M.K. Abraham Maniyanodil and ABM Builders Pvt. Ltd. v. Peter Cherian Veliyathumalil N.P. Cherian

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR & THE HONOURABLE SMT. JUSTICE P.V.ASHA MONDAY, THE 22ND DAY OF SEPTEMBER 2014/31ST BHADRA, 1936 RFA.No. 121 of 2008 ( ) ------------------------ AGAINST THE ORDER/JUDGMENT IN OS 465/2003 of I ADDL.SUB COURT,ERNAKULAM DATED 08-01-2008 APPELLANT(S)/DEFENDANTS 1 AND 4: ---------------------------------------------- 1. M.K.ABRAHAM MANIYANODIL HOUSE, VALLAMKULAM, ERAVIPEROOR VILLAGE, THIRUVALLA TALUK, MG.DIRECTOR ABM PROPERTIES. 2. ABM BUILDERS PVT. LTD., ABM TOWERS, P.O.BOX NO. 2040, KADAVANTHRA COCHIN-682 020. BY ADVS.SRI.G.SREEKUMAR (CHELUR) SRI.K.RAVI (PARIYARATH) SMT.PREETHY KARUNAKARAN RESPONDENT(S)/PLAINTIFF: ------------------------------ PETER CHERIAN VELIAYTHUMALIL N.P.CHERIAN, 28/3591, CHILAVANNUR ROAD KADAVANTHRA, KOCHI-682 020, PRESENTLY WORKING AT DOHA QUATAR, REPT.BY POWER OF ATTORNEY HOLDER, JOSE NIDIRY S/O.LATE JOHN NIDIRY, RESIDING AT H.NO.15 R, BY ADV. SRI.SANTHEEP ANKARATH R, BY ADV. SRI.V.C.MADHAVANKUTTY THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 9/7/2014 THE COURT ON 22/9/2014 DELIVERED THE FOLLOWING: ## **T.R.RAMACHANDRAN NAIR & P.V. ASHA, JJ.** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **R.F.A. No.121 OF 2008** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **DATED THIS THE 22ND DAY OF SEPTEMBER, 2014** ## **JUDGMENT** ## Ramachandran Nair, J. This appeal is filed by the defendants in O.S. No.465/2003 on the file of the Ist Addl. Sub Court, Ernakulam which was decreed allowing the pleas of the plaintiff. The parties are referred to as arrayed in this appeal. 2. The respondent filed the suit seeking for a decree for specific performance and alternatively for return of advance money with interest and to realise the amounts towards damages suffered by him. It was partly decreed, viz. for return of advance money with interest at the rate of 18% from 17.7.1996 till the date of suit and at the rate of 6% thereafter till realisation. Both sides had filed appeals before this Court as R.F.A. No.452/2005 (appeal filed by the appellants herein) and R.F.A. NO.378/2006 (appeal filed by the respondent/plaintiff). The appeal filed by the plaintiff was confined to challenge against the refusal to award interest for certain periods. These appeals were disposed of by this Court by judgment dated 20.9.2007 which is reported as **Peter Cherian v.** RFA No.121/2008 -2- **M.K. Abraham** (2007 (4) KLT 679). The judgment is rendered by one of us (Ramachandran Nair, J.). 3. By the above judgment this Court inter alia rejected the contentions of the appellants that the claim for interest is barred by limitation. At the appellate stage the respondent had filed I.A. No.446/2007 for permitting him to remit the deficit court fee. The said issue was considered and decided in favour of the respondent and finally this Court remanded the matter to the trial court for adjudicating the issue regarding liability to pay interest on various claims including granting of interest at 18%. This was directed after allowing the respondent to remit the required amount of court fee in the light of Section 12(4) of the Kerala Court Fees and Suits Valuation Act. This Court allowed the respondent to amend the valuation of the plaint also with liberty to the appellants herein to take up all available contentions on merits. Thereafter, the matter was reheard and the court below has passed a decree allowing the respondent to realise an amount of Rs.28,07,837/-. It was directed that out of the said amount, Rs.11,51,000/received on 7.4.2006 will be deducted and aggrieved by the said judgment and decree, this appeal is filed by the appellants/defendants 1 and 4. RFA No.121/2008 -3- 4. Shorn of unnecessary details, the necessary facts for the disposal of the appeal are the following: The plaint schedule property was allotted to the third defendant by the Greater Cochin Development Authority (“GCDA” for short). Defendants 1 and 2 are Managing Partners of the 4[th] defendant which is a partnership firm and the third defendant is another partner of the firm. The respondent/plaintiff is a non resident Indian. The allotment by the GCDA was made for the purpose of developing the plot by constructing a multi storied building. The partnership was formed by defendants 1 to 3 to implement the project. 5. An agreement was entered into by the respondent with the second appellant/4[th] defendant on 20.7.1995 (Ext.A1) whereby the second appellant agreed to sell 1/65[th] share in the undivided 51.152 cents of land in Sy. Nos.391 and 392 of Elamkulam Village together with the right to construct an apartment on the first floor of the multi storied building named A.B.M. Towers and the right to construct a covered car parking for a total consideration of Rs.1,90,000/-. By this agreement the construction of the building was entrusted with the second appellant. The respondent was entitled to get the flat constructed with the right to use the proportionate RFA No.121/2008 -4- share in the common areas and with common facilities and the covered car parking. Ext.A2 dated 20.7.1995 is the second agreement executed between the parties on the same date whereby the second appellant agreed to construct an apartment having an extent of 1404 sq. ft. on the first floor of the building for a total cost of Rs.14,04,000/- which includes the price of the 1/65[th] share in the undivided property and Rs.75,000/- towards cost of car parking space for parking of cars for one car. The period for completion was provided as 30.8.1997 and it was agreed that possession will be handed over to the plaintiff within 90 days of such completion. There was a specific provision with regard to payment of instalments by the respondent, according to which, the respondent has to make payment either according to the payment schedule incorporated in the agreement or as per the revised payment schedule as agreed to subsequently basing on the stages of construction. Another important provision was concerning the consequence of default by the respective parties and the present appeal depends upon the interpretation of the same. It was provided that in case of default on the part of the respondent, the second appellant was entitled to cancel the agreement and return the amount received after deducting 10% and in case of default RFA No.121/2008 -5- on the part of the second appellant, the respondent was entitled to realise the amounts paid to the second appellant with interest at 18% per annum from the respective payment dates. 