IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH R.S.A. No. 184 of 2007 Date of Decision : July 14, 2008 Gurnam Singh .....Appellant Versus Balwinder Kaur .....Respondent CORAM : HON’BLE MR JUSTICE T.P.S. MANN Present : Mr. R.K. Battas, Advocate and Ms. Preeti Khanna, Advocate Mr. S.S.Chandi, Advocate T.P.S. MANN, J. Suit for possession by way of specific performance of the agreement to sell dated 10.11.1998 in respect of land measuring 9 kanals 18 marlas situated in village Ida, Tehsil Shahkot at the rate of Rs. 3,00,000/- per killa was decreed in favour of the plaintiff-respondent and against defendant-appellant. The plaintiff was directed to deposit the balance sale consideration of Rs. 1,58,250/- within a period of two months from the date of the decree passed by the trial Court and the defendant thereafter to execute the sale deed in favour of the plaintiff within a period of one month, failing which the plaintiff was given the right to get the sale deed executed with the intervention of the Court. Aggrieved of the same, the defendant filed an appeal, which has been dismissed by the appellate Court. He is now before R.S.A. No. 184 of 2007 -2- this Court in a second appeal filed under Section 100 of the Code of Civil Procedure. Learned counsel for the appellant submitted that agreement to sell dated 10.11.1998 contained the name of Balbir Kaur and not of plaintiff-Balwinder Kaur as the proposed vendee. Said Balwinder Kaur had not thumb-marked the agreement, as it was shown to be thumb-marked by Balbir Kaur only. Therefore, the agreement was a result of impersonation, fraud and forgery. Though in his written statement, the defendant-appellant had taken all these pleas yet while appearing as DW1 nothing of that sort was stated. He even did not care to examine any expert to prove that the thumb- impression, as appearing on Ex. P1, was not that of Balwinder Kaur- plaintiff. There were thumb-impressions affixed by Balwinder Kaur on each and every page of the agreement to sell. Apparently, on account of over- sight, the Deed Writer wrongly mentioned the name of the proposed vendee as Balbir Kaur, instead of Balwinder Kaur. The plaintiff has examined Sarwan Singh PW2, who was a witness to the agreement to sell. Said Sarwan Singh was admittedly a common relative of the parties. He had no reason to falsely depose against the defendant or in favour of the plaintiff. Learned counsel for the appellant then submitted that there existed a default clause in the agreement to sell, which barred specific performance. In this regard, learned counsel relied upon Dadarao and another v. Ramrao and others, (1999) 8 Supreme Court Cases 416, wherein R.S.A. No. 184 of 2007 -3- agreement for sale of agricultural land itself provided for the return of earnest money along with another sum in case the seller refused to sell or the purchaser refused to buy and, thus, the contract could not be specifically enforced as there was no obligation on the seller to complete the sale transaction. The facts in the above case were that as per the agreement, the sale deed was to be executed on or before 15.4.1972. The agreement itself provided as to what was to happen if either the seller refused to sell or the purchaser refused to buy. In that event, the agreement provided that in addition to the earnest money of Rs. 1,000/-, a sum of Rs. 500/- was to be given back to Tukaram Devsarkar and that “no sale deed will be executed”. Accordingly, it was held that the agreement was very categorical in envisaging that a sale deed was to be executed only if both the parties agreed to do so and in the event of anyone 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 and in that situation, Rs. 500/- in addition to the return of Rs. 1,000/- was the only sum payable, the sum of Rs. 500/- being the amount of quantified damages or interest payable on Rs. 1,000/-. Accordingly, it was held that there was no obligation on Balwantrao to complete the sale transaction. On the other hand, in the present case, it was only mentioned in the agreement to sell that the consequence of non- performance of the terms was payment of double the amount of earnest money. It was not mentioned that in such a case, the sale deed was not to be executed. R.S.A. No. 184 of 2007 -4- Even if it is taken that once default clause was there in the agreement and, therefore, no specific performance could be granted, it may be mentioned here that the view in the case of Dadarao and another (supra) has already been held to be per incuriam in P.D’Souza v. Shondrilo Naidu, 2004 (6) SCC 649, on the ground that it did not create a binding precedent, having not noticed the statutory provisions under Section 23 of the Specific Relief Act, hereinafter referred to as ‘the Act’, as also an earlier binding precedent in M.L. Devender Singh and others v. Syed Khaja, (1973) 2 Supreme Court Cases 515. In the case of M.L. Devender Singh and others (supra), it was held that Section 23 of the Act made it clear that mere specification of a sum of money to be paid for a breach was in order to compel the performance of the contract to transfer and not to deny the claim of specific performance. The relevant observations are as follows :- “It may be mentioned here that the principles contained in Section 20 of the old Act are re-enacted in Section 23 of the Act of 1963 in language which makes it clear that a case where an option is given by a contract to a party either to pay or to carry out the other terms of the contract falls outside the purview of Section 20 of the old Act, but, mere specification of a sum of money to be paid for a breach in order to compel the performance of the contract to transfer property will not do. Section 23 of the Act of 1963 may be advantageously cited here. It runs as follows :- R.S.A. No. 184 of 2007 -5- “23. (1) A contract, otherwise, proper to be specifically enforced, may be so enforced, though a sum be named in it as the amount to be paid in case of its breach and the party in default is wiling to pay the same, if the court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance. (2) When enforcing specific performance under this section, the court shall not also decree payment of the sum so named in the contract.” We think that Section 23 of the Act of 1963 contains a comprehensive statement of the principles on