Karnataka High Court
Mustaf S/O. Goususab vs Gangadhar S/O. Channamallappa ... on 17 June, 2025
Author: Hanchate Sanjeevkumar
Bench: Hanchate Sanjeevkumar
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MSA No. 100012 of 2025
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IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
R
DATED THIS THE 17TH DAY OF JUNE, 2025
BEFORE
THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR
MISCELLANEOUS SECOND APPEAL NO. 100012 OF 2025 (RO)
BETWEEN:
MUSTAF S/O. GOUSUSAB
HALAGALI @ HOLAGERI,
AGE: 60 YEARS, OCC: BUSINESS,
R/O: SECTOR NO.30, PLOT NO.A, 138,
NAVANAGAR, BAGALKOTE-587 301,
TQ/DIST: BAGALKOTE,
NOW AT C/O. MOHAMMADSAB SARWAN,
R/O: JEERGAL, TQ: MUDHOL,
DIST: BAGALKOTE.
... APPELLANT
(BY SRI SHRIHARSH A. NEELOPANT, ADVOCATE.)
AND:
GANGADHAR
Digitally signed by S/O. CHANNAMALLAPPA JADAGOUDAR,
MALLIKARJUN
RUDRAYYA KALMATH AGE: 81 YEARS, OCC: PENSIONER,
Location: HIGH COURT R/O: ASANGI, NOW AT BAGALKOTE,
OF KARNATAKA
DHARWAD BENCH TQ/DIST: BAGALKOTE.
... RESPONDENT
(BY SRI PRAKASH HOSAMANI, ADVOCATE.)
THIS MISCELLANEOUS SECOND APPEAL IS FILED UNDER
SECTION 43 RULE 1(U) OF THE CIVIL PROCEDURE CODE, 1908,
PRAYING TO SET ASIDE THE JUDGMENT AND DECREE DATED
11.11.2024, PASSED IN R.A.NO.76/2020, ON THE FILE OF THE
ADDITIONAL DISTRICT AND SESSIONS JUDGE, FAST TRACK
SPECIAL COURT-I, BAGALKOT, BY ALLOWING THE PRESENT APPEAL
BY CONFIRMING THE JUDGMENT AND DECREE DATED 27.04.2017,
PASSED IN O.S.NO.142/2014, ON THE FILE OF THE I ADDITIONAL
SENIOR CIVIL JUDGE AND JMFC, BAGALKOT AND ETC.,.
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MSA No. 100012 of 2025
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THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
JUDGMENT IS DELIVERED THEREIN AS UNDER:
ORAL JUDGMENT
(PER: THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR)
This appeal is filed by the defendant calling in question
the judgment and decree dated 11.11.2024, passed by the
Additional District and Sessions Judge, Fast Track Special
Court-I, Bagalkot (First Appellate Court), in R.A.No.76/2020,
thereby, the order dated 27.04.2017, passed by the
I Additional Senior Civil Judge and JMFC, Bagalkot (trial
Court), in O.S.No.142/2014, is reversed and remanded the
matter to the trial Court for fresh consideration.
2. Heard the arguments of learned counsels
appearing for both the sides and perused the material placed
before the Court.
3. For the purpose of convenience and easy
reference, ranking of the parties is referred to as per their
status before the trial Court.
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4. The plaintiff has filed suit for specific performance
of contract in respect of the suit property by stating that
defendant is owner of suit property and an agreement of sale
was executed on 21.09.2004 for a total sale consideration of
Rs.6,00,000/- and the plaintiff has paid the entire sale
consideration amount and accordingly an unregistered
agreement of sale was executed. But thereafter the
defendant has not come forward to execute the registered
sale deed. Therefore, the plaintiff has filed suit for specific
performance of contract.
5. After service of summons, the defendant has
entered appearance through advocate and filed the written
statement and also filed I.A.No.4 under Order VII Rule 11(d)
of the Civil Procedure Code, 1908, praying for rejection of
plaint as the plaint is bared by law. The defendant asserted
that there is a prohibitory clause of non alienation of
property for a period of 10 years and the alleged agreement
of sale is executed within the period of prohibitory/non
alienation period. Therefore, the said transaction is barred by
law/prohibited by law and prayed to consider the application
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positively. The trial Court has rejected the plaint as barred
by law under Order VII Rule 11(d) of CPC.
