PRESENT: THE HONOURABLE DR. JUSTICE A.K.RATH Date of Hearing:16.02.2017 & Date of Judgment: 03.03.2017 DR.A.K.RATH, J. This is plaintiffs appeal against an affirming judgment.
2. The case of the plaintiff is that defendant no.1 was the owner of the suit land. The consolidation record of right was published in his name. To press his legal necessity, defendant no.1 approached him on 13.7.1985 to sell the land for consideration of Rs.5000/-. The suit property was adjoining to his homestead land. He accepted the proposal. He paid an amount of Rs.2600/- towards advance to defendant no.1. Possession was delivered to him by defendant no.1 with a stipulation that the latter would take necessary permission and execute the registered sale deed on receipt of balance consideration of Rs.2400/- from him. He requested defendant no.1 number of times to obtain permission to execute the sale deed. While the matter stood thus, on 18.11.1987 he came to know that defendant no.1 was going to sell the suit land in favour of defendant no.2. He filed objection before the Tahasildar, Binka not to accord permission to sell the land. The Tahasildar had ignored the objection and illegally accorded permission to sell the chaka to defendant no.1 in favour of defendant no.2. While the matter stood thus, defendant no.2 tried to take forcible possession of the land on the strength of the sale deed, but he could not. He was ready and willing to purchase the entire land. With this factual scenario, the suit had been filed for declaration that the registered sale deed dated 20.11.1987 executed by defendant no.1 in favour of defendant no.2 is illegal, for a direction to the defendants to execute the sale deed in respect of the suit plot in favour of the plaintiff and for permanent injunction or in alternative for a decree of damages of Rs.12,000/-.
3. Pursuant to issuance of summons, both the defendants entered appearance and filed a comprehensive written statement denying the assertions made in the plaint. The case of the defendants is that defendant no.1 had not executed any agreement to sale in favour of plaintiff, nor received an amount of Rs.2600/- from him to sell the suit plot. The plaintiff is not in possession of the suit land. About five years before defendant no.1 incurred a loan of Rs.2600/- from Uprendra Panda, elder brother of the plaintiff. On 15.10.1986, the said Upendra Panda demanded repayment of money and insisted upon him to sign on a plain paper to use the same as security for payment of loan amount. Out of fear, he had signed on the blank paper. Apprehending that his property would be grabbed, he made an endorsement on the reverse side of the plain paper that he will get back his land on return of Rs.2600/-. The said blank paper had been utilized for agreement to sell. He entered into an agreement with defendant no.2 on 11.9.1985 to sell the land for consideration of Rs.10,000/-. Since a part of chaka could not be transferred, he wanted to sell the entire chaka. The defendant no.2 agreed for the same. The consideration money for the entre chaka was fixed at Rs.15,000/-. While the matter stood thus, the defendant no.1 applied the Tahasildar, Binka for permission to sell the land in favour of defendant no.2. The Tahasildar granted permission. Thereafter the defendant no.1 sold the entire Chaka no.96 of village Urle to defendant no.2 on receipt of balance consideration money and executed a sale deed in his favour on 20.11.1987. Possession of the land was delivered to vendee. The plaintiff had not objected for grant of permission. The defendant no.2 is the owner in possession of a suit land and the bona fide purchaser of value.
4. On the inter se pleadings of the parties, the learned trial court framed as many as seven issues. To prove the case, the plaintiff had examined three witnesses and on his behalf, six documents were executed. The defendants had examined two witnesses and on their behalf, four documents were exhibited. On a thread bare analysis of evidence on record and pleadings, the learned trial court came to hold that agreement for sale dated 13.7.1985 is void, since it was for sale of fragment of a chaka. The execution of the agreement is shrouded with suspicious circumstances. It was a manufactured document. It further held that the document in question is in the nature of sale deed. The same being unregistered, it is void. Held so, the learned trial court dismissed the suit. The plaintiff unsuccessfully challenged the same before the learned District Judge, Bolangir, which was transferred to the court of the learned Additional District Judge, Bolangir and renumbered as Title Appeal No.63/47 of 1991-92. The appeal was eventually dismissed.
5. The Second Appeal was admitted on 3.9.1998 on the following substantial questions of law enumerated in Grounds Nos.1 to 3 of the appeal memo.
1. Whether the learned Lower Appellate court committed serious illegality in holding that the agreement (Ext.1/b) is void under Sections 34 and
35 of the Orissa Consolidation of Holdings and Prevention of Fragmentation of Land Act, 1972 without keeping in view that the transfer is void and that an agreement for sale is not a transfer ?