which, even before the Act of 1963, the presence of a term in a contract specifying a sum of money to be paid for a breach of the contract has to be construed. Where payment is an alternative to carrying out the other terms of the contract, it would exclude, by the terms of the contract itself, specific performance of the contract to convey a property. R.S.A. No. 184 of 2007 -6- The position stated above is in conformity with the principles found stated in Sir Edward Fry’s “Treatise on the Specific Performance of Contracts” (Sixth Edn. at p.65). It was said there : "The question always is: What is the contract? Is it that one certain act shall be done, with a sum annexed, whether by way of penalty or damages, to secure the performance of this very act? Or, is it that one of the two things shall be done at the election of the party who has to perform the contract, namely, the performance of the act or the payment of the sum of money? If the former, the fact of the penal or other like sum being annexed will not prevent the Court's enforcing performance of the very act, and thus carrying into execution the intention of the parties; if the latter, the contract is satisfied by the payment of a sum of money, and there is no ground for proceeding against the party having the election to compel the performance of the other alternative. From what has been said it will be gathered that contracts of the kind now under discussion are divisible into three classes:- (i) Where the sum mentioned is strictly a penalty-a sum named by way of securing the performance of the contract, as the penalty is a bond; R.S.A. No. 184 of 2007 -7- (ii) Where the sum named is to be paid as liquidated damages for a breach of the contract: (iii) Where the sum named is an amount the payment of which may be substituted for the performance of the act at the election of the person by whom the money is to be paid or the act done. Where the stipulated payment comes under either of the two first-mentioned heads, the Court will enforce the contract, if in other respects it can and ought to be enforced, just in the same way as a contract not to do a particular act, with a penalty added to secure its performance or a sum named as liquidated damages, may be specifically enforced by means of an injunction against breaking it. On the other hand, where the contract comes under the third head, it is satisfied by the payment of the money, and there is no ground for the Court to compel the specific performance of the other alternative of the contract. xxx xxx xxx xxx xxx The fact that the parties themselves have provided a sum to be paid by the party breaking the contract does not, by itself, remove the strong presumption contemplated by the use of the words "unless and until the contrary is R.S.A. No. 184 of 2007 -8- proved." The sufficiency or insufficiency of any evidence to remove such a presumption is a matter of evidence. The fact that the parties themselves specified a sum of money to be paid in the event of its breach is, no doubt, a piece of evidence to be considered in deciding whether the presumption has been repelled or not. But, in our opinion, it is nothing more than a piece of evidence. It is not conclusive or decisive. The second assumption underlying the contentions on behalf the defendants-appellants is that, once the presumption, contained in explanation to Section 12 of the old Act, is removed, the bar contained in Section 21 of the old Act, against the specific enforcement of a contract for which compensation in money is an adequate relief, automatically operates, overlooks that the condition for the imposition of the bar is actual proof that compensation in money is adequate on the facts and circumstances of a particular case before the Court. The effect of the presumption is that the party coming to Court for the specific performance of a contract for sale of immovable property need not prove anything until the other side has removed the presumption. After evidence is led to remove the presumption, the plaintiff may still be in a position to prove, by other evidence in the case, that payment of money does not compensate him adequately.” R.S.A. No. 184 of 2007 -9- After noticing the aforementioned observations of the Court in M.L. Devender Singh’s case (supra) it was held in P.D’Souza ’s case (supra) that the decision in Dadara’s case (supra) was rendered per incuriam. The relevant observations are as under :- “In Dadarao whereupon Mr. Bhat placed strong reliance, the binding decision of M.L. Devender Singh 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 stipulatd 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 R.S.A. No. 184 of 2007 -10- 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) In P.S. Rankrishna Reddy v. M.K. Bhagyalakshmi and another, (2007) 10 SCC 231, it was reiterated that the decision in Dadarao’s case (supra) had been rendered per incuriam. In the same very judgment, the Court also relied on Jai Narain Parasrampuria v. Pushpa Devi Saraf (2006) 7 SCC 756 that a stipulation in regard to payment of damages by one party of the contract to the other did not establish that the same was not an agreement for sale. The following observations from the said judgment were referred to and relied upon :- “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 :- ‘(7) 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 R.S.A. No. 184 of 2007 -11- 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 annum.’ 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 contract. 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, therefore, unwarranted.” As per the agreement to sell, there was no stipulation that in the event of the seller not coming forward to execute the sale deed, the buyer R.S.A. No. 184 of 2007 -12- would be only entitled to liquidated damages and not to anything else. Thus, remedy was available to the buyer of enforcing the agreement to sell. In view of the above, no case is made out for grant of any interference in the judgments and decrees passed by the Courts below. No substantial questions of law, as claimed by the appellant, arises for determination. The appeal, being without any merit, is, therefore, dismissed. The parties are left to bear their own costs. ( T.P.S. MANN ) July 14, 2008 JUDGE satish Whether referred to the Reporters : YES / NO