- 1 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 5TH DAY OF MARCH, 2025 PRESENT THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM AND THE HON'BLE MR. JUSTICE G BASAVARAJA REGULAR FIRST APPEAL NO. 100408 OF 2020 (SP) BETWEEN: SRI. M. IBRAHIM S/O. LATE M. LALSAB AGE: 62 YEARS, OCC: BUSINESS AND AGRICULTURE, R/O: HUSSAIN NAGAR, ANANTHAPUR ROAD, BALLARI-587301. …APPELLANT (BY SMT. PALLAVI S.PACHHAPURE, ADVOCATE) AND: 1. SRI. R. ESHWAR REDDY S/O. LATE RAMAREDDY OCC: BUSINESS AND AGRICULTURE, R/O. FLAT NO.404, V-2, VASUDHA, 9TH A MAIN, SRINIVAS NAGAR, B.S.K., 1ST STAGE, BENGALURU-560001. 2. THE ASSISTANT EXECUTIVE ENGINEER KARNATAKA HOUSING BOARD, 1ST CROSS, S.N.PET, BALLARI-587301. …RESPONDENTS (BY SRI. GURUKUMAR V.A. AND SRI. DEEPAK S.KULKARNI, ADVOCATEs FOR R1; SMT. SHARMILA M.PATIL, ADVOCATE FOR R2) THIS REGULAR FIRST APPEAL IS FILED UNDER SEC. 96 OF CPC., AGAINST THE JUDGMENT AND DECREE DATED 15.07.2020 PASSED IN O.S.NO.304/2016 ON THE FILE OF THE PRINCIPAL SENIOR CIVIL JUDGE AND CHIEF JUDICIAL MAGISTRATE, BALLARI, DECREEING THE SUIT FILED FOR SPECIFIC PERFORMANCE OF CONTRACT. Digitally signed by MOHANKUMAR B SHELAR Location: HIGH COURT OF KARNATAKA DHARWAD BENCH Date: 2025.03.21 15:27:19 +0530 - 2 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING: 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 defendant No.1 assailing the judgment and decree rendered in O.S.No.304/2016 wherein the trial Court has decreed the suit filed in O.S.No.304/2016 thereby granting the decree for specific performance of the contract. Consequently, defendant No.1 is called upon to executed registered sale deed by receiving balance sale consideration of Rs.2,00,000/- after securing possession from defendant No.2. The said judgment is under challenge. 2. For the sake of convenience the parties are referred to as per their rank before the trial Court. 3. Plaintiff based on agreement/ memorandum of understanding dated 3.9.2014 filed a suit for specific performance of contract in O.S.No.304/2016. The case of - 3 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 the plaintiff is that he is an agriculturist and businessman residing at Bengaluru. Defendant No.1, who is owner of Survey No.1021B measuring 7.74 acres and Survey No.1021A measuring 6.05 acres, both situated at Ballari village, had availed a loan from Canara Bank, Contonment Branch, Ballari, and in order to discharge the said loan amount, defendant No.1 under the compelling circumstances had to sell the lands for joint development in co-ordination with defendant No.2/Karnataka Housing Board. Therefore, plaintiff claims that defendant No.1 expressed the desire to sell a part of land measuring 3.00 acres and alternatively developed area of 13,500 sq. ft. that would be formed by defendant No.2. Plaintiff asserts that he readily accepted the offer and after negotiation an amount of Rs.42 lakhs was fixed and towards part payment, plaintiff asserts that he paid Rs.40 lakhs on 2.9.2014 by issuing three post dated cheques for a sum of Rs.20 Lakhs each drawn on Vijaya Bank, Banashankari Branch, by RTGS drawn at SBI, Patel Nagar Branch, Ballari. These cheques were drawn in the name of - 4 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 defendant No.1 and the said amount is credited to the account of defendant No.1. Plaintiff asserts that defendant No.1 executed an agreement of sale without possession in his favour and agreed to complete the sale transaction after accomplishment of project by defendant No.2, who had entered into development agreement with defendant No.1. Plaintiff while instituting the suit has claimed that despite legal notice dated 12.9.2016 and 25.10.2016 issued through advocate calling upon defendant No.1 to execute sale deed in respect of developed land measuring 13,500 sq. ft. and deliver the developed property in his favour, defendant No.1 failed to comply his part of contract and therefore, the present suit is filed by specifically pleading that plaintiff is ever ready and willing to perform his part of the contract. 