Karnataka High Court
Sri.Gopalappa vs Mr.Dwarakanth on 10 April, 2026
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RFA No. 1661 of 2012
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. JUSTICE JAYANT BANERJI
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
REGULAR FIRST APPEAL NO. 1661 OF 2012 (SP)
BETWEEN:
SRI.GOPALAPPA,
AGED ABOUT 61 YEARS,
S/O MUTHAPPA,
RESIDING AT NO.765/A,
15TH MAIN, 7TH CROSS,
BTM LAYOUT, MICO LAYOUT,
BANGALORE-560 076.
...APPELLANT
(BY SRI B.R.VISHWANATH., ADVOCATE)
AND:
1. MR.DWARAKANTH,
AGED ABOUT 49 YEARS,
SON OF B.VISVESWARAIAH,
2. MRS.GAYATHRI DWARAKANATH,
AGED ABOUT 45 YEARS,
WIFE OF DWARAKANATH,
BOTH ARE RESIDING AT
NO.17/1, 4TH MODEL HOUSE STREET,
BASAVANAGUDI,
BANGALORE-560 004.
3. MR.V.K.MOHAMMED ISMAIL,
AGED ABOUT 51 YEARS,
SON OF LATE HABIBULLAH AND K.CHOTIBI,
RESIDING AT NO.45, ALABADAR HOUSE,
2ND CROSS, KHBCS LAYOUT,
BANGALORE-560 078.
4. MR.ARUN CHAWLA,
AGED ABOUT 27 YEARS,
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RFA No. 1661 of 2012
SON OF MOHAN CHAWLA,
RESIDING AT NO.79/124,
6TH MAIN, 36TH CROSS,
5TH BLOCK, JAYANAGAR,
BANGALORE-560 041.
...RESPONDENTS
(BY SRI.S.GANGADHAR AITHAL., ADVOCATE FOR C/R4;
R1 AND R2 SERVED UNREPRESENTED;
V/O DTD 07.10.2024 NOTICE TO R3 HELD SUFFICIENT)
THIS REGULAR FIRST APPEAL IS FILED U/SEC.96 R/W ORDER
XLI RULE 1 OF CPC AGAINST THE JUDGMENT AND DECREE DATED
04.08.2012 PASSED IN O.S.NO.9153/2004 ON THE FILE OF THE V
ADDITIONAL CITY CIVIL JUDGE, BANGALORE, PARTLY DECREEING
THE SUIT FOR SPECIFIC PERFORMANCE ETC.
THIS REGULAR FIRST APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT COMING ON FOR 'PRONOUNCEMENT OF
JUDGMENT' THIS DAY, JAYANT BANERJI J., MADE THE
FOLLOWING:
CORAM: HON'BLE MR. JUSTICE JAYANT BANERJI
AND
HON'BLE MR. JUSTICE K. V. ARAVIND
CAV JUDGMENT
(PER: HON’BLE MR. JUSTICE JAYANT BANERJI)
This is the plaintiff’s appeal seeking modification of the
judgment and decree dated 04.08.2012 passed by the 5th
Additional City Civil and Sessions Judge, Bangalore, in OS No.
9153/2004 and to decree the suit filed by the plaintiff as
prayed for. The plaintiff filed a suit for specific performance in
respect of the suit schedule property, which was partly decreed
with costs. It was decreed that the 1st defendant, who is the
respondent no. 1 herein shall refund the earnest money of
Rs.5,00,000/- (Rupees Five Lakhs) to the plaintiff with costs
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RFA No. 1661 of 2012
and interest at the rate of 18% per annum from the date of suit
till the date of realisation of the decreetal amount. The suit
against the defendant nos. 2 to 4 was dismissed.
2. For the sake of convenience, the parties are being
referred to as per their ranking before the trial Court.
Pleadings:
3. The suit was filed by the plaintiff on 10.12.2004
with the following prayers:-
“PRAYER
“WHEREFORE, the plaintiff prays for a Judgment
and Decree against the Defendants for Specific
Performance:
a) directing the Defendants to execute the sale deed
in favour of the plaintiff in pursuance of the
Agreement/Memorandum of Understanding dated
07.01.2004.
b) if the defendants fail to execute the sale deed in
favour of the plaintiff. This Hon’ble Court be
pleased to execute the same in favour of the
Plaintiff.
c) Restraining the Defendants their workmen, agents
or anybody claiming through them from interfering
with the peaceful possession and enjoyment of the
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RFA No. 1661 of 2012
suit schedule property by decree of permanent
injunction.
IN ALTERNATIVE
d) If the specific performance cannot be granted by
this Hon’ble Court to direct the Defendant to pay
Rs.5,00,000/- with interest at the rate of 24% p.a.
from the date of agreement till the date of payment
and also damages of Rupees Fifty Lakhs to the
plaintiff.”
e) for such other and further reliefs as this Hon’ble
Court deems fit to grant under the circumstances
of the case with costs in the interest of justice and
equity”
4. The plaint case in brief is that the 1st defendant
entered into a Memorandum of Understanding1 with the plaintiff
on 07.01.2004 in respect of suit schedule property, by which
the plaintiff was nominated to be the purchaser of the suit
schedule property, in which MOU, a representation was made
by the 1st defendant that he has an understanding with the 3rd
defendant for the purchase of the suit schedule property. The
price agreed for the nomination and assignment inclusive of the
sale consideration to be paid to the owner, that is, the 3rd
defendant in respect of the suit schedule property was agreed
as Rs.78,00,000/- (Rupees Seventy Eight Lakhs). As per the
terms of MOU, the plaintiff is entitled to make payment of sale
1
MOU
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RFA No. 1661 of 2012
consideration to the 3rd defendant directly and get the sale
deed executed in his favour or in favour of his nominee. An
advance of a sum of Rs.5,00,000/- (Rupees Five Lakhs) was
paid by the plaintiff by means of a cheque to the 1st defendant,
which was duly acknowledged. The sale was to be completed
within 3 months from the date of the MOU or within 1 month
from the date of the owner furnishing the original documents
relating to the scheduled property after getting the discharge of
loan from Sree Charan Co-operative Bank Ltd., of which Bank
the 1st defendant was the Chairman and Managing Director.
The 1st defendant represented that he would make
arrangements for discharge of the said loan and get the sale
deed executed by the 3rd defendant. The 3rd defendant also
agreed for the said arrangement. On 10.08.2004 the 1st
defendant sent a letter to the plaintiff stating that the deal may
get delayed and requested to take back the advance. The
plaintiff caused a legal notice to be issued stating that he is
ready to perform his part of the contract and is ready and
willing to get the seal deed executed in his favour; that the 1st
defendant is not entitled to unilaterally cancel the MOU. A reply
notice was given on behalf of 1st defendant by his counsel on
02.09.2004. The 1st defendant with an ulterior motive to cause
loss to the plaintiff, surreptitiously has got the two sale deeds
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RFA No. 1661 of 2012
registered in his name own and in the name of the 2nd
defendant, who is the wife of the 1st defendant. It is stated that
the defendants suppressed the actual market value of the suit
schedule property by getting the same registered for
Rs.37,50,000/-(Rupees Thirty Seven Lakhs Fifty Thousand)
against Rs.78,00,000/- (Rupees Seventy Eight Lakhs), which is
the actual value as per the MOU, and the said act of the
defendants confirmed that they have an intention to deprive
and cheat the plaintiff. The defendants were evading and
postponing the execution of the sale deed and were negotiating
with third parties to sell the property by suppressing the
transaction with the plaintiff. Since the defendants refused to
execute the sale deed in favour of the plaintiff as per the terms
of the said agreement, the suit was filed.
5. A written statement dated 30.08.2010 was filed by
the defendant nos. 1 and 2. It is stated that the 1st defendant
agreed only to be the facilitator for the sale of the suit schedule
property, of which the 3rd defendant was the owner, on terms
and conditions as per MOU. The time for completion of the
terms and conditions of the MOU is stated as three months or
one month from the date of furnishing/obtaining the original
documents and discharge of mortgage loan on the suit schedule
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RFA No. 1661 of 2012
property by the 3rd defendant. Since the matter was getting
delayed for completion of the sale transaction within 3 months,
the 1st defendant by a letter dated 10.08.2004, requested the
plaintiff to receive back Rs.5,00,000/- (Rupees Five Lakh) and
cancel the MOU. However, the plaintiff demanded execution of
sale deed in respect of the suit schedule property.
