- 1 - RFA NO.100032 of 2019 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 29TH 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.100032 OF 2019 BETWEEN: 1. MR. RAMESH S/O. SHRINIVAS SHANBAG 2. MRS. SEEMA W/O. RAMESH SHANBAG APPELLANTS NO.1 AND 2 SINCE DECEASED BY THEIR LR’s., 1(A). GANESH S/O. SRINIVAS SHANBAG AGED ABOUT 64 YEARS, OCC: BUSINESS, R/AT. PLOT NO.33, SUBASH NAGAR, BELAGAVI. 1(B). SHRI. SUBHASH S/O. SRINIVAS SHANBAG AGED ABOUT 65 YEARS, OCC: BUSINESS, R/AT. PLOT NO.33, SUBASH NAGAR, BELAGAVI. 1(C). SMT. SUDHA W/O. LATE MANJUNATH BHANDARY, AGED ABOUT 75 YEARS, OCC: HOUSEHOLD, R/AT. PLOT NO.33, SUBASH NAGAR, BELAGAVI. 1(D). SMT. PREMA W/O. LATE VISHWANATH PAI AGED ABOUT 69 YEARS, OCC: HOUSEHOLD, R/AT. PLOT NO.33, SUBASH NAGAR, BELAGAVI. R - 2 - RFA NO.100032 of 2019 1(E). SHRI. SAGAR S/O. SURESH SHANBAG AGED ABOUT 36 YEARS, OCC: BUSINESS, R/AT. PLOT NO.33, SUBASH NAGAR, BELAGAVI AND ALSO ELECTRONIC CITY, PHASE-II, BENGALURU. …APPELLANTS (BY SRI. MALLIKARJUNSWAMY B.HIREMATH, ADVOCATE) AND: JAI CONSTRUCTION A PROPRIETARY CONCERN, REPRESENTED BY ITS PROPRIETOR, MISS. N.G.DANEWALE, AGE ABOUT 52 YEARS, OCC: BUSINESS, R/O. 95, KHANAPUR ROAD, CAMP, BELAGAVI. …RESPONDENT (BY SRI. S.B.SHAIKH, ADVOCATE) THIS REGULAR FIRST APPEAL IS FILED UNDER SECTION 96 OF CPC PRAYING THAT AGAINST THE JUDGMENT AND DECREE DATED 31.10.2018 PASSED IN O.S.NO.245/2017 ON THE FILE OF THE PRINCIPAL SENIOR CIVIL JUDGE AND CHIEF JUDICIAL MAGISTRATE, BELAGAVI, DISMISSING THE SUIT FILED FOR RECOVERY OF MONEY, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL HAVING BEEN HEARD AND RESERVED ON 25.04.2025, COMING ON FOR PRONOUNCEMENT OF JUDGMENT 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 - 3 - RFA NO.100032 of 2019 CAV JUDGMENT (PER: THE HON'BLE MR.JUSTICE SACHIN SHANKAR MAGADUM) The captioned appeal is by the plaintiffs who are aggrieved by the judgment rendered by the Court below in O.S.No.245/2017. The plaintiffs suit seeking refund of the advance amount paid under an agreement to sell dated 17.02.2011 is dismissed on the ground of limitation by applying Article 24 of the Limitation Act. 2. For the sake of brevity, the parties are referred to as per their rank before the trial Court. 3. The facts leading to the case are as under: Plaintiffs filed a suit seeking refund of advance amount. Plaintiffs contended that defendant is a proprietary concern engaged in construction activities. Plaintiffs have further pleaded that they came to know about the proposed project undertaken by defendant and accordingly approached the defendant and on enquiry about the proposed construction, plaintiffs agreed to purchase two plots in the proposed building. Two plots - 4 - RFA NO.100032 of 2019 were agreed to be purchased by the plaintiffs for a sale consideration of Rs.38,40,000/-. The plaintiffs accordingly paid an advance sale consideration of Rs.35,00,000/-. Plaintiffs further contended that they paid another sum of Rs.5,00,000/- by way of cheque bearing No.456763. As per the terms of agreement, defendant had undertaken to complete the entire project within a period of two years and had agreed to execute sale deed by receiving balance sale consideration. Plaintiffs further alleged that they have in all paid Rs.41,00,000/- to defendant whereas defendant has repaid a sum of Rs.2,00,000/- by way of hand loan taken from plaintiffs by cheque bearing No.109483. Hence, filed the present suit for the remaining amount of Rs.39,00,000/- with interest. 4. Defendant, on receipt of summons, tendered appearance and filed written statement. Though defendant admitted the contents of para 2 of the plaint and admitted the transaction, defendant claimed that the project could not be accomplished within the stipulated period of two years for various government policies and non-availability - 5 - RFA NO.100032 of 2019 of sand. Defendant however claimed that when plaintiffs asked the defendant to repay the advance amount, in view of deliberations and amicable settlement, plaintiffs agreed to receive a sum of Rs.13,00,000/- towards full and final settlement and there was an agreement that plaintiffs would not insist for payment of interest and they waived of interest. Having received the entire amount, defendant alleged that a false suit is filed seeking refund of advance amount of Rs.35,00,000/- with interest. 