IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS FRIDAY, THE 13TH NOVEMBER 2009 / 22ND KARTHIKA 1931 AFA.No. 23 of 2002 ------------------------------- -- AGAINST THE JUDGEMENT IN AS.267/1991 OF THE LEARNED SINGLE JUDGE OF THIS COURT. OS.269/1989 of PRL.SUB COURT, KOZHIKODE .................... APPELLANT(S): RESPONDENT: DEFENDANT: ---------------------------------------------------------------- P.BHASKARAN, PUDUKKUTY HOUSE,S/O.KELAN, THAMARASSERY AMSOM, MARUTHATTU DESOM, KOZHIKODE TALUK. BY ADV. SRI.M.C.SEN, SENIOR ADVOCATE RESPONDENT(S): APPELLANT: PLAINTIFF: ------------------------------------------------------------ N.APPU, RETIRED TEACHER, S/O.CHEKKUTTY, NADUVALAD HOUSE, THAMARASSERY AMSOM, MARUTHATTU DESOM, KOZHIKODE TALUK. ADV. SRI.P.V. RAMA WARRIER SRI.T.R. RAVI THIS APPEAL FROM FIRST APPEAL HAVING BEEN FINALLY HEARD ON 8.9.2009, THE COURT ON 13/11/2009 DELIVERED THE FOLLOWING: K.M. JOSEPH & M. L. JOSEPH FRANCIS, JJ. ------------------------------------------ A.F.A. NO. 23 OF 2002 ------------------------------------------ Dated this the 13th November, 2009 JUDGMENT K.M. Joseph, J. Defendant is the appellant. The Suit which is one for declaration and injunction stands dismissed by the trial court. In an Appeal filed by the respondent/plaintiff, the Suit stands decreed. 2. Briefly put, the case of the respondent/plaintiff is as follows: The defendant was the owner in possession and enjoyment of the plaint schedule property. He was in financial difficulties. He decided to sell the plaint schedule property and through his son-in-law, the respondent was contacted and the property was sold by Deed dated 23.5.1989. He took possession of the AFA.NO.23/02 2 property. In view of the fact that the defendant has not acquired the building to reside in, the building in the plaint schedule property was rented out to the defendant for a period of eleven months on a monthly rent of Rs.150/= and he is residing in the building under Rent Deed executed by him. The further case of the plaintiff was that the son-in-law who brokered the deed, demanded brokerage and the plaintiff refused to pay brokerage as he was not a broker. The defendant out of the influence of the son-in-law, purported to cancel the sale deed. 3. The appellant/defendant contended that he never decided to sell the property to the plaintiff or any other person. He was in possession of the building not as a tenant. The property is valued at Rs.2,40,000/= by the Kerala State Financial Corporation. The building in the plaint schedule property is alleged to fetch more than Rs.1,50,000/=. He had a chitty in the KSFC in which properties of the plaintiff were offered as security. The defendant was in urgent need of Rs.53,000/= and AFA.NO.23/02 3 the plaintiff has agreed to pay the amount as loan for two years. The plaintiff demanded execution of sale deed as security. The plaintiff did not pay the amount after execution of the document, even though he agreed to pay the amount immediately after execution of the document. So, the document was cancelled on 29.5.1989. The plaintiff had obtained the signature of the defendant in some blank stamp papers which were converted into an agreement. The trial court after considering the deposition of PWs. 1 and 2 and DW1 to 6 besides Exts.A1 to A6 and B1 to B7, proceeded to find as follows: The plaintiff could not state the survey number, measurement, boundaries and details of the trees in the plaint schedule property. He had not measured the property before purchasing. He had not perused any prior title deeds. He had not verified the Encumbrance Certificate. The plaintiff had not taken possession of the property on the date of Ext.A1 (Sale Deed). The Sale Deed is not a genuine one. The defendant had AFA.NO.23/02 4 not received the consideration, and the plaintiff has not paid the consideration. No rent has been paid. It is further found that from a perusal of Ext.A2 (the rent agreement alleged to be executed), it cannot be said that it was created by obtaining signature on blank stamp papers. However, it is found that the defendant has not paid any rent for the building. The witnesses in Ext.A2 are not examined, it is stated, though they were available for examination and Ext.A2, it is found, is not a genuine document. 