5.2 Due to unforeseen and unavoidable circumstances,
the owners of the said property were not able to discharge their
obligations in time. It is stated that the MOU was entered into
for a limited purpose and it could not be treated as an
agreement of sale. The averment in the plaint that the suit
schedule property was worth Rs.78,00,000/- (Rupees Seventy
Eight Lakhs) during the year 2004 is stated to be ‘not correct’.
It is stated that only after cancellation of the MOU and
requesting the plaintiff to receive back his money, the 1st and
2nd defendants have purchased the suit schedule property after
raising loans by paying the prevailing market rate; that after
purchase of the suit schedule property, as the defendant nos. 1
and 2 were not in a position to look after their interest, they
jointly agreed to sell the suit schedule property for a sum of
Rs.50,00,000/- (Rupees Fifty Lakhs) and executed a registered
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RFA No. 1661 of 2012
General Power of Attorney2 dated 24.02.2005 in favour of
Sri. Mohan Chavala. Through their registered GPA holder, the
1st and 2nd defendants sold the suit schedule property in favour
of Sri. Arjun Chavala for a total sum of Rs.50,00,000/- (Rupees
Fifty Lakhs) to discharge their debts and other family
commitments under a registered sale deed dated 24.08.2005
and delivered physical possession of the suit schedule property
to the said purchaser. It is stated that even as on date, the
defendants are ready and willing to pay back the amount of
Rs.5,00,000/- (Rupees Five Lakhs) to the plaintiff or to deposit
the said amount before the Court. It is stated that the MOU is
not an agreement of sale and not legally enforceable.
6. The 3rd defendant filed a written statement stating
that he had nothing to do with the alleged transaction between
the plaintiff and the defendant nos. 1 and 2. The plaint
averments are false and concocted. It is stated that, in
pursuance of an agreement to sell entered between the
defendant nos. 1 and 2, the defendant no. 3 and other owners,
executed a regular sale deed in favour of the defendant nos. 1
and 2. After payment of the sale consideration, possession has
been given to them.
2
GPA
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RFA No. 1661 of 2012
7. Yet another written statement was filed by the
defendant no. 4. It is stated that the defendant no.4 is not a
necessary party. The defendant no. 4 purchased the suit
schedule property under a registered sale deed dated
24.08.2005 executed by Sri. Mohan Chavala, the registered
GPA holder of defendant nos. 1 and 2. There is no privity of
contract between the defendant no. 4 and the plaintiff. The
defendant no.4 is a bona fide purchaser for value without notice
of any agreement/MOU.
Issues:
8. On the basis of the submissions, the following
issues were framed:-
“i) Does the plaintiff prove that the defendants 1 & 2
assigned their interest in the schedule property in
his favour by executing a Memorandum of
Understanding on 07/01/2004?
ii) Does the plaintiff prove that he paid an amount of
Rs.5,00,000/- by way of advance to the first
defendant pursuant to MoU dated 07/01/2004?
iii) Does the plaintiff prove that he is always ready
and willing to perform his part of the contract?
iv) Does the 3rd defendant prove that the MoU
dtd.7/1/2004 between the plaintiffs and
defendants 1 and 2, is not binding on him?
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RFA No. 1661 of 2012
v) Does the 3rd defendant prove that in view of the
schedule property having been sold by him to
defendants 1 and 2, he is not under an obligation
to execute the sale deed in favour of plaintiff and
thus he is not a necessary party to the suit?
vi) Whether the plaintiff is entitled for relief of
specific performance or the alternative relief as
sought for?
vii) What decree or order?
9. Since the plaintiff had stated nothing in the plaint
about his possession over the suit schedule property, no issue
was framed by the trial Court as regards the relief of injunction.
The judgment of the trial court:
10. The plaintiff, Sri. Gopalappa, examined himself as
PW1. On behalf of the defendant, the 1st defendant examined
himself as DW1 and the defendant no.4 was examined as DW2.
On behalf of the plaintiff, Exs.P1 to P18 were marked. On
behalf of the defendants, Exs.D1 to D16 were marked.
11. The findings on the issues as recorded by the trial
Court are as follows:-
1&2: Affirmative
3: Negative
4&5: Affirmative
6: Partly in the affirmative
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RFA No. 1661 of 2012
7: As per final order
12. After going through the terms of the MOU and the
submissions advanced on behalf of the parties as well as the
evidence, the trial Court noted that the contents of the MOU,
the conditions therein, the sale price fixed, receipt of earnest
money, etc. are those of an agreement of sale. Therefore the
Trial Court’s opinion was that the document is a sale agreement
and not an MOU as contended by defendant nos.1 and 2. The
trial Court also referred to the admissions made by the 1st
defendant in his cross-examination, on the basis of which, it
was gathered that the intention of the parties was only to enter
into a sale agreement in respect of the suit schedule property.
Accordingly, Issue Nos.1 and 2 were answered in the
affirmative.
13. As regards Issue No.3, it was held that the plaintiff
had not acted as per the MOU and did not issue any notice to
the defendants within 3 months showing his readiness and
willingness with all money ready with him. It was noted that
after lapse of 7 months, the defendant himself wrote a letter
dated 10.08.2004 requesting the plaintiff to cancel the MOU
dated 07.01.2004. It was observed that in all the transactions,
neither the 1st defendant nor the 2nd defendant was shown as
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RFA No. 1661 of 2012
the owners of the suit property. The alleged agreement
between the 1st defendant and the 3rd defendant was not
collected by the plaintiff when he entered into the MOU (Ex.P1).
It was held that non-production of agreement between the 1st
defendant and the 3rd defendant was fatal to the case of the
plaintiff.
14. It was held that the plaintiff was not ready and
willing to perform his part of the contract. On the date of
transaction (MOU), the 1st defendant and 2nd defendant were
not the owners of the property. As per the evidence available,
the 1st defendant and the 2nd defendant purchased the suit
property on 18.11.2004 and thereafter sold the same during
pendency of the suit. The suit was filed by the plaintiff on
10.12.2004. It was held that the documents-Exs.P1 to P10 did
not disclose the plaintiff’s readiness and willingness well within
three months as per the recitals in the agreement (MOU). It
was noted that after purchasing the property, the 4th defendant
started constructions and the building was completed as per
Exs.D13 and D14; that in the cross-examination the PW1 had
admitted that under Ex.P1 (MOU), time was the essence of
contract; that he also admitted that the 1st defendant had
written a letter to him as per Ex.P2 which is a letter dated
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RFA No. 1661 of 2012
10.08.2004 issued by the 1st defendant requesting the plaintiff
to receive back his earnest money and to cancel the MOU.
15. It is pertinent to mention here that a memo dated
20.07.2012 was filed by the plaintiff in which it was stated that
sale consideration being offered by the plaintiff as per the
terms of the MOU is Rs.78,00,000/- (Rupees Seventy Eight
Lakhs), and the plaintiff has been always ready and willing to
pay the balance sale consideration to the defendants. He also
stated that he is ready and willing to pay the cost of
improvement made on the property by the 4th defendant as
may be estimated by a competent Engineer.
16. With regard to this memo, the trial Court held that
it was not sustainable in law. It was observed that the memo
was filed to fill up the lacuna in the evidence and the
admissions made by the plaintiff. Objections were filed to this
memo by the 4th defendant. Accordingly, the memo was
rejected by the trial Court holding that the offer made by the
plaintiff could not be accepted at that stage, when the plaintiff
is entitled for alternative relief of refund of earnest money with
substantial interest. Therefore, the trial Court answered Issue
No.3, in the negative.
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RFA No. 1661 of 2012
17. With regard to Issue Nos. 4 and 5, it was held that
the third defendant was not a party to the MOU (Ex.P1). He
was also not the attesting or consenting witness to the MOU.
