IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR MONDAY, THE 26TH SEPTEMBER 2011 / 4TH ASWINA 1933 RSA.No. 1232 of 2004() ---------------------- AS.90/2000 of ADDL.DISTRICT COURT,THODUPUZHA OS.135/1996 of SUB COURT,THODUPUZHA .................... APPELLANT (PLAINTIFF-RESPONDENT): ----------------------------------------------------------- V.V.GEORGE, SON OF VARKEY, CHIRAMEL HOUSE, EZHALLOOR, KUMARAMANGALAM VILLAGE, THODUPUZHA TALUK. BY ADV. SRI.R.RAJESH KORMATH SMT.PREETHY KARUNAKARAN SMT.M.R.MINI SMT.SANJANA R.NAIR SRI.JAYKAR.K.S. RESPONDENT(S): (DEFENDANT-APPELLANT): -------------------------------------------------------------------- JOSEPH, SON OF CHACKO, KOCHUVEMPILLIL HOUSE, EZHALLOOR, KUMARAMANGALAM VILLAGE, THODUPUZHA TALUK, IDUKKI DISTRICT. ADV. SRI.MATHEW JOHN (K) FOR R1 SRI.SUJESH MENON V.B. FOR R1 THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 26 / 9/ 2011, THE COURT ON 26/09/2011 PASSED THE FOLLOWING: M.SASIDHARAN NAMBIAR,J. =========================== R.S.A. No.1232 OF 2004 =========================== Dated this the 26th day of September,2011 JUDGMENT Plaintiff in O.S.135/1996 on the file of Sub Court, Thodupuzha is the appellant. Defendant is the respondent. Appellant and respondent admittedly entered into Ext.A1 agreement for sale dated 15.11.1995, whereunder appellant paid Rs.1,00,000/- and the respondent agreed to execute a sale deed transferring his rights over 85 cents of property, on receipt of the balance consideration of Rs.25,00,000/-. Appellant instituted the suit for realisation of the advance amount paid contending that respondent has broken the contract and therefore he is entitled to receive the advance paid under Ext.A1. Respondent resisted the suit contending that the agreement was not broken by him but by the appellant and on RSA 1232/2004 2 account of breach of the contract, respondent sustained a loss of Rs.1,68,800/- and under Ext.A1 when the contract was broken by the appellant, he is not entitled to claim back the amount, which is liable to be forfeited. It is therefore contended that appellant is not entitled to the decree sought for. 2. Learned Sub Judge on the evidence of Pws.1 to 3, Dws. 1 to 3, Exts.A1 to A5 and Exts.B1 to B10 granted a decree in favour of the appellant finding that Rs.1,00,000/- was paid by the appellant as part of the sale consideration as advance under Ext.A1 agreement and there was defect in the title of the respondent and without disclosing it Ext.A1 agreement was entered into and therefore appellant is entitled to get back the advance with interest and costs. Respondent challenged the decree before District Court, Thodupuzha in A.S.No.90/2000. Learned District Judge on reappreciation of the evidence found that finding of the trial court that the agreement was broken by the respondent is RSA 1232/2004 3 not correct and instead it was the appellant who committed breach of the agreement. Learned District Judge found that Rs.1,00,000/- was paid as earnest money, as the total consideration fixed under Ext.A1 was Rs.25,00,000/-. It was also found that the evidence of the respondent establishes that he sustained a loss of more than Rs.1,00,000/- and therefore appellant is not entitled to the decree granted by the trial court. First appellate court allowed the appeal, set aside the decree granted by the trial court and dismissed the suit. It is challenged in the second appeal. 3. The appeal was admitted formulating the following substantial questions of law. 1) Did the courts below act in accordance with law in construing and interpreting the items of Ext.A1? 2)Is the amount of Rupees One lakh paid thereunder advance or earnest? RSA 1232/2004 4 3) What is the effect of section 55(1)(a) of the Transfer of Properties Act on the basis of the materials on record? 4. Learned counsel appearing for the appellant and respondent were heard. 5. The argument of the learned counsel is that when under Ext.A1 agreement executed by the respondent, it was agreed to assign 68 cents which lies to the east of the road and 17 cents which lies to the west of the road, on the premise that the property obtained by Chacko the predecessor in interest of the respondent was the property which lies to the east of the property allotted to Poulose which was the western property, out of 5.19 acres which originally belonged to Mathai under settlement deed 910/1970, the property allotted to Chacko was not the property shown in Ext.A1 but to the south of the property of Poulose and therefore respondent had no subsisting right to transfer the RSA 1232/2004 5 