IN THE HIGH COURT OF JUDICATURE AT MADRAS Date: 28.9.2011 Coram The Hon’ble Mr.Justice R.S.RAMANATHAN Second Appeal No.543 of 2011 and M.P.No.1 of 2011 Saravanan Appellant/Appellant/Plaintiff vs. Rajkumar Respondent/Respondent/Defendant For appellant : Mr.C.Jagadish For respondent : Mr.R.Subramanian Prayer:- Second Appeal against the judgment and decree dated 29.12.2010 in A.S.No.2 of 2008 on the file of the Additional District Judge (Fast Track Court), Namakkal confirming the judgment and decree dated 27.9.2007 in O.S.No.43 of 1997 on the file of the Subordinate Judge, Namakkal. JUDGMENT The unsuccessful plaintiff is the appellant. 2. The plaintiff filed the suit for specific performance of the agreement of sale and both the courts dismissed the suit. The case of the plaintiff was that the respondent agreed to sell the suit property for a sum of Rs.1,75,000/= and received an advance of Rs.1,50,000/= and entered into the agreement of sale dated 16.12.1994 and as per the agreement of sale, three years time was fixed for completing the sale transaction and on 10.1.1997, the appellant demanded the respondent to execute the sale deed and respondent sent a reply denying the execution of agreement of sale and therefore, the suit was filed for specific performance. https://hcservices.ecourts.gov.in/hcservices/ 3. The respondent contested the suit by contending that he never entered into an agreement of sale as claimed by the appellant and also explained the circumstances under which his signatures were obtained in the blank papers. It is the specific case of the respondent that the respondent and the brother of the appellant were known to each other and the respondent and his brother availed the loan from the Tamil Nadu Industrial Investment Corporation (TIIC) for running a service station and also borrowed loans from various persons and when the creditors pressed for payment, they approached the appellant and his brother for advice and the appellant and his brother Vijayakumar are running Suba Investments and Selvi Investment and yet another finance company and they agreed to finance the respondent to pay off the creditors and believing them, the respondent, as suggested by them, executed an agreement of sale in favour of the appellant and his brother executed another agreement of sale in favour of the appellant's brother and also delivered the documents of title and the agreements of sale were not intended to be acted upon and the agreements of sale were executed only as a security for the loan availed from the appellant and his brother and they also repaid the loan and the agreement of sale executed by the respondent's brother was cancelled by the brother of the appellant and the suit was filed on the basis of agreement of sale executed by the respondent and therefore, they are not bound to execute the sale deed. 4. The courts below accepted the case of the respondent and held that the agreement of sale was executed only as a security and it was not intended to be acted upon and it was proved by the respondent through various exhibits and therefore, the appellant is not entitled to the relief of specific performance. The courts below further held that having regard to the advance paid, it is unbelievable that three years time is fixed for paying the balance sale consideration and therefore it must only be a money transaction and it cannot be an agreement of sale. Hence, the second appeal. 5. Learned counsel for the appellant submitted that having regard to the admission of the agreement of sale, the courts below ought to have decreed the suit as prayed for and even though Rs.1,50,000/= was paid out of the total sale consideration of Rs.1,75,000/=, three years time was fixed to enable the respondent to vacate and hand over the service station run in the suit property and therefore, it cannot be stated that the agreement of sale was obtained as security when the respondent admitted the agreement of sale in evidence. He also relied upon the decision in RANAKRISHNA REDDY, P.S. v. https://hcservices.ecourts.gov.in/hcservices/ M.K.BHAGYALAKSHMI (2007 (2) CTC 357) wherein the Honourable Supreme Court, in a similar circumstance, held that fixation of a longer period for the balance payment of a small amount will not lead to the conclusion that the transaction was only a money transaction and when the party admitted the execution of the sale agreement, the other side is entitled to get the relief of specific performance and therefore, contended that both the courts below erred in holding that the sale agreement was not intended to be acted upon and it was executed only as a security for the loan availed by the respondent and his brother. 6. On the basis of the submissions made by the learned counsel for the appellant, the following substantial questions of law are framed for consideration:- "a) Whether the courts below are right in law in dismissing the suit for specific performance particularly when the existence and execution of the agreement for sale has been admitted by the defendant? b) Whether the courts below have properly appreciated the law relating to burden of proof while arriving at a conclusion that the suit agreement has been executed by the defendant as security for the repayment of loan and not specifically enforceable when there is admittedly no loan transaction between the plaintiff and the defendant?" 