Even the defendant no. 2 was not a party to the MOU. No
consent of the 3rd defendant was taken by the plaintiff before
entering into the MOU with the defendant no.1. The 3rd
defendant honestly sold the property in favour of the defendant
nos.1 and 2. The 3rd defendant was found to be not a necessary
party to the suit. The suit against him deserved to be
dismissed. It was also observed that the plaintiff had not taken
any summons to examine the 3rd defendant. Accordingly, the
Issue Nos. 4 and 5 were answered in the affirmative in favour
of the 3rd defendant.
18. As regards Issue No.6, it was held that when the
plaintiff had not proved his readiness and willingness, the
question of granting decree of specific performance did not
arise. As admitted by the plaintiff himself in the cross-
examination, the 4th defendant had constructed a four storied
building investing huge amount and some portion was already
leased to tenants for commercial purpose. It was held that
even in the entire evidence of DW2, the learned counsel for the
plaintiff had not elicited anything trustworthy to show that the
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RFA No. 1661 of 2012
4th defendant purchased the suit property with all knowledge of
the MOU and the litigation pending before the Court in respect
of the suit schedule property. It was observed that the
defendant nos.1 and 2 purchased the suit schedule property
under two registered sale deeds dated 18.11.2004. The suit
was filed on 10.12.2004. The defendant nos.1 and 2, in turn,
sold the property in favour of the 4th defendant by registered
sale deed dated 24.08.2005. However, the 4th defendant was
impleaded in the suit after lapse of five years from the date of
sale.
19. The evidence of the 4th defendant was found to be
unimpeachable that he was a bona fide purchaser. It was
observed that, if the Court granted a decree of specific
performance, greater hardship will be caused to the 4th
defendant and it would amount to multiplicity of proceedings.
Therefore, the Court granted the decree for refund of the
earnest money with interest and cost of the suit. The
alternative prayer made by the plaintiff for damages of
Rs.50,00,000/- (Rupees Fifty Lakhs) was declined for the
reason that there is no clause in the MOU for grant of liquidated
damages on the breach of agreement by either side. The
plaintiff also had not paid any Court fee to consider such relief.
It was held that the plaintiff is entitled for refund of earnest
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RFA No. 1661 of 2012
money with interest. Accordingly, Issue No.6 was answered by
the trial Court partly in the affirmative. Accordingly, the suit
was partly decreed as aforesaid.
Points for determination:
20. The points for determination would be:-
i) Whether the plaintiff is entitled to a decree of
specific performance of the MOU?
ii) Whether time was the essence of the
contract?
iii) Whether the plaintiff is ready and willing to
perform his point of the contract?
iv) Whether the plaintiff is entitled for damages?
Evidence:
21. Ex.P1 is the MOU dated 07.01.2004 between the
defendant no. 1, who is referred therein as the ‘1st Party’, and
the plaintiff, who is referred therein as the ‘2nd Party’.
22. In the examination-in-chief, the PW1 iterated the
contents of the plaint. Additional evidence by way of affidavit
was also furnished by him. It is stated therein that the
defendant no.1 by playing fraud against the plaintiff to deprive
him of his valuable right over the suit schedule property,
colluded with defendants and got the sale deed in the name of
the defendant nos.1 and 2. The defendant no.2 is none other
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RFA No. 1661 of 2012
than the wife of the defendant no.1. It was stated that initially
the defendant nos. 1 and 2 did not appear. The defendant no.2
was placed ex-parte and the defendant no.1 was avoiding
service of summons, whereafter paper publication was issued
to the defendant no. 1. Thereafter also he did not appear
before the trial Court. The trial Court then issued an
attachment warrant of the property of defendant no.1, which
was duly executed. However, when the defendant no.1 did not
appear, finally the Court issued bailable warrant, which was
duly executed and thereafter the defendant no.1 was forced to
appear. It is stated that the sale deed executed by defendant
nos. 1 and defendant no.2, in favour of defendant no.4, is hit
by Section 52 of the Transfer of Property Act, 18823 and that
sale deed is not binding on the plaintiff.
23. Exs.P1 to P9 are marked in the further
examination-in-chief held on 28.11.2005. The PW1 was cross-
examined on 08.02.2012 on behalf of Defendant No.4. On
28.02.2012, PW1 was cross-examined by advocate for
Defendant No. 1 and Defendant No. 2. In the cross-
examination on 08.02.2012, PW.1 stated that Sri. Arun Chavala
purchased the suit schedule property after filing of the case and
3
TP Act
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RFA No. 1661 of 2012
he is the owner of the same. The allegation that PW1 filed a
suit in collusion with the defendant nos.1 and 2 was denied.
There was no agreement or MOU between the 2nd defendant
and the PW.1. The agreement in respect of the suit schedule
property was with the plaintiff. He stated that there was no
other agreement with him. He admitted that the 3rd defendant
was neither a party nor a witness, nor a consenting witness to
Ex.P1(MOU). He denied knowledge of whether the 4th
defendant had prior knowledge with regard to Ex.P1 or any
other agreement, or that whether the 4th defendant is a bona
fide purchaser for valuable consideration. He denied that he
was ready to receive back the amount from the defendant
nos.1 and 2. It was stated that the suit schedule property was
being visited by him every day and the building was under
construction. The construction was nearly complete. He did not
have any estimation as to how much money had been spent.
24. Thereafter in the cross-examination of PW1 done on
behalf of the defendant nos.1 and 2 on 28.02.2012, it is stated
that the scheduled property mentioned in Ex.P1 belongs to
Mohammed; he had not entered into any sale agreement with
Mohammed; Ex.P1 is an unregistered document entered into
between him and the 1st defendant; neither the 2nd defendant
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RFA No. 1661 of 2012
nor the owner of the scheduled property was a party or
witnesses to Ex.P1. Under Ex.P1, time was the essence of the
contract; the first defendant had written a letter to PW1 as per
Ex.P2. That after receipt of Ex.P2, PW1 issued legal notice as
per Ex.P3. It was true that the 1st defendant replied the notice
as per Ex.P4. It was false to suggest that the 1st defendant sent
a cheque for Rs.6,01,691/- along with registered letter dated
24.02.2005; PW1 received only registered letter, but had not
received the cheque; it was false to suggest that the 1st
defendant had no intention to cheat and acted bonafidely by
sending letter to him as Ex.P2; it was false to say that there
was no cause of action to file the suit.
25. The DW1 (defendant No.1) filed his affidavit by way
of examination-in-chief dated 19.03.2012, wherein he
reiterated the contents of his written statement. He stated that
the time for completion of the terms and conditions of the said
MOU was 3 months or 1 month from the date of
furnishing/obtaining the original documents and discharge of
mortgage loan on the suit schedule property by the 3rd
defendant. It was stated that there was no mens rea or
criminal breach of trust involved by him. The MOU was entered
into for limited purposes and it could not be treated as an
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RFA No. 1661 of 2012
agreement of sale. It was stated that after purchase of the suit
schedule property, they were not in a position to look after
their interest in the suit schedule property and pay the debts
they had incurred. Hence, they (defendant Nos. 1 and 2) jointly
agreed to sell the suit schedule property for a sum of
Rs.50,00,000/- (Rupees Fifty Lakhs) and executed a GPA dated
24.02.2005 in favour of Sri. Mohan Chavala. The GPA holder in
turn sold the suit to the 4th defendant-Sri Arun Chavala for total
sum of Rs.50,00,000/- (Rupees Fifty Lakhs) to discharge their
debts and other family commitments by a registered sale deed
dated 24.08.2005 and delivered physical possession of the suit
schedule property to the purchaser.
26. In the cross-examination of DW.1 held on
06.06.2012, he stated, inter alia, that he was also President of
Sree Charan Co-operative Bank. The total transaction of the
bank/turnover was up to 300 Crores; he was the Chairman of
the said bank since last 14 years; he had become Chairman of
the said bank when he had entered into the MOU as per Ex.P1.
He did not know the suit schedule property was pledged to the
said bank on the date of Ex.P1; he did not know to which bank
the suit schedule property was pledged on the date of Ex.P1;
he did not know in which bank the property was to be
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RFA No. 1661 of 2012
discharged free from encumbrance. He admitted paragraph
No.4 of the MOU. He also admitted that there was a sale
agreement between him and the 3rd defendant namely V.K.