2. Whether the learned Lower Appellate court should have directed the defendant no.1 to refund the part of the consideration money along with amount spent by the plaintiff for improvement of the suit land ?
3. Whether the learned Lower Appellate Court committed serious illegality in not giving any finding relating to the possession of the parties as well as the validity of the sale deed in favour of the defendant no.2 ?
6. Heard Mr.Budhiram Das on behalf of Mr.N.C.Pati, learned Advocate for the appellant and Mr.P.K.Das, learned Advocate for respondent no.2.
7. The learned Advocate for the appellant submitted that both the courts below have committed a manifest illegality and impropriety in holding that the agreement to sell is void as it was fragment of a chaka. He further submitted that since the defendant no.1 has received an amount of Rs.2600/-, the courts below have committed a patent error in not directing the defendant no.1 to pay the same.
8. Per contra, Mr.Das, learned Advocate for the respondent no.2 submitted that defendant no.1 had not executed any agreement for sale in favour of the plaintiff. The signature of defendant no.1 appearing in the blank paper has been utilized for the purpose of agreement to sell. The defendant no.1 had not received any amount from the plaintiff. To press his legal necessity, the defendant no.1 had alienated the entire chaka after obtaining necessary permission from the competent authority to defendant no.2 for a valid consideration. Thus, the defendant no.2 is the absolutely owner in possession of the suit land.
9. The learned appellate court on examination of the agreement dated 13.7.1985, vide Ext.1 came to a categorical conclusion that the document in question is an agreement to sell the suit land. It further held that defendant no.1 had executed the said document in favour of the plaintiff to sell the suit plot and received a part consideration of Rs.2600/- He further agreed to execute and register the sale deed in favour of the plaintiff after receipt of Rs.2400/-. The plaintiff is not contiguous land owner of the suit plot. Thus he could not have purchased a part of the suit plot. Relying on Section 34 (2) of the Orissa Consolidation of Holdings and Prevention of Fragmentation of Land Act (hereinafter referred to as O.C.H. & P.F.L Act), it held that a transfer in contravention of provision of Section 34 of O.C.H. & P.F.L. Act is void. The suit document therefore is void and unenforceable since its object to complete a transaction which is prohibited by law.
10. Sub. Sec. (1) of Section 34 of the O.C.H. & P.F.L Act provides that no agricultural land in a locality shall be transferred or partitioned so as to create a fragment. Sub. Sec (2) provides that no fragment shall be transferred except to a land-owner of a contiguous Chaka.
11. Sub-Sec. (1) of Sec. 35 of the said Act provides that a transfer or partition in contravention of the provisions of Sec. 34 shall be void. Thus a transfer in contravention of provision of Sec.
34 of the O.C.H. & P.F.L Act is void.
12. The question does arise as to whether the defendant no.1 shall refund the amount received towards part consideration to the plaintiff ?
13. Section 65 of the Indian Contract Act provides obligation of person who has received advantage under void agreement, or contract that becomes void. The same is quoted below:
65. Obligation of person who has received advantage under void agreement, or contract that becomes void.When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.
14. The Privy Council in the case of Harnath Kaur v. Indeer Bahadur Singh, AIR 1922 PC 403, held that the section deals with (a) agreements and (b) contracts. The distinction between them is apparent from section 2. By clause (e) every promise and every set of promises forming the consideration for each other is an agreement, and by clause (h) an agreement enforceable by law is a contract. Section 65, therefore, deals with (a) agreements enforceable by law and (b) with agreements not so enforceable. By clause (g) an agreement not enforceable by law is said to be void. An agreement, therefore, discovered to be void is one discovered to be not enforceable by law, and, on the language of the section would include an agreement that was void in that sense from its inception as distinct from a contract that becomes void.
