K.R Manickam v. P. Kumaravel 2. A. R...

JUDGMENT

The unsuccessful plaintiff, in getting a decree for specific performance of the agreement, has filed the above appeal.

2. The first defendant is the owner of the suit property and he negotiated a sale agreement with the plaintiff and they entered into an agreement of sale on 1.9.1979, with respect to the suit property. The plaintiff has been in possession as a lessee of the same. The sale consideration agreed between the parties was Rs. 49,000/- and the plaintiff paid an advance of Rs. 4,501/- to the first defendant on 1.9.1979 As per the terms and conditions of the agreement the plaintiff has to settle and discharge the loan amount on behalf of the 1st defendant, payable to M/s. Sudarsan Chit (India) Ltd. The 1st defendant has to execute a sale deed after receiving the sale price within a month in favour of the plaintiff at his expenses. Though the plaintiff was ready and willing to perform his part of the obligation and requested the 1st defendant to accompany him to M/s. Sudarsan Chit Company, for the purpose of settling and discharging the loan transaction mentioned in the sale agreement, the 1st defendant was evading with an ulterior motive. So, the plaintiff caused a notice to the 1st defendant on 28.9.1979 asking him to execute the sale deed. The plaintiff himself went to M/s Sudarsan Chit (India) Ltd and after due verification he was able to find out that the 1st defendant owned a sum of Rs. 25,000/-. He offered a sum of Rs. 22,500/- in full and final settlement of the loan amount and it was accepted by the Manager of the said Company and he passed on a receipt dated 26.11.1980 After the discharge of the loan amount, the Manager of the said company returned all the original documents to the plaintiff, which the 1st defendant had offered to them as collateral security. The plaintiff, thus, has paid a total sum of Rs. 27,051/- towards the sale consideration. According to the plaintiff, immediately after discharge of the said loan transaction, the plaintiff along with one Rajangam approached the 1st defendant and intimated the same to him and requested him to execute the sale deed after receipt of balance sale consideration of Rs. 21,949. Though the 1st defendant agreed to receive the balance amount and promised to execute the sale deed in favour of the plaintiff after verifying the discharge of the loan transaction, he was evading and dodging to receive the balance consideration and execute the sale deed. Thereafter also the plaintiff caused a legal notice to the 1st defendant. To his surprise the plaintiff received a legal notice from the defendants on 9.2.1981 stating that the 2nd defendant had purchased the suit property on 7.1.1981 and so he is entitled to collect the monthly rent from January 1981, from the plaintiff. The plaintiff has specifically stated that the 2nd defendant, with full knowledge about the sale transaction entered into between the plaintiff and 1st defendant, had obtained the sale deed fraudulently. So the plaintiff has filed the above suit for enforcing the agreement dated 1.9.1979

3. The 2nd defendant filed a written statement denying the genuineness of the agreement in favour of the plaintiff and also the passing of the consideration towards the said agreement. According to him, the plaintiff sent the notices long after the sale in favour of the 2nd defendant and after knowing about the sale in favour of the 2nd defendant. He has specifically stated that the 2nd defendant did not know about the agreement in favour of the plaintiff and the 2nd defendant is the bona fide purchaser for value. He denied the fact that the plaintiff is in possession and enjoyment of the suit property in pursuance of the agreement in favour of the plaintiff.

4. The 1st plaintiff remained absent and was set ex parte.

5. The trial Court framed as many as five issues and found that Ex. A1 agreement in favour of the plaintiff is not a true and valid document and that Ex. A1 is not enforceable as against the 2nd defendant as he is the bona fide purchaser for value, without the knowledge about Ex. A1. On the basis of the above said findings, the trial Court dismissed the suit with costs. Aggrieved, the plaintiff has filed the above Appeal.

6. The points for consideration in this Appeal are:—

(1) Whether the 2nd defendant is the bona fidepurchaser for value, without having any knowledge about Ex. Al;

(2) Whether Ex. A1 is valid, genuine and enforceable against the 2nd defendant.

