IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH THURSDAY, THE 5TH MARCH 2009 / 14TH PHALGUNA 1930 AS.NO. 184 OF 1996() --------------------------------- (AGAINST O.S. NO.605 OF 1992, IIIRD ADDITIONAL SUB COURT, ERNAKULAM) APPELLANT(S) - 2ND DEFENDANT: --------------------------------------------------- GEORGE KURIAN, AGED 33 YEARS, CHARTERED ACCOUNTANT, SON OF KURIAN, VANDANATHIL HOUSE, AIKKARANADU NORTH VILLAGE, KUNNATHUNADU TALUK. BY ADV. SRI.SHEJI P.ABRAHAM RESPONDENT(S) - PLAINTIFF & IST DEFENDANT: ------------------------------------------------------------- 1. PHILOMINA PIUS, AGED 33 YEARS, W/O. PIUS FROM KUTTIKKATTU HOUSE, CHERIAKADAVU DESOM, PALLURUTHI VILLAGE, NOW RESIDING AT KUTTIKKATTU VEEDU, MULLASSERY CANAL ROAD, COCHIN - 11. 2. REGI ISAC, AGED 34 YEARS, S/O.ISAC JACOB, HOUSE NO.36/1806, DURBAR HALL ROAD, KARITHALA DESOM, ERNAKULAM VILLAGE. ADV. SRI.P.G.PARAMESWARA PANICKER, SENIOR ADVOCATE THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 05/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: THOMAS P. JOSEPH, J. -------------------------------------- A.S.No.184 of 1996 -------------------------------------- Dated this the 5th day of March, 2009. JUDGMENT Defendant No.2 has come up in appeal challenging the judgment and decree of the III Additional Sub Judge, Ernakulam whereby Ext.B1, agreement for sale dated 4.4.1991 executed by respondent No.2/defendant No.1 as power of attorney holder of respondent No.1/plaintiff was cancelled, respondent No.2 was restrained and prohibited from executing any sale deed pursuant to that agreement and rejecting the counter claim made by the appellant for specific performance of Ext.B1 or, in the alternative for return of advance money of Rs.35,000/- with interest. 2. Short facts necessary for consideration of this appeal are: 1 ½ cents of land together with the building thereon situated on the side of the road connecting YMCA Junction to the M.G.Road at Ernakulam in the heart of the City was acquired by respondent No.1 as per Ext.A1, assignment deed No.866 of 1990 dated 7.3.1990 for a sum of Rs.80,000/- . The husband of respondent No.1 (PW4) is conducting a restaurant in the said building. According to respondent No.1, her husband was in need of money and she thought of disposing of the said property. Respondent No.2 who is a money lender by profession approached respondent No.1 and told her that the property would fetch anything not less than Rs.1.50 lakhs per cent and that the property with AS No.184/1996 2 building could be sold for Rs.3 to 4 lakhs. Accordingly, respondent No.1 executed a power of attorney in favour of respondent No.2 (Ext.A2 is its copy) on 11.1.1991 and registered as document No.32/1991 conferring power on respondent No.2 to sell the said property. While so, respondent No.2 served a notice on respondent No.1 demanding her to vacate the building in the said property within 30 days and threatening eviction with police assistance in case she failed to vacate. Following that, respondent No.1 cancelled the power of attorney as per Ext.A3, registered document No.503/1992 dated 4.7.1992. On 5.7.1992, a photocopy of that cancellation deed along with a notice (Ext.A6 is its copy) was given to respondent No.2. Respondent No.2 gave Ext.A4, reply dated 14.7.1992 wherein he claims that on the strength of the power given to him as per Ext.A2 he negotiated the sale of the said property and entered into Ext.B1, agreement with the appellant on 4.4.1991 for sale of the said property for a total consideration of Rs.50,000/- and received Rs.35,000/- as advance. Immediately, respondent No.1 applied (to the Registrar) for a copy of the said agreement for sale and got it on 16.7.1992. Respondent No.1 states that it was a fraudulent and collusive act of the appellant and respondent No.2 in entering to Ext.B1, agreement for sale for a throw away price of Rs.50,000/-. Therefore, she sued the appellant and respondent No.2 as aforesaid. Respondent No.2/defendant No.1 contended that respondent No.1/plaintiff borrowed Rs.3.50 lakhs from him on 12.11.1990 and executed a demand promissory note for the said amount. Respondent No.1 created equitable mortgage of said property in his favour by deposit of the original title deed. At a time when he demanded AS No.184/1996 3 repayment of that amount, respondent No.1 told him that he could sell the property and adjust the sale proceeds in the loan amount payable by her. It is accordingly that the power of attorney was executed in his name and on the strength of that power of attorney, he entered into Ext.B1, agreement for sale dated 4.4.1991 with the appellant. He claimed that since the property was encumbered, the maximum sale consideration that could be fetched is only Rs.50,000/- and that the sum of