CMA/455/2009 of YUVA CONSTRUCTION PVT. LTD. Vs NAISA SUDHAKAR REDDY AND 3 OTHERS on 31 December 2009

THE HON’BLE SRI JUSTICE V.V.S. RAOAND

THE HON’BLE SRI JUSTICE B.N.RAO NALLACIVIL MISCELLANEOUS APPEAL No.455 of 200931.12.2009

Between:

Yuva Constructions Pvt. Ltd., 18-1-36, Temple Lane,Near Mango Market, Tarapet, Vijayawada, represented by itsAuthorised Signatory, T.Vijaya Kumar … Appellant

AND

Naisa Sudhakar Reddy, S/o.late Naisa Ramasubba Reddy And others

... Respondents

THE HON’BLE SRI JUSTICE V.V.S. RAOAND

THE HON’BLE SRI JUSTICE B.N.RAO NALLA

CIVIL MISCELLANEOUS APPEAL No.455 of 2009

JUDGMENT:(per Hon’ble Sri Justice V.V.S.Rao)

This appeal under Order XLIII Rule 1 of Code of Civil Procedure1908 (CPC) is filed against the order dated 08.4.2009 in I.A.No.130 of2008 in O.S.No.85 of 2008 on the file of the Court of IV AdditionalDistrict Judge, Tirupati. By the said order, appellant, who is fourthdefendant in the suit, has been restrained from alienating the suitschedule property by changing the physical features in any manner tothird parties till the disposal of the suit. The suit schedule property iscomprised in survey Nos.188/1 and 188/2 situated at KotramangalamVillage accounts of Renigunta Mandal in Chittoor District admeasuringAcs.5.27.

The brief facts of the matter are as follows. Respondents 1 and2 herein (hereafter, plaintiffs) filed the suit for specific performance ofagreement of sale dated 21.7.2005 executed by defendants 1 to 3 afterreceiving balance sale consideration of Rs.1,12,02,000/- and deliveredpossession of suit schedule property. The appellant herein was alsoimpleaded as fourth defendant (hereafter called as such) alleging thatthey erected a board at the suit schedule property and were taking updevelopmental works. Plaintiffs alleged that fourth defendant is a

stranger and he has no manner of right thereto. They also allege thatdefendants 2 and 3 on behalf of first defendant firm entered intoagreement of sale agreeing to sell suit schedule property forRs.1,37,02,000/- and received advance amount of Rs.25,00,000/- andagreed to execute registered sale deed on or before 20.12.2005. Theyalso allege that they paid Rs.10,200/- to Tirupathi Urban DevelopmentAuthority (TUDA) for betterment charges and applied for approval ofthe layout. TUDA refused to approve the master-plan. The plaintiffsthen approached defendants 1 to 3 for furnishing correct surveynumbers of the property. Defendants 1 to 3 did not cooperate. Onenquiry they came to know that survey numbers mentioned in the saledeed of defendants 1 to 3 were wrongly noted, which was alsoconfirmed by revenue authorities. Plaintiffs therefore postponedpayment of balance sale consideration and requested defendants 1 to3 to obtain registered rectification deed and then execute registeredsale deed in favour of plaintiffs. But in spite of repeated demands andplaintiffs expressing their readiness and willingness to perform theirpart of contract, defendants did not cooperate though they obtainedrectification deed on 13.6.2007 from their vendors. Time is notessence of the contract and, therefore, vendors are bound to executethe sale deed after receiving balance sale consideration. They gotissued notice on 28.12.2007 calling upon defendants 1 to 3 to receivebalance sale consideration and to execute sale deed on 28.1.2008before Sub Registrar, Renigunta. After receiving the same, vendorsadvised plaintiffs to be ready with the money and draft document atSub Registrar’s Office. Therefore, on 28.1.2008 plaintiffs were presentat the Sub Registrar’s Office, Renigunta, along with draft documentand challans under which stamp duty was paid. Though they waitedupto 5.00 pm, defendants 1 to 3 did not turn up. Suspecting the bonafides of the vendors, on 25.1.2008 plaintiffs visited the suit scheduleproperty and found that name board erected by them was damagedand that fourth defendant along with 10 to 15 followers came there andthreatened plaintiffs informing that he grabbed the land and, therefore,he is impleaded as a party. In their interlocutory application fortemporary injunction, plaintiffs made similar averments.

