about the facts of the case and his evidence cannot be taken into consideration. He further contended that D.Sreenivas Rao, who is authorised by the plaintiff company to initiate legal proceedings, he cannot delegate such power to PW-1 by giving Special Power of Attorney, as D.Sreenivasa Rao is not a Director and he is only an employee of the plaintiff company.
12. In support of his contention, the learned Senior Counsel relied upon the decision of the Hon'ble Supreme Court in Chand Rani (Dead) by LRs V/s. 11 Kamal Rani (Dead) by LRs 1., wherein it was held at Para No.20, which reads as hereunder:
It is settled law that the fixation of the period within which the contract has to be performed does not make the stipulation as to time the essence of the contract. When a contract relates to sale of immovable property it will normally be presumed that the time is not the essence of the contract. (Vide Gomathinayagam Pillai v. Pallaniswami Nadar. It may also be mentioned that the language used in the agreement is not such as to indicate in unmistakable terms that the time if of the essence of the contract. The intention to treat time as the essence of the contract may be evidenced by circumstances which are sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract.
13. The learned counsel relied upon the decision of the Hon'ble Supreme Court in LOURDU MARI DAVID AND ORS. V/s. LOUIS CHINNAYA AROGIASWAMY AND ORS 2., wherein it was held at para No.2 as hereunder :
It is settled law that the party who seeks to avail of the equitable jurisdiction of a Court and specific performance being equitable relief, must come to the Court with clean hands; In other words the party who makes false allegations does not come with clean hands and is not entitled to the equitable relief. The Division Bench has pointed put in the judgment three grounds which disentitle the plaintiff to the equitable relief as he came with a positive case of incorrect and false facts as set put in paragraphs 4 to 6 thus:
"On a perusal of the records we are entirely in agreement with the view expressed by the learned Judge. It 1 ) AIR 1993 SC‐1742 2 ) (1996) 5 SUPREME COURT CASES‐589 12 is quite clear that the plaintiff has not come to Court with clean hands. There are three circumstances which are pointed out by the learned Judge and we find that they are sufficient to warrant refusal of the claim for specific performance. First is that the plaintiff claimed that he was already in possession of Door. No. 2/53 as a lessee and he was given possession of Door No. 1/53 on the date of the agreement itself, viz., 18.10.1976 by defendants 1 and 2.
But, in the course of evidence he did not say anything about taking possession pursuant to the sale agreement. On the contrary, he deposed falsely that he did not mention in the plaint about getting possession of Door No. 1/53 on .18.10.197.6. It is mentioned in the evidence that Door No. 1/53 was not given to the plaintiff at any time in December, 1976, The tenant who was occupying the said portion has vacated the same and gave possession to defendants 1 and 2 who is turn handed over the same to third defendant. Thus, the case of the plaintiff regarding possession of Door No. 1/53 is false. Learned counsel contends that there was no mention in the plaint as to the date on which he took possession of Door No. 1/53. This contention is not Correct. In paragraph 5 of the plaint it is mentioned specifically that in pursuance of the agreement, the plaintiff who was in possession of item No. 2 was given possession of item No. 1 on that date and that he was in possession of both the items since then under the agreement dated 18.10.1976. This plea is clearly false. DW-3 who was occupying Door No. 1/53 has given evidence that the portion was vacated on 12.12.1976 by his father by taking a sum of Rs, 2500 from the prior owner. The plaintiff has himself stated as PW-1 that the tenant delivered possession to the owner of the property on 15.12.1976. That relied his case that he had taken possession even on the date of agreement viz., 18.10.1976. But, in another place P.W. 1 has stated that the tenant of Door No. 1/53 vacated the 13 portion on 5.12.1976. Thus, his evidence is not only false, but also discrepant.
14. The learned Senior Counsel further relied upon the decision of the Hon'ble Supreme Court in K. JAYARAM AND ORS. V/s. BANGALORE DEVELOPMENT AUTHORITY AND ORS3 ., wherein it was held at para 12 as hereunder :
12. It is well-settled that the jurisdiction exercised by the High Court under Article 226 of the Constitution of India is extraordinary, equitable and discretionary and it is imperative that the petitioner approaching the writ court must come with clean hands and put forward all facts before the Court without concealing or suppressing anything. A litigant is bound to state all facts which are relevant to the litigation. If he withholds some vital or relevant material in order to gain advantage over the other side then he would be guilty of playing fraud with the court as well as with the opposite parties which cannot be countenanced.
