Abdul Salam, Moideen Bava and Yahiya v. Abdul Rahman, Abdul Jaleel and P.A. Mohammed

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHIRCY V.** **TUESDAY ,THE 05TH DAY OF FEBRUARY 2019 / 16TH MAGHA, 1940** ## **RFA.No. 701 of 2013** **AGAINST THE JUDGMENT AND DECREE IN OS 609/2010 of PRINCIPAL SUB COURT,IRINJALAKUDA DATED 12-06-2013** ## **APPELLANTS/DEFENDANTS 1 TO 3:** **1 ABDUL SALAM AGED 73 YEARS, AGRICULTURIST, S/O. KUNHIKOMU HAJI, PADIYATH, MANAPPAT HOUSE, EDAVILANGU VILLAGE, KODUNGALLUR TALUK.** **2 MOIDEEN BAVA AGED 58 YEARS, BUSINESS, S/O. MOHAMMED, MATHILAKATHU VEETIL HOUSE, AZHIKODE VILLAGE & P.O., KODUNGALLUR TALUK.** **3 YAHIYA AGED 48 YEARS, S/O.MOHAMMED, MATHILAKATHU VEETTIL HOUSE, AZHIKODE VILLAGE & P.O., KODUNGALLUR TALUK, P.O.AZHIKODE 680 673.** **BY ADVS. SRI.P.VIJAYA BHANU (SR.) SMT.SEEMA P.JOSEPH SRI.P.M.ABDUL JALEEL (KODUNGALLUR) SRI.T.V.SHAJI AJEESH K SASI FOR APPELLANT** ## **RESPONDENTS/PLAINTIFFS & DEFENDANT 4:** **1 ABDUL RAHMAN AGED 65 YEARS, FARMING, S/O. ISMAIL HAJI, KADAMBOT HOUSE, SANTHIPURAM P.O., S.N. PURAM VILLAGE, KODUNGALLUR TALUK - 680 668.** R.F.A.No.701/2013 2 **2 ABDUL JALEEL AGED 55 YEARS,FARMING, S/O. ABDU, VADAKKEVEETIL HOUSE, SANTHIPURAM P.O, S.N. PURAM VILLAGE, KODUNGALLUR TALUK - 680 668. 3 P.A.MOHAMMED AGED 46 YEARS, BUSINESS, S/O. ABDUL KHADER, PADIYATH, MANAPATT HOUSE, EDAVILANGU, EDVAILANGU VILLAGE, KODUNGALLUR TALUK - 680 671. BY ADVS.SRI.RENJITH THAMPAN (SR.) SMT.P.R.REENA** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 05.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** R.F.A.No.701/2013 3 ## **JUDGMENT** Defendants 1 to 3 in O.S.No.609/2010 on the file of the Principal Sub Court, Irinjalakuda are the appellants. 2. The suit was filed by the plaintiffs 1 & 2 for return of advance money. The case pleaded before the court below is that the first defendant entered into an agreement with the plaintiff and the 4[th] defendant for sale of the plaint schedule property having an extent of 61.150 cents of land fixing sale consideration of Rs.1,67,500/-per cent. The time fixed for execution of the agreement was six months from 18.4.2008, the date of the agreement. So the period expired on 18.10.2008. On the date of execution of the agreement an amount of Rs.15 lakhs was received by the first defendant from the plaintiffs and Rs.8 lakhs from the 4[th] defendant. So in total an advance amount of Rs.23 lakhs was received by the first defendant from the plaintiffs and the 4[th] defendant. Though the first defendant agreed to convince the plaintiffs and the 4[th] defendant with regard to the title deed R.F.A.No.701/2013 4 and other documents and the extent of property, the said condition was not complied with by the first defendant and hence the sale deed was not executed as agreed between the parties. The plaintiffs and defendant No.4 were ready and willing to pay the balance sale consideration and get the document executed in their favour. But it was not materialised due to the failure on the side of the first defendant, still then he failed to return the advance amount received from the plaintiffs and the 4[th] defendant. Therefore a lawyer notice was issued on 1.4.2010 but a reply notice was received with false allegations. As the defendants failed to comply with the stipulations in the agreement, the claim was limited to Rs.18 lakhs which had been received by the first defendant from the plaintiff and the suit was filed for realization of the said amount with interest at the rate of 12% per annum. 3. Defendants 1 to 3 filed a common written statement admitting the execution of the sale agreement dated 18.4.2008 as well the receipt of the advance amount of Rs.15 lakhs on the R.F.A.No.701/2013 5 date of the agreement itself and Rs.8 lakhs thereafter on 15.5.2008. The defendants were always ready and willing to perform their part of the agreement. In fact the plaintiffs failed to fulfill the conditions in the agreement and they evaded the same and hence the document was not executed. The first defendant in the meanwhile entered into an agreement to purchase 39½ cents of land. But since the sale deed was not executed with respect to the plaint schedule property, he had to arrange money by availing loan of Rs.30 lakhs through the son of his brother from a Finance Company by paying huge amount as interest and thus he sustained heavy loss in that transaction. The sale deed was not executed in favour of the plaintiffs due to the failure on the side of the plaintiffs in arranging money within the time fixed and hence they are not entitled to get back the amount claimed. 