Ranakrishna Reddy Vs. M.K. Bhagyalakshmi and Anr  Insc 171 (20 February 2007)
S.B. Sinha & Markandey Katju
J U D G E M E N T S.B. SINHA,J.
Defendant No. 1 in the suit is Appellant before us. He was admittedly owner
of a residential house admeasuring 40 ft. x 30 ft bearing No. 148 (New Plot No.
78), 8th Cross, N.R. Colony, Bangalore. Respondent No. 1 has been in possession
of the suit property as a tenant on a monthly rent of Rs. 115/-. The appellant
admittedly had taken loan from Respondent No. 1 herein from time to time, the
details whereof are as under :
"23.4.79 Rs. 8000 27.4.79 Rs. 4000 10.5.79 Rs. 2900 11.5.79 Rs.
Admittedly, the parties entered into an agreement for sale on 11.05.1979.
The aforementioned sum of Rs. 15,000/- received by the appellant was treated to
be the amount of advance paid out of the amount of consideration fixed in the
said agreement of sale i.e Rs. 45,000/-. The relevant terms of the said
agreement are as under :
"Whereas the first party is the absolute owner of house bearing No.
148, 8th cross N.R. colony, Bangalore- 19 more fully described in the schedule
hereunder, having acquired the same under registered gift deed, executed by
Mrs. B.N. Vijaya Deva.
Whereas the second party has offered to buy and the first party has agreed
to sell to the second party the schedule property for a sum of Rs. 45,000/-
(Rupees fourty five thousand only.) The first party hereby agreed to sell the
schedule property to the second party on the following terms and conditions.
A sum of Rs. 15,000/- (Rupees fifteen thousand only) has been paid this
day by the second party to the first party which he hereby acknowledges out of
the said price of Rupees Forty Five thousand.
A further sum of Rs. 5,000/- (Rupees five thousand only) in respect of
the balance of the price shall be paid by the second party to the first party
within one year from this date, i.e., 11-5-79.
The remaining balance of the consideration for the sale, i.e., Rs.
25,000/- (Rupees twenty five thousand only) shall be paid by the second party
to the first party within five years from this date.
On payment of the full consideration of Rs.
45,000/- to the first party by the second party in the manner aforesaid the
first party shall execute a registered deed of sale in favour of the second
party conveying the schedule property to the second party. The expenses for
conveyance for stamp and registration shall be borne by the second party only
but the first party shall apply to the competent authorities for permission to
sell the property to the second party and take other steps necessary for the
xxx xxx xxx The first party shall notify the tenants in the property of the
fact of sale at the time the sale deed is executed in the manner mentioned
above and call upon them to vacate the property and render all assistance and
help to the second party to obtain in vacant possession of the schedule
In case the first party shall commit breach of the agreement, he shall,
besides refunding the sum he has received under this agreement, to the second
party, shall in addition pay a sum of rupees ten thousand as damages.
In case the second party commits breach of this agreement she shall forfeit
a sum of Rs. ten thousand out of the amounts paid."
Although a period of five years was fixed for execution of the sale deed on
payment of the balance sum, admittedly, the appellant herein has received a
further sum of Rs. 5,000/- from Respondent No. 1.
It is furthermore not in dispute that the respondents served a notice upon
the appellant on or before 29.5.1981 alleging that he had been making attempts
to sell the property to third parties.
Appellant was called upon to execute a registered deed of sale on receipt of
the balance amount and as he did not agree thereto, the respondent No. 1 filed
a suit for specific performance of the said agreement of sale dated 11.05.1979.
The said suit was decreed by the learned Trial Judge by a judgment and
decree dated 05.04.1989. A first appeal preferred thereagainst by the appellant
has been dismissed by the High Court by reason of the impugned judgment.
Mr. G.V. Chandrashekhar, learned counsel appearing on behalf of the
appellant, submitted that the learned Trial Judge as also the High Court
committed a serious error in construing the said document as an agreement for
sale in stead and place of an agreement for loan. It was urged that having
regard to the fact that diverse amounts had been taken by the appellant from
the respondents as also the fact that similar agreements for sale were entered
into by and between the appellant and other persons categorically demonstrate
that he had merely borrowed some amount and the purported agreement for sale
was not meant to be acted upon. The learned counsel urged that in view of the
default clauses contained in the agreement, the same could not have been
construed to be an agreement for sale. Strong reliance in this behalf has been
placed on Dadarao and Another v. Ramrao and Others [(1999) 8 SCC 416].
In any event, it was urged that it is not a fit case where the Courts below
should have exercised their discretionary jurisdiction under Section 20 of the Specific Relief
Mr. S.N. Bhat, learned counsel appearing on behalf of the respondents, on
the other hand, supported the judgment.