Rs.35,000/- given by the appellant as advance was adjusted in the loan amount payable to him by respondent No.1. Appellant contended that he agreed to purchase the property as per Ext.B1 for Rs.50,000/- and paid Rs.35,000/- as advance. He is entitled to get the sale deed executed in terms of that agreement and at any rate, for return of the advance money with interest. He therefore, laid the counter claim as aforesaid. Respondent No.1 filed replication denying the allegations in the counter claim and asserting the averments in the plaint. Both sides adduced oral and documentary evidence. Learned Sub Judge found that the appellant and respondent No.2 have acted fraudulently in executing Ext.B1, agreement for sale and hence, respondent No.1 was justified in cancelling the power of attorney. It is accordingly that the impugned decree was passed. 3. Heard both sides. 4. Following points arose for a decision:- (i) Whether cancellation of the power of attorney is valid? AS No.184/1996 4 (ii) Whether Ext.B1, agreement for sale is liable to be cancelled? (iii) Whether the counter claim made by the appellant is allowable? 5. Perused the records. 6. Points (i) and (ii) : These points can be considered together for convenience. Though respondent No.1 has a contention that she was unaware of the contents of Ext.A2, power of attorney as she had no occasion to read through that document and blindly believed respondent No.2, that contention cannot be sustained since it has come in evidence that respondent No.1 is reasonably educated and hence the plea of non-est factum is not available to her. Question is whether she was competent and entitled to cancel the power of attorney and whether, Ext.B1, agreement for sale executed by respondent No.2 in favour of the appellant on the strength of power of attorney is liable to be cancelled on the ground of fraud and collusion as pleaded by respondent No.1 7. Learned counsel for the appellant contended that the suit must fail since the plaint does not contain particulars of the alleged fraud and collusion as required under Order VI Rule 4 of the Code of Civil Procedure (for short, “the Code”). According to the learned counsel, there is only a vague averment in paragraph 9 of the plaint that the agreement for sale between the appellant and AS No.184/1996 5 respondent No.2 is fraudulent, the cause thereof being that appellant and respondent No.2 are brothers-in-law and that the sale consideration fixed in the agreement for sale is only Rs.50,000/-. Learned counsel placed reliance on the decision in Bishundeo v. Seogeni Rai (AIR (38) 1951 SC 280). 8. In the decision relied on by the learned counsel it is stated in paragraphs 24 and 25 that when vitiating factors such as fraud, undue influence, etc. are set up in challenge of an instrument, the particulars of such vitiating factors should be stated in the plaint and that there can be no departure from such particulars in evidence. No doubt, the mandate of Order VI Rule 4 of the Code is also the same. I have gone through the plaint and in particular, the averments in paragraphs 5 to 9 where the particulars of the alleged transactions leading to the execution of the power of attorney and the agreement for sale are given. “Fraud” is defined in Tomlin's Law Dictionary as 'deceit in grants and conveyances of lands, and bargains and sales of goods, etc. to the damage of another person which may be either by suppression of the truth, or suggestion of a falsehood'. “Collusion” between two persons, to the prejudice and loss of a third, is, in the eye of the court, the same as 'fraud'. If this be the concept of fraud and collusion, on going through the averments in paragraphs 5 to 9 in the plaint, I am inclined to think that sufficient particulars on which respondent No.1 has laid her claim have been pleaded. AS No.184/1996 6 9. Now coming to the question whether respondent No.1 was legally and factually justified in cancelling the power of attorney and whether, her contention that Ext.B1 is the result of fraud and collusion can be sustained, it is contended by the learned counsel for respondent No.1 that the very execution of Ext.B1, agreement for sale is without power in so far as Ext.A2, power of attorney does not empower respondent No.2 to enter into any such agreement for sale. Learned counsel contended that the power of attorney being the creation of an agency has to be strictly construed and the agent can exercise only such power as is expressly conferred on him. Learned counsel referred to me the Commentaries on Pollock and Mulla, Indian Contract and Specific Relief Act, 12th Edition, Vol.II at pages 2148 and 2153. According to the learned counsel, the power to sell property does not take in the power to enter into an agreement for