7. The plaintiff/appellant entered into possession of the suit property in question as tenant. Under Ex. A1 he entered into an agreement with the 1st defendant to purchase the suit property for a sum of Rs. 49,000/-. As per the recital of the said agreement, the plaintiff has to discharge the said debt due to M/s Sudarsan Chits (India) Ltd. The learned Senior Counsel appearing for the appellant/plaintiff has submitted that the 2nd defendant cannot non-suit the plaintiff on the ground that the plaintiff was not ready and willing to perform his part of the contract, in pursuance of Ex. A1, as the 2nd defendant is only the subsequent purchaser. It is well settled that the plea that the plaintiff was not ready and willing to perform his part of the contract is specifically available only to the vendor/lst defendant. Such a defence is not available to the subsequent purchaser.

8. Such a view has been taken by the Apex Court in the decision in Jugraj Singh v. Labh Singh, (1995) 2 SCC 31 wherein it has been held as follows:

“5. This Court in Gomathjnayagam Pillai v. Palaniswami Naidu, AIR 1967 SC 868: (1967) 1 SCR 227, quoting with approval Ardeshir case, AIR 1928 PC 208:55 Ind App 360, has held as follows:

‘But the respondent has claimed a decree for specific performance and it is for him to establish that he was, since the date of the contract, continuously ready and willing to perform his part of the contract If he fails to do so, his claim for specific performance must fail’.

That plea is specifically available to the vendor/defendant. It is personal to him. The subsequent purchasers have got only the right to defend their purchase on the premises that they have no prior knowledge of the agreement of sale with the plaintiff. They are bona fide purchaser for valuable consideration. Though they are necessary parties to the suit, since any decree obtained by the plaintiff would be binding on the subsequent purchasers, the plea that the plaintiff must always be ready and willing to perform his part of the contract must be available only to the vendor or his legal representatives, but not to the subsequent purchasers. The High Court, therefore, was right in rejecting the petitioner's contention and did not rightly accept the plea. We do not find any ground warranting interference”.

In this case, the 1st defendant did not deny the case of the plaintiff by filing written statement so, this Court has to accept the case of the plaintiff that he was ready and willing to perform his part of the contract.

9. As stated above, the plaintiff has been occupying the suit property as a tenant. This fact has been admitted by the 2nd defendant. The 2nd defendant, pursuant to his purchase, sent a notice through his advocate, Ex. A19 dated 9.2.1981 asking the plaintiff to attorn his tenancy and to pay the rent to him. D.W.I has deposed as follows:—

From the above, it is very clear that even before completing the sale in his favour, the 2nd defendant knew that the plaintiff has been occupying the suit property as a tenant. But, he has not enquired about the character of possession or person in possession of the suit property.

10. While dealing with the conditions stipulated under Sec. 27(b) of the Specific Relief Act to get the benefit on the basis of the subsequent transfer, the Division Bench of this Court, following various, earlier decisions of this Court, in the decision in Veeramalai v. Thadikara, AIR 1968 Mad. 383 = 81 L.W 90, has held as follows:—

“The only question that remains is whether the defendants are entitled to invoke the provisions of Sec. 27 (b) of the Specific Relief Act, as persons who have paid money in good faith, and without notice of the original contract. It is simply amusing how, on the admitted facts, the learned Subordinate Judge felt that defendants 3 to 5 are transferees for value who have paid their money in good faith and without notice of the plaintiff's agreement of sale. He has not borne in niind the rudiments and the basic principles of law. The general rule is that no person can convey a better title that what he has, except where the statute provides exceptions to the rule like Sec. 27 (b) of the Specific Relief Act. If a person, as the owner of the property, has entered into an agreement, to sell the property, he cannot thereafter convey the same property to any other person, as after the prior agreement of sale, he cannot be said to be a free owner of the property. If he subsequently alienates the property he can alienate if only subject to the rights created under the prior agreement of sale. S. 27 of the Specific Relief Act is in these terms:—

27. Except as otherwise provided in this Chapter, specific performance of a contract may be enforced against

(a) either party thereto; (b) any other person claiming under him by a title arising subsequently to the contract except a transferee for value who has paid his money in good faith and without notice of the original contract.

