- 1 - NC: 2025:KHC:10950 RSA No. 279 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE ASHOK S.KINAGI REGULAR SECOND APPEAL NO. 279 OF 2016 (SP) BETWEEN: S ONKARA SHASTRY S/O LATE SADASHIVA SHASTRY AGED ABOUT 62 YEARS R/AT SHIVAMOGGA ROAD, SHIKARIPURA TOWN, SHIMOGA DISTRICT-577427 …APPELLANT (BY SRI. PRITHVIRAJ SHASTRY, ADVOCATE FOR SRI. G BALAKRISHNA SHASTRY, ADVOCATE) AND: H S RAJASHEKHARA S/O H. SHIVAPPA AGED ABOUT 62 YEARS R/AT SHIVA NILAYA, 2ND CROSS, CHANNAPPA LAYOUT, SHIVAMOGGA-577201 …RESPONDENT (BY SRI. PRANESH CHANDRA, ADVOCATE) THIS RSA IS FILED UNDER SEC.100 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED 16.09.2015 PASSED IN RA NO.63/2007 ON THE FILE OF THE I ADDL. DISTRICT JUDGE, SHIVAMOGGA. PARTLY ALLOWING THE APPEAL AND MODIFYING THE JUDGMENT AND DECREE DATED 29.9.2007 PASSED IN OS NO. 188/97 ON THE FILE OF THE ADDL. CIVIL JUDGE (SR.DN) AND MACT, SHIVAMOGGA. Digitally signed by SUNITHA K S Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:10950 RSA No. 279 of 2016 THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE ASHOK S.KINAGI ORAL JUDGMENT This Regular Second Appeal is filed by the appellant challenging the judgment and decree dated 16.09.2015 passed in R.A.No.63/2007 by the learned first Additional District Jude, Shivamogga, confirming the judgment and preliminary decree dated 29.09.2007 passed in O.S.No.188/1997, on the file of the learned Additional Civil Judge (Sr.Dn.) Shivamogga. 2. For convenience, parties are referred to based on their ranking before the trial Court. The appellant was the plaintiff and the respondent was the defendant. 3. Brief facts leading rise to the filing of this appeal are as follows: The plaintiff filed a suit against the defendant for specific performance of the contract. It is the case of the plaintiff that the defendant is the absolute owner of the - 3 - NC: 2025:KHC:10950 RSA No. 279 of 2016 suit property and he had agreed to sell the suit schedule property for consideration of Rs.8,50,000/- on 12.06.1995. On the date of execution of the sale agreement, the plaintiff paid a sum of Rs.5,00,000/- to the defendant towards the advance sale consideration and it was agreed that the balance sale consideration amount shall be paid within 10 months subject to the condition that the defendant has to discharge the loan to Karnataka Housing Board i.e., mortgage loan and obtain the deposited the title deed, as the suit property is the sole subject to the mortgage loan to Karnataka Housing Board (for short, KHB). The defendant wanted some time to clear the loan he obtained from the KHB as he could not discharge the loan and sought for as extension of six months which was ended on 31.03.1996. The defendant failed to receive the balance consideration amount and execute a registered sale deed. 4. The plaintiff to show that he has been always ready and willing to perform his part of the contract issued - 4 - NC: 2025:KHC:10950 RSA No. 279 of 2016 a legal notice calling upon the defendant to receive the balance sale consideration amount and execute a registered sale deed. Instead of executing a registered sale deed, defendant demanded to enhance the sale consideration amount and tried to alienate the said property in favour of 3rd party. Hence, the plaintiff filed a suit for injunction restraining the defendant from alienating the suit schedule property. Thus, a cause of action arose for the plaintiff to file a suit for a specific performance contract. Accordingly prays to decree the suit. 5. The defendant filed a written statement contending that as per the agreement, he has not agreed to sell suit property for sale consideration of Rs.8,50,000/- and he has not received earnest money of Rs.5,00,000/- and executed a registered agreement to sale dated 12.06.1995. It is stated that he had received only Rs.3,00,000/-, as loan from the plaintiff. It is contended that the sale agreement was executed as a security for repayment of the loan amount obtained by the defendant - 5 - NC: 2025:KHC:10950 RSA No. 279 of 2016 from the plaintiff. It is contended that the defendant never agreed to sell the suit schedule property to the plaintiff at any time. It is contended that the defendant would discharge the loan of Rs.3,00,000/-. Hence, prays to dismiss the suit. 6. Trial Court, based on the pleadings of the parties, framed the following issues: ISSUES IN O.S.No.188/1997 1. Whether the plaintiff proves that on the date of agreement the defendant has received sum of Rs.5 lakhs from him? 2. Whether the defendant roves that the said agreement was executed only as security or the loan borrowed from the plaintiff? 