This position of the law has been carefully enunciated by this
Court in the case of A.C. Arulappan v. Ahalya Naik[1], wherein it was held
that:-
“If under the terms of the contract the plaintiff gets an
unfair advantage over the defendant, the court may not
exercise its discretion in favour of the plaintiff....If it
is inequitable to grant specific relief, then also the court
would desist from granting a decree to the plaintiff.”
It is clear that it will be inequitable to grant a decree of specific
performance in this case where it is clear that the
plaintiffs have an unfair advantage over the defendants and the Trial Court
has rightly exercised its discretion not to grant specific performance.
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION
CIVIL APPEAL NOS.4597-4598 OF 2014 (Arising out of SLP
(C) Nos. 31491-31492 of 2012)
SHAMSHER SINGH & ORS ……APPELLANTS
Versus
RAJINDER KUMAR & ORS ….RESPONDENTS
V.Gopala Gowda, J.
Citation; AIR 2014 SC2253
Leave granted.
2. These appeals have been preferred by the appellants (the original
defendants) against the common Judgment and final Order dated 17th
September, 2012 passed by the High Court of Punjab and Haryana at
Chandigarh in RSA Nos. 2871 & 1543 of 2012. By the said impugned judgment,
two separate RSAs filed by the appellants against the common judgment of
First Appellate Court were dismissed by the High Court.
3. The factual matrix of the case is as follows:
The respondents (original plaintiffs) filed a suit for specific
performance against the appellants herein alleging that an agreement to
sell dated 3rd June, 2002 was entered between them with respect to the suit
land. It was alleged that out of [pic]3,00,000/- (total agreed
consideration), [pic]2,00,000/- had already been paid by the plaintiffs
on 3rd June, 2002 and as per agreement, the balance amount were to be paid
at the time of execution of sale deed, i.e. on 20th December, 2002. It was
further alleged that later, the defendant-appellants became dishonest and
wanted to sell the land to some other persons. Therefore, they had to file
the suit.
4. The defendants filed their written statement contending in that they had
never entered into any agreement to sell the suit land to the plaintiffs.
It was also contended that the alleged agreement to sell was a product of
forgery and fabrication and so, it was null and void. The Trial Court
having considered the contention of both the parties, partly decreed the
suit of the plaintiffs on 13th May, 2009 and directed the defendants to pay
[pic]3,00,000/- to the plaintiffs along with simple interest @9% per
annum from the date of execution of the agreement to sell till the date of
payment.
5. Being aggrieved by the Judgment and Decree, the defendant-appellants
filed Civil Appeal No. 74 of 2009 on the ground that the alleged agreement
to sell was not valid and legal and the appellants never intended to sell
the suit land. They further contended that there was no signature of any of
the attesting witness on the receipt of the earnest money and the land was
already under mortgage with the banks and so there was no question of any
agreement to sell and urged other grounds as well.
6. The plaintiffs also filed a Special Civil Appeal No. 102 of 2009 against
the judgment and decree dated 13th May, 2009 with prayer for direction of
execution of sale deed and transfer of possession of the suit land. Both
the appeals were disposed of by the First Appellate Court vide common
judgment and order dated 17th February, 2012. The Appellate Court while
dismissing the appeal preferred by the defendant-appellants, allowed the
appeal preferred by the plaintiff-respondents and directed the defendant-
appellants to get the sale deed executed and registered in favour of the
plaintiff-respondents.
7. Second appeals preferred by the defendant-appellants against the common
judgment passed by the First Appellate Court were dismissed by impugned
common judgment dated 17th September, 2012. Hence, these appeals.
8. The main issues in this case are (i) whether a decree of specific
performance can be passed with respect to the purported agreement of sale
between the plaintiff and the defendants and (ii) whether the defendant
nos.1 to 3 could have entered into this purported agreement of sale with
respect to the fact that their land has been contended to be mortgaged with
the defendant nos.4 and 5 as security for loans that they have taken. The
first appellate court as well as the High Court have decreed the specific
performance, ordering the defendants to enforce the agreement of sale, Ex.