5. Plaintiffs to substantiate their respective claims examined plaintiff No.1 as PW.1 and relied on documentary evidence vide Exs.P-1 to P-4. While defendant did not chose to enter the witness box. The trial Court on assessing the oral and documentary evidence answered both the issues in the negative and held that plaintiffs are not entitled for suit claim with interest on the ground that the claim is barred by limitation under Article 24 of the Limitation Act. 6. Learned counsel appearing on behalf of the plaintiffs, while reiterating the grounds raised in the - 6 - RFA NO.100032 of 2019 memorandum of appeal, has vehemently argued that the trial Court has grossly erred in law in applying the provisions of limitation under Article 24 of the Limitation Act, 1963, despite the fact that the defendant had not specifically raised a plea of limitation in his written statement. According to learned counsel, the trial Court's approach is not only legally unsustainable but also runs counter to the well-settled principles laid down by the Madras High Court. In support of his submissions, he placed strong reliance on the decision of the Madras High Court in K.S. Shanmugham and Another v. Samiappan and Others, wherein it was categorically held that unless limitation is specifically pleaded, the Court should not non- suit a party on that ground. Further reliance was placed on the judgment rendered in P. Muthuswamy v. K. Armugam, where similar principles were reiterated. Drawing strength from these authorities, learned counsel contended that the plaintiffs, being the purchasers under the agreement to sell, have an equitable right in the nature of a charge over the property, as clearly provided under clause (b) of sub- - 7 - RFA NO.100032 of 2019 section (6) of Section 55 of the Transfer of Property Act, 1882. He would submit that, in the present case, the suit filed by the plaintiffs seeking refund of advance sale consideration along with interest ought to have been treated as one falling under Article 62 of the Limitation Act, which governs enforcement of a charge, and not under Article 24, which pertains to suits for money payable by the defendant to the plaintiff for money received. Thus, it is contended that the trial Court committed a serious jurisdictional error in misapplying the law, resulting in miscarriage of justice. 7. Per contra, learned counsel appearing for the defendant has sought to justify the findings and conclusions recorded by the trial Court. He argued that the nature of the present suit, being essentially for recovery of money namely, the advance sale consideration squarely falls within the ambit of Article 24 of the Limitation Act. According to him, the plaintiffs have merely sought refund of money paid without specifically seeking enforcement of any charge, and therefore, the suit is governed by Article - 8 - RFA NO.100032 of 2019 24, which prescribes a period of three years from the date the money is received. Learned counsel further contended that under Section 3 of the Limitation Act, the Court is duty-bound to dismiss any suit filed beyond the prescribed period of limitation, even if limitation is not specifically pleaded as a defence. He would therefore submit that the trial Court has rightly exercised its discretion in dismissing the suit on the ground of limitation and has not committed any error warranting interference. Accordingly, learned counsel for the defendant prayed for dismissal of the present appeal, contending that no indulgence is called for in the facts and circumstances of the case. 8. Heard learned counsel appearing for plaintiffs and learned counsel appearing for defendant. We have meticulously examined the pleadings averred in the plaint. We have also given our anxious consideration to the stand taken by the defendant in the written statement. We have also examined the oral evidence let in by plaintiffs. The following point would arise for consideration: - 9 - RFA NO.100032 of 2019 "Whether the trial Court’s finding that the plaintiff’s suit is barred by limitation under Article 24 of the Limitation Act, as the cause of action