Saravanan vs Rajkumar

R.S. Ramanathan

The unsuccessful plaintiff is the appellant.

The plaintiff filed the suit for specificperformance of the agreement of sale and both the courtsdismissed the suit. The case of the plaintiff was that therespondent agreed to sell the suit property for a sum of Rs. 1,75,000= and received an advance of Rs. 1,50,000= andentered into the agreement of sale dated 16.12.1994 and asper the agreement of sale, three years time was fixed forcompleting the sale transaction and on 10.1.1997, theappellant demanded the respondent to execute the sale deedand respondent sent a reply denying the execution ofagreement of sale and therefore, the suit was filed forspecific performance.

The respondent contested the suit by contendingthat he never entered into an agreement of sale as claimedby the appellant and also explained the circumstances underwhich his signatures were obtained in the blank papeRs. Itis the specific case of the respondent that the respondentand the brother of the appellant were known to each otherand the respondent and his brother availed the loan fromthe Tamil Nadu Industrial Investment Corporation (TIIC) forrunning a service station and also borrowed loans fromvarious persons and when the creditors pressed for payment,they approached the appellant and his brother for adviceand the appellant and his brother Vijayakumar are runningSuba Investments and Selvi Investment and yet anotherfinance company and they agreed to finance the respondent to pay off the creditors and believing them, therespondent, as suggested by them, executed an agreement ofsale in favour of the appellant and his brother executedanother agreement of sale in favour of the appellant''sbrother and also delivered the documents of title and theagreements of sale were not intended to be acted upon andthe agreements of sale were executed only as a security forthe loan availed from the appellant and his brother andthey also repaid the loan and the agreement of saleexecuted by the respondent's brother was cancelled by thebrother of the appellant and the suit was filed on thebasis of agreement of sale executed by the respondent andtherefore, they are not bound to execute the sale deed.

The courts below accepted the case of therespondent and held that the agreement of sale was executedonly as a security and it was not intended to be acted uponand it was proved by the respondent through variousexhibits and therefore, the appellant is not entitled tothe relief of specific performance. The courts belowfurther held that having regard to the advance paid, it isunbelievable that three years time is fixed for paying thebalance sale consideration and therefore it must only be a money transaction and it cannot be an agreement of sale. Hence, the second appeal.

Learned counsel for the appellant submitted thathaving regard to the admission of the agreement of sale,the courts below ought to have decreed the suit as prayedfor and even though Rs. 1,50,000= was paid out of the totalsale consideration of Rs. 1,75,000=, three years time wasfixed to enable the respondent to vacate and hand over theservice station run in the suit property and therefore, itcannot be stated that the agreement of sale was obtained assecurity when the respondent admitted the agreement of salein evidence. He also relied upon the decision in P.S. Ranakrishna Reddy Vs. M.K. Bhagyalakshmi and Another, wherein the Honourable Supreme Court, in a similarcircumstance, held that fixation of a longer period for thebalance payment of a small amount will not lead to theconclusion that the transaction was only a moneytransaction and when the party admitted the execution ofthe sale agreement, the other side is entitled to get therelief of specific performance and therefore, contendedthat both the courts below erred in holding that the saleagreement was not intended to be acted upon and it was executed only as a security for the loan availed by the respondent and his brother.

On the basis of the submissions made by the learnedcounsel for the appellant, the following substantialquestions of law are framed for consideration:-

a) Whether the courts below are rightin law in dismissing the suit forspecific performance particularly whenthe existence and execution of theagreement for sale has been admittedby the defendant?

b) Whether the courts below haveproperly appreciated the law relating toburden of proof while arriving at aconclusion that the suit agreement hasbeen executed by the defendant assecurity for the repayment of loan andnot specifically enforceable when there is admittedly no loan transaction between the plaintiff and the defendant?

