IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD THURSDAY, THE THIRD DAY OF FEBRUARY, TWO THOUSAND AND ELEVEN PRESENT THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT No. 1088 OF 2002 BETWEEN: Kommineni Subbarao …APPELLANT AND Bollineni Venkata Subbaratnam …RESPONDENT TRANSFER APPEL SUIT No. 2350 OF 2004 BETWEEN: Kommineni Subba Rao …APPELLANT AND Bolineni Venkata Subba Ratnam …RESPONDENT The Court made the following: THE HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO APPEAL SUIT No. 1088 OF 2002 AND TRANSFER APPEAL NO. 2350 OF 2004 COMMON JUDGMENT: Both the appeals arise out of a common judgment passed in O.S.Nos.17 of 2001 and 169 of 1999 on the file of the Principal Senior Civil Judge, Ongole. The plaintiff in O.S.No.17 of 2001 is the defendant in O.S.No.169 of 1999 and vice versa and both the appeals were filed by the plaintiff in O.S.No.17 of 2001. The parties are referred as arrayed in O.S.No.17 of 2001. 2. The plaintiff claims that he has approached the defendant for a loan of Rs.50,000/- for lorry repairs and the defendant agreed to advance the same with an interest at the rate of 30% per annum. The defendant has obtained a sale deed for a sum of Rs.1,00,000/- on 12- 12-1996, though only Rs.50,000/- was paid. There was also a deed of undertaking to the effect that if the plaintiff pays the principal and interest within two years, the defendant has to re-convey the property under the sale deed, and the sale was not a real transaction and it was not intended to act upon. The plaintiff has paid a sum of Rs.22,500/- in nine instalments and when the plaintiff made the money ready for payment of the balance, the defendant avoided and a notice was given. The defendant gave a reply contending that the plaintiff has to pay a sum of Rs.65,800/- under promissory note, dated 12-12-1996, and the plaintiff has not paid the said amount, the re-conveyance of the schedule property cannot be bound. The claim of the defendant is not correct, the plaintiff was always ready and willing to discharge the debt and hence the suit was filed for specific performance of the deed of undertaking, dated 12-12-1996, for re-conveyance of the property or any alternative for cancellation of the sale deed, dated 12-12-1996. 3. The defendant filed a written statement and also the suit O.S.No. 169 of 1999 with substantial allegations of similar nature. According to the case of the defendant, as pleaded in the suit and as contended in O.S.No.169 of 1999, the plaintiff has received a sale consideration of Rs.34,200/- under the sale deed and on the date of execution of the sale deed on 12-12-1996 he received a sum of Rs.65,800/- and executed a promissory note and on the same day, executed the Deed of Understanding on 12-12-1996, wherein he has to pay interest at 30% per annum within two years in every month and if that amount is paid and the loan is discharged, the property shall be re-conveyed. Since the plaintiff has not discharged his obligation as amount was not paid, the claim of the plaintiff cannot be accepted. The plea of payment of Rs.22,500/- for nine months at the rate of Rs.2,500/- per month with interest at the rate of 30% per annum on Rs.1,00,000/- consideration is admitted. 4. The contention of the plaintiff that only Rs.50,000/- was borrowed and the documents executed are not true. Therefore, the suit was filed for enforcement of the promissory note debt and the claim of the plaintiff for specific performance or cancellation of the sale deed are disputed. 5. On the basis of the above pleadings, the following issues were framed by the trial court for trial: 1) Whether the plaintiff is guilty of violation in terms of agreement? 2) Whether the suit claim is within time? 3) Whether the Act 4 of 1938 is applicable to the present suit? 4) Whether the plaintiff is entitled to the decree as prayed for specific performance? 5) Whether the time is the essence of contract? 6) To what relief? 6. On the basis of the pleadings, both the suits were tried together and on behalf of the plaintiff, PWs. 1 and 2 were examined and marked Exs.A-1 to A-5. On behalf of the defendants, DWs.1 and 2 were examined and marked Ex.B-1 promissory note. 7. After considering the evidence on record, the learned Principal Senior Civil Judge dismissed the suit of the plaintiff and decreed the suit of the defendant on the basis of the promissory note. Aggrieved by the said judgment, the present appeals were filed. 8. The points that arise for consideration are: 1) Whether the transaction under Ex.A-1 is a loan transaction or a sale transaction and the plaintiff is entitled for cancellation or re-conveyance of the same? 2) Whether the defendant is entitled for recovery of the promissory note amount? 3) Whether the judgment and decree passed by the lower Court in the appeals is legal and sustainable? 