is deemed to have commenced two years from the date of execution of Ex.P-1 (i.e., 17.06.2013), rendering the suit filed in 2017 time-barred is perverse and legally unsustainable?" Finding on point: 9. Before we examine the finding recorded by the trial Court while non-suiting plaintiffs suit under Article 24, we are inclined to examine the pleadings at para 8 and 9 of the written statement which would have a direct bearing on the lis. Para 8 and 9 are extracted which reads as under: “8. It is humbly submitted that the defendant could not complete the construction of the building due to the circumstances beyond her control. There was no alternative to stop the construction for want of sand. At the same time, there was also shortage of skilled labours at relevant time. In addition to this, due to unexpected demonetization introduced by the Government, the process of purchase and sale of construction material was hampered. The material was not being supplied in time. All this contributed to stoppage of work. Though, the defendant very much intended to complete the work in time and to execute - 10 - RFA NO.100032 of 2019 the final sale deed, she was restrained by the above said circumstances from constructing the building in time. There was absolutely no negligence on the part of the defendant. The defendant denies that, she has failed to perform her part of contract. 9. It is further humbly submitted that, when the plaintiffs asked the defendant to pay back the advance amount, the defendant agreed and she has paid totally Rs. 13,00,000/to the plaintiffs i.e., Rs.11,00,000 _ Rs.2,00,000/. So far as the payment of 18% interest is concerned, on the prolonged discussion with the plaintiffs, they have agreed to give up the interest. In such circumstances, the total claim of the plaintiffs of Rs.90,69,107/is totally baseless and wrong. The defendant contended that, she is liable to pay only Rs.28,00,000/. The defendant has been requesting the plaintiffs to receive Rs.28,00,000/-and to settle the accounts. Inspite of the same, they got issued legal notice. However, while replying the notice the defendant has once again called upon the plaintffs to receive Rs.28,00,000/- But the plaintffs have approached the Hon'ble Court by filing false suit, which is liable to be dismissed.” 10. Upon a meticulous examination of the pleadings, particularly paragraphs 8 and 9 of the written statement filed by the defendant, it is evident that the defendant has unequivocally admitted his inability to complete the construction of the building which was the - 11 - RFA NO.100032 of 2019 subject matter of the agreement to sell. The defendant attributes his failure primarily to external factors, namely, the acute shortage of sand and skilled labour prevailing at the relevant point of time. Further, he has candidly acknowledged that the sudden and unexpected demonetization move introduced by the Central Government severely hampered the purchase and sale of construction materials, thereby rendering it impossible for him to complete the project as initially envisaged. Importantly, in paragraph 9 of the written statement, the defendant has admitted that the plaintiffs had demanded a refund of the advance amount paid under the agreement. Though certain assertions made in the later part of paragraph 9 may not be germane to the core controversy, what stands out from a conjoint reading of paragraphs 8 and 9 is that the transaction between the plaintiffs and defendant, including the receipt of substantial advance sale consideration, is clearly admitted and established. 11. The core issue that falls for consideration in the present appeal is whether the suit instituted by the - 12 - RFA NO.100032 of 2019 plaintiffs seeking refund of the advance sale consideration is governed by Article 24 or by Article 62 of the Limitation Act, 1963. It is well-settled that Article 24 applies to suits for recovery of money where the money is received by the defendant for the plaintiff’s use, covering claims in general for refund of monies simpliciter. However, in the instant case, the plaintiffs' claim for refund arises specifically from an agreement to sell immovable property, under which a substantial advance consideration