The plain language of the sub-section (b) shows that the subsequent transferee can retain the benefit of his transfer by purchase which, prima facie, he had no right to get, only after satisfying the two conditions concurrently; (1) he must have paid the full value for which he purchased the property and he must have paid it in good faith and without notice of the prior contract. Further the burden of proof is upon the subsequent purchaser to establish these conditions in order that his rights may prevail over the prior agreement of sale. It will be sufficient to refer to the decision of the Privy Council in Bhup Narain Singh v. Gokul Chand, 66 Mad LJ. 255 = (AIR 1934 PC 68), about the stringent nature of the conditions and the burden of proof under Sec. 27 (b). In the instant case, the full price has not been paid at the time when controversy arose and even at the time when the suit was filed. The learned judge was of the view that because the bargain as embodied in the three sale deeds provided for the payment of the money in convenient instalments and as a substantial portion of the price had been paid, the defendants must be regarded as transferees who paid their money. This view is clearly erroneous. It is sufficient to refer to the leading decision in Himatilal Motilal v. Vasudev Ganesh, (1912) ILR 36 Bom. 446, in which it was held that in order to defeat the prior equity to which the plaintiff was entitled, the subsequent purchasers were bound to establish three things that (1) they were purchasers for value (2) bonafide (3) without notice; and that if the entire price had not been paid and a security had been given for the payment of the balance of the purchase price, the defendants cannot resist the claim for specific performance. (Vide observations at page 451 of the above decision). Section 27(b) of the Specific Relief Act is only the statutory provision of the principles mentioned in the decisions in England to which reference has been made in this Bench decision to the Bombay High Court. The principle in this decision was referred to with approval ir Mohammed Haneef Sahib v. Board of Trustees, Jumma Masjid Adoni, 1944.1 Mad 377 = AIR 1944 Mad 421) in which it was held that the words in Sec. 27(b) who has paid his money mean the transferee who has paid the whole of the consideration and not a transferee who has paid only part of it. Our attention was also drawn to the decision of Justice. Varadhachariar, J., in Arunachala v. Madappa, AIR 1936 Mad 949 in which the learned Judge (Varadhachariar, J) called for a finding from the trial Court as to the dates on which the subsequent purchaser paid and could be deemed to have paid the purchase price. A perusal of the judgment shows that the learned judge was also of the view that the entire purchase money should have been paid before the subsequent purchaser obtained knowledge of the prior agreement of sale. In the instant case, even at the time when the first defendant gave evidence, there was admittedly a balance of Rs. 7000/- due under the three sale deeds. (Vide D.W 1's evidence at page 44 of the typed papers). The learned judge has committed a serious error in thinking that the words who has paid his money in Section 27(b) are equivalent to who has paid his money (sic) or who has agreed to pay his money'. The judge has overlooked that it is the actual payment of the money which alone confers the right so as to prevail over a prior agreement of sale.