15. The learned Senior Counsel lastly relied upon the decision of the Hon'ble Supreme Court in KHAN MOHAMAD KHAN AND ORS. V/s. JAM MOHAMMAD KHAN 4., wherein it was held at para No. 7 as hereunder :
7. It is no longer res integra that an application for temporary injunction are decided on three well recognized principles firstly, prima facie case, secondly, balance of convenience and inconvenience and thirdly irreparable lose and injury. The conduct of the parties before the Court is also one of the relevant factors which shall weigh to the Court in an 3 ) 2021 SCC ONLINE‐SC‐1194 4 ) 2015 SCC ONLINE ; CAL 6415 : : (2015) 3 ICC 889 : (2015) 4 CCC 14 injunction proceeding as a person who does not come to the Court with clean hands does not deserve to get an order of injunction. This Court had an occasion to peruse the plaint of the title suit No. 73 of 2010 and the order refusing to pass an injunction wherefrom it appears, though the claim was restricted to 90 decimal of land but the properties inherited by the parties from their predecessor were also noticed by the Trial Court. The injunction is a discretionary and equitable relief and may disentitle the plaintiff an order of injunction if there is a suppression of the material facts. This Court is not oblivion of the fact that there lies a distinction between the suppression of the facts and suppression of material facts. Every facts which do not germane to the core issue if not disclosed cannot stand in the way of passing the order of injunction. The material facts are those which have a direct nexus and impact on the disputes involved in the suit or a proceeding and the suppression thereof may disentitle the plaintiff to have the order of injunction in his favour. The reference can conveniently be made to a judgment of the Delhi High Court rendered in case of M/s Seemax Construction (P) Ltd. v. State Bank of India and another reported in AIR 1992 Delhi page-197 wherein it is held that the suppression of material fact by itself is sufficient enough to decline the discretionary relief of injunction in these words:
"10. The suppression of material fact by itself is sufficient ground to decline the discretionary relief of injunction. A party seeking discretionary relief has to approach the court with clean hands and is required to disclose all material facts which may, one way or the other, affect the decision. A person deliberately concealing material facts from court is not entitled to any discretionary relief. The court can refuse to hear such person on merits. A person seeking relief of injunction is required to make honest disclosure of all relevant statements of facts otherwise it would amount 15 to an abuse of the process of the court. Reference may be made to decision in The King v. The General Commissioners for the purposes of the Income-tax Acts for the District of Kensington, 1917(1) King'' Bench Division 486 where the court refused a writ of prohibition without going into the merits because of suppression of material facts by the applicant. The legal position in our country is also no different (See : Charanji Lal v. Financial Commissioner, Haryana Chandigarh, AIR 1978 Punjab and Haryana, 326 (FB). Reference may also be made to a decision of the Supreme Court in Udai Chand v. Shankar Lal, AIR 1978 SC 265: (1978)2 SCC 209. In the said decision the Supreme Court revoked the order granting special leave and held that there was a misstatement of material fact and that amounted to serious misrepresentation. The principles applicable are same whether it is a case of misstatement of a material fact or suppression of material fact."
16. Per Contra, the learned Senior Counsel, Sri A. Sudershan Reddy, who represented Sri A. Sanjay Kishore, on behalf of the plaintiff vehemently contended that the amount given by the plaintiff to the defendants is only the loan amount not the earnest sale consideration. The suit filed by the plaintiff is only simple suit filed for recovery of amount on the basis of promissory note executed by the first defendant and the suit is very much maintainable in law. The learned Senior Counsel has drawn the attention of this Court on the terms and conditions of the memorandum of understanding; vis-a-vis on Clause 'B', 'F', 'H', and 'I', which reads as hereunder :16
CLAUSE "B" : The First Party jointly and severally represents warrants and assures the second party that the schedule land is not a protected land for catchment, water body or for any other public interests purposes and that the same is also not covered within the ambit of G.O.Ms.No.111, M.A., dated 08-03-1996 and/or any other amendment thereto, or any other similar Government Order/Notification.
CLAUSE "F" : The second party has informed the first party that the schedule land, at the moment, was not suitable for its business purposes unless the same is a clear land which can be used for residential purpose in the form of high rise apartments and villas, Golf Club, I.T. Park.