Mohammed Ismail. He did not remember on what consideration
the 3rd defendant agreed to execute the sale deed in his favour
under the agreement. He admitted that under such agreement,
the 3rd defendant agreed to execute the sale deed either to him
or his nominees; it is on the basis of agreement that he had
entered into an agreement as per Ex.P1 (MOU). He admitted
that the 2nd defendant was his wife. He and the 2nd defendant
purchased the suit schedule property for total consideration of
Rs.37,54,000/- (Rupees Thirty Seven Lakhs Fifty Four
Thousand) under Exs.P5 and P6. He admitted that he had
agreed to sell the suit schedule property for a total
consideration of Rs.78,00,000/- (Rupees Seventy Eight Lakhs)
to the plaintiff under Ex.P1. He denied the suggestion that the
plaintiff got issued legal notice dated 18.08.2004 stating that
he is ready to pay the consideration of Rs.78,00,000/- (Rupees
Seventy Eight Lakhs) and to get the sale deed in his favour. He
admitted that his advocate issued reply notice as per Ex.P4,
after receipt of Ex.P3. He admitted that the address mentioned
in the notice and the cause title belonged to him. The reply
notice dated 01.03.2005 as per Ex.P8 issued by the plaintiff
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RFA No. 1661 of 2012
was admitted. He also admitted that he appeared before the
Court only in the year 2008 on a warrant issued by a Court. He
stated that he was not in a position to produce the agreement
entered into between him and the 3rd defendant, because such
agreement was not available. He admitted that Charan
Souhardha Bank had got legal advisers; that their bank got
simple mortgage from the 3rd defendant by receiving some title
deed. He did not remember whether the title deeds had been
taken by the bank or not, but he had not borrowed any loan
from the Charan Souhardha Co-operative Bank and purchased
the property; he did not remember where he had borrowed the
loan at that time. He stated that they had sold the property to
the 4th dependent for a total consideration of Rs.50,00,000/-
(Rupees Fifty Lakhs). He did not remember whether he had
brought to the notice of the 4th defendant regarding the
contents of Ex.P1. He denied the suggestion that in order to
deprive the right of the plaintiff and to cheat the plaintiff, he
and the 4th defendant together created all those documents and
also subsequent transaction documents. He further stated that
he did not remember whether he had agreed to get the sale
deed executed or not as per Ex.P1 (MOU). He admitted that as
per clause 7 of Ex.P1, he had agreed to execute the sale deed
in favour of the plaintiff. He denied the suggestion that in order
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RFA No. 1661 of 2012
to frustrate the right of the plaintiff, they had executed the sale
deed in favour of the 4th defendant.
27. In further cross-examination done by the counsel
for the defendant no.4, the DW1 stated that before selling the
property, he had not intimated the matter of Ex.P1 to Arjun
Chavala. He stated that he did not remember himself and the
plaintiff had colluded.
28. DW.2 is the defendant no.4 herein. In his
examination-in-chief he got marked Exs.D1 to D.14 on
21.03.2012. In his cross-examination on 15.06.2012 he stated
that before purchase of the property, he and his father
negotiated the transaction. Before the purchase of the property
there was no contact or connection between DW.2 and DW.1.
On the advise of the 1st defendant, he opened a bank account
in Charan Co-operative Bank. He enquired from the
neighbouring persons regarding the property and thereafter
negotiated. He denied the suggestion that his father and the 1st
defendant were close prior to the transactions. At the time of
sale agreement, his father had paid a sum of Rs.50,00,000/-
(Rupees Fifty Lakhs) and thereafter he had not paid any
amount to the 1st defendant. He had taken permission to
demolish the existing building in the year 2008. Permission was
– 24 –
RFA No. 1661 of 2012
obtained from BBMP to put up a new construction in the year
2008 itself. They had started construction of the building in the
year 2008. He denied the suggestion that after filing of the
application in Court seeking directions not to put up any
construction, he had constructed the building. He then stated
that they had taken permission only in the year 2011 and
started construction. He denied the suggestion that his father
and the 1st defendant were close friends and even though they
had knowledge of the sale agreement between the plaintiff and
the 1st defendant, they had intentionally purchased the
property. He also denied the suggestion that he and his father
had got knowledge of the Court proceedings. It was admitted
that when they started construction, the plaintiff lodged a
complaint against them. He stated that in the year 2011 itself
the building was completed. They had not taken completion
report from the BBMP/BMP. It was denied that when the
plaintiff lodged a complaint, they were only digging the earth
and putting up pillars. He stated that they had not given any
notice to the 1st defendant after coming to know the Court
proceedings. He denied the suggestion that he, his father and
the first defendant had all colluded together. He admitted that,
no civil or criminal action was initiated by them against the 1st
defendant. He denied the suggestion that they and the 1st
– 25 –
RFA No. 1661 of 2012
defendant were partners in the construction of the building,
hence they had not taken action. The suggestion was denied
that the sale deed was collusive and was nominal.
29. Now to discuss the contents of the MOU which is an
unregistered document. Under the proviso to Section 49 of the
Registration Act, 1908, an unregistered document affecting
immovable property and required by the Registration Act or the
Transfer of Property Act, 1882 to be registered may be received
as evidence of a contract in a suit for specific performance
under Chapter II of the Specific Relief Act. The schedule to the
MOU is the suit schedule property.
29.1. By means of the MOU, the 1st defendant
represented to the plaintiff that, one Sri. Mohammed Ismail
(Defendant No.3 herein) had an understanding with him to sell
the scheduled property to the 1st defendant or his nominee,
which arrangement is subsisting and valid. The 1st defendant
offered to nominate the plaintiff to be the purchaser in regard
to the MOU schedule property and obtain a deed of sale
executed by the said owner in favour of the plaintiff.
Accordingly, pursuant to the recitals and in consideration of the
price agreed to be paid by the plaintiff under the MOU, the 1st
defendant nominated the plaintiff to be the purchaser of the
– 26 –
RFA No. 1661 of 2012
MOU schedule property, subject to the terms mentioned
therein. The consideration payable to the 1st defendant by the
plaintiff under the MOU for nomination and assignment was
Rs.78,00,000/- (Rupees Seventy Eight Lakhs) which was to
include the amount paid to the owner Sri. Mohammed Ismail
by the 1st defendant as advance and also sale consideration
agreed to be paid by the 1st defendant to the owner-
Mohammed Ismail. It was left open for the first defendant to
pay the amount of sale consideration directly to the owners or
to the 1st defendant and deduct the same from the payment to
be made to the 1st defendant. An advance of Rs.5,00,000/-
(Rupees Five Lakhs) was acknowledged to be paid by the
plaintiff to the 1st defendant with the balance of the price being
agreed to be paid by the plaintiff at the time of registration of
the deed of sale.
29.2. Clause 4 of the MOU provided the time for
completion. The sale in favour of the plaintiff was to be
completed within 3 months from the date of the MOU or within
1 month from the date of the owner’s furnishing and obtaining
other permission documents relating to the MOU schedule
property, getting discharge of loan from Sree Charan
Souhardha Co-operative Bank Ltd., and absolute sale deed
– 27 –
RFA No. 1661 of 2012
from the BDA, whichever date is later. The 1st defendant
assured under the MOU that the title of the owner to the MOU
schedule property is good, marketable and subsisting, and the
scheduled property would be conveyed to the 2nd party free
from all encumbrances, attachments or acquisition proceedings
or charges of any kind. It was agreed that the 1st defendant
would obtain the conveyance of the MOU schedule property by
the owners either in favour of the plaintiff and/or his
nominee(s), as required by the plaintiff. As regards the
consequences of breach of agreement, it was provided that the
aggrieved party shall be entitled to specific performance of the
MOU and also recover all losses and expenses incurred by
them/him, as a consequence of such breach from the party
committing breach. Any breach by the owners shall be
considered a breach by 1st party and the plaintiff will be entitled
to proceed against both for its remedy.