(7) The trial Court has committed the same serious error in holding that the defendant are transferees without notice of the original contract under Sec. 27 (a) of the Specific Relief Act. We have already held that the defendants had actual knowledge of the plaintiff's prior agreement of sale when they took the sale deeds, Exs. B-13 to B-15. Even if the defendants had no actual notice or knowledge of the agreement of sale, they must be deemed to have had constructive notice or knowledge on the admitted facts of the case. It is surprising how the learned judge was persuaded to find this point in favour of the defendants despite the fact that his attention was invited to the decision in M.R.P Yella Reddi v. Subbireddi, 1954-2 Mad L.J (Andh) 6 — (AIR 1954 Andhra 20), of the Andhra High Court which contains a reference to all the leading decisions in England and India and in particular to the decisions of this Court., the latest being the decision of Balakrishna Iyer, J., in Parvathiammal v. Sivasankara Bhattar, 1951-2 Mad LJ. 181 = (AIR 1952 Mad 265). It only shows that the learned judge has not carefully looked into the decisions referred to in his judgment. He says that no enquiry is necessary by the subsequent purchaser regarding the rights of the person who is already in possession, once it is found that that the person originally got into possession as a lessee under the vendor. In other words, the learned judge holds that if the subsequent purchaser knew that at some earlier point of time the person who relied upon the agreement of sale was already in possession as a lessee, the subsequent purchaser need not make any enquiry as to whether the lessee was continuing in possession only as a lessee or in the assertion of any other right. It is this identical point which has been considered by the leading decisions in England and in India and the view has been uniformly taken in all the cases that it is the duty of the subsequent purchaser to enquire (of?) the persons in possession as to the precise character in which he was in possession at the time when the subsequent sale transaction was entered into. In 1951-2-Mad. LJ. 191 = AIR 1952 Mad 265) a usufructuary mortgage was in possession of the property and an agreement of sale was entered into by the mortgagor to sell the property to the usufructuary mortgage in satisfaction of the mortgage and also for payment of some additional consideration. The contesting defendant was the subsequent purchaser and it was admitted that the latter did not make any enquiries of the usufructuary mortgatee in order to ascertain from him whether he had any right in the property other than as usufructuary mortgagee. The identical argument which was accepted by the trial Court in the instant case was advanced that once it was known that the property was in the possession of a usufructuary mortgagee, there was nothing further that a prospective purchaser of the property need have enquired about. This argument was rejected in unambiguous terms. The learned Judge has referred to all the leading decisions and in particular had extracted the following statement of the law in Bamhart v. Greenshields, (1853) 14 ER 204 at p. 209-

‘with respect to the effect of possession merely we take the law to be that if there be a tenant in possession of land purchaser is bound by all the equities which the tenant could enforce against the vendor and that the equity of the tenant extends not only to interests connected with his tenancy as in Taylor v. Stibbert, 1794-2 Ves Jr. 437, but also to interest collateral agreement, as in Danies v. Davison, 1809 — 16 Ves Jun 249, All v. Anthony 1816-1 Mer 282, the principle being the same in both classes of cases, namely, that the possession of the tenant is notice that he has some interest in the lands, and that a purchaser having notice of the fact, is bound, according to the ordinary rules, either to enquire with that interest is, or to give effect to it, whatever it may be’.

1954-2-Mad. L.J (Andh) 6 — (AIR 1954 Andhra 20), was a case in which the person in whose favour a prior agreement of sale was entered into was already in possession as a lessee but the property was subsequently sold to the contesting defendant. There too the same argument was advanced, that in view of the character of the plaintiff's possession at its inception as a tenant, there was no duty cast upon the subsequent purchaser to make any further enquiry. This argument was not accepted. As this decision reviews the relevant cases on the topic, it is not necessary to burden this judgment by referring to all the cases. Reference may, however, be made to the following observations of the Lord Chancellor in the leading decisions which has been followed in all subsequent cases in Daniels v. Davison (1309) 16 Ves Jun 249 at p. 254:—

‘Where there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that person is in possession that a tenant being in possession under a lease with an agreement in his pocket to become the purchaser, these circumstances altogether give him an equity repelling the claim of a subsequent purchaser who made an enquiry as to the nature of his possession’.