3. Whether the plaintiff proves that he was always ready and willing to perform his part of the contract by paying the balance of the sale price? 4. Whether the plaintiff is entitled for specific performance of agreement dtd.12.6.1995? 5. Whether the plaintiff is entitled for decree for payment of Rs.5 lakhs with damages as sought for? 6. To what order or decree the parties are entitled? - 6 - NC: 2025:KHC:10950 RSA No. 279 of 2016 Additional Issue: 1. Whether the defendant proves that on the date of agreement he has received only Rs.3 lakhs from the plaintiff? 7. The plaintiff, to substantiate his case, examined himself as PW-1 and marked 27 documents as Exs.P.1 to P.27. The defendant did not enter the witness box. Hence, the evidence of the defendant was taken as nil. The trial Court, after recording the evidence, hearing on both sides and on the assessment of oral and documentary evidence answered issue Nos.1 and 3 in the affirmative, issue Nos.2 and 4 in the negative, issue No.5 partly in the affirmative, additional issue No.1 in the negative. Consequently, decreed the suit of the plaintiff in part with cost, for recovery of Rs.5,00,000/- along with the interest rate at 6% per annum from the date of the agreement of sale i.e., 12.06.1995 till realization of the said amount in due course of law and the suit for specific performance of contract was dismissed. The suit of the defendant in O.S.No.134/2002 filed for perpetual injunction against the - 7 - NC: 2025:KHC:10950 RSA No. 279 of 2016 suit in O.S.No.188/1999 was dismissed. Both the plaintiff and defendant aggrieved by the impugned judgment passed in O.S.No.134/2002 and O.S.No.188/1997 preferred appeals in R.A.Nos.63/2007 and 64/2007 on the file of the learned First Additional District Judge, Shivamogga. 8. The First Appellate Court after hearing the learned counsel for the parties framed the following points for consideration. POINTS 1. Whether the appellant proves that he is entitled for decree for specific performance of the contract? 2. Whether the appellant is entitled for production of the documents as per I.A.No.2 dated: 10.07.2009? 3. Whether the respondent is entitled for the production of the documents as per I.A. dated:24.03.2014 filed u/o 41 R.27 C.P.C.? 4. Whether the appellant is entitled for injunction as prayed for in O.S.134/2002? 5. Whether the appellant proves that judgment passed by the lower Court is erroneous and - 8 - NC: 2025:KHC:10950 RSA No. 279 of 2016 requires interference at the hands of Appellate Court? 6. What Order? 9. The First Appellate Court partly allowed the appeal filed by the plaintiff with cost throughout, dismissed the appeal filed by the defendant, and modified the judgment and decree passed by the trial Court, in O.S.No.188/1997 and the suit of the plaintiff, decreed in part with cost. It is ordered and declared that the plaintiff is entitled to recovery of Rs.5,00,000/- along with the interest @18% p.a. from the date of agreement of sale dated 12.06.1995 till the date of realization. Further the defendant was directed to pay the liquidated damages of Rs.10,00,000/- to the plaintiff within three months, from the date of the order. If the liquidated damages are not paid within three months the liquidated damages shall carry interest @24% p.a. from the date of the judgment. The plaintiff aggrieved by the judgments and decrees passed in O.S.No.188/1997 and R.A.No.63/2017, wherein both the Courts below declined to grant the relief of - 9 - NC: 2025:KHC:10950 RSA No. 279 of 2016 specific performance of contract, filed this regular second appeal. 10. Heard the arguments of the learned counsel for the plaintiff and the defendant. 11. Learned counsel Sri. Prithviraj Shastry submits that both the Courts below have held that the plaintiff has proved execution of a sale agreement by defendant in favour of the plaintiff. Further, he submits that the defendant to deprive the execution of a registered sale deed filed a suit and falsely entered into a sale agreement with one Narasimha Murthy and he has filed a suit for specific performance of contract in O.S.No.40/2000 on the file of learned First Senior Additional Senior Civil Judge, Tarikere. 