P-2. The Trial Court, on the other hand, did not grant decree of specific
performance, but instead passed a decree ordering the defendants to return
[pic]3,00,000/- with interest to the plaintiffs on the ground that a
balanced approach should be taken as the plaintiffs should be protected and
the defendant nos. 1 to 3 should not be disproportionately penalized and
that the administration of justice requires that the defendant nos. 1 to 3
should be directed to return the amount of [pic]3,00,000/- to the
plaintiffs along with simple interest @ 9% per annum from the date of
execution of the agreement of sale till the date of payment. The Trial
Court further went on to observe that if the defendants directed to execute
the agreement of sale, then comparatively greater hardship would be caused
to them. The first appellate court, on the ground that the defendants have
not taken a plea of hardship has reversed the judgment of the Trial Court,
decreeing specific performance of the agreement of sale, directing the
defendants to execute the sale deed and register it in favour of the
plaintiffs on the basis of the agreement to sell, Ex. P-2. The plaintiffs
were directed to deposit the balance sale consideration minus earnest
amount already paid, within one month of the order. The High Court has
upheld the order and judgment of the first appellate court.
9. After going through the findings and reasons recorded by the appellate
courts and the impugned judgment and with reference to the questions of law
raised in these appeals and grounds urged in support of the same, the
following points would arise for our consideration:
1) Whether the concurrent finding of the second appellate court in
reversing the finding of the Trial Court in its judgment to
exercise discretionary power not to grant decree of specific
performance as provided under Section 20(2) (a) and (b) of the
Specific Relief Act, 1963, after referring to Exs.P-2, P-8 and
other relevant facts, is legal and valid?
2) Whether the appellate courts were right in ignoring the relevant
legal aspect of the case viz. whether the vendors, who had
mortgaged the schedule property to the banks, had the right to
enter into agreement and whether such agreement is valid and in
that case, do the plaintiffs then have the right of enforcing
such agreement without asking the vendor to redeem the mortgage
in relation to the suit schedule property and obtaining a valid
discharge?
3) What order/decree are the appellants entitled to?
Answer to point no.1
10. The High Court has erred in law in dismissing the Second Appeal filed
by the defendants questioning the correctness of the judgment and decree of
the First Appellate Court in reversing the judgment of the Trial Court
wherein it has decreed a sum of [pic]3,00,000/- with 9% interest to be
paid to the plaintiffs in lieu of granting the relief of specific
performance in relation to the property in question in favour of the
plaintiff by exercising its sound discretionary power under Section 20(2)
(a) and (b) of the Act. This judgment and decree of the First Appellate
Court was challenged by the defendants urging various legal grounds. The
High Court should have examined the case of the defendant Nos. 1 to 3
keeping in view the discretionary power conferred upon the courts below
while examining the respective claim and counter claims of the parties
particularly in the light of the covenants in the agreement of sale, Ex.P-2
and also with reference to exhibit P-8, the compromise arrived at between
the parties at the Police Station. The appellate courts have erred in
holding that the agreement of sale was proved by the plaintiff though the
defendant Nos. 1 to 3 in their statement denied the execution and pleaded
that it is a mortgage and not an agreement of sale. The said finding of
fact recorded by the Trial Court was annulled by the First Appellate Court
in exercise of its appellate power without examining the pleadings and
substantiated evidence on record particularly the recitals of the agreement
of sale and the compromise deed between the parties. Therefore, the said
finding of fact recorded by the First Appellate Court in reversing the
finding of the Trial Court recorded on the contentious issue is not only
erroneous but also suffers from error in law. Therefore, the substantial
question of law that would arise in the Second Appeal before the High Court
namely, is whether the finding of the Trial Court in exercise of its
discretionary power under Section 20(2) (a) and (b) of the Act must be
reversed, keeping in view the Exhibit P-8, the compromise deed and awarding
monetary decree of [pic]3,00,000/- though the advance amount paid is
[pic]2,00,000/- is contrary to the legal evidence and the statutory
provisions of Section 20(2) (a) and (b) and also Section 21(2) of the
Specific Relief Act. We have considered this question of law while
answering the point No. 1 framed in these appeals in favour of defendant
Nos. 1 to 3.