was paid, a fact unequivocally admitted by the defendant. The nature of the claim, therefore, is not one of mere money had and received, but one involving an advance paid pursuant to a contractual obligation under a written agreement to sell immovable property. Consequently, the present claim squarely falls within the ambit of Article 62 of the Limitation Act, which prescribes a twelve-year limitation period for enforcement of payment out of a charge on immovable property. In the context of the present transaction, the plaintiffs, as purchasers, acquired a statutory charge over the property under Section 55(6)(b) - 13 - RFA NO.100032 of 2019 of the Transfer of Property Act, 1882. This provision confers upon the purchaser a charge on the property for the price paid in the event the sale transaction does not culminate successfully. Thus, the plaintiffs' right to seek refund, being backed by a statutory charge, is governed by Article 62, and not by Article 24 of the Limitation Act. 12. A careful scrutiny of the written statement further reveals that there is no specific or categorical denial by the defendant of the plaintiffs' entitlement to refund of the advance amount. On the contrary, paragraph 9 of the written statement discloses that the defendant had assured the plaintiffs that the advance amount would be refunded. Although the defendant has sought to restrict his liability to a sum of ₹28,00,000/- a contention apparently supported by a stray admission extracted during the cross-examination of PW-1 , such an isolated statement cannot be treated as conclusive against the plaintiffs, particularly when the pleadings of the plaintiffs meticulously set out the actual amount paid, being ₹41,00,000/-. More significantly, the defendant chose not - 14 - RFA NO.100032 of 2019 to step into the witness box to substantiate his version or to rebut the plaintiffs’ evidence. In the absence of any rebuttal evidence and in light of the admitted transaction recorded under Ex.P-1, namely the suit agreement to sell, the plaintiffs’ claim that they paid ₹41,00,000/- as advance sale consideration stands firmly established. It is pertinent to note that under Section 55(6)(b) of the Transfer of Property Act, a purchaser who has paid any portion of the purchase money is entitled to a statutory charge upon the property for the amount paid and for interest thereon, as against the seller and all persons claiming under him. Thus, the advance amount paid by the plaintiffs is protected by a statutory charge, and upon the failure of the seller to complete the sale, the plaintiffs are entitled to enforce this right by way of a suit governed by Article 62, seeking refund of the advance along with interest. 13. In the facts and circumstances of the present case, it is apparent that the plaintiffs had two courses open to them: either to seek specific performance of the - 15 - RFA NO.100032 of 2019 agreement to sell or to sue for refund of the earnest money paid. Having chosen the latter remedy, the plaintiffs’ right to recover the advance consideration is clearly traceable to the statutory charge conferred under Section 55(6)(b) of the Transfer of Property Act. Consequently, the present suit, which seeks enforcement of such a right, is governed by Article 62 of the Limitation Act, 1963, which provides for a limitation period of twelve years from the date when the right to sue accrues. It must be emphasized that the right to refund is not based on an ordinary money transaction but emanates from a higher equitable right recognized by statute, namely the charge created in favour of the buyer upon part payment of the consideration under an agreement to sell immovable property. 