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2025 DAILYLAW 8648 (MAD)

Robert Correya v. P. Kanagaraj

2025-10-10

K Govindarajan Thilakavadi

body2025
JUDGMENT : K. GOVINDARAJAN THILAKAVADI, J. 1. In this Second Appeal, challenge is made to the judgment and decree dated 20.03.2019 passed in A.S. No.111 of 2013, on the file of the IV Additional District Judge, Coimbatore, reversing the Judgment and decree dated 02.09.2013 passed in O.S.No.367 of 2011, on the file of the I Additional Sub-Court, Coimbatore. 2. The case of the plaintiff is that the defendants are the absolute owners of the suit property. The first defendant on behalf of the defendants 2 and 3 agreed to sell the suit property to the plaintiff and received a sum of Rs.5,00,000/- as advance on 20.01.2011 and executed a receipt on the same day in favour of the plaintiff. Since there was some discrepancies in the title documents with regard to the extent of the properties agreed to sell, the plaintiff requested the 1 st defendant to bring out rectification deeds. But for the reasons best known to the 1 st defendant, he brought out the rectification deed only in respect of one sale deed dated 01.12.2006 and failed to bring out rectification deeds with regard to other title deeds. The plaintiff was always ready and willing to purchase the suit property provided all the relevant documents were made available by the defendants with clear title and extent. Since, the 1 st defendant gave evasive reply in bringing out the rectification deeds as requested by the plaintiff, the plaintiff issued a legal notice on 10.03.2011 for refund of entire advance money of Rs.5,00,000/- received by the 1 st defendant from the plaintiff with 24% interest from the date of receipt of the said notice till the date of payment. On 17.03.2011, the 1 st defendant issued a reply notice admitting the receipt of the advance amount of Rs.5,00,000/- paid by the plaintiff but refused to refund the said amount by stating that the plaintiff was in default. Hence, the suit. 3. The claim of the plaintiff was resisted by the 1 st defendant by stating that he was always ready and willing to perform his part of the contract. The plaintiff is only a name lender and son in law of one Gerard S. Nayagam, who is the intending purchaser. In spite of several demands made by the 1 st defendant, the intending purchaser, without any reasonable cause, postponed the execution of the sale deed and left the Country. The plaintiff is only a name lender and son in law of one Gerard S. Nayagam, who is the intending purchaser. In spite of several demands made by the 1 st defendant, the intending purchaser, without any reasonable cause, postponed the execution of the sale deed and left the Country. The 1 st defendant has not committed any breach of contract. The intending purchaser did not have sufficient funds to purchase the suit property and instigated the plaintiff to file the present suit. Since the intending purchaser failed to perform his part of the contract, the 1 st defendant has suffered mental agony and unable to sell the property. He would further submit that the plaintiff has purposely included the properties of the 2 nd and 3 rd defendant with ulterior motive and so he is not entitled to get any relief as against the defendants 2 and 3. Since the 1 st defendant has suffered a huge loss, the amount paid by the plaintiff is liable to be forfeited. The 2 nd and 3 rd defendant submitted that there is no privity of contract between themselves and the plaintiff and there is no cause of action for the suit as against them and therefore, prayed for dismissal of the suit. 4. The trial court decreed the suit in favour of the plaintiff. Aggrieved by this, the 1 st defendant preferred the appeal suit in A.S. No.111/2013 before the IV Additional District Court, Coimbatore. The first appellate court set aside the judgment and decree passed by the trial court and dismissed the suit filed by the plaintiff. Challenging the same, the present second appeal is preferred by the plaintiff. 5. The second appeal was admitted on the following substantial questions of law: "1. Whether the dismissal of the suit by the lower appellate court would result in unjust enrichment of the defendants? 2. Whether the lower appellate court was right in reversing the judgment of the trial court when there was no concluded contract between the parties and in the absence of agreement or forfeiture of earnest money?" 6. The learned counsel for the appellant/plaintiff submits that the above suit was filed by the plaintiff seeking refund of Rs.5,00,000/- with 24% interest from the defendants 1 to 3 which was paid as advance for purchasing the suit properties. However, the said suit was dismissed by the first appellate court. The learned counsel for the appellant/plaintiff submits that the above suit was filed by the plaintiff seeking refund of Rs.5,00,000/- with 24% interest from the defendants 1 to 3 which was paid as advance for purchasing the suit properties. However, the said suit was dismissed by the first appellate court. He would submit that the defendants were under the obligation to transfer the property without any defects in the title deeds. Since the defendants failed to bring out the rectification deeds, the plaintiff was not willing to purchase the suit property and therefore, he demanded for refund of the advance amount paid by him at the time of negotiation. Since the defendants refused to pay the said advance amount, the plaintiff was constrained to file the above suit for refund of advance money. The first appellate court, without considering the above facts, dismissed the suit filed by the plaintiff by stating that the plaintiff was in default and committed breach of contract and therefore the plaintiff has to forego the advance paid to the 1 st defendant. He would submit that the advance money can be forfeited only when the contract explicitly states that the money serves as 'earnest money' or a security deposit for performance. If the advance payment is purely a part payment and not designated as 'earnest money', it cannot be forfeited unless the contract clearly makes it a guarantee for due performance. In the present case, there is no default on the part of the plaintiff and the advance payment made by the plaintiff is purely a part payment and not designated as 'earnest money' and therefore, the same cannot be forfeited. Moreover, there is no contract between the parties explicitly stating that the money serves as 'earnest money' or 'security deposit' for performance. To support his contention he has relied upon the judgment of the Hon'ble Supreme Court in the case of Satish Batra vs. Sudhir Rawal reported in (2013) 1 SCC 345 7. On the other hand, the learned counsel appearing for the respondents/defendants would submit that in Ex.A4 receipt, it is stated that the sale transaction has to be completed within a period of one month. In fact, the plaintiff after perusing the title documents of the defendants, paid the advance amount. He would further submit that there was no privity of contract between the plaintiff and defendants 2 and 3 therein. In fact, the plaintiff after perusing the title documents of the defendants, paid the advance amount. He would further submit that there was no privity of contract between the plaintiff and defendants 2 and 3 therein. Hence, the suit is bad for mis joinder of parties as the defendants 2 and 3 were not parties to the above transaction between the 1 st defendant and the plaintiff. The learned counsel further submits that, due to the attitude of the plaintiff, the 1 st defendant is unable to sell his property to others and therefore, 1 st defendant is entitled to forfeit the entire advance amount for the loss suffered by him. Considering the above facts, the first appellate court rightly held that the 1 st defendant is entitled to forfeit the advance money. He would further contend that the defect in the sale deed was rectified on 14.02.2011 and all revenue records including patta, chitta and EC were handed over to the plaintiff and the last date for registration under Ex.A4 receipt was 02.03.2011, which was willfully ignored by the plaintiff. The learned counsel further submitted that the plaintiff was not ready and willing to perform his part of contract as contemplated under Section 16 (c) of the Specific Relief Act, 1963 and that the findings of the first appellate court was based on evidence and the same cannot be disturbed in a second appeal. He would further contend that the plaintiff failed to disclose the fact that the rectification deed was executed before the last date of sale and that the defendants 2 and 3 were wrongly impleaded in the suit and no notice was served on them. The above facts would establish that the plaintiff is not entitled for any relief in the suit. To support his contentions he has relied upon Maula Bux vs. Union of India reported in AIR 1970 SC 1955 and Kailash Nath Associates vs. DDA reported in (2015) 4 SCC 136 . 8. The learned counsel further submits that the second appeal is liable to be dismissed in limine for failing to raise any substantial question of law, a sine qua non under Section 100 CPC. 8. The learned counsel further submits that the second appeal is liable to be dismissed in limine for failing to raise any substantial question of law, a sine qua non under Section 100 CPC. To support his contentions he has relied upon the judgment of Hon'ble Supreme Court in the case of Kondiba Dagadu Kadam vs. Savitribai Sopan Gujar & Others reported in (1999) 3 SCC 722 and Narayanan Rajendran & Another vs. V.Lekshmy Sarojini & Others reported in (2009) 5 SCC 264 . Hence prayed for dismissal of the second appeal. 