Madras High Court

K.Velusamy vs C.Easwaran on 28 November, 2023

    2023:MHC:5212




                                                                                   S.A.No.327 of 2017

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                          RESERVED ON            : 08.11.2023

                                          PRONOUNCED ON          : 28.11.2023

                                                       CORAM

                                    THE HONOURABLE MR. JUSTICE S.SOUNTHAR

                                                  S.A.No.327 of 2017
                                                         and
                                           C.M.P.Nos.7803 and 10917 of 2017

                     K.Velusamy                                              ... Appellant

                                                           Vs

                     C.Easwaran                                              ... Respondent

                     Prayer:- Second Appeal is filed under Section 100 of Civil Procedure Code,
                     praying to set aside the judgment and decree dated 19.01.2017 made in
                     A.S.No.17 of 2016 on the file of the learned First Additional District Court,
                     Erode confirming the judgment and decree dated 19.08.2015 made in O.S.
                     No.160 of 2011 on the file of the learned I Additional Sub Court, Erode.

                                     For Appellant    : Mr.N.Manokaran

                                     For Respondent   : Mr.T.M.Hariharan



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                                                                                         S.A.No.327 of 2017

                                                        JUDGMENT

The unsuccessful defendant in the suit for specific performance is the

appellant. The respondent/plaintiff filed a suit for specific performance with

prayer for alternative relief of return of advance amount. The suit was

decreed in respect of the main relief granting specific performance. The

appeal filed by the unsuccessful defendant was also dismissed. Hence, the

appellant/defendant has come up by way of this second appeal.

2. According to the respondent/plaintiff, he entered into a registered

Sale Agreement on 30.01.2008 agreeing to purchase the property covered by

the agreement from appellant/defendant for a sale consideration of

Rs.2,30,000/-. The respondent paid an advance amount of Rs.2,10,000/- on

the date of agreement itself and agreed to pay the balance amount of

Rs.20,000/- within a period of three years time (on or before 30.01.2011). It

was also averred by the respondent that appellant also executed a General

Power of Attorney on the very same date in favour of respondent's wife

authorising her to execute the Sale Deed in respect of the suit property in

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favour of respondent in furtherance of the Suit Sale Agreement. The

respondent also claimed that he was always ready and willing to perform his

part of the contract as per the terms of agreement and requested the

appellant on several occasions about his intention to get the sale deed

executed after tendering the balance sale consideration. But the appellant

has been postponing the execution of the sale deed by giving lame excuses.

It was further averred that as the respondent found some unusual activity on

the part of the appellant, he verified with the records pertaining to the suit

property with the District Registrar Office at Erode and found that the

appellant had cancelled the General Power of Attorney executed in favour

of the respondent's wife on 13.01.2011. Hence, the respondent issued a

telegram on 27.01.2011 expressing his readiness and willingness to

complete the sale transaction. The respondent also issued a legal notice

expressing his readiness and willingness on 27.01.2011 itself and calling

upon the appellant to execute the sale deed as per the Suit Sale Agreement

within 24 hours from the date of receipt of the notice. However, appellant

caused a notice on 26.01.2011 with false and untenable allegations as if, the

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Suit Sale Agreement and General Power of Attorney were executed as a

security for loan transaction. Therefore, the respondent/plaintiff was

constrained to file a suit for above said relief.

3. The appellant herein filed a written statement and raised a defence

that the Suit Sale Agreement was not executed with intention to sell the suit

property. However, the same was executed as a security for the amount

borrowed by the appellant/defendant from the respondent/plaintiff. It was

specifically pleaded by the appellant that he borrowed a sum of Rs.40,000/-

from the respondent during February - 2005 and as per the request of the

respondent, he executed a Sale Agreement in favour of respondent's wife

and also executed a General Power of Attorney in his favour on 10.03.2005.

