THE COMMISSIONER OF INCOME TAX vs. M/S A S KUPPARAJU BROTHERS

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

Dated this the 22nd day of October, 2013 PRESENT THE HON’BLE MR. JUSTICE N. KUMAR AND THE HON’BLE MR. JUSTICE H. BILLAPPA RFA No.1226 OF 2006

BETWEEN:

Annappa Reddy since dead by LR’s

Wife of late Annappa Reddy

65 years

Son of late Annappa

50 years

Wife of T. Gopala Reddy

48 years

Son of late Annappa Reddy

46 years

Wife of R P Chandra Bhupal Reddy

41 years

Wife of Sadasiva Reddy

39 years

Son of late Annappa Reddy

37 years

All are residing at # 55/1

100 ft Road

J P Nagar, VI Phase

Bangalore -78

…Appellants

(By Sri N. S. Sanjay Gowda, Advocate)

AND:

Son of K.M. Muiswamappa

37 years

Resident of Thanisandra Village

Arabic College Post

Bangalore – 560 045

Wife of N. Ameen 31 years

Sarakki Palya, Near High Tension Village

Electric Line, Thanisandra Dhakale

Arabic Village Post

Bangalore – 560 045

Son of Late Syed Yusuff

29 years

Resident of Nagavara

Arabic Village Post

Bangalore – 560 045

…Respondents

(By Sri H.N. Prakash, Advocate for R1; R2 & R3 served)

This RFA under Section 96 of CPC against the judgment and decree dated 04-01-2006 passed in OS No.3457/1992 on the file of the XVII Additional City Civil Judge, Bangalore City, CCH-16, partly decreeing the suit for specific performance.

This RFA coming on for hearing this day, N. KUMAR J., delivered the following:

J U D G M E N T

This is plaintiffs’ appeal against the judgment and decree of the trial Court declining to grant decree for specific performance, instead granted decree for repayment of money paid under the agreement of sale.

For the purpose of convenience, the parties are referred to as they are referred to in the suit.

The subject matter of the suit is land bearing Sy.No.14/1 measuring 1 acre 37 guntas and 14/2

measuring 1 acre 37 guntas, in all 3 acres 28 guntas situate in the village of Tanisandra, Krishnarajapuram Hobli, Bangalore South Taluk, which is more particularly described in the schedule to the plaint and hereinafter referred to as ‘schedule property’.

The case of the plaintiff is that the first defendant agreed to sell the schedule property under written agreement dated 06.06.1998 for a consideration of Rs.1 lakh per acre. On the date of agreement, plaintiffs paid an advance amount of Rs.50,000-00 to the first defendant. Subsequently, he has paid the first defendant. Subsequently he has paid the first defendant further sums towards the price of the said land. In all, Rs.2,20,000-00 as on 06.01.1991. As intended by the parties, by virtue of the agreement, the plaintiff was also placed in vacant possession of the said property. The plaintiff fenced its boundaries at a cost of Rs.30,000-00 on all the four sides by erecting stone pillars with barbed wire to conserve his possession and also

to prevent trespass including cattle trespass. The plaintiff cultivated the schedule land growing Ragi crops during the year 1988-89, 1989-90 and Hurali during the year 1990-91. The total amount agreed for 3 acres 28 guntas would be Rs.3,70,000-00 out of which Rs.2,20,000-00 is paid. The first defendant after receiving the said amount of Rs.2,20,000-00 appropriated the same towards the price of the schedule property. To complete the sale transaction he has to receive only Rs.1,50,000-00. Though the agreement stipulated a time of six months tentatively for the execution of the instrument of sale, initial provisions was made for six more months which could be on 06.06.1989. The first defendant went on receiving even on the expiry of the aforesaid period and thus received Rs.75,000-00 on 21.10.1990 and Rs.20,000-00 on 06.01.1991 nor the plaintiff has suffered any disability which would amount to a termination or cancellation of the said agreement. The contract of sale is in full force and duly binding on the parties to it. The said agreement of sale and the entire

transaction was mooted through R. Munikrishna, S/o Rodappa of the same village. He has also a witness to all the payments. On 30.04.1992, the plaintiff received information of sale and transfer of the schedule property by the first defendant in favour of the second defendant under two registered sale deeds dated 28.04.1992 for a consideration of Rs.2,34,000-00. The said transaction of sale is in contravention of the existing agreement of sale in favour of the plaintiff.