CLAUSE "H" : Basing on the aforesaid representations, warranties and assurances jointly and severally given by the first party, the second party showed interest to purchase the schedule land at the offer price of Rs.25,00,00,000=00 (Rupees Twenty five crores only), (hereinafter referred to as the 'sale consideration') subject to the condition that within 60 days (sixty days) from the date of this MoU, the first party shall obtain approvals for land conversion.
17. The learned Senior Counsel has further drawn the attention of this Court and taken us to the terms and conditions of the memorandum of understanding and the contingencies that emanate from it are namely;
condition No.1, 2, 3, 4, 11 and 12 of MoU, which reads as follows :
CONDITION No.1: In pursuance of the above understanding the second party agreed to give loan to the first party of a sum of Rs.2,50,00,000=00 (Rs.two crores and fifty lakhs only), (hereinafter referred to as the "loan:") on a execution by first party of a demand promissory note. All the three persons comprised in the first party hereby unanimously agree that Sri B.Ravinder Reddy shall, for himself and on behalf of all others comprised in the first party receive the loan and execute the said demand promissory note with joint and several responsibility.17
CONDITION No.2 : Within a period of 60 (sixty) days from the date of this MoU, the first party shall obtain approvals for land conversion. Provided however the second party shall alone be entitled at its absolute discretion, to extend the said time period of 60 days by such further period (s) as it may deem fit.
CONDITION No.3 : Immediately, but not later than seven days (or such other number of days as may be permitted by the second party) after approvals for land conversion, the first party shall, subject to clause 4 infra, enter into with the second party, an agreement for sale of the schedule land (hereinafter called the "agreement for sale"), at the offered price of Rs.25,00,00,000=00 (Rs.Twenty five crores only) (the sale consideration), on such terms and conditions as may be mutually agreed. This provision is subject to the provisions of clause 12, infra.
CONDITION No.4 : In the agreement for sale mentioned in the clause 3, the loan given by the second party to the first party pursuant to clause 1 supra, shall be treated as advance paid for purchase of the schedule land and the balance amount of sale consideration of Rs.22,50,00,000=00 (Rs. twenty two crores and fifty lakhs sonly) after reducing the said loan shall become payable in such instalments as may be mutually agreed to between the parties in the agreement for sale.
CONDITION No.11: The first party agrees that the second party may at such time(s) and at such places as it may deem fit, issue a public notices in news papers, informing the general public regarding the present transaction for ruling out any future claims or litigation in respect of the schedule land and the first party shall not have any objection therefor. 18
CONDITION No.12 : Notwithstanding anything contained in this MoU and without assigning any reason therefor, the second party at its discretion, shall be entitled not to buy the schedule land any time before entering into the agreement for sale and to seek repayment by the first party of the loan given by the second party pursuant to the provisions of clause 1 supra, together with any accrued interest thereon pursuant to the provisions of clause 5, and terminate this MoU after receipt of the loan together with any interest accrued thereon, Provided however, the first party shall always be bound by the provisions of this MoU and that the first party shall not have a right to terminate this MoU.
18. The learned Senior Counsel further contended that the Plaintiff is entitled to recover the amount along with interest and the trial court after taking into consideration of the oral and documentary evidence placed on record and also after hearing both parties, decreed the suit by assigning specific finding holding that the plaintiff is entitled to recover an amount of Rs.3,74,62,000=00 together with interest @ 18% per annum on Rs.2,50,00,000=00 from the date of filing of the suit till realization with proportionate cost. He further contended that there is no illegality or irregularity in the impugned judgment and decree passed by the trial court, which calls for interference. He further contended that even assuming that the transaction is treated as earnest sale consideration for the purchase of schedule land, there is no forfeiture clause in the memorandum of understanding. The learned Senior Counsel further contended that non- 19 mentioning of issuance of Ex.B-1 publication ipso facto will not amount to suppression of fact. The issuance of Ex.B-1 has no bearing on the suit filed by the plaintiff. The said notice is issued only as a precautionary measure. The defendants have not executed any agreement of sale pursuant to the memorandum of understanding.
19. He further submitted that the defendants have admitted the execution of memorandum of understanding and the promissory note and receiving amount of Rs.2,50,00,000=00 towards loan for obtaining necessary permissions within the period and the defendants failed to comply the terms and conditions of the memorandum of understanding within the stipulated time and the plaintiff has rightly filed the suit for recovery of amount basing upon Ex.B-6 promissory note.