12. The said suit was ended in a compromise. The said compromise decree is not binding on the plaintiff, and the said suit was filed during the pendency of the present suit. He also submits that mere inadequacy of amount is - 10 - NC: 2025:KHC:10950 RSA No. 279 of 2016 not a ground to refuse the specific performance of a contract. He submits that both the Courts below have committed an error. 13. Further he submits that the defendant had not entered the witness box and denied the case of the plaintiff and the plaintiff to establish that he has always ready and willing to perform his part of the contract, the plaintiff got issued a legal notice, calling upon the defendant to receive the balance consideration amount and execute a registered sale deed. Despite service of notice the defendant did not reply to the legal notice. He submits that non-reply to the legal notice amounts to admitting the contents of the legal notice. To buttress his arguments he relied on the judgment in the case Shankerappa Vs. Sushilabai reported in AIR 1984 Kar 112. Further he has also relied on the judgment of the Hon’ble Apex Court in the case of Ferrodous Estates (Pvt.) Limited Vs. P. Gopirathnam reported AIR 2020 SC 5041. - 11 - NC: 2025:KHC:10950 RSA No. 279 of 2016 14. Hence, on these grounds, he submits that both the Courts below in the absence of rebuttal evidence, have committed an error in declining to grant the relief of specific performance of contract. Hence, he submits that the impugned judgments passed by the Courts below are arbitrary and erroneous. Accordingly, prays to decree the suit for specific performance of contract. 15. Per contra, learned counsel for the defendant submits that the transaction between the plaintiff and defendant is not a sale transaction, but a loan transaction. He further submits that if specific performance of the contract is granted, the defendant would be put to hardship. He also submits that the defendant had entered into the sale agreement with one Narasimha Murthy prior to the execution of the alleged sale transaction with the plaintiff. He submits that the said Narasimha Murty had filed a suit in O.S.No.40/2000 for specific performance of contract. The said suit ended in a compromise. He also submits that as of the date of execution of the alleged sale - 12 - NC: 2025:KHC:10950 RSA No. 279 of 2016 agreement, there was an encumbrance on the suit schedule property, and the defendant had obtained a loan from KHB. Alleged sale agreement is un-enforceable. The trial Court, as well as the First Appellate Court were justified in passing the impugned judgments. Hence, on these grounds, he prays to dismiss the appeal. 16. This Court admitted the appeal on 15.03.2017, to consider the following substantial questions of law: 1) Whether the trial Court was right in denying the relief of specific performance on the ground, suit property was mortgaged by the defendant in favour of the Housing Board. 2) Both the Courts below having come to the conclusion that plaintiff is always ready and willing to perform his part of the contract and defendant has played all tactics with ulterior motive to defeat the rights of the plaintiff and were justified in denying the relief of specific performance? 3) To consider any other question of law which may arise for consideration while hearing the appeal? 17. Substantial questions of law No.1 and 2 are interlinked, hence, they are taken together for common discussion to avoid the repetition of facts. - 13 - NC: 2025:KHC:10950 RSA No. 279 of 2016 Re-Substantial Questions of Law No.1 and 2: 18. The plaintiff, to substantiate his case, has examined himself as PW-1. He deposed that the defendant is the absolute owner of the suit schedule property, and the defendant agreed to sell the suit schedule property for consideration of Rs.8,50,000/- and as on the date of execution of the sale agreement the plaintiff paid Rs.5,00,000/- to the defendant as an advance sale consideration amount, and it was agreed that the balance sale consideration be paid within 10 months and get the sale deed executed. The plaintiff approached the defendant and offered the balance consideration amount but the defendant went on postponing on one preface or the other. 