Kishanlal Soni and others vs Chandrabala Devi

Jeevan Reddv, J.—This Letters Patent Appeal is preferred by the defendants in a suit for specific performance. The respondent-plaintiff instituted the suit on the basis of an agreement of sale dt. 27-10-1977 executed by the 1st defendant in favour of the plaintiff. The agreement of sale pertains to a shop-cum-house situated at old Gunj, Mahboobnagar. The agreement recites that though the property stands in the name of the 1st defendant''s mother (defendant No. 2), it had fallen to his share in the partition, and that he has agreed to sell the same to the plaintiff for a consideration of Rs. 30,000/-. On the date of agreement the 1st defendant received a sum of Rs. 10,000/-. He agreed to receive the balance of Rs. 20,000/ - on the date of registration of the sale-deed, within one month. The plaintiff was a tenant in the said shop-cuni-house since several years prior to the said agreement. She instituted the suit with the allegations that the 1st defendant refused to receive the balance consideration and execute the sale-deed as per the agreement, and that when a notice was given calling upon him to execute the sale-deed, he put forward a false plea that the said property is a joint family property of himself, his brothers, and his mother, and inasmuch as the "said property had fallen to the share of his brothers, he cannot execute the sale-deed. The plaintiff''s case was that the theory of partition set up by the 1st defendant is false, and that he is bound to execute the sale-deed.

The 1st defendant filed a written statement stating that the said agreement was executed by him under a belief that the property in question would fall to his share in the partition, and that his mother, the 2nd defendant, would also agree to execute a sale-deed. According to him, there was an understanding between him and the plaintiffs husband at the time of agreement of sale that, in case the 2nd defendant does not give her consent, or if the property does not fall to the 1st defendant''s share, the earnest money will be returned.

Defendants 2 to 4 filed a separate written statement contending that the property in question is the exclusive property of the 2nd defendant, and that the 1st defendant had no right or authority to agree to sell the same.

On behalf of the plaintiff two witnesses were examined, including the plaintiff (P.W. 1)- P-W. 2 is an attestor to the agreement of sale. The plaintiff also adduced documentary evidence, Exs. A-1 to A-5. On behalf of the defendants no evidence what-soever was let in, either oral of documentary.

On a consideration of the material placed before him, the learned trial Judge decreed the suit holding (i) that the agreement of sale is true and binding upon all the defendants 1 to 4; (ii) that the 1st defendant was competent to sell the property in question, inasmuch as it had fallen to his share in partition; (iii) that the partition set up by the defendants (said to have taken place after the agreement of sale), is not true; and (iv) that the plaintiff is entitled to specific performance of the agreement. On appeal, the learned single Judge has affirmed the findings of the trial Judge and dismissed the appeal.

In this Letters Patent Appeal, it is contended by Sri M.S.K. Sastry, learned counsel for the appellants, that the plaintiff has failed to adduce any evidence in proof of her contention that there was a partition between defendants 1 to 4, and that the suit property had fallen to the share of the 1st defendant. He submitted that the partition evidence by registered deed (effected subsequent to the suit agreement) is true and binding on the defendants, and that even if the said partition deed is disbelieved for any reason, the property would be joint family property of all the defendants 1 to 4. He submitted that in such a situation, the present suit must be dismissed, leaving the plaintiff to work out her rights in accordance with law. We are not prepared to agree. We must reiterate that no evidence whatsoever was let in by the defendants. The agreement of sale executed by the 1st defendant -- the execution whereof is not disputed -- specifically recites that the said property had fallen to the share of the 1st defendant and therefore he was selling it. This recital in Ex. A-1 is also evidence according to law, and could be acted upon. The inconsistent pleas put forward by the f st defendant in his reply to the suit notice and in the written statement, and the further inconsistency between the 1st defendant''s version and the version of defendants 2 to 4 put forward in their written statement, rightly led the trial Judge and the learned single Judge to accept the plaintiffs plea that the recital in Ex. A-1 is true, and that the 1st defendant was competent to sell the property. We are, therefore, unable to see any substance in this appeal. We do not also see any reason to differ with the concurrent findings of fact recorded by the trial Court and the learned single Judge.

