Madras High Court

Basavaraj vs Narayanappa on 8 March, 2023

                                                                    S.A.No.1204 of 2009 & M.P. No.1 of 2009



                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     DATED : 08.03.2023

                                                          CORAM

                                  THE HONOURABLE MRS. JUSTICE R.HEMALATHA
                                                   S.A.No.1204 of 2009 &
                                                     M.P. No.1 of 2009


                     Basavaraj                                                            ...Appellant
                                                             Vs.

                     1. Narayanappa
                     2. Nethappa                                                       ... Respondents

                     Prayer : Second Appeal filed under Section 100 CPC, 1908 against the
                     decree and judgment dated 11.06.2009 passed in A.S. No.6 of 2008, on
                     the file of the Principal District Judge, Krishnagiri, reversing the decree
                     and judgment dated 06.12.2007 passed in O.S. No.74 of 2005, on the file
                     of the Subordinate Judge, Hosur.
                                   For Appellant             :   Ms.V. Srimathi
                                   For Respondents           :   Mr. P. Mani.


                                                       JUDGMENT

The appellant is the plaintiff in O.S. No.74/05 on the file of the

Subordinate Judge, Hosur. He filed the suit for specific performance of

contract against the respondents 1 and 2.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

2. For the sake of convenience, the parties are referred to as

per their ranking in the trial court and at appropriate places, their rank in

the present appeal would also be indicated.

3. The brief facts of the case of the plaintiff are as follows:

i. The defendants approached the plaintiff for selling the suit

property for a sale consideration of Rs.1,10,000/-

ii. The sale agreement was executed and registered on 19.09.2002 by

the defendants in Document No.948/02 of Rayakottai Sub

Registrar Office.

iii. The plaintiff paid a sum of Rs.1,04,000/- towards advance on the

date of sale agreement. It was agreed between the parties that the

balance sale consideration of Rs.6,000/- should be paid within a

period of 3 years from the date of sale agreement.

iv. Though the plaintiff approached the defendants on several

occasions and expressed his willingness to pay the balance amount

of Rs.6,000/- and get the sale deed registered, there was no

response from the defendants. Hence the suit.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

4. The suit was resisted by the defendants on the following

grounds:

i. The suit property is the ancestral property of the first defendant.

ii. The defendants approached the plaintiff for obtaining a loan of

Rs.50,000/-. The plaintiff, instead of executing a mortgage deed,

created an agreement of sale for Rs.1,10,000/-. There was no

intention on the part of the defendants to create an agreement of

sale.

iii. The plaintiff paid only a sum of Rs.50,000/- to the defendants and

calculated interest @ 3% per annum and added Rs.54,000/-

(interest amount) to the principal amount of Rs.50,000/- and

shown Rs.1,04,000/- as sale advance. The plaintiff has claimed

interest at an exorbitant rate and therefore, punishable under

Usurious Loans Act and the Tamil Nadu Prohibition of charging of

Exorbitant Interest Act, 2003. There was no intention on the part of

the defendants to sell the suit property in favour of the plaintiff and

hence, the suit is liable to be dismissed.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

5. On the basis of the above pleadings, the trial Court framed

the following issues :

i. Whether the plaintiff is entitled for specific performance of contract

?

ii. Whether the contention of the defendants that the sale agreement

filed by the plaintiff cannot be entertained is correct ?

iii. Whether the contention of the defendants that the sale agreement

had been a created one is right ?

iv. To what relief the plaintiff is entitled?

6. In the trial Court, the plaintiff examined himself and two

other witnesses and marked Ex.A1 to A3. The second defendant

examined himself, however, no documentary evidence was adduced on

his side.

7. After analyzing the oral and documentary evidence adduced

on both sides the trial Court decreed the suit in favour of the plaintiff vide

its decree and judgment dated 06.12.2007 on the following grounds:

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

i. The sale agreement was executed and registered for a total sale

consideration of Rs.1,10,000/- out of which Rs.1,04,000/- was paid

by the plaintiff on the date of sale agreement and hence, the

defendants cannot contend that there was no intention on their part

to create a sale agreement.

ii. The guideline value of the suit property was Rs.50,000/- per acre

and the sale consideration fixed for 2 acres of land as Rs.1,04,000/-

cannot be said to be too low.

iii. The defendants have not sent a legal notice to the plaintiff to repay

the loan amount allegedly paid by them.