ANALYSIS:
30. On reading the MOU, we are convinced that the
MOU is actually a sale agreement and we are in full agreement
with the same finding being returned by the trial Court. This
finding also draws strength from the examination-in-chief of
the PW1, as well as the testimony of DW1. In the cross-
– 28 –
RFA No. 1661 of 2012
examination of DW1, he admits that he had agreed to sell the
suit property for a total consideration of Rs.78,00,000/-
(Rupees Seventy Eight Lakhs) to the plaintiff under Ex.P1
(MOU). So, evidently the parties are ad idem that the MOU is in
fact an agreement to sell. Though at several places in the
written statement filed by the defendant no.1 and in his
examination-in-chief he has stated that the MOU was entered
into for ‘facilitating’ the sale transaction of the property in
dispute from the 3rd defendant, however, when he was
specifically queried, he stated that he did not know the
meaning of the word facilitating. Simultaneously, he answered
that he did not remember whether he had agreed to get the
sale deed executed or not as per Ex.P1. He also admitted that
as per Clause-7 of Ex.P1 (MOU), he had agreed to execute the
sale deed in favour of the plaintiff. Clause-7 of the MOU
provides that the 1st defendant would obtain the conveyance of
the MOU schedule property by the owners either in favour of
the plaintiff and/or his nominee(s), as required by the plaintiff.
31. The trial Court has laboured on the testimony of the
PW1 during his cross-examination done on behalf of the
defendants no. 1 and 2, which was that under Ex.P1, time was
the essence of the contract. This was taken by the trial Court as
– 29 –
RFA No. 1661 of 2012
an admission by the plaintiff that he had to act as per the MOU
within 3 months. As is noted hereinabove, the MOU clearly
provides that the sale would be completed in favour of the
plaintiff within 3 months from the date of the MOU or within 1
month from the date the owners furnishing the requisite
documents and getting discharge of loan from the co-operative
bank, whichever date is later. There are no consequences or
other restrictive provisions in the MOU that may result in or
indicate termination of the agreement in case the sale is not
completed. Therefore, in the light of the judgment of the
Supreme Court in Chand Rani Vs. Kamal Rani4, in the present
case, time is not the essence of this contract. The trial Court,
therefore, has misdirected itself in holding that the plaintiff had
to act as per the MOU within 3 months, basing its finding on
the ‘admission’ of the P.W1 without adverting to the terms of
the MOU.
32. Now to consider the agreement that is referred to
in the MOU which was between the defendant no.1 and the
owner, who is the defendant no.3. A perusal of the MOU itself
leaves no room for doubt that the first defendant had
categorically represented to the plaintiff regarding the
4
(1993) 1 SCC 519
– 30 –
RFA No. 1661 of 2012
existence of the agreement with both the defendant no.3
(owner) and the defendant no.1 being bound by the same. In
the cross-examination of DW1, he has admitted that there is a
sale agreement between him and the 3rd defendant namely
Mohammed Ismail. He however, did not remember on what
consideration the 3rd defendant agreed to execute the sale deed
in his favour under the agreement. He also admitted that under
such agreement the 3rd defendant agreed to execute the sale
deed either to him or to his nominees. He categorically stated
that it was on the basis of the agreement that he had entered
into an agreement as per Ex.P1. It would also be pertinent to
refer to the written statement filed by the 3rd defendant, in
paragraph-5 of which he stated that in pursuance of the
agreement of sale entered into between him and the defendant
nos. 1 and 2, the 3rd defendant and other owners had executed
a regular sale deed in favour of the defendant nos. 1 and 2.
Therefore, the existence of the agreement to sell between the
1st defendant and the 3rd defendant is proved. Hence, it is
evident that the terms of the MOU entered into between the 1st
defendant and the plaintiff, were in terms of an agreement
between the owner and the 1st defendant. In view of these
facts, the trial Court was not right in saying that, firstly, the
plaintiff should have procured the agreement, and, secondly, to
– 31 –
RFA No. 1661 of 2012
record a finding that non-production of the agreement was fatal
to the case of the plaintiff.
33. It is pertinent to mention here that even though in
his written statement, the defendant no.3 admitted the
agreement to sell between himself and the defendant nos. 1
and 2, however, in the two sale deeds, both dated 18.11.2004,
executed by the defendant no. 3 in favour of the defendant
no.1 and defendant no.2 (Exs.P5 and P6 respectively), there is
no mention of the agreement to sell. It is noted that in the sale
deed executed by defendant no. 3 in favour of defendant no. 1,
one of the witnesses is Gayathri, who is the defendant no. 2,
and, in the sale deed executed by the defendant no. 3 in favour
of the defendant no. 2, one of the witnesses is
Sri. B.V. Dwarkanath, the defendant no.1.
34. As far as the question of readiness and willingness
of the plaintiff to perform his part of contract within the
stipulated time is concerned, the background of the matter may
be discussed. The MOU is of 07.01.2004. On 10.08.2004,
defendant no.1 wrote to the plaintiff stating that owing to
certain personal reasons, the deal may be delayed and that the
plaintiff is requested to take back his advance amount of
Rs.5,00,000/- within seven days from the date of receipt of
– 32 –
RFA No. 1661 of 2012
that letter and get the MOU cancelled. This letter is Ex.P2. A
perusal of the pleadings and the evidence reflects that this was
the first date on which the plaintiff got a hint of the intention of
defendant no. 1 to resile from his promise. There is no proof of
the date of dispatch of Ex.P2 or its receipt by the plaintiff.
However, promptly, on 18.08.2004, a legal notice was issued
by RPAD to the defendant no.1 through the advocate of the
plaintiff. In the legal notice reference was made to the MOU
and it was stated that in view of the understanding, the plaintiff
had already mobilized funds by giving up interest in certain
other properties, which were getting him more benefits. It was
stated in the notice that the plaintiff was in such an
irretrievable position and as such he is not in a position to
accept the unilateral and illegal cancellation of the MOU. It was
stated that MOU be complied with and the sale deed be
executed by the owner in favour of the plaintiff. It was stated
that the plaintiff had always been ready and willing to perform
his part of the contract. It was stated that the plaintiff is ready
with the balance sale consideration and the defendant no.1 was
asked and to inform the date and time for getting the sale deed
executed in his favour.
– 33 –
RFA No. 1661 of 2012
35. About 15 days thereafter, that is on 02.09.2004, a
reply legal notice was sent on behalf of the defendant no.1,
which is marked as Ex.P4. In this reply legal notice, it is stated
that the period of completing the MOU was 3 months from
07.01.2004 or within 1 month from the date of the owners of
the above said property furnishing the original documents after
getting due discharge of existing liability on the said property
and getting other relevant title deeds from the BDA or
whichever event occurs earlier. It is stated in the reply notice
that due to unforeseen and unavoidable circumstances, the
owners of the property were not able to discharge their
obligations in spite of the best efforts of the defendant no.1.
Therefore, the defendant no.1 was requesting the plaintiff to
take back the amount of Rs.5,00,000/- paid as deposit amount,
but the same was not being heeded by the plaintiff.
36. Thereafter, the two sale deeds dated 18.11.2004
(Exs.P5 & P6) were executed by the owner (defendant no.3) in
favour of the defendant nos.1 and 2 respectively. The suit was
then filed by the plaintiff in OS No. 9153/2004 on 10.12.2004.
37. It is clear that the trial Court has clearly not
perused the entire evidence and the chronology of
developments while recording its finding that the plaintiff has
– 34 –
RFA No. 1661 of 2012
not shown his readiness and willingness to perform the contract
within the stipulated time. It goes on to state that the
documents Exhibits P1 to P10 do not disclose the plaintiffs
readiness and willingness to perform his part of the contract
well within 3 months as per the recitals in the agreement. Such
a finding cannot be sustained. It is pertinent to mention here
that, as is evident from the reply legal notice dated 02.09.2004
sent by the advocate of the defendant no.1, the defendant no.1
had falsely instructed his own counsel that the MOU’s period of
completion is 3 months from 07.01.2004 or within 1 month or
the contingencies specified in the MOU taking place, whichever
event occurs earlier, whereas, it is evident from bare perusal of
the MOU that it mentions whichever event occurs later.
