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M/s. N.K. Constructions, Represented by its Proprietor, Naren Kumar v/s B.M. Veeresh

    RFA. No. 1535 of 2011 (SP)

    Decided On, 01 February 2021

    At, High Court of Karnataka

    By, THE HONOURABLE MRS. JUSTICE S. SUJATHA & THE HONOURABLE MR. JUSTICE SACHIN SHANKAR MAGADUM

    For the Appellant: D.P. Mahesh, Advocate. For the Respondents: R1, A. Ram Mohan, R3 & R4, S. Gangadhar Aithal, Advocates.



Judgment Text

(Prayer: This RFA is filed Under Order 41, Rule-1 and 2, read with Section 96 of CPC, against the judgment and decree dated:25.06.2011 passed in O.S.2123/2009 on the file of the XI-Addl. City Civil Judge, Bangalore, decreeing the suit for the specific performance.)Sachin Shankar Magadum, J.1. This captioned appeal is filed by the first defendant challenging the judgment and decree dated 25.6.2011 passed in O.S.No.2123/2009 by the learned XI Addl. City Civil Judge, Bangalore City.2. For the sake of convenience, the parties are referred to as per their rank before the Court below.3. Facts leading to the case are as under:The plaintiff filed a suit for the relief of specific performance of the agreement of sale dated 6.3.2006 in respect of "B" Schedule property along with undivided share in "A" schedule property by specifically contending that defendants 3 and 4 are the owners of plaint "A" schedule property and the second defendant was the builder and developer. It is stated in para 2 of the plaint that an agreement was entered into between defendants 3 and 4 on the one hand and the second defendant who is the builder on the other hand on 10.3.1995. Accordingly, the parties signed the Memorandum of Understanding dated 10.3.1995. Pursuant to the same, defendants 3 and 4 entrusted the schedule "A" property to the second defendant to construct residential flats. The plaintiff has further contended that there was also a Memorandum of Understanding dated 15.3.2006 between the second defendant and all other purchasers of the flats including the first defendant.The plaintiff has further pleaded at para 2 of the plaint that there was an interse dispute between the defendants in O.S.No.6355/2004 to which the first defendant was also a party. The plaintiff has further stated that the matter was referred to Lok-Adalath wherein the matter was amicably settled. It is also stated that an assignment deed dated 17.4.2007 was executed between the defendants and as per the terms of the said assignment the first defendant paid a sum of Rs.13 lakhs to the second defendant and pursuant to execution of the said assignment the first defendant took the project of construction of apartments consisting of four units on the 3rd floor at his own cost and he undertook to complete the entire work within two months.The plaintiff has further stated that defendants 2 to 4 had agreed to sell flat No.002 which is referred as plaint 'B' schedule property for valuable consideration of Rs.30 lakhs. It is also stated that the plaintiff had paid the entire sale consideration of Rs.30 Lakhs. At para 13 of the plaint, the plaintiff has furnished the details of the payments made on various dates.The grievance of the plaintiff is that though he had paid entire sale consideration, the first defendant started harassing the plaintiff which compelled the plaintiff to issue a legal notice on 7.1.2009 to all the defendants calling upon them to execute a registered sale deed in respect of "B" schedule property, as agreed. The first defendant issued a reply notice virtually denying the agreement of sale dated 6.3.2006 in favour of the plaintiff. The plaintiff has further stated that defendants 3 and 4 who are owners also sent a reply notice dated 11.1.2009 refusing to execute the sale deed in favour of the plaintiff.On receipt of summons, the defendants entered appearance through their respective counsel and contested the proceedings.The first defendant stoutly denied the entire averments made in the plaint and specifically contended that there is no contract in existence between the plaintiff and the first defendant. The first defendant denied receipt of any consideration from the plaintiff as alleged and as such contended that the suit is not all maintainable. The first defendant has specifically contended that the plaintiff is not all in possession of schedule "B" property as claimed in the plaint. At para 10 of the written statement, the first defendant has specifically contended that the property referred in the schedule to the suit and I.A. is quite different from the schedule mentioned in the agreement of sale. On this count, the first defendant contended that the alleged agreement of sale is not at all enforceable.The first defendant further contended that the plaintiff and second defendant have colluded with each other and have created the alleged fabricated agreement of sale. It is specifically pleaded at Para 11 of the written statement that the second defendant has no semblance of right to execute the agreement of sale as the power given to the second defendant