6. Questioning the same, the plaintiff has preferred
appeal in R.A.No.76/2020 and the First Appellate Court has
allowed the appeal, set aside the order passed by the trial
Court and remanded the case to the trial Court for fresh
consideration on the reason that the plaintiff has filed a suit
for specific performance of contract, alternatively to refund
of earnest amount. Therefore, the plaintiff is entitled for
refund of earnest amount in case the plaintiff fails to get a
decree for specific performance of contract. Therefore, on
these reasons the order passed by the trial Court is set aside
and remanded the case to the trial Court for fresh
consideration of the suit.
7. Heard the arguments of learned counsels
appearing for both the sides and perused the material placed
before the Court.
8. Now, the point that arises for consideration in this
appeal is as follows:
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"Whether, under the facts and
circumstances involved in the case, the provision
under Order VII Rule 11(d) of CPC is applicable
to judicial pronouncement of orders apart from
law enacted by Legislature for the purpose of
considering the case as barred by law under
Order VII Rule 11(d) of CPC?"
9. Learned counsel for the appellant/defendant
submitted that the defendant was allotted with suit property
in the year 1999 and there is a prohibitory clause while
allotting suit property to the defendant that the defendant
shall not alienate or create any encumbrance or charge for a
period of ten years. But the agreement of sale was executed
on 21.09.2004 within the period of five years contrary to the
conditions stipulated in the order of grant of suit property in
favour of defendant. Therefore, such agreement is in
violation of section 23 of the Indian Contract Act. Therefore,
the defendant has rightly filed application under Order VII
Rule 11(d) of CPC contending that the plaint is barred by law
and it is rightly honoured by the trial Court. Thus, rejected
the plaint. But the First Appellate Court without appreciating
these admitted facts and law on this point has erroneously
remanded the case to the trial Court for fresh consideration.
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It is further submitted that as per judgment of the Hon'ble
Supreme Court in the case of Smt.Narayanamma and
another Etc. Etc., vs. Govindappa and others Etc. Etc.,
reported in AIR 2019 SC 4654, any agreement in
contravention of prohibitory period is illegal. Therefore when
this being the public policy, therefore the dictum of Hon'ble
Supreme Court is also law to be construed as barred by law
under Order VII Rule 11(d) of CPC. But the First Appellate
Court has not followed this, but erroneously set aside the
order of the trial Court and remanded the matter to the trial
Court, which is not correct. Therefore, prays to allow the
appeal.
10. On the other hand, learned counsel for
respondent/plaintiff submitted that the agreement of sale is
only an agreement and the property has not been
transferred. Therefore, this prohibitory clause is not
applicable to the present case on hand. Though the
agreement is after five years from the date of grant order,
but before completion of non alienation period, the plaintiff
has no right without obtaining permission from the
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competent authorities, the transaction is completed.
Therefore, the trial Court has committed error in rejecting
the plaint, which is rightly considered by the First Appellate
Court. Therefore, submitted that the appeal be dismissed.
11. In support of the argument he has placed reliance
on a judgment of this Court in the case of Subbireddy vs.
K.V.Srinivasa Murthy, reported in MANU/KA/0475/
2005.
12. Some of the admitted facts herein are that the
defendant is owner of the suit property. The defendant was
allotted with the suit property in the year 1999 and the
defendant was issued with a grant order by the competent
authority. The plaintiff entered into agreement of sale on
21.09.2004 and according to the plaintiff, he has paid the
entire sale consideration amount of Rs.6,00,000/- to the
defendant and the defendant has received the said amount.
Therefore, admittedly the said agreement of sale is within
the period of five years from the date of allotment of suit
property to the defendant.
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13. The trial Court has considered that there is a
prohibitory clause in the grant order (hakku patra) issued by
Bagalkote Town Development Authority, in the name of the
defendant, in which one of the condition at clause No.6 is
that the allottee shall not alienate or transfer the property by
way of sale or by way of rent and shall not transfer the rights
to any third party except for mortgaging to the scheduled
banks, co-operative societies, LIC of India, for raising loan.
Therefore, as per this clause there is a prohibitory clause not
to sell the property within a period of 10 years from the date
of issuance of 'hakku patra'. Admittedly in the present case
the agreement of sale dated 21.09.2004 is within a period of
05 years from the date of 'hakku patra'. Thus, the question
arises is, whether is it hit by section 23 of the Indian
Contract Act. Section 23 of the Indian Contract Act reads as
follows:
23. What considerations and objects are
lawful, and what not.- The consideration or object of
an agreement is lawful, unless--
it is forbidden by law; or
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is of such a nature that, if permitted, it would
defeat the provisions of any law; or is
fraudulent ; or
involves or implies, injury to the person or
property of another; or
the Court regards it as immoral, or opposed
to public policy.