The trial Court on 08.7.2008 ordered ex parte ad interiminjunction by passing an order, which reads as under.

Heard the learned counsel appearing for thepetitioners. Perused the affidavit of the petitioner filed insupport of the petition and the documents filed along with theplaint. The petitioners filed the suit against the defendants forspecific performance of agreement of sale dated 25.1.2005. Itis the case of the petitioners that the respondent agreed to sellthe petition schedule property to the petitioners for total

Analysis

consideration of Rs.1,37,02,000/- and received advance ofRs.25,00,000/- on the same day and that the respondents arenot coming forward to execute regular registered sale deed infavour of the petitioners in spite of several demands. As seenfrom the record, it is very clear that the petitioners also gotissued a legal notice to the respondent before filing the suit. Prima facie case and balance of convenience appear to be infavour of the petitioners. If notice is ordered before grantingad interim injunction, the very purpose for which this petition isfiled may be defeated by delay. If the respondents areallowed to alienate the petition schedule property to thirdparties, the petitioner will be put to much hardship. To avoidmultiplicity of proceedings and to keep the property in tact, Ithink, it is just and proper to grant ad interim. Issue ad interiminjunction restraining the respondents from alienating thepetition schedule property by changing the physical featuresin any manner to third parties. Notice to the respondents by21.8.2008. The petitioners are directed to comply theprovision of Order 30 Rule 3(a) CPC.

The fourth defendant filed counter making following allegationsand averments. Fourth defendant purchased suit schedule propertyfrom defendants 1 to 3 under a registered sale deed dated 04.7.2007bearing document No.4697 of 2007 of Sub Registrar’s Office,Renigunta, duly paying sale consideration of Rs.11,69,940/- by way ofdemand draft. Fourth defendant also verified the title of the vendorsand only after taking assurance from them that suit schedule propertyis free from any encumbrances and after obtaining all the title deedsand relevant documents they purchased the suit schedule property. They took possession of suit schedule property. After registration ofsale deed, there was escalation of land rates. The vendors thenrequested for payment of higher rates, which was refused by fourthdefendant. Therefore, defendants 1 to 3 colluded with plaintiffs,created a false document as if there was agreement in force earlier tothe sale in favour of fourth defendant and got filed the suit. The saidagreement has no validity and expired on 20.12.2005. Fourthdefendant also purchased Acs.16.55 including suit schedule propertyand developed the property. Defendants 1 to 3 are aware of the saledeed. Subsequently they developed the property by spending hugeamounts. They also obtained necessary orders from RevenueDivisional Officer (RDO) for mutation in the revenue records as well aspermission for conversion of agricultural land into non-agriculturalland. Fourth defendant also alleged that plaintiffs were not ready andwilling to perform the contract and that they did not place any evidencethat they committed breach of contract and that they are not bona fidepurchasers.

In the enquiry, the trial Court marked plaintiffs’ documents Exs.A1 to A17 which include the agreement of sale dated 21.7.2005(Ex.A1), Registration copy of rectification deed dated 13.6.2007(Ex.A2) and legal notice dated 28.12.2007 issued by plaintiffs (Ex.A3). Defendants’ documents being copy of sale deed dated 11.7.2005under which defendants 1 to 3 purchased the property fromM/s.Munireddy Venkata Reddy, Nadamuni Reddy, Gopala Reddy andDasaradha Rami Reddy in favour of defendants 1 to 3 was marked asEx.B1, encumbrance certificate was marked as Ex.B2 and registeredsale deed dated 04.7.2007 executed by defendants 1 to 3 in favour offourth defendant was marked as Ex.B3.

