1 FA.617.98.doc ndm IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO. 617 OF 1998 Bhaskar Nathuji Dhikale and others. ... Appellants Versus Giridharilal Daulatram Sachadeo and others. ... Respondents ----- Mr. Sanjay Jain i/b Mr. Ramesh Jain for the Appellants. Mr. P.K.Dhakephalkar, Senior Counsel, i/b Mr. S.A.Rajeshirke for Respondent No.1. ----- CORAM: A.S.OKA, J. DATE : 06 th June, 2011. ORAL JUDGMENT: 1 This is an appeal originally preferred by the Defendants No.1 to 3 taking exception to the judgment and decree dated 31 st March, 1998 passed by the learned trial Judge in a suit filed by the Respondent Nos.1 and 2. It must be noted here that the Appellant No.1 who is the Defendant No.1 was transposed as a respondent on the basis of an order passed by this Court. The impugned decree is of specific performance of agreement for sale of the suit property. 2 FA.617.98.doc 2 With a view to appreciate the submissions made by the learned counsel appearing for the parties, it will be necessary to make a brief reference to the facts of the case. The suit property subject matter of dispute is land bearing Survey No.143/1-A/2 corresponding to City Survey No.5284 admeasuring 50 Ares situated within the limits of Nashik Municipal Corporation. The case made out by the Plaintiffs is based on the suit agreement dated 24 th February, 1984 executed by the Defendant no.1. Admittedly, the Defendant No.1 is the owner of the suit property. In the suit agreement dated 24 th February, 1984, it was provided that the Defendant No.1 shall sell the suit property to the Plaintiffs at the rate of Rs.110/- per square yard. The case made out by the Plaintiffs is that till the date of execution of the suit agreement, the Plaintiffs had paid a total amount of Rs.85,000/- to the Defendant No.1, which was treated as earnest amount and the balance consideration was to be paid by the Plaintiffs to the Defendant No.1 after the suit property was included in the residential zone and at the time of execution of the sale-deed. The agreement provided that the sale was to be completed after an order was made on the Return filed by the Defendant No.1 in under Section 6 (1) of 3 FA.617.98.doc the Urban Land Ceiling Act, 1976 (hereinafter referred to as “the said Act of 1976”). It was provided that the sale shall be completed within a period of two months from the date on which permission is granted by the Competent Authority under Section 26 (1) of the said Act of 1976. The case of the Plaintiffs is that prior to the execution of the suit agreement, the Defendant No.1 had executed Agreement dated 10 th February, 1982 and at the time of execution of the said agreement, a sum of Rs.30,500/- was paid by way of earnest amount. It is alleged that subsequently, there was another Agreement for Sale dated 4 th June, 1983 under which a sum of Rs.44,500/- was paid to the Defendant No.1. It is stated that apart from the aforesaid total amount of Rs.75,000/-, at the time of execution of the suit agreement, the Plaintiffs had paid a sum of Rs.10,000/- to the Defendant No.1 and therefore, total amount of Rs.85,000/- was paid by the Plaintiffs to the Defendants No.1. It is contended that the earlier agreements dated 10 th February, 1982 and 4 th June, 1983 have been merged into the suit agreement. It is contended by the Plaintiffs that in view of the inclusion of the suit property in the Nashik Urban Agglomeration, the sale transaction could not be completed on the basis 4 FA.617.98.doc of the said earlier two agreements. Reliance is placed on the order dated 1 st March, 1986 passed by the Competent Authority under the said Act of 1976 by which the Defendant No.1 was allowed to retain an area of 3886 square meters. It is contended that in view of the fact that the Competent Authority under the said Act of 1976 allowed the Defendant No.1 to retain an area of 38.86 Ares, the Plaintiffs are entitled to purchase the said area and therefore, the total consideration amount payable would be Rs. 5,11,170/-. It is alleged that though it was expected that at the time of execution of the suit agreement the suit property would be included in the residential zone, as the Plaintiff No.2 is an agriculturist, the Plaintiffs were even willing to purchase the suit property as an agricultural land. Usual averments regarding readiness and willingness have been made. 3 It is contended that before filing of the suit, the Plaintiffs learnt that a sale transaction has been entered into between the Defendant No.1 and the Defendant