It was also averred by the appellant that he had been paying interest for the

said sum regularly and after sometime due to loss in his transport business,

he requested the respondent to pay a further sum of Rs.3,00,000/- in

addition to the amount already borrowed, agreeing to pay interest at the rate

of 24% per annum. Since the agreed interest was very high, the appellant

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requested the respondent to reduce the rate of interest and accordingly, the

respondent agreed to receive monthly interest of Rs.6,500/- per month and

as per his request, a fresh Suit Sale Agreement was executed in his favour

and a fresh General Power of Attorney was also executed in favour of

respondent's wife. In view of the execution of fresh Suit Sale Agreement

and General Power of Attorney, the earlier Sale Agreement and General

Power of Attorney dated 10.03.2005 were cancelled on 30.01.2008. It was

also averred by the appellant that he paid the entire principal sum together

with interest on 29.12.2010 and after payment of the same, he requested the

respondent to cancel the Suit Sale Agreement and General Power of

Attorney and return the blank cheques and blank promissory notes handed

over to him. As the respondent failed to accede for the said request and

proclaimed that he would alienate the property by virtue of the power in

favour of his wife, appellant cancelled the General Power of Deed in favour

of respondent's wife on 11.01.2011 and issued a notice to respondent

mentioning the cancellation of power of attorney and other facts. On these

pleadings, the appellant sought for dismissal of the suit.

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4. Before the Trial Court, the respondent/plaintiff was examined as

PW.1 and attestor to the Suit Sale Agreement was examined as PW.2. On

behalf of the respondent, 11 documents were marked as Exs.A1 to A11. On

behalf of the appellant, he was examined as DW.1 and 7 documents were

marked on his side as Exs.B1 to B7.

5. The Trial Court on appreciation of oral and documentary evidences

available on record, came to the conclusion that Suit Sale Agreement relied

on by the respondent was a genuine document and appellant failed to prove

the loan transaction pleaded by him and consequently, granted a decree for

specific performance. Aggrieved by the same, the appellant preferred an

first appeal in A.S.No.17 of 2016 on the file of the I Additional District

Judge, Erode. The First Appellate Court confirmed the findings of the Trial

Court and dismissed the appeal. Aggrieved by the concurrent judgment, the

unsuccessful defendant has come up by way of this second appeal.

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6. This Court, at the time of admission formulated the following

substantial questions of law:-

“(1) Whether the findings of the Courts below are vitiated by failure to consider the defence plea which is corroborated through Ex.B1 to B4 for establishing that Ex.A1 is not intended to be an agreement of sale but it is only a security for loan transaction?

(2) Whether the Courts below are right in law in decreeing the Suit without adverting to the personal bar under Sections 16 (c) and 20 (3) of the Specific Relief Act, 1963 even assuming, but without admitting the agreement under Ex.A1 is intended for sale?”

7. The learned counsel appearing for the appellant submitted that even

before the sale transaction, there was a Sale Agreement between the

appellant and respondent's wife in respect of the very same property under

Ex.B1 whereunder, appellant agreed to purchase the very same property for

sale consideration of Rs.2,20,000/-. Under the earlier agreement, the

advance amount was mentioned as Rs.2,00,000/-. The time stipulated for

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completion of sale transaction was two years. On the very same date of

earlier agreement, a General Power of Attorney was executed in respect of

the very same property in favour of the respondent. Those two documents

dated 10.03.2005 were marked as Exs.B1 and B2. When there was an Sale

Agreement in respect of very same suit property under Ex.B1, absolutely

there was no necessity for the respondent to get another Sale Agreement in

his favour. Therefore, the learned counsel submitted that existence of earlier

Sale Agreement in favour of the respondent's wife and Power Deed in his

own favour clearly probabilise the defence that Suit Sale Agreement is only

a security for loan transaction. The learned counsel further submitted that

even assuming the Suit Sale Agreement is held to be proved, the time limit

of three years stipulated under the agreement is quite long and appellant

failed to prove his continuous readiness and willingness from the agreement

to the date of filing of the suit and consequently, the decree for specific

performance granted by the Courts below are liable to be set aside.

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8. In support of his contention, the learned counsel appearing for the

appellant relied on the following judgments:-

(i) Shenbagam and others vs. K.K.Rathinavel reported in 2022 SCC

Online SC 71.

(ii) Jayakantham vs. Abaykumar reported in (2017) 5 SCC 178.

(iii) J.P.Builders vs. A.Ramadas Rao reported in (2011) 1 SCC 429.

(iv) M.Jayaprakash Narayanan vs. Santhammal and others reported

in 2018 (1) CTC 701.

(v) Kamireddi Sattiaraju and others vs. Kandamuri Boolaeswari

reported in 2007 (3) LW 580 = 2007 (1) MLJ 499.

(vi) P.Sampoornam and others vs. L.T.Somasundaram and others

reported in (2008) 2 CTC 382.

(vii) J.Baskaran vs. T. Pappa reported in 2012 (2) MWN (Civil) 342.

