India Financial Assn., Seventh Day ... vs M.A. Unneerikutty & Anr

Background facts in a nutshell are as follows :

This was followed by another agreement dated 21.5.1985, executed by defendant No.2, in his capacity as the Power of Attorney Holder of the defendant No.1, and the plaintiff. In that agreement, after reciting the title of the defendant No.1- Company represented by its Power of Attorney, it was stated that it had been decided to sell the property to the plaintiff for a consideration of Rupees Eight Lakhs and the plaintiff had agreed to purchase the same. The document also recites that on that day, the defendant No.1 acting through its Power of Attorney, had received a sum of Rupees Three Lakhs as advance towards the sale price. The document was to be registered on or before 30.9.1985. The Company was to hand over all the title deeds relating to the property, including the encumbrance certificate, within one month before registration of the sale deed. All expenses for registration had to be met by the plaintiff and if the Company failed to complete the registration of the sale deed within the agreed period, the plaintiff had the power to take the necessary legal steps for getting the sale deed registered and in that event, the Company would be liable for the expenses and loss incurred in that behalf. The sum of Rupees Three Lakhs paid as advance was liable to be recovered as charge on the property. If the plaintiff fails to pay the balance consideration of Rupees Five Lakhs to the Company within the agreed period, the plaintiff was liable to the Company for all the losses incurred and the company had the full power to recover all the losses from the plaintiff. As noticed supra, the Power of Attorney signed this agreement on behalf of the defendant No.1 company and the witnesses to this agreement were also the same two witnesses who had signed as witnesses in the receipt. On the same day, another agreement was also executed by the parties. This agreement indicated that the company would sell and the plaintiff would purchase the property for a price of Rupees Five Lakhs or the price to be adjusted as per the approved survey of the property. The sale was subject to clear title and free from all encumbrances. The agreement recites that the purchaser, the plaintiff, had paid a sum of Rs.10,000/- by cash and a sum of Rs.40,000/- by way of cheque dated 31.5.1985 as advance, the receipt of which the Company and the Power of Attorney acknowledged. The balance sale price was to be paid on or before 30.9.1985. The agreement stated that time was of the essence of the contract. Clause 5 of this agreement stated that the Company and its Power of Attorney were to demolish the existing buildings in the schedule property, salvage the same and deliver possession of the land only to the plaintiff at the time of registration of the sale deed. The company was to obtain the Clearance Certificate in terms of Section 230A of the Income Tax Act, 1961. The cost of registration was to be borne by the plaintiff and in the event of default on the part of the company to sell the schedule property after complying with the conditions, the company was liable to return the advance of Rs.50,000/- as liquidated damages to the plaintiff. In the event of default on the part of the plaintiff to buy the schedule property as per the conditions set out, the plaintiff was to forfeit the advance of Rs.50,000/- to the company. Thereafter, the company was free to deal with the property as it pleased. It was also provided that either party was entitled to enforce specific performance of the contract. It is seen that on the same day, there is a letter said to have been signed by defendant No.2. In that letter, it was stated, after referring to Clause 5 of the other agreement that the Power of Attorney, defendant No. 2 agrees to demolish only the church building and the school building and retain building No.6/64A. There is no dispute that pursuant to the agreement for sale entered into with the plaintiff, the prior documents of title of the Company were handed over to the plaintiff.

In the plaint, after setting out details of the agreement between the parties, payment and receipt of Rs.10,000/- as advance, it was stated that on 21.5.1985 a formal agreement for sale was entered into showing the consideration as Rupees Eight Lakhs including the sum of Rs.3,10,000/- already paid towards the sale price. The plaint further stated that the total price of Rupees Eight Lakhs was for 30 cents of property and all the improvements thereon, including a Church building, a school building and another building. It was stated that the church and the school were being shifted by the defendant No.1 from those buildings to some other premises. The plaint further proceeded to state that for reasons best known to them, the defendants wanted modification of the deed by re- fixing the sale consideration to Rupees Five Lakhs and giving liberty to the defendants to pull down and remove the buildings existing in the property, so that the material could be used to build, at another site proposed to be purchased by the defendant No.1 Company. This agreement was also entered into on the same day and this was the latter agreement and the second agreement. It was asserted that the total consideration paid by the plaintiff to the first defendant as advance came to Rs.3,50,000/-. If the defendants were to be permitted to remove the buildings and take away the materials, the balance amount payable by the plaintiff to the first defendant company would be Rs.1,50,000/-. If on the other hand, the defendants did not want to remove the school building and the church building and would have them retained in the property, the plaintiff was ready and willing to pay a further sum of Rs.4,50,000/- to make the total consideration of Rupees Eight Lakhs for sale of the entire property including all the improvements. It was pleaded that while drafting the second agreement, it was mistakenly stated in Clause 5 that the vendor shall demolish the existing buildings in the schedule property, salvage the same and deliver possession of the land to the vendee. According to the plaint, if this is understood to imply that the land only had been agreed to be sold by the defendants to the plaintiff, that was not correct and to clarify the position arising out of the unclear clause, defendant No.2 wrote a letter to the plaintiff on the same day. According to the plaint, that letter was intended to make it clear that building No. 6/64A was included in the sale and that the church building and the school building were to be demolished and removed by the defendants. According to the plaintiff since he found that defendant No.2 and the other representatives of defendant No.1, namely Sarathchandra and P.V. George who were witnesses to the agreement, were highly educated respectable persons, he did not think it necessary to have a formal agreement drawn up. The plaintiff had no reason to believe that the defendants would go back on their promise. The plaintiff came to know that the defendants have the intention to retract from the agreement. It was in this context that he filed the suit O.S. 102 of 1985 seeking to restrain the defendants from alienating the property. The plaintiff was ready and willing to pay the balance amount due for execution of the sale deed. The plaintiff was always ready and willing to perform his part of the contract. In case the defendants do not agree to demolish and remove the church building and the school building, the plaintiff was ready and willing to pay the further sum of Rupees three lakhs to make the total consideration of Rupees Eight Lakhs for the entire property including all the improvements. Thus, the plaintiff was entitled to a specific performance of the agreement for sale. He valued the suit at Rupees Five Lakhs under Section 42 of the Kerala Court Fees and Suits Valuation Act (in short the 'Valuation Act') being the consideration for the sale.

Learned counsel for the appellant questioned correctness of the judgment rendered by the Division Bench on the ground that the agreements were pre-planned and executed simultaneously as one integrated inseverable transaction. Stamp papers were purchased on the same day. The defendant No. 2 though an employee of the appellant No.1 Institution was a party to the illegal transaction. Obvious intention was to declare only the reduced amount of Rs.5 lakhs as the apparent sale price and to pay Rs.3 lakhs as uncounted money. In the meantime to have hold on each other another agreement was prepared declaring the actual price of Rs.8 lakhs. It was further urged that Section 23 read with Section 24 of the Contract Act rendered the agreements void. The High Court should have noted that the agreements were immoral or opposed to public policy. This is the essence of Section 23 of the Contract Act. Similarly, Section 24 postulates that the agreement would be void if the considerations and the object are unlawful in part. Closing down a well-running school managed by dedicated missionaries and closing a functional church would cause comparatively more hardships as against the specific performance of a tainted transaction. Same cannot be enforced in a suit for specific performance of contract.

"16. Personal bars to relief: