IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS WEDNESDAY, THE 9TH DECEMBER 2009 / 18TH AGRAHAYANA 1931 AS.No. 390 of 1998(B) ------------------------------ OS.44/1996 of SUB COURT, PALA .................... APPELLANT(S): PLAINTIFF: -------------------------------------- P.V.JOHN, KAVARAPPADIL HOUSE, KIZHAKKUMCHERI VADAKKE MURI, NADUVILA VILLAGE, VAIKOM TALUK. BY ADV. SRI.P.G.PARAMESWARA PANICKER, SENIOR ADVOCATE SRI.N.MANOJ KUMAR RESPONDENT(S): DEFENDANTS: ----------------------------------------------- 1. THRESIAMMA, W/O.KURIAKOSE, PALATHINKALAYA THEKKEVELIYIL, UDAYAMPEROOR KARA, MANAKKUNNAM VILLAGE. 2. JOSEPH, S/O.KURIAKOSE, MADATHIL, KIZHAKKUMCHERI, VALLAKAM KARA, NADUVILA VILLAGE. 3. JOSEPH, S/O.JOHN, CHEMMANATHU KARA, VAIKOM VILLAGE, KOTTAYAM. 4. JOSEPH, S/O.ULAHANNAN, KURUPPANCHERI THARAYIL, VALLAKAM KARA, NADUVILA VILLAGE. ADDL. 5. JOSEPH, S/O.KURIAN, MAZHUVANCHERIL, MUVATTUPUZHA TALUK, ELANJI VILLAGE. (The additional 5th respondent is impleaded as per order on CMP No.2737 of 2002 dated 7.11.2003). AS.No. 390 of 1998 -2- ADDL.6. JEEVAN RAJ, S/O.AYYAPPAN, CHULLIPARAMBIL HOUSE, KAKKANAD KARA, KAKKANAD VILLAGE. ADDL.7. MANIYAN NAIR, S/O.V.CHELLAPPAN NAIR, CHILAMBU VEEDU, VAIKOM VILLAGE, PADINJARE MURI, THEKKE NADA P.O.-686142. (Additional arespondents 6 and 7 are impleaded as per order on I.A. No.1222/2004 dated 7.4.2004) R1 & R2 BY ADV.SRI.K.J.JOSEMON. R1 TO R4 BY ADV. SRI.AGINOV MATHAPPAN SRI.K.GEORGE SMT.K.SHERIN MOHAN R5 BY ADV. SRI.MATHEW SKARIA THIS APPEAL SUIT HAVING BEEN FINALLY HEARD 09/12/2009 ALONG WITH RFA NO. 266 OF 2006 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.M.JOSEPH & M.L.JOSEPH FRANCIS, JJ. ------------------------------------------------------ A.S.No.390 of 1998 (B) R.F.A.No.266 of 2006-C ---------------------------------------------- Dated, this the 9th day of December, 2009 J U D G M E N T K.M.Joseph, J. These cases being connected, they are disposed of by this common judgment. 2. AS 390/98 arises out of OS 44/96 on the file of the Sub Court, Pala. OS 44/96 is a suit for specific performance of contract or in the alternative to return Rs.10,000/- paid as advance with 12 % interest. RFA 266/2006 is directed against OS 45/1996. That was a suit filed by the plaintiff in the other case seeking injunction. The plaintiff is the appellant in both appeals. A.S.No.390/1998: 3. We will refer to the facts in OS 44/1996. The case of the appellant/plaintiff in brief is as follows: 4. The plaint schedule property consisting of 1 acre 24 cents belonged to the Ist defendant. The 2nd defendant is the father of the Ist defendant and also the power of attorney holder of the Ist defendant. The 2nd AS.390/98 & RFA.266/06 -2- defendant executed an agreement of sale in respect of the plaint schedule property on 30.4.1988 in favour of the appellant. The consideration of the property is fixed as Rs.2,000/- per cent. The 2nd defendant agreed to measure the property and sell the same to the appellant within a period of 3 months from 30.4.1988. He received advance of Rs.10,000/- from the appellant on 30.4.1988 on behalf of the Ist defendant. Defendants 1 and 2 were not in a position to execute the sale deed within the time and the period of contract was extended upto 15.2.1989. They made an attempt to sell the property to strangers. Then the plaintiff instituted the suit for injunction. It is stated that defendants 1 and 2 have created some documents in favour of defendants 3 and 4. It is said to be in violation of the order of injunction granted by the Munsiff Court, Vaikom in the suit for injunction filed by the appellant and therefore those documents were invalid and sham. 5. The case of defendants 1 and 2, inter alia, was as follows: 1 acre 34 cents belonged to the Ist defendant. AS.390/98 & RFA.266/06 -3- They denied the agreement dated 30.4.1988. They say that they have not received the advance amount as alleged. According to them, there was an agreement on 2.11.1987. It is their case that on the said date 10 cents out of 1 acre 34 cents was sold to the appellant pursuant to his request. On the said day, there was an agreement for sale of the remaining property. The consideration fixed was Rs.2,000/- per cent. The 2nd defendant received advance of Rs.10,000/- on 2.11.1987. The plaintiff is described as a broker. He was unable to raise the funds. He approached the defendants seeking extension of time by three months. Another agreement was executed on 2.4.1988 cancelling the earlier agreement. Very same conditions in the agreement dated 2.11.1987 were retained and the advance paid on 2.11.1987 was treated as advance in the agreement dated 2.4.1988. Again, the appellant could not raise