4. Defendant No.1, on receipt of summons, tendered appearance and filed written statement stoutly denying the entire averments made in the plaint. Defendant No.1, on the contrary, though admitted the - 5 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 execution of Ex.P1, agreement/memorandum of understanding (MOU), however, claimed that defendant No.1 had never expressed his intention of selling the property. On the contrary, defendant No.1 claimed that this document was executed only by way of security while securing loan from the plaintiff. Though defendant No.1 acknowledged the receipt of amount paid by the plaintiff, defendant No.1 contended that the transaction is clearly an out and out loan transaction and therefore, plaintiff is not entitled for the relief sought in the plaint. 5. Defendant No.2/Karnataka Housing Board also filed written statement and had claimed that it is not aware of the transaction entered into between plaintiff and defendant No.1. 6. Plaintiff and defendant No.1 to substantiate their respective claims led in oral and documentary evidence. Trial Court having framed issues and after conclusion of trial, answered issue Nos.1 to 4 in the affirmative. While answering Issue No.1 in the - 6 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 affirmative, the trial Court held that the suit sale agreement stands proved. While answering Issue No.5 in the negative, the trial Court while assessing the evidence on record, more particularly, Ex.P1 and other supporting documents held that defendant No.1 has failed to substantiate that the suit agreement was executed as a security document. Consequently, suit is decreed thereby granting the relief of specific performance of contract. 7. Heard the learned counsel appearing for defendant No.1, learned counsel appearing for plaintiff and the learned Standing counsel appearing for defendant No.2. We have given our anxious consideration to the oral and documentary evidence. 8. The following points would arise for consideration: (i) Whether the trial Court was justified in exercising judicial discretion in favour of the plaintiff and consequently granting the larger relief of specific performance of contract? - 7 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 (ii) Whether the finding of the trial Court that defendant No.1 has failed to substantiate that the suit agreement was executed as a security document is perverse? (iii) Whether the judgment rendered by the trial Court needs modification and the decree needs to be granted only to an extent of 13,500 sq. ft. of developed area as contemplated at Para 7 of the memorandum of understanding vide Ex.P1? FINDINGS ON POINT Nos.1 and 2: 9. On meticulous examination of the oral and documentary evidence, we would find that defendant No.1 has admitted the execution of the agreement/memorandum of understanding dated 3.9.2014. Having admitted the execution, defendant No.1 has contended that he never intended to sell the suit schedule property and this document was executed only by way of collateral security. Therefore, the stand taken by defendant No.1 runs contrary to para 7 of the agreement/Memorandum of understanding 3.9.2014 - 8 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 marked at Ex.P1. Para 7 would be relevant, the same is extracted, which reads as under: "7. The first party herein has specifically agreed to deliver 13500 Sq.Ft of land which he may get from the Karnataka Housing Board after the development, since he has agreed to give his land to the said Corporation for the development purpose. After his share, out of the same, he has agreed to part 13500 Sq.ft of land after fully developed in favour of the second party herein i.e., purchaser herein." 