under general power of attorney(GPA) by defendants 3 and 4 has been cancelled on 5.8.2004. The first defendant further claimed that he has acquired right, title and interest over the schedule "A" property under the assignment deed executed before the Lok Adalath in O.S.6355/2004. The first defendant further asserted exclusive possession of schedule "A" property and denied the schedule as stated in the schedule "B" property i.e. flat No.002. The first defendant contends that suit itself is premature since the first defendant is developing the schedule "A" property under the assignment deed vide Ex.D28. At para 20 of the written statement it is specifically contended that the plaintiff is not at all in possession of schedule "B" property.The second defendant has filed written statement and admitted that defendants 3 and 4 are the owners of plaint A schedule property and has further admitted that the defendants have executed an assignment deed in favour of the first defendant thereby authorising the completion of the construction. At the same time, at para 5 of the written statement, the second defendant has also admitted that plaint B schedule property was agreed to be sold in favour of the plaintiff for consideration of 30 lakhs and accordingly defendants 2 to 4 have executed the agreement of sale dated 6.3.2006 and in the same para it is further admitted that the plaint "B" schedule property is handed over to the plaintiff. On these set of defences, the second defendant contended that there is no cause of action for the plaintiff to file the suit against the second defendant and in the event the decree is passed, defendants 1 to 4 are to be directed to execute the sale deed in favour of the plaintiff.The defendants 3 and 4 who are the owners of the suit schedule property have taken a specific contention that there is no privity of contract between the plaintiff and defendants 3 and 4. They have not entered into any agreement with the plaintiff as alleged. They have also seriously disputed handing over possession and receipt of alleged consideration as alleged in the plaint. They have contended that second defendant has no right, title and interest in plaint "B" schedule property. The defendants 3 and 4 have contended that the power of attorney executed in favour of the second defendant stood cancelled by way of notice as well as by paper publication.On these set of pleadings the trial Court formulated the following issues:"1. Whether the plaintiff proves that the defendant No.2 to 4 executed agreement of sale dated 6.3.2006 agreeing to sell "B" schedule property along with the undivided share in the "A" schedule property to him for consideration of Rs.30-00 lakhs and have received the entire consideration amount of Rs.30-00 lakhs?2. Whether the plaintiff proves that the 2nd defendant issued occupation certificate dated 28.9.2006 and handed over possession of plaint "B" schedule property to him?3. Whether the plaintiff proves that he has always been ready and willing to perform his part of contract?4. Whether the first defendant proves that the agreement of sale dated 6.3.2006 executed by the 2nd defendant in favour of the plaintiff is void and unenforceable and the same has been cancelled by him?5. Whether the defendant No.1, 3 and 4 prove that the GPA given to the 2nd defendant by defendant No.3 and 4 has been cancelled?6. Whether the first defendant proves that the plaintiff entered into a memorandum of understanding dated 23.3.2006 with him and he has failed to comply with the terms of the said memorandum of understanding and also the agreement of sale deed 6.3.2006?7. Whether the plaintiff is entitled for the relief fo specific performance of contract?8. Whether the plaintiff is entitled for the relief of permanent injunction as sought for?9. Whether the plaintiff is entitled for possession of "B" schedule property and undivided share in the "A" schedule property?10. What decree or order?"The plaintiff in support of his contention got himself examined as P.W.1 and got marked Exs.P1 to P20. The defendants 1, 3 and 4 in support of their contentions got themselves examined as D.Ws.1 and 3 respectively and got marked Exs.D1 to D38. The second defendant got himself examined as D.W.2.The Court below on appreciation of oral and documentary evidence on record, answered Issue Nos.1, 3, 7 and 9 in the affirmative and issue Nos.2.4, 5,6 and 8 in the negative and accordingly decreed the suit of the plaintiff for specific performance of the agreement of sale dated 6.3.2006 and for possession of "B" schedule property.Being aggrieved by the same, the first defendant has preferred this appeal.4. We have heard the learned counsel appearing for the plaintiff as well as the defendants. We have meticulously perused the pleadings of the parties . We have reassessed the entire oral and documentary evidence.5. The following points would arise for consideration in the present appeal:"(1) Whether the Court below was justified in holding that the plaintiff has proved that defendants 2 to 4 executed the agreement of sale dated 6.3.2006 as per Ex.P4 in respect of schedule "B" property along with undivided share in schedule A property for sale consideration of Rs.30 lakhs and has further proved that the entire sale consideration of Rs.30 lakhs was paid to defendants 2 to 4 and thereby entitled for decree for specific performance?