8. Aggrieved over the decree and judgment passed by the trial

Court, the second defendant filed an appeal in A.S.No.6 of 2008 before

the Principal District Court, Krishnagiri. The learned Principal District

Judge, Krishnagiri allowed the appeal and set aside the decree and

judgment passed by the trial Court vide his decree and judgment dated

11.06.2009 on the following grounds :

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

i. The arithmetic calculation would establish that the plaintiff paid a

sum of Rs.50,000/- as loan to the defendants and the interest for

the said sum works out to Rs.54,000/- (@ 3% per month for three

years). If the principal amount of Rs.50,000/- and the interest

amount of Rs.54,000/- are added, the sum comes to Rs.1,04,000/-

which is reflected in the sale agreement Ex.A1.

ii. It is difficult to accept that the plaintiff who paid 94.5% of the sale

consideration, sought three years time for repayment of balance

consideration of Rs.6,000/- (5.45%).

iii. The suit for specific performance is a discretionary relief and the

scrutiny of oral and documentary evidence adduced on both sides

clearly would go to show that the plaintiff has not approached the

Court with clean hands and the plaintiff being a money lender had

created the sale agreement only for the purpose of loan amount

obtained by the defendants.

iv. Both the courts below held that the defendants have saleable

interest in the suit property and the contention of the defendants

that the suit property is an ancestral property was not accepted.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

9. Now the present second appeal is filed by the plaintiff on the

following substantial question of law :

i. Whether the lower appellate court is justified in concluding that the

nature of transaction is only security for the loan transaction,

contrary to Sections 91 & 92 of Evidence Act?

ii. When the value of the property is as indicated in the sale

agreement whether it is permissible on the part of the defendants to

contend that the document under Ex.A1 is a loan transaction ?

iii. Whether the defendants are not estopped by record and conduct

from denying the contents of Ex.A1?

10. Heard Ms.V.Srimathi, learned counsel for the appellant and

Mr.P.Mani, learned counsel for the respondents.

11. Ms.V.Srimathi, learned counsel for the appellant would

contend that a bare perusal of Ex.A1 sale agreement would go to show

that the nature of transaction was only that of a sale agreement and not a

loan transaction and the onus of proof heavily lies on the respondents

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

who had contended that there was only a loan transaction between them

and the plaintiff and that in the instant case the defendants have not

discharged their burden. She relied on the decision in A.M.Adhil

Badusha vs.Sucharitha Anand and Another reported in (2012) 8 Mad

LJ 177 and T.G.Pongiannan vs. K.M.Natarajan and Another reported

in 2009 (6) CTC 301 in support of her contentions. She also relied on

the decision in Mangala Waman Karandikar (Dead) through legal

representatives vs. Prakash Damodar Ranade reported in (2021) 6

SCC 139 and contended that conjoint reading of Sections 92 & 95 of the

Indian Evidence Act would go to show that it is only in cases where the

terms of the document leave the question in doubt, then resort could be

had to the proviso to Section 92. She further contended that in the instant

case since the document is a straight forward one and presents no

difficulty in construing it, the proviso to Section 92 would not apply and

if the contrary view is adopted to render Section 92 of the Indian

Evidence Act, it would enlarge the ambit of proviso (6) beyond the main

section itself. She would further contend that the plaintiff has paid the

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

substantial amount of sale consideration even on the date of sale

agreement and he was possessing sufficient means to pay the balance

amount of Rs.6,000/-. It is her contention that the first appellate court

without taking into account Section 92 of the Indian Evidence Act had

held that the suit transaction was only a loan transaction and there was

no intention on the part of the defendants to create a sale agreement in

favour of the plaintiff merely on the ground that the plaintiff admitted that

he is a money lender. She therefore, prayed for allowing the present

appeal.

12.Per contra Mr.P.Mani, learned counsel for the respondents

relied on the following decisions in

1. Tejram vs. Patirambhau reported in 1997 (9) SCC 634

2. Pappammal @ T.Pappa vs. P. Ramasamy reported in 2012 (4)

CTC 100

3. Rajammal and another vs. M.Senbagam reported in 2016 (6)

CTC 225.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

4. Judgment dated 17.03.2021 passed by the Division Bench of this

Court in A.S. No.573 of 2018 (S.A. Giridaran and others vs. A.