Arguments

Learned IV Additional District Judge, Tirupathi, considered theonly question for consideration as to whether plaintiffs made out primafacie case and proof of balance of convenience and hardshipwarranting the grant of ad interim injunction observing that the fourthdefendant failed to explain as to why defendants 1 to 3 sold theproperty at Rs.11,69,940/- when the market value is Rs.1,37,02,000/-and came to the conclusion that the agreement in favour of plaintiffsprima facie evidences bona fide purchase by plaintiffs, thought it fitproper to grant interim injunction and accordingly made ad interim exparte injunction granted on 18.07.2008 absolute. The learned DistrictJudge also opined that if the fourth defendant is allowed to alienate theproperty by making further constructions, the plaintiffs would sufferhardship.

In this appeal, fourth defendant contends that the agreement setup by the plaintiffs is not bona fide and is doubtful. Apart from sayingthat defendants 1 to 3 are in collusion with the plaintiffs to defeat therights of the fourth defendant under Ex.B3 sale deed, the learnedsenior counsel would urge that defendants 1 to 3 themselvespurchased suit schedule property for Rs.2,63,500/- and therefore saleconsideration under Ex.B3 cannot be considered as low. According tohim, so as to defeat the rights of the fourth defendant, plaintiffs incollusion with defendants 1 to 3 mentioned the consideration asRs.1,37,02,000/-. He contends that till the suit was filed, the plaintiffsthemselves were not aware of the exact survey numbers of theproperty, they purchased under Ex.B1 suit agreement, dated21.07.2005, which itself is typed on stamp paper purchased threemonths prior to the alleged agreement. He submits that even as persuit agreement of sale, the last date for payment of sale considerationwas 20.12.2005, in default of which the vendors can forfeit theadvance amount allegedly paid. Therefore, he submits that theagreement is unenforceable. Lastly, he submits that fourth defendant isa bona fide purchaser without notice of alleged prior sale in favour ofplaintiffs, and therefore, the contract set up by plaintiffs cannot be specifically enforced.

Learned counsel for plaintiffs (respondents 1 and 2 herein)submits that defendants 1 to 3 in collusion with fourth defendant hasexecuted Ex.B3, sale deed, and the same does not in any manneraffect the rights of the plaintiffs under Ex.B1, agreement of sale.According to him, even though defendants 1 to 3 obtained rectificationdeed from their vendors, on 13.06.2007, the same was never broughtto the notice of the plaintiffs in spite of the fact that they paid necessarystamp duty by way of challan Ex.A5. Nextly, he contends that thoughthe survey number was wrongly mentioned in the agreement of sale,plaintiffs can always seek specific performance after the defect isrectified by the vendors as contemplated under Section 13 of theSpecific Relief Act, 1963.

He placed reliance on Century Flour Mills v S.Suppiah[[1]],Sujit Pal v Prabir Kumar Sun[[2]], Sri Brahadambal Agency andPartnershi Firm v Ramasamy[[3]], Ashwani Kumar v Lachi Ram[[4]],Kishore Motiani v M/s.Om Prakash and Sons[[5]], Deendayal v SmtHarjot Kanwar[[6]], Ranga Reddy v P.Aswarthappa[[7]], Power GridCorporation of India Limited v Nadipalloi Varakrypa PrasadaRao[[8]]and Taurus Homes Private Limited v Joint Collector No.1,R.R.District[[9]].

In the background of the case and having regard to the rivalsubmissions, we have called upon the question as to whether theCourt below was in error in granting ad interim injunction restrainingthe fourth defendant – the subsequent purchaser; from alienating thesuit schedule property by changing the physical features to thirdparties.