Lastly and alternatively Mr. M.S.K. Sastry argued that the 1st defendant is entitled, at any rate, to interest on the sum of Rs. 20,000/- which is outstanding. He submitted that the plaintiff who was a tenant in the suit property, continued in possession of the property, and on the ground that the character of her possession has changed with effect from the date of agreement of sale, has also not paid any rent to the 1st defendant. He says that the 1st defendant has been deprived of the enjoyment of the property, and also of the major portion of the consideration. He also brings to our notice that the value of the property has gone up several times by now, and in all the circumstances it would be just to award interest to him on the amount outstanding. On the other hand, Sri C. Sadasiva Reddy, learned counsel for the plaintiff, submits that there is no reason or justification for mulcting the plaintiff with interest; it is not a case where the plaintiff was not ready and willing to pay the amount; she was always ready and willing to pay the said amount and, indeed, she offered it to the 1st defendant, but he refused to receive it under a false plea. He submits that the plaintiff has paid a sum of Rs. 10,000/- out of the total consideration of Rs. 30,000/- whereas the annual rent being paid by her was only Rs.1,000/- per annum. He says, interest on Rs. 10,000/- paid is equal to the rent payable and that, in the circumstances, the 1st defendant cannot be said to have suffered any prejudice. Even if he has suffered any prejudice, it is only and exclusively on account of his own conduct in trying to resile from a solemn agreement executed by him. He submitted further that soon after the trial Court''s decree, the plaintiff has deposited the balance of the amount in accordance with the decree.

Clause (a) of sub-sec. (4) of S. 55 of the -Transfer of Property Act declares that "the seller is entitled (a) to the rents and profits of the property till the ownership thereof passes to the buyer". The contract of sale does not transfer the ownership in the property; it only creates a right in the purchaser to compel the owner to sell the property to him in accordance with the terms of the agreement. It also creates a corresponding obligation upon the owner/seller to execute a sale deed and transfer the property in terms of the agreement. In this case, the agreement does not say that the plaintiff/purchaser is relieved of the obligation to pay the rent from that date. No doubt the agreement contemplated a sale deed being executed within one month; but, even then, there was an interval of one month between the agreement and the contemplated sale deed. It is true that the sale deed could not be executed on account of a false plea taken by the 1st defendant. For that reason the plaintiff was obliged to file the present suit, and she has deservedly succeeded. The fact remains that the plaintiff has all along been in possession and enjoyment of the property without paying any rent. All that she had paid was the sum of Rs. 10,000/- paid on the date of agreement. This is also not a case where she had deposited the balance amount into Court at the time of the institution of the suit, or during the pendency of the suit. She is stated to have deposited the said amount only after the trial Court decreed the suit. Now looking to the 1st defendant, he has been deprived of his rents and also the sum of Rs. 20,000 / - due under the agreement. Is it just and proper to punish him in the circumstances by depriving him of interest on the balance amount also? In this connection we may take judicial notice of the fact that this property being an urban property, its value has gone up by several times during the pendency of these proceedings. It is true that the 1st defendant is responsible for all this delay; but, it is a question "of adjusting equities between the parties. We are not punishing anybody. An order which is equitable in the circumstances, has to be passed. In this connection, we may refer to the following statement of law from the Commentary in Muila''s Transfer of Property Act, Seventh Edition, (edited by H. R. Khanna and P. M. Bakshi) at pages 323-324. It reads :--

"This sub-section shows that possession should be given by the seller when ownership passes to the buyer. But if the buyer takes possession before completion, he would, as he takes the rents and profits, pay interest on unpaid purchase money. This is because it is inequitable that the same person should enjoy both the rents and profits of the land as also the interest on the money. It makes no difference that the land yields no profits and that the delay in completion is due to the seller.....The only exception to this rule is when, after the buyer has taken possession, the seller delays completion and the circumstances are such as to require the purchaser to keep the purchase money lying idle and unproductive. In such a case the seller will not be entitled to interest.....".