sale. 10. No doubt, a power of attorney has to be strictly construed and the grantee can only exercise such powers as are granted to him expressly or by necessary implication. But, in the light of the judicial pronouncements on the point, I am unable to accept the contention that the power to sell does not take in the power to enter into an agreement for sale. Support for that view comes from Bank of Bengal v. Ramanathan Chetty and others (AIR 1915 Privy Council 121) where it was observed that: AS No.184/1996 7 “Where an act purporting to be done under a power of attorney is challenged as being in excess of the authority conferred by the power, it is necessary to show that on a fair construction of the whole instrument the authority in question is to be found within the four corners of the instrument, either in express terms or by necessary implication.” and Pazhaniappa Chettiyar v. South Indian Planting and Industrial Co. Ltd. (AIR 1953 Travancore-Cochin 161) where it was held that: “An authority to sell must certainly include an authority to agree to sell. The circumstance that the agreement to sell is in the shape of a separate document reduced to writing some time before the actual execution of the deed of sale, does not matter or affect the authority to sell.” In this case, Ext.A2 specifically confers power on respondent No.2 to sell the property if necessary by effecting necessary advertisements or otherwise negotiating and procuring the sale. That power certainly takes in the power to enter into an agreement for sale as well. AS No.184/1996 8 11. Counsel for respondent No.2 would contend that though, respondent No.2 has not preferred an appeal against the judgment and decree of the court below he is entitled to challenge the judgment and decree in that, the judgment and decree if, are sustained that may give a cause of action to the appellant to seek recovery of Rs.35,000/- taken by him as advance. Learned counsel for the appellant and respondent No.2 contend that on the evidence on record the court below was not justified in concluding that respondent No.1 was justified in revoking the power of attorney. According to the learned counsel, since the agreement between respondent Nos. 1 and 2 was that was that respondent No.2 could sell the property and appropriate the sale proceeds towards loan of Rs.3,50,000/-, the power of attorney was not liable to be revoked unilaterally at the instance of respondent No.1. Learned counsel in that regard placed reliance on the Law Relating to Power of Attorney by S.Parameswaran, 3rd Edition at page 30 where it is stated: “A power-of-attorney recognise and recording the interest of attorney in the property cannot be revoked or terminated. In an almost identical situation the same view was expressed by the Kings Bench in Rainbow v. Hawkins. In that case, an auctioneer was instructed to sell goods by auction, fixing a reserve price. But, while auctioning, he sold the goods without reserve. AS No.184/1996 9 When the question arose whether he could by that act bind his principal, the Court said that the principal is bound by the same.” But in this case Ext.A2, power of attorney does not say either expressly or by necessary implication that respondent No.2 was authorised to adjust the sale proceeds towards any such loan. On the face of Ext.A2, the contention that it was not permissible for respondent No.1 as regards future transaction also to revoke the power of attorney cannot be accepted, the question whether Ext.B1, agreement for sale is liable to to be cancelled on the grounds set up by respondent No.1 being an altogether different matter depending on the facts, circumstances and evidence in the case. 12. Now I shall refer to Ext.B1 which purports to be an agreement for sale of property belonging to respondent No.1 and executed between the appellant and respondent No.2 as the power of attorney of respondent No.1. The consideration referred to in Ext.B1 is Rs.50,000/- . It recites that Rs.35,000/- was taken by respondent No.2 as advance and that on payment of balance sale consideration (Rs.15,000/-) and on respondent No.2 producing the encumbrance certificate to show that there was no liability outstanding on the property, at any time not later than two years from the date of agreement, the sale deed is to be executed. Respondent No.1 has a case that the property would have fetched not less than Rs.3 - 4 lakhs but the appellant and respondent No.2 fraudulently, to cheat her and whisk away the valuable AS No.184/1996 10 property situated in the heart of the City have created Ext.B1 for sale of the property for a meagre sum of Rs.50,000/- though she had purchased the property for Rs.80,000/- in the year 1990. According to her, there was no advertisement or negotiation