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

CTC 100.

(ix) Petchiammal vs. R.Perumal and another (order made in S.A. (MD)

No.195 of 2015 dated 18.12.2019)

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9. The learned counsel appearing for the respondent by taking this

Court to the evidence of PW.1 and PW.2 and the findings of the Courts

below contended that on appreciation of evidence available on record, both

the Courts below came to a factual conclusion that the Suit Sale Agreement

was a genuine document and hence, the same requires no interference by

this Court. The learned counsel further submitted that though appellant

pleaded that he repaid the entire loan amount received by him from the

respondent, he failed to lead any evidence in support of the said plea.

Therefore, it is his contention that having failed to prove the repayment of

loan amount, the appellant is not entitled to claim that Suit Sale Agreement

is only a security for alleged loan transaction. In support of his

contention, the learned counsel appearing for the respondent relied on the

following judgments:-

(i) Motilal Jain vs. Ramdasi reported in (2000) 6 SCC 420.

(ii) P.Daivasigamani vs. S.Sambandan reported in (2022) 14 SCC 793.

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10. The Suit Sale Agreement said to have been entered into on

30.01.2008. As per the terms of agreement, the agreed sale consideration

was Rs.2,30,000/-. The respondent said to have paid an advance amount of

Rs.2,10,000/- on the date of agreement itself. For the remaining balance

amount of Rs.20,000/-, a long time limit of three years was fixed under the

terms of agreement. The time limit of three years fixed in the terms of

agreement for payment of paltry sum of Rs.20,000/- is quite unnatural and

shaking the conscious of this Court. It is bounden duty of the

respondent/plaintiff to explain the fixation of three years time limit for

payment of balance sale consideration of Rs.20,000/-.

11. The learned counsel appearing for the respondent attempted to

explain the same by referring to the evidence of PW.1 that the appellant

requested fixation of long time as he wanted time to remove the lorry scraps

stored in the subject matter of the Sale Agreement. However, in Ex.A1-Suit

Sale Agreement, no reason is given for fixing long time limit of 3 years.

Even in the legal notice issued by the respondent dated 27.01.2011 marked

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as Ex.A5, the respondent/plaintiff failed to mention the said reason for

fixation of long time limit for completing the sale transaction. In the legal

notice, it was averred by the respondent that he was ready and willing from

the inception and inspite of his readiness and willingness, the appellant

postponed the execution of the sale deed by giving lame excuse. Even in the

plaint filed by the respondent, he has not mentioned the above said reason

for fixation of three years time limit for completing the sale transaction. In

the plaint averment also the respondent had stated that appellant postponed

the completion of the sale transaction by giving lame excuse. Therefore, the

three years time limit fixed for payment of paltry sum of Rs.20,000/- is

unnatural on the face of the Suit Sale Agreement and the respondent failed

to give any plausible explanation for fixation of such a long period.

12. It is also seen from the records even before Ex.A1-Sale

Agreement and Ex.A2-General Power of Attorney, there was yet another

Sale Agreement between the appellant and wife of the respondent under

Ex.B1 dated 10.03.2005. Likewise, on the very same date, the appellant also

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executed a Power of Attorney in the name of the respondent. As per the

terms of earlier agreement under Ex.B1, the total sale consideration was

Rs.2,20,000/- and an advance of Rs.2,00,000/- was paid. The time limit

fixed for performance of the agreement was two years. When there was an

agreement of sale with wife of the respondent in respect of very same

property, absolutely there is no necessity for the appellant to enter into Sale

Agreement with respondent herein, three years thereafter under Ex.A1.

13. It is also pertinent to mention that on the date of Ex.A1, earlier

Sale Agreement between the appellant and respondent's wife and earlier

Power of Attorney in favour of respondent were cancelled under Exs.B3 and

B4. The respondent is unable to explain the reason for execution of present

Suit Sale Agreement in his name cancelling the earlier agreement in the

name of his wife. If the parties wanted to extend the time fixed in the earlier

agreement, they could have simply made an endorsement in the earlier

agreement itself and extended the same. What was the necessity to cancel

the earlier agreement entered into with wife of the respondent was not at all

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explained by the respondent.