The plaintiff has performed his part of the obligation towards the first defendant by making payments. He was always ready and willing to perform the rest of the obligation towards the completion of the sale which remained incomplete on account of omissions of the first defendant to measure and fix the actual boundaries, to produce No Objection Certificate under Section 230-A of the Income Tax Act, 1961 and apply and obtain a formal No Objection Certificate from the competent Revenue Authority

for alienation of the schedule property which is a Inam land granted by the first defendant and his another brother M. Ramaiah by the Land Tribunal, Bangalore South Taluk, for which purpose the first defendant has taken another year’s of time on 16.05.1989 to execute the sale deed. The first defendant cannot avoid the contract merely on the afflux of time which was only tentatively agreed to. The first defendant was bound to execute the instrument of sale before the stipulated time in respect of at least one of the two items for which he has received the full consideration as on 21.10.1990 leaving a surplus by way of advance for the other item. For the reason best known to the first defendant and his associates, he has chosen to execute illegal sales in favour of the second defendant on 28.04.1992 to defeat the rights of the plaintiff and defraud him. The said sales have been brought in by way of collusion between the first defendant and the second defendant who is not even an agriculturist nor belongs to an agricultural family legally capable of holding land conveyed to her and further more the

third defendant is set up by other defendants on unlawful considerations and unlawful objects as if he has an interest of his own.

The second defendant who is an ostensible purchaser in the sale deed of 28.04.1992 is relation of a person by name Sadiq, residing adjacent to the schedule property where they have been doing business in sale of sites formed on revenue lands, to an extent of about 40 to 50 acres of land around the schedule property stretching from the western side of Tanisandra Road to Henur Road on the East and possesses land on either side of the schedule property. Except to the extent of the schedule property, all the land in that area belongs to her or his said relation who have been concerned to purchase the schedule property even before the plaintiff entered into an agreement for sale with the first defendant and even thereafter she and her relation Sadiq has made all attempts to displace the plaintiffs from the schedule property. As purchaser, she has full knowledge

of the agreement of sale dated 06.06.1988 in favour of the plaintiff. She is also aware of the fact that the original documents pertaining to the schedule property have been in the custody of the plaintiff. The agreement of sale has not been cancelled. The first defendant has also made an application to the Assistant Commissioner for No Objection Certificate for alienating the schedule property to the plaintiff. Therefore the plaintiff filed a suit for specific performance of agreement of sale.

After service of summons, the defendants entered appearance.

The first defendant filed a detailed written statement traversing the allegations made in the plaint. He has denied all the allegations in the plaint. After denying all the allegations, he has specifically pleaded that one R. Munikrishan S/o Rodappa has played a fraud at the instigation of the plaintiff to prepare an agreement of sale to

get more money from the second defendant, even though this defendant opposed for it, the plaintiff took signature on some stamp papers in blank stating that they are needed for some other transaction to which the defendant is going to purchase for his bonafides. But the plaintiff has played a fraud and misrepresented to this defendant and to the second defendant for illegal gain, which in law neither the plaintiff nor any other person is entitled to any relief prayed in the suit. This defendant has executed an agreement of sale in favour of the third defendant and the third defendant has transferred the said agreement and the new agreement was written in favour of the second defendant and several notices were issued by the second defendant to perform this defendant’s part of contract and later on, on 28.04.1991 this defendant executed the sale deed in favour of the second defendant. At no point of time the plaintiff was or is in possession and has not put up any fence as alleged in the plaint nor cultivated the suit land. On the other hand, till the execution of the sale deed by the defendant in favour of

the second defendant, he was cultivating the suit land and the pahani extract clearly goes to show that up to 1992 the first defendant has cultivated the suit lands and after the sale the second defendant is cultivating the suit land and this year she has cultivated the jola crop in the suit land and there is no fencing around the suit schedule property which can be verified by appointing a commissioner in this regard. Therefore he sought for dismissal of the suit.

