Ponnambilath Abdul Salam v. Chottukadan Kunhamina

RFA NO.15/2005 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHIRCY V.** **TUESDAY, THE 13TH DAY OF AUGUST 2019 / 22ND SRAVANA, 1941** ## **RFA.No.15 OF 2005** **AGAINST THE JUDGMENT AND DECREE IN OS 242/2001 DATED 20-06-2003 OF ADDITIONAL SUB COURT, THALASSERY** ## **APPELLANT/PLAINTIFF:** **1 PONNAMBILATH ABDUL SALAM,(PARTY-IN-PERSON) S/O. MOOSAN, AGED 58 YEARS, RESIDING NEAR MANNA, CHIRAKKAL AMSOM AND DESOM, KANNUR.** **(DIED) (LEGAL HEIRS IMPLEADED)** - **ADDL. APPELLANTS IMPLEADED** - **ADDL. KURIKKALATH NABEESU** - **A2 W/O LATE PONNAMBILATH ABDUL SALAM, AGED 52 YEARS RESIDING AT BAITHULFARAH, OLADATHAZHA , P O AZHIKODE, KANNUR DISTRICT.** - **3 K SHAMEEM, S/O LATE PONNAMBILATH ABDUL SALAM, AGED 33 YEARS RESIDING AT BAITHULFARAH, OLADATHAZHA , P O AZHIKODE, KANNUR** - **4 K VAHIDA,** - **D/O LATE PONNAMBILATH ABDUL SALAM, AGED 35 YEARS RESIDING AT BAITHULFARAH, OLADATHAZHA, P O AZHIKODE, KANNUR.** **LEGAL HEIRS OF DECEASED APPELLANT ARE IMPLEADED AS ADDITIONAL APPELANTS 2 TO 4 AS PER ORDER DATED 22/11/13 IN IA 3887/2007** **BY ADVS. SRI.P.M.PAREETH SMT KEERTHANA J RAMESH FOR APPELLANT** ## **RESPONDENT/DEFENDANT :** **CHOTTUKADAN KUNHAMINA, D/O. MOIDEEN, AGED 46 YEARS, P.O. AZHIKODE, AZHIKODE AMSOM AND** RFA NO.15/2005 2 ## **DESOM, KANNUR.** **R1 BY GOVERNMENT PLEADER R1 BY ADV. SRI.V.R.KESAVA KAIMAL** ## **OTHER PRESENT:** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 21.03.2019 THE COURT ON 13-08-2019 DELIVERED THE FOLLOWING:** ## **JUDGMENT** O.S. No. 242 of 2001, a suit for realization of an amount of Rs. 3,15,000/-with interest advanced by the plaintiff to the defendant pursuant to an agreement dated 20.8.1999, was dismissed by the Additional Subordinate Court, Thalassery by a judgment dated 20[th] June, 2003. Challenging the said verdict, this appeal has been preferred by the plaintiff against the defendant/respondent. 2. For the sake of convenience, the parties to this appeal are referred to, as the plaintiff and the defendant, as arrayed in the suit before the trial court. 3. Brief facts necessary for the disposal of this appeal are as follows: On 20.8.1999 the defendant agreed to sell her property for a total sale consideration of Rs.8,55,000/- to the plaintiff within RFA NO.15/2005 4 a period of 4 ½ months from the date of agreement. On the date of the agreement plaintiff had advanced a sum of Rs.3,15,000/- to the defendant. Though, the plaintiff was ready with the balance sale consideration, on enquiry, it was learnt that the property was mortgaged with Kerala Financial Corporation ('KFC' for short) and some other Banks. So also, it was learnt that the the defendant had agreed to sell the very same property with a pathway leading to the said property to some others with the intention to cheat the plaintiff. So, the plaintiff was compelled to rescind the contract and he issued a lawyer notice on 6.1.2000 demanding back the advance amount paid by him. Instead of paying the amount, the defendant issued a reply raising false contentions. Hence, the suit for realization of the sum of Rs.3,75,424/-. 4. The defendant resisted the plaint claim inter alia contending that the property was not mortgaged to any Bank RFA NO.15/2005 5 as alleged and in fact she had marketable title over the property. She was running an oil mill in another plot by availing a loan of Rs.2,87,000/- from KFC on deposit of the title deed of the property. As she suffered loss in the business , she was forced to sell the property and the agreement was executed with the plaintiff to raise fund to settle the dues and to purchase a small residential building for her accommodation. On receipt of the advance amount from the plaintiff, she paid an amount of Rs.2,00,000/- to one Moosankutty to purchase a property. After execution of the agreement dated 20.8.1999, the plaintiff in fact approached the defendant and requested to provide a pathway to the property. The pathway was lying through the property where the oil mill was situated. That property was mortgaged to KFC and the defendant informed the plaintiff that the title deed was deposited with KFC. Still the plaintiff agreed to purchase the RFA NO.15/2005 6 pathway and for the same another agreement was executed on 28.8.1999 fixing the value of the property as Rs.20,000/- and received an advance amount of Rs.5,000/- . The plaintiff agreed to purchase the property on or before 31.12.2000 and so the defendant had to clear off the loan due to KFC only by 31.12.2000. In fact the defendant had approached the plaintiff for getting the balance sale consideration for the property as well for the pathway, but the plaintiff evaded the same and then a notice was issued on 6.1.2000 raising false allegations. By the letter it was also informed that the plaintiff was rescinding the agreement unilaterally. Hence, the defendant sent a notice intimating him that she will be present before the Sub Registrar's office on 20.1.2001 to register the sale deed. But the plaintiff remained absent. The defendant was ready to register the sale deed in favour of the plaintiff as the property was free from encumbrance and charge. RFA NO.15/2005 7 Therefore, there was no failure on the part of the defendant in performing the agreement. 