property agreed under Ext.A1. It was also agreed that though Mathai had a daughter by name Anna, she was not given any right under the settlement deed and therefore without the junction of Anna, even if appellant had obtained a sale deed, there would have been defect in the title deed and in such circumstances appellant wanted the respondent to get a release deed from Anna and also a document executed by the legal heirs of Mathai showing that the property obtained by Chacko is the property agreed to be sold under Ext.A1 and in such circumstances finding of the trial court that the agreement for sale was broken by the respondent is correct and first appellate court was not justified in reversing that finding and holding that the agreement was broken by the appellant. Learned counsel also argued that even if the agreement was broken by the appellant, when Ext.A1 shows that Rs.1,00,000/- was paid as advance towards the sale consideration payable by the appellant under the agreement, even if there was a breach of the RSA 1232/2004 6 contract by the appellant, as provided under section 74 of Indian Contract Act, respondent could only forfeit that portion of the loss sustained by him and first appellate court should not have accepted the evidence of DW1, uncorroboated by any evidence and upheld the claim that he sustained a loss of Rs.1,00,000/-. It was argued that even if respondent is entitled forfeit a portion of the advance amount, it could only be a reasonable amount, corresponding to the actual loss sustained and hence first appellate court was not justified in dismissing the suit. Learned counsel argued that though respondent contended that he had evicted the tenants, in view of the time provided under Ext.A1 to execute the sale deed, it was admitted by DW1 that subsequently the rooms were leased out for enhanced rent and therefore respondent did not sustain any loss on account of eviction of the tenants and only gained. Learned counsel also pointed out that the evidence of DW1 establishes that advance received was utilised by RSA 1232/2004 7 him to pay the loan availed from a bank and therefore respondent instead of sustaining loss, actually gained the interest payable, which was otherwise payable on the amount borrowed from the Bank. Learned counsel also argued that though it was contended that respondent sustained loss by not cultivating the property with seasonal crops and also by stopping the manufacture of cement bricks, apart from the evidence of DW1, there is no other evidence and even if it is taken that respondent had not cultivated the property with seasonal crops or stopped manufacturing bricks, when there is no evidence to prove that he sustained loss as canvassed, first appellate court should have granted a decree permitting the appellant to realise the balance amount deducting the actual loss sustained by the respondent. 6. Learned counsel appearing for the respondent pointed out that first appellate court on proper appreciation of the evidence found that the agreement was broken not by the respondent but by RSA 1232/2004 8 the appellant who is really engaged in the business of real estate and finding that he cannot get the expected profit from the property and it is not on account of the defect in title, appellant failed to get the sale deed executed by the respondent. Learned counsel argued that as rightly found by the first appellate court, the documents executed by the legal heirs of Poulose as well as by Chacko establish that though the property was divided in the settlement deed not in accordance with the description given in Ext.A1, the property being enjoyed by Chacko and Poulose were respectively the eastern and western portion of the property and therefore there was no defect of title of the property agreed to be sold and hence finding of the first appellate court that the agreement was broken by the appellant is perfectly correct. Learned counsel argued that though the building tenants were not examined, evidence of DW1 establishes that, as under the agreement sale deed is to be executed within six months and RSA 1232/2004 9 vacant possession of the property is to be handed over, the tenants were evicted and on account of the said eviction respondent lost monthly rent at the rate of Rs.900/- and though the building was subsequently leased out for enhanced rent, evidence establishes that respondent lost Rs.10,800/- being the rent which he would have otherwise received from the tenants and therefore a loss of Rs.10,800/- was established. Learned counsel also argued that evidence