IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD FRIDAY, THE NINETEENTH DAY OF NOVEMBER TWO THOUSAND AND TEN PRESENT THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR APPEAL SUIT Nos.2399 of 2001 and 448 of 2002 & CROSS-OBJECTIONS (SR).No.86461 of 2001 IN APPEAL SUIT No.448 of 2002 APPEAL SUIT No.2399 of 2001 & CROSS-OBJECTIONS (SR).No.86461 of 2001 BETWEEN M/s. Andhra Graphite (P) Ltd. …APPELLANT/CROSS-OBJECTOR AND M/s. Jobing Syndicate. …RESPONDENT APPEAL SUIT No.448 of 2002: BETWEEN M/s. Jobing Syndicate. …APPELLANT AND M/s. Andhra Graphite (P) Ltd. …RESPONDENT Counsel for the Appellant: MR. D.V. SITHARAM MURTHY ADVOCATE GENERAL Counsel for the Respondent: MR. V.S.R. ANJANEYULU The Court made the following: - COMMON JUDGMENT: A.S.No.2399 of 2001 is an appeal by the defendant against the judgment and decree in a suit O.S.No.379 of 1995 filed for specific performance on the file of the II Additional Senior Civil Judge, Visakhapatnam dated 07.03.2001. The said decree directed the appellant/defendant to execute and register a sale deed in favour of the plaintiff/respondent herein by receiving the balance sale consideration with interest at 18% from the date of suit. The respondent/plaintiff was also aggrieved by the said decree to the extent of directing payment of interest on the balance sale consideration and has filed a separate appeal being A.S.No.448 of 2002 on 23.07.2001 against the said decree. The defendant had also filed a counter claim in the suit O.S.No.379 of 1995 seeking eviction of the plaintiff and for damages and the same was dismissed by the trial Court while decreeing specific performance in favour of the plaintiff. The defendant, therefore, has filed Cross-Objections (SR).No.86461 of 2001 in A.S.No.448 of 2002 to the extent of rejection of counter claim. 2. Both the appeals and the cross-objections have been heard at length. The learned Advocate General appearing for the defendant/cross-objector had made detailed submissions in support of the cross-objections against the decree and has also made elaborate submissions against the decree for specific performance granted in the said suit O.S.No.379 of 1995. Mr. V.S.R. Anjaneyulu, learned counsel for the plaintiff has also equally and elaborately argued in support of sustaining the decree for specific performance and had also very seriously opposed the maintainability of the cross-objections as well as merits thereof. 3. The plaintiff in O.S.No.379 of 1995 - M/s. Jobing Syndicate – a registered partnership firm, is seeking to enforce an agreement of sale dated 01.08.1990. The defendant – M/s. Andhra Graphite (P) Limited, is a company, which was allotted suit plot by the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) for the purpose of establishing its graphite manufacturing unit. M/s. Jobing Syndicate is hereinafter referred to as plaintiff and M/s. Andhra Graphite (P) Limited is hereinafter referred to as defendant for the sake of convenience and clarity. BACKGROUND FACTS: 4. (a) The defendant was allotted plot No.D-12 with shed and appurtenant area in the industrial estate Visakhapatnam on lease hold basis by APIIC under an agreement dated 03.06.1961. The defendant unit, however, became sick around 1982-83 and started recurring losses and fell in arrears of hire charges to APIIC as well as liabilities towards Andhra Pradesh State Electricity Board (APSEB) etc. Later in the year 1984-86 the lease hold in favour of the defendant was converted into hire purchase but the industrial sickness of the defendant continued and around 1990, the defendant was not able to generate any income from the said unit and fell in substantial arrears to various financial institutions including APIIC resulting in APIIC threatening to cancel the allotment by taking over possession. (b) The defendant, therefore, gave an advertisement intending to give the unit on long lease basis to interested parties. The plaintiff, who was running a steel manufacturing unit in Alipuram area, which was residential area, was looking for an alternate location and after seeing the advertisement the plaintiff, being interested, inspected the unit and as per the advertisement, met P.W.2, who was the auditor of the defendant and who was looking after the proposed lease by the defendant. The plaintiff was informed that Rs.83,000/- was immediately payable to APIIC to avoid cancellation of allotment. The plaintiff being interested in taking the unit, after discussions with the defendant and his auditor, immediately advanced Rs.85,000/- by a cheque drawn in favour of the defendant on 15.06.1990 and it is alleged that the plaintiff and the defendant together encashed the cheque and later deposited Rs.83,000/- with APIIC to avoid seizure of plot and cancellation of allotment. It is alleged that the plaintiff and the defendant had agreed that a detailed lease deed will be subsequently