The second defendant also filed a detailed written statement traversing the allegations in the plaint and denying all the allegations in the plaint. She has specifically pleaded that she entered into an agreement of sale about two years back and the first defendant received advance amount of Rs.1 lakh only from this defendant when the agreement of sale was executed. Thereafter on several occasions, this defendant paid the amount of consideration in part as further advance and at last the first defendant came and executed the sale deed in her favour. As such, the said

transaction of sale between the first defendant and the second defendant is valid and not in contravention of the existing agreement. There is no agreement of sale executed by the first defendant in favour of the plaintiff. The alleged agreement of sale has come up for the purpose of the suit. The said agreement does not disclose that the first defendant has to get the Income Tax Clearance Certificate under Section 230-A of the Income Tax Act. Even to get this, the plaintiff should furnish the draft sale deed to the defendant, then alone Income Tax Clearance Certificate will be issued, for getting formal No Objection Certificate from the Urban Land Ceiling Authority or any other Authority, both the plaintiff and the first defendant should have to file the affidavit along with necessary forms. All these things or the acts should be done are not averred in the alleged agreement of sale nor the plaintiff has issued any legal notice to the first defendant to perform his part of the contract. All of a sudden, an agreement is got prepared mentioning the date

as 06.06.1988 and the suit is filed based on the said agreement. Therefore they sought for dismissal of the suit.

10.

Subsequently, additional written statement came to be filed by the second defendant contending that the legal representatives of the deceased plaintiff are not entitled to prosecute the suit. They are all married daughters living with their husband. In the written statement, virtually what is pleaded earlier has been reiterated.

11.

On the aforesaid pleadings, the trial Court framed nine issues. 1. Whether the plaintiff proves that the defendant No.1 has executed a valid sale agreement in his favour on 6-6-1988 and has received part of consideration of Rs.2,20,000/- on different dates as contended?

12.

The plaintiff, in order to establish his claim examined A. Nagaraj, the 4th legal representative of the deceased plaintiff as P.W-1 and produced 20 documents which are marked as Exs.P-1 to P-20. The first defendant

did not step into the witness box. One K. Sadiq was examined on behalf of second defendant as D.W-1 and produced 22 documents, which are marked as Exs.D-1 to D-22.

13.

The trial Court on appreciation of the aforesaid oral and documentary evidence on record held that the plaintiff has proved due execution of the agreement of sale. Further he has proved that he has paid a sum of Rs.2,20,000-00 to the first defendant. However, the plaintiff has failed to prove that he was always ready to perform his part of the contract. The second defendant has proved that he is the bonafide purchaser of the suit property from the first defendant without notice. The suit is not bad for non-joinder of necessary parties. The suit is also not barred by limitation. Therefore it did not grant decree for specific performance, but granted decree for money under which the first defendant was directed to repay the consideration of

Rs.2,20,000-00 received under the agreement of sale with interest at 18% from 21.10.1990 till realization.

14.

Aggrieved by the said judgment and decree of the trial Court, the plaintiffs are in appeal.

15.

The learned Counsel for the appellants assailing the judgment and decree of the trial Court contended that when once the trial Court held that the suit agreement is proved, payment of Rs.2,20,000-00 in terms of the agreement of sale is proved, when the first defendant has not stepped into the witness box, when the first defendant went to the extent of denying the very execution of the agreement of sale and when he executes sale deed in favour of the second defendant for a consideration less than what was agreed under the agreement of sale, it committed a serious error in holding that plaintiff has not established readiness and willingness to perform his part of the contract. He submits that in the light of the judgment of the Apex Court

in the case of SATYA JAIN (D) THR.L.Rs & ORS Vs. ANIS AHMED RUSHDIE (D) THR. L.Rs & ORS reported in AIR 2013 SC 434, the trial Court ought to have taken note of the conduct of the parties prior and subsequent to the filing of the suit and if it had done so, it would not have dismissed the suit for specific performance. Therefore he submits that a case for interference is made out.

16.

In the light of the aforesaid facts and rival contentions urged before us, the only point that arise for our consideration in this appeal is:

“Whether the trial Court was justified in dismissing the suit of the plaintiff for specific performance on the ground that the plaintiff was not ready and willing to perform his part of the contract ?”

17.

The trial Court on appreciation of the evidence on record has categorically held that the suit agreement is

proved. It is marked as Ex.P-1. The said agreement discloses that the property belongs to first defendant and his elder brother Ramaiah. This is a granted land to their father. Total extent measures 3 acres 28 guntas. The consideration agreed upon is Rs.1 lakh per acre. Rs.50,000- 00 was paid on the date of the agreement. A separate receipt also is executed by the first defendant acknowledging the receipt of Rs.50,000-00. The first defendant executed the sale deed for the purpose of discharging the family debts and to met other legal necessities of the family. It also shows that possession of the land was given to the plaintiff under the agreement of sale. It is the specific case of the plaintiff that on the date of agreement of sale, all the original title deeds are handed over to him. The period agreed upon for completion of the sale transaction is six months. The registration charges have to be borne by the plaintiff. If plaintiff has any difficulty in getting the document registered within six months period, he has been given another six months time to complete the transaction. It is also stated

that apart from Rs.50,000-00 received under the agreement, the plaintiff has to pay a sum of Rs.1 lakh if and when the first defendant needs the amount. The endorsement made on the said agreement shows that a sum of Rs.50,000-00 was paid on 20.10.1988. Again a sum of Rs.25,000-00 was paid on 16.05.1989 and the period was extended by one year. On 21.10.1990 another sum of Rs.75,000-00 is paid. Another sum of Rs.20,000-00 was paid on 06.01.1991. Thus, in all a sum of Rs.2,20,000-00 out of Rs.3,70,000-00 was paid. It is contended on behalf of the plaintiff that when the first defendant has received those amounts, a substantial portion of the sale consideration is paid and when the plaintiff was ready and willing to pay the balance sale consideration, the finding of the trial Court that plaintiff has failed to establish readiness and willingness is contrary to the material on record. In this context, it is necessary to look into the law on the point.

18.

Section 20 of the Specific Relief Act declares that jurisdiction to decree specific performance is discretionary and Court is not bound to grant such relief merely because it is lawful to do so. However, the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.

19.

Section 16 of the Act prescribes a bar for granting relief of specific performance. It provides that specific performance of a contract cannot be enforced in favour of a person who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. Explanation to clause (c) of Section 16 makes it clear that where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in Court any money except when so directed by the Court.

Further it says that plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction.

20.

It is only when the plaintiff has come to the Court satisfying these legal requirements, the Court gets the jurisdiction to grant a decree for specific performance. It is a question of jurisdiction. Therefore not only the plaintiff has to aver in the plaint that he was ready and willing to perform his part of the contract, further he has to prove his readiness and willingness to perform the contract to the satisfaction of the Court to invoke the jurisdiction of the Court to grant a decree for specific performance.

21.

It is in this context if we apply the same principles to the facts of this case, it is clear that the first defendant agreed to sell the schedule property to the plaintiff for a sum of Rs.1 lakh per acre, which works out to Rs.3,70,000-00. On the date of the agreement, Rs.50,000-

00 was paid. The period stipulated for payment of the balance consideration is six months. If the plaintiff wants extension of time, he is granted six months time. If the plaintiff was ready with the balance sale consideration, at the expiry of six months period, he should have called upon the defendant to receive the balance consideration and execute the sale deed. It is settled law that readiness and willingness should be from the date of agreement of sale till the date of the suit, even up to the date of hearing. The agreement expressly states that this property is not encumbered. There is no loan taken on this property. It is free from encumbrance. The first defendant undertook to produce index of land, record of rights, pahani, encumbrance certificate and any certificate to show that there are no litigation pending on the said property. There was no stipulation in the agreement that the first defendant has to measure and fix actual boundaries, to produce No Objection Certificate under Section 230-A of the Income Tax Act, 1961, to apply and obtain a formal No Objection

Certificate from the competent Revenue Authorities for alienation of the schedule property, which is an inam land granted to the first defendant and his another brother M. Ramaiah by the Land Tribunal, Bangalore South Taluk. However in the plaint, it is specifically pleaded that there was an obligation that the first defendant has to perform his part of the contract and to perform the said obligation he took one year’s time. On the date the trial took place, the plaintiff was dead. Therefore his son has stepped into the witness box. In his evidence regarding readiness and willingness of his father to perform his part of the contract, he has deposed that his father was always ready and willing to perform the rest of the obligation towards the completion of the sale which remained incomplete on account of omissions of the first defendant to measure and fix the actual boundaries, to produce No Objection Certificate from the competent Revenue Authority for alienation of the schedule property which is a Inam land granted to the first defendant and his another brother M. Ramaiah by the Land