6. It was averred by the respondent/plaintiff that he had paid an amount of Rs.4,01,000/- as advance on the agreement. He had availed a loan subsequently from the Housing Development Finance Corporation for payment to the defendants at different stages of construction as agreed. The bank was given standing instructions that the amounts are to be disbursed as and when they are due. It was granted with interest at the rate of 15.5% per annum. Subsequent payments were made by the plaintiff, viz. Rs.3 lakhs, Rs.1.5 lakhs, Rs.1.5 lakhs and Rs.1.5 lakhs on 12.1.1996, 17.4.1996, 4.7.1996 and 18.9.1996 respectively. As on 18.9.1996 he had made payment to the tune of Rs.11,51,000/- towards the total consideration including the price of parking space. It was also alleged that he had made a further payment of Rs.47,500/- towards flooring and another amount of Rs.32,649/- towards laying of marble. According to the respondent, further amounts could not be paid even though he was willing to pay it, as the construction was behind the schedule. It was at this stage disputes arose RFA No.121/2008 -6- between the parties and on 19.11.1999 the respondent was served with a notice from the second appellant/fourth defendant informing that the defendants have availed a loan from the Housing Urban Development Corporation (for short “HUDCO”) to the tune of Rs.1 Crore and the respondent plaintiff was directed to pay an amount of Rs.3 lakhs being the proportionate share of the loan amount against his apartment and to obtain individual apartment clearance. Such a liability was disputed by the respondent, as he was not a party to any such deal with the said Corporation. There were correspondences between the two parties and finally, after mediation, an agreement was arrived at on 26.7.2001 so as to hand over possession of flat No.2A1 in the second floor and the car parking lot NO.17 to the respondent. It was agreed that the respondent should give an irrevocable bank guarantee of Rs.3,13,149/- together with interest at bank overdraft rate till date of payment to the defendants which shall be payable to them on giving clear title deeds. The respondent was given possession on 27.7.2001 and he made arrangements to execute the bank guarantee with the bank which was also ready on 6.9.2001, according to the averments in the plaint. But in the meanwhile, by notice dated 18.8.2001 second appellant RFA No.121/2008 -7- demanded payment of Rs.6,56,369/- with interest in default of which they threatened legal action. It has further been stated therein that the HUDCO has approached the Debt Recovery Tribunal for recovering huge amount. The respondent gave a detailed reply to the said notice. 7. It was contended by the respondent that after getting possession of the flat, he has put up several fittings in the flat spending large amounts. It was having a temporary electric connection. He was informed by the Finance Manager of the second appellant by letter dated 24.7.2002 that he has to pay an amount of Rs.2,176/- to the Corporation as tax for the period from April, 2002 to March, 2003. According to the respondent, he paid the said amount. On 27.6.2002 the plaintiff entered into a lease agreement with one Shri M. Ibrahim, who agreed to take on lease the flat for a rent of Rs.6,000/- per month from 15.9.2002 for a period of 11 months. The furnitures of the tenant were also shifted on 14.9.2002. But when he went to the flat for making arrangements on the morning of 15.9.2002, it was found that there was no power supply. On enquiry, it was informed that the Director of the second appellant disconnected the temporary power supply to the flat. The tenant informed the same to the respondent. The respondent RFA No.121/2008 -8- who was in Quatar, immediately contacted the Director of the second appellant and enquired about this. Then, he was asked to pay the entire amount demanded as per the lawyer notice and he was also informed that he will be evicted and the flat will be repossessed by the second appellant if the amount as demanded is not paid immediately. The respondent refused the demand over phone. Finally, since there was a threat of dispossession, the respondent had filed O.S. No.1531/2002 before the Munsiff's Court, Ernakulam seeking for a permanent prohibitory injunction against threat of disturbance of peaceful possession and enjoyment of property. An interim injunction was granted by the Munsiff's Court. The defendants thereafter issued a notice on 11.6.2003 (Ext.A24) rescinding the agreement. This led to the filing of the present suit by the respondent. The suit was filed for granting a decree for specific performance, viz. to direct the defendants to execute the sale deed of the plaint schedule property including flat No.2A1 and the car parking space No.17 in favour of the respondent after receiving the balance sale consideration. It was alternatively prayed to grant a decree for return of advance money of Rs.11,98,500/- with interest. The third prayer was to realise a sum of Rs.9,78,720/- with future interest at 18% RFA No.121/2008 -9- per annum being the damages suffered by the respondent. 