14. The learned counsel for the appellant placed much reliance on

Ex.B7-letter written by appellant in favour of respondent agreeing to pay

Rs.3,53,000/- on or before 29th December, 2010. The said letter was marked

through cross examination of PW.1. The respondent herein as PW.1 clearly

admitted that he had written the wordings in Ex.B7-letter. The said

document goes a long way in explaining the transaction between the

appellant and respondent was nothing but a loan transaction. Though the

respondent denied the suggestion that he requested the appellant to execute

a letter as per wordings in Ex.B7, he admitted Ex.B7 was written by him

and he could not re-collect for what purpose he had written Ex.B7.

15. A perusal of Ex.B7 would suggest the wordings in the said

document is in the nature of appellant agreeing to pay Rs.3,53,000/- to

respondent on or before 29th December, 2010. Though the Courts below

based on the evidence of PW.1 and attestor to Ex.A1 namely PW.2 came to

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the conclusion that the execution of Suit Sale Agreement was proved by

respondent, various attendant circumstances referred above were not

considered by the Courts below. The following attendant circumstances,

supports the plea raised by the appellant that Suit Sale Agreement was

executed as a security for loan transaction.

(a) The long time limit of three years stipulated in the Suit Sale

Agreement for payment of small amount of Rs.20,000/- is inherently

unnatural and the same was not explained satisfactorily by the

respondent. Such a stipulation in the agreement raises a suspicion

that agreement could have been executed for loan transaction.

(b) The respondent is unable to explain the reasons for execution of

earlier Sale Agreement in the name of his wife and Power Deed in his

favour. A comparison of terms of agreement in the earlier Sale

Agreement-Ex.B1 and terms of present Suit Sale Agreement Ex.A1

would make it clear that in both the agreements more than 90% of the

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sale consideration was paid and only for a payment of 10% of the

sale consideration, long period of two years and three years were

stipulated.

(c) Ex.B7-letter in the nature of appellant agreeing to pay Rs.3,53,000/-

to respondent on or before 29th December, 2010 was admitted by

respondent when he was in witness box and he could not explain the

circumstances under which it was prepared by him. The Courts below

while upholding the validity of Ex.A1-Sale Agreement failed to take

into consider the impact of Exs.B1 to B4, B7 and the stipulation of

long time limit for payment of small amount etc.

16. It is settled law that the relief of specific performance was

discretionary one as per the law that stood on the date of Suit Sale

Agreement. The relief of specific performance need not be granted merely

because it is lawful to do so. The Court while exercising its discretion must

take into consideration the totality of the circumstances leading to the

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execution of the Sale Agreement and come to the conclusion that it would

be equitable to order specific performance of the Sale Agreement. The

person, who seeks equitable remedy of specific performance must establish

he is entitled to equity.

17. In the case on hand, various circumstances discussed above

creates a serious doubt about the intention of the parties to enter into a Sale

Agreement. The documentary evidence available on record especially

Exs.B1 to B4 and B7 coupled with long time of three years stipulated for

payment of mere 10% of the sale consideration, supports the defence of the

appellant that the Suit Sale Agreement was not intended to be treated as Sale

Agreement but it was executed only as a security for loan transaction.

Hence, the conclusion reached by the Courts below that respondent was

entitled to equitable right of specific performance is liable to be interfered

with. Accordingly, the question of law No.1 framed at the time of admission

is answered in favour of the appellant and against the respondent.

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18. As far as the readiness and willingness of the respondent is

concerned, the respondent paid 90% of the sale consideration on the date of

agreement itself and there is no explanation available on record why the

respondent waited for three years for payment of remaining Rs.20,000/-.

Though it was submitted by the learned counsel for the appellant that long

period of three years was agreed at the request of the appellant to remove

his belongings from the suit property, three years period for removing the

belongings of the appellant from the suit property is not acceptable to this

Court. No prudent person would agree to wait for three long years after

paying 90% of the sale consideration. The evidence available on record

would suggest that the first telegram of the respondent was sent only on

27.01.2011 nearly at the verge of expiry of three years period. There is no

serious dispute with regard to the financial capacity of the respondent to pay

balance amount of Rs.20,000/-. However, his willingness to complete the

sale transaction needs to be proved based on his conduct throughout from

the date of inception of the contract to the date of filing of the suit.

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19. In the case on hand, except the telegram and legal notice issued,

just three days prior to the date of expiry of three years period stipulated

under the agreement, there is no other evidence available on record to

suggest that the respondent was willing to perform his part of the contract

throughout and it was appellant, who was at fault. Hence, there is no

difficulty in coming to the conclusion that the respondent was ready to

perform his contract by virtue of his financial ability, however, I hold his

willingness to complete the sale transaction was not at all proved in the

present case. Hence, the question of law No.2 is also answered in favour of

the appellant and against the respondent.