Mallika).

5. Judgment dated 07.07.2021 passed by the Single Judge of this

Court in S.A. No.500 of 2021 (C.Senthamarai vs. Vincent Mary)

6. Judgment dated 18.10.2022 passed by the Single Judge of this

Court in S.A. No.329 of 2017 (Luisa @ Lusiva (died) rep. by her

legal heir vs. Prakasam Ammal)

and contended as follows:

i. 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.A1 could not have been intended to be acted upon as

agreement of sale.

ii. It is sufficient for the respondents to prove preponderance of

probabilities which would lead to the conclusion that Ex.A1 was

not intended to be acted upon as agreement sale.

iii. No convincing reason is stated as to why the plaintiff sought 3

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

years time for paying the balance sale consideration of Rs.6,000/-

to get the sale deed executed in his favour, more particularly, when

the fact remains that he is a money lender.

iv. Right to pay the balance amount and claim for execution of sale

deed does not arise for the plaintiff at the eleventh hour of the

third year and in the instant case the plaintiff has filed the suit at

the fag end of the third year.

v. The plaintiff should have shown that the right to get the sale deed

executed in his favour commences even from the date of execution

of the agreement and the plaintiff should plead and prove his

readiness and willingness right from the date of agreement till the

decree is passed. No reason has been shown in the sale agreement

or in the plaint as to why 3 years time limit was fixed for execution

of the sale deed and such a long delay indicates that there is no

readiness or willingness on the part of the plaintiff.

vi. The trial court had erred in relying on the vague evidence of the

plaintiff to grant discretionary relief of specific performance in

contravention to the mandate of Section 20 of the Specific Relief

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

Act. Therefore, the first appellate court was right in setting aside

the decree passed by the trial court.

12.1. The learned counsel for the defendants also relied on the

decision of this court in A.S. 293 of 2011 dated 22.12.2022, wherein this

Court held as follows:

The Hon'ble Supreme Court and this Court has time and again recognized the legal position that a party to the contract is entitled to raise a plea which would invalidate the contract as a whole. In other words, the plea of misrepresentation, fraud or sham and nominal transaction are permissible and Section 92 of Evidence Act has no application. The Hon'ble Supreme Court, in the case of Gangabai v. Chhabubai reported in AIR 1982 SC Page 20, after referring to Section 92(1) of Evidence Act, 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. It is further observed that the bar arises only when the document is relied upon and its terms are sought to be varied and contradicted. Several judgments of the Hon'ble Supreme Court were considered by the Hon'ble Supreme Court in the said judgment and

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

therefore, the plea that has now been raised by the defendant is not barred under Section 92 of Indian Evidence Act.

It is his further submission that the plaintiff has failed to provide any

documents or evidence which would indicate that he called upon the

respondents to perform their obligations within the time stipulated in the

contract. Specific Performance being a equitable remedy, the court while

granting decree of specific performance exercises its discretionary

jurisdiction. As per Section 20 of the Specific Relief Act, discretion of the

court must be exercised in accordance with sound and reasonable judicial

principles. He also relied on the decision in Katta Sujatha Reddy and

another vs. Siddamsetty Infra Projects Pvt. Ltd. reported in 2023 (1)

MWN (civil) 65 in which the Apex Court held that the amended Section

20 of the Specific Relief Act is prospective and not retrospective. He,

therefore prayed for dismissal of the appeal.

13. It is admitted by both the parties that the registered sale

agreement (Ex.A1) was entered into on 19.09.2002 and the sale

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

consideration of the suit property was fixed as Rs.1,10,000/-, out of

which Rs.1,04,000/- was paid by the plaintiff on the date of the sale

agreement itself. The contention of the defendants is that though a

registered sale agreement was made, it was not intended to be acted upon.