Tribunal, Bangalore South Taluk, for which purpose the first defendant has taken another year’s time on 16.05.1989 to execute the sale deed. To show that his father was ready and willing to perform his part of the contract or at any rate, that the balance sale consideration was ready either on the date of the agreement of sale or after the expiry of six months period or on the date of the suit was filed, no material is placed before the Court. On the contrary, the conditions which are not part of the contract are asserted as impediment for completion of the sale transaction and it is the defendants who took time for performing those obligations. This evidence clearly demonstrate two things. (1) There is no evidence on record to show that the plaintiff was ready with the balance sale consideration at the expiry of six months period. (2) The plaintiff was entitled to another six months only if he is unable to complete the transaction. If he was ready with the balance sale consideration, there was no necessity for extension of time. The endorsement shows that payments are made in bits, which the first

respondent has received without any murmur. Therefore it shows when the defendant has received the amounts in bits, certainly he would have received the amount in lumpsum which is the balance sale consideration payable to him. If he has executed the sale deed in favour of the second defendant without a murmur, he would have executed the sale deed in favour of the plaintiff provided the agreed balance consideration had been tendered. On the contrary, both in the plaint and in the evidence, the conditions which are not part of the agreement are introduced and insisted upon before payment of balance consideration. Therefore this conduct of the plaintiff shows that neither he was ready with the balance consideration nor willing to perform his part of the contract.

22.

By taking into consideration these undisputed facts on record, the trial Court rightly held that the plaintiff has failed to prove his readiness and willingness to perform

his part of the contract and therefore he is not entitled to a decree for specific performance.

23.

In so far as the argument that the Court has to take into consideration the conduct of the defendant, is concerned, there can be no doubt. Certainly, the Court has to take note of the conduct of the plaintiff and the defendant after the execution of the agreement, up to the date of the suit and in a given case, even subsequent to the date of the suit. It is only after taking into consideration the material on record coupled with the conduct of the parties, the Court has to decide to exercise the discretion one way of the other. In the instant case, the defendant has not been very fair. He has denied the execution of the agreement. He contends that the plaintiff has taken his signature on the blank paper, he contends that he has not received any consideration at all. He has also set up earlier agreement in favour of the second defendant and wants to execute the sale deed in favour of the second defendant during the subsistence of the

present agreement. Certainly his conduct shows that defendant is not fair in his dealings. But the unfair conduct of the defendant cannot be made basis for granting the decree in favour of the plaintiff. Plaintiff’s conduct also should be looked into. When the conduct of the plaintiff is also not fair, merely because the defendant’s conduct is also not fair, the plaintiff is not entitled for grant of decree for specific performance.

24.

As stated above, the agreement is held to be proved. Consideration agreed upon is not in dispute. Rs.50,000-00 was paid under the agreement. The balance sale consideration had to be paid within six months and it is only at the instance of the defendant, time could have been extended. The plaintiff has not shown to the Court that he was ready with the balance sale consideration. He did not call upon the first defendant to receive the money and execute the sale deed. In fact, he has not even issued notice. On the contrary, his conduct shows that he has been paying

the money if and when he was able to generate some funds in installments for a period of two years. That is not the way the sale transaction is to be completed. When a price is fixed for immovable property which is to be paid within the time stipulated under the agreement, any extension of time certainly would be detrimental to the interest of the seller, as the value of the property goes up and the value of the money comes down.

25.

Under these circumstances, it would be unfair to grant a decree for specific performance in favour of the plaintiff who has not paid the sale consideration nearly for a period of three years and has filed the suit only after the property is sold in favour of the second defendant. Even no legal notice is issued. There was no readiness and willingness calling upon the first defendant to perform his part of the contract.

26.

In that view of the matter, we do not see any justification to interfere with the well reasoned order passed by the trial Court. Appeal lacks merit.

27.

It is submitted by the learned Counsel for appellant that during the pendency of the appeal, the schedule property was notified for acquisition. The land is acquired by the BDA for formation of Arkavathy Layout. Award is passed and compensation is awarded. Taking note of the subsequent event, this Court, by order dated 22.11.2006 passed an interim order restraining the BDA from disbursing the compensation amount in respect of the suit property, for a period of six weeks. Subsequently the said interim order has been extended. Therefore, as the decree passed by the trial Court is confirmed by this Court, the plaintiff would be entitled to the amount of Rs.2,20,000-00 with interest at 18% as ordered by the trial Court. As the property is now acquired and compensation is

awarded, the said amount is recoverable from the amount awarded by the BDA.

Hence we pass the following order:

The BDA is directed not to pay compensation amount to the first defendant or to the second defendant, as the case may be, unless this decree is satisfied by them or in the alternative, they can make payment in terms of the decree, to the plaintiff-appellant herein. Appeal is dismissed.

Sd/- JUDGE

Sd/- JUDGE

ksp/-