9. POINTS: Evidently, as can be seen from the plea of the defendant, the sale deed Ex.A-1, dated 12-12-1996, was executed for a value of Rs.1,00,000/- and the composition of the consideration is said to be amount lent under the promissory note Ex.B-1 for a sum of Rs.65,800/- and a sum of Rs.34,200/- said to have been given as a consideration under Ex.A-1 sale deed. Therefore, the total consideration, which was mentioned in Ex.A-1 is component of Ex.B-1 and also the payment of Rs.34,200/-. If the defendant is to rely upon the sale deed, which was executed for a consideration of Rs.1,00,000/-, is really supported by the consideration and that there is no liability to re-convey the property for the default under the agreement Ex.A-2 about the payment of the money. Then, the sale is made absolute and the right of the defendant to recover the amount under the promissory note debt does not arise since she has got already property towards the said debt. But, curiously while resisting the claim of the plaintiff for re-conveyance or declaration about the nature of the sale transaction, the defendant has instituted the suit for recovery of the promissory note debt. Evidently, the defendant has got double advantage of the transaction. The defendant has got the money under the promissory note and also the property worth of Rs.1,00,000/- under Ex.A-1 sale transaction, such a course of advantage cannot be given to any party. 10. From the conduct of the defendant and if reliance is placed under Ex.A-2, which is undertaking given by the plaintiff about the discharge of the debt, then the sale deed is become absolute in the moment default is committed and no right is conferred on the defendant to enforce the promissory note debt. Therefore, it is quite clear that the defendant never intended the sale transaction to be an absolute one and the default of the plaintiff, if any, is not sought to be taken as defeating his right to claim back the property. From the fact that Ex.A-2 agreement stipulates that the property shall be re- conveyed on payment of the debt with interest, it is quite clear that the property intended transaction under Ex.A-1 only as a security for the loan transaction and not a sale transaction, which is totally supported by consideration. If such is the case, the lower Court should have taken into consideration the moment decree on the basis of the promissory note was passed, the rights under the sale deed claimed by the defendant are lost. The lower Court should not have decreed the suit of the defendant, if once the suit of the plaintiff for re- conveyance of the property or cancellation of the sale deed is dismissed. The judgment and decree passed by the lower Court suffers from infirmity and evidently from the nature of the undertaking Ex.A-2, the defendant has to re-convey the property and when evidently a sum of Rs.22,500/- said to have been paid under nine instalments and for the balance of amount due under the promissory note, the suit was filed and decreed, it cannot be said that the sale transaction is totally supported by consideration and that it is a valid transaction. At any rate, when the plaintiff has committed default or breach of the obligation, the defendant has not issued any notice calling upon the defendant that as per the undertaking under Ex.A-2, the right of re-conveyance or cancellation is lost and therefore, the defendant became the absolute owner of the property. 11. On the other hand, the conduct of the defendant in instituting the suit for recovery of the money on the basis of the promissory note clearly shows that the defendant never intended that the agreement Ex.A-2 shall be acted upon and the default committed by the plaintiff, if any, shall be taken advantage by the defendant. Therefore, from the above circumstances, it is quite clear that the defendant having opted to enforce the promissory note debt under Ex.B-1 cannot be allowed to contend and take advantage that the sale deed is also binding on the plaintiff and that the sale deed is valid and enforceable. From the nature of the transactions, which is contemporaneous on the sale deed i.e., 12-12-1996, it is quite clear that the transaction between the parties is purely a loan transaction and securities were given and it is not a sale transaction, where the defendant has derived absolute rights on the property. 12. In view of the circumstances, it has to be hold that the sale deed is not a valid transaction and it is not a sale transaction, but however, it is to be held it is a conditional loan transaction and the consideration said to have been paid under the said sale deed is only Rs.34,200/- and out of which, already Rs.22,500/- has been discharged and the balance amount is payable by the plaintiff since already a decree was passed by the lower Court for the amount due under the promissory note. 13. Therefore, the A.S.No.1088 of 2002 is dismissed and TR.AS.2350 of 2004 is allowed and the decree of the lower Court is set aside and this Court holds that the transaction is not a sale transaction and accordingly, declares that this is not a sale and however, the plaintiff is directed to pay the balance sum of Rs.11,700/- with interest at the rate of 24% per annum from 31-10-1997 till the date of suit and with subsequent interest at 12% per annum from the date of suit till the date of decree and with subsequent interest at 6% per annum till the date of realisation. Parties should bear their own costs. Date: 03-02-2011. ________________________ N.R.L.NAGESWARA RAO,J INL THE HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO APPEAL SUIT No. 1088 OF 2002 AND TRANSFER APPEAL NO. 2350 OF 2004 3rd February, 2011 INL