38. As a matter of fact, the legal note dated
18.08.2004 sent on behalf of the plaintiff reflects the
promptitude of the reply, the shock reflected in the legal notice
of the plaintiff as well as his categorical statement regarding his
readiness and willingness to perform his part of the contract.
He had already mobilised funds. That legal notice of
18.08.2004 (Ex.P3) itself calls upon the defendant no.1 to
inform the time and date for getting the sale deed executed in
favour of the plaintiff, as he is ready with the balance sale
– 35 –
RFA No. 1661 of 2012
consideration. Importantly, in his reply legal notice of
02.09.2004 (Ex.P4), there is no averment or indication that the
plaintiff is not ready and willing, nor it stated that the plaintiff
has no financial capacity. Therefore, we find that the plaintiff
was ready and willing to perform his part of the contract.
39. In view of this finding, the answer of the trial Court
on Issue No.3 is set aside.
40. It is pertinent to mention here that after filing of
the suit 10.12.2004, on 24.02.2005 a letter (Ex.P7) was
purportedly sent by the defendant no.1 to the plaintiff with
reference to the legal notice dated 18.08.2004 and the reply
notice of the defendant no.1 dated 02.09.2004 in which it was
stated that enclosed therein was a cheque dated 24.02.2005
drawn on Sree Charan Souhardha Co-operative Bank Limited,
main Branch, Bangalore for an amount of Rs.6,01,691/-, being
the amount of advance of Rs.5,00,000/- and interest at the
rate of 18% per cent from 07.01.2004, asking the plaintiff to
receive and acknowledge the same. It was also mentioned that
the matter be treated as closed amicably.
41. It appears that on 01.03.2005, a reply to Ex.P7 was
sought to be sent on behalf of the plaintiff through his advocate
– 36 –
RFA No. 1661 of 2012
(Ex.P8) seeking to inform defendant no.1 regarding filing of the
suit for specific performance of the MOU in respect of the suit
schedule property, specifying the next date of hearing along
with a copy of the plaint. It was also stated that though the
defendant no.1 is residing in the address shown in the cause
title, he has evaded service of notice issued by the Court to
circumvent the said proceedings, with a mala fide intention. It
is stated in the notice that the letter (dated 24.02.2005) was
sent without enclosing the cheque, which showed its ulterior
motive. It again called upon the defendant no.1 to execute the
sale deed with regard to the suit property, as the plaintiff was
always ready and willing to perform his part of contract.
However, this letter, though was sent by registered post
(Ex.P9) to the defendant no.1, the same was returned as ‘not
claimed’.
42. Now coming to the point whether the plaintiff is
entitled to a decree of specific performance of the MOU or
whether the plaintiff is entitled for damages.
43. It is true that the 3rd defendant is not a signatory to
the MOU. However, the agreement to sell which is indicated in
the MOU entered into by him with the defendant nos. 1 & 2 is
not denied. That agreement not being produced, no liability
– 37 –
RFA No. 1661 of 2012
under that agreement can be ascertained of the defendant
no.3. The agreement to sell with the defendant no.3 is
admitted both by the DW.1 in his cross-examination and the
defendant no.3 in his written statement. The sale deeds dated
18.11.2004 (Exs.P5 & P6) executed in favour of defendant no.1
and 2 respectively by the defendant no.3 do not disclose the
agreement to sell. Therefore, the finding of the trial Court on
Issue Nos. 4 and 5 that the 3rd defendant honestly sold the
property in favour defendant nos. 1 & 2 by receiving substantial
consideration, does not appear to be correct.
44. The 1st notice (Ex.P2) dated 10.08.2004, which was
sent to the plaintiff by the defendant no.1, which can be
connected to the sale deeds (Exs.P5 & P6), states that owing to
certain personal reasons, the deal may get delayed and the
plaintiff was asked to take back the advance amount and to get
the MOU cancelled. Even the reply notice dated 02.09.2004
(Ex.P4) sent on behalf of defendant no.1 specifically refers to
the MOU being completed within 3 months or within 1 month of
the contingencies mentioned therein whichever event occurs
‘earlier’. This indicates that there is an intention to mislead and
deceive on part of the defendant no.1.
– 38 –
RFA No. 1661 of 2012
45. In paragraph-5 of the plaint, it is mentioned, inter
alia, that sale would be made within one month from the date
of owner furnishing original documents relating to the
scheduled property after getting discharge of loan from Sree
Charan Co-operative Bank Limited5, of which the 1st defendant
is the Chairman and Managing Director. It is stated therein that
the 1st defendant represented that he will make arrangements
for discharge of the said loan and get the sale deed executed
from the 3rd defendant and the 3rd defendant also had agreed
for the said arrangement. This paragraph has not been denied
by defendant no.1 in his written statement. Moreover, the PW1
has proved these facts in his examination-in-chief. No question
was put on behalf of the defendant no.1 to the plaintiff in this
regard. Moreover, in his cross-examination, the defendant no.1
as DW1, has admitted that he is also president of Sree Charan
Co-operative Bank; that he is the Chairman of the bank since
the last 14 years, which has a total transaction/turnover of up
to 300 Crores; that he had become the Chairman of the bank
when he had entered the MOU (Ex.P1). However, DW.1 feigns
in his cross-examination that, he does not know the suit
schedule property was pledged to the bank on the date of the
5
The full name of the Co-operative bank is mentioned in the MOU as Sree
Charan Souhardha Co-operative Bank Limited.
– 39 –
RFA No. 1661 of 2012
MOU (Ex.P1). He also states that he does not know to which
bank the suit property was pledged on the date of Ex.P1. He
also does not know in which bank the property is to be
discharged free from encumbrance. In the same vein, he
admits in his cross-examination that Paragraph-4 of the MOU
mentions getting original documents after discharge of loan
from Sree Charan Souhardha Co-operative Bank Limited. He
also admits of a sale agreement between him and the
defendant.
46. There is, thus, clinching evidence of the nexus
between the defendant no.1 and the defendant no.3. The
original documents of the suit schedule property of which the
owner is admittedly the Defendant no.3 was charged/pledged
to Sree Charan Souhardha Co-operative Bank, of which the
defendant no.1 was the Chairman and Managing Director,
which reflects a pact of the defendant no.1 with the defendant
no.3. The statement in the cross-examination that the DW1
did not know that the suit schedule property was pledged to the
said bank on the date of Ex.P1 is unbelievable.
47. A perusal of the certificate of encumbrance in
Form-15 (Ex. D9) that has been proved by the 4th defendant
reflects on the 1st page that in Column-5, the name of Sree
– 40 –
RFA No. 1661 of 2012
Charan Souhardha Co-operative Bank Limited is mentioned and
in column-6 thereof the name of the 3rd defendant is
mentioned. On page 2 of Ex.D9, there are two entries in
Column-5, the name of the 3rd defendant is mentioned and in
Column-6, the names of the defendant nos. 1 and 2 are
mentioned. Defendant no.4 has proved Ex.D1, which is an
agreement to sell entered into by the defendant nos. 1 and 2,
referred to as the sellers therein, and the defendant no. 4 Arjun
Chavala, who is referred therein as the purchaser. This
agreement is made on 24.02.2005, which is registered (Ex.D1).
A perusal of Ex.D1 reflects that there is no reference made by
‘sellers’ to any dispute on litigation pending between the
defendant nos.1 and 2 and the plaintiff. As a matter of fact, on
Page-5 of Ex.D1, it is mentioned that the scheduled property is
not subject matter of any litigation or proceeding and the same
is not attached or sought to be sold in whole or in portion in
any Court, or other civil or revenue, or other proceedings and
not subject to any attachment by the proceedings etc. The
Ex.D1 also reflects that a power of attorney was executed by
the defendant nos.1 and 2 in favour of Sri. Mohan Chavala, the
father of the defendant no.4. It is noted that Ex.D1
acknowledges payment by the purchaser to the seller an
advance amount totaling Rs.50,00,000/- (Rupees Fifty Lakhs),
– 41 –
RFA No. 1661 of 2012
which amount was stated to be the total sale consideration of
the sale deed with regard to the scheduled property, which is
the suit schedule property.