10. Though defendant No.1 has admitted this document, however, in the written statement, defendant No.1 has tried to place reliance on one more document which is alleged to have been executed on the same date i.e. 3.9.2014, which is marked at Ex.D1. This document is marked by confronting to P.W.1. We have examined the contents of Ex.D1, which is a very short document. Therefore, we deem it fit to cull out Ex.D1, which reads as under: "M¦àUÉ ¥ÀvÀæ ¢£ÁAPÀ: 03.09.2014 gÀAzÀÄ. §gɹPÉÆAqÀªÀgÀÄ: Dgï.F±ÀégÀgÉrØ vÀAzÉ ¢ªÀAUÀvÀ gÁªÀÄgÉrØ. - 9 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 «¼Á¸À : ¥sÁèöåmï £ÀA.404, V-2, ªÀ¸ÀÄzsÀ, 9£Éà "A" ªÉÄãï, ²æäªÁ¸À £ÀUÀgÀ, §£À±ÀAPÀj, 1£Éà ºÀAvÀ, ¨ÉAUÀ¼ÀÆgÀÄ-560 050. §gÉzÀÄPÉÆlÖªÀgÀÄ: JA.E¨Áæ»A vÀAzÉ JA.¯Á¯ï ¸Á¨ï. «¼Á¸À: ºÀĸÉÃ£ï £ÀUÀgÀ, ¥ÀmÉÃ¯ï £ÀUÀgÀ, §¼Áîj. £Á£ÀÄ ¤ªÀÄUÉ gÀÆ.40,00,000/-£À®ªÀvÀÄÛ ®PÀë gÀÆ¥Á¬ÄUÀ½UÉ ªÀiÁgÁl ªÀiÁrzÀ D¹ÛAiÀÄ£ÀÄß EAzÀÄ §¼Áîj G¥À-£ÉÆÃAzÀuÁ¢üPÁjUÀ¼À PÀbÉÃjAiÀÄ°è §ÄPï £ÀA.1 ¹.r. £ÀA. BLYD300, jf¸ÀÖgï £ÀA.6771/2014-15gÀ ¥ÀæPÁgÀ «PÀæAiÀÄ CVæ«ÄAmï jf¸ÀÖgï ªÀiÁr¹PÉÆnÖgÀÄvÉÛãÉ. DzÀgÉ ¸ÀzÀj £ÉÆÃAzÀt ªÀiÁr¹PÉÆlÖ «QæAiÀÄ CVæªÉÄAn£À°è gÀÆ.42,00,000/- £À®ªÀvÉÛgÀqÀÄ ®PÀë gÀÆ¥Á¬ÄUÀ½UÉ ªÀiÁgÁl ªÀiÁr gÀÆ.40,00,000/-£À®ªÀvÀÄÛ ®PÀë gÀÆ¥Á¬ÄUÀ¼ÀÄ £À£ÀUÉ ªÀÄÄnÖgÀÄvÀÛªÉ JAzÀÄ vÉÆÃj¹gÀÄvÉÛãÉ. ¸ÀzÀj «PÀæAiÀÄ CUÉæªÉÄAn£À D¹ìAiÀÄ£ÀÄß PÀæAiÀÄ jf¸ÀÖgï ªÀiÁr¹PÉÆqÀĪÁUÀ ¤«ÄäAzÀ gÀÆ.2,00,000/- JgÀqÀÄ ®PÀë gÀÆ¥Á¬ÄUÀ¼ÀÄ ¤«ÄäAzÀ £Á£ÀÄ ¥ÀqÉzÀÄ PÀæAiÀÄ jf¸ÀÖgï ªÀiÁr¹PÉÆqÀÄvÉÛÃ£É JAzÀÄ ¸ÀºÀ CVæªÉÄAl£À°è vÉÆÃj¹gÀÄvÀÛzÉ. £Á£ÀÄ PÀæAiÀÄ jf¸ÀÖgï ªÀiÁr¹PÉÆqÀĪÁUÀ ZÉPï gÀÆ¥ÀzÀ°è CxÀªÁ r.r gÀÆ¥ÀzÀ°è G½zÀ PÀæAiÀÄzsÀ£À ªÉÆvÀÛ gÀÆ. 2,00,000/- JgÀqÀÄ ®PÀë gÀÆ¥Á¬ÄUÀ¼ÀÄ vÉUÉzÀÄPÉÆAqÀÄ jf¸ÀÖgï ªÀiÁr¹PÉÆlÖgÉ ¸ÀzÀj ªÉÆvÀÛªÀ£ÀÄß ¤ªÀÄUÉ £Á£ÀÄ ªÁ¥Á¸ÀÄ PÉÆqÀ®Ä ¨ÁzsÀå£ÁVgÀÄvÉÛãÉ. »ÃUÉAzÀÄ £À£Àß RÄzÀÄÝ gÁf¬ÄAzÀ M¦à, §gÉzÀÄPÉÆlÖ M¦àUÉ ¥ÀvÀæ ¸À». ¸ÁQëUÀ¼ÀÄ: 1. 2. CA±ÀvÀAiÀiÁgÀPÀgÀÄ." 11. On closer examination of the recitals in Ex.D1, we are of the view that this document will not come to the aid of defendant No.1. Though defendant No.1 has asserted that this document is executed by plaintiff, on closer examination of the recitals, it can be easily gathered - 10 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 that this document is also executed by defendant No.1. Under the document, defendant No.1 acknowledged that against receipt of Rs.2,00,000/-, he would complete the transaction. However the last two lines, run contrary to the later part of the document. Last two lines, gives an impression that in the event the sale transaction is concluded, he would return back the entire sale consideration. Therefore, we are of the view that if the document is read in entirety, the only inference that could be drawn from this document is that defendant No.1 has not only acknowledged the agreement marked at Ex.P1 but he has further acknowledged that he is willing to complete the transaction by receiving Rs.2,00,000/-. 12. Now, the evidence of attesting witness would also play a crucial role. His examination-in-chief is very brief and therefore, this Court would deem it fit to cull out the examination-in-chief of P.W.2. The same is extracted, which reads as under: "Deposition of P.W.-2 Duly sworn on 03.10.2018 - 11 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 Name of the Witness : Sri. K.S.Hariprasad Name of the father : Late Sri.K.Shanthappa Age : 48 years Occupation : Business Residence : Cowl Bazaar Ballari Examination in chief by counsel for plaintiff Sri. DMR for Sri BSS I know both the parties to the proceedings, I know the facts of the case personally. Today, I have filed my affidavit in lieu my examination in chief. The contents therein are true and correct to the best of my knowledge, belief and information, I swear accordingly. The document now shown to