In a suit for specific performance of agreement of sale, of late, ithas become common that the plaintiff also moves an interlocutoryapplication for injunction restraining the defendant (vendor) fromalienating the property pending adjudication of the rights of the plaintiff,to enforce the contract. If the plaintiff is also in possession, which isdelivered to him under the suit agreement, it is also common thatplaintiff seeks ad interim injunction restraining the defendant frominterfering with the possession. In other case, the plaintiff can be saidto have proved prima facie case if he convinced the Court that the suitagreement is valid, and that it is executed by the persons competent tosell, it is executed in respect of the property which is delineated andcapable of easy identification, and also that he/she has been readyand willing to perform his/her part of the contract, and thatdefendant/vendor went back on the promise to cause legal injury to the plaintiff. There could be other factors of prima facie cases, dependingon the circumstances. In a case where a third party comes forwardsaying that the same suit schedule property has been purchasedsubsequent to the suit agreement or such third party is already made aparty to the suit, the plaintiff has to further prove that the subsequentpurchaser had notice whether actual or constructive of the originalcontract which is sought to be enforced in the suit and that suchsubsequent contract was effected by the defendant only to defeat theinterests of the plaintiff.

As pointed out by learned senior counsel for the fourthdefendant, the plaintiffs impleaded the fourth defendant alleging thatten to fifteen followers of fourth defendant entered into the suitschedule land saying that it has been grabbed and threatened theplaintiffs. There is not even an allegation that the fourth defendant issubsequent purchaser with knowledge and notice of the suitagreement in favour of the plaintiffs. When it was specifically pleadedand evidence was adduced by marking Ex.B.3, registered sale deed,which itself is a constructive notice to the plaintiffs, it is rather curiousfor the plaintiffs to contend that the sale deed in favour of the fourthdefendant is not bona fide. When the competing parties rely onregistered documents and/or unregistered agreements of sale, theCourt must attach importance to the registered documentsnotwithstanding the fact that the sale consideration of registereddocument may be less and sale consideration shown in theunregistered agreement of sale may be more, which by itself is notrelevant. Indeed, it would be improper to ignore registered sale deed infavour of the fourth defendant only on the ground that it is forconsideration of Rs.11,69,940/- especially when defendants 1 to 3themselves purchased the property under Ex.B.1, sale deed, for a sumof Rs.2,63,500/-. Therefore, in the absence of any plea that the fourthdefendant is a subsequent purchaser with notice of prior sale and inthe absence of even rudimentary proof, it cannot be said that theplaintiffs have prima facie case in their favour to seek specificenforcement of contract. As per Section 19 of the Specific Relief Actspecific enforcement of contract can be denied if there is a subsequentpurchaser who is a transferee for value and who paid money in goodfaith and had no notice of original contract. Plaintiffs never made anyattempt to prove in that direction. This Court after perusal of Ex.B1,dated 11.07.2005, Ex.A1, dated 21.07.2005 and Ex.B3, dated04.07.2007 is convinced that there is unexplained discrepancy in thecase set up by plaintiffs.

Plaintiffs’ agreement is typed on non-judicial stamp paper whichwas purchased by first plaintiff on 15.04.2005. The agreement was

entered on 21.07.2005. Two probabilities are that the stamp paper waspurchased on 15.04.2005 and used and executed on 21.07.2005 orthe signatures were obtained on 15.04.2005 and later agreementswere typed on stamp papers. In either of these cases, the agreementitself creates suspicion. A copy of the written statement filed by seconddefendant – partner of first defendant, is supplied by plaintiffs. Thoughthe execution of the agreement is admitted, its enforceability is denied.All the allegations made by plaintiffs are categorically denied withreference to each of the allegations and a further allegation is madethat the plaintiffs have set up a frivolous case. They alleged thatplaintiffs failed to comply with the terms and conditions of Ex.A.1, thatthey were never ready to perform their part of the contract within thetime stipulated though the time is essence of the contract and alsoexpressed their inability and requested defendants 1 to 3 to refund theadvance amount. Therefore, second defendant offered that they soldthe plaint schedule property to fourth defendant, after obtainingrectification deed although no such deed is required and deliveredpossession on the date of Ex.B.3. Thus, when the vendors of theplaintiffs themselves dispute the enforceability of the agreement of saleon the ground that plaintiffs went back on their promise and requestedfor refund of the advance amount paid, prima facie case in their favourcannot readily be inferred.