15. Taking a cue from the decision in the case of Harnath Kaur (supra), a Full Bench of five Judges of the Hydrabad High Court, in Budhulal v. Deccan Banking Co. Ltd., AIR 1955 Hyd 69 (FB) speaking through Jaganmohan Reddy, J. went on to refer to the observations of Pollock and Mullah in their Treaties on Indian Contract and Specific Relief Acts and held that Section 65 of the Indian Contract Act does not apply to agreements which are void under Section 24 by reason of an unlawful consideration or object and there being no other provision in the Act under which money paid for an unlawful purpose may be recovered back, an analogy of English law will be the best guide. They then referred to the reasoning of the learned authors that if the view of the Privy Council is right namely that agreements discovered to be void apply to all agreements which are ab initio void including agreements based on unlawful consideration, it follows that the person who has paid money or transferred property to another for an illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carried into execution and both the transferor and transferee are in pari delicto. The Bench then proceeded to observe that the view of the learned authors is neither supported by any of the subsequent Privy Council decisions nor is it consistent with the natural meaning to be given to the provisions of Section 65. The section by using the words 'when an agreement is discovered to be void' means nothing more nor less than when the plaintiff comes to know or finds out that the agreement is void. The word 'discovery' would imply the preexistence of something which is subsequently found out and it may be observed that Section 66, Hyderabad Contract Act makes the knowledge (11m) of the agreement being void as one of the prerequisites for restitution and is used in the sense of an agreement being discovered to be void. If knowledge is an essential requisite even an agreement ab initio void can be discovered to be void subsequently. There may be cases where parties enter into an agreement honestly thinking that it is a perfectly legal agreement and where one of them sues the other or wants the other to act on it, it is then that he may discover it to be void. There is nothing specific in Section 65, Indian Contract Act or its corresponding section of the Hyderabad Contract Act to make it inapplicable to such cases. It was further held that a person who gives money for an unlawful purpose knowing it to be so, or in such circumstances that knowledge of illegality or unlawfulness can as a finding of fact be imputed to him, the agreement under which the payment is made cannot on his part be said to be discovered to be void. The criticism that if the aforesaid view is right then a person who has paid money or transferred property to another for illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carried into execution, notwithstanding the fact that both the transferor and transferee are in pari delicto, in our view, overlooks the fact that the courts do not assist a person who comes with unclean hands. In such cases, the defendant possesses at,. advantage cover the plaintiff- in pari delicto potior est conditio defendentio. This specific provision made by the legislature cannot be taken advantage of in derogation of the principle that Section 65 of the Contract Act is inapplicable where the object of the agreement was illegal to the knowledge of both the parties at the time it was made. In such a case the agreement would be void ab initio and there would be no room for the subsequent discovery of that fact. It further held that where a contract is discovered to be void the promissor can in a suitable case be given the benefit of Sec.65 of the Contract Act.
16. The Calcutta High Court in the case of Ram Nagina Singh V. Governor General in Council, AIR 1952 Calcutta 306, held that the Sec.65 of the Indian Contract Act enunciates the principle of restitution & should be liberally construed in order to do equity & justice between the parties. The intention of the section is to prevent a party to avoid agreement, to retain benefits received under it. The agreement may be void on grounds of fact or on grounds of law. There is nothing in the section to restrict it to agreements which are void on grounds of fact. The only requirement is that the benefit must have been received under a void agreement before discovery that it was void. The next question is when the agreement is discovered to be void. The Privy Council has made it clear that there may be circumstances under which an agreement which is void is discovered to be so after the date of the agreement. The question is what are those circumstances. The ordinary presumption is it is true that the parties know the law & are presumed to know it but the presumption may be rebutted by the special circumstances in a case if it is proved as a fact that the parties were under a misapprehension as to their rights & did not know in fact that the agreement which they had entered into was void by reason of a statutory provision of which they had no knowledge or appreciation. In spite of presumption of knowledge of law, other facts can be taken into account in considering the question whether or not the parties in fact knew the agreement to be void & appreciated it.
17. The principle underlying Section 65 is that a right to restitution may arise out of the failure of a contract though the right be not itself a matter of contractual obligation as held by Privy Council in the case of Babu Raja Mohan Manucha and others v. Babu Manzoor Ahmad Khan and others, A.I.R. 1943 Privy Council
18. There is no iota of doubt that the agreement dated 13.7.1985 vide Ext.1 is an agreement to sell. The defendant no.1 had received an amount of Rs.2600/- towards part consideration at the time of entering into an agreement. Both the parties knew that the document would be enforceable in the Court of law. Neither the plaintiff nor defendant no.1 knew that the agreement to be void. Both the parties assumed that agreement was a valid agreement. In view of the same, Section 65 of the Indian Contract Act applies to the facts of this case. The plaintiff is entitled to recover the money paid to the defendant no.1 towards part consideration.
19. In the wake of the aforesaid, the judgment and decree of the Courts below are set aside. The suit is decreed to the extent indicated above. The Second Appeal is allowed. No costs. Dr.A.K.Rath, J. Orissa High Court, Cuttack. The 3rd March, 2017/CRB.
Comments