48. Ex.D2 is a GPA executed by the defendants nos. 1
and 2 in favour of the father of the defendant no.4, Sri. Mohan
Chavala in respect of the suit schedule property. Ex.D3 is the
sale deed dated 24.08.2005 executed by the defendant nos.1
and 2 in favour of the defendant no.4. In this document too in
Page-5, it is stated that the scheduled property is not subject
matter of any litigation or proceeding etc. The scheduled
property of the said deed is the suit schedule property.
49. The defendant no.4 appeared as witness DW2. In
the examination-in-chief, by way of affidavit, he has stated,
inter alia, that the plaintiff was an utter stranger to him; that
he is a stranger to the alleged agreement (MOU) and he is
neither a necessary party nor a proper party. It is stated that
after purchase of the suit schedule property, he had demolished
the existing structure and put up a commercial complex
investing a huge amount.
50. DW.2 was cross-examined on 15.06.2012. He
stated that he had taken permission only in the year 2011 and
– 42 –
RFA No. 1661 of 2012
started construction. The suggestion that his father and the 1st
defendant were close friends and the suit schedule property
was intentionally purchased even though they had knowledge
of the sale agreement between the plaintiff and the 1st
defendant was denied. It is stated that in the year 2011 itself
the building was completed. He admitted that when they had
started construction, the plaintiff lodged a complaint against
them. He denied that when the plaintiff lodged complaint, they
were only digging the earth and putting up pillars. He had not
given any notice to the 1st defendant after coming to know the
court proceedings. Collusion between him, his father and the 1st
defendant was denied. It was admitted that they had not
initiated any civil or criminal action against the 1st defendant.
He denied the suggestion that they and the 1st defendant were
partners in the construction of the building. Hence, they had
not taken action. The suggestion that the sale deed is a
collusive document and nominal, was also denied.
51. The complaint lodged against defendant no.4 and
defendant no.1 by the plaintiff before the Station House Officer,
Jayanagar Police Station on 23.02.2011 is marked as Ex.P10. It
is stated in that complaint that the property was attached and
arrest warrant against the defendant no.1 was duly executed
– 43 –
RFA No. 1661 of 2012
and that the attachment of the property had not been recalled
by the Court, which is still in force. Collusion between the
defendant no.1 and the defendant no.4 was alleged that they
were trying to put up a construction over the property. A non-
cognizable report was registered by the police that was marked
as Ex.P11. Photographs purporting to be of the site are
enclosed as Exs.P12, P13, P15, P16, P17. Ex.P18 is a Compact
Disc which is damaged. The sanction plan is on record as
Ex.D10. The sanction is for stilt + ground floor + two upper
floors and the period of sanction is from 02.11.2010 upto
01.11.2012.
52. Therefore, given the admissions made by the
defendant no.4, in light of the documents/material on record, it
is evident that the complaint was filed, and it was in the full
knowledge of defendant no.4. The complaint was made on
23.02.2011 with no action by the defendant no.4 against the
plaintiff. The written statement of the defendant no.4 bears the
date 27.06.2011.
53. The amount agreed to be paid by the plaintiff to the
defendant no.1 or the owner was Rs.78,00,000/-. The
defendant no.3 executed the sale deeds (Exs.P5 and P6) in
favour of the defendant nos. 1 and 2, for a sum of
– 44 –
RFA No. 1661 of 2012
Rs.18,27,000/- (Rupees Eighteen Lakhs Twenty Seven
Thousand) and Rs.18,75,000/- (Rupees Eighteen Lakhs
Seventy Five Thousand) respectively. Despite getting those sale
deeds executed, no intimation was sent to the plaintiff by the
defendant no.1 or defendant no.2 of having acquired the
properties and they surreptitiously proceeded to execute the
agreement of sale dated 24.02.2005 (Ex.D1) in favour of the
defendant no.4.
54. It is pertinent to mention here that the suit in OS
No. 9153/2004 was filed on 10.12.2004 and defendant no.1
was served ‘as absent’ and defendant no. 2 was served in the
house ‘as refused’. On 31.03.2005, the Court noted service on
defendant no.2 ‘as sufficient’, and allowed the application under
Order V Rule 20 CPC for service on the defendant no.1 by
affixation on the house numbers and boundaries. On
27.05.2005, the defendant no.2 was placed ex-parte. On
19.07.2005, the Court recorded that the defendant no.1 served
by affixture, but he was absent. It is only thereafter that the
sale deed dated 24.08.2005 (Ex.D3) was executed by
defendant nos. 1 and defendant no.2 in favour of defendant no.
4.
– 45 –
RFA No. 1661 of 2012
55. It is clear from the aforesaid that the defendant
nos. 1 and 2 were reported as duly served with the Court
summons prior to execution of the sale deed dated 24.08.2005
(Ex.D3). Even earlier, they concealed the fact of the MOU and
the legal notices sent by the plaintiff to the defendant Nos.1 &
2. The agreement to sell (Ex.D1) which was executed on
24.02.2005 itself reflects that the entire sale consideration of a
suit of Rs.50,00,000/- (Rupees Fifty Lakhs) was paid by means
of cheques. Thus, this Court cannot but hold that the defendant
nos. 1 & 2 resorted to fraud and subterfuge against the plaintiff
for depriving him of the benefit and right under the MOU
aforesaid. Once the sale deeds dated 18.11.2004 (Exs.P5 and
P6) were executed in favour of the defendants, all
contingencies contemplated in Clause-4 of the MOU were
fulfilled and therefore the defendant nos. 1 and 2 were bound
to honour their commitment under the MOU.
56. As far as the defendant no.4 is concerned, it is his
own admission made in his cross-examination as DW2, that the
construction over the suit schedule property was commenced
and completed by him in the year 2011 itself. Moreover,
despite getting knowledge on the complaint being filed against
him, no attempt was made by him to confront the defendant
– 46 –
RFA No. 1661 of 2012
nos. 1 and 2 or to stop the constructions which were stated by
the plaintiff to be at the initial stages as per the suggestion put
to the DW.2 during his cross-examination. Under such
circumstances, the suggestion put by the counsel for the
plaintiff during the cross-examination of the defendant no.4
assumes importance that the defendant no. 4, his father and
the 1st defendant had colluded and that they and the 1st
defendant are partners to the construction of the building.
Hence they had not taken any action. The sale deed (Ex.D3)
dated 24.08.2005, as noted above, was executed on receipt of
an amount of Rs.50,00,000/- pursuant to the agreement to sell
(Ex.D2). The defendant no.1 has been acting all along in his
capacity as the Chairman and Managing Director of a Co-
operative Bank which is dealing with public money and public
trust. Under the facts and circumstances, we hold that the sale
deed (Ex.D3) of 24.08.2005 is an outcome of fraud played by
the defendant Nos.1 and 2 against the plaintiff. Further, the
defendant No.4 on getting information of the complaint filed
before police, which complaint also mentioned about the
pending litigation, chose to proceed with the constructions and
complete it. This indicates his intention to frustrate any
legitimate claim of the plaintiff.
– 47 –
RFA No. 1661 of 2012
57. Evidently, the status of defendant no.4 is that of
transferee pendente lite. The Supreme Court in the case of
Thomson Press (India) Ltd. v. Nanak Builders & Investors (P)
Ltd.6, while looking into an order passed by the Division Bench
of the High Court affirming an order of the learned Single
Judge and rejecting the petition filed by the appellant therein
under Order 1 Rule 10 CPC for impleading the defendants in a
suit for specific performance of contract filed by the respondent
no.1, the plaintiff therein, considered the question as to
whether if the appellant therein who was the transferee
pendente lite having notice and knowledge about the pendency
of the suit for specific performance and the order of injunction
could be impleaded as a party under Order 1 Rule 10 CPC on
the basis of sale deeds executed in their favour by the
defendants.
58. While considering that question, the Supreme Court
in Thomson Press (India) Ltd., discussed some of the relevant
laws. It was observed as follows:-
“26. It would also be worth discussing some of the
relevant laws in order to appreciate the case on hand. Section
52 of the Transfer of Property Act speaks about the doctrine of
lis pendens. Section 52 reads as under:
6
(2013) 5 SCC 397,
– 48 –
RFA No. 1661 of 2012
“52. Transfer of property pending suit
relating thereto.–During the pendency in any
court having authority within the limits of India
excluding the State of Jammu and Kashmir or
established beyond such limits by the Central
Government of any suit or proceeding which is not
collusive and in which any right to immovable
property is directly and specifically in question, the
property cannot be transferred or otherwise dealt
with by any party to the suit or proceeding so as to
affect the rights of any other party thereto under the
decree or order which may be made therein, except
under the authority of the court and on such terms
as it may impose.