The second defendant, who filed the counter on behalf of thefirst defendant, also alleged that defendants 1 to 3 never agreed to sellplaint schedule properties to plaintiffs and Ex.A.1 agreement is inrespect of properties mentioned in the schedule to Ex.A.1. This alsocreates a doubt as to whether defendants 1 to 3 sold the plaintschedule property to plaintiffs under Ex.A.1. Here it is necessary tonotice that the particulars of the property purchased by defendants 1 to3 under Ex.B.1, the property they allegedly sold to plaintiffs underEx.A.1 and the property purchased by fourth defendant underEx.B.3.

Under Ex.B.1, dated 11.07.2005, defendants 1 to 3 purchasedland admeasuring Acs.5.27 out of total extent of Acs.8.53 in surveyNo.188/2 situated in No.19, Kotramangalam village of ReniguntaMandal. The said land is bounded on East - survey No.188/2, west –pathway, north – road leading to Panniru canal and south – land ofKotramangalam Venkata Reddy. In Ex.A.1, suit agreement, dated21.07.2005, the boundaries are the same and the land covered byEx.A.1 is also comprised in survey No.188/2. But, under sale deed,Ex.B.3, dated 04.07.2007, fourth defendant purchased landadmeasuring Acs.2.42 in survey No.188/1 and Acs.2.85 in surveyNo.188/2 (totally admeasuring Acs.5.27) and the said land is bounded

Conclusion

on East by land of Gollapalli Muni Reddy, west by pathway, north byroad leading to Panniru canal and south by land of KotramangalamVenkata Reddy. The plaint schedule, however, does not conform tothe schedule in Ex.A.1, but curiously to the schedule in Ex.B.3. This issought to be explained by the plaintiffs that they realize the incorrectsurvey numbers when they approached TUDA, that they requesteddefendants 1 to 3 to obtain necessary rectification deed from vendorsand though such rectification deed was obtained on 13.06.2007, thesame was withheld from plaintiffs. This appears to be highlyimprobable for two reasons. Indisputably, Ex.A1 was executed on21.07.2005 and till 28.07.2007, when they issued notice, the plaintiffsdid not make any efforts to pay balance of consideration of more thanRupees one crore nor issued any notice to defendants 1 to 3.Secondly, Ex.B.3 sale deed was executed in favour of fourth defendanton 04.07.2007, after obtaining rectification deed on 13.06.2007, whichis quite probable. In addition, counsel for plaintiffs has placed beforethis Court the proceedings of Revenue Divisional Officer dated15.12.2009 whereunder necessary permission was granted forconversion of agricultural land to non-agricultural use. Therefore, asalleged by defendant No.2 in the written statement, the plaint scheduleproperty is certainly not the land which is mentioned in the scheduleunder Ex.A1, agreement of sale. For these reasons, we are not able toapprove the findings recorded by Court below that the plaintiffs provedprima facie case and balance of convenience. Admittedly, plaintiffswere not in possession of the property and it is only fourth defendantwho is in possession of the property. Further, specific performance canalso be denied and compensation is awarded. As noticed supra,though as admitted by second defendant, the fourth defendant issubsequent purchaser, plaintiffs did not even allege that fourthdefendant had notice of prior sale. Therefore, Section 19(b) of SpecificRelief Act would be attracted. We, however, hasten to add that allthese matters are to be gone into after a full trial and observations areonly intended for the purpose of this appeal and are not intended toinfluence the independent consideration by Court below.

In the result, for the above reasons, the impugned order of theCourt below is set aside and I.A.No.130 of 2008 in O.S.No.85 of 2008shall stand dismissed. We direct the parties to bear their respectivecosts.

The civil miscellaneous appeal is accordingly allowed. Nocosts.

December 31, 2009YS[1]AIR 1975 Madras 270 (FB)[2]AIR 1986 Calcutta 220[3]AIR 2002 Madras 352[4]AIR 2003 Himachal Pradesh 28[5]AIR 2003 Delhi 166[6]AIR 2003 Rajasthan 202[7]2009 (2) ALT 127[8]2209 (2) ALT 135[9]2009 (4) ALT 627

_______________

(V.V.S.RAO,J)

__________________(B.N.RAO NALLA, J)