8. The appellants' case in a nutshell was the following: It was contended in the written statement filed by the appellants/defendants 1 and 4 that even though there were two agreements between the parties, the respondent did not pay the amounts in tune with the stipulations in the agreement Ext.A2. Amounts were outstanding and finally by letter dated 21.12.2000 the defendants informed the respondent that the construction of the apartment is over and is ready for taking possession and the balance amount of Rs.6,56,738/- is due which has to be paid. As it was not complied with, a further letter was sent on 11.1.2001. The respondent sent a reply dated 17.4.2001 whereby he threatened to impose liability for interest on the amount as the building was not completed. Even though a further letter was sent on 18.8.2001 informing the respondent that he is liable to pay interest and also the amount due as the defendants have borrowed money from HUDCO to whom interest has to be paid, the respondent disputed the said liability by reply dated 13.9.2002. It was further contended that even though an agreement was executed between the parties on 12.7.2001 as per which possession of the apartment was handed over to the respondent along RFA No.121/2008 -10- with car parking area and certain payments were also directed to be made, the respondent did not pay the said amount. Again, an amount of Rs.6,56,369/- was demanded by the defendants, but the plaintiff did not pay the same. It is at that stage the plaintiff entered into an agreement with another person for leasing the apartment for rent at Rs.6,000/- per month. The defendants refused to accept the same as the temporary power supply was given only for personal use of the respondent. It was contended that since the respondent has violated the terms of the agreement leased out the property, the defendants refused to allow the said tenant to occupy the premises. It was also contended that since the Debt Recovery Tribunal has decreed the suit, the respondent is liable to pay interest to the defendants for payment to HUDCO. Again the respondent was informed by letter dated 11.6.2003 about his liability to pay various amounts. It was contended that the respondent is not entitled for any of the prayers made in the suit as he has committed default in payment of the amounts and as the agreement has been cancelled by the defendants. 9. The oral evidence in this case consists of the deposition of P.W.1 for the plaintiff and D.W.1 for the defendants. The plaintiff has marked in RFA No.121/2008 -11- evidence Exts.A1 to A25 and defendant has marked in evidence Ext.B1. Exts.C1 and C2 are respectively the Commissioner's report and rough sketch. 10. We heard learned counsel for the appellants Shri G. Sreekumar (Chelur) and Shri Sandeep Ankarath, learned counsel for the respondent. 11. Shri G. Sreekumar, learned counsel for the appellants submitted that even though the agreements Exts.A1 and A2 were there earlier, Ext.A16 superseded them. The said agreement does not specify or speak of any liability for interest on the part of the appellants. It is submitted that as per the earlier agreement, the respondent had to be allotted a flat in the first floor, numbered as 1-A1 and now as per Ext.A16 agreement it has been varied and what is allotted is flat 2-A1. The said agreement, viz. Ext.A16 has been entered into after mutual discussions. It is submitted that consideration for the agreement Ext.A16 is different. He relied upon Section 62 of the Contract Act, 1872 to contend that there is a variation of the terms of the original agreement. It is stated there cannot be a charge on flat 2-A1. Learned counsel elaborated his arguments by submitting that in the earlier round of litigation it was found that Ext. A2 was varied by RFA No.121/2008 -12- Ext.A16 and he placed reliance upon paragraph 16 of the judgment. It is submitted that in the proof affidavit in paragraph 10 the respondent/plaintiff has also mentioned about the settlement and therefore it clearly shows that there is a new contract between the parties. 12. Apart from the same, learned counsel submitted that actually possession was given to the plaintiff and he had also tried to induct a tenant. In these circumstances there is no liability for payment of interest on the part of the appellants and actually the defendants are entitled to retain certain amounts, viz. the advance amount. He relied upon the decision of the Apex Court in **Young Achievers v. IMS Learning Resources Private Limited** {(2013) 10 SCC 535} to contend that there is a clear novation of the agreement. It is therefore submitted that the view taken by the court below that the plaintiff is entitled to return the advance money with interest is not correct. 13. Shri Sandeep Ankarath, learned counsel for the respondent submitted that in the judgment rendered by this Court in **Peter Cherian's case** (2007 (4) KLT 679) laches on the part of the appellants have been conclusively found. The plaintiff has clearly relied upon in the plaint RFA No.121/2008 -13- Exts.A1 and A2. In the written statement there is no plea of novation and the contentions of the defendants are also based on Ext.A2 and not even a suggestion has been made in the oral evidence, to P.W.1. Learned counsel relied upon paragraphs 14 and 25 to 27 of the earlier judgment of this Court to contend that there is a clear finding about the liability to pay interest as contained in Ext.A2. It is not a case of substitution of any contract, learned counsel submitted. It is further submitted that even in the notice sent by the appellants, they do not rely upon Ext.A16 and they have demanded interest based on the earlier agreement, Ext.A2. Learned counsel submitted that there is a clear violation on the part of the defendants to act upon Ext.A16 and therefore they cannot plead that Ext.A2 has been