- 1 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 8TH DAY OF APRIL 2025 PRESENT THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM AND THE HON'BLE MR. JUSTICE G BASAVARAJA REGULAR FIRST APPEAL NO.100470 OF 2022 (SP) BETWEEN: PRAKASH S/O. NARAYANAPPA DAYAPULE AGED ABOUT 52 YEARS, OCC: BUSINESS AND AGRICULTURE, R/O. OPPOSITE TO RTO OFFICE, NAVANAGAR, BAGALKOTE-587101. …APPELLANT (BY SRI. GOPALA KRISHNA KURANDAWAD, ADVOCATE) AND: 1. ANNAKKA @ ANNAPURNA W/O. LATE LAXMAN @ LAXMAPPA MADDI, AGED ABOUT 47 YEARS, OCC: AGRICULTURE, R/O. WARD NO.1, HUGAR ONI, NEAR JYOTI BANK, KATAGERI, TQ: GULEDGUDDA, DIST: BAGALKOTE-587203. 2. MAHESH S/O. LATE LAXMAN @ LAXMAPPA MADDI, AGED ABOUT 26 YEARS, OCC: AGRICULTURE, R/O. WARD NO.1, HUGAR ONI, NEAR JYOTI BANK, KATAGERI, TQ: GULEDGUDDA, DIST: BAGALKOTE-587203. …RESPONDENTS (BY SRI. S.B.HEBBALLI, ADVOCATE FOR R1; SRI. PRAKASH HOSMANE, ADVOCATE FOR R2) THIS RFA IS FILED UNDER SECTION 96 OF CPC 1908 AGAINST THE JUDGMENT AND DECREE DATED 08.07.2022 PASSED IN O.S.NO.155/2020 ON THE FILE OF THE PRINCIPAL SENIOR CIVIL JUDGE AND CHIEF JUDICIAL MAGISTRATE BAGALAKOTE, DISMISSING THE SUIT FILED FOR SPECIFIC PERFORMANCE AND IN THE INTEREST OF JUSTICE AND EQUITY. Digitally signed by MOHANKUMAR B SHELAR Location: HIGH COURT OF KARNATAKA DHARWAD BENCH Date: 2025.04.19 11:13:42 +0530 - 2 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM AND THE HON'BLE MR. JUSTICE G BASAVARAJA ORAL JUDGMENT (PER: THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM) The captioned appeal is by the unsuccessful plaintiff who is aggrieved by the judgment and decree rendered by the Court below in O.S.No.155/2020. 2. For the sake of brevity, the parties are referred to as per their rank before the trial Court. 3. Plaintiff has instituted a suit for specific performance of contract based on an agreement to sell dated 24.10.2008. Plaintiff asserts that original defendant Lakshman who is the husband of defendant No.1 and father of defendant No.2 offered to sell the suit land measuring 4 acres 23 guntas out of total extent measuring 5 acres 17 guntas for a sale consideration of Rs.28,59,375/-. Plaintiff further asserts that the original - 3 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 owner Lakshman executed an agreement on 24.10.2008 by receiving earnest money of Rs.5,50,000/-. Plaintiff further claims that on 13.05.2009, Lakshman requested to pay a further amount of Rs.1,50,000/-. Plaintiff asserts that he has paid a further sum of Rs.1,50,000/- on 13.05.2009 evidenced at Ex.P-4. Plaintiff's further case is that since the original owner Lakshman was in need of further money, on 25.07.2011, plaintiff has issued a cheque bearing No.528093 for an amount of Rs.2,00,000/-. Plaintiff further asserts that on 12.12.2012, the original owner Lakshman received a further sum of Rs.6,00,000/- and has executed a document which is marked at Ex.P-5. 4. The plaintiff further asserts that the original owner, Lakshman, passed away on 25.08.2018. However, prior to his death, the Assistant Commissioner had passed an order dated 14.08.2018, wherein it was categorically held that the sale deed executed in favour of Lakshman on 28.08.2004 was valid and did not contravene any - 4 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 provisions of the Karnataka Land Reforms Act. Relying upon this, the plaintiff has specifically pleaded that on 22.09.2020, defendant No.2 executed a sale deed and also received the entire balance sale consideration from the plaintiff. However, despite having signed the document and receiving the full consideration, defendant No.2 subsequently went back on the transaction, stating that he would secure the presence of his mother (presumably a necessary party for execution) to complete the registration process. According to the plaintiff, the defendants, despite having received the full consideration amount, failed to honor the commitment and did not complete the execution and registration of the sale deed. Consequently, a legal notice was issued to the defendants on 04.10.2020 demanding compliance. Since the defendants failed to respond to the notice, the plaintiff was constrained to institute the present suit seeking appropriate reliefs. - 5 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 5. After the institution of the suit, the defendants failed to appear before the Trial Court and were placed ex- parte. In support of his claim, the plaintiff adduced both oral and documentary evidence. The Trial Court, in the absence of any defense or rebuttal by the defendants, initially observed that the plaintiff had succeeded in proving the payment of Rs.13,00,000/- towards the consideration amount. However, upon a more detailed examination of the evidence, particularly the unregistered sale deed marked as Ex.P-6, the Trial Court expressed doubts regarding the genuineness of the transaction. The Court found discrepancies and inconsistencies in the plaintiff’s version, which cast a shadow of doubt over the legitimacy of the transaction. Consequently, the Trial Court proceeded to dismiss the suit in its entirety, despite the existence of an alternate prayer in the plaint seeking refund of the earnest money paid under the agreement. 