19. To establish that the plaintiff has been always ready and willing to perform his part of the contract, the plaintiff issued a legal notice calling upon the defendant to receive the balance sale consideration amount and execute - 14 - NC: 2025:KHC:10950 RSA No. 279 of 2016 the registered sale deed. Notice was duly served. The defendant did not reply to the legal notice. 20. To prove the claim, the plaintiff has produced the document Ex.P.1 is the original sale agreement, which discloses that the defendant agreed to sell the suit schedule property in favour of the plaintiff for total consideration of Rs.8,50,000/- and the plaintiff paid Rs.5,00,000/- as on the date of the sale agreement. Exs.P.2 and P.3 are the assessment and demand register extracts regarding the suit schedule property. Ex.P.4 and P.5 are the encumbrance certificates. Ex.P.6 is the office copy of the legal notice issued by the plaintiff on 17.08.1996 to the defendant, calling upon the defendant to receive the balance consideration amount and execute a registered sale deed. Ex.P.7 is the certificate of posting which discloses that the plaintiff got issued a legal notice as per Ex.P.6, Ex.P.8 office copy of the legal notice dated 03.01.1997 which discloses that the plaintiff issued a notice to the defendant regarding the execution of sale - 15 - NC: 2025:KHC:10950 RSA No. 279 of 2016 deed. Ex.P.10 is the C.P.O. which discloses that the notice was duly served on the defendant. Ex.P.11 is the certified copy of the partition deed executed between the plaintiff and his sibling. Ex.P.12 is the certified copy of the will dated 11.08.1986, executed in favour of the plaintiff, by plaintiff’s father. Exs.P.13 and P.14 are the relinquishment deeds dated 21.04.1988 and 06.05.1988 respectively. Ex.P.15 is the death certificate of the plaintiff’s father who passed away on 07.12.1991 and Ex.P.16 is the power of attorney dated 11.08.1986 executed by plaintiff’s father in favour of the plaintiff wherein the executant had apprised Omkar Shastri to execute a sale deed and all other deeds on behalf of the executant and do all other necessary acts on behalf of him. Ex.P.17 is the death certificate of the plaintiff’s mother, who passed away on 27.02.1989. Ex.P.18 is the copy of the affidavit. Ex.P.19 is the copy of the order passed by the Special Deputy Commissioner. Ex.P.20 is the copy of the license issued for exhibition of cinematograph to the plaintiff’s father S. Sadashiva - 16 - NC: 2025:KHC:10950 RSA No. 279 of 2016 Shastri. Ex.P.21 to P.24 are the assessments and demand register extractions. Ex.P.25 to P.27 are the demand register extracts. 21. During the cross-examination, it was suggested to PW-1 that the transaction between the plaintiff and the defendant is the loan transaction and not a sale transaction and said suggestion was denied by PW-1. Except for suggesting the above said fact, nothing has been elicited to disbelieve the evidence of PW-1. In rebuttal, the defendant has not entered the witness box. 22. From the perusal of the records, it discloses that the defendant had admitted the execution of the agreement but has taken defence that the said transaction is a loan transaction and not a sale transaction. Further, the plaintiff, by producing Ex.P.1, the original sale agreement, has proved that the defendant had executed a sale agreement in favour of the plaintiff agreeing to sell the suit schedule property for consideration of Rs.8,50,000/- and accordingly, the plaintiff had paid - 17 - NC: 2025:KHC:10950 RSA No. 279 of 2016 Rs.5,00,000/- to the defendant and agreed to pay the balance consideration amount within 10 months from the date of sale agreement. 23. The plaintiff approached the defendant by issuing a legal notice at Ex.P.6 dated 17.08.1996 calling upon the defendant to receive the balance consideration amount and execute a registered sale deed. The defendant did not reply to the legal notice dated 17.08.1996. The plaintiff again issued a legal notice on 03.01.1997 as per Ex.P.8 calling upon the defendant to receive the balance consideration amount and execute a registered sale deed. The defendant did not reply to the second legal notice. The plaintiff has proved that the defendant had executed a sale agreement in favour of the plaintiff and received the advance sale consideration of Rs.5,00,000/-. The plaintiff has proved that he has been always ready and willing to perform his part of the contract. 