Kerala High Court
George vs Moncy Daniel on 7 November, 2024
2024:KER:82384
R.F.A.No.137/2005 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE G.GIRISH
THURSDAY, THE 7TH DAY OF NOVEMBER 2024 / 16TH KARTHIKA,
1946
RFA NO. 137 OF 2005 (B)
AGAINST THE JUDGMENT AND DECREE DATED 31.05.2004 IN
OS NO.38 OF 2001 OF SUB COURT, ERNAKULAM
APPELLANT/PLAINTIFF
GEORGE, S/O PAILY, AGED 51, MANAGING PARTNER,
GEO SREE ENTERPRISES, A PARTNERSHIP FIRM WITH ITS
OFFICE AT PANAMPILLY, NAGAR, COCHIN-36.
BY ADVS.
SRI.S.SREEKUMAR
SRI.P.JAYABAL MENON
SRI.P.MARTIN JOSE
SRI.THOMAS P.KURUVILLA
SRI.P.PRIJITH
RESPONDENT/DEFENDANT:
MONCY DANIEL,PANACHOOR HOUSE, MULAKKAL WARD,
MULLAKKAL VILLAGE, ALAPPUZHA.
ADV SRI.K.B.PRADEEP
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD
ON 04.11.2024 THE COURT ON 07.11.2024 DELIVERED THE
FOLLOWING:
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R.F.A.No.137/2005 2
JUDGMENT
The non-suited plaintiff in a suit for return of advance money
has filed this appeal against the judgment dated 31.05.2004 of the
III Additional Sub Court, Ernakulam.
2. The appellant entered into an agreement with the
respondent on 13.04.2000 for the purchase of 2 Acres and 61 cents
of land for a sale consideration of Rs.1,48,00,000/-. The agreement
was reduced into writing on the same day and an advance sale
consideration of Rs.5,00,000/- was paid to the respondent. As per
the terms of agreement, the sale deed ought to have been
executed within six months, with the appellant paying the balance
sale consideration, and the respondent convincing the appellant
about the extent and non-liability of the property, and conveying
the prior title deeds. The appellant would allege that the
respondent failed to get the property cleared off encumbrance and
to convince him about the extent of the property, and to hand over
the prior title deeds. The respondent, on the other hand,
contended that the appellant was not ready and willing to perform
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his part of the agreement and hence he issued a notice on
23.10.2000 granting a further period of one week from that date for
the due performance of the agreement. To the above notice, the
appellant sent a reply notice on 07.11.2000 demanding back the
advance of sale consideration paid, stating the reason that the
respondent did not fulfil his part of the agreement by getting the
property cleared off encumbrance and handing over the prior title
deeds. As the respondent did not return the advance money as
demanded by the appellant, the suit was instituted by the appellant.
3. Before the Trial Court, the respondent raised the same
contention that the sale did not materialise due to the failure of the
appellant to make payment of the balance sale consideration and to
perform his part of the agreement. He also contended that the
advance sale consideration received from the appellant was utilised
by him for the payment of advance for purchase of property from a
person by name Shibulal by virtue of an agreement executed on
16.05.2000, and that the above amount was forfeited by that
person since the respondent was not able to mobilise the balance
sale consideration which he expected from the appellant in
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connection with the sale of the property to him. Accordingly, the
respondent contended that the appellant is not entitled for the
return of advance money since it has to be treated as the loss
suffered by the respondent inconnection with the failure of the
transaction with the appellant. It was the further contention of the
respondent before the Trial Court that the appellant was disentitled
to claim the aforesaid amount since there was no rescission of
contract.
4. In the trial that ensued, the appellant was examined as
PW1 and three documents were marked as Exts.A1 to A3. The
respondent and one witness were examined as DW1 and DW2, and
one document was marked as Ext.B1.
5. After an evaluation of the aforesaid evidence and
hearing both sides, the learned Sub Judge found that the appellant
was not ready and willing to perform his part of the contract, which
eventually resulted in loss to the tune of Rs.5,00,000/- to the
respondent due to the inability of the respondent to fulfil his part of
the agreement he entered with a person by name Shibulal. The
learned Sub Judge also observed in the impugned order that the
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plaintiff had never rescinded the contract by giving notice. With the
above findings, the learned Sub Judge dismissed the suit with the
costs of the respondent.
6. In the present appeal, the appellant would contend that
the Trial Court went wrong in arriving at the finding that there was
breach of contract on the part of the appellant leading to loss to the
tune of Rs.5,00,000/- to the respondent. According to the
appellant, the respondent himself had terminated the contract and
hence no further termination on the part of appellant was
necessary. The appellant also contended that the respondent did
not prove that he suffered actual damages and hence he was
bound to repay the advance money with interest @ 18% per
annum to the appellant.
7. Heard the learned counsel for the appellant and the
learned counsel for the respondent.
8. Here is a case where the appellant and the respondent
blame each other for their failure to perform their respective part of
Ext.A1 agreement leading to the collapse of the contract between
them. While it is contended by the appellant that the property
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sought to be sold to him by the respondent was remaining under
encumbrance throughout the whole period of six months from
13.04.2000, the date of Ext.A1 agreement, which compelled him to
resile from the contract, the respondent would contend that the
failure on the part of the appellant to make payment of the balance
sale consideration was the only reason which resulted in the
collapse of the contract. The respondent, by relying on Ext.A2
notice, would contend that he had given a further grace period of
one week from 23.10.2000 for the appellant to fulfil his part of the
agreement and to get the sale deed executed, but all such efforts
were in vain since the appellant was not ready with funds. Relying
on the evidence tendered through Ext.B1 agreement dated
16.05.2000 and the oral testimonies of DW1 and DW2, the
respondent would point out that he had suffered a loss of
Rs.5,00,000/- due to the forfeiture of the said advance money paid
in connection with Ext.B1 agreement, and hence he is not liable to
return the advance money to the appellant.
9. As regards the contention of the appellant that the
landed property which is the subject matter of Ext.A1 agreement
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was remaining under encumbrance throughout the period of
agreement, it is worth to note that the contention in the above
regard was more or less admitted, at least to a certain extent, by
DW1 during cross-examination. To the specific question put by the
learned counsel for the appellant to DW1, as to whether the landed
property was pledged with the financial establishment by name
'Sudarshana Chit Fund', DW1 answered that the above pledge was
released before the period of agreement. Thereupon, the learned
counsel for the appellant put the next question as to whether the
original title deed of the suit property was remaining under pledge
with the above financial institution even on 05.10.2000, to which
the respondent answered that it was not pledged but there was an
endorsement. He also hastened to add that it was released before
the period of agreement. Notwithstanding the above contention of
the respondent about the release of the encumbrance before the
expiry of the period of Ext.A1 agreement, he did not care to
produce any evidence to show that the encumbrance created over
the property was lifted before the expiry of the period of Ext.A1
agreement. It is pertinent to note that the contention of the
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appellant that the property sought to be sold to him by virtue of
Ext.A1 was not free from encumbrance and liability at the time of
execution of Ext.A1, is not disputed by the respondent. Instead,
the plea put forward by the respondent is that the aforesaid liability
and encumbrance of the suit property was cleared during the period
of six months prescribed under Ext.A1 for the performance of the
contract. Having regard to the above nature of the stand taken by
the respondent in respect of the status of the encumbrance and
liability over the suit property, it was upto the respondent to
produce appropriate documentary evidence before the Trial Court to
establish that the suit property was rendered free of liability and
encumbrance during the period of agreement. Having failed to fulfil
the responsibility in the above regard, the respondent cannot blame
the appellant for not advancing the balance sale consideration and
purchasing the property. In this context, it is pertinent to note that
even in Ext.A2 notice sent by the respondent on 23.10.2000, he
had not informed the appellant that the property sought to be sold
is free from encumbrance. On the other hand, it could be seen
from Ext.A3 reply notice sent by the appellant that the failure of the
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respondent to procure the original title deed of the property after
clearing the subsisting mortgage over it was highlighted as the
reason which prevented the appellant to proceed further with the
sale agreement.
10. The contention of the respondent that he had sustained
a loss of Rs.5,00,000/- in connection with Ext.B1 agreement with a
person by name Shibulal as a result of the failure of the appellant to
advance the balance sale consideration, is not supported by any
evidence other than the oral testimony of the respondent as DW1.
It is true that Ext.B1 agreement in the oral testimony of DW2 who
is an attester to that document, would reveal that the respondent
had entered into an agreement with a person by name Shibulal for
the purchase of landed property and made an advance payment of
Rs.5,00,000/- in that transaction. However, there is nothing on
record other than the interested testimony of the respondent as
DW1 to show that the aforesaid amount of Rs.5,00,000/- was not
repaid by the above said Shibulal. Thus, it is not possible to
conclude that the respondent suffered loss to the tune of
Rs.5,00,000/- in connection with Ext.B1 agreement.
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11. A reading of Ext.A1 agreement would make it clear that
the amount of Rs.5,00,000/- which the appellant advanced to the
respondent on 13.04.2000, was in fact, part of sale consideration,
and not earnest money. Thus, even if it is taken for the sake of
arguments that the failure on the part of the appellant to honour
the terms of Ext.A1 agreement was the reason for the breakage of
the contract, still the respondent cannot forfeit the said amount in
the absence of convincing evidence pointing to the actual loss
sustained by him as a result of the non-performance of the said
agreement. As far as the present case is concerned, there is no
convincing evidence to substantiate the contention of the
respondent that he suffered loss to the tune of Rs.5,00,000/- due to
the non-fulfilment of Ext.A1 agreement. It is well settled that in
cases where a sum is shown in the agreement as liquidated amount
payable as damages for breach of agreement, it is not liable to be
forfeited by the party complaining of breach unless he shows to
have faced a detriment by way of actual loss or damages. The
proposition of law in the above regard has been laid down in the
Division Bench decisions of this Court in Varkey Thomas v.
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G. Vijayendra Kurup and Others [2017 (1) KHC 452] and
Soji Peter v. K.B.Vijayan and Others [2017 (4) KHC 456].
12. In the case on hand, the respondent cannot evade his
responsibility to pay back the advance amount of Rs.5,00,000/-
received from the appellant, since he failed not only to establish
that the default on the part of the appellant had entailed in the
breach of contract, but also to establish that he suffered any actual
loss due to the failure in enforcing Ext.A1 agreement. That being
so, the impugned judgment and decree of the Trial Court are liable
to be set aside.
In the result, the appeal stands allowed as follows:
(i) The judgment and decree of the III Additional Sub
Court, Ernakulam in O.S.No.38/2001 are hereby set
aside.
(ii) A decree is passed permitting the appellant/plaintiff
to realise an amount of Rs.5,00,000/- (Rupees five
lakhs only) with interest @ 6% per annum from
13.04.2000 onwards till the date of full realisation,
excluding the period from 09.04.2019 to 21.08.2019
when this appeal remained as dismissed for
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non-prosecution, from the respondent/defendant
and all his assets.
(iii) The appellant/plaintiff will also be entitled to realise
the entire costs of the proceedings from the
respondent and his assets.
(sd/-)
G.GIRISH, JUDGE
jsr