(Vide also 34 Halsbury's Laws of England page 366, Para 644 and 14 Halsbury's (sic) England, page 546, para 1024) For all these reasons, it has to be held that the defendants have failed to satisfy both the limbs of S. 27(b) of the Specific Relief Act. (1) they have not paid the money and (2) they are not transferees in good faith and without knowledge of the prior agreement of sale. The plaintiff will be entitled to a decree for specific performance as against defendants 2 to 5 and 7. The sale deed to be executed by them shall be on the lines indicated in the decision of the Supreme Court in Durga Prasad v. Deepchand, 1954-1-Mad. L.J (SC) 60 = (AIR 1954 SC 75 = 67 L.W 945.). As the plaintiff has deposited the balance of price at the time of the institution of the suit, there is no question of the plaintiff being liable for mesne profits thereafter from May 1957 till 8th June 1960 for three years, they the defendants, will not be liable to pay interest on the balance of Rs. 8000/-. So far as the period from May 1957 to 1960 is concerned, on our findings, the plaintiff has been in possession not as a lessee but only in pursuance of the agreement of sale. He will not be liable for any rent or damages for use and occupation nor for any mesne profits. The question whether he could be held liable for interest on the balance of Rs. 8,000/- from May 1957 to 8th June 1960. He was always ready and willing but neither defendants 3 to 5 nor the 6th defendant would receive the money and complete the transaction. On the other hand, the plaintiff was harassed by eviction proceedings and put to unnecessary expenses. In those circumstances, having regard to the fraudulent conduct of the first defendant, we are of the view that the plaintiff should not be made liable for interest. The result is that a sale deed will have to be executed in favour of the plaintiff and the sum of Rs. 8,000/- will have to be taken by the defendants 3 to 5 instead of the properties, their rights will be transferred to the balance i.e, the sum of Rs. 8,000/-. In view of this conclusion of ours the question of the plaintiff's right to the site on which he has put up the building on payment of paghudi does not arise”

11. Another Division Bench of this Court in the decision in R.K Mohammed Ubaidullah and 3 others v. Hajee C. Abdul Wahab and another, 1990 T.L.NJ 207 = 1990-2-L.W. 147 following the earlier decisions regarding the ‘bona fide purchaser, has held that if the subsequent purchaser failed to enquire the person who is in possession as to the precise character in which he was in possession at the time when the subsequent sale transaction was entered into and if the subsequent purchaser failed to discharge it, he cannot be deemed to have purchased the property in good faith.

12. Even in the evidence as D.W.I, the 2nd defendant, has deposed that there was no prior agreement, that he did not take any steps to peruse the title deeds and that he did not demand the title deeds to verify the same. He has also deposed that even though the 1st defendant said that the title deeds were with the Chit Company, he did not take any efforts to enquire about the same with Chit Company. The omission on the part of the 2nd defendant to make enquiries about the plaintiff or about his right must be treated as wilful abstinence or gross negligence, which means that the 2nd defendant, by the existing equity in favour of the plaintiff, cannot get the benefit of the subsequent purchase of the suit property. So, the trial Court is not correct in holding that the 2nd defendant is a bona fide purchaser for value, without knowing the agreement in favour, of the plaintiff.

13. The trial Court has also found that Ex. A.1 is not true and valid document. When the execution of the document is admitted by the 1st defendant in so many notices which fact is also not disputed before me, it is for the 1st defendant to establish that Ex. A1 is not a true and valid document. When the 1st defendant was not before the Court by defending the case of the plaintiff and he did not stand in the witness box to offer himself to be cross-examined by the plaintiff, the plaintiff's case that Ex. A1 is true and valid one has to be accepted. Moreover, as stated earlier, when tthe execution of Ex. A1 is not • denied by the 1st defendaant himself, the conclusion of the trial Court that Ex. A.1 is not true and valid one cannot be correct. In the recent decision in Vidhyadhar v. Mankikrao, AIR 1999 SC 1441 = 1999-2-L.W. 576, while dealing with similar circumstances, the Apex Court has held as follows:—