In each of these cases, the consideration or object
of an agreement is said to be unlawful. Every agreement
of which the object or consideration is unlawful is void.
14. While making allotment of site/plot, a condition is
stipulated for prohibiting making alienation to third parties,
which is a public policy in the interest of allottee. Here, in the
present case the Bagalkote Town Development Authority has
allotted the site to the land losers, who have lost their land
due to Upper Krishna Project. Therefore, such condition is
put in the interest of allottee and their family members. This
prohibition is as per public policy to give security to the
family. Therefore, when this being the public policy, then
whatever agreement entered as in the present case is
opposed to the public policy. Hence, it attracts section 23 of
the Indian Contract Act.
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15. Therefore, in this context, the agreement of sale
made in this case dated 21.09.2004 is opposed to public
policy. Hence, as per Section 23 of the Indian Contract Act,
the agreement would not be said to be lawful, since it is
within the prohibitory period of 10 years as opposed to public
policy.
16. In the similar circumstances, the Hon'ble
Supreme Court in the case of Smt. Narayanamma and
another Etc. Etc., V/s Govindappa and others Etc. Etc.,1
has held at paragraph Nos.23 to 25 as under:
"23. The transaction between the late
Bale Venkataramanappa and the plaintiff is
not disputed. Initially the said Bale
Venkataramanappa had executed a
registered mortgage deed in favour of the
plaintiff. Within a month, he entered into an
agreement to sell wherein, the entire
consideration for the transfer as well as
handing over of the possession was
acknowledged. It could thus be seen, that
the transaction was nothing short of a
transfer of property. Under Section 61 of the
AIR 2019 SC 4654
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Reforms Act, there is a complete prohibition
on such mortgage or transfer for a period of
15 years from the date of grant. Sub-section
(1) of Section 61 of the Reforms Act begins
with a non-obstante clause. It is thus clear
that, the unambiguous legislative intent is
that no such mortgage, transfer, sale, etc.
would be permitted for a period of 15 years
from the date of grant. Undisputedly, even
according to the plaintiff, the grant is of the
year 1983, as such, the transfer in question
in the year 1990 is beyond any doubt within
the prohibited period of 15 years. Sub-
section (3) of Section 61 of the Reforms Act
makes the legislative intent very clear. It
provides, that any transfer in violation of
sub-section (1) shall be invalid and it also
provides for the consequence for such
invalid transaction.
24. Undisputedly, both, the predecessor-
in-title of the defendant(s) as well as the
plaintiff, are confederates in this illegality.
Both, the plaintiff and the predecessor-in-
title of the defendant(s) can be said to be
equally responsible for violation of law.
25. However, the ticklish question that
arises in such a situation is:"the decision of
this Court would weigh in side of which
party"? As held by Hidayatullah, J. in Kedar
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Nath Motani [AIR 1960 SC 213 (supra)], the
question that would arise for consideration is
as to whether the plaintiff can rest his claim
without relying upon the illegal transaction
or as to whether the plaintiff can rest his
claim on something else without relying on
the illegal transaction. Undisputedly, in the
present case, the claim of the plaintiff is
entirely based upon the agreement to sell
dated 15-5-1990, which is clearly hit by
Section 61 of the Reforms Act. There is no
other foundation for the claim of the plaintiff
except the one based on the agreement to
sell, which is hit by Section 61 of the Act. In
such a case, as observed by Taylor, in his
"Law of Evidence" which has been approved
by Gajendragadkar, J. in Immani Appa
Rao [AIR 1962 SC 370 (supra)], although
illegality is not pleaded by the defendant nor
sought to be relied upon him by way of
defence, yet the Court itself, upon the
illegality appearing upon the evidence, will
take notice of it, and will dismiss the
action ex turpi causa non oritur actio i.e. no
polluted hand shall touch the pure fountain
of justice. Equally, as observed in Story's
Equity Jurisprudence, which again is
approved in Immani Appa Rao (supra),
where the parties are concerned with illegal
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agreements or other transactions, courts of
equity following the rule of law as to
participators in a common crime will not
interpose to grant any relief, acting upon the
maxim in pari delicto potior est conditio
defendantis et possidentis."