24. The trial Court has dismissed the suit for specific performance of a contract on the ground that the - 18 - NC: 2025:KHC:10950 RSA No. 279 of 2016 defendant had entered into a sale agreement with one Narasimhamurthy, and he filed a suit in O.S.No.40/2000, and the said suit ended in compromise. Admittedly, the present suit was filed in the year 1997 and the suit filed by the Narasimhamurthy was in the year 2000 and further the defendant has filed the written statement on 20.07.1998. There is no reference to the alleged sale agreement with Narasimhamurthy in the written statement. The suit filed by Narasimhamurthy in O.S.No.40/2020 is only to deprive the execution of a sale deed in favour of the plaintiff. The defendant has played fraud on the plaintiff. Further, the trial Court has also dismissed the suit for the relief of specific performance of the contract on the ground that there is a price escalation of price of suit schedule property. 25. The trial Court as well as the First Appellate Court, failed to consider explanation 1 to Section 20 of the Specific Relief Act, wherein, the mere inadequacy of the consideration or mere fact that the contract is onerous to - 19 - NC: 2025:KHC:10950 RSA No. 279 of 2016 the defendant or improvident in its nature, shall not be deemed to constitute as unfair advantage within the meaning of clause (a) or hardship within the meaning of Clause (b). 26. The Courts below, without considering explanation No.1 to Section 20 of the Specific Relief Act have passed the impugned judgments. The impugned judgments passed by the Courts below dismissing the suit for specific performance of the contract is arbitrary and erroneous. 27. Though it is the defence of the defendant that as on the date of the execution of a sale agreement in favour of the plaintiff, there was an encumbrance on the suit property, and the said property was hypothecated in favour of the KHB. Though the plaintiff has produced the documents before the first appellate Court to show that the said loan was cleared, the first appellate Court rejected an application for production of additional evidence. The defendant did not dispute that the loan was - 20 - NC: 2025:KHC:10950 RSA No. 279 of 2016 cleared and there is no encumbrance on the suit schedule property. Merely an encumbrance was created is no ground to deny the specific performance of the contract wherein the first charge on the suit property. Further both the Courts below have committed an error in passing impugned judgments on the ground that the defendant has mortgaged the suit property in favour of KHB. 28. In view of the above discussion, the plaintiff has proved that the defendant executed a sale agreement in favour of the plaintiff agreeing to sell the suit schedule property, and the plaintiff got issued two legal notices calling upon the defendant to receive the balance sale consideration amount and execute a registered sale deed. Despite the service of notices, the defendant did not reply to the legal notice. Further, though, the defendant had filed a written statement in the instant case but did not enter the witness box. There is no rebuttal evidence. The said fact was not considered by the Courts below. - 21 - NC: 2025:KHC:10950 RSA No. 279 of 2016 29. In view of the above discussion, I answer the substantial question of law Nos.1 and 2 in the negative. 30. Accordingly, I proceed to pass the following: ORDER (i) The appeal is allowed. (ii) The impugned judgments and decrees are set aside. The suit of the plaintiff is decreed. (iii) The defendant is directed to execute a registered sale deed in favour of the plaintiff within three months, and further the plaintiff is directed to deposit the entire balance consideration amount, if, not deposited. (iv) The plaintiff, considering the escalation of price agreed to pay an additional consideration of Rs.20.00 lakhs to the defendant. (v) The plaintiff is directed to deposit the balance amount and additional consideration - 22 - NC: 2025:KHC:10950 RSA No. 279 of 2016 amount of Rs.20.00 lakhs within three months. The Office is directed to draw a decree and send back the records to the trial Court. Sd/- (ASHOK S.KINAGI) JUDGE BVK