Nos.2 to 4 in respect of a portion of the suit property and that the Defendant Nos. 2 to 4 were very well aware that the Defendant No.1 had executed an agreement for sale in favour of 5 FA.617.98.doc the Plaintiffs. It is contended that despite of the said knowledge, the Defendant Nos.2 to 4 entered into a transaction of sale with the Defendant No.1. It is, therefore, contended that the transaction of sale was not binding on the Plaintiffs. It is alleged that the Plaintiffs became aware of the said transaction on or about 27 th August, 1987 when they obtained an extract of the Record of Rights. It appears from the extract of Record of Rights that an area admeasuring 10 Ares has been transferred by way of sale by the Defendant No.1 to the Defendant No.2 and another area of 10 Ares has been transferred by the Defendant No.2 jointly to the Defendant Nos.3 and 4. It is alleged that the Defendant No. 1 was trying to transfer another portion admeasuring 10 Ares to one Rajendra Ganpat Adyaprabhu. Therefore, the suit for specific performance was filed on 6 th October, 1987 by the Plaintiffs. The first prayer in the suit is for a direction against the Defendant Nos.1 to 4 to execute and register a document of sale in favour of the Plaintiffs in respect of the property described in Schedule 'B' to the plaint, which is the property admeasuring 38.86 Ares, which was allowed to be retained by the Competent Authority. The second prayer is for declaration that the 6 FA.617.98.doc sale-deed executed by the Defendant No.1 in favour of the Defendant Nos.2 to 4 is illegal and not binding the Plaintiffs. 4 The Defendant No.1 filed written statement. It is contended that the Plaintiffs are very rich persons and in order to avoid payment of heavy duty of income tax and property tax, they are in habit of making such hollow and false documents. It is denied that the Defendant No.1 had executed any agreement for sale in respect of the suit property on 24 th February, 1984. The Defendant No.1 also denied the execution of the agreements dated 10 th February, 1982 and 4 th June, 1983. It is contended that the Defendant No.1 has not received any amount of Rs. 85,000/- as alleged by the Plaintiffs. It is contended that the suit transaction was only a paper transaction to avoid the payment of income tax and property tax. 5 The Defendant No.1 stated that a public notice was published on 13 th February, 1987 in Daily Deshdoot newspaper wherein it is clearly stated that a portion of the suit property was to be sold and 7 FA.617.98.doc objections were to be called for. It is contended that notwithstanding the public notice, objection was not lodged by the Plaintiffs. It is contended that after publication of the public notice, he has sold area of 20 Ares out of total area of 50 Ares. It is contended that the balance land admeasuring 30 Ares continues to be in possession of the Defendant No. 1 as the owner. 6 A separate written statement was filed by the Defendant Nos. 2 to 4. The contention of raised in the said written statement apart from the denial of the suit agreement is that the Defendant No.1 has already executed a registered sale-deed in favour of Defendant Nos.2 to 4 and there was no reason to obtain permission and/or consent of the Plaintiffs. The said Defendants contended that before purchasing the property, they had inserted public notice dated 13 th February, 1987 and to the said notice, objection was not received from any person. Thus, it is contended that the said Defendants are bona fide purchasers without knowledge of the suit agreement. 8 FA.617.98.doc 7 The learned trial Judge framed various issues and also some additional issues. The issues framed by the trial Court and findings recorded thereon read thus: “Issues Findings 1. Do Plaintiffs prove that the Defendant No.1 has executed an agreement of sale in favour of them in respect of the suit property and agreed to sell the same @ Rs.110/- per sq. Yard ? Yes. 2. Do Plaintiffs prove that till the date of execution of suit agreement of sale they paid Rs.85,000/- to the Defendants ? Yes. 3. Do Plaintiffs prove that they were and are still ready to pay remaining consideration of Rs.4,26,170 ? Yes. 4. Do Defendants No.2 to 4 prove that the suit is bad due to misjoinder of parties ? No. 5. Whether the Plaintiffs entitled for the relief of specific performance of contract ? Yes. 6. Whether the Plaintiffs are entitled to recover the amount of Rs.5,11,170/- by way of damages ? Does not survive. 7. What as to interest ? Does not survive. 