14. The trial Court, unfortunately, failed to appreciate the true nature of the plaintiffs’ claim and erroneously proceeded to apply Article 24 of the Limitation Act to the facts of the present case. A closer reading of the judgment reveals that the learned trial Judge not only - 16 - RFA NO.100032 of 2019 misapplied the law but also overlooked the material admissions made by the defendant in the pleadings, thereby adopting a hyper-technical approach wholly unsuited to the facts. Even in a case where limitation is not pleaded as a defence, the Court is required to consider the equities involved, especially where the defendant has admittedly received a substantial sum and failed to fulfil his obligations. The summary dismissal of the suit on the supposed ground of bar under Article 24 has, therefore, resulted in grave miscarriage of justice. The defendant, having utilized a significant amount of money paid by the plaintiffs without completing the project, cannot be permitted to retain the benefits unjustly. In view of the clear and categorical admissions made by the defendant in paragraphs 8 and 9 of the written statement, coupled with the plaintiffs’ undisputed right under Section 55(6)(b) of the Transfer of Property Act, the application of Article 62 was the only legally tenable course. The findings recorded by the trial Court are thus perverse, palpably erroneous, and unsustainable in law. Accordingly, the judgment and - 17 - RFA NO.100032 of 2019 decree passed by the trial Court deserve to be set aside. The point for determination framed hereinabove is answered in the affirmative. Conclusion and Reasons for Reversal 15. Upon a thorough analysis of the pleadings, evidence, and the relevant statutory provisions, it is evident that the plaintiffs' claim is one seeking enforcement of a statutory charge arising under Section 55(6)(b) of the Transfer of Property Act, 1882. The defendant's unequivocal admissions in paragraphs 8 and 9 of the written statement including his acknowledgment of the receipt of substantial advance consideration and his failure to complete the construction due to factors beyond his control leave no room for doubt regarding the existence of the transaction and the plaintiffs' entitlement to a refund. 16. The trial Court, however, fell into grave error in characterizing the plaintiffs' suit as one governed by Article 24 of the Limitation Act, 1963, rather than Article - 18 - RFA NO.100032 of 2019 62. The plaintiffs' claim, far from being a simple demand for return of money had and received, was firmly anchored in an enforceable statutory charge upon the immovable property, triggered by the seller’s failure to consummate the sale. As such, Article 62, which provides for a twelve- year limitation period for suits based on enforcement of a charge, was clearly applicable. 17. The trial Court further erred in failing to appreciate the critical admissions of the defendant and in unduly relying on an isolated statement extracted during the cross-examination of PW-1, while disregarding the comprehensive pleadings and documentary evidence establishing the plaintiffs’ case. The plaintiffs had meticulously pleaded and proved payment of ₹41,00,000/- under the suit agreement (Ex.P-1), and the defendant’s failure to tender rebuttal evidence only fortified the plaintiffs’ claim. - 19 - RFA NO.100032 of 2019 18. It is trite law that a defendant who has admittedly received substantial amounts under a contract and subsequently defaulted in performing his part cannot be permitted to retain such sums unjustly. The equities of the case overwhelmingly favour the plaintiffs, and any technical approach to limitation, ignoring the statutory protections available to a purchaser, would result in manifest injustice. 19. Accordingly, the findings of the trial Court are perverse, legally unsustainable, and have resulted in a miscarriage of justice. The judgment and decree of the trial Court is, therefore, liable to be set aside. The point for determination framed hereinabove is answered in favour of the plaintiffs and against the defendant. The suit instituted by the plaintiffs is held to be within limitation and maintainable under Article 62 of the Limitation Act, 1963. - 20 - RFA NO.100032 of 2019 20. For the foregoing reasons, this Court proceeds to pass the following: ORDER (i) The appeal is allowed; (ii) The judgment and decree dated 31.10.2018 passed in O.S.No.245/2017 is hereby set aside. Consequently, suit is decreed; (iii) The defendant is hereby directed to refund an amount of Rs.37,00,000/- with 18% interest from the date of filing of suit till realization. (iv) Appeal is allowed with cost. (v) Draw decree accordingly. Sd/- (SACHIN SHANKAR MAGADUM) JUDGE Sd/- (G BASAVARAJA) JUDGE CA Ct:vh