20. In J.Baskaran vs. T. Pappa reported in 2012 (2) MWN (Civil)

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

CTC 100, almost in a similar situation where 90% of the sale consideration

was paid and unreasonably long period was fixed for payment of remaining

10% of the balance sale consideration, this Court came to the conclusion

such agreement cannot be construed as Agreement of Sale, the relevant

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observation of this Court in J.Baskaran case cited supra, reads as follows:-

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

21. Likewise, in Pappammal @ T. Pappa case cited supra, this Court

while considering similar situation observed as follows:-

“22. Further, having regard to the sale consideration fixed, the advance paid and time fixed for payment of balance

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sale consideration, one can easily infer that Ex.A.2 could not have been intended to be acted upon as Agreement of Sale. In this context, the judgment reported in the case of Tejram v. Patirambhau, 1997 (9) SCC 634, is relevant. In that case, having regard to the similar set of facts, the Hon'ble Supreme Court held that the agreement in reality was only a money transaction and therefore, the Respondent was not entitled to the relief of Specific Performance. In that reported case, out of the sale consideration of Rs.50,000/-, Rs.48,000/- was received and one year time was given for payment of Rs.2,000/-. In such circumstances, it was held by the Hon'ble Supreme Court that it was only a loan transaction and cannot be construed as Agreement of Sale.

23. In this case also, out of the total sale consideration of Rs.40,000/-, Rs.30,000/- was paid and for the payment of balance sum of Rs.10,000/- five year period was prescribed and therefore, in my opinion, Ex.A.2 was not intended to be an Agreement of Sale and it must have been executed only as security or as a loan transaction.

24. As stated supra, the Appellant had proved that she had dealing with the Vetri Murugan Finance, by marking

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Ex.B.2 series, and the brother-in-law of the Respondent was also one of the Directors of Vetri Murugan Finance Company and he has also filed the suit for Specific Performance of Agreement of Sale and therefore, the Appellant has proved that preponderance of probabilities would only lead to the conclusion that Ex.A.2 was not intended to be acted upon as Agreement of Sale and it was given only as security or as loan transaction.

25. The Courts below, without properly appreciating the consideration fixed, advance paid and the time fixed for payment of balance sale consideration, erred in holding that Ex.A.2 was intended to be acted upon as Agreement of Sale.

According to me, the findings of the Courts below are perverse and is liable to be set aside. Hence, the substantial question of law No.1, is answered in favour of the Appellant.”

22. The law laid down by this Court in the above mentioned case laws

are squarely applicable to the facts of the present case and hence, this Court

has no hesitation in coming to the conclusion that findings of the Courts

below that Suit Sale Agreement was intended to be treated as Sale

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Agreement is liable to be interfered with and the appellant by

preponderance of probabilities proved his defence that Suit Sale Agreement

was executed only as a security for loan transaction between the parties.

23. In view of the discussions made above, the judgment and decree

passed by the Courts below are set aside and the second appeal is allowed.

Both the Courts below came to the conclusion that the appellant failed to

prove his plea of repayment of the amount borrowed by him from the

respondent. As per the terms of Suit Sale Agreement, the appellant received

an advance amount of Rs.2,10,000/- on the date of agreement itself. In view

of the conclusion reached by this Court Suit Sale Agreement is only a

security for loan transaction, the appellant is liable to repay the amount

received by him under the Sale Agreement with interest. As per the admitted

case of the appellant as pleaded in his written statement, he agreed to pay

interest at the rate of 24% per annum for the amount lent by the respondent.

This Court feels the interest at the rate of 24% is on higher side, therefore,

in the facts and circumstances of the case, it would be appropriate to direct

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the appellant to pay interest at the rate of 12% per annum from the date of

agreement namely 30.01.2008 to date of actual payment of amount to the

respondent.

In Fine:-

(a) The Second Appeal is Allowed by setting aside the judgment and

decree passed by the Courts below.

(b) The suit is dismissed in respect of main relief of specific

performance.

(c) The suit is decreed in respect of alternative prayer for recovery of

advance amount.

(d) The appellant is hereby directed to pay a sum of Rs.2,10,000/- to

the respondent with interest at the rate of 12% per annum on such

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amount from the date of agreement (30.01.2008) to the date of

actual payment.