(2) Whether the finding of the Court below that defendants 3 and 4 who are the owners of the suit land have no authority to unilaterally cancel the joint development agreement dated 10.3.1995 and general power of attorney dated 31.3.1995 executed in favour of the first developer i.e. defendant No.2 is perverse and palpably erroneous?(3) Whether the appellant has succeeded in proving that plaintiff entered into memorandum of understanding as per Ex.D1 and has failed to comply with the terms of the said Memorandum of Understanding as per Ex.D1?(4) Whether the Court below was justified in holding that the first defendant has failed to prove that the suit agreement dated 6.3.2006 executed by the second defendant in favour of the plaintiff as per Ex.P4 is void and unenforceable?REGARDING POINT No.1:6. The first defendant has totally denied the registered agreement of sale dated 6.3.2006 executed by the second defendant in favour of the plaintiff. At para 8 of the written statement, the first defendant has specifically contended that there is no contract between the plaintiff and the first defendant. There is no offer by the first defendant and acceptance by the plaintiff pertaining to the suit schedule "B" property. At para 8, the first defendant has specifically contended that he has not received any consideration from the plaintiff pursuant to the alleged suit agreement of sale. In this background, the first defendant has specifically contended that the suit itself is not maintainable. However, during trial, the first defendant has heavily relied on Ex.D1 which is a Memorandum of Understanding dated 23.3.2006. This document is admitted by the first defendant. In the Memorandum of Understanding as per Ex.D1, the plaintiff's name is at Sl.No.3 and in the said memorandum it is clearly mentioned that the plaintiff is an agreement holder of flat No.002 on ground floor with built up area of 1325 sq. ft. This document is signed by the first defendant and the same is being set up by the first defendant during trial. The averment made by the first defendant in regard to the execution of the suit agreement by defendants 2 to 4 which was admittedly much prior to the assignment deed, runs contrary to Ex.D1 wherein the first defendant has admitted the agreement of sale executed in favour of the plaintiff. The plaintiff at para 13 of the plaint has specifically stated that he has paid a sum of Rs.30 Lakhs to the second defendant. The payments are made on various dates. The second defendant who is examined as D.W.2 in examination in chief has admitted in unequivocal terms that the payment of Rs.30 lakhs was towards sale consideration of Flat No.002 i.e. the suit schedule "B" property. The relevant portion of his examination-in-chief is culled out as under:"4. Smt. B.M. Veeresh paid Rs. 30,00,000/- (Rupees Thirty Lakhs Only) to me being the total sale consideration."The plaintiff has also succeeded in eliciting the authority of the second defendant in entering into an agreement with prospective purchasers. The second defendant is the Director of the second defendant company. He has specifically stated that he was authorised pursuant to the joint development agreement and general power of attorney dated 31.3.1995 to enter into an agreement with various prospective purchasers. The clinching evidence adduced by the plaintiff vide Ex.P4 coupled with the categorical admissions given by the second defendant in the examination-in-chief in regard to receipt of sale consideration of Rs.30 lakhs clearly establishes due execution of agreement as per Ex.P4. The second defendant being the developer and GPA holder of defendants 3 and 4 has executed agreement of sale as per Ex.P4 and the clinching evidence adduced by the plaintiff in regard to execution of agreement of sale as per Ex.P4 and also payment of Rs.30 lakhs is established by the plaintiff. The plaintiff has specifically pleaded at para 13 of the plaint that he has paid the entire sale consideration of Rs.30 lakhs. At para 13 he has specifically given the dates and the amount paid to the second defendant who was the developer at the relevant point of time and had an authorisation from defendants 2 and 3 under joint development agreement as well as general power of attorney. The agreement in favour of the plaintiff though initially denied by the first defendant who is the second developer, during trial he has relied on Ex.D1 by contending that all prospective purchasers have entered into a memorandum of understanding. In the said document as per Ex.D1, the first defendant has admitted that the plaintiff is the agreement holder in respect of Flat No.002. In that view of the matter, we are of the view that the plaintiff has established the due execution of suit