5. A counter claim was also raised for permitting the defendant to adjust the advance amount of Rs.3,15,000/- towards the loss sustained by him to the tune of Rs.4,50,000/-. 6. By the judgment under challenge, the suit as well the counter claim was dismissed. The defendant did not file any appeal challenging the dismissal of the counter claim. 7. Before the court below PW1 was examined and Exts.A1 to A7 were marked on the side of the plaintiff. DW1 was examined and B1 to B6 were marked for the defendant. 8. Heard Adv. Keerthana. J. Ramesh, the learned counsel appearing for the appellant/plaintiff and Adv. V.R. Kesava Kaimal, the learned counsel for the respondent/defendant. 9. The property involved in Ext. A1 sale agreement is 31 RFA NO.15/2005 8 and ¾ cents in Re.Sy. No. 406/1C of Azhikode Desom. The execution of Ext.A1 agreement to sell dated 20.8.1999 is not in dispute. As per Ext.A1 dated 20.8.1999, the sale deed for the said property had to be executed by the defendant in favour of the plaintiff within a period of 4 ½ months from the date of agreement. The total sale consideration fixed was Rs.8,55,000/-, out of which an amount of Rs.3,15,000/- was received as advance. The main contention raised by the plaintiff is that the defendant had no marketable title over the property because of the financial liabilities with respect to the property, and she was not free to assign the property to him by 4.1.2000 within the time stipulated in the agreement. As time was the essence of the contract and the plaintiff was convinced of the fact that the defendant was not able to assign the property pursuant to Ext.A1 agreement within the time stipulated, he sent Ext.A2 notice rescinding the contract. It is RFA NO.15/2005 9 the case of the plaintiff that he was ready to purchase the property within the time stipulated in the agreement and also a pathway pursuant to another agreement, but when he realised that the properties were mortgaged by depositing title deeds and the defendant had no marketable title to execute the document, and that the defendant had entered into agreements previously with some others with respect to the very same property, he rescinded the contract and thereby issued Ext.A2 notice. 10. The reasons mainly projected in Ext.A2 notice for rescinding the contract are the following: - I. The financial liability pending with KFC was not disclosed by the defendant. II. The defendant failed to show the original title deed of her property to the plaintiff so as to enable him for making arrangements to get the sale deed executed in RFA NO.15/2005 10 his favour and to ensure that the property is free from encumbrances. III. The defendant agreed to demarcate the pathway leading to the said property and to incorporate the same in the document. But on enquiry, it was learnt that she was not able to execute a document with respect to the said property as the same was also mortgaged with some financial institution and she did not have marketable right over the property. IV. While Ext.A1 agreement was in force, the defendant entered into another agreement for sale with another person promising to alienate the property to him. V. As the defendant had no marketable title over the property , Ext.A1 was created with the intention to cheat the plaintiff and in order to make unlawful gain. RFA NO.15/2005 11 11. Per contra, the defendant had contended that, she had suffered heavy loss since the document was not executed due to the breach committed by the plaintiff. DW1, the husband of the defendant deposed that an amount of Rs.2,00,000/- was paid to one Moosankkutty as advance to purchase a property for her with the sale consideration. Since the execution of the document pursuant to Ext.A1 was not materialized, she could not purchase the land and thus she lost the said amount. She has also denied the allegation that she has not shown the original title deed of the property to the plaintiff at the time of execution of the sale agreement. At the outset it is to be noted that the pleadings and the evidence on record would reveal that another agreement was executed on 28.8.1999 to assign a pathway which was lying through another property owned by the defendant for a total sale consideration of Rs.20,000/- so as to have access to the RFA NO.15/2005 12 plaint schedule property on advance payment of Rs.5,000/According to the defendant, she was running an oil mill and the pathway leading to the property proposed to be sold to the plaintiff was lying through the property in which the oil mill was situated and that property was mortgaged to KFC and as per the agreement, she was having time till 31.12.2000 for clearing off the liability pending with respect to that property. But according to the defendant even before the expiry of the time fixed for execution of the sale deed between the parties pursuant to the agreement dated 20.8.1999, the plaintiff had issued Ext.A2 notice dated 6.1.2001. At the outset, it is to be noted that neither the plaintiff nor the defendant produced the alleged agreement dated 20.8.1999. In the absence of the said agreement before court, it is not possible to verify the genuineness of the said transaction and the connected dealings , in fact, what is called for consideration in this case RFA NO.15/2005 13 