substituted. Ext.A19 is specifically referred to by the learned counsel to point out that in the said lawyer notice also no mention has been made about Ext.A16 agreement. Therefore it is a clear case where Ext.A16 was given up by the defendants also. It is submitted that a reading of Exts.A19 and A24 lawyer notices issued by the defendants will show that they have demanded the amounts with interest as provided in Ext.A2 itself. Thus, it is a case where Ext.A2 continued to be binding on the parties and what is contained in Ext.A16 is RFA No.121/2008 -14- only an extension of time. 14. It is submitted by the learned counsel for the respondent that the flat was not occupied by the plaintiff respondent and the tenant was also not allowed to occupy it by the defendants. Therefore, on that score the liability to pay interest will not be lost. He specifically referred to Section 30 of the Specific Relief Act also. It is submitted that actually the plaintiff took back possession under lock and key. He further submitted by relying upon the decision of the Calcutta High Court in **Juggilal v. N.V. Internationale Crediet-En-Handels** (AIR 1955 Calcutta 65) that alteration of contract will not amount to novation. 15. It is further submitted by the learned counsel for the respondent that with regard to the construction, there has been deviation from the plan by the appellants. They have made a construction of commercial space as first floor and it is in that circumstance the second floor flat was allotted to the respondent and it is not a case where it is the allotment of the second floor of the residential quarters to the respondent. Learned counsel also submitted that Ext.A2 has not been challenged in the appeal and the valuation pointed out in the memorandum of appeal is also not proper. RFA No.121/2008 -15- 16. It may be mentioned herein that when the earlier appeals, viz. R.F.A. Nos.452/2006 and 378/2006 were pending, this Court by interim order dated 30.8.2005 had directed the plaint schedule property to be sold in public auction under the supervision of a Commissioner appointed by this Court, which course was agreed to by both sides. Accordingly, a public auction was held in which the property was bid by the appellants herein who were the appellants in R.F.A. No.452/2005, for a sum of Rs.30 lakhs and possession has been handed over to them. Out of this, the plaintiff was paid Rs.11,98,500/- and the balance amount was put in Fixed Deposit with Andhra Bank, Ernakulam. 17. In the judgment in **Peter Cherian's case** (2007 (4) KLT 679) this Court had repelled the contentions of the appellants that since possession was given, the charge under Section 55(6)(b) of the Transfer of Property Act has been lost to the plaintiff. It was found that there was no execution of conveyance by the appellants. In the course of discussion, in paragraph 14 it was noticed that Clause 12 of Ext.A2 which was relied upon by the court below to grant interest shows that the appellants have clearly agreed to pay interest on the amount received as advance. The other contention that the RFA No.121/2008 -16- claim for return of advance money is barred by limitation, was also repelled. 18. The points that arise for consideration are: (a) Whether Ext.A16 amounts to a novation of the contract executed between the parties as Exts.A1 and A2; and (b) Whether the appellants/defendants have any liability to pay interest on the advance amount received from the respondent/plaintiff. 19. After remand, the plaintiff has amended the prayer portion and the valuation including the claim of interest at 18% from the respective date of payments, has been quantified to the tune of Rs.28,07,837/-. Court fee has been paid in tune with the amendments allowed by the court. The defendants have filed additional written statement also disputing the liability to pay interest. 20. We have already referred to the agreements Exts.A1 and A2. What is agreed to by Ext.A1 by the appellants is to sell and the respondent to purchase 1/65[th] share in the undivided 51.152 cents of land in Sy. Nos.391 and 392 of Elamkulam village together with the right to construct an apartment on the first floor and the right to construct a covered car parking for a separate consideration subject to the condition that the RFA No.121/2008 -17- construction of the apartment and the proportionate share in the common areas and common amenities shall be entrusted to the contractor, ABM Builders Pvt. Ltd., under a separate agreement. Certain other clauses have also been agreed to by the parties which are not relevant here. Ext.A2 is the agreement for construction entered into between the second appellant and the respondent herein, as per which the second appellant agreed to construct, as building contractors for the plaintiff, an apartment Type A1 for a total cost of Rs.14,04,000/- including cost of undivided share in land and for construction and another amount of Rs.75,000/- for construction of a covered car parking area in the ground floor or in the open space around. The payment schedule is given in paragraph 2 of the agreement. Apart from the amount already paid, viz. Rs.15,000/-, the plaintiff had to pay on or before 20.7.1995, Rs.3,36,000/- and another amount of Rs.10 lakhs in equal monthly instalments of Rs.50,000/- payable on or before the 10[th] day of each month starting from July, 1995. At the time of handing over possession of the flat, the plaintiff had to pay a sum of Rs.53,000/- also. The first instalment towards additional amount for covered car parking, viz. Rs.37,500/- has to be paid by 10.8.1995 and the second instalment, viz. RFA No.121/2008 -18- Rs.37,500/- on 1.6.1996. It was stipulated that the first party, viz. the second appellant, was entitled to realise interest at the rate of 18% in case of default on the part of the second party to pay the instalments within