20. In support of his contention, the learned Senior Counsel, Sri A. Sudershan Reddy relied upon the decision of the Hon'ble Supreme Court in SATISH BATRA V/s. SUDHIR RAWAL 5., reported in (2013) 1 Supreme Court Cases 345 : (2013) 1 Supreme Court Cases (Civ) 483: 2012 SCC ON LINE SC 1244, wherein it was held at para-15 as follows :
15. The law is, therefore, clear that to justify the forfeiture of advance money being part of 'earnest money' the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non- performance, by the depositor. There can be converse situation also 5 ) RFA No.1967 of 2011 dated 11‐01‐2021 20 that if the seller fails to perform the contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply.
21. He also relied on a unreported decision of the High Court of Karnataka at Bengaluru in SRI PAWAN KUMAR DALMIYA AND ANR. V/s. SRI BILIGOWDA & ORS., RFA.No. 1967 OF 2011, dated 11-01-2021, wherein it was held at para No. 31 as follows :
It is apt to refer to the case of M.Ratnam s/o late Maya & Ors. Vs. Smt. Susheelamma reported in 2008 (5) KCCR 3455, wherein, this court while dealing with the refund of earnest money deposit in the absence of consensual ad-idem contract, where the parties entered into such a contract on mutual mistake, held that the party who had paid advance amount is entitled to the refund of amount with interest @ 6% per annum from the date of agreement till the date of repayment.
22. The learned Senior Counsel lastly relied upon a decision of the High Court of Chhattisgarh in SUNIL JAIN V/s. VISHAL RAM SAHU6., reported in MANU/CG/0612/2018 > AIR 2019 :chh37, wherein it was held at para No.13 as follows:
15. Law is, therefore, clear that to justify the forfeiture of advance money being part of 'earnest money' the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non-performance, by the depositor. There can be converse situation also that if the seller fails to perform the contract the purchaser can 21 also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply.
23. The learned Senior Counsel appearing for the plaintiff lastly contended that against the judgment passed in C.C.No.488 of 2012, the plaintiff filed the appeal and the same is pending before the appellate court and the order of the criminal court is not binding on civil court.
24. Having heard the learned Senior Counsel for the contesting parties and perused the judgment and decree impugned in this appeal and the oral and documentary evidence adduced by both the parties.
25. In view of the rival contentions raised by the respective parties, the points that emerges for consideration in this appeal are as follows :
(i) Whether the suit filed by the plaintiff for recovery of amount of Rs.2,50,00,000-00 is maintainable basing upon the promissory note Ex.B-6 ?
(ii) Whether the judgment and decree passed by the court below is sustainable under law ?
(iii) To what relief ?
26.1 Point Nos. (i), (ii) & (iii) : It is the contention of the plaintiff company that they entered into an memorandum of understanding/agreement with the defendants and they paid Rs. 2.5 crores towards loan with prerequisite that the defendant has to comply the conditions as stipulated in the memorandum of understanding, failing which, 22 the defendants to pay the said loan amount with interest according to demand defendant No.1 executed promissory note/Ex.A-6 and based upon the same plaintiff filed the suit for recovery of amount and the said court rightly decreed the suit after considering entire evidence placed on record, it has to be considered as loan. Whereas the contention of the defendants is that the suit amount was given by the plaintiff towards advance sale consideration but not a loan and the promissory note in pursuance of MoU/Ex.A6 is only and the said document is not admissible in evidence, as it was not registered.
26.2 In order to establish its case, the plaintiff examined PW-1 and his evidence is in consonance with his pleadings and also marked Ex.A-1 to Ex.A-18. Whereas the defendants examined DW-1 and marked Ex.B-1 certified copy of paper publication. The evidence of DW-1 is also in consonance with his pleadings. The defendant No.1 also examined one independent witness as DW-2. The evidence on record clearly shows that the plaintiff has given hand loan of Rs.2,50,00,000-00 with an understanding that the defendants has to obtain necessary permissions and approval within a period of sixty days, and if the defendants fail to comply the prerequisite they have to pay the above said amount of Rs.2,50,00,000=00 with interest @ 18% per annum. The pronote also depict that the defendants have received Rs.2,50,00,000-00 and to the said pronote, cheque/Ex-A8 and the defendants admitted that they received the above said amount and executed promissory note/Ex.A-4 and issued the cheque and pronote. On this aspect, there is nothing on record to show that 23 the pronote was issued as a security. In fact the memorandum of understanding is quite evident to show that the defendants have received Rs.2,50,00,000-00 which emerges out of the memorandum of understanding and they fail to pay the said amount.