It is admitted by the appellants that he is one of the partners in Suba Investments and Selvi Investments. Itis also admitted that his brother PW2 is running SubaInvestments. It is also admitted that the defendant andhis brother were having dealings in the financial companiesin which the appellant and his brother are partneRs. Exs.B1 to B3 and B4 to B7 would prove various payments madeby the appellant towards the amount payable to thosefinancial companies. Further, on the date of the agreementof sale, viz., 16.12.1994, as per Ex.B5, the respondentreceived a sum of Rs. 3,00,000. It is also admitted thatafter receiving the amount under Ex.B5, the documents weretaken back from TIIC and were handed over to the appellanton 21.12.1994 and the appellant also admitted that he wasnot aware of any previous loans payable by the respondentto TIIC and he did not make any enquiry regarding theoriginal documents of title before entering into anagreement of sale while paying more than 90% of the saleconsideration. This conduct on the part of the appellantwould prove that the document would not have been intendedto be acted upon as an agreement of sale and no prudent manwould pay more than 90% of the sale consideration withoutverifying the documents of title.

Further, admittedly, Exs.B10 agreement of sale wasexecuted by Varadarajan, the brother of the respondent infavour of Vijayakumar brother of the appellant and that wasdated 28.7.1993 and that was admittedly cancelled asevidenced by Ex.P11 dated 20.7.996. The appellant or hisbrother were not able to say any reason for cancelling theagreement Ex.B 10. Further, admittedly, the property which was a subject matter of Ex.B10 was having an extent of 729 sq ft and that is situate adjacent to the suit property and in respect of that property, the sale agreement was entered for Rs. 1,75,000= whereas the suit property is having 4317 sq ft and for the said extent, the agreement ofsale was Rs. 1,75,000=. Therefore, considering all these aspects, the courts below rightly held that the respondent proved that the agreement of sale was executed only assecurity for the loan availed by him from the appellants and having regard to the price fixed in Ex.B10 and A1 and also having regard to the fact that three years period wasfixed for payment of Rs. 25,000= out of the saleconsideration of Rs. 1,75,000=, both the courts below rightly held that the agreement of sale was not intended to be acted upon and it was only a security document.

The judgment relied upon by the learned counsel forthe appellant cannot be applied to the facts and circumstances of the present case. In the decision reported in P.S. Ranakrishna Reddy Vs. M.K. Bhagyalakshmi and Another, , the agreement ofsale was entered into on 11.5.1979 and out of the saleconsideration of Rs. 45,000=, Rs. 15,000= was paid under the date of the agreement and Rs. 5000= was to be paid within the period of one year and the balance shall be paid within the period of five years from that date. Even though five years period was fixed, within two years, notice was served by the respondent calling upon the appellant to execute the sale deed and immediately, thereafter, the suit was filed. Considering all these aspects, it was held in that judgment that the suitdocument was only an agreement of sale and it cannot beconstrued as a money transaction. Further, in that case,the defendant did not prove his case about the financialtransaction between the parties.

On the other hand, in the present case, as statedsupra, the respondents proved the financial transactionbetween the parties and therefore, the judgment reported in P.S. Ranakrishna Reddy Vs. M.K. Bhagyalakshmi and Another, cannot be applied to the facts and circumstances of this case. Further, in a similarcircumstance, the Honourable Supreme Court in Tejram Vs. Patirambhau, held that having regard tothe payment of more than 90% and fixing three years for thepayment of balance amount, the transaction can only betermed as a money transaction and it cannot be termed as anagreement of sale. The facts of that case squarely appliesto the facts of this case. In similar circumstance, thiscourt also held in the judgment reported in (2007) MLJ 222 Vallithai & Others v. Arulraj that the transaction canbe considered as a money transaction and it cannot betreated as an agreement of sale.

11, One more aspect was that even though out of thesale consideration of Rs. 1.75,000=, Rs. 1,50,000= waspaid, possession was retained by the respondent and noexplanation was given as to why the appellant did not askfor possession and no reason was stated in the agreement ofsale regarding the fixing of three years after having paid90% of the sale consideration. Only in pleadings it wasstated that for vacating the service station, three yearstime was granted. As stated supra, the respondent provedto the satisfaction of the court that the circumstances under the agreement of sale was executed and both thecourts have rightly held that the transaction was only amoney transaction and the agreement of sale was notexecuted with the intention to act upon and therefore, thesubstantial questions of law are answered against theappellant and I hold that the courts below havebelieved the case of the respondent and held that therespondent proved that it was only a loan transaction andthe document viz., the agreement of sale was not intendedto be acted upon. The judgment and decree of the courtsbelow are confirmed.

In the result, the second appeal is dismissed. Nocosts. The connected miscellaneous petition is also dismissed.