of PW2, the witness examined by the appellant, establishes that he was the broker and he received Rs.10,000/- from the respondent as brokerage and it was not repaid and therefore respondent sustained a loss of Rs.10,000/-. Learned counsel also argued that evidence of DW1 establishes that he has to discontinue the seasonal cultivation, as possession is to be handed over within six months and therefore he sustained a loss of Rs.20,000/- on account of the failure to cultivate the property. It was also argued that evidence of DW1 RSA 1232/2004 10 establishes that he stopped cement bricks manufacturing business which was being carried out in the plaint schedule property, as he has to handover possession as provided in Ext.A1 and therefore on that account respondent lost Rs.35,000/-. Learned counsel pointed out that the evidence of DW1 with regard to the stopping of the brick manufacturing business, was not challenged in cross examination and he was only asked whether there is documentary evidence to prove the business. Learned counsel also argued that evidence of DW1 establishes that he had to spend Rs.20,000/- for in search of alternate property and in such circumstances finding of the first appellate court that appellant is not entitled to realise the advance paid is perfectly correct. Learned counsel also argued that respondent lsustained loss on account of the distress sale of the cattles, as he had to leave the place if the sale deed was executed. 7.Ext.A1 agreement for sale was executed on RSA 1232/2004 11 15.11.1995. It shows that appellant agreed to purchase and respondent agreed to sell 68 cents obtained by his father, under settlement deed 910 of 1970 and another 17 cents including six cents which was obtained by the father under the same settlement deed and 10 ½ cents which was obtained by the father on possessory right and later obtained by purchase certificate, for a total consideration of Rs.25 lakhs. Ext.A1 establishes that Rs.1,00,000/- was paid by the appellant and received by the respondent on the date of execution of Ext.A1 and that amount was paid and received as advance, being part of the sale consideration. Ext.A1 agreement shows that within a period of six months, when the appellant pays the balance consideration of Rs.24 lakhs, deducting Rs.1,00,000/- already paid, respondent has to execute a sale deed transferring his right in respect of the property covered under Ext.A1 to the appellant. The contention of the appellant was that when under the settlement deed, properties RSA 1232/2004 12 were settled in favour of Poulose and his brother Chacko and in such a way that the northern property in favour of Poulose and the southern property in favour of Chacko, under Ext.A1 the property agreed to be sold lies to the east of the road and the remaining 17 cents lies to the west of the road and when the road runs north south and the properties were divided north south, respondent will not get title to the property agreed to be sold and therefore there was defect in the title. Though the trial court accepted this contention, first appellate court on reappreciation of the evidence found that though the properties were settled under the document in such a way that the northern property was allotted to Poulose and the southern property to Chacko, evidence establish that the property which was put in the possession of Chacko was the eastern portion and that of Poulose was the western portion and the additional documents produced and marked before the first appellate court establishes that there was no dispute between RSA 1232/2004 13 the legal heirs of Poulose or Chacko on that aspect. In the light of the evidence, the factual finding of the first appellate court that though the property was settled as northern and southern portion, the property in fact in the possession of Poulose and Chacko were respectively the western and eastern portion is correct. Therefore finding of the first appellate court that the sale deed was not got executed, on account of the defect in the title of the respondent is correct. But for the unwillingness of the respondent to purchase the property, the agreement would have been performed. That factual finding cannot be interfered in the light of the evidence, in exercise of the powers under section 100 of the Code of Civil Procedure. 