6. The appeal was heard with the assistance of the learned counsel representing the plaintiff, as well as - 6 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 counsel appearing on behalf of defendant No.1 and defendant No.3. The Court has carefully examined the averments made in the plaint, the evidence led during the trial, and the legal submissions advanced by the respective counsels. Special emphasis was laid on the documentary evidence produced by the plaintiff, particularly Exs.P-2, P-4, and the unregistered sale deed marked as Ex.P-6. Upon a meticulous and comprehensive review of the records, the following points arise for determination by this Court: 1) Whether trial Court having recorded a finding that plaintiff has succeeded in proving the agreement vide Exs.P-2 to P-6 and having recorded a finding that payment of Rs.13,00,000/-is proved by plaintiff, erred in not ordering for refund? 2) Whether plaintiff based on oral and documentary evidence is able to substantiate before this Court that he is entitled for discretionary relief of specific performance of contract? - 7 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 3) If not, whether plaintiff is entitled for refund of the amount that is paid under the agreement and the other documents namely Exs.P-2 to P-6? Findings on Point Nos.1 to 3: 7. In order to establish that the original owner, Sri Lakshman, had offered to sell the suit schedule property and had in fact executed an agreement to sell dated 24.10.2008, the plaintiff has relied upon and produced a copy of the said agreement, which has been marked as Ex.P-2. To further support the authenticity of the agreement, the plaintiff has examined one of the attesting witnesses to the document. During the course of examination, the signatures of the witnesses have been duly identified and marked as Ex.P-2(a) and P-3(a). The plaintiff further contends that after the execution of the agreement to sell, he continued to make further payments towards the agreed sale consideration. In this regard, he asserts that, at the request of the original owner, Lakshman, an additional amount of Rs.1,50,000/- was - 8 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 paid on 13.05.2009, and in support of this, the plaintiff has produced a separate document executed by Lakshman, which is marked as Ex.P-4. This document evidences the receipt of the said additional payment by the original owner. 8. Upon a meticulous examination of Exs.P-2 and P-4, this Court is satisfied that the plaintiff has successfully demonstrated that a total of Rs.7,00,000/- was paid to the original owner, Lakshman comprising Rs.5,50,000/- as earnest money at the time of execution of the agreement to sell (Ex.P-2) and an additional Rs.1,50,000/- as evidenced by the receipt dated 13.05.2009 (Ex.P-4). The plaintiff has, however, further asserted that a subsequent payment of Rs.6,00,000/- was made on 12.12.2012, and in support of this contention, he has produced a document marked as Ex.P-5. A closer scrutiny of this document reveals that it does not have any direct connection to the original agreement to sell dated 24.10.2008. The said document (Ex.P-5) is styled as - 9 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 a receipt for having received a hand loan from the plaintiff by the original owner Lakshman. There is no reference or linkage made in this document to the earlier agreement to sell or any acknowledgment that the sum of Rs.6,00,000/- was paid in furtherance of the original transaction under Ex.P-2. Consequently, this Court is of the opinion that Ex.P-5 cannot be construed as a payment made under the terms of the agreement to sell dated 24.10.2008, and therefore, it cannot be taken into account while evaluating the total consideration paid by the plaintiff pursuant to said agreement. The nature and content of Ex.P-5 clearly indicate that it was a separate transaction unrelated to the subject agreement, and accordingly, the alleged payment under this document stands excluded from consideration in this case. 9. The plaintiff has also sought to rely on an unregistered sale deed dated 22.09.2020, which is marked as Ex.P-6, asserting that following the disposal of an appeal by the Assistant Commissioner, evidenced at - 10 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 Ex.P-16, the legal heirs of the deceased Lakshman, who are the present defendants, agreed to sell the suit schedule property to him. However, this unregistered document appears to be inconsistent with and contradicts the terms of the original agreement to sell dated 24.10.2008. Under the original agreement (Ex.P-2), the sale consideration was fixed at Rs.28,59,375/-, and it was alleged that an earnest amount of Rs.5,50,000/- had been paid. In stark contrast, Ex.P-6 states that the sale consideration is only Rs.18,80,000/-, and it records that a cheque for Rs.12,00,000/- (bearing No.001771) was issued by the plaintiff, with the remaining Rs.6,80,000/- stated to have already been paid. This discrepancy in sale consideration particularly a downward revision of nearly Rs.10,00,000/- after a span of 12 years raises serious doubts about the credibility and veracity of Ex.P-6. Given the normal trend of property values appreciating over time, a depreciation of such magnitude appears highly improbable. Therefore, rather than reinforcing the plaintiff’s case, Ex.P-6 undermines it, casting doubts on - 11 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 the plaintiff’s narrative and raising questions about the authenticity of the subsequent transaction alleged to have been entered into with the legal heirs of the original vendor. 