17. In the above said case also, occupancy right was
be granted by the land Tribunal and there was a clause of
non-alienating the land for a period of 15 years, which is as
per Section 61 of the Karnataka Land Reforms Act, 1961 (for
short, 'the Act'). Therefore, if any transaction takes place
within a period of 15 years, the same will be hit by Section
61 of the Act. Section 61 of the Act is enacted in the public
interest as a matter of public policy that whoever is granted
occupancy rights, shall not alienate the land to any other
third parties within fifteen years. This is law declared by
legislature as a matter of public policy to give social security
to the farmers. In the same way, in the present case, the
defendant has lost the lands. Therefore, compensating him,
the suit schedule property was allotted to defendant to give
security to the family of the defendant. Therefore, when such
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prohibitory clause is imposed in the grant order, which is
matter of public policy, any transactions including agreement
of sale is contrary to the public policy which is hit by Section
23 of the Contract Act.
18. Further, for considering the provision under Order
VII Rule 11(d), it is invoked as plaint is barred by law. The
law declared by legislature could not alone be considered as
law but also the judicial pronouncement be considered as law
declared for the purpose of considering Order VII Rule 11(d)
of CPC. The Hon'ble Apex Court in the case of Bhargavi
Constructions and another V/s Kothakapu Muthyam
Reddy and others2, has observed at paragraph Nos.24 to
32 reads as under:
24. In our considered view, the
aforesaid law laid down by this Court is
binding on all the courts in the country by
virtue of mandate of Article 141 of the
Constitution. This Court, in no uncertain
terms, has laid down that challenge to the
award of Lok Adalat can be done only by
(2018) 13 SCC 480
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filing a writ petition under Article 226 and/or
Article 227 of the Constitution of India in the
High Court and that too on very limited
grounds. In the light of clear pronouncement
of the law by this Court, we are of the
opinion that the only remedy available to the
aggrieved person (respondents
herein/plaintiffs) was to file a writ petition
under Article 226 and/or Article 227 of the
Constitution of India in the High Court for
challenging the award dated 22-8-2007
passed by the Lok Adalat. It was then for the
writ court to decide as to whether any
ground was made out by the writ petitioners
for quashing the award and, if so, whether
those grounds are sufficient for its quashing.
25. The High Court was, therefore, not
right in by-passing the law laid down by this
Court on the ground that the suit can be
filed to challenge the award, if the challenge
is founded on the allegations of fraud. In our
opinion, it was not correct approach of the
High Court to deal with the issue in question
to which we do not concur.
26. We also do not agree with the
submissions of Mr Adinarayana Rao, learned
Senior Counsel for the respondents when he
urged that firstly, the expression "law"
occurring in clause (d) of Rule 11 Order 7
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does not include the "judicial decisions" and
clause (d) applies only to bar which is
contained in "the Act" enacted by the
legislature; and secondly, even if it is held to
include the "judicial decisions", yet the law
laid down in State of Punjab cannot be read
to hold that the suit is barred. Both these
submissions, in our view, have no merit.
27. Black's Law Dictionary (9th Edn.)
defines the expression "law". It says that
"law" includes the "judicial precedents" (see
at p. 962). Similarly, the expression "law"
defined in Jowett's Dictionary of English
Law (3rd Edn., Vol. 2, (pp. 1304/1305) says
that "law is derived from judicial precedents,
legislation or from custom. When derived
from judicial precedents, it is called common
law, equity, or admiralty, probate or
ecclesiastical law according to the nature of
the courts by which it was originally
enforced".
28. The question as to whether the
expression "law" occurring in clause (d) of
Rule 11 of Order 7 of the Code includes
"judicial decisions of the Apex Court" came
up for consideration before the Division
Bench of the Allahabad High Court
in Virendra Kumar Dixit v. State of U.P. The
Division Bench dealt with the issue in detail
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in the context of several decisions on the
subject and held in para 15 as under : (SCC
OnLine All)
"15. Law includes not only legislative
enactments but also judicial precedents. An
authoritative judgment of the courts
including higher judiciary is also law."
29. This very issue was again considered
by the Gujarat High Court (Single Bench)
in Hermes Marines Ltd. v. Capeshore
Maritime Partners FZC The learned Single
Judge examined the issue and relying upon
the decision of the Allahabad High Court
quoted supra held in para 53 as under :
(Hermes case, SCC OnLine Guj)
"53. In the light of the above discussion,
in the considered view of this Court, it
cannot be said that the term "barred by any
law" occurring in clause (d) of Rule 11 of
Order 7 of the Code, ought to be read to
mean only the law codified in a legislative
enactment and not the law laid down by the
courts in judicial precedents. The judicial
precedent of the Supreme Court in Liverpool
& London Steamship Protection and
Indemnity Assn. Ltd. v. M.V. Sea Success
I has been followed by the decision of the
Division Bench in Croft Sales & Distribution
Ltd. v. M.V. Basil. It is, therefore, the law as
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of today, which is that the Geneva
Convention of 1999 cannot be made
applicable to a contract that does not involve
public law character. Such a contract would
not give rise to a maritime claim. As
discussed earlier, the word "law" as
occurring in Order 7 Rule 11(d) would also
mean judicial precedent. If the judicial
precedent bars any action that would be the
law."