8.Then the only question is whether the advance of Rs.1,00,000/- received by the respondent is liable to be forfeited or whether appellant is entitled to realise the same. Though the learned District Judge found that Rs.1,00,000/- was paid as earnest money and as Ext.A1 provides for forfeiture RSA 1232/2004 14 of the earnest amount, the appellant is not entitled to claim back the advance paid, on the facts, I cannot agree. Ext.A1 establishes that Rs.1,00,000/- was paid as part of the sale consideration, being the advance. When the said advance paid was agreed to be adjusted towards the sale consideration payable, finding of the trial court that Rs.1,00,000/-was received by the respondent as advance, towards the sale consideration is perfectly correct. The first appellate court was not justified in holding that as it is only a small percentage of the total sale consideration, it is only an earnest money cannot be accepted. If that be so, unless respondent sustained loss, he is liable to return the advance received. 9. The question is whether the respondent sustained loss and if so whether he is liable to forfeit the entire amount or only a portion, and if so what portion. The fact that respondent has paid Rs.10,000/- as fees for PW2, the broker was RSA 1232/2004 15 specifically pleaded. PW2 who was examined by the appellant, at the time of his examination unambiguously admitted that he received Rs.10,000/- as his remuneration from the appellant and respondent did not pay any fees. It was also deposed that he did not repay the same. Therefore there is evidence to prove that appellant sustained a loss of Rs.10,000/- being the remuneration paid to PW2. 10. It is the specific case of the respondent that the building in the plaint schedule property was occupied by tenants and he was getting a monthly rent of Rs.900/- and as Ext.A1 agreement provides for handing over vacant possession of the property within a period of six months, he evicted the tenants and he thereby lost the monthly rent and thereby sustained a loss of Rs.10,800/-. Though the tenants were not examined, PW1 had given the details of the tenants as well as the monthly rent being received and the loss sustained. Though appellant denied the case, the suggestion put to RSA 1232/2004 16 DW1 was that, subsequent to eviction the respondent rented out the rooms for enhanced rent. It was admitted by the respondent . Therefore the very fact that appellant suggested a case that subsequent to eviction of the tenants, respondent granted fresh lease in favour of other persons for enhanced rent, establishes the case of the respondent that he had evicted the tenants. Even if it could be argued that by evicting the tenants, the buildings were rented out for enhanced rent, that would have been possible even otherwise. Therefore for the reason that respondent obtained enhanced rent later, it cannot be said that he did not sustain loss of the rent for the period, while the building was lying vacant. In such circumstances, the evidence establish that respondent sustained a loss of Rs.10,800/- being the rent , he would have otherwise obtained from the tenants. Though respondent contended that he sustained a loss of Rs.20,000/- as he could not do the seasonal cultivation as he had to surrender RSA 1232/2004 17 possession of the property within six months and he lost Rs.35,000/- by stopping the business of manufacturing cement bricks, there is no acceptable evidence to prove the exact income which the respondent was getting either by the seasonal cultivation or by the manufacture of cement bricks. At the same time it cannot be said that respondent did not sustain loss, as his evidence establish that he had to stop the seasonal cultivation and also the manufacture of cement bricks. In the absence of proper evidence, it can only be found that he sustained a reasonable loss, which cannot be more than Rs.25,000/-. Though respondent claimed that because of the agreement he had to sell the cattles and he sustained loss, there is no evidence either to prove that the cattles were sold or that they were sold not for the actual value. Hence there is only evidence to prove a loss of Rs.45,800/-. Respondent is therefore liable to return the balance of Rs.54,200/- with interest at 6% per annum from the date of the suit till RSA 1232/2004 18 realisation. The appeal is allowed. The decree and judgment in A.S.90/2000 on the file of Additional District Court, Thodupuzha are set aside. O.S.135/1996 on the file of Sub Court, Thodupuzha stands decreed as follows:- Respondent is directed to pay Rs.54,200/- with interest at 6% per annum from 17.10.1996 with proportionate cost. M.SASIDHARAN NAMBIAR JUDGE tpl/- M.SASIDHARAN NAMBIAR, J. --------------------- W.P.(C).NO. /06 --------------------- JUDGMENT SEPTEMBER,2006