According to them, they obtained a loan of Rs.50,000/- from the plaintiff

for which an exorbitant rate of interest @ 36% per annum was charged

by the plaintiff and the advance amount was indicated in the sale

agreement as Rs.1,04,000/-

14. It is pertinent to point out that though the plaintiff paid a

sum of Rs.1,04,000/- on the date of sale agreement itself, it is not known

as to why he fixed three long years for payment of the balance of

Rs.6,000/- for getting the sale deed executed in his name. This was taken

into account by the first appellate court and held that the sale agreement

was created only for the purpose of loan transaction between the plaintiff

and the defendants. The first appellate court had also calculated the

interest for Rs.50,000/- for three years which comes to Rs.54,000/- ( @

3% per month for three years) and held that if the principal amount and

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

the interest amount are added it would come to Rs.1,04,000/- and this

was indicated in Ex.A1 as an advance amount.

15. The specific contention of the learned counsel for the

appellant is that when the execution of the sale agreement and the terms

of the contract had not been denied by the defendants, they cannot now

contend that Ex.A1 was created for some other purpose as it is hit by

Section 92 of the Code of Civil Procedure.

16. Per contra Mr.P.Mani, learned counsel for the respondents

contended that as per proviso to Section 92 of the Indian Evidence Act

the party to the deed can be permitted to contend that the deed was not

intended to be acted upon but was only a sham and nominal document

and that the bar arises only when the document is relied upon and the

terms are sought to be varied and contradicted. It is his contention that

the plaintiff himself admitted that he is a money lender and therefore, it

is sufficient for the defendants to prove their case by preponderance of

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

probabilities as held by the Hon'ble Supreme Court in the decision in

Pappammal @ T.Pappa vs. P. Ramasamy (cited supra).

17. Though the agreement of sale was registered and the

plaintiff paid a sum of Rs.1,04,000/- on the date of the sale agreement,

he fixed three years period for the payment of balance sale consideration

of just Rs.6,000/-. The plaintiff nowhere in the plaint has explained the

reasons for the same. Though the learned counsel for the appellant relied

on several decisions to show that the appellant was having sufficient

money to pay the balance sale consideration and get the sale deed

executed in his name, the real issue involved in the instant case is whether

the parties executed the sale agreement only for the purpose of executing

the sale deed in favour of the plaintiff or it is executed as a security for

the loan obtained by the defendants as alleged by them. In the plaint,

though the plaintiff had stated that he approached the defendants to pay

the balance sale consideration on several occasions and that the

defendants evaded, the plaintiff has not specified any date of the alleged

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

approach made by him for getting the sale deed executed in his favour.

The fact that the agreement is registered gives an indication that special

care is taken by the plaintiff to make the agreement as a genuine sale

transaction. In evaluating whether the plaintiff was ready and willing to

perform his part of the contract, it is not only necessary to view whether

he had financial capacity to pay the balance sale consideration but also

assess his conduct throughout the transaction. It is settled law that the

plaintiff must prove that he was always ready and willing to perform his

part of the contract and in this regard, the burden of proof heavily lies on

the plaintiff. In the instant case, admittedly the plaintiff did not issue even

a single notice to the defendants though it is contended by him that the

defendants evaded him. The suit was filed just few days before the expiry

of the period of limitation of three years and that too without issuing any

notice to the defendants. It is settled principles of law that the Court while

granting decree of specific performance exercises its discretionary

jurisdiction. In the decision in Katta Sujatha Reddy and another vs.

Siddamsetty Infra Projects Pvt. Ltd. (cited supra) the full bench of the

Hon'ble Supreme Court held that the amendment carried out in 2018 in

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

the Specific Relief Act was not a mere procedural enactment, rather it had

substantive principles built into its working and such amendments would

apply only prospectively and not retrospectively. The sale agreement was

prior to the amendment in 2018 and therefore, the submission of the

learned counsel for the appellant that after the amendment of Section 10

of the Specific Relief Act, the Courts are obliged to enforce the specific

performance of a contract subject to the provisions of sub section (2) of

Section 11, Section 14 & Section 16 of the Specific Relief Act cannot be

accepted.

18. The trial Court merely based on the guideline value had

come to the conclusion that the sale consideration had been properly fixed

in the agreement of sale. It is settled that the guideline value and market

value are distant neighbours. No documentary evidence was produced by

the plaintiff to show that the actual market value of the suit property at

the relevant point of time was Rs.1,06,000/-. Merely because the sale

agreement is registered and the defendants did not deny their signatures

on the sale agreement, it cannot be simply held that the parties intended

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

only to create a sale agreement. The evidence on record and the

surrounding circumstances in the instant case such as fixing up of a long

gap of three years for payment of just Rs.6,000/- from the date of the sale

agreement adding exact interest amount of Rs.54,000/- to Rs.50,000/- as

advance amount in the sale agreement and non issuance of notice by the

plaintiff to the defendants to show his readiness and willingness to

perform his part of the contract are all the factors which go against the

case of the plaintiff.