The said statement of law is based upon several English and Indian decisions, and was also approved by the Supreme Court in National Insurance Co. Ltd., Calcutta Vs. Life Insurance Corporation of India, . The following passage from the said decision may usefully be quoted (at p. H79 of AIR) :--

"The Company relied on cases of purchases of immovable property where interest is awarded as a general rule of equity if the purchaser enters into possession without having paid the purchase-money to the seller. The reason of the rule was stated a long time ago by Lord St. Loenards L.C. in Birch v. Joy (1852) 3 HLC 565 : 10 ER 222, as follows :--

"The parties change characters, the property remains at law just where it was, the purchaser has the money in his pocket, and the seller still has the estate vested in him; but they exchange characters in a Court of Equity, the seller becomes the owner of the money and the purchaser becomes the owner of the estate."

On entering possession the purchaser becomes entitled to the rents but if he has not paid the price, interest in equity is deemed payable by him on the purchase price which belongs to the seller. This principle was applied by the House of Lords in cases of compulsory purchases. In Swift and Co. v. Board of Trade (1925) AC 520, Viscount Cave L.C. gave the reason that the practice rests upon the principle that the taking of possession is an implied agreement to pay interest which was stated by Sir William Grant M.R. in Fludyer v. Cocker, (1805) 33 ER 10 This principle was further extended to the Privy Council to the compulsory taking over of a business as a going concern in International Railway C6. v. Niagara Parks Commission, (1941) AC 328": AIR 1941 PC 114.

In this Court also the principle was applied to the East Punjab Requisition of Immovable Property Act (Temporary Powers Act) (Pun. 48 of 1948) replaced by the Punjab Requisition and Acquisition of Immovable Property Act (Pun. 11 of 1953). Under that Act though compensation was payable there was no provision for the payment of interest. This Court approved the decision of the Privy Council in Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission, (1928) AC 492, w''here the Judicial Committee had observed :--

"But for all that, the owner is deprived of his property in this case as much as in the other, and the rule has long been accepted in the interpretation of statutes that they are not to be held to deprive individuals of property, without compensation unless the intention to do so is made quite clear. The right to receive interest takes the place of the right to retain possession and is within the rule."

This Court observed as follows :-- "It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it he is entitled to claim interest in place of the right to retain possession"..... 9. We may in this connection refer to the decision of an English Judge, Denman, J. in Ballard v. Shutt, (1880) 15 Ch D 122. The learned Judge referred to the earlier decision in Birch v. Joy, (1852) 3 HLC 565 and observed as follows :--

"It is true that in many of the cases, notably in Birch v. Joy, (1852) 3 HLC 565 the purchaser was not only in possession but also in actual receipt of rents and profits; but where possession of land of which there are no tenants is taken by a purchaser pending delay in the completion of the purchase, even though such delay be attributable to the vendor, especially whereas in the present case, he takes possession with a view to make a profit out of the land, I apprehend there is the same reason as in the other case, that the vendor should not remain without the land and also without interest upon his purchase money.....".

We may not be understood as saying that in every such case the vendor should be held entitled to interest. All that we are doing is to recognize the power of the Court to award interest in appropriate cases if the ends of justice demand that interest should be awarded. We have pointed out the particulsr circumstances of this case in which the plaintiff has been enjoying the property without paying the rent and also had the benefit of the balance of purchase-money. It is true that the plaintiff could not pay the balance of purchase-money because the 1st defendant refused to receive the same; but; all-the-same, since she had the use of the money also (besides being in possession and enjoyment of the property), it is but just thitt she should pay interest on the balance amount. Accordingly, we direct that the plaintiff shall pay, and the 1st defendant shall be entitled to, interest on the amount of Rs. 20,000/- commencing from the date of agreement, up to the date of deposit of the said amount. The rate of interest shall be 12% per annum. Three months for deposit of interest amount.

Letters Patent Appeal is, accordingly, dismissed, subject to the direction regarding payment of interest in the preceding para graph. The payment of the said interest amount shall be in addition to the balance of consideration of Rs.20,000/- payable by the plaintiff.

We direct the parties to bear their own costs in this Letters Patent Appeal.

Petition dismissed.