agreement. Further, the second defendant has admitted in unequivocal terms in the examination-in-chief that the defendants have received Rs.30 lakhs which was the agreed sale consideration as per Ex.P4 in favour of the plaintiff. Thus, the plaintiff has paid the sale consideration and thereby he has performed his part of the contract and clinching evidence on record would also establish his readiness and willingness to perform his part of the contract. We are of the opinion that subsequent to payment of entire sale consideration, there was nothing left to be done by the plaintiff. All these material aspects are dealt by the trial Court while dealing with Issue No.3.7. The trial Court has rightly answered Issue Nos.1 and 3 in the affirmative by holding that plaintiff has proved that defendants 2 to 4 have executed the agreement of sale by receiving the entire sale consideration of Rs.30 lakhs. The said finding is based on the legal evidence adduced by the plaintiff and the reasons recorded on Issue Nos.1 and 3 does not suffer from any infirmities. Accordingly, Point No.1 is answered in the affirmative.REGARDING POINT Nos.2 and 3:8. Defendants 3 and 4 entered into a Joint Development Agreement and also executed a GPA in favour of second defendant. On perusal of Ex.D28 which is an assignment deed executed by the second defendant-developer in favour of the first defendant who is the subsequent developer, there is a reference to the joint development agreement as well as GPA in favour of second defendant executed by original owners Defendants 3 and 4. It appears that there was a dispute between second defendant and Defendants 3 and 4 and probably this prompted the landlords to issue a legal notice intimating the second defendant that they have cancelled the joint development agreement dated 10.3.1995 and consequently the GPA executed by them is also cancelled. Now the question that requires to be considered by this Court is that when a registered document is sought to be cancelled, whether a party to the registered document can unilaterally cancel the registered document, that too, by issuing a legal notice. It is a trite law that whenever a joint development agreement-cum-GPA is sought to be cancelled, execution and registration of such a document/deed must be at the instance of both the parties i.e. bilaterally and not unilaterally. In the present case on hand, Defendants 3 and 4 have virtually sought for cancellation of the joint development agreement and GPA by issuing a legal notice without the knowledge and consent of the developer i.e. the second defendant. It is a trite law that in the case of a bilateral agreement, either parties cannot seek cancellation of the bilateral agreement by even registering the cancellation deed. In the present case on hand, Defendants 3 and 4 by issuing a legal notice are claiming that the earlier joint development agreement and GPA stood cancelled.9. Having regard to the provisions of the Section 17 of the Indian Registration Act, in our opinion, when a registered development agreement cum GPA is sought to be cancelled, either the registration of such a deed must be at the instance of both the parties or the cancellation has to be sought by approaching a competent civil Court. The cancellation of joint development agreement in our opinion amount to recession of contract and if the issue in question is viewed from that angle, in the light of the provisions of Section 62 of the Indian Contract Act, any recession must be bilateral. In the instant case, if the joint development agreement cum GPA created a right in favour of the second defendant, the legal notice would in no terms nullify the same.10. The Hon'ble Apex Court in Suraj Lamps & Industries Private Limited .vs. State of Haryana and another reported in (2012) 1 SCC 656 has held that registration provides safety and security to the transactions relating to immovable properties. It ensures that every person dealing with immovable property can rely with confidence upon the statements contained in the registers as full and complete account of all transactions by which the title to the property will be effected. The observations by the Hon'be Apex Court emphasis the importance and purpose of registration which ensures that every person dealing with immovable property can rely on the statements made in the registered documents. In this background, if the transaction between the plaintiff and second defendant is examined, the plaintiff having verified the authorisation given under the joint development agreement as well as the GPA has entered into a transaction by believing those registered documents. It is also evident from the records that he has paid the entire sale consideration of Rs.30 lakhs pursuant to the agreement of sale executed by the second defendant in his favour as per Ex.P4.11. If the above said material aspects are taken into consideration, we are of the view that defendants 3 and 4 had no authority to unilaterally cancel the joint development agreement and GPA and the said issue has been rightly