me at Ex.P1 is the suit sale agreement for which I am the one of the attesting witnesses. My signature is already exhibited as Ex.P.1(c). The signature of purchaser/plaintiff is already exhibited as Ex.P.1(a). The other witness by name Sri Ahemed S/O Ibrahim he also put his signature which is already exhibited as Ex.P1(d). The scribe is Sri. A.Venkatesha. His signature is already exhibited as Ex.P.1(e). I identify all the above signatures. Cross examination by counsel for 1st defendant Sri.RVVC. Deferred on request (Computerised to my dictation in the open court) sd/- ROIAC sd/- PSCJ & CJM, Ballari " 13. Upon a meticulous examination of the cross- examination conducted by the learned counsel representing Defendant No.1, this Court finds it striking - 12 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 that not a single suggestion was made to the witness indicating that the parties never intended to execute a sale transaction. It is particularly noteworthy that no attempt was made to challenge the plaintiff’s claim that Exhibit P1 was an outright sale agreement, rather than a document executed merely as collateral security for a loan transaction. Despite having ample opportunity to confront the witness, the defense failed to put forth even a single question or suggestion to that effect. Furthermore, P.W.2, who is a crucial witness to this transaction, was not confronted with any suggestion that the agreement in question was anything other than a sale transaction. In contrast, P.W.2, during his examination-in-chief, unequivocally testified that Exhibit P1 was indeed a sale agreement. The absence of any contradiction or challenge to this assertion during cross-examination strengthens the plaintiff’s case. Based on this, the Court is of the firm view that the plaintiff has successfully demonstrated that Defendant No.1 had, in fact, offered to sell the suit property, measuring 13,500 square feet, and had accepted - 13 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 a substantial sum of ₹40,00,000/- as consideration for the sale. 14. Upon a thorough perusal of the records, the Court must now determine whether the discretionary relief of specific performance ought to be denied in the given circumstances. It is an established principle that specific performance is an equitable remedy, and in deciding whether to grant such relief, the Court must take into consideration the conduct of the parties and the equities involved. In the present case, the evidence on record clearly establishes that a significant sum of ₹40,00,000/- was paid to Defendant No.1 through a bank transaction as far back as the year 2014. This payment, made in good faith, demonstrates the seriousness of the plaintiff’s intent and commitment to the transaction. Given these circumstances, the balance of equity tilts heavily in favor of the plaintiff. Permitting Defendant No.1 to resile from the terms of the agreement at this stage would not only amount to an unjust enrichment of the defendant but - 14 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 would also cause irreparable harm and financial prejudice to the plaintiff, who has already invested a substantial amount in reliance on the contract. The trial Court, in its wisdom, exercised its discretion judiciously, having duly considered the sovereign principles of equity, fairness, and good conscience. This Court, therefore, finds no reason to interfere with the findings of the trial Court in this regard. 