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Judgment
G.R. Udhwani, J.—The Gujarat State Finance Corporation-original defendant is in Appeal questioning the judgment and decree dated 27.12.2005 passed by the learned Second Additional Senior Civil Judge, Vadodara decreeing the Special Civil Suit No. 1 of 2002, whereby the plaintiff respondent was held entitled to recover Rs. 7,35,000/- (Rs. Seven Lakh Thirty Five Thousand only) with interest at the rate of 6% p.a. from the appellant. He was also held entitled to recover the actual possession of the machineries and other material of the ownership of the plaintiffs, which were in possession of the defendants, as also the machineries and other material sold by the defendants. For the convenience, parties as arrayed in the plaint, are referred to herein.
The dispute lies in narrow compass. The defendant auctioned land bearing Survey No. 1739 of village: Tundav admeasuring 2480 sq.mt. to realize its dues from one Satya Surya Food Products, who had deposited its title deed with the defendant as security. The plaintiff Vraj Food Pvt. Ltd. was acknowledged as highest bidder, and after deposit of part of sale consideration i.e. Rs. 7,35,000/-, was put in possession of the land on 19.7.1997. An agreement to sale was also executed on 25.7.1997 but concededly conveyance was never executed.
Prior thereto, Land Acquisition Proceedings in respect of 2080 sq. mt. of the said land were initiated and concluded on or before 8.8.1996.
The plaintiff did not pay the remaining sale consideration and instead, instituted Special Civil Application No. 1273 of 1999 raising a title dispute in relation to land in question. The said petition was rejected on 3.8.2001. It is the case of the defendant that thereafter possession of the land in question was taken over from the plaintiff and it was re-auctioned and possession is now with the third party.
The plaintiff instituted a suit, primarily attributing suppression of material fact as regards acquisition proceedings and illegality of the contract by virtue of bar of conveyance of the property, as published by the Land Acquisition Officer during the Land Acquisition Proceedings. The plaintiff prayed for refund of Rs. 7,35,000/- i.e. part of the sale consideration, as also damage in the sum of Rs. 5,83,000/- with 18% interest. By the impugned judgment, relief as aforesaid, having been granted, the appellant-original defendant is before this Court.
On considering the rival contentions, the scope of this appeal appears to be limited and therefore, it is not necessary to discuss in detail the oral and documentary evidences on record. Suffice it to say that, the admitted position that conveyance was not executed between the parties and hence there was no concluded contract, would be enough to decide this appeal.
Learned counsel for the appellant is unable to dispute the proposition of law that a mere agreement to sale would not have conveyed the title to plaintiff. The learned advocate for the appellant is also unable to dispute the proposition of law that an agreement enforceable by law is a contract.
Concededly, before auctioning the suit property, the acquisition proceedings were concluded. Section 16 of the Land Acquisition Act, 1894 (hereinafter referred to as ''the Act of 1894'' for short), reads as under:--
Section 16: Power to take possession: When the Collector has made an award u/s 11, he may take possession of the land, which shall thereupon vest absolutely in the Government, free from all encumbrances.
Thus, the appellant ceased to own the land in question even before the auction itself and had no authority to convey it to the respondent.
The purpose of the plaintiff was to commission a factory and therefore, apart from the legal bar, it would not have entered into even an agreement to sale, had it been informed about the legal status of the land under the Act of 1894.
Section 20 of the Indian Contract Act, 1872 (for short ''the Act'') contemplates an agreement void where both parties are under mistake as to matter of fact. In the trial Court, the defendant pleaded ignorance about the acquisition proceedings. Thus, it was on the mistaken fact that the defendant proposed to auction the land and in fact entered into an agreement to sale with the plaintiff When the agreement to sale was entered into, admittedly, the subject matter of the agreement did not exist in as much as the land in question was already acquired. Thus, had the contract been executed, it would have been void u/s 20 of the Act.
The trial Court, however, applied Section 55 of the Transfer of Property Act. The provisions imposes certain obligations upon the seller and buyer in absence of contra to the contrary. Under Sub-section (1), seller is bound to disclose to the buyer any material defect in the property or in the seller''s title thereto, of which, the seller is, and the buyer is not, aware and which the buyer could not with ordinary care discover. The emphasised of text equally imposes an obligation upon the buyer to discover the fact when such discovery is possible by ordinary care. Admittedly, the plaintiff did not seek title clearance. It merely relied upon the terms of the advertisement for auction. Since the seller was obliged to disclose only those facts, which could not have been discovered by the buyer using ordinary care, applicability of the provision in the facts of the case was out of question, since the defect in title could have been easily discovered by necessary inquiry from the revenue authority or the Collector. However, the fact remains that the defendant was unable to execute the conveyance and no conveyance was ever executed and rightly so; the contract being void u/s 20 of the Act. The defendant therefore, could not have retained the part of sale consideration and was under an obligation to refund it to the plaintiff.
Learned counsel for the appellant however would contend that the plaintiff was put in possession of the disputed property to commission a factory on it and used it without any complaint of being hindered by the Land Acquisition proceedings and the property in question was sold on ''as is where is basis'' and therefore, even if the title was defective, the plaintiff was under an obligation to accept the property in question.
The next limb of the argument is that the trial Court rendered contradictory findings to an effect that the defendant suppressed the fact while decreeing refund of consideration as to acquisition proceedings in relation to the land in question and to an effect that property in question was sold to the plaintiff on "as is where is basis" while disallowing the claim for damage. The argument is that the later part of the finding should have governed whole case and suit was liable to be dismissed.
Learned counsel for the respondent relied upon Haryana Financial Corporation and Another Vs. Rajesh Gupta,
I am afraid, none of the contentions raised by learned counsel for the appellant can be countenanced for the simple reason that void agreement cannot be enforced at law. The principle "as is where is basis" cannot be stretched so as to compel the buyer to execute the void contract. Such doctrine is applicable only in relation to quantity, quality, condition etc. of the subject matter of the sale and not in case of legal infirmities, for illegal and void contract are unenforceable.
True it is that the defendant''s dues were secured by deposit of title deeds but such a right got terminated on conclusion of the land acquisition proceedings, u/s 16 of the Act of 1894. The property vest in the acquiring authority. Therefore, at the most, the defendant could have resorted to the remedy under the Act of 1894 for compensation.
However, it appears that the trial Court rightly refused to countenance the claim as to damages on the principle of caveat emptor in as much as the plaintiff without investigating into the title of the defendant, parted with the money, got the possession, only to find that contract was not executable for want of title with the defendant. In above view of the matter, this Court is unable to find any substance in this Appeal. It is therefore, dismissed with no order as to costs. The amount, if any, deposited with the trial Court, shall be dispensed to the respondent.