executed to enable the plaintiff to use the said unit for manufacture of steel. PLAINT ALLEGATIONS: 5. The plaintiff alleged that around July 1990 the defendant conceded to sell the unit to the plaintiff on outright basis for which negotiations and discussions were held and it was agreed to sell the unit to the plaintiff for total consideration of Rs.9,00,000/-, which resulted in drawing of the suit agreement Ex.A13 dated 01.08.1990. Suffice it to notice that as per the plaint allegations the defendant was to obtain permission from APIIC to change the nature of business so as to enable the plaintiff to manufacture steel and the defendant was also to obtain necessary clearance from APIIC, SBI, APSEB and APGST by discharging the due amounts. The amount of Rs.9,00,000/-, which was fixed as consideration was payable as Rs.2,50,000/- on the date of agreement and out of the balance – Rs.50,000/- on or before 01.10.1990; Rs.3,00,000/- on or before 31.07.1991 and another amount of Rs.3,00,000/- on or before 31.07.1992. The plaintiff alleges that as he has already paid Rs.85,000/- under the cheque dated 15.06.1990 itself, he had paid Rs.1,65,000/- in cash and thereby the defendant acknowledged the receipt of Rs.2,50,000/- on the date of agreement, as the first installment. 6. It is further alleged that as the plaintiff was ready and willing to perform his part of the contract, he had paid further sum of Rs.50,000/- and demanded the defendant to clear the dues to various institutions but the defendant failed to clear the dues and obtain clearance from various institutions, but further demanded a sum of Rs.4,00,000/- and 10% of turnover of plaintiff’s steel manufacturing business, which was not part of the bargain agreed to under Ex.A13 and as such, on refusal of the plaintiff to comply with the said additional demand, the defendant threatened to dispossess the plaintiff. In order to ward off the said threat of dispossession, the plaintiff filed O.S.No.736 of 1993 before the Principal District Munsif, Visakhapatnam for permanent injunction against the defendant. The plaint and the written statement in the said suit are marked as Ex.B4 and Ex.B8, which will be referred to later. 7. The plaintiff, therefore, alleges that since he was always ready and willing, he gave a notice to the defendant dated 08.07.1995 – Ex.A9 calling upon the defendant to come with all the clearance certificates necessary for execution and registration of proper sale deed. The said notice, however, was replied to by the defendant under his reply dated 18.07.1995 – Ex.A10 alleging that the plaintiff himself has repudiated the said agreement and has no right to seek specific performance. Ultimately, therefore, the plaintiff filed the present suit for specific performance on 28.07.1995. 8. The evidence laid by the plaintiff shows that in between the suit agreement Ex.A13 dated 01.08.1990 and the suit notice Ex.A9 dated 08.07.1995 followed by the plaint in the present suit dated 28.07.1995, there were certain payments and exchange of notices between the parties. Ex.A3 is the cash receipt dated 25.06.1990 showing that the defendant received Rs.19,500/- towards part payment of consideration. Similarly, under Ex.A4 dated 10.07.1991 the defendant received Rs.75,039.25 ps. towards part payment and under Ex.A5 dated 04.09.1991 the defendant received Rs.10,000/- towards part payment. The plaintiff has also filed and marked Ex.A11 dated 20.09.1991 showing that he has made a special term deposit for Rs.45,000/- with State Bank of India, Industrial Estate branch, Visakhapatnam towards token deposit for intended compromise for discharge of loan amount due to the bank from the defendant. Apart from the payments and deposit above, the plaintiff also had issued notice – Ex.A6 dated 09.07.1993 alleging that the plaintiff had totally paid Rs.3,55,039/- and had incurred expenditure of Rs.2,50,000/- towards compound wall and civil work carried out in the unit. It was also pointed out that the defendant is due huge amounts towards electricity charges, loan default to SBI to the tune of about Rs.6 lakhs and APGST dues of about Rs.24,000/-, which remained unpaid by the defendant. 9. The plaintiff also stated that while the defendant was allotted only 864 sq. yards, he was mislead into believing that the defendant had 1264 sq. yards allotted to it and thereby the plaintiff asserted that keeping in view the value of the property and the liabilities, he need not pay any amount and demanded the defendant to register the property forthwith in his favour. The notice also stated that if the defendant thinks that the calculation and facts regarding the liabilities are not correct, he may treat the agreement as cancelled and refund all amounts to the plaintiff including Rs.2,50,000/- spent by the plaintiff towards repairs with interest at 18% per annum. The very same notice with very self-same contents was again issued by the plaintiff to the defendant on 03.09.1993 under Ex.B6. It is alleged that there is no reply by the defendant to this notice. It is thereafter that the plaintiff filed the injunction suit, referred to above and the evidence, further, shows that the defendant further issued Ex.A7 dated 11.09.1993 notice to the plaintiff demanding him to pay 10% of his profits as per the understanding and the same was replied to by the plaintiff’s reply notice dated 19.09.1993 denying any such obligation in terms of the suit agreement. Plaintiff’s injunction suit O.S.No.736 of 1993, is already referred to above. In the said suit, the defendant filed written statement on 07.12.1993 and also issued quit notice – Ex.A8 equivalent to Ex.B1 alleging that though possession was delivered to the plaintiff under suit agreement dated 01.08.1990 and though the plaintiff was earning substantial profits by manufacture of steel furniture at the unit, has failed to honour the commitment of payment of 10% of turnover to the defendant and on account of non-performance of the obligation by the plaintiff, the regular conveyance could not be made though the defendant was ready to perform his part of the contract. Also stated that the plaintiff having repudiated the contract, in the alternative suggested lease agreement, which was not acceptable to the defendant. The defendant, therefore, alleged that possession of the unit would generate rents of minimum of Rs.8,000/- per month and that the residual relationship only being that of landlord and tenant between the parties, the amount of Rs.3,50,000/- paid by the plaintiff on adjustment towards rent at Rs.8,000/- per month, balance amount of Rs.58,000/- towards arrears of rent till October 1994 was demanded and possession of the property was also demanded by 01.08.1995. The said notice was replied to by the plaintiff under Ex.B2 dated 09.12.1994 denying that there is any relationship of landlord and tenant and along with the said notice, copy of Ex.B6 notice was again sent requiring the defendant to comply with the same. GIST OF THE WRITTEN STATEMENT: 10. The defendant stated that the plaintiff approached P.W.2 – auditor in the last week of July 1990 offering to purchase the unit. The defendant, however, alleged that the said P.W.2 betrayed the confidence of the defendant and when the suit agreement was drafted with a clear understanding that regular reconveyance deed will be executed only after the defendant acquires title for the unit from APIIC, the defendant claims that there was also an understanding that after the defendant obtains permission from APIIC for change of business from graphite production to steel manufacture, the plaintiff would pay 10% of the total turnover and meanwhile, an agreement of sale with delivery of possession will be effected in favour of plaintiff. The defendant also alleged that he agreed for the proposal on condition that the plaintiff should clear away all the dues of the defendant, which were estimated at about Rs.4,00,000/-, which the plaintiff promised to clear. In addition to the above, sale consideration of the unit was fixed at Rs.9,00,000/-. The defendant, however, states that the plaintiff as well as P.W.2 convinced him that sale consideration of Rs.9,00,000/- only will be mentioned in the sale agreement and other stipulations would not be mentioned and believing them the defendant executed the said agreement. The defendant, however, alleged that even as per the terms of the suit agreement except payment of total amount of Rs.3,50,000/-, that too, in installments, the plaintiff failed to discharge his obligations even as per terms of the agreement, apart from defaults in complying with the understanding referred to above. It is, further, alleged that the plaintiff ultimately expressed his inability to perform the obligation under the suit agreement and demanded return of the advance amount of Rs.3,50,000/-. The plaintiff refused to pay the balance amount to the defendant and refused to vacate the premises until at once the amount, paid as advance, is returned to him. At this stage, at the instance of P.W.2, a draft lease agreement for five years was proposed by the plaintiff but the same was not accepted by the defendant and consequently, the suit agreement was frustrated on account of non-performance by the plaintiff. 11. The defendant claims that on account of the defaults by the plaintiff, he was put to substantial loss in the form of mounting interest liability for which he claims damages of nominal amount of Rs.50,000/-. The defendant also alleged that the action on the part of the plaintiff in filing injunction suit and obtaining ad interim injunction against him also shows that he was not ready and willing and on the contrary, repudiated the suit agreement. The suit agreement also was challenged on the ground that it is insufficiently stamped and is not enforceable. The claim of the defendant, as landlord, was reiterated by the defendant and it was also claimed that the present suit is barred under Order II Rule 2 of the Code of Civil Procedure, 1908 and is also otherwise time barred, keeping in view the date of performance of the suit agreement and the date of the suit. The written statement, further, contains a specific paragraph that the plaintiff has not come to the Court with clean hands and is guilty of suppression of material facts. It was also alleged that the suit agreement is not seriously meant to be acted upon and in any case, it stood repudiated by the plaintiff as early as in August 1991. It is asserted that the plaintiff was never ready to perform his obligation and is not entitled for a decree of specific performance and not even entitled for refund. A counter claim was also made for eviction of the plaintiff, as he was in possession of the unit either as a lessee or a licensee in law and is also liable for arrears of rent and damages at Rs.8,000/- per month and for future rents. 12. The plaintiff examined himself as P.W.1; the auditor of the defendant as P.W.2 and a practicing advocate was examined as P.W.3, who spoke about suit agreement Ex.A13 being typed and executed in his office. The Managing Director of the defendant is examined as D.W.1 while D.W.2 is examined to speak of discussions, which took place between the plaintiff and the defendant at the house of P.W.2 regarding the rents at Rs.8,000/- per month; D.W.3, the Assistant Executive Engineer, R & B Department, is examined for the purpose of stating the prevailing rents as per the official estimates of R & B Department. Most of the documents marked on behalf of either side are already referred in the paragraphs above. 13. On the basis of the above, the trial Court framed the following issues and additional issues: 1. Whether the plaintiff is entitled for specific performance of agreement of sale dt. 1-8-1990 as prayed by it or whether the plaintiff is entitled for alternative relief of recovery of amount of Rs.3,55,000/- with interest at 24% p.a. and damages of Rs.5,45,000/- amounting to a total of Rs.9,00,000/-? 2. Whether the defendant is entitled for counter-claim of order of eviction of the plaintiff as a tenant from the plaint schedule property and to direct him to deliver the possession of the property to the defendant? 3. Whether the defendant is entitled for counter claim award of Rs.1,30,000/- as arrears of rent upto 31-7-1995 at the rate of Rs.8,000/- per month? 4. Whether the defendant is entitled for counter claim award of future rent or damages for use and occupation against the plaintiff from 1-8-1995 till the delivery of possession of the suit schedule property? 5. Whether the defendant is entitled for the counter claim of award of Rs.50,000/- as damages? 6. To what relief? ADDITIONAL ISSUES: 1. Whether the suit agreement dt. 1-8-1990 is invalid, unenforceable and cannot be given effect to? 2. Whether this suit is barred under law in terms of the provisions contained in Or. 2 Rule 2 of CPC? 3. Whether the suit agreement is not capable of specific performance in view of the provisions contained in Sec. 17 of Specific Relief Act, 1963? 14. The trial Court held that Order II Rule 2 CPC has no application, as the injunction suit and the specific performance suit are entirely different and evidence is also different. The trial Court also held that there is no relationship of landlord and tenant between the parties and the defendant cannot evict the plaintiff based on notice under Section 106 of the Transfer of Property Act. The counter claim of the defendant with regard to arrears of rent both past and future was also held against him consequently. The trial Court also held that since Ex.A13 relates to sale of immovable property, time is not the essence of the contract. The trial Court also held that since Ex.A13 agreement does not refer to the obligation of the plaintiff with regard to 10% commission over turnover, the defendant is not entitled for the same and so far as the area of plot is concerned, as per Ex.A13 the same being 1264 sq. yards, the plaintiff’s complaint of lesser area of 864 sq. yards cannot be accepted. The trial Court also held that the plaintiff is entitled to protect his possession under Section 53-A of the Transfer of Property Act and found that the plaintiff had established his readiness and willingness and it cannot be said that the contract is repudiated by the plaintiff and as such, the suit agreement is valid and enforceable and can be given effect to and consequently, decreed the suit for specific performance. 