10. It is a well-established principle of law that in a suit seeking the equitable relief of specific performance, the plaintiff must demonstrate that his conduct has been fair, honest, and above reproach throughout the transaction. In the present case, the plaintiff has failed to meet this standard. His conduct, especially the attempt to introduce inconsistent and doubtful documents such as Ex.P-5 and Ex.P-6, reflects a lack of candour and raises serious concerns about the bona fides of his claim. In light of the foregoing analysis, this Court concludes that the plaintiff is not entitled to the discretionary and equitable remedy of specific performance of the agreement dated 24.10.2008. However, it is equally evident from the record that the plaintiff has established the execution of the agreement to sell (Ex.P-2) and the subsequent receipt - 12 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 (Ex.P-4) evidencing payment of Rs.7,00,000/- to the original owner, Lakshman. 11. Although the plaintiff’s claim for specific performance cannot be entertained, justice demands that he should not be left uncompensated for the amount he has successfully proven to have paid. In view of the acknowledgment and evidence supporting the payment of Rs.7,00,000/-, this Court deems it just and proper to direct the defendants being the legal representatives of the original vendor to refund the said amount to the plaintiff. Further, taking into account the fact that this amount was paid between 2008 and 2009 and considering the devaluation of the rupee over the years, an interest rate of 8% per annum is awarded on the sum of Rs.7,00,000/-, calculated from the date of last payment till realization. Though the standard rate of interest is usually pegged at 6%, the higher rate is justified under the present circumstances. Accordingly, point Nos.1 and - 13 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 3 are answered partly in the affirmative, while point No.2 is answered in the negative. 12. CONCLUSIONS: (i) The trial court, after a detailed examination of the evidence, has categorically accepted that the plaintiff succeeded in proving execution of the agreement to sell dated 24.10.2008 (Ex.P-2) and an additional payment of Rs.1,50,000/- on 13.05.2009 (Ex.P-4), amounting to a total of Rs.7,00,000/-. Despite this undisputed finding, the trial court proceeded to dismiss the suit in its entirety, including the alternative prayer for refund of the amounts paid. This, in our considered opinion, constitutes a patent error in appreciation of law and facts. (ii) When specific performance is denied on the grounds of plaintiff’s conduct or lack of readiness and willingness or that discretionary relief of specific performance cannot be granted, courts are nonetheless required to consider the alternative relief of refund - 14 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 particularly where the plaintiff has established part performance of his obligations, including monetary payments. The trial court failed to exercise this equitable discretion in favour of refund, despite clear evidence that the plaintiff had discharged payment of part consideration under the agreement. (iii) The trial court has not provided any cogent reasoning as to why the refund of Rs.7,00,000/-, admittedly paid under the agreement to sell, should be denied. The denial of refund in the face of admitted receipt of monies by the vendor violates basic principles of justice and equity. The law does not permit unjust enrichment, and the defendants cannot be allowed to retain the amount received under a failed contract without offering restitution. (iv) It is a settled position in law that if the court finds that specific performance cannot be granted, but the plaintiff has made payments under the contract, the court is bound to order refund of such amounts, with interest. - 15 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 The trial court’s failure to apply this well-established principle necessitates interference by this Court. (v) In light of the above, the dismissal of the suit in its entirety despite the trial court's own finding in favour of the plaintiff with respect to payment results in a clear miscarriage of justice. Therefore, this Court finds it just and necessary to reverse the judgment of the trial court to the extent it denies refund and directs the defendants to refund Rs.7,00,000/- along with interest at the rate of 8% per annum from 13.05.2009 until the date of realization. 13. For the foregoing reasons, we proceed to pass the following: ORDER (i) Appeal is allowed in part; (ii) The judgment and decree dated 08.07.2022 passed in O.S.No.155/2020 on the file of the Prl. Senior Civil Judge and CJM, Bagalkote is hereby set aside; - 16 - NC: 2025:KHC-D:6272-DB RFA No. 100470 of 2022 (iii) Defendant Nos.1 and 2 are hereby directed to refund an amount of Rs.7,00,000/- with 8% interest from the date of agreement till realisation; (iv) The suit filed by the plaintiff in O.S.No.155/2020 is decreed in part with proportionate costs; (v) Plaintiff is reserved with liberty to recover the alleged payment of Rs.6,00,000/- under Ex.P-5 in accordance with law; (vi) Draw decree accordingly. Sd/- (SACHIN SHANKAR MAGADUM) JUDGE Sd/- (G BASAVARAJA) JUDGE CA/- Ct:vh List No.: 1 Sl No.: 33