the stipulated dates. By clause 5 the work had to be finished on or before 30.8.1997 and possession will be handed over within 90 days after completion. Clause 12 is important which is extracted below: “12. If the terms of the contract are not carried out by the First Party on account of the default of the First Party without any default on the part of the Second Party then the First Party shall be liable to pay all the amounts received from the second party together with interest at the rate 18% per annum from the respective dates of payment.” The first party therein is the second appellant and the second party is the respondent plaintiff. Going by clause 11, if there is a failure on the part of the second party to pay the instalments on or before the stipulated time the first party has the discretion to cancel the agreement and return without interest to the second party the instalments paid after deducting 10% out of that, as damages suffered by the first party. 21. The plaintiff has produced various documents along with the proof affidavit. It has been stated in paragraph 5 that he has paid an amount RFA No.121/2008 -19- of Rs.15,000/- prior to the date of agreement as advance consideration to the second appellant and Ext.A3 is the receipt dated 21.2.1995. An amount of Rs.3,86,000/- was paid on 18.7.1995 and Exts.A4 and A5 are the receipts showing the same. Thus, an amount of Rs.4,01,000/- was paid before the date of agreement. He had availed a loan from HDFC for an amount of Rs.10 lakhs for payment to the second appellant which was intimated to the second appellant. A letter was given by the second appellant by way of clearance of title and encumbrances which is marked as Ext.A6. It is the evidence of P.W.1 that further amounts were being paid through HDFC as per the standing instructions given. Thus, amounts to the tune of Rs.3 lakhs, Rs.1.5 lakhs, Rs.1.5 lakhs and Rs.1.5 lakhs were paid on 12.1.1996, 17.4.1996, 4.7.1996 and 18.9.1996 totaling Rs.11,51,000/-, out of the total consideration of Rs.14,04,000/- and all the amounts were accepted by the appellants. Ext.A7 is the receipt for purchase of marble for flooring, viz. Rs.47,500/- and Ext.A8 is the certificate issued by the HDFC to the respondent evidencing various payments made to the second appellant and the last payment was Rs.2,50,000/- to the plaintiff. The work was delayed by the appellants and therefore the plaintiff did not pay the balance RFA No.121/2008 -20- instalment even though he was willing to pay the amount and was ready with the money. Ext.A9 is the letter issued by the first appellant stating that quarterly payment is acceptable to him. Regarding the non completion of the work, the HDFC itself sent a letter to the plaintiff which is produced as Ext.A10 and it is the case of the respondent that the structure of the building was not completed even in late 1998. Ext.A11 is the letter of apology issued by the second appellant. By Ext.A12 notice the respondent was directed to pay an amount of Rs.3 lakhs to HUDCO being the proportionate share of loan amount against his apartment which liability was disputed by him. Therein also, the second appellant has offered explanation for the delay in completing the building. Thereafter, another letter was issued on 21.12.2000 by the second appellant demanding an amount of Rs.6,56,738/- and stating that apartment No.2A1 is ready for possession. To this letter, the respondent forwarded Ext.A13 letter asking the second appellant to clarify both the points. But thereafter no reply was given to him. By Ext.A14 letter the plaintiff demanded interest at 18% per annum for the payments made by him to which Ext.A15 reply was given by the second appellant. RFA No.121/2008 -21- 22. Now we will come to Ext.A16 which contains three clauses which are extracted below: “1. ABM Builders (P) Ltd. Hereby give possession of flat No.2A1 in second floor and car parking lot NO.17 of ABM Towers to Peter Cherian, Valiyathumalil on 28[th] July 2001. 2. Peter Cherian shall give irrevocable Bank Guarantee for Rs.3,13,149/- together with interest at bank overdraft rate till date of payment to ABM Builders (P) Ltd., which shall be payable to them on giving clear Title Deeds. 3. A joint measurement regarding saleable area of the apartment shall be done with the Owners Association. If the saleable area, on a joint measurement with the owners association if found, more or less, it shall be payable by both the parties.” By Ext.A16, it was agreed to give possession of flat No.2A1 in second floor and car parking lot NO.17 of ABM Towers on 27.7.2001. The respondent will have to give an irrevocable Bank Guarantee for Rs.3,13,149/- together with interest at bank overdraft rate till date of payment to the second appellant which shall be payable to them on giving clear title deeds. Clause 3 provides for measurement of the saleable area of the apartment. Ext.A17 is the application given by the respondent RFA No.121/2008 -22- requesting the Bank to prepare the Bank Guarantee. It is stated in the proof affidavit that he left for Doha thereafter. It is also stated that the bank guarantee was accepted by the second appellant and Ext.A18 is the photo copy of the same. 23. Ext.A19 is the lawyer notice dated 18.8.2001 issued to the respondent whereby the second appellant demanded an amount of Rs.6,56,369/- excluding electricity and water connection charges and other statutory payments with interest at 21% per annum which was served to the plaintiff in Doha. Ext.A20 is the reply given to the same by the respondent disputing the said liability. Ext.A21 is the draft of the agreement entered into between the respondent and the tenant Shri M. Ibrahim. Ext.A22 is the further notice issued to the respondent demanding Rs.9,99,384/- by the Finance Manager of the second appellant and Ext.A23 is the reply given by the respondent whereby he denied the liability, which was sent through his lawyer. Thereafter, the second appellant rescinded the contract by Ext.A24 notice sent through their lawyer. They informed that they intend to cancel the agreement and adjust the payments made by the respondent to the amounts due from him. Ext.A25 is the reply notice given on behalf of the RFA No.121/2008 -23- respondent. 