Original relationship of the parties as landlord and tenant is not in
dispute. The fact that the appellant intended to convey his right, title and
interest in respect of the said property is also not in dispute. As noticed
hereinbefore, he entered into more than one agreement in respect of the self-
same property and took advances in respect thereof from more than one person.
The agreement in question has been described as an agreement for sale.
Appellant admittedly was owner of the property. The agreement shows that there
had been negotiations between the parties as a result whereof the respondent
herein had offered to buy and the appellant had agreed to sell the said
property for a sum of Rs. 45,000/-. The terms and conditions stipulated therein
were arrived at as a result of the negotiations between the parties.
No part of the agreement supports the contention of Mr.
Chandrashekhar that the same was not meant to be acted upon. It was signed
by the parties. Two witnesses who had attested the signature of the parties to
the agreement were examined before the Trial Court. It may be that despite the
said agreement, Respondent No. 1 was allowed to continue to remain in
possession of the premises in question as a tenant and not in part performance
of the said agreement for sale, but it was not necessary for the parties to
adopt the latter course only. The parties, on a plain reading of the agreement,
apparently intended to continue their relationship as landlord and tenant till
a regular deed of sale was executed.
A document, as is well known, must be read in its entirety. The intention of
the parties, it is equally well settled, must be gathered from the document
itself. All parts of the deed must be read in their entirety so as to ascertain
the nature thereof.
The purported default clause, to which our attention has been drawn by Mr.
Chandrashekhar, does not lead to the conclusion that the same was a contract of
loan. By reason thereof, the respective liabilities of the parties were fixed.
In the event, the provisions of the said contract were breached, the damage
which might have been suffered by one party by reason of act of omission or
commission on the part of the other in the matter of performance of the terms
and conditions thereof had been quantified. The quantum of damages fixed
therein was the same for both the parties. The submission of Mr. Chandrashekhar
that in view of the fact that parties had agreed that in the event of breach on
the part of the appellant, the respondent would be entitled to claim damages
for a sum of Rs. 10,000/- only and, thus, the said agreement for sale was not
meant to be acted upon cannot be accepted. If the said contention is accepted,
the damages quantified in the event of any breach on the part of Respondent No.
1 cannot be explained. It is clear that in the event of commission of any
breach on the part of respondent, the appellant was entitled to forfeit the
entire amount of advance. The very fact that the parties intentionally
incorporated such default clause clearly goes to show that they intended to lay
down their rights and obligations under the contract explicitly. They,
therefore, knew the terms thereof. They understood the same. There is no uncertainty
or vagueness therein.
The decision of this Court in Dadarao (supra), whereupon reliance has been
placed by Mr. Chandrashekhar is wholly misplaced. The term of the agreement
therein was absolutely different. We need not dilate on the said decision in
view of the fact that in a subsequent decision of this Court in P.D' Souza v.
Shondrilo Naidu [(2004) 6 SCC 649], it has been held to have been rendered per
"In Dadarao whereupon Mr Bhat placed strong reliance, the binding
decision of M.L. Devender Singh4 was not noticed. This Court furthermore failed
to notice and consider the provisions of Section 23 of the Specific Relief
Act, 1963. The said decision, thus, was rendered per incuriam.
Furthermore, the relevant term stipulated in Dadarao was as under: (SCC
p. 417, para 2) Tukaram Devsarkar, aged about 65, agriculturist, r/o Devsar,
purchaser (ghenar) Balwantrao Ganpatrao Pande, aged 76 years, r/o Dijadi, Post
Devsar, vendor (denar), who hereby give in writing that a paddy field situated
at Dighadi Mouja, Survey No. 7/2 admeasuring 3 acres belonging to me hereby
agree to sell to you for Rs 2000 and agree to receive Rs 1000 from you in
presence of V.D.N. Sane. A sale deed shall be made by me at my cost by
15-4-1972. In case the sale deed is not made to you or if you refuse to accept,
in addition of earnest money an amount of Rs 500 shall be given or taken and no
sale deed will be executed. The possession of the property has been agreed to
be delivered at the time of purchase. This agreement is binding on the legal
heirs and successors and assigns.(emphasis supplied) Interpreting the said
term, it was held: (SCC p. 418, paras 6-7)
The relationship between the parties has to be regulated by the terms of
the agreement between them. Whereas the defendants in the suit had taken up the
stand that the agreement dated 24-4-1969 was really in the nature of a loan
transaction, it is the plaintiff who contended that it was an agreement to
sell. As we read the agreement, it contemplates that on or before 15-4-1972 the
sale deed would be executed. But what is important is that the agreement itself
provides as to what is to happen if either the seller refuses to sell or the purchaser
refuses to buy. In that event the agreement provides that in addition to the
earnest money of Rs 1000 a sum of Rs 500 was to be given back to Tukaram
Devsarkar and that no sale deed will be executed. The agreement is very
categorical in envisaging that a sale deed is to be executed only if both the
parties agree to do so and in the event of any one of them resiling from the
same there was to be no question of the other party being compelled to go ahead
with the execution of the sale deed. In the event of the sale deed not being
executed, Rs 500 in addition to the return of Rs 1000, was the only sum
payable. This sum of Rs 500 perhaps represented the amount of quantified
damages or, as the defendants would have it, interest payable on Rs 1000.