funds and he prayed extension of time. After cancelling the earlier agreement, a new agreement was executed on 6.8.1988 wherein the period fixed was three months. The original advance was carried over. The period expired on 6.10.1988. On 6.11.1988 the AS.390/98 & RFA.266/06 -4- appellant approached the defendants and expressed his inability to raise funds. Further extension of time was sought till 28.11.1988. A new agreement was executed on 7.11.1988. The advance was carried over to this agreement also. Subsequently, the appellant met the 2nd defendant and told him that he is not in a position to raise funds and he requested the 2nd defendant to execute sale deed in respect of 12.865 cents after adjusting the advance paid. A sale deed was executed on 29.11.1988. Only a meager amount was shown as consideration in order to avoid payment of stamp duty. There is no subsisting contract and they have denied the allegations regarding the readiness and willingness of the appellant to perform the contract. 6. The 3rd defendant also filed written statement denying the allegations. 7. Before the trial court, the agreement dated 30.4.1988 was marked as Ext.A1. Ext.A2 is the sale deed executed on 8.3.1989 by the 2nd defendant. Ext.A3 is another sale deed executed by the 2nd defendant. Ext.B1 is the agreement dated 6.8.1988. Ext.B2 is the agreement dated AS.390/98 & RFA.266/06 -5- 7.11.1988. Ext.B3 is the sale deed executed by the 2nd defendant in favour of the appellant. Ext.B4 is the power of attorney executed by the Ist defendant in favour of the 2nd defendant. Ext.B5 is the same as Ext.A2. Appellant was examined as Pw1. The 2nd defendant was examined as Dw1 and Dw2 is the 3rd defendant. The court below found that Ext.A1 does not inspire the confidence of the court. It is further found that even if there is an agreement dated 30.4.1988, in view of Ext.B2 dated 7.11.1988 Ext.A1 is no longer in force. The appellant has suppressed Ext.B2 agreement. It is found that the circumstances brought out in evidence would establish that the 2nd defendant has not executed Ext.A1 document. RFA 266/2006: 8. This is a suit seeking injunction against defendants 1 and 2 against alienation of the property. The suit was filed on the basis of the alleged agreement for sale of the property. 9. We heard Sri.P.G.Parameswara Panicker, learned senior counsel appearing on behalf of the appellant, AS.390/98 & RFA.266/06 -6- Sri.K.J.Josemon, learned counsel for respondents 1 and 2 and Sri.Mathew Scaria, learned counsel for the 5th respondent. Sri.P.G.Parameswara Panicker would contend that there was an agreement on 2.11.1987 for the sale of 1 acre 24 cents at the rate of Rs.2,000/- per cent. On the said day Rs.10,000/- was paid as advance. A period of 6 months was fixed for the performance of the agreement. It is pointed out that it is agreed by the seller that he would discharge the mortgage outstanding and the property would be measured. He would contend that the 2nd respondent did not discharge his obligation under the agreement by discharging the mortgage. (It has come out in evidence that the mortgage was discharged only on 7.10.1988). He would submit that the trial court is not correct in not acting upon Ext.A1. According to him, Ext.A1 was produced and that was the only agreement with the appellant. He would point out certain circumstances to support his contention that Ext.A1 is a genuine document. He would point out that the two witnesses in Ext.A1 are the witnesses in Ext.B1 and B2 agreements and Ext.B3 sale deed and Ext.B4 power of attorney and one of the AS.390/98 & RFA.266/06 -7- witnesses is also a witness in Exts.B5. He further submits that the first witness is none other than the uncle of the 2nd defendant. He would point out that, at any rate, Ext.A1 is not very relevant. In this context he pressed into service the doctrine of novation and he would submit that in the facts and circumstances of this case it is clear that there were no novation as the original agreement between the parties is dated 2.11.1987 wherein the relevant terms have been set out and all that has happened when Ext.A1 dated 30.4.1988 was executed, was extension of time. He would submit that variation of a few terms in the agreement would not by itself result in novation of the contract. He would submit that unless a later contract placed side by side with an earlier contract is so inconsistent with the former, there cannot be a question of novation and the original agreement would continue to exist in the eye of law. Novation takes place only when the original agreement is substituted by a new agreement and there cannot be a substitution of the earlier