24. In cross examination, the respondent has deposed that instalments were paid as per the change agreed to by the builders also. According to him, he being not a party to the agreement between HUDCO and the second appellant, he was not bound to remit Rs.3 lakhs as demanded and he had no knowledge about the details of the order passed by the Debt Recovery Tribunal also. According to him, as per Ext.A16, he was not given clear title deeds and thereafter the second appellant sent Ext.A19 lawyer notice. The agreement was also revoked. He deposed that the tenant was prevented from occupying the flat and the electricity connection was also disconnected which was not in his name. 25. The evidence of D.W.1 will show that he has admitted in cross examination that the construction was made after making deviation in the plan. At the stage of construction of the first floor, a loan from HUDCO was availed in October, 1997. According to him, just below the flat allotted to the respondent, is a commercial space and the roof of which was shown as the balcony of P.W.1. He also deposed that P.W.1 has not been granted title even though possession was given. RFA No.121/2008 -24- 26. As regards the plea of the appellants now that there is novation of the contract, we will have to consider the effect of Exts.A2 and A16 and the subsequent communications and correspondence and also the notices issued by the second appellant. In Ext.A16, it can be seen that going by clause 2, what is provided is that “the respondent shall give irrevocable Bank Guarantee for Rs.3,13,149/- together with interest at bank overdraft rate till date of payment to the second appellant, which shall be payable to them on giving clear Title Deeds.” In fact, the averment in the plaint regarding the subsequent steps taken by the respondent to issue the Bank Guarantee, have not been denied in the written statement. The letter demanding more amount was replied by Ext.A13 letter by the plaintiff even before Ext.A16 was executed. It is not as if in Ext.A13 he has agreed to pay Rs.6,56,738/-. Therein, he has referred to the said letter and has objected to the demand for more money. We extract the relevant portion hereunder: “Your letter of 21[st] December 2000 states that apartment 2A1 is ready for possession and an amount of Rs.6,56,738/- is due from me. Please rectify this error and inform me the status of apartment 1A1 (apartment A1 at first floor) and the balance due from me.” It is thus clear that he has not agreed to pay Rs.6,56,738/-. By Ext.A14 RFA No.121/2008 -25- the respondent reminded the second appellant about clauses 5 and 12 of Ext.A2 and he informed that he will charge interest at 18% per annum from he respective dates of payment. To Ext.A14, Ext.A15 reply was given by the second appellant. What is informed therein is that the construction of the flat has been completed except the installation of sanitary fittings such as closets and wash basins which required the confirmation of the respondent for the colour. Of course, there is a request that the respondent can take possession of the apartment. 27. We will now refer to Ext.A18, copy of the bank guarantee produced by the respondent. Therein reference made about Ext.A16 is as a supplemental agreement. 28. When we refer to the lawyer notice Ext.A19 issued to the respondent, what we find is that there is no reference about Ext.A16 agreement, or any plea of novation of the contract, etc. After referring to the details of the loan availed from HUDCO and the liability of the defendants arising from the said loan transaction, reference has been made about the case filed by HUDCO before the Debt Recovery Tribunal. Finally, it is stated that the respondent is liable to pay Rs.6,56,369/- with liability to pay RFA No.121/2008 -26- interest from the date of default. It was also informed as follows: “You are also liable to pay interest which our clients are liable to pay to HUDCO. The above amount does not include electricity and water connection charges and other statutory payments.” Finally, it is demanded that the aforesaid amount with interest at the rate of 21% per annum has to be paid within 15 days from the date of receipt of the notice, failing which legal action has been threatened. 29. In Ext.A20 reply notice given by the respondent through his lawyer, he has disputed the said liability and demanded payment of advance amount with interest along with damages and compensation for mental agony, etc. When we come to Ext.A22 issued by the Finance Manager of the second appellant to the respondent, what we find is that with regard to the balance amount outstanding as on 31.3.2002 including interest for delay in payments, the figure shown is Rs.9,99,384/- in the account of the respondent. In Ext.A24 lawyer notice issued by the second appellant also, there is no reference about Ext.A16. After stating about the demand of Rs.9,99,384/- allegedly due as on 31.3.2002, the respondent is informed that he did not make the interest on fixed amount and the Bank Guarantee itself RFA No.121/2008 -27- got revoked and that the defendants are entitled to the full amount. It is further stated as follows: “Since you have defaulted payments our clients have no other alternative than to terminate the contract in accordance with the terms of the agreement and recover the amount payable after adjusting the amount already paid.” It is further informed that in view of the fact that the agreement is cancelled, the respondent is not entitled to have possession of the property and the appellants have instructed the security people not to allow him to enter the premises and occupy the property. It is also informed that the appellants are also entitled to sell Flat No.2A1 to any other party. Thus, when we refer to Exts.A19, A22 and A24, what we find is that the appellants have also demanded amounts varying from the amount shown in Ext.A16 with interest. In Exts.A22 and A24 they have clearly stated that Ext.A2 agreement was revoked. 