11. An extremely important aspect of this case is the compromise, Ex. P-8
which had been arrived at between the parties to the suit, and has also
been brought on record as evidence. The Trial Court relied on the same to
show that the defendants have agreed to the agreement of sale and at the
compromise arrived at by the parties at the Police Station, the condition
agreed upon was that the defendant Nos. 1 to 3 would return the earnest
amount. The said compromise also bears the thumb impressions of the
defendants. The Trial Court held that the compromise is an important
document that contradicts the version put forth by the defendants, as it
has been stated in the compromise that the defendants had expressed their
willingness to execute the sale deed uptil 25.07.2002. The defendants
cannot then do a u-turn and deny the existence of the agreement of sale.
Thus, on this ground too, we have to hold that since the defendants had
agreed to return the amount as per the compromise, the judgment of the
Trial Court decreeing return of an amount of [pic]3,00,000/- with 9%
simple interest from the date of execution of the agreement of sale till
the date of payment, must be upheld and that of the appellate courts
decreeing specific performance be rejected.
Therefore, the first appellate court has grossly erred in law by
decreeing the suit for specific performance considering the well-reasoned
order of the Trial Court. The High Court has also erroneously upheld the
same. As per section 20(2)(b) of the Specific Relief Act,1963 (in short
“the Act”), the jurisdiction to grant decree of specific performance is
discretionary and section 20(2) lists the cases in which the court may
properly exercise discretion not to grant decree of specific performance.
Section 20(2) (a) and (b) reads thus:
“(2) The following are cases in which the court may properly
exercise discretion not to decree specific performance:-
(a) where the terms of the contract or the conduct of the
parties at the time of entering into the contract or the
other circumstances under which the contract was entered
into are such that the contract, though not voidable, gives
the plaintiff an unfair advantage over the defendant; or
(b) where the performance of the contract would involve
some hardship on the defendant which he did not foresee
whereas its non-performance would involve no such hardship
on the plaintiff.”
12. On perusal of the original records in this case, it has come to light
that both the purported agreement of sale, Ex. P-2 as well as the
compromise, Ex.P-8 have major discrepancies in them. Certain clauses in
both the documents seem to unduly favour the plaintiffs. In Ex.P-2, the
operative part of the agreement of sale which is originally in Hindi, the
English translation of the same reads as under:
“….The last date for execution of sale deed is fixed as 20th
December, 2002. By that date if the seller fails to get the sale
deed executed in favour of the buyer then the seller will pay
the amount double of the advance money taken, and if by the due
date the buyer does not get the sale deed executed then the
advance money paid by him will be forfeited and instead of
claiming compensation the buyer shall have the right to get the
sale deed executed through court in his name or in anyone else’s
name without paying the balance amount and the seller will have
no right of any objection. The buyer shall bear all costs of
registration……”
This does not seem equitable and it seems unlikely that a seller would
agree to such a clause. This seems to be a clear case of terms of a
contract resulting in an unfair advantage for the plaintiffs over the
defendants. Since the defendants are disputing the agreement of sale and
claiming that the document on which they put their thumb impressions was in
fact a mortgage deed in lieu of the loan of [pic]85,000/- that they had
asked from the plaintiffs for their household expenses, it puts the
plaintiffs in a position of ‘unfair advantage’ over the defendants, thus
bringing the case for not granting decree of specific performance within
Section 20(2)(a)of the Act. Further, the Trial Court has clearly explained
the reasons for not granting a decree of specific performance and instead
granted a decree for recovery of the money from the defendants and this
falls squarely within the conditions set out in Section 20(2) (a) and (b)
of the Act. This position of the law has been carefully enunciated by this
Court in the case of A.C. Arulappan v. Ahalya Naik[1], wherein it was held
that:-
“If under the terms of the contract the plaintiff gets an
unfair advantage over the defendant, the court may not
exercise its discretion in favour of the plaintiff....If it
is inequitable to grant specific relief, then also the court
would desist from granting a decree to the plaintiff.”
It is clear that it will be inequitable to grant a decree of specific
performance in this case where it is clear that the
plaintiffs have an unfair advantage over the defendants and the Trial Court
has rightly exercised its discretion not to grant specific performance.