7. It is admitted by the appellants that he is one of the partners in Suba Investments and Selvi Investments. It is also admitted that his brother PW2 is running Suba Investments. It is also admitted that the defendant and his brother were having dealings in the financial companies in which the appellant and his brother are partners. Exs.B1 to B3 and B4 to B7 would prove various payments made by the appellant towards the amount payable to those financial companies. Further, on the date of the agreement of sale, viz., 16.12.1994, as per Ex.B5, the respondent received a sum of Rs.3,00,000. It is also admitted that after receiving the amount under Ex.B5, the documents were taken back from TIIC and were handed over to the appellant on 21.12.1994 and the appellant also admitted that he was not aware of any previous loans payable by the respondent to TIIC and he did not make any enquiry regarding the original documents of title before entering into an agreement of sale while paying more than 90% of the sale consideration. This conduct on the part of the appellant would prove that the document would not have https://hcservices.ecourts.gov.in/hcservices/ been intended to be acted upon as an agreement of sale and no prudent man would pay more than 90% of the sale consideration without verifying the documents of title. 8. Further, admittedly, Exs.B10 agreement of sale was executed by Varadarajan, the brother of the respondent in favour of Vijayakumar brother of the appellant and that was dated 28.7.1993 and that was admittedly cancelled as evidenced by Ex.P11 dated 20.7.996. The appellant or his brother were not able to say any reason for cancelling the agreement Ex.B10. Further, admittedly, the property which was a a subject matter of Ex.B10 was having an extent of 729 sqft and that is situate adjacent to the suit property and in respect of that property, the sale agreement was entered for Rs.1,75,000/= whereas the suit property is having 4317 sqft and for the said extent, the agreement of sale was Rs.1,75,000/=. Therefore, considering all these aspects, the courts below rightly held that the respondent proved that the agreement of sale was executed only as security for the loan availed by him from the appellants and having regard to the price fixed in Ex.B10 and A1 and also having regard to the fact that three years period was fixed for payment of Rs.25,000/= out of the sale consideration of Rs.1,75,000/=, both the courts below rightly held that the agreement of sale was not intended to be acted upon and it was only a security document. 9. The judgment relied upon by the learned counsel for the appellant cannot be applied to the facts and circumstances of the present case. In the decision reported in 2007 (2) CTC 357 cited supra, the agreement of sale was entered into on 11.5.1979 and out of the sale consideration of Rs.45,000/=, Rs.15,000/= was paid under the date of the agreement and Rs.5000/= was to be paid within the period of one year and the balance shall be paid within the period of five years from that date. Even though five years period was fixed, within two years, notice was served by the respondent calling upon the appellant to execute the sale deed and immediately, thereafter, the suit was filed. Considering all these aspects, it was held in that judgment that the suit document was only an agreement of sale and it cannot be construed as a money transaction. Further, in that case, the defendant did not prove his case about the financial transaction between the parties. 10. On the other hand, in the present case, as stated supra, the respondents proved the financial transaction between the parties and therefore, the judgment reported in 2007 (2) CTC 357 cannot be applied to the facts and circumstances of this case. Further, in a similar circumstance, the Honourable Supreme Court in TEJRAM v. https://hcservices.ecourts.gov.in/hcservices/ PATIRAM BHAU (1997 (9) SCC 634) held that having regard to the payment of more than 90% and fixing three years for the payment of balance amount, the transaction can only be termed as a money transaction and it cannot be termed as an agreement of sale. The facts of that case squarely applies to the facts of this case. In similar circumstance, this court also held in the judgment reported in (2007) MLJ 222 (VALLITHAI & OTHERS v. ARULRAJ) that the transaction can be considered as a money transaction and it cannot be treated as an agreement of sale. 11, One more aspect was that even though out of the sale consideration of Rs.1.75,000/=, Rs.1,50,000/= was paid, possession was retained by the respondent and no explanation was given as to why the appellant did not ask for possession and no reason was stated in the agreement of sale regarding the fixing of three years after having paid 90% of the sale consideration. Only in pleadings it was stated that for vacating the service station, three years time was granted. As stated supra, the respondent proved to the satisfaction of the court that the circumstances under the agreement of sale was executed and both the courts have rightly held that the transaction was only a money transaction and the agreement of sale was not executed with the intention to act upon and therefore, the substantial questions of law are answered against the appellant and I hold that the the courts below have believed the case of the respondent and held that the respondent proved that it was only a loan transaction and the document viz., the agreement of sale was not intended to be acted upon. The judgment and decree of the courts below are confirmed. In the result, the second appeal is dismissed. No costs. The connected miscellaneous petition is also dismissed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ssk. https://hcservices.ecourts.gov.in/hcservices/ To 1. The Additional District Judge (Fast Track Court), Namakkal. 2. The Subordinate Judge, Namakkal. 1 CC to Mr.R.Subramanian, Advocate, SR.60570 S.A.No.543 of 2011 rj(co) SRA(19/10/2011) https://hcservices.ecourts.gov.in/hcservices/