30. Much reliance is placed by the learned counsel for the appellants on Section 62 of the Contract Act which reads as follows: “ **62. Effect of novation, rescission, and alteration of contract.** -- If the parties to a contract agrees to substitute a new contract for it, or RFA No.121/2008 -28- to rescind or alter it, the original contract need not be performed.” A reading of Ext.A16 will show that it provides for allotment of flat No.2A1 instead of flat No.1A1. It is not as if flat No.1A1 is unavailable, since it is clear from the evidence of D.W1 - as rightly pointed out by the learned counsel for the respondent - that the said floor has been made as a commercial construction which is admitted to be in the possession of the appellants. Therefore, the number given as 2A1, as rightly pointed out by the learned counsel for the respondent, indicates the floor for residential occupation. It is not a case, as contended by the learned counsel for the appellants, that there is a clear substitution by a new contract, going by the circumstances of the case and as is clear from the subsequent correspondence between the parties. The appellants themselves are relying upon the clauses in Ext.A2 to demand further amounts by way of price for the flat along with interest. The justification sought is that a loan was availed by them from HUDCO in October, 1997. None of the documents executed by the appellants with HUDCO have been marked in evidence and the order of the Debt Recovery Tribunal is also not produced in evidence. Therefore, there is nothing to show that the respondent was bound by any of RFA No.121/2008 -29- the terms agreed to between HUDCO and the appellants and automatically he has got a liability to pay them. The demands made by the appellants as per Exts.A19, A22 and A24 will thus clearly show that they have never treated Ext.A16 as one substituting the earlier one. They themselves did not act on Ext.A16. If that be so, they cannot argue for the position that there is clear novation and the respondent cannot invoke clause 12 of Ext.A2 for payment of interest by the appellants. 31. Shri G. Sreekumar, learned counsel for the appellants relied upon **Young Achievers' case** {(2013) 10 SCC 535} in this context. Therein, the Apex Court was considering a case where in the initial agreement executed between the parties, there was a clause for arbitration. A reading of paragraph 4 of the judgment will show that instead of the arbitration clause in the agreements dated 1.4.2007 and 1.4.2010, it was mutually decided that if there is any violation of the trade mark IMS, the respondent is entitled to take legal recourse against the appellant. The Apex Court, in paragraph 5 observed that an arbitration clause in an agreement cannot survive if the agreement containing arbitration clause has been superseded/novated by a later agreement. Finally, in paragraph 8 the Apex Court has held as follows: RFA No.121/2008 -30- “8. We may indicate that so far as the present case is concerned, parties have entered into a fresh contract contained in the exit paper which does not even indicate any disputes arising under the original contract or about the settlement thereof, it is nothing but a pure and simple novation of the original contract by mutual consent.............” 32. We are afraid, the said portion of the judgment cannot come to the rescue of the appellants herein to contend that there is a novation of the original contract, for the reasons already explained by us above. Herein, the appellants themselves are not relying upon Ext.A16 while demanding various amounts from the respondent as we have already found and they have also not acted upon Ext.A16. 33. It is also not stated in Ext.A16 that the earlier agreement has been cancelled. The respondent did not act upon Ext.A16 to transfer title by accepting the amounts specified therein. 34. In this context, we will also refer to the stand taken in the written statement and the different stand taken by the appellants in evidence with regard to the said aspect. In the written statement filed on 28.11.2003 what is stated in paragraph 7 after referring to Ext.A16, is that the plaintiff agreed to execute an irrevocable Bank Guarantee for Rs.3,13,149/- together with RFA No.121/2008 -31- interest on Bank overdraft rate till the date of payment to the defendants and also amounts payable to them till the clearing of the title deed. It is contended that the plaintiff/respondent is also liable to pay the interest payable to HUDCO and recovery certificate had already been obtained by them from the Debt Recovery Tribunal. It is further stated that the plaintiff has not paid the amount. 35. In paragraph 8 of the written statement it is stated that the defendant claimed a sum of Rs.6,56,369/- and the plaintiff did not pay the amount. In the proof affidavit filed by defendants 1 and 4, in paragraph 5 after referring to Ext.A16 it is stated that “Accordingly the plaintiff caused a Bank Guarantee to be executed agreeing to pay the balance amount with interest @ 13.5% per annum.” In paragraph 6 it is stated that “the plaintiff failed to pay the aforesaid amount (as per Ext.A16). Hence the defendants caused Ext.A-19 lawyer notice dt.18.1.2001 directing the plaintiff to pay the balance amount of Rs.6,56,369/-.” This is in variation of the contentions raised in the written statement which we have already extracted. It is evident that the appellants are demanding more amount in Exts.A19, A22 and A24 other than provided in Ext.A16. Therefore, we cannot accept the RFA No.121/2008 -32- argument of the learned counsel for the appellants that there is a clear substitution of the agreement and the respondent cannot rely upon Ext.A2 for claiming interest as per the agreed terms therein. 