15. The conduct of Defendant No.1 throughout these proceedings is another critical aspect that requires careful scrutiny. The records reveal that Defendant No.1 did not respond to the legal notice issued by the plaintiff. A party who genuinely disputes the nature of a transaction would typically raise an objection at the earliest possible opportunity. However, in this case, Defendant No.1 failed to offer any explanation or rebuttal when the plaintiff initially asserted his claim through legal notice. The defense that the transaction was a mere loan arrangement, rather than an outright sale, was raised only after the suit was filed and summons were served. This - 15 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 delayed response raises serious doubts about the bona fides of the defense, leading this Court to conclude that the plea of a loan transaction is nothing more than an afterthought. Additionally, Defendant No.1 has not expressed any willingness to refund the amount received— not in the written statement nor at any stage during the trial proceedings. Such conduct further weakens the defendant’s position and lends credibility to the plaintiff’s claim. Having thoroughly analyzed the oral and documentary evidence on record, this Court finds no reason to interfere with the well-reasoned findings of the trial Court on Issue Nos.1 to 4. Accordingly, Point No.1 is answered in the affirmative, affirming the validity of the sale transaction, while Point No.2 is answered in the negative, rejecting the defendant’s claim that the agreement was a mere loan transaction. FINDING ON POINT NO.3: 16. The trial Court, while decreeing the suit, ought to have carefully examined the precise extent of the - 16 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 property that was agreed to be sold under the agreement/Memorandum of Understanding (MOU) marked as Ex.P1. A plain reading of Para 7 of Ex.P1, which has been extracted earlier, makes it abundantly clear that defendant No.1 had agreed to sell only 13,500 square feet of developed area to the plaintiff. This provision in Ex.P1 explicitly defines the extent of the property subject to the agreement, leaving no ambiguity regarding the area covered under the contract. Furthermore, Para 7 of Ex.P1 also provides a clear indication that both parties were well aware of the fact that the land in question was to be developed by defendant No.2. Given this context, even if the plaintiff is found to be entitled to the relief of specific performance, such entitlement must be strictly confined to the agreed-upon extent of 13,500 square feet of developed area. However, upon careful scrutiny of the decree granted by the trial Court, it is evident that the decree extends beyond the scope of Ex.P1 and includes an area larger - 17 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 than what was agreed upon between the parties. This is contrary to the express terms of the agreement, as reflected in Ex.P1. Therefore, the decree requires modification to align with the contractual terms and the specific extent of property agreed upon by the parties. Accordingly, the decree granted by the trial Court is modified to restrict the relief of specific performance to only 13,500 square feet of developed area, as originally agreed upon in Ex.P1. Any portion of the decree granting relief beyond this specified extent stands modified and corrected in conformity with the terms of the agreement. In light of the foregoing analysis, point No.3 is answered in the affirmative. 17. For the foregoing reasons, we proceed to pass the following: ORDER (i) Appeal is allowed in part. (ii) The suit of the plaintiff is decreed. Defendant No.1 is hereby directed to execute sale deed to - 18 - NC: 2025:KHC-D:4302-DB RFA No. 100408 of 2020 an extent of 13500 sq. ft. of developed land out of 40% of the developed land that would be handed over by defendant No.2 to defendant no.1. (iii) Plaintiff shall deposit the balance sale consideration of Rs.2,00,000/- within a period of six weeks from the date of receipt of certified copy of this order. Sd/- (SACHIN SHANKAR MAGADUM) JUDGE Sd/- (G BASAVARAJA) JUDGE ALB Ct:vh List No.: 1 Sl No.: 28