30. Similarly, this very issue was again
examined by the Bombay High Court (Single
Judge) in Shahid S. Sarkar v. Mangala
Shivdas Dandekar. The learned Judge placed
reliance on the decisions of the Allahabad
High Court in Virendra Kumar Dixit v. State
of U.P. and the Gujarat High Court
in Hermes Marines Ltd. and held as under :
(Shahid case, SCC OnLine Bom paras 18 &
19)
"18. ... The law laid down by the highest
court of a State as well as the Supreme
Court, is the law. In fact, Article 141 of the
Constitution of India categorically states that
the law declared by the Supreme Court shall
be binding on all courts within the territories
of India. There is nothing even in CPC to
restrict the meaning of the words "barred by
any law" to mean only codified law or statute
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law as sought to be contended by Mr Patil.
In the view that I have taken, I am
supported by a decision of the Gujarat High
Court in Hermes Marines Ltd. [Hermes
Marines Ltd. ...
19. One must also not lose sight of the
purpose and intention behind Order 7 Rule
11(d). The intention appears to be that when
the suit appears from the statement in the
plaint to be barred by any law, the courts
will not unnecessarily protract the litigation
and proceed with the hearing of the suit. The
purpose clearly appears to be to ensure that
where a defendant is able to establish that
the plaint ought to be rejected on any of the
grounds set out in the said Rule, the Court
would be duty-bound to do so, so as to save
expenses, achieve expedition and avoid the
court's resources being used up on cases
which will serve no useful purpose. A
litigation, which in the opinion of the court,
is doomed to fail would not further be
allowed to be used as a device to harass a
defendant."
31. Similarly, issue was again examined
by the High Court of Jharkhand (Single
Judge) in Mira Sinha v. State of Jharkhand.
The learned Judge, in para 7 held as under :
(SCC OnLine Jhar)
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"7. In the background of the law laid
down by the Hon'ble Supreme Court, it is
apparent that Order 7 Rule 11(d) CPC
application is maintainable only when the
suit is barred by any law. The expression
"law" included in Rule 11(d) includes the law
of limitation and, it would also include the
law declared by the Hon'ble Supreme Court."
32. We are in agreement with the view
taken by the Allahabad, Gujarat, Bombay and
Jharkhand High Courts in the aforementioned
four decisions which, in our opinion, is the
proper interpretation of the expression "law"
occurring in clause (d) of Rule 11 of Order 7 of
the Code. This answers the first submission of
the learned counsel for the respondents
against the respondents.
19. Therefore, when application is filed under Order
VII Rule 11(d) of CPC, the wordings used in the said
provision "barred by law" also includes judicial
pronouncements declared by Hon'ble Apex Court.
Accordingly, I answer the point framed in this case "in the
affirmative". Therefore, when this being the factual matrix
and law involved in the present case, the trial Court is
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correct in rejecting the plaint invoking Order VII Rule 11(d)
of CPC. The first Appellate Court has committed error in
remanding the matter to the trial Court for fresh
consideration. The purpose of remanding the case for trial
Court is for enabling the plaintiff to make claim of refund of
earnest amount. Only for this purpose for refund of earnest
amount, if the case is remanded, then, it would take some
more time. Therefore, what would happen in future if the
same is granted here, then it would meet the ends of justice
to both parties and is also in the interest of equity.
Therefore, the defendant is directed to refund the earnest
amount of Rs.6,00,000/- received by the plaintiff along with
interest at the rate of 9% p.a. from the date of the
agreement till realization.
20. For the foregoing reasons, I proceed to pass the
following:
ORDER
i. The appeal is allowed.
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ii. The order dated 11.11.2024, passed by the
Additional District and Sessions Judge, Fast
Track Special Court-I, Bagalkot (First
Appellate Court), in R.A.No.76/2020 is set
aside.
iii. The appellant/defendant shall refund the
earnest amount of Rs.6,00,000/- to the
respondent/plaintiff with interest at the
rate of 9% p.a. from the date of
agreement till realization within a period of
3 months from the date of receipt of copy
of the order.
Sd/-
(HANCHATE SANJEEVKUMAR)
JUDGE
MRK-para 1 to 14.
RKM-para 15 to end.
CT: BCK