8. What order or decree ? As per final order. 9 FA.617.98.doc Addl Issues :- 9. Does Plaintiff prove the agreement dtd. 24.2.84 and the agreement dtd.10.2.82 & 4.6.83 are merged in suit agreement ? Yes. 10. Does Plaintiff prove that Defendant No. 1 entered into transaction which Defendants No.2 to 4 and the same transaction is not binding upon him ? Yes 11. Does Defendants No.2 to 4 that they are bonafide purchaser for value without notice ? No. 12. Do Plaintiffs prove that the sale-deed executed by Defendant No.1 in favour of Defendant No.2 to 4 with respect of the portion of the suit property is illegal and not binding upon them ? Yes.” Operative part of the impugned judgment and decree reads thus: “O r d e r 1. Suit of the Plaintiffs is decreed with costs. 2. Defendant No.1 is hereby directed to execute the sale-deed of the suit property as per Agreement to sale (Exh.68) in favour of the Plaintiffs, after accepting the balance amount, and to hand over the possession of the suit property to Plaintiff No.1 within six months from the date of this order. 3. Plaintiff No.1 is directed to deposit the remaining amount of Rs.4,26,170/- in the Court within one month from the date of this order. 10 FA.617.98.doc 4. Sale-deed be executed through Court- Commissioner. 5. It is hereby declared that sale-deed executed by the Defendant No.1 in favour of Defendant No.2 to 4 is null and void and same is not binding upon the Plaintiffs. 6. Decree be drawn accordingly.” 8 The learned counsel appearing for the Appellants (Defendant Nos.2 to 3) invited attention of the Court to the averments made in the plaint. He submitted that the averments made in the plaint itself disclose that out of the suit property, the Defendant No.1 had already sold an area of 10 Ares to the Defendant No.2 and an area of 10 Ares to the Defendant Nos.3 and 4 jointly. Thus, the Plaintiffs had knowledge about the sale-deeds. He pointed out the public notice dated 13 th February, 1987, which is at Exhibit-107 published in the Daily Deshdoot. 9 The learned counsel appearing for the Appellants also invited attention of the Court to the oral evidence of the Plaintiffs. The Plaintiffs have not substantiated their case that Defendant Nos.2 to 4 have taken the property with the knowledge of the suit agreement. He invited attention of the Court to the evidence of the Plaintiff No.1 and in 11 FA.617.98.doc particular his cross-examination. He also pointed out the relevant part of the cross-examination and submitted that there is no evidence adduced by the Plaintiffs to show that the Defendant Nos.2 to 4 had knowledge about the suit agreement. Inviting attention of the Court to paragraph No. 10 of the cross-examination, he stated that the statements made in therein show that the Plaintiffs were aware of the suit agreement. He pointed out that in the cross-examination, the Plaintiff No.1 stated that he was not aware whether the Defendant Nos.2 to 4 were not aware of the suit agreement. He also invited attention of the Court to the evidence of the Plaintiff No.2. He pointed out that evidence of both the Plaintiffs shows that the Plaintiff No.1 is a builder and the Plaintiff No.2 is a businessman, who is running a bar. He has also invited attention of the Court to the deposition of the Defendant No.1. He stated that the public notice has been marked as Exhibit-107. He submitted that there is no cross-examination made of the Defendant No.1 on the aspect of publication of public notice. He submitted that in the cross-examination of the Defendant No.1 made by the Advocate for the Plaintiffs, there is no challenge to the said notice. He invited attention of the Court to the 12 FA.617.98.doc evidence of the Defendant No.3. He pointed out that the Defendant No.3 also identified the copy of the newspaper at Exhibit-107, which contained public notice. The learned counsel submitted a fact that an area of 10 Ares was sold by the Defendant No.1 to the Defendant No.2 and another area of 10 Ares was sold by the Defendant No.1 to the Defendant Nos. 3 and 4 is disclosed in the plaint itself. He placed reliance on the various decisions including the decision in the case of Jagan Nath Vs. Jagdish Rai and others [(1998) 5 Supreme Court Cases 537]. He pointed out relevant part of the said decision of the Apex Court. He also placed reliance on another decision of the Apex Court in the case of Ram Niwas (dead) through LRs. Vs. Bano (Smt) and others [(2006) 6 Supreme Court Cases 685]. He submitted that it is not even the case