Explanation.–For the purposes of this section,
the pendency of a suit or proceeding shall be
deemed to commence from the date of the
presentation of the plaint or the institution of the
proceeding in a court of competent jurisdiction, and
to continue until the suit or proceeding has been
disposed of by a final decree or order and complete
satisfaction or discharge of such decree or order has
been obtained, or has become unobtainable by
reason of the expiration of any period of limitation
prescribed for the execution thereof by any law for
the time being in force.”
It is well settled that the doctrine of lis pendens is a
doctrine based on the ground that it is necessary for the
administration of justice that the decision of a court in a suit
should be binding not only on the litigating parties but on
those who derive title pendente lite. The provision of this
section does not indeed annul the conveyance or the transfer
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RFA No. 1661 of 2012
otherwise, but to render it subservient to the rights of the
parties to a litigation.
…………………………………………………..
………………………………………………………………..
29. The aforesaid Section 52 of the Transfer of
Property Act again came up for consideration before this Court
in Rajender Singh v. Santa Singh [(1973) 2 SCC 705 : AIR
1973 SC 2537] and Their Lordships with approval of the
principles laid down in Jayaram Mudaliar v. Ayyaswami [(1972)
2 SCC 200 : (1973) 1 SCR 139] reiterated: (Rajender Singh
case [(1973) 2 SCC 705 : AIR 1973 SC 2537] , SCC p. 711,
para 15)
“15. The doctrine of lis pendens was intended to
strike at attempts by parties to a litigation to
circumvent the jurisdiction of a court, in which a
dispute on rights or interests in immovable property
is pending, by private dealings which may remove
the subject-matter of litigation from the ambit of the
court’s power to decide a pending dispute or
frustrate its decree. Alienees acquiring any
immovable property during a litigation over it are
held to be bound, by an application of the doctrine,
by the decree passed in the suit even though they
may not have been impleaded in it. The whole object
of the doctrine of lis pendens is to subject parties to
the litigation as well as others, who seek to acquire
rights in immovable property, which are the subject-
matter of a litigation, to the power and jurisdiction of
the court so as to prevent the object of a pending
action from being defeated.”
…………………………………………………………….
…………………………………………………………….
– 50 –
RFA No. 1661 of 2012
33. At this juncture, we would also like to refer to
Section 19 of the Specific Relief Act which reads as under:
“19. Relief against parties and persons
claiming under them by subsequent title.–
Except as otherwise provided by 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;
(c) any person claiming under a title which,
though prior to the contract and known to the
plaintiff, might have been displaced by the
defendant;
(d) when a company has entered into a
contract and subsequently becomes amalgamated
with another company, the new company which
arises out of the amalgamation;
(e) when the promoters of a company have,
before its incorporation entered into a contract for
the purpose of the company and such contract is
warranted by the terms of the incorporation, the
company:
Provided that the company has accepted the
contract and communicated such acceptance to
the other party to the contract.”
From the bare reading of the aforesaid provision, it is
manifest that a contract for specific performance may be
– 51 –
RFA No. 1661 of 2012
enforced against the parties to the contract and the persons
mentioned in the said section. Clause (b) of Section 19 makes
it very clear that a suit for specific performance cannot be
enforced against a person who is a transferee from the vendor
for valuable consideration and without notice of the original
contract which is sought to be enforced in the suit.”
59. Learned Counsel for the appellants referred to the
following judgments of the Supreme Court:
(i) Guruswamy Nadar v P.Lakshmi Ammal7
(ii) Shyam Singh v. Daryao Singh & Ors8
60. In the judgment of Shyam Singh only legal question
involved was whether the terms of agreement of repurchase
dated 04.02.1971 contained any implied prohibition on the
original contracting parties (particularly defendant Nos.2 to 4
therein) from transferring or assigning their rights in favour of
a third party. This case is based on its own facts and is not
helpful to the case of the appellant herein in the present case.
61. In case of Guruswamy Nadar, after considering the
judgments of the Allahabad High Court, the Privy Council of the
Supreme Court, it was observed that it is apparent that the
7
(2008) 5 SCC 796
8
AIR 2004 SC 348
9
2024 INSC 1022
– 52 –
RFA No. 1661 of 2012
appellant who was the subsequent purchaser of the same
property had purchased in good faith, but the principle of lis
pendens will certainly be applicable to the present case
notwithstanding the fact that under Section 19(b) of the
Specific Relief Act, his rights could be protected.
62. The judgment of the Supreme Court in Parswanath
Saha, the issue was with regard to hardship of the defendant
after they had parted with the suit property. After considering
the provisions of Section 20 of the Specific Relief Act, and
considering a catena of decisions of the High Court and the
Supreme Court, it was held that the issue of hardship would
come into play only after it is established by cogent evidence
that the person who executed the agreement of sale was
unable to foresee the hardship at the time of entering into
contract. This judgment, however, is of no benefit to the
appellant in the facts and circumstances of the instance case.
63. However, as noted aforesaid in the judgment of
Thomson Press (India) Ltd., which is a subsequent decision of
the Supreme Court, it was held that the suit for specific
performance cannot be enforced against the person who is
transferee from the vendor for valuable consideration without
– 53 –
RFA No. 1661 of 2012
notice of the original contract which is sought to be enforced in
the suit.
64. In the light of the aforesaid enunciation of law by
the Supreme Court in Thomson Press (India) Ltd., it is noted
that, though defendant No.4 chose to proceed with the
construction of the building on the suit schedule property,
despite having knowledge of the police complaint as well as
having knowledge of the litigation between defendant Nos.1
and 2 and the plaintiff, no liability for specific performance
under Section 19 of the Specific Relief Act can be imposed on
him in view of the fact that it has not been clinchingly
demonstrated that at the time of execution of the sale deed by
defendant Nos.1 and 2 in favour of defendant No.4 on
24.08.2005 (Ex.D3) defendant No.4 was anyone but a
transferee for value who has paid his money in good faith and
without notice of the original contract.
65. The case of defendant No.4 would be covered by
the exception carved out in clause (b) of Section 19 of the
Specific Relief Act since he is apparently a bona fide purchaser.
66. However, ordering specific performance of the
contract may lead to multiplicity of proceedings and may delay
– 54 –
RFA No. 1661 of 2012
the right of the plaintiff to the benefit conferred by the MOU
indefinitely. Under the circumstances, ordering specific
performance may not an appropriate relief. Therefore, we have
to consider the aspect of grant of damages to the plaintiff
which has been claimed by him as an alternate prayer.
67. In that prayer made by the plaintiff, apart from
seeking a direction to the defendants to pay Rs.5,00,000/- with
interest at the rate of 24% per annum from the date of
agreement till the date of payment, damages of Rs.50,00,000/-
has also been claimed.
68. The trial Court has already in the impugned
judgment, decreed payment of Rs.5,00,000/- with interest at
the rate of 18% per annum, which has not been challenged by
the defendants.
69. Accordingly, we direct as follows:
ORDER
i) The appeal is partly allowed and the impugned
judgment and decree dated 04.08.2012 is set
aside in part.
ii) Defendant No.1 shall pay Rs.5,00,000/- with
interest at the rate of 18% per annum from
– 55 –
RFA No. 1661 of 2012
the date of filing of the suit till the date of
payment.
iii) The plaintiff is entitled to damages of
Rs.50,00,000/- that is claimed by him in the
suit which amount shall be paid by defendant
Nos.1 and 2, jointly and severally, within three
months.
iv) The plaintiff shall be entitled to costs.
v) The suit against defendant Nos.3 and 4 is
dismissed.
Sd/-
(JAYANT BANERJI)
JUDGE
Sd/-
(K.V.ARAVIND)
JUDGE
KGR/KSR