is only Ext.A1 agreement dated 20.8.1999. In paragraph No. 5 of the plaint, of course, there is reference about the access to the property involved in Ext.A1 agreement but the defendant had contended that she had to execute the sale deed for the pathway only by 31.12.2000. There is no contra evidence to discard the said contention. Undisputedly, there was no direct access to the property involved in Ext.A1. But it is clear from the records that the plaintiff had entered into Ext.A1 agreement knowing fully well that there was no pathway leading to the property involved in Ext.A1. So also the property under mortgage with financial institution was another property and the pathway was through that property and she was able to execute a document only after clearing off the said liability. It is also to be noted that by Exts.A8 to A11(not shown in the index though marked through the plaintiff), it is explicitly clear that the defendant had entered RFA NO.15/2005 14 into several other agreements for sale with respect to Ext.A1 property with more than one person and suits were filed by those persons who agreed to purchase the property on the strength of the previous agreements executed with the defendant. That fact was also not disclosed by the defendant while entering into Ext.A1 contract. But the contention raised by the plaintiff that the defendant had no marketable title over the property for which she entered into the agreement with the plaintiff appears to be incorrect as the suit is based on Ext.A1 alone. The seller is bound to disclose to the buyer all material aspects about the title of the property and all documents of title on request for examination under Section 55(1) (a) (b) of the Transfer of Property Act. Ext A2 coupled with the oral testimony of the plaintiff would reveal that there was failure on the side of the defendant to perform such obligations. As per Ext.A1, the period fixed for execution of the sale deed had RFA NO.15/2005 15 expired on 4.1.2000 and the plaintiff issued Ext.A2 notice on 6.1.2000 itself. It is apparently clear that the defendant had entered into certain agreements to sell the very same property to others and litigations were pending, but failed to disclose the same and thus attempted to deceive the plaintiff and to deprive the legitimate expectation to get the sale deed executed in his favour in respect of the suit property. As a prudent purchaser the plaintiff was supposed to scrutinize the documents relating to the tile of the suit property with due diligence only prior to the paying of the sale consideration to get the sale deed executed in his favour. Whether the plaintiff had sufficient resources to pay balance consideration was supposed to be proved only if the suit was for specific performance of contract. By the issuance of Ext.A2, it is evident that the plaintiff was not ready to purchase the property for the reasons mentioned therein and that had led RFA NO.15/2005 16 to the cancellation of the agreement and therefore, the question of readiness and willingness of the plaintiff to perform the contract is not an issue for consideration. The reasons stated to repudiate the contract stands established by the evidence available on record. As the suit is to get back the amount paid by the plaintiff as advance to the defendant, the question is whether the defendant is entitled to retain the said amount as claimed by her. 12. Considering the nature of the transaction involved, the relevant provisions arise for consideration in the Contract Act are Sections 64 ,65 and 75 of the Contract Act ('the Act' for short). This Court deems it proper to quote the above Sections for the sake of convenience. Section 64 of the Act reads as follows: - “ 64. Consequences of rescission of a voidable contract when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any RFA NO.15/2005 17 promise therein contained in which he is the promisor. The party rescinding a voidable contract shall, if he had received any benefit thereunder another party to such contract, restore such benefit, so far as may be, to the person from whom it was received. 65. Obligation of person who has received advantage under void agreement or contract that becomes void. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. ## 75. Party rightfully rescinding contract, entitled to compensation. A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract.” 13. The time fixed for execution of the sale deed was 4 ½ months which was over by 4.1.2000. The terms and the surrounding circumstances make it clear that the intention of the parties was to make time as the essence of contract and a RFA NO.15/2005 18 contrary intention is not evident from the records. That be so the parties are governed by the first part of Section 55 of the Contract Act which reads as follows: “ 55. Effect of failure to perform at a fixed time, in contract in which time is essential - When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential.- If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon: If, in case of a contract voidable on account of the promisor's failure to perform his promise at RFA NO.15/2005 19 the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promissee cannot claim compensation of any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.” 