made out by the Plaintiffs that the Defendant Nos.2 to 4 had knowledge about the suit agreement. He also placed reliance on the decision of the Apex Court in the case of Bharat Karsondas Thakkar Vs. Kiran Construction Company and others [(2008) 13 Supreme Court Cases 658]. He submitted that in a suit for specific performance, there is no occasion for the trial Court to pass a decree of declaration that the sale- 13 FA.617.98.doc deed executed in favour of the Defendant Nos. 2 to 4 were null and void. He submitted that though only one sale-deed executed by the Defendant No.1 in favour of the Defendant Nos. 3 and 4 is produced on record and the other is not produced, the existence of the other sale-deed is not disputed by the Plaintiffs and in fact in the plaint itself it is disclosed that there were two sale-deeds executed. It is submitted that it is impossible to record a finding that the Defendant Nos.2 to 4 had prior knowledge of the suit agreement. He submitted that in any case, this was not a case where a discretion under Section 20 of the Specific Relief Act, 1963 (hereinafter referred to as “the said Act of 1963) could have been exercised in favour of the Plaintiffs. He submitted that the Plaintiffs are rich persons. Moreover, the Plaintiff No.1 is a developer. He submitted that thus, in this case, the discretion under Section 20 of the said Act of 1963 could not have been exercised in favour of the Plaintiffs. 10 Lastly, he invited attention of the Court to the reasons recorded by the trial Court. He submitted that the effect of the publication of notice has not been considered by the trial Court. Inviting attention of 14 FA.617.98.doc the Court to paragraph No.17 of the judgment, he submitted that the reasons recorded therein are completely erroneous and illegal. Inviting attention of the Court to the findings recorded, he submitted that there could not have been a decree passed against the Defendant Nos.2 to 4. 11 The learned senior counsel appearing for the Plaintiffs pointed out that the Defendant No.1 claimed to have published a public notice in a newspaper about the proposed transaction with the Defendant Nos.2 to 4. He pointed out that the name of the newspaper set out in the written statement is daily Deshdoot. He invited attention of the Court to the deposition of the Defendant No.1 in which he stated that the notice was published in the newspaper daily Gaokari. He pointed out the contents of the notice at Exhibit-107. He submitted that moreover, the said public notice issued by an Advocate contains a recital that the purchasers who were represented by the said Advocate had entered into an agreement for sale with the Defendant No.1. He submitted that it is doubtful whether the said public notice issued relates to the transactions entered into between the Defendant Nos.1 and the Defendant Nos.2 to 4. 15 FA.617.98.doc He pointed out that only one sale-deed dated 24 th February, 1984 executed by the Defendant No.1 in favour of the Defendant Nos.3 and 4 is on record. He pointed out that other sale-deed on which reliance is placed by the Defendant Nos.1 to 4 is not produced. He submitted that by no stretch of imagination, the Defendant Nos.2 to 4 can say that they had no knowledge about the suit agreement. He submitted that the case made out by the Plaintiffs that the said sale transaction is not binding them has been rightly accepted by the Trial Court. He pointed out that no declaration has been claimed that the sale transactions are illegal or null and void. He pointed out that there is an error in the English deposition incorporated in the paper-book. Inviting attention of the Court to the evidence of the Plaintiff No.1 and in particular on paragraph No.10, he pointed out that a suggestion was given to him in the cross examination, which is recorded in paragraph No.10 of the original Marathi deposition that after informing the Plaintiffs, the Defendant No.1 had sold the suit property to the Defendant Nos.2 to 4. 12 The learned counsel appearing for the Appellants again 16 FA.617.98.doc invited attention of the Court to the fact that there is no cross-examination on the aspect of publication of notice at Exhibit-107. He submitted that the decree could not have been passed and in any event, it was not a case where specific performance could have been granted. 