dealt with by the learned Judge while answering issue No.5. If defendants 3 and 4 had cancelled the Joint Development Agreement and GPA in favour of the second defendant then second defendant would not have entered into a compromise in O.S.No.6355/2004 wherein the matter was referred to Lok Adalath to enable the parties to settle the matter and it is before the Lok Adalath, defendants 1 to 4 have amicably settled the matter and the second defendant has executed an assignment deed as per Ex.D28. The assignment deed executed before the Lok Adalath is dated 17.4.2007. The relevant clause No.4 in the assignment deed would bind the second defendant as well as the first defendant insofar as it relates to the transactions entered into by second defendant on behalf of Defendants 3 and 4 with the prospective purchasers. The relevant clause is culled out as under:"4. That the ASSIGNOR hereby agrees, undertakes and assures that the ASSIGNEE shall be responsible for any act, Deed, commitment or undertakings, assurances made by him to the prospective purchasers/Agreements holders."12. On a plain reading of clause 4 it is clearly evident that the assignee has undertaken to abide by the acts, deeds and undertakings and assurance given by the second defendant. The clause 4 would clinch the issue and would clearly establish that all the agreements and transactions and receipt of consideration are saved and thereby neither the first defendant nor defendants 3 and 4 can dispute the transaction between the plaintiff and defendants 2 to 4 as per Ex.P4 and accordingly, they cannot claim that the earlier joint development agreement and GPA was cancelled. The defendants 1, 3 and 4 are also estopped from contending that the joint development agreement and GPA in favour of the second defendant was cancelled by issuing legal notice dated 5.8.2004. The second defendant lost all subsisting rights under the joint development agreement on the date of the assignment deed which was executed on 17.4.2007. What can be inferred from this assignment deed is that till 17.4.2007, the second defendant had every right to receive sale consideration from the prospective purchasers which he was authorised to do. If the first defendant is asserting right under assignment deed as per Ex.D28, then he is bound by the terms and conditions enumerated in the assignment deed as per Ex.D28.13. For the reasons stated supra, we would proceed to hold that defendants 3 and 4 could not have unilaterally cancelled the joint development agreement and general power of attorney which was impermissible in law and accordingly, point Nos. 2 and 3 is answered in the negative. REGARDING POINT No.4:14. The first defendant who is the subsequent developer and has taken over the project of construction of the apartment in Schedule "A" property is denying the authority of the second defendant in executing the agreement of sale in favour of the prospective purchasers, which includes suit agreement in favour of the plaintiff. Though there is total denial of the suit agreement in favour of plaintiff by the first defendant, but however during trial the first defendant has relied on the memorandum of understanding entered into between the first defendant and prospective purchasers as per Ex.D1 wherein the name of the plaintiff is reflected at Sl.No.3 and is shown to be agreement holder of flat No.002. The first defendant who is the subsequent developer has come into picture after execution of an assignment deed by defendants 2 to 4 which is marked as Ex.D28. Under the said assignment deed, the first defendant has paid a sum of Rs.13 lakhs to the second defendant and thereby all rights have been transferred in favour of the first defendant to carry out further construction activities. This assignment deed is executed on 17.4.2007 and the same is produced before the Lok-Adalath in O.S.6355/2004. The fact that first defendant has paid the second defendant a sum of Rs.13 lakhs would clearly establish that prior to execution of the assignment deed, it was the second defendant who was authorised to enter into an agreement with the prospective purchasers. Prior to execution of the assignment deed, the defendants 3 and 4 who are admittedly the owners of the land in question have entered into joint development agreement with the second defendant on 10.3.1995 and in pursuance of the same, the GPA was also executed on 31.3.1995. The defendants 3 and 4 who are the owners of the land in question have claimed that they have cancelled the joint development agreement as well as GPA by giving paper publication. From the records, it is forthcoming that the suit agreement in favour of the plaintiff which is dated 6.3.2006 is much prior to the assignment deed executed by second defendant in favour of the first defendant which is dated 17.4.2007. In the assignment deed as per Ex.D28, the first defendant has not disputed the GPA executed by the owners in favour of second defendant. On reading of clause 2 of assignment deed dated 17.4.2007 it is forthcoming that second defendant has given up