15. Learned Advocate General appearing for the defendant has contended that the Court below committed serious error in overruling the defendant’s objection under Order II Rule 2 CPC inasmuch the plaintiff had clearly given up the relief of specific performance available to him on the date he filed the suit for permanent injunction simplicitor and as such, the subsequent suit for specific performance filed two years thereafter is clearly barred by the principles under Order II Rule 2 CPC. Even otherwise also, the present suit filed on 28.07.1995 is clearly barred by limitation under Article 54 of the Limitation Act, as the suit agreement was dated 01.08.1990 and the defaults committed by the plaintiff in paying the installments fixed under suit agreement Ex.A13 and the repudiation by the plaintiff himself under Exs.A6 and B6, does not save the suit from limitation. Learned Advocate General, therefore, states that this is a case where the plaintiff has abandoned the suit agreement and had, admittedly, failed to pay the installments and as against the consideration of Rs.9,00,000/-, he has paid only Rs.3,50,000/- and has taken the specific stand under Exs.A6 and B6 that he is not liable to pay any further amounts. Learned Advocate General, further, reiterated that this also shows non- fulfillment of Section 16(C) of the Specific Relief Act (for short ‘the Act’), as the readiness and willingness on the part of the plaintiff is on his own showing non-fulfilled. It is also pointed out that the plaint in the injunction suit marked as Ex.B4 clearly shows that the plaintiff is justifying Ex.A6 repudiation and points out that neither Ex.A6 nor Ex.B6 dated 09.07.1993 and 03.09.1993 respectively are referred to in the plaint. The plaintiff, therefore, is guilty of suppression of material facts. 16. Learned Advocate General states that the suit agreement Ex.A13 by the defendant was in the nature of distress sale by the vendor but the vendee failed to adhere to the payment schedule establishing that he is neither ready nor willing, as such, the present suit for specific performance is contrary to Exs.A6, B6 and B4 plaint in the injunction suit. It is also pointed out that the demand of the plaintiff under Exs.A6 and B6 that the defendant should not only refund the advance received but should also refund the amounts spent by the plaintiff towards civil work, is clearly not provided for under Ex.A13. It is also pointed out that even after the decree, the balance amount as required under the decree has not been deposited even as on the date of appeal and thereafter. The plaintiff’s conduct, therefore, was clearly against decreeing specific performance. 17. To the extent of rejection of counter claim, the learned Advocate General states that having repudiated the suit agreement; the plaintiff had no legal right to remain on the suit property and that too without payment of any amount towards use and occupation. The plaintiff, on the other hand, is not only churning out huge turnover by using the suit premises for manufacture of steel furniture but is also exploiting the defendant by neither paying the agreed sale consideration, even as per Ex.A13, nor paying the minimum rent towards use and occupation of the suit property by him all these years. Further, even if the relationship of landlord and tenant is not discernible from the suit agreement and correspondences, the plaintiff at least is in permissive possession under the suit agreement and, as such, in law at least answers the description of licensee and therefore, is liable to pay for the use and occupation of the premises. The quit notice – Ex.A8 being not declared as invalid, even otherwise, is in accordance with Section 106 of the Transfer of Property Act, there is no reason why the counter claim of the defendant cannot be decreed. A decision of this Court in G. ROSAIAH v. C. BALARAMI REDDY[1] is relied upon for the purpose of showing the manner in which the discretion under Section 20 of the Act is required to be exercised. The following decisions are also referred to for the purpose of showing that the plaintiff is not ready and willing, as required to be established under Section 16 of the Act. P.G. SINHA (PANCHU GOPAL SINHA) v. COMMODORE K.C. CHATTERJEE AND OTHERS[2]; RAM AWADH (DEAD) BY LRS. & ORS. v. ACHHAIBAR DUBEY & ANR[3]; VOLETI RANGAIAH v. ADAPA SATYANARAYANA AND OTHERS[4]; SRI P. PURUSHOTHAM REDDY AND ANR. v. PRATAP STEELS LIMITED[5] and POLEPALLE SUBRAMANYAM CHETTY v. GUNDAMREDDY PEDDAKKA[6] He, therefore, submits that there is no equity in favour of the plaintiff and on the contrary, he is liable for damages. 18. Mr. V.S.R. Anjaneyulu, learned counsel appearing for the plaintiff, on the other hand, submitted that Ex.A6 notice by the plaintiff cannot be treated as repudiation, as the said notice was conditional requiring the defendant to verify the accounts. He, further, submits that there was no reply to this notice by the defendant. Ex.B6 also is similar to Ex.A6 for which also there is no reply. Further, in the injunction suit filed on 14.07.1993 vide plaint