agreement when only one or a few terms are altered. He would submit that the consideration of the agreement AS.390/98 & RFA.266/06 -8- dated 2.11.1987 continues as a golden thread in the agreement dated 2.4.1988, 30.4.1988, 6.8.1988 and 7.11.1988. The property is the same, parties are the same, and the amount paid as advance on 2.11.1987 is treated as advance in subsequent agreements. The only thing purported to be done was extension of period of agreement upon expiry of the earlier agreement. In this regard, he relied on Pollock & Mulla in Indian Contract and Specific Relief Acts, (12th Edition) wherein at Page 1214 it is stated as follows: “The word 'novation' is used in the marginal note to the section, and is the accepted catchword for its subject matter. It has been thus defined: 'that, there being a contract in existence, some new contract is substituted for it either between the same parties (for that might be) or between different parties, the consideration mutually being the discharge of the old contract. Novation of a contract comprises two elements: the discharge of one debt or debtor and the substitution of a new debt or debtor. It is well settled that the parties to an original contract can by mutual agreement enter into a new contract in substitution of the old one. Novation is a substitution of the contract and not mere variation of some of its terms. It should rescind or extinguish the previous contract. Novation under s 62 is brought about by: AS.390/98 & RFA.266/06 -9- (a) introduction of new parties; or (b) by alteration between the same parties by introduction of new terms. It is not consistent with the original debtors remaining liable on the old contract. Substitution of a new contract is the core of novation. Its essential feature is that a right under the original contract is relinguished or replaced by a new contract. Where these essentials are missing there is no novation. Under Indian law one of the requisites of such novation is the agreement of all the parties to the new contract. The consent of the parties may be established by circumstances showing such assent as well as by express words.” 10. He also relied on the decision in Vishram Arjun v. Irukulla Shankariah and another {AIR 1957 AP 784} (paragraphs 6 and 10). Paragraph 10 reads as follows: 10. The question therefore is, whether Ex.D-7 is in fact a novation. As observed above, a novation is a substitution of the contract and not a mere variation of some of its terms. It should rescind or extinguish the previous contract. As laid down in Gilbert v.Hall, (1831) I LJ Ch 15 (H), a new and independent agreement concerning the same matter as the previous agreement may be construed to discharge the former, only if the terms of the latter are so inconsistent with those of the former that they cannot stand together. In other words, a contract will be said to be rescinded by another between the same parties when the latter is inconsistent with or AS.390/98 & RFA.266/06 -10- renders impossible the performance of the former. If their legal effect is the same, though they differ in terms, even then it will be a mere ratification of the first and they must be construed together. Whether an agreement entered into is in substitution of an old contract or not is always a question of fact depending also on the intention of the parties. The intention of the parties no doubt may be inferred from the contents of the document, but in order to gather their intention one should look to the substance of the matter and not to the mere form. The same was the view expressed by the Calcutta High Court in Kshetranath v. Harsukdas Balakissendas, AIR 1927 Cal 538 (I). Looking at the terms of the contract from this angle, we feel it difficult to come to the conclusion that Ext.D-7 which relates only to some of the terms and is not a self-contained agreement in relation to the contract of sale entered into between the parties, substitutes or extinguishes the previous contract and can form the sole basis for determination of all rights and liabilities of the party in relation to the contract of sale. It is substantially an agreement of remission. The same will be the conclusion even if the matter is judged under the provisions of the Sale of Goods Act. One would do well to bear in mind that Ext.P-6 is a contract to sell goods. The term 'goods' is defined in section 2 (7) of the Indian Sale of Goods Act (III of 1930) as follows: “ Goods' means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming AS.390/98 & RFA.266/06 -11- part of the land which are agreed to be severed before sale or under the contract of sale.” According to Section 6 (1) of the said