4. In Appeal, the learned Single Judge noted that DW2 has deposed that the respondent has got sufficient means to advance the amount. It is further noted that the contention of the appellant that the plaintiff has not inspected the property and he has not asked for Encumbrance Certificate before execution of Ext.A1 is of no significance as Ext.A1 contains clear recital about assigning of the property and the passing of consideration. Likewise, the non-payment of building tax, basic tax or the non- AFA.NO.23/02 5 payment of rent, was not found of importance, as the dispute between the parties started immediately after execution of Ext.A1. Thereafter, after referring to the decisions of the Apex Court and of this Court, it is found that Ext.A1 makes it clear that the property is transferred for a consideration of Rs.53,000/= and there was no reservation in the document in regard to the passing of consideration or title to the possession of the property at a later time. It is further found that in Ext.B1 which purports to be the Deed by which the document was cancelled, the only reason stated is the failure of consideration and nothing else. The learned Single Judge found that the evidence on record makes it clear that Ext.A1 assignment deed is executed by the appellant with the intention to assign the property in favour of the plaintiff. On this reasoning, inter alia, the learned Single Judge decreed the suit. 5. We heard Shri M. C. Sen, learned senior counsel for the appellant and Shri T. R. Ravi, learned counsel appearing for the AFA.NO.23/02 6 respondent. 6. Learned senior counsel for the appellant would contend that this is a case where the learned Single Judge has erred in not appreciating the circumstances leading to Ext.A1 as also the law governing the issue at hand. It is contended that Ext.A1 was not executed with the intention of transferring the rights of the appellant in favour of the plaintiff. He would contend that the evidence on record in the form of valuation done in the year 1985 which is nearly four years prior to Ext.A1 assignment deed that the property was much more valuable than it is shown as in Ext.A1. It is contended that the value of the property going by the valuation report was Rs.2,70,000/= whereas only Rs.53,000/= is shown as the consideration in Ext.A1. The extent is 58 cents with improvements and a house. He would submit that the appellant was in need of money, the transaction was essentially one which arose out of a loan and document came to be executed by way of security. He would submit that the plaintiff had created security in respect of the loan availed by AFA.NO.23/02 7 the appellant earlier. The respondent had proceeded to transfer one of the items offered as security. The appellant had approached the plaintiff for a loan in connection with the transaction relating to a bus. He would point out that the appellant and another partner of his decided to pay Rs.53,000/= each for carrying out the transaction and that is how he approached the appellant. He would further point out that the possession of the property did not change hands as would have been natural to a transaction which is recited in Ext.A1, namely a sale. He reiterated that there is no evidence for any rent being paid and Marshalled the reasoning of the trial court. He would further contend that while it is true that the recital of a term in a written document may not be open to contradiction or variation by way of oral evidence, the law does not prevent oral evidence being adduced to reveal the true nature of the transaction. Likewise, he would contend that it is always open to a party to a document to show by oral evidence that the statement in a document that consideration has been paid is incorrect. He AFA.NO.23/02 8 would point out that the appellant has on 30.5.1989 sent a notice to the respondent wherein he has set up a definite case relating to the true nature of the transaction between the parties. He would also submit that this has been followed up by taking the plea relating to the document being executed by way of security and he would point out that the plea of non-payment of the consideration of Rs.53,000/= should be appreciated, in the context of the larger plea as to the nature of the transaction and this is where the learned Single Judge fell in error. In other words, he would contend that if a party to a document which is styled as a sale deed, admits the sale deed, it may not be open to him to vary the terms of the disposition. He relied on the decision in Smt. Gangabai v. Smt. Chhabubai (AIR 1982 SC 20). He also sought to distinguish the reasoning of the Apex Court which has been relied on by the learned Single Judge. Per contra, Shri T.R. Ravi, learned counsel for the respondent/plaintiff would contend that Ext.A1 is unambiguous in the terms which have been incorporated therein, that the AFA.NO.23/02 9 appellant intended to convey the ownership over the property to the plaintiff. He took us