Further we find it necessary to refer to para 3 of the pleadings
wherein it is stated as under:-
“3. That the defendants no.1 to 3 entered into an agreement
to sell the suit land as detailed and described in the head
note of the plaint with plaintiffs for a sum of
[pic]3,00,000/- (Rs. Three Lacs) and they executed agreement
to sell dated 3.6.2002 and received earnest money of [pic]
2,00,000/-(Rs. Two Lacs) and executed a valid receipt on the
foot of the agreement to sell dated 3.6.2002 in the presence
of witnesses.”
This receipt has been executed on the same day, i.e. on 3-6-2002 as the
agreement of sale, and the terms of the receipt are in direct contradiction
with the terms of the agreement, as the receipt says that [pic]2,00,000/-
has been received by the defendant Nos.1 to 3 whereas the agreement of sale
speaks only of [pic]1,00,000/- that has changed hands and the plaintiff
will pay the defendant Nos.1 to 3 the remaining [pic]2,00,000/- at the time
of registration. Further, in the written statement, the defendants have
pleaded that they only took a loan of [pic]85,000 and mortgaged their land
as security and were tricked into putting their thumb impressions on the
purported agreement of sale.
It is clear from all this that the discrepancies make it difficult for
us to accept that the defendant Nos.1 to 3 have intended for this to be an
agreement of sale and it is extremely likely that the plaintiff has tried
to take unfair advantage of them. It is prudent on our part, therefore, to
uphold the Trial Court’s judgment not to decree specific performance of the
purported agreement of sale. We will modify the Trial Court’s decree
insofar as the amount is concerned and order the defendant Nos.1 to 3 to
return [pic]2,00,000/- with interest and not an amount of [pic]3,00,000/-
as directed by the Trial Court.
Answer to point no.2
13. Another important aspect of this case that has slipped the eyes of the
courts below is the question of the mortgage of the suit property, as
pleaded by the defendant Nos. 4 and 5. They placed the confirmation of
mutation in favour of the Bank, Ex. D-1 and the Mortgage deed, Ex. D-2 as
evidence. The plaintiffs have referred to the same in para 2 of their
pleadings and the defendants, in reply have admitted this in para 2 of
their written statement wherein they have stated that it is a matter of
record that they have mortgaged their portion of the land in favour of
defendant Nos. 4 and 5. More importantly, the plaintiffs have admitted the
same in para 2 of their plaint, therefore it was in their knowledge that
the land in question was already mortgaged with defendant Nos. 4 and 5.
There has been no finding recorded on the same by either the appellate
courts or the Trial Court and as per Section 13(c) of the Act, when the
vendor (the defendants herein) professes to sell unencumbered property but
the same is mortgaged, then the vendor has only a right to redeem it and
the purchaser may compel him to redeem the mortgage and to obtain a valid
discharge. This aspect of the matter, too, has not been dealt with by the
Trial Court or the appellate courts.
Answer to point no.3
14. Thus, the judgment and order of the Trial Court must be modified and
the judgments and orders of the appellate courts must be reversed. There
are many discrepancies on the face of this case and the Trial Court would
have done well to examine all the evidence with care and diligence, which
has not been done in the present case. In spite of the same, it would be
prudent to uphold the judgment and decree of the Trial Court by modifying
it instead of the judgments and orders of the appellate courts which have
decreed the original suit for specific performance of the agreement to sell
the suit schedule property.
15. For the foregoing reasons, these appeals are allowed, the impugned
judgment and order passed by the High Court is set aside and the judgment
and decree passed by the Trial Court in Civil Suit no.755 of 2003 is
modified in the aforesaid terms. We thereby, order and direct the defendant
Nos.1 to 3 to repay the plaintiff an amount of
[pic]2,00,000/- with interest @6% per annum within six weeks from the date
of receipt of the certified copy of this judgment.
………………………………………………………………………J.
[SUDHANSU JYOTI MUKHOPADHAYA]
………………………………………………………………………J.
[V. GOPALA GOWDA]
New Delhi, April 16, 2014
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[1] (2001) 6 SCC 600
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19
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