Act, the goods which form the subject of a contract of sale maybe either existing goods, owned or possessed by the seller, or future goods. Sub- section (3) of the said section reads as follows: “Where by contract of sale, the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.” The suit contract of sale relates to severed timber lying in the forest area and also future goods therein subject to the Forest Rules as stated in Ext.D-34, the original contract of sale executed between the Forest Department and the plaintiff, is no doubt a contract of sale within the meaning of the Indian Sale of Goods Act and also the Hyderabad Sale of Goods Act (Act VII of 1351, F). By the time Ext.D-7 was entered into, not only the defendants were put in possession of the subject matter of sale but also that they had removed a substantial portion of such goods to their destination and even paid considerable amount. It cannot therefore be said that Ext.D-7 is a rescission of the previous contract of sale. At the most it is an agreement varying the quantum of purchase money in view of subsequent circumstances. The time and the manner in which the payment was to be made under Ext.P-6 was made dependent on the demand of P.W.D. from the first party, but now it has been clearly determined. There is no variation as to the term relating to the unservicable wood to be left for the use of the AS.390/98 & RFA.266/06 -12- plaintiff. The term relating to the responsibility of the plaintiff to the P.W.D. for any dispute is not altered. Nor is the term relating to power-of- attorney affected. As a matter of fact this document does not bear reference to any of these even though they are some of the important terms of contract of sale. For these, one has even now to look to Ext.P-6 notwithstanding Ext.D-7. In this way, Exts.P-6 and D-7 are, both put together, one complete subsisting contract. The latter supplements rather than supplants or substitutes the former. The plea of novation therefore must fail.” He also relied on State of Bihar v. Ram Ballabh Das Jalan and another {AIR 1960 Patna 400}. 11. He would further contend that it is important to notice the effect of Ext.B3. Ext.B3 is the sale deed executed by the 2nd defendant in favour of the appellant in respect of 12.865 cents out of the plaint schedule property on 16.11.1988. He would contend that the agreement dated 2.11.1987 as also other agreements which have been admittedly executed and two of which are produced as Exts.B1 and B2, all create a legal right in the plaintiff to seek specific performance for 1 acre 24 cents. When Ext.B3 sale deed was AS.390/98 & RFA.266/06 -13- executed he would contend that the appellant was ready and willing to take the entire property. He had necessary funds also. But, the 2nd defendant refused to sell the entire property. There was a rise in price of the property. This, according to him, was brought about by the operation of the service station which was started by the appellant in the 10 cents of the property which was purchased by him on 2.11.1987. He would submit that unless there is accord and satisfaction, the appellant could not be said to have given up his right for specific performance of the entire property covered by the agreement. There is no such accord and satisfaction. In this regard he would submit that the conduct of the defendants is crucial. He would submit that Ext.B3 was executed on 16.11.1988. However it is registered on 29.11.1988. According to him, the 2nd defendant who was examined as Dw1 has stated that the registration took place on 29.11.1988 and he was watching whether the appellant would be forthcoming with the entire funds. This circumstance, in his submission is clinching to show that when Ext.B3 sale deed was executed on 16.11.1988, the parties did AS.390/98 & RFA.266/06 -14- not contemplate that the plaintiff is foreclosed for suing for remainder of the property. He would further point out that if it were that by Ext.B3 the plaintiff was giving up his rights under the agreement, nothing prevented the parties from expressly mentioning so in Ext.B3 itself. He also relied on the decision in Bharat Coking Coal Ltd.v Annapurna Construction (2003 (8) SCC 154) wherein it was held as follows: “Only because the respondent has accepted the final bill, the same would not mean that it was not entitled to raise any claim. It is not the case of the appellant that while accepting the final bill, the respondent had unequivocally stated that he would not raise any further claim. In absence of such a declaration, the respondent cannot be held to be estopped or precluded from raising any claim. We, therefore, do not find any merit in the said submission of Mr.Sinha.” 