for the sale. 13. The property is situated in the heart of Ernakulam City and takes in a building as well though according to the appellant and respondent No.2, it is a part of a line building and pretty old. It is also not very much in dispute that the husband of respondent No.1 (he was examined as PW4) has been running a restaurant at all relevant times. Even as per Ext.A1, (by which the property was assigned in favour of respondent No.1 and executed on 7.3.1990) that property was purchased by respondent No.1 on that day for a sum of Rs.80,000/- but in Ext.B1, dated 4.4.1991 the total sale consideration stated is only Rs.50,000/-. When this glaring inconsistency was pointed out to the appellant and respondent No.2 they tried to explain that the property was otherwise encumbered to the tune of Rs.3,50,000/- as an equitable mortgage was created by depositing the title deed and hence, there was no purchaser for the property for a value higher than Rs.50,000/-. Learned counsel for appellant and respondent No.2 invited my attention to Ext. B3, copy of the plaint in O.S.No.702 of 1992 instituted by respondent No.2 against respondent No.1 for realisation of the loan amount of Rs.3,50,000/-, less Rs.35,000/- allegedly adjusted by respondent No.2 and Ext.B4, copy of the written statement filed by respondent No.1 O.S.No.702 of 1992. (I am told that the decision in O.S.No.702 AS No.184/1996 11 of 1992 is under challenge in A.S.No.370 of 1996). But, that is an alleged transaction between respondent Nos.1 and 2 and assuming that there was such a transaction and creation of equitable mortgage (which ofcourse is disputed by respondent No.1), that does not mean that the value of the property should or has to go down. So far as there is no contract between the parties that sale of the property for Rs.50,000/- to the appellant would discharge the loan allegedly due to respondent No.2 from respondent No.1. May be, if there was an understanding between the respondents, respondent No.2 would have been entitled to appropriate the sale proceeds towards the said loan but that does not mean that the property could have been sold for a lessor price to a stranger, in this case the appellant. I do not find any satisfactory explanation as to how the sale consideration of Rs.80,000/- (stated in Ext.A1 dated 7.3.1990), instead of soaring up in the normal course by lapse of one year plummeted down to Rs.50,000/- when that property was agreed to be sold as per Ext.B1 dated 4.4.1991. 14. I do not intend to say that the said fact alone would indicate fraud and collusion between the appellant and respondent No.2. Other circumstances are also to be looked into. Concededly, appellant and respondent No.2 are brothers-in-law and going by the evidence of appellant as DW1, his wife, Sherly George is also a partner in the partnership financing business set up by respondent No.2. It is seen from Ext.B1 that the said Sherly George appears as the first identifying witness in it followed by another person who is employed with AS No.184/1996 12 Tapovan Housing finance Ltd. with whom respondent No.1 appeared to have had some business as stated by PW4, her husband. It has come out in evidence that appellant is working as a Chartered Accountant and his office is on the next door of the office of the firm involving his wife, respondent No.2, his mother and other family members situated in the same building. That, the wife of the appellant is a partner along with respondent No.2 in the financing business to which respondent No.1 allegedly owed Rs.3,50,000/- and that Ext.B1 is executed between the appellant and respondent No.2 are certainly relevant facts to be taken into consideration. 15. Yet another circumstance pleaded by respondent No.1 is that there was no proper advertisement or negotiation for sale of the property. This is practically admitted by respondent No.2 also as his contention is that Ext.A2 did not oblige him to make advertisement. True, there is no specific direction in Ext.A2 requiring respondent No.2 to make any such advertisement but, clause (1) in Ext.A2 is that respondent No.2 is authorised to advertise for sale or otherwise negotiate and procure the sale of the property. This in my view is not merely a power conferred on respondent No.2 but a duty cast on him in his capacity as the agent of respondent No.1 and that agency requiring him to act for the atmost benefit and advantage of his principal by selling the property for the maximum price possible for which, advertisement for sale was needed. Concededly, that responsibility was not discharged by respondent No.2. It is strange to hear from respondent No.2 as DW2 that he did not even know what AS No.184/1996 13 price the property would fetch. There is no case or evidence that respondent No.2 moved his little finger even, to ascertain whether the property would fetch anything more than Rs.50,000/- and whether there was any other buyer for it. He, without making any such effort, appears to have been eager to sell the property to his own kith and kin for Rs.50,000/-. It was too much for respondent No.2 to have attempted at that and then trying to take shelter under Ext.A2 contending that he was not bound to make any advertisement for sale. I am unable to think that by executing Ext.B1 for a sum of Rs.50,000/-, respondent No.2 was protecting the interest of his principal, respondent No.1. 