9. Heard the respective counsel for the parties. The facts are undisputed. The only question is, whether the 1 st defendant is entitled to retain the entire amount of Rs.5,00,000/- received as advance money or not? The question whether the defendants can retain the entire advance amount depends upon the terms of the agreement between the parties. In this case, no sale agreement was entered between the plaintiff and the 1 st defendant. Admittedly, on 20.01.2011, the 1 st defendant has received a sum of Rs.5,00,000/- from the plaintiff and executed Ex.A4 receipt on the same day in favour of the plaintiff. The relevant portion of the said receipt is extracted hereunder: Therefore, the above recital in Ex.A4 receipt stipulates that the receipt is valid only till 02.03.2011. But, nowhere in the above receipt it is explicitly stated that the sale transaction has to be completed within a period of one month and if the plaintiff fails to perform his part of contract, the advance money will be forfeited. Moreover, there is no agreement between the parties that when the transaction falls through, by reason of the fault or failure of the purchaser the advance amount will be forfeited. It is also not in dispute that there were some discrepancies in the extent of land mentioned in the title deeds. While so, it is for the 1 st defendant to rectify the same before execution of the sale deed. Though it is contended by the respondents that that the defect in the sale deed was rectified on 14.02.2011, it is seen that the rectification was brought out only in respect the sale deed dated 1.12.2006 which is in the name of the 2 nd defendant and failed to bring out rectification in respect of other title documents. Naturally, the plaintiff was unable to perform his part of contract. Naturally, the plaintiff was unable to perform his part of contract. Therefore, there can be converse situation also that if the defendant fails to perform the contract, the purchaser is entitled for refund of the advance money. Even otherwise, in the absence of any proof as to the loss suffered by the defendants, the advance amount cannot be forfeited. Moreover, the advance money for a sale can be forfeited when there is a clear and explicit forfeiture clause in the contract, typically for the buyer's default or failure to perform the contract, such as not paying the balance amount by the stipulated dead line. The key is that the advance money must be specifically designated as 'earnest money' or a security deposit to guarantee performance, and not just a part payment of the total price. Nowhere in Ex.A4 receipt it is stated that when the plaintiff failed to perform his contract within the stipulated dead line and that the advance money is designated as 'earnest money' to guarantee the performance, the money will be forfeited. As stated above, the advance money for a sale transaction can typically be forfeited if the contract clearly states it is earnest money' and the buyer defaults on the agreement, failing to perform their contractual obligations. A specific clause is necessary in the agreement explicitly linking forfeiture to a purchaser's failure to complete the sale. Without such a stipulation in the present case, the money is considered part of the purchase price and may not be forfeited. In the present case, the sale could not be completed only due to default on the part of the 1 st defendant. The trial court has rightly held that, when the amount was given to the 1 st defendant there was a proposal and price was not fixed and that, the defects found in the title deeds are material defects. The trial court felt that the plaintiff has rightly wriggled out of contract. Therefore, in the absence of a concluded contract between the parties and in the absence of agreement to forfeit the advance money, the 1 st defendant is not entitled to forfeit the advance money paid by the plaintiff. Hence, the plaintiff is entitled to get refund of advance amount with interest. Therefore, in the absence of a concluded contract between the parties and in the absence of agreement to forfeit the advance money, the 1 st defendant is not entitled to forfeit the advance money paid by the plaintiff. Hence, the plaintiff is entitled to get refund of advance amount with interest. The first appellate court, without appreciating the above facts and circumstances of the case, erroneously set aside the judgment and decree passed by the trial court, which resulted in unjust enrichment of the 1 st defendant. 10. Though it is contended by the 1st defendant that the properties of the defendants 2 and 3 are included by the plaintiff purposely, the rectification deed dated 14.02.2011 is in favour of the 2 nd defendant Suseela, wife of the 1st defendant. Hence the contention of the defendants that there is no privity of contract with the plaintiff is unsustainable. Hence, the defendants are liable pay the advance amount received by the 1 st defendant on behalf of himself and other defendants from the plaintiff. 11. In the result, i. The second appeal is allowed. No costs. ii. The judgment and decree dated 20.03.2019 passed in A.S. No.111 of 2013, on the file of the IV Additional District Judge, Coimbatore, is set aside. iii.the Judgment and decree dated 02.09.2013 passed in O.S.No.367 of 2011, on the file of the I Additional Sub-Court, Coimbatore, is party modified to an extent that the defendants are hereby directed to pay a sum of Rs.5,00,000/- with interest at the rate of 6% per annum instead of 9% ordered by the trial court, from the date of filing of the suit till the date of realisation.