4. Before the court below, the first plaintiff was examined as PW1 and Exts.A1 to A6 were marked on the side of the plaintiffs. The first defendant was examined as DW1 and DW2, R.F.A.No.701/2013 6 the broker who intervened in the transaction, was also examined. No documentary evidence for the defendants. 5. The court below after evaluating the evidence decreed the suit as prayed for. The said judgment and decree are under challenge in this appeal. 6. Heard Sri.P.Vijayabhanu, learned Senior counsel for the appellants and Smt. Reena.P.R., learned counsel appearing for the respondent. 7. The suit was filed for return of the advance amount on the basis of Ext.A1 sale deed dated 18.4.2008. Admittedly the sale agreement had been executed by the plaintiffs and the 4[th] defendant on one side and the defendants 1 to 3 on the other side. It is pertinent to note that the property involved in this case having an extent of 61.150 cents belonged to defendants 2 and 3. In fact, the first defendant had entered into an agreement with defendants 2 and 3 to purchase the property. Thereafter, he along with defendants 2 and 3 entered into the sale agreement with the plaintiffs on 18.4.2018. So actually the R.F.A.No.701/2013 7 first defendant has not obtained the title deed of the property having an extent of 61.150 cents. The price fixed for the property was 1,67,500/- per cent. On the date of execution of the agreement itself, the plaintiffs had paid an amount of Rs.15 lakhs and that has been mentioned in the agreement. Thereafter, an amount of Rs.8 lakhs was paid by the 4[th] defendant as part of the sale consideration on 15.5.2008 and that was also endorsed on the reverse side of Ext.A1 agreement. The 4[th] defendant who joined the plaintiffs to purchase the property remained ex parte. It has come out in evidence that he is a relative of the plaintiffs and no relief was sought for against the 4[th] defendant. In fact the claim is only for Rs.18 lakhs after deducting the amount of Rs.5 lakhs paid on 15.5.2008. It has also come out in evidence that DW1 has not acquired title over the plaint schedule property at the time of entering into the sale agreement with the plaintiffs and the 4[th] defendant. It is significant to note that the receipt of the advance amount is not in dispute. The 1[st] plaintiff as PW1 had deposed before the court that the plaintiffs were always R.F.A.No.701/2013 8 ready and willing to pay the balance sale consideration and get the title deed executed in their favour. He has also deposed that his two sons were in Gulf and he was having sufficient funds to pay the balance sale consideration and he approached the defendants many times. But they evaded the execution of the documents and hence finally he issued Ext.A2 notice on 1.4.2010. So his definite case is that he was having sufficient funds and the plaintiffs were ready and willing to get the document executed, but the defendants failed to perform their part of the contract and hence the sale deed was not executed. It was further contended that the first defendant failed to take steps to measure out the property and convince with regard to the extent of the property and to make available the documents. There is absolutely no evidence to show that the first defendant had in his possession the encumbrance certificate, tax receipt, prior title deeds etc so as to execute the sale deed as agreed, though the contention raised by the defendants is that the plaintiffs have not asked for measurement of the property. It is R.F.A.No.701/2013 9 difficult to accept the said contention in the absence of reliable and cogent evidence before the court. So on an evaluation of the entire evidence adduced by the parties, it can only be concluded that the execution of the sale deeds was not materialised because of the default and failure to comply with their part of obligation on the side of the defendants. It is also evident from the records that the plaintiffs were having sufficient funds and they were always ready and willing to perform their part of the contract. It has also come out in evidence that the property belongs to another person by name Dr.Burd and he is having some right in the property. But that fact was not revealed in the agreement and it was disclosed by the party only when PW1 was in the box. 8. So also it is to be noted that even though DW1 has a case that he had entered into an agreement for purchase of 39½ cents of property from one Siddique and he had to arrange sale consideration for purchase of that property by availing a loan from a Finance company through the help of the son of his R.F.A.No.701/2013 10 brother, as there was failure on the side of the plaintiffs in paying the balance consideration. But no document is available to substantiate the contention that he had sustained loss due to the failure on the part of the plaintiffs to perform the contract. 