26.3 During the course of arguments, the learned Senior Counsel, Sri B.Chandrasen Reddy also contended that the suit filed by the plaintiff before the court below is not having jurisdiction to entertain the suit, as the property covered under memorandum of understanding under Ex.B-4 is situated outside the territorial jurisdiction of the lower court and the same is situated within the pecuniary jurisdiction of Ranga Reddy court and the commercial court is not having jurisdiction to entertain the suit. To rebut the said contention, the learned Senior Counsel, Sri A.Sudershan Reddy contended that Ex.B-6 promissory note was executed by the defendant No.1 within the jurisdiction of Commercial Court, City Civil Court, Hyderabad, therefore, it is amply clear that the Commercial Court, City Civil Court, Hyderabad is having pecuniary as well as territorial jurisdiction to try and decide the commercial suit, as the suit filed by the plaintiff is not against the schedule land, which are mentioned in the memorandum of understanding. Admittedly, the execution of promissory note is within pecuniary and territorial jurisdiction of Commercial Court, City Civil Court, Hyderabad and the suit is very much maintainable under law. It is pertinent to note that non- mentioning of issuance of notice under Ex.B1 publication in the plaint, the 24 defendants is not entitled to deny the claim of the plaintiff to refund the amount. Be that as it may, the defendants have admitted execution of promissory note on receiving of the amount of Rs.2,50,00,000/- under Ex.B-6 and the entire evidence reveals that as per the MoU/Ex.A4 the defendants have not complied the terms and conditions of the MoU and they did not obtain respective permissions from competent authorities. During the course of arguments, the learned Senior Counsel for the respondent informed to this Court that till date the defendants have not obtained permission from the competent authority as mentioned in MoU/Ex.A-4.
26.4 PW-1 has proved the entire case and the GPA who is authorised person is espoused to enter into the witness box to give evidence and accordingly he deposed before the court below. The trial court analysed the oral and documentary evidence placed on record in right perspective, intention of the parties and the surrounding circumstances in decreeing the suit filed by the plaintiff by assigning determinative cogent findings.
26.5 The judgments relied upon by the learned Senior Counsel for the appellants/defendants are not applicable to the facts and circumstances of the case on hand. On the other hand, the judgment in Satish Batra (supra) relied upon by the learned Senior Counsel for the respondent/plaintiff clearly says that in the absence of forfeiture clause in the contract, the parties are entitled to claim refund of the amounts, which were paid at the time of entering into contract. In this instant case, the plaintiff has paid an amount of Rs.2.5 crores 25 while entering the MOU/Ex.A4 and the defendants have received the said amount and executed a promissory note/Ex.A6 and as per the terms and conditions of the MoU the defendants have failed to obtain the permissions as mentioned in the said MoU within time and the plaintiff filed the suit for recovery of the amount and that there is no forfeiture clause in the said MoU/Ex.A4 and the trial court rightly decreed the suit by giving cogent findings.
26.6 Viewed from any angle, it is evident from the memorandum of understanding that the defendants have received Rs.2,50,00,000=00 and the terms and conditions of the memorandum of understanding are predominantly binding on the defendants; but, however, they failed to pay the amount, which they have received from the plaintiff under promissory note.
27. We are of the considered opinion that the suit is unequivocally very much maintainable. The trial court has rightly decreed the suit filed by the plaintiff for recovery of the amount of Rs.2,50,00,000-00. For the foregoing discussion, we are, therefore, not inclined to disturb the findings of the trial court. We therefore, find no merit in this appeal and the same is liable to be dismissed.
28. In the result, the appeal is dismissed but in the circumstances, there shall be no order as to costs.
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29. As a sequel, miscellaneous applications if any, pending shall stand disposed of.
_______________________ JUSTICE P. NAVEEN RAO __________________________ JUSTICE J. SREENIVAS RAO 20-09-2022 ISL { PD : JUDGMENT }