19. In the decision in A.M.Adhil Badusha vs.Sucharitha Anand

and Another (cited supra), relied upon by the counsel for the appellant,

the time for performance of contract was fixed as six months and before

the expiry of six months the plaintiff issued a notice calling upon the

defendants to execute the sale deed in his favour after receiving balance

sale consideration of Rs.50,000/-. In such circumstances, it was held that

the plaintiff is entitled for specific performance of contract. Hence the

said decision would not apply to the present case. Similarly, the decision

in T.G.Pongiannan vs. K.M.Natarajan and Another (cited supra)

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

would not apply to the facts of the present case. A conjoint reading of

Section 92 and 95 of the Indian Evidence Act makes the point clear that

even though there is a registered instrument evidencing a particular

transaction, yet the parties are at liberty to plead and prove that such a

registered document was not intended to be acted upon. As already

observed, the reason for fixing up a long gap of three years for the

payment of balance sale consideration Rs.6,000/- and the non issuance of

notice by the plaintiff to show his readiness and willingness and also the

absence of plea in the plaint in this regard are the factors which have to

be taken into account in the instant case and, the defendants by

preponderance of probabilities have proved that the sale agreement Ex.A1

was created only for the purpose of repayment of loan amount obtained

by them from the plaintiff. Moreover, the sale agreement is of the year

2002. More than two decades have passed and the value of the property

would have increased manifold and in the circumstances it may not be

proper for the Courts to exercise its discretionary power to grant the

decree of specific performance of contract. The first appellate court in fact

had analysed the entire evidence on record and had observed as follows :

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

"22. The suit for specific performance is a discretionary

relief. The Court has to look into the genuineness of the

case by weighing the evidence on either side. According to

the plaintiff, the defendants agreed to sell the property for

Rs.1,10,000/- and the plaintiff has paid Rs.1,04,000/- as

advance i.e. 94.55% of the sale amount. It is agreed to pay

the balance sale consideration of Rs.6,000/- i.e. 5.45%

within 3 years time and get the sale deed executed. In a

usual practice it is difficult to accept that the purchaser

having paid 94.55% of the sale amount as advance would

wait for 2 long years to pay the remaining balance sale

consideration of 5.45% and it is not practical and common,

which would give the strength of the case of the

defendants. Further during the course of the cross

examination P.W.1 admittedly

" khjj;jpw;F 3 &gha; tl;b vd;why; xU tUlj;jpw;F &.18 Mapuk; vd;Wk; 3 tUlj;jpw;F &.54 Mapuk; tl;b MFk; vd;W nrhd;dhh;fs;.

https://www.mhc.tn.gov.in/judis S.A.No.1204 of 2009 & M.P. No.1 of 2009

ghf;fpj; njhiff;F 3 tUl tha;jh nfhLj;Njhk;.

jpUg;gp &.1,04,000/-I nfhLj;J tpl;lhy; fpiua xg;ge;j gj;jpuj;ij mky;gLj;j khl;Nld; vd;w fhuzj;jpw;fhf mt;thW vOjpNdd;. &.1,04,000/-I jpUg;gp je;jhy; ehd; fpuak; nra;J jukhl;Nld; mjw;fhf jhd; 3 tUlk; tha;jh je;Njd;. jw;NghJ jukhl;Nld;."

It is clearly an admission that Ex.A1 was created only as a

security for due repayment of loan of account obtained by

the defendants. The citation referred by the plaintiff's

counsel is not applicable to this case. To substantiate the

case of the defendant by working out interest at the rate of

3% per month per 100 for 3 years would come to

Rs.54,000/-. Rs.50,000/- principal added with 3 years of

interest would come to Rs.1,04,000/-. This would also help

the defendants to come to conclusion and the defendants'

case has been accepted on this score also. Therefore, the

appellant/2nd defendant established that Ex.A1 was

created as a security to the due repayment of loan amount.