all his rights. The claim and right, if any, of second defendant stood settled on 17.4.2007. Till then, the second defendant had every right as a developer to deal with the property. In this background, the admission made by the second defendant that he has received a sum of Rs.30 lakhs from plaintiff on various dates would be a relevant factor. The last payment made by plaintiff is for a sum of Rs.5 lakhs by way of cash on 3.8.2006 whereas the assignment deed is executed on 17.4.2007. What emerges from this significant details is that much prior to the second defendant executing the assignment deed the plaintiff had paid the entire sale consideration.15. The first defendant is denying the claim of plaintiff by relying on Ex.D1, which is a memorandum of understanding entered into by the first defendant with prospective purchasers. This Memorandum of Understanding is dated 23.3.2006. As on 23.3.2006 the first defendant who is the subsequent developer had not acquired any right in the suit schedule 'A' property. He acquired right only on 17.4.2007 when second defendant assigned all his rights in favour of the first defendant as per Ex.D28. As per the assignment deed, the first defendant has paid Rs.13 Lakhs to the second defendant and has thereby taken up the project to proceed with further construction and development of residential complex in the suit schedule property. It is also forthcoming that they have agreed to the construction and development of residential complex in the schedule "A' property. As discussed while dealing with point Nos.2 and 3, the first defendant had undertaken to abide by all the acts, deeds executed by the second defendant and has also agreed to abide by the undertaking given by the second defendant to the prospective purchasers/agreement holders. For the reasons stated supra, appellant has failed to prove that suit agreement is void and unenforceable. Accordingly, point No.4 is answered in the affirmative.16. The learned Ju

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dge has exhaustively dealt with all the issues and has come to the conclusion that the plaintiff has established due execution of sale agreement by the second defendant as per Ex.P4. The learned Judge has also come to the conclusion that the plaintiff has proved that he has paid the entire sale consideration. The learned Judge has also recorded a categorical finding that defendants 3 and 4 had no authority to unilaterally cancel the joint development agreement and GPA executed by them in favour of the second defendant who was the first developer. We have meticulously examined the reasons assigned by the learned Judge while dealing with the issues framed therein and we would find that the discretion exercised by the learned Judge is based on judicial principles and the legal evidence placed on record by the plaintiff. It is axiomatic that when a discretionary remedy is prayed for by a party, such a party must come to the Court with clean hands. We have meticulously examined the pleadings and also the conduct of the plaintiff who has been agitating his rights on the basis of an agreement executed way back in 2006. The pleadings raised by the plaintiff indicate all facts with sufficient candour and clarity. His conduct is unblemished. On the contrary, it is the defendants who had dispute interse and plaintiff is caught up between interse dispute between defendants 3 and 4 on the one hand and the second defendant on the other hand. The evidence on record indicate that the plaintiff is made to run from pillar to post. The defendants have got the matter settled before the Lok Adalath and have signed Ex.D28 which is an assignment deed executed by the second defendant in favour of the first defendant. The first defendant has given an undertaking that he is bound by the acts, deeds and undertakings given by the second defendant prior to execution of assignment deed. Inspite of being a signatory to the assignment deed, the first defendant has clearly gone to the extent of denying the suit agreement executed by the second defendant in favour of the plaintiff much prior to the execution of the assignment deed as per Ex.D28. All these material facts would lay a foundation and would indicate that the plaintiff is entitled for discretionary relief of specific performance. On re-appreciation of the entire oral and documentary evidence independent of reasons assigned by the Court below, this Court has also come to the conclusion that the plaintiff is entitled for the relief of specific performance of the contract. The grounds raised by the first defendant would not displace the reasons and conclusions arrived at by the learned Judge since the discretion exercised by the learned trial Judge in granting the discretionary relief of specific performance is based on judicial process and is not arbitrary, capricious and perverse. We are not inclined to interfere with the judgment and decree of the Court below.17. For the foregoing reasons, the appeal is dismissed.
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