If the agreement had not stipulated as to what is to happen in the event
of the sale not going through, then perhaps the plaintiff could have asked the
Court for a decree of specific performance but here the parties to the
agreement had agreed that even if the seller did not want to execute the sale
deed he would only be required to refund the amount of Rs 1000 plus pay Rs 500
in addition thereto. There was thus no obligation on Balwantrao to complete the
Apart from the fact that the agreement of sale did not contain a similar
clause, Dadarao does not create a binding precedent having not noticed the
statutory provisions as also an earlier binding precedent."
We may furthermore notice that recently in Jai Narain Parasrampuria (Dead)
and Others v. Pushpa Devi Saraf and Others [(2006) 7 SCC 756], this Court
categorically opined that a stipulation in regard to payment of damages by one
party of the contract to the other does not establish that the same was not an
agreement for sale stating:
"One of the learned Judges of the High Court also held that the
said agreement dated 12-6-1984 was in fact an agreement for obtaining loan.
There was no warrant for such a proposition. Clause 7 of the agreement on the
basis whereof such a finding was arrived at reads as under:
"That it is further agreed that in case any defect in the right or
title of the parties of the first part or the said Company is found or any
other encumbrance or legal hurdle is found in respect of the said house
property then in both the circumstances the second party shall have option for
the refund of advance money of Rs. 10 lakhs together with interest @ 18% per
It is interesting to note that the sale deed dated 24-2-1979 whereby Sarafs purchased the property also contains an identical clause. Such types of
clauses normally are found in the agreement so as to enable the vendee to
protect his interest against the defects in the vendor's title, if any. The
agreement records the valuation of property at Rs. 11 lakhs. The respondents
relying on or on the basis of another purported agreement dated 4-6-1984
executed by Sarafs in favour of their son- in-law, Original Defendant 5, S.K.
Mittal stated that the property was worth Rs. 25 lakhs. The trial court, in our
opinion, correctly arrived at an opinion that the said agreement was a sham
one. Original Defendant 5 did not file any suit for specific performance of
The said agreement for sale had not been acted upon by the parties. Reliance
placed on the said agreement by a learned Judge of the High Court was,
The contention of the appellant has been rejected both by the learned Trial
Judge as also by the High Court upon assigning sufficient and cogent reasons.
The agreement has been held to have been executed by the parties in support
whereof large number of witnesses had been examined. The High Court, in
particular in its judgment, has categorically opined that when the respondents
served a notice upon the appellant on 29.05.1981, it was expected of the
appellant to raise a contention that the said agreement was a sham one or
nominal one and was not meant to be acted upon but it was not done. Failure on
the part of the appellant to do so would give rise to an inference that the plea
raised in the suit was an afterthought.
The findings of facts by both the Courts are concurrent ones and in our
opinion no case has been made out to interfere therewith by this Court.
Submission of Mr. Chandrashekhar to the effect that having regard to the
rise in price of an immovable property in Bangalore, the Court ought not to
have exercised its discretionary jurisdiction under Section 20 of the Specific Relief
Act is stated to be rejected. We have noticed hereinbefore that the
appellant had entered into an agreement for sale with others also.
He had, even after 11.5.1979, received a sum of Rs. 5,000/- from the
respondent. He with a view to defeat the lawful claim of Respondent No. 1 had
raised a plea of having executed a prior agreement for sale in respect of
self-same property in favour of his son-in-law who had never claimed any right
thereunder or filed a suit for specific performance of contract. The Courts
below have categorically arrived at a finding that the said contention of the
appellant was not acceptable. Rise in the price of an immovable property by
itself is not a ground for refusal to enforce a lawful agreement of sale. [See
P.D' Souza (supra) and Jai Narain Parasrampuria (supra)] For the reasons
aforementioned, there is no merit in this appeal which is dismissed
accordingly. In the facts and circumstances of this case, however, there shall
be no order as to costs.