16. Ext.B2 is the encumbrance certificate produced by respondent No.2. Concededly, that certificate does not disclose any liability on the property, ofcourse the claim of respondent No.2 in respect of Rs.3,50,000/- being that an equitable mortgage was created and that liability may not be born out by Ext.B2. It is not as if appellant (DW1) was unaware of the said liability of respondent No.1 towards respondent No.2. It is not explained why, in so far as there is no case or evidence of any other liability being on the property, respondent No.2 was gracious enough to give the appellant two years' time to raise the balance sum of Rs.15,000/- and get the sale deed executed. True, Ext.B1 states that respondent No.2 was to take the encumbrance certificate of the property but, by any stretch of imagination I am unable to think that it required two years' time to take the encumbrance certificate. AS No.184/1996 14 17. Learned counsel for the appellant has a contention that the attempt of the appellant and respondent No.2 were to defraud respondent No.1, there was no necessity to enter into an agreement like Ext.B1, instead, the property could have been sold out right to the appellant for the sum of Rs.50,000/-. The answer for that comes from the deposition of the appellant as DW1. In cross-examination he stated, departing from Ext.B1 and the alleged proposal for sale of the property to him that respondent No.2 asked him a loan of Rs.50,000/- and he agreed to advance the sum provided, he was given proper security and accordingly, agreement for sale (Ext.B1) was executed. He specifically stated that their attempt was to sell the property for a higher price. That possibly is the reason why the appellant and respondent No.2 provided a long period of two years in Ext.B1 for execution of the sale deed. Respondent No.2 has no case that even after Ext.B1, he was attempting to get a better purchaser for the property. There is merit in the contention of respondent No.1 that attempt of respondent No.2 and the appellant whose wife is a partner along with her brother, respondent No.2 in the financing business was to make unlawful gain for themselves under cover of Ext.A2, the power of attorney. It is also pertinent to note that the power conferred on respondent No.2 as per Ext.A2 was not to take a loan from the appellant and create security for that, but to sell the property. AS No.184/1996 15 18. Though Ext.B1 was executed on 4.4.1991, there is no acceptable evidence on the face of conflicting statements on oath by respondent Nos.1 and 2 that information regarding Ext.B1 was given by respondent No.2 to respondent No.1 at the time or after its execution. According to respondent No.1, on 4.4.1991 she was given a notice by respondent No.2 asking her to vacate the property within 30 days and threatening police action in case of non-compliance. Learned counsel for the appellant and respondent No.2 would contend that going by Ext.B4, copy of the written statement in O.S.No.702 of 1992, respondent No.1 was aware of Ext.B1 immediately after its execution. But, I am unable to hold so. What is stated in Ext.B4 is about the agreement dated 4.4.1991 but the averments therein do not indicate that respondent No.1 had information about Ext.B1 at the time of or immediately after its execution. Respondent No.2 could have produced the copy of notice dated 4.4.1991 if he has a case that in that notice, information was conveyed to respondent No.1 about the agreement for sale. True, the original of the notice is with respondent No.1 and she did not produce it but, she was not called upon to do so. Though it is contended by respondent No.2 that photocopy of the agreement was given to respondent No.1 also, that has been denied and I find no acceptable evidence to hold that it was so done by respondent No.2. Going by the records, information regarding Ext.B1 is given by respondent No.2 to respondent No.1 for the first time as per Ext.A4, reply notice dated 14.7.1992. There, it is ofcourse stated about Ext.B1, the agreement for sale for Rs.50,000/- and about respondent No.2 receiving Rs.35,000/- as advance. But in Ext.A4 also there is no