12. He would further contend that it is settled law that in contracts of sale of immovable property, time is not the essence of the contract. He wold point out that in February, 1989, upon knowing that the defendants are attempting to alienate the property, the appellant instituted the suit for injunction in the Munsiff Court, Vaikom. It is pending decision on the interlocutory application in the said AS.390/98 & RFA.266/06 -15- suit that the 2nd defendant sold 7 cents to the 3rd defendant vide Ext.A2 and 5.45 cents vide Ext.A3 to the 4th defendant. Ext.A2 is on 8.3.1989 while Ext.A3 is dated 21.2.1989. Subsequent to the alienation, interlocutory injunction was granted. Subsequent to the same and pending the suit, the 2nd defendant has transferred 10 cents more in favour of the 5th respondent. He would submit that the plaintiff was affluent. He would also submit that even if Ext.A1 could not be acted upon as a Court of justice nothing would prevent this Court from granting relief to the appellant/plaintiff on the admitted facts. In other words, he would contend that ignoring Ext.A1 agreements dated 2.11.1987, 2.4.1988, 6.8.1988, 7.11.988 cannot be overlooked. Since these agreements are admitted and as in a sale of immovable property time is not the essence of contract and as the plaintiff is ready and willing and was having the funds which is to be determined on the basis of the capacity to raise the consideration, the court below has clearly erred in not granting the relief. 13. Sri.K.J.Josemon, learned counsel appearing AS.390/98 & RFA.266/06 -16- on behalf of defendants 1 and 2 would on the other hand point out that there is no merit in the Appeal. He would contend that it is relevant to notice the averments in the plaint. There is no reference to Exts.B1, B2 and B3. The crucial aspects have been suppressed. He would reiterate that Ext.A1 is not a genuine document. Further, in regard to the question as to the effect of Ext.B3 sale deed, he would point out one circumstance. Upon executing Ext.B3 sale deed, the plaintiff returned Exts.B1 and B2 agreements to defendants 1 and 2. In Ext.B2 agreement dated 7.11.1988 it is recited that all the earlier agreements were cancelled. Ext.A1 is dated 30.4.1988. Thus, upon execution of Ext.B3 sale deed and the return of all the agreements, there is no subsisting agreement to be specifically enforced and the case set up by the appellant/plaintiff being built around Ext.A1, cannot be decreed by a court, he points out. He would refer in this context the decision in Singaravelu Kounder v Sulaiman (2007 (2) KLT 556) wherein the Division Bench of this Court, inter alia, held as follows: “The plaintiff in a suit for specific reference must plead and prove that he was ready and willing to AS.390/98 & RFA.266/06 -17- perform his part of the contract and that he continued to be so. It is founded on the principles of equity. “Specific performance will be refused where the contract is tainted with fraud, even if it is not a fraud on the other party to the contract, but on the public, or where the plaintiff has made some positive misrepresentation, or has been guilty of fraudulent suppression, or if the particulars or conditions of sale are misleading; indeed, in such cases the contract will be rescinded, and cannot be enforced even at law. Even if there is no fraud or misrepresentation sufficient to justify the rescission of the contract, the court may still refuse the equitable remedy of specific performance if the conduct of the plaintiff has been tricky or unfair, for “he who comes into equity must come with clean hands,” and the court is not bound to decree specific performance in every case in which it will not set aside the contract.” 14. He relies on the same for pointing out that in this case the consideration shown in Ext.B3 is Rs.6,000/-. According to him, the amount was shown, so that the plaintiff could avoid payment of stamp duty. He would further point out that the appellant was not ready and willing to perform the contract. He did not have funds to purchase the entire property and the time which was fixed in Ext.B2 dated 7.11.1988 was to expire on 28.11.1988. He came forward to purchase 12.865 cents. According to him, the consideration AS.390/98 & RFA.266/06 -18- was by partly adjusting Rs.10,000/- given as advance and the balance was given by the appellant. Therefore it is a clear case where the appellant was not ready and willing and furthermore, he must be treated as given up his rights under the agreement by taking the sale of a lesser extent for which he was possessed of funds. He also highlighted the conduct of the plaintiff.