through the terms in this regard. He further pointed out that in Ext.B1 cancellation deed executed by the appellant on 29.5.1989, all that is stated is that the appellant has not been paid Rs.53,000/=. He would submit that the mere fact that the buyer has not paid Rs.53,000/= would not entitle the seller to wriggle out of the conveyance effected under a document of sale of immovable property. The seller would have only a right to bring a Suit for recovery of money of the sale price and it cannot have the effect of invalidating the sale deed in any manner. He would further contend that there was evidence regarding both the capacity of the plaintiff to raise the funds and the actual payment of the same. He would also contend that the learned Single Judge correctly took note of the evidence showing that the plaintiff had capacity to raise the money. He would further point out that the transaction took place in 1989 and having regard to the nature of the property, it could not be said that the price is inadequate. He would also AFA.NO.23/02 10 contend that the law would not permit the variation of the express recital of the conveyance effected under Ext.A1. 7. Shri M.C. Sen, learned senior counsel for the appellant would submit that the learned Single Judge was in error in appreciating the legal position and the facts of the case. He would contend that the acknowledgment of a receipt of the whole or part of sale consideration, is not a term within the meaning of Sections 91 and 92 of the Indian Evidence Act and the oral evidence can be given to prove the contrary. In this regard, he relied on the Judgment of a Full Bench of the Allahabad High Court in Mohammad Taki Khan v. Jang Singh (AIR 1935 Allahabad 529). Therein, the court, inter alia, held as follows: “The amount of sale consideration is a term of deed of sale; when the terms of a deed of sale have been proved according to S.91 of the Act, no evidence of any oral agreement or statement shall be admitted as between the parties to the deed of sale or their representative for the purpose of contradicting varying, adding to or subtracting AFA.NO.23/02 11 from the amount of sale consideration....................The acknowledgment of receipt of the whole or part of the sale consideration in a deed of sale is not a term of the deed of sale and oral evidence may be given to show that the amount acknowledged or any part of it was not received.” On the same lines, is the Judgment of a learned Single Judge in Bhawanbhai Premabhai and Others v. Bai Vahali and Others (AIR 1955 Bombay 320), which is also relied on by the learned counsel for the appellant. He would contend further that the transaction is an unconscionable one and it was a loan transaction. The amount was a nominal one and it supported the theory of a loan transaction more than a sale. In this regard, he relied on the Judgment of a Learned Single Judge in Vinayakappa Suryabhanappa Dahenkar v. Dulichand Hariram Muraka (AIR 1986 Bombay 193). In Kaliaperumal v. Rajagopal And Another ((2009) 4 SCC 193), the Apex Court was dealing with the case where the following facts were present: AFA.NO.23/02 12 The respondent sold the properties to the appellant for a consideration of Rs.43,000/= and a sum of Rs.3,000/= was appropriated for discharging a mortgage executed by the respondent in the appellant's favour. The balance of Rs.40,000/= was to be paid before the Registrar at the time of registration of the deed. The appellant, however, alleged that since the respondents required to purchase a lorry, he had paid them a sum of Rs.25,000/= and he was liable to pay only the balance amount of Rs.15,000/=. The respondents admitted execution of the Deed before the Registrar, but they refused to make endorsement on the Deed in token of admitting execution, contending that they were not paid the remaining consideration of Rs.40,000/=. The Registrar recorded that no amount was tendered by the appellant to the respondents in his presence, but registered the Deed. The appellant instituted a Suit seeking declaration of title as well as possession. The High Court in Second Appeal had taken the view that title has not never passed to the appellant as the intention of the parties was that title AFA.NO.23/02 13 would not pass until the full consideration is paid by him. The Supreme Court dismissed the Appeal. In the course of the Judgment, the Court held, inter alia, as follows: “17. It is now well settled that payment of entire price is not a condition precedent for completion of the sale by passing of title, as Section 54 of the Transfer of Property Act, 1882 (“the Act”, for short) defines “sale” as “a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised”. If the intention of parties was that title should pass on execution and registration, title would pass to the purchaser even if the sale price of part thereof is not paid. In the event of non-payment of price (or balance price as the case may be) thereafter, the remedy of the vendor is only to sue for the balance price. He cannot avoid the sale. He is, however, entitled to a charge upon the property for the unpaid part of the sale price where the ownership of the property has passed to the buyer before payment of the entire price, under Section 55(4)(b) of the Act. 18. Normally, ownership and title to the AFA.NO.23/02 14 property will pass to the purchaser on registration of the sale deed with effect from the date of execution of the sale deed. But this is not an invariable rule, as the true test of passing of property is the intention of parties. Though registration is prima facie proof of an intention to transfer the property, it is not proof of operative transfer if payment of consideration (price) is a condition precedent for passing of the property. 19. The answer to the question whether the parties intended that transfer of the ownership should be merely by execution and registration of the deed or whether they intended the transfer of the property to take place, only after receipt of the entire consideration, would depend on the intention of the parties. Such intention is primarily to be gathered and determined from the recitals of the sale deed. When the recitals are insufficient or ambiguous the surrounding circumstances and conduct of parties can be looked into for ascertaining the intention, subject to the limitations placed by Section 92 of the Evidence Act. 22. There is yet another circumstance to show that title was intended to pass only after AFA.NO.23/02 15 payment of full price. Though the sale deed recites that the purchaser is entitled to hold, possess and enjoy the scheduled properties from the date of sale, neither the possession of the properties nor the title deeds were delivered to the purchaser either on the date of sale or thereafter. It is admitted that possession of the suit properties purported to have been sold under the sale deed was never delivered to the appellant and continued to be with the respondents. In fact, the appellant, therefore, sought a decree for possession of the suit properties from the respondents with mesne profits. If really the intention of the parties was that the title to the properties should pass to the appellant on execution of the deed and its registration, the possession of the suit properties would have been delivered to the appellant.” Learned senior counsel for the appellant would further contend that the learned Single Judge has erred in seeking to draw support from the Judgments of the Apex Court in State of Kerala v. The Cochin Chemical Refineries Ltd. (AIR 1968 SC 1361) , Vidhyadhar v. Mankikrao and another (AIR 1999 SC 1441) and AFA.NO.23/02 16 Bishundeo Narain Rai (dead) by L.Rs. and Others v. Anmol Devi and Others (AIR 1998 SC 3006). 8. In State of Kerala v. The Cochin chemical Refineries Ltd. (AIR 1968 SCC 1361), the respondent had executed a mortgage under which the State of Travancore - Cochin was to advance certain sum to the respondent. It executed a simple mortgage in favour of the State in respect of certain properties and undertook to supply certain quantity of ground-nut cake to the State. The State failed, inter alia, to advance the amount. On the question of claim for damages, for breach of covenant, it was contended that the failure to advance the amount absolved the State from its obligation to purchase the goods of the respondent. This contention of the State was repelled. In the course of the Judgment, the Court also held as follows: “The transaction of mortgage formally executed does not become void or ineffective merely because the mortgagee fails to advance the amount of money undertaken to be advanced by him. If without advancing the amount agreed to be advanced, he sues on the title created under the AFA.NO.23/02 17 deed of mortgage, the court will not award him a decree for anything more than what he has advanced. But, that is not to say that the mortgage is invalid.” 