9. Of course DW2, the broker who intervened in the transaction was examined, but he had deposed before the court that the transaction had taken place between the plaintiffs and defendants 1 to 3 and so he had no idea about the real owners of the plaint schedule property. So the evidence of DW2 will no way help the defendants to substantiate their case. Therefore, it could be seen that the defendants have failed to substantiate their case that the agreement was not materialized due to the failure on the side of the plaintiffs and because of the same they sustained heavy loss, so as to entitle them to retain the advance money received. 10. Learned counsel for the defendants has relied on the decision in **Satish Batra v. Sudhir Rawal[ (2013) 1 SCC 345]** and argued that earnest money can be forfeited when there is R.F.A.No.701/2013 11 default on the side of the purchaser. In this decision earnest money is specifically described in paragraph 12 of the judgment as follows: “ 12. In Shree Hanuman Cotton Mills and Others v. Tata Air Craft Limited 1969 (3) SCC 522, this Court elaborately discussed the principles which emerged from the expression “earnest money”. That was a case where the appellant therein entered into a contract with the respondent for purchase of aero scrap. According to the contract, the buyer had to deposit with the company 25% of the total amount and that deposit was to remain with the company as the earnest money to be adjusted in the final bills. Buyer was bound to pay the full value less the deposit before taking delivery of the stores. In case of default by the buyer, the company was entitled to forfeit unconditionally the earnest money paid by the buyer and cancel the contract. The appellant advanced a sum of Rs.25,000/- (being 25% of the total amount) agreeing to pay the balance in two installments. On appellant’s failure to pay any further amount, respondent forfeited the sum of Rs.25,000/-, which according to it, was earnest money and cancelled the contract. Appellant filed a suit for recovery of the said amount. The trial Court held that the sum was paid by way of deposit or earnest money which was primarily a security for the performance of the contract and that the respondent was entitled to forfeit the deposit amount when the appellant committed a breach of the contract and R.F.A.No.701/2013 12 dismissed the suit. The High Court confirmed the decision taken by the trial Court. This Court, considering the scope of the term “earnest”, laid down certain principles, which are as follows: '21. From a review of the decisions cited above, the following principles emerge regarding “earnest'” - 1) It must be given at the moment at which the contract is concluded. - 2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract. - 3) It is part of the purchase price when the transaction is carried out. - 4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. 5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.' Here, the nature and character of the the amount received by the first defendant on execution of Ext.A1 agreement and the surrounding circumstances involved, indicate that it is not the earnest money, but it is the money paid as part payment on the basis of the agreement. So the decision referred to by the R.F.A.No.701/2013 13 learned counsel for the defendants is not applicable in this case. 11. Therefore, forfeiture of the amount of 18 lakhs is not justified. I find absolutely no ground to interfere with the judgment under challenge. The plaintiffs are entitled to get the amount of Rs.23,37,688/- with interest at the rate of 12% per annum on the principal amount of Rs.18,00,000/-from the date of the suit till the date of decree and thereafter at the rate of 6% per annum on the principal amount till realization. The judgment and decree are hereby confirmed. Appeal dismissed. No costs. Sd/- ks **SHIRCY.V. JUDGE**