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Judgment
P.B.Suresh Kumar, J.
These appeals arise from the decree and judgment in O.S.No.321 of 2006 on the file of the Additional Subordinate Judge's Court, North Paravur. Among the appeals, R.F.A.No.686 of 2010 is by the defendant and R.F.A.No.766 of 2010 is by the plaintiff in the suit. The suit was one for specific performance of an agreement for sale.
The defendant owns a property measuring 9 acres and 47.41 cents in Re-Survey No.35/2/1 of Karukutty Village. He agreed to sell the said property to the plaintiff in terms of an agreement on 13.07.2005 for a consideration of Rs.52,500/- per cent. A sum of Rs.1 crore was paid by the plaintiff to the defendant by way of advance sale consideration, of which Rs.65 lakhs was in cash and Rs.35 lakhs was in the form of a post-dated cheque dated 25.8.2005. As per the terms of the agreement, the last date fixed for payment of the balance sale consideration was 12.01.2006. The post-dated cheque given by the plaintiff to the defendant by way of the portion of the advance sale consideration in terms of the agreement for sale was, however, not honoured by the bank. On 2.9.2005, the defendant called upon the plaintiff to pay the amount covered by the cheque, to which the plaintiff has sent a reply on 20.9.2005 stating that there was an income tax raid in his offices and residence on 24.8.2005; that the Income Tax Department has freezed his bank accounts in connection with the said proceedings and it is on account of the said reason that the cheque was not honoured by the bank. It was also stated by the plaintiff in the said reply that though he has offered to pay the amount covered by the cheque in cash on coming to know of the dishonour, the defendant refused to accept the same. It was further stated by the plaintiff in the reply that he is prepared to pay the amount covered by the cheque in cash if the defendant is prepared to accept the same. On 23.9.2005, the defendant issued a notice to the plaintiff stating that he is repudiating the contract as the plaintiff has failed to pay the advance sale consideration given by way of post-dated cheque. A reply was sent by the plaintiff to the said notice also, stating that he is prepared to pay the amount covered by the cheque, if the defendant is prepared to accept the same. Later, on 03.01.2006 the plaintiff called upon the defendant through a lawyer notice to receive the balance sale consideration and to transfer the property to him. The defendant has not responded to the said notice. The suit was instituted thereafter for specific performance of the agreement for sale alleging that the defendant is obliged in law to accept the sale consideration agreed in terms of the agreement, less the amount received from the plaintiff by way of cash, and transfer the property to the plaintiff.
The defendant filed a written statement admitting the execution of the agreement dated 13.07.2005, nevertheless, contending that since the plaintiff did not pay the amount covered by the cheque despite notice intimating the plaintiff about the dishonour of the cheque, he is not entitled to the decree for specific performance sought in the suit.
The plaintiff gave evidence as PW1 and a witness was examined on his side as PW2. Exts.A1 to A60 were the documents proved on the side of the plaintiff. Among the said documents, Ext.A1 is the agreement for sale dated 13.07.2005, Ext.A2 is the lawyer notice caused to be issued by the defendant to the plaintiff intimating the dishonour of the cheque, Ext.A3 is the reply of the plaintiff to Ext.A2 lawyer notice, Ext.A4 is the lawyer notice caused to be issued by the defendant to the plaintiff repudiating the contract, Ext.A5 is the reply of the plaintiff to Ext.A4 notice and Ext.A6 is the lawyer notice caused to be issued by the plaintiff to the defendant demanding specific performance of the agreement for sale. No evidence was adduced on the side of the defendant.
The court below, on an appraisal of the materials on record, found that insofar as the plaintiff could not honour the cheque given by him in terms of the agreement by way of advance sale consideration, he is not entitled to the decree for specific performance. The court, however, granted the plaintiff a decree directing the defendant to return the portion of the advance sale consideration received from the plaintiff namely, Rs.65 lakhs, with interest at the rate of 6% from 13.07.2005 till realisation and also the proportionate costs. The plaintiff is aggrieved by the decision of the court below inasmuch as he was not granted the decree for specific performance, and the defendant is aggrieved by the decision of the court below inasmuch as the decree directs him to pay the proportionate costs to the plaintiff. Hence, these appeals.
Heard the learned Senior Counsel for the plaintiff as also the learned Senior Counsel for the defendant.
The learned Senior Counsel for the plaintiff contended that insofar as the dishonour of the cheque issued towards the portion of the advance sale consideration was due to reasons beyond the control of the plaintiff, the court below acted illegally in declining the plaintiff the decree for specific performance. According to the learned counsel, it is all the more so since the plaintiff was willing all throughout to pay the amount covered by the cheque. It was also argued by the learned counsel that in the absence of any finding by the court below that the plaintiff was not ready and willing to discharge his obligations under the agreement for sale, the court below ought to have granted the decree for specific performance sought by him.