14. In order to fortify the contention of the defendant that, she is entitled to retain the amount as loss sustained to her, relies on the decision of a Division Bench of this court in Hajira v. Anto (2018 KHC 227). In paragraph No. 15 of the said decision, it has been observed as follows : “15. Admittedly the repudiation of contract alleged by the defendants is before the expiry of the period of contract. In the contract there is no provision for rescission unilaterally by any of the parties before the expiry of the period of contract. If that be so, the parties are governed by the provisions contained in the Specific Relief Act and the Contract Act in the matter of rescission of contract. The legal position is different regarding the right to rescind a contract by one of the parties in the absence of a provision in the contract and it really RFA NO.15/2005 20 depends on the question whether time is essence of the contract. The repudiation/rescission of a contract by one of the parties before the expiry of the agreed period of performance is permissible only when there is anticipatory breach of contract in which time is essence of the contract. It would be capable of giving an option to the promisee to treat either the contract or that much part of the contract void. The principle embodied under the first part of S.55 of the Contract Act enables the promisee to exercise an option to treat the entire contract or so much part of the contract which was not performed by the promisor void when time is essence of the contract. The question of rescission/repudiation of contract would come into play only when the contract or any portion thereof is either void or become void. S. 55 of the Contract Act and S.27 of the Specific Relief Act deal with the power of Court to adjudge any rescission of contract when sued for that purpose by any interested person. It is permissible only on two grounds i.e under Clauses (a) and (b) of subsection (1) of S.27 of the Specific Relief Act, namely, (a) where the contract is voidable or terminable by the plaintiffs, (b) where the contract is unlawful for the causes not apparent on its face and the defendants are more to RFA NO.15/2005 21 blame than the plaintiffs. …............... ” It was further observed that ''….. A conjoint reading of first limb of S.55 and S.64 and S.65 of the Contract Act would settle the legal position that in the case of repudiation/rescission of a contract in which time is essence of the contract, the promisee who rescind/repudiate the contract being the same void, is not entitled to any compensation from the promisor for any loss occasioned to him by such failure except under S.64 and S.65 of the Contract Act which is limited to restoring the other party with the benefit he had received under the contract and to return advantage, if any, he had obtained by such agreement. In other words, the compensation which is permissible under S.64 and S.65 is confined only to return of the benefit which he had received from the other party and to return any advantage obtained under such agreement. If we go by the strict interpretation to first limb of S.55 and S.64 and S.65 of the Contract Act, it is clear that unless the parties have agreed otherwise they cannot claim compensation on account of any “loss occasioned” due to repudiation/rescission of the contract'' 15. The plaintiff relying on Sections 73 and 74 of the Contract Act would argue that the defendant is entitled to RFA NO.15/2005 22 appropriate the amount received as advance only on proof of legal injury suffered on account of breach. Section 73 and 74 of the Act are also reiterated for the sake of convenience. “ 73. Compensation for loss or damage caused by breach of contract - When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract- when an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person RFA NO.15/2005 23 had contracted to discharge it and had broken his contract. Explanation: In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by non-performance of the contract must be taken into account.” 74. Compensation for breach of contract where penalty stipulated for When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Explanation: A stipulation for increased interest from the date of default may be a stipulation by way of penalty. Exception: When any person enters into any bail bond, recognisance or other instrument of the same nature, or, under the provisions of any law, or under the RFA NO.15/2005 24 orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein. Explanation : A person who enters into a contract with the government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.” A Division Bench of this Court in Vinodan v. Sunil Kumar (2015 (2) KHC 656) relying on the decision in State of Kerala v United Shippers and Dredgers (AIR 1982 Kerala 281) held that a party complaining breach of contract and claiming compensation is entitled to succeed only on proof of legal injury having been suffered on account of breach of contract. In Varkey Thomas v. G. Vijayendra Kurup and others (2017 (1) KHC 452 ) another Division Bench of this Court relying on the very same decision State of Kerala v United Shippers and Dredgers (AIR 1982 Kerala 281) observed in para 9 that