9. The learned Single Judge has taken the view that the same principle would apply in the case of a sale. In other words, even taking the view that the consideration of Rs.53,000/= was not actually paid by the respondent to the appellant, it will not detract from the validity of the sale deed. Learned senior counsel would contend that, that was a case where the parties proceeded on the basis that the transaction was a mortgage whereas in the facts of this case, the contention taken is that though the document is styled as a sale deed, what had happened was that the appellant sought a loan and the respondent demanded execution of a sale deed and what is more, even the amount which was promised by the respondent as a loan was not actually given. Therefore, it is contended that the learned Single Judge was in error in drawing support from the decision in State AFA.NO.23/02 18 of Kerala v. The Cochin Chemical Refineries Ltd. (AIR 1968 SC 1361). 10. In Vidhyadhar v. Mankikrao and another (AIR 1999 SC 1441) also, the Apex Court took the view, inter alia, that even if the whole of the price is not paid, but the document is executed and thereafter registered, if the property is of the value of more than Rs.100/=, the sale would be complete. The learned Single Judge took the view that the mere contention of the appellant that the consideration for Ext.A1 has not passed, cannot lead to the finding that Ext.A1 is void or ineffective. Herein also, the learned senior counsel would contend that the learned Single Judge has erred in relying on the said Judgment. It is necessary to notice the facts of the said case. The plaint schedule property belonged to the second defendant. He executed a document styled as “Kararkharedi” in favour of the first defendant for a sum of Rs.1,500/= and delivered possession also. There was a stipulation in the document that if the entire amount of Rs.1,500/= was returned to the first defendant before AFA.NO.23/02 19 15.3.1973, the property would be given back to the second defendant. The second defendant executed a sale deed which was registered in favour of the plaintiff in respect of the land for a sum of Rs.5,000/=. The plaintiff instituted a Suit wherein it was alleged that the second defendant had offered the entire amount to the first defendant, but it was not accepted. A money order was sent which was also refused by the first defendant. It is alleged that the document executed by the second defendant in favour of the first defendant was a mortgage by conditional sale which is liable to be redeemed. Alternatively, it was contended that if the document was a sale, the plaintiff was entitled to re-conveyance of the property. The trial court had found that there was a mortgage by the second defendant. It was further found that there was a sale by the second defendant in favour of the plaintiff and on that basis, the plaintiff was directed to pay the sum of Rs.1,500/= to the first defendant and a decree of redemption was passed. The first appellate court confirmed the decree. The High Court in Second Appeal had AFA.NO.23/02 20 taken the view that the plaintiff had not paid the entire sale consideration to the second defendant and only a sum of Rs.500/= had been paid. The Apex Court allowed the Appeal by the plaintiff. Of course, the Court took note of the various circumstances including the fact that the first defendant did not even step into the witness box to prove his contention that the document executed as a sale deed by the second defendant in favour of the plaintiff was sham. The Apex Court did not accept the view expressed by the Privy Council in Lal Achal Ram v. Raja Kazim Hussain Khan (1905) 32 Indian Appeals 113) in the broad statement that it is not open to a stranger to a sale deed to dispute the payment of the consideration or its adequacy. Thereafter, dealing with the argument that the entire sale consideration was not paid by the plaintiff to the second defendant, the Court proceeded to take the view, inter alia, which we have already adverted to. That is to say, the Court took the view that the non-payment of the whole price will not stand in the way of the transaction taking effect and the title AFA.NO.23/02 21 would pass under the transaction. Paragraphs 36 and 37 also being relevant, are extracted hereunder: “36. There is a catena of decisions of various High Courts in which it has been held that even if the whole of the price is not paid, the transaction of sale will take effect and the title would pass under that transaction. To cite only a few, in Gayatri Prasad v. Board of Revenue, 1973 All LJ 412, it was held that non-payment of a portion of the sale price would not effect validity of sale. It was observed that part payment of consideration by vendee itself proved the intention to pay the remaining amount of sale price. To the same effect is the decision of the Madhya Pradesh High Court in Sukaloo v. Punau, AIR 1961 Madh Pra.176: ILR (1960) MP 614. 37.