36. Shri Sandeep Ankarath, learned counsel for the respondent relied upon the decision of the Apex Court in **United Bank of India v. Ramdas Mahadeo Prashad and others** {(2004) 1 SCC 252} to submit that Ext.A16 is not at all an agreement as such, but it is only a letter incorporating an understanding. In the above decision, the Apex Court has held in paragraph 9, while considering non-compliance with the terms and conditions of the Memorandum of Understanding (MOU), as follows: “We have already said there was no concluded settlement or novation. Even otherwise, there has been non-compliance with the terms and conditions of the MOU by the respondents and a party in breach can hardly seek to enforce a contract. Therefore, the MOU does not amount to novation of contract as envisaged under Section 62 of the Indian Contract Act.” We have already expressed our view that there is no novation of the original contract. In the other decision relied upon by the learned counsel for the respondent, in **Juggilal's case** (AIR 1955 Clacultta 65), it was held that RFA No.121/2008 -33- “mere alteration or modification of the terms of a contract do not amount to its rescission.” 37. The decision of the Apex Court in **M/s. Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board and another** (AIR 2012 SC 3167) is relied upon to contend that the party cannot be allowed to raise the plea regarding novation for the first time during the hearing. Therein, the Apex Court held that “the ground or issue of novation of Contract is a mixed question of fact and law and it is being raised, for the first time, at the time of hearing of the case before the Apex Court which cannot be permitted to be raised. It was further held that “novation or alteration of contract is required to be urged evidentially and scrutinised by the courts below.” 38. Of course, Shri G. Sreekumar, learned counsel for the appellants replied that in the additional written statement in paragraph 9 the appellants have stated that the original contract, Ext.A2 has been varied as per Ext.A16 and both parties have waived their right to claim interest. True that the said contention is raised therein. But as we have already found, the appellants have also demanded interest without complying with the terms of RFA No.121/2008 -34- Ext.A16. Therefore, the principle of novation cannot come to the aid of the appellants. Even though learned counsel for the appellants submitted that as possession was handed over and as he has also inducted a tenant, he cannot get interest, we cannot agree with the same. In the written statement itself the appellants have pointed out that they have not allowed the tenant to occupy the flat. This is clear from paragraph 9 of the original written statement dated 28.11.2003 wherein it is stated that “the defendant refused to allow the said tenant to occupy the premises.” The title deeds have not been executed in favour of the respondent also which aspect has been clearly found by this Court in favour of the respondent in paragraph 14 of the judgment in **Peter Cherian's case** (2007 (4) KLT 679). Of course, it was in the context of considering whether the plaintiff has lost the statutory charge available under Section 55(6)(b) of the Transfer of Property Act. 39. Much reliance was placed by the learned counsel for the appellants, Shri G. Sreekumar with regard to the observations in paragraph 17 of the above judgment while discussing various aspects arising in the case. While addressing the plea raised by the defendants that the plaintiff's claim is barred by limitation, this Court held as follows: RFA No.121/2008 -35- “At any rate, Ext.A16 will show that the contract Ext.A2 was varied and the disputes were settled at that time and possession was handed over. It is a case where there was delay on the part of the defendants in completing the construction and therefore the date 30.8.1997 cannot be said to be the crucial date as far as the cut off date for performance of the contract is concerned. In the light of the statutory charge under Section 55(6)(b) also, the claim for return of advance money with interest is not barred, as held by the trial court.” Shri G. Sreekumar submitted that this Court understood Ext.A16 as a variation of Ext.A2 and therefore the principles of novation will apply. It is clear that this Court was referring to Ext.A16 while considering the plea regarding limitation and the plea of novation was not at all raised therein and that the said observation therefore cannot come to the aid of the appellants. What is varied by Ext.A16 is the number of the flat, i.e. instead of 1A1, it was changed as 2A1 and the original contract between the parties stood as such. The court below has, therefore, rightly rejected the contention of the appellants that Ext.A16 varied the terms of the contract. 40. With regard to the liability to pay interest, clause 12 of Ext.A2 is relevant. The respondent is entitled for grant of interest from the respective RFA No.121/2008 **==> picture [21 x 9] intentionally omitted <==** dates of payment of advance amount, as rightly found by the court below. He is, thus, entitled for the contractual rate of interest. We, therefore, find no reason to interfere with the decree and judgment passed by the court below and the claim for payment of interest has been rightly allowed. The appeal is therefore dismissed with costs. **(T.R.RAMACHANDRAN NAIR, JUDGE)** **(P.V. ASHA, JUDGE)** **kav/**