RFA NO.15/2005 25 ''….....The retention of the amount paid as advance by the defendants when the plaintiff was justified in repudiating the contract amounts to unjust enrichment .Even otherwise the defendants are entitled to appropriate the amount received as advance only on proof of legal injury suffered on account of breach. The amount received as advance bears a sizable proportion to the total sale consideration party and cannot by any stretch of imagination be stated as earnest money …....'' It was further observed in para 11 as follows: ''….....The penalty of forfeiture of the amount paid as advance in Ext.A1 agreement in terms of S.74 is subject to the reasonable compensation to be awarded under S.73 of the contract Act, 1872. The defendants are not liable to be compensated in the absence of proof of legal injury and therefore there cannot be a forfeiture of the amount paid as advance by the plaintiff'' 17. In short, it would explicitly make it clear that only if sufficient materials were available that breach was committed by the plaintiff and the defendant suffered legal injury, loss or RFA NO.15/2005 26 damage by breach of contract on the side of the plaintiff, the amount paid as advance by the plaintiff, could be forfeited. The amount is lying in deposit with the defendant from the date of agreement to sell. The records will not indicate that in a hasty manner, the plaintiff rescinded the contract but on the other hand, he issued Ext.A2 only after the period. Therefore, in my opinion a deceitful and calculated move was made by the defendant, to deprive the legitimate right of the plaintiff, as an agreement holder. 18. Here, as mentioned above, the counter claim raised by the defendant was dismissed but no appeal was filed against dismissal of the counter claim and no cross appeal was filed in this appeal also. But pointing out the decisions in EDC Limited, Goa v. GKB Opthalmics Ltd. (2015 KHC 3256) and G.K Engineering Works v. St. John The Baptist Church, Aluva (2011 (1) KHC 438), learned counsel for the defendant argued RFA NO.15/2005 27 that under Order XLI R.22 of the Code of Civil Procedure, it is open to him, while supporting the decree, challenge the findings on some of the issues, which are answered against him. But in fact no reliable evidence was adduced by the defendant to prove that she sustained any legal injury due to the breach of contract committed by the plaintiff. Her case that she lost an amount of Rs.2,00,000/- as she was unable to purchase a land from one Moosankutty by utilizing the sale consideration which he ought to have received from the plaintiff by executing the sale deed pursuant to Ext.A1 agreement, was not proved by adducing reliable oral or documentary evidence. The alleged agreement was not even produced. The defendant as well Sri.Moosankutty were not examined. The mere production of a receipt which is not even properly executed, alone is not sufficient to prove the case of the defendant that he paid Rs.2,00,000/- as advance. It is RFA NO.15/2005 28 also significant to note that in the written statement, it was contended that the amount paid was Rs.2,00,000/- but in the the receipt it was mentioned as Rs. 2,50,000/-. That itself creates doubt about the genuineness of the case put forth by the defendant. Like that, the loan availed by her from KFC which is evident by Exts.B2 and B3 and loan from the Kannur District Co-operative Society, would prove her financial liabilities for which the plaintiff cannot be held responsible. So, at any cost, it is not possible to conclude that due to non execution of the sale deed she sustained any legal injury. It is evident from the records that the purchase was not materialized because of the failure on the side of the defendant to disclose the entire aspects to the plaintiff before executing the sale deed. The defendant chose not to lead evidence before court to substantiate her plea. In any case the defendant cannot take advantage of her own wrong. RFA NO.15/2005 29 Therefore, on a meticulous evaluation of the evidence, the finding of the court below that the defendant can retain the amount advanced by the plaintiff pursuant to Ext.A1 sale agreement and so she is not bound to return the same to the plaintiff are not based upon proper appreciation of evidence and legal infirmity can be traced out which warrants an interference by this Court. Doubtless that the plaintiff is entitled to get a decree for realization of the advance amount paid by him to the defendant and no prejudice will be caused to defendant in any manner whatsoever. The said amount of Rs.3,15,000/- was lying with the defendant from 20.8.1999 on a false contention that she was ready to perform her part of contract. The suit was filed claiming back the amount on 9.11.2001, within the period of limitation. In the result, this appeal is allowed, the judgment and decree of the court below are set aside and a decree is RFA NO.15/2005 30 granted in favour of the appellant/plaintiff to recover a sum of Rs.3,15,000/- with interest at the rate of 6% per annum from the date of suit till realization from the defendant and her assets. The plaintiff is also entitled to realize the cost of the suit throughout from the defendant. Sd/- SHIRCY V, JUDGE sb/smm RFA NO.15/2005 31