“Where a party to the suit does not appear into the witness box and states his own case on oath and does not offer himself to be cross-examined by the other side, a presumption would arise that the case set up by him is not correct as has been held in a series of decisions passed by various High Courts and the Privy Council beginning from the decision in Sardar Gurbaksha Singh v. Gurdial Singh, AIR 1927 PC 230. This was followed by the Lahore High Court in Kirpa Singh v. Ajaipal Singh, AIR 1930 Lahore 1 and the Bombay High Court in Martand Pandharinath Chaudhari v. Radhabai Krishnarao Deshmukh, AIR 1931 Bombay 97. The Madhya Pradesh High Court in Gulla Kharagjit Carpenter v. Narasingh Nandkishore Rawat AIR 1970 Madhya Pradesh 225, also followed the Privy Council decision in Sardar Gurbakhsh Singh's case (AIR 1927 PC 230) (supra). The Allahabad High Court in Arjun Singh v. Vvrender Nath, AIR 1971 Allahabad 29 held that if a party abstains from entering the witness box, it would give rise to an inference adverse against him. Similarly, a Division Bench of the Punjab and Haryana High Court in Bhawan Dass v. Bhishan Chand, AIR 1974 Punj and Har 7, drew a presumption under Section 114 of the Evidence Act against a party who did not enter into the witness box”.

14. The learned Senior Counsel appearing for the 2nd respondent/2nd defendant, in view of the settled principles of law with respect to the abovesaid aspects,, is not in a position to sustain the findings of the trial Court with respect to issue Nos, 1 to 3.

15. He has concentrated the argument only with respect to issue No. 4, namely, whether the sale agreement is enforceable as against the 2nd defendant, so as to sustain the decree, dismissing the suit. The learned Senior Counsel has submitted that the said agreement was executed in the circumstances mentioned under Ex. A25. The plaintiff has signed as surety for the amount payable to the said Chit Company. At the instance of an employee, namely, Nagalingam, the plaintiff had insisted the 1st defendant to execute the agreement to safeguard the plaintiff's interest in the event of the plaintiff was compelled to pay the amount due to the said Chit Company, by the 1st defendant. On that basis the learned Senior Counsel has submitted that the said document Ex. A1 agreement is not meant for selling the suit property but only to safeguard the interest of the plaintiff. So, according to him, it is for the plaintiff to establish the said agreement was executed for the purpose of selling the suit property. The learned Senior Counsel has pointed out that no attestor was examined to establish the said agreement. He has also brought to the notice of this Court that the 1st defendant was able to pay the sum of Rs. 10,900/-within 20 days from the date of execution of Ex. A1 and so it cannot be said that the 1st defendant was in need of money. On that basis the learned Senior Counsel has submitted that the said agreement in favour of the plaintiff is not a valid one, so as to enable the plaintiff to enforce the same against the defendants. I am not able to accept the said argument.

15.A When the learned senior Counsel appearing for the 2nd respondent has fairly conceded that the 1st defendant has admitted the signature in the agreement Ex. A1 it amounts to admission of the execution of the document. When the plaintiff has come forward with the specific plea that the said agreement was executed for the purpose of selling the suit property, it is for the 1st defendant to defend the same and establish that the said document was executed to safeguard the interest of the plaintiff and not to sell the suit property as mentioned therein. So, the burden is on the 1st defendant to establish his case especially when the execution of the said document is admitted by him. The intention as alleged by the 1st defendant cannot be established by the 2nd defendant as he is not a party to Ex. A1, nor has the 2nd defendant examined anybody to establish the reason for executing Ex. A1, as stated by the 1st defendant under Ex. A25. No other evidence is available to sustain the said submission. Having stated certain reasons for executing the document under Ex. A1, the 1st defendant did not appear before the Court, and he has not filed written statement. He did not get into the witness box and he has not taken any steps to prove his case as mentioned in Ex. A25, to non-suit the plaintiff. As held in the decision in AIR 1999 SC 1441 = 1999-2-L.W. 576 (supra) the 1st defendant did not state the facts mentioned in Ex. A25, in the written statement, and he had avoided the witness box, so that he may not be cross-examined. At the instance of the 2nd defendant, such a defence cannot be accepted, especially when there is no specific: evidence to that effect.

16. So, the findings of the trial Court in answering issue Nos. 1 to 4 cannot be sustained. So, the said document Ex. A1 is enforceable in law against the defendants.

17. In view of the above discussions, the appellant/plaintiff is entitled for the decree as prayed for and the judgment and decree of the trial Court cannot be sustained, and they are set aside. Consequently, this Appeal is allowed with costs.

RR/VCS.