Per contra, the learned Senior Counsel for the defendant argued that insofar as the plaintiff himself admits that the cheque issued by him towards the portion of the advance sale consideration was not honoured by the bank, the court below cannot be found fault with for having declined the decree for specific performance sought by the plaintiff. In the context of the appeal filed by the defendant, it was argued by the learned counsel that insofar as it was found by the court below that the plaintiff has committed breach of the terms of the contract, it was inappropriate for the court to direct the defendant to pay proportionate costs of the suit to the plaintiff. According to the learned counsel, the impugned decree, inasmuch as it directs the defendant to pay the costs of the suit to the plaintiff, is illegal.
We have perused the records of the case and considered the submissions made by the learned counsel for the parties on either side.
As noted, the execution of Ext.A1 agreement for sale and receipt of Rs.65 lakhs by way of advance sale consideration in cash have not been denied or disputed by the defendant. It is also an admitted fact that the advance sale consideration agreed to be paid by the plaintiff to the defendant for sale of the property was Rs.1 crore, and the same, less the amount paid in cash was given by the plaintiff to the defendant by way of a post-dated cheque. It is also an admitted fact that the said post-dated cheque was dishonoured by the bank on presentation. Even though the parties to the suit were proceeding as if there was a concluded contract for sale of the suit property, insofar as the cheque given by the plaintiff to the defendant towards the portion of the advance sale consideration was dishonoured on presentation, the first and foremost question to be considered, according to us, is as to whether there was a concluded contract between the parties for sale of the suit property.
As revealed from the recitals in Ext.A1 agreement, the consideration of the defendant for the promise made to the plaintiff for the sale of the suit property was Rs.1 crore, the payment of which is stated to have been effected by the plaintiff to the defendant by way of advance sale consideration as recorded in the agreement. There is no dispute between the parties on this aspect. The parties do not also dispute the fact that the payment of advance sale consideration as recorded in the agreement has not been effected in full, inasmuch as the cheque issued by the plaintiff to the defendant towards a portion of the same, viz, Rs.35 lakhs was dishonoured by the bank. Even though the plaintiff has a case that he has offered the amount covered by the cheque in cash to the defendant on coming to know of the dishonour of the cheque, the defendant does not admit the said fact. Be that as it may, insofar as the cheque given towards payment of a portion of the advance sale consideration was dishonoured, the effect of the same on the agreement for sale needs to be considered. A cheque given is treated as payment of the amount covered therein only if it is honoured upon presentation, for, the mere tendering of a worthless cheque cannot be equated with payment [See Director of Income Tax v. Raunaq Education Foundation, (2013) 2 SCC 62]. If the cheque is honoured on presentation, the payment relates back to the date of tender of the cheque and if not, no payment is deemed to have been made, whatever be the reason for the dishonour of the cheque. It is by now settled that when a payment is made by way of a cheque, the person who receives the cheque may either accept it as an absolute payment or as a conditional payment. The presumption, in the absence of a clear indication to the contrary, is that the payment by means of a cheque is conditional [See CITI Bank N.A. v. Standard Chartered Bank, (2004) 1 SCC 12]. There are no indications in the case on hand to infer that the defendant has accepted the cheque issued by the plaintiff towards payment of the portion of the advance sale consideration as an absolute payment. In other words, the acceptance of the cheque by the defendant for a portion of the consideration recorded in the agreement was conditional. As provided for in Section 7 of the Indian Contract Act, 1872, in order to convert a proposal into a promise, the acceptance of the same must be absolute and unqualified. If that be so, according to us, the acceptance of the proposal made by the defendant for the sale of the property by the plaintiff was not absolute and unqualified. If the acceptance of the proposal made by the defendant for sale of the property by the plaintiff was not absolute and unqualified, there is no concluded contract. Even if the case set out by the plaintiff that he was prepared to pay the amount covered by the cheque to the defendant and the defendant has refused to receive the same is accepted as true, the agreement for sale will not become enforceable, since it is otherwise found to be not enforceable unless there is a fresh promise. We are not oblivious of the fact that the plaintiff has paid a sum of Rs.65 lakhs in cash on the date of the agreement and the defendant has accepted the same towards part of the advance sale consideration. According to us, the payment of the said amount and the receipt thereof does not make the contract a conclusive and enforceable one, for the consideration for the promise made by the defendant to sell the property to the plaintiff was the payment of Rs.1 crore referred to in the agreement.
Insofar as it is found that there was no concluded contract between the parties for sale of the suit property, the question whether there was readiness and willingness on the part of the plaintiff to pay the balance sale consideration does not arise for consideration.
Coming to the appeal preferred by the defendant, insofar as it is found that there was no concluded contract between the parties for sale of suit property enforceable by law, we are of the view that the court below was not justified in directing the defendant to pay the costs of the suit to the plaintiff. At the same time, insofar as the sum of Rs.65 lakhs paid by the plaintiff to the defendant at the time of entering into Ext.A1 agreement for sale was not by way of earnest money, in the absence of any pleading of proof that the defendant has sustained any loss on account of the arrangement, the court below was justified in passing a decree directing the defendant to return the portion of the advance sale consideration received from the plaintiff.
In the result, R.F.A.No.766 of 2010 is dismissed and R.F.A.No.686 of 2010 is allowed in part vacating the decree for payment of proportionate costs in favour of the plaintiff.