13 I have given careful consideration to the submissions made by the learned counsel appearing for the parties. Before adverting to the questions involved, it must be noted here that the plea of the Defendant Nos.2 to 4 is that they are bona fide purchasers of an area of 10 Ares each under the sale-deeds. It will be necessary to make a reference to the written statement of the Defendant Nos.2 to 4 and in particular, paragraph No.15 thereof. What is pointed out in the written statement reads thus: “15. The averments in the Plaint para 14 that some portion is sold to the defendants by the defendant No.1 is correct but it is denied that there is distinct separate property as described in the Schedule B of the Plaint. The defendant No.1 has already executed and registered the sale deed in favour of the defendant Nos.2 to 4. This defendants submit that, there was no reason to obtain the permission and/or consent from the plaintiffs. It is denied that the defendant Nos.2 to 4 were very well knowing that the defendant 17 FA.617.98.doc No.1 has entered into an agreement for sale, in favour of the plaintiffs, in respect of the said property. It is denied that despite of such knowledge, the defendant Nos.2 to 4 are entering into the transaction of the sale with the defendant No.1. It is denied that the plaintiffs had any transaction with the defendant No.1 therefore, the transactions of the defendant Nos.2 to 4 are not binding on the plaintiffs. It is denied that, the defendant Nos.1 to 4 are liable to execute the necessary document of sale, in favour of the plaintiffs. It is denied that the plaintiffs came to know about the said transaction on or about 27/08/1987. It is submitted that before purchasing the said property this defendants have inserted the public notice on 13/02/1987 and to this notice there was no objection from any person, including the plaintiffs and considering the fact that, the property is free, clear marketable and free from encumbrances, these defendants have purchased the said property for value without notice. It is submitted that there was no reason for this defendants to come to know that there was any agreement with the defendant No.1, as the said agreement is not at all recorded in any of the records. Therefore, it is wrong to say that these defendants had knowledge of the transaction of the plaintiffs and while entering into further transaction with the defendant No.1. As there was no objection to the public notice, it was natural consequence that, the defendants entered into further finalisation of the transaction and the conveyance, with the defendant No.1. That defendant No.1 at no time informed these defendants that, he had at any time executed the alleged agreement with the plaintiff and agreed to sell the property. It is submitted that it has been known to these defendants, that there was such transaction then naturally the defendants would have called upon the defendant No.1 to remove the said objection or get the said transaction cancelled and there was no reason for the defendants to come to know that there was any such 18 FA.617.98.doc transaction and as there was no objection to the public notice, these defendants got the final sale deed executed in their favour. It is true that, the area as shown in the Plaint para 14 is sold by the defendant No.1 to the defendant Nos.2 to 4. The sale deeds are executed much proper to the filing of the suit. Therefore, the plaintiffs have no reason and cause to challenge those sale deeds. The averments which are made in the Plaint para 14 which are against the averments in this Written Statement stand denied.” (Emphasis added) Thus, there is a specific stand taken that before purchasing the suit property, the said Defendants had inserted public notice on 13 th February, 1987. As far as the Defendant No.1 is concerned, there is a separate written statement filed raising the contention that a public notice was published at his instance. 14 The first question which is required to be considered is whether the Defendant Nos.2 to 4 are bona fide purchasers without notice of the suit transaction between the Plaintiffs and the Defendant No. 1. On this behalf, it will be necessary to make a reference to Section 19 of the said Act of 1963. Section 19 of the said Act of 1963 reads thus: 19 FA.617.98.doc “19. Relief against parties and persons claiming under them by subsequent title.- Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against- (a) either party thereto; (b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract; (c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant; (d) when a company has entered into a contract and subsequently becomes amalgamated with another