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Judgment
S. Vimala, J.—When a transaction has been reduced to writing, either by requirement of law or by agreement of the parties, the writing becomes the exclusive memorial thereof; and no extrinsic evidence is admissible either to prove independently the transaction or to contradict vary, add to or subtract from, the terms of the documents, though the content of the document may be proved either by primary or secondary evidence. This is the law stated in Section 92 of the Indian Evidence Act. Whether the construction of a document so as to ascertain the intention of the parties is controlled by the provisions of Section 91 or 92 of the Indian Evidence Act is the issue raised in this appeal.
The bar u/s 92, whether it applies only when it is sought to be proved that the terms of the transaction were different and not that the transaction itself was different than what it purported to be is yet another issue raised in this appeal.
Defendants are the appellants.
The second appeal has been filed challenging the judgment and decree dated 29.10.2009 made in A.S. No. 43 of 2008 (ADJ cum FTC), Dindigul, confirming the judgment and decree dated 20.06.2008 made in O.S. No. 214 of 2004 (ASJ), Dindigul.
The second appeal has been admitted on the following substantial question of law:-
Whether the courts below are correct in holding that the parties intended to enter into an agreement of sale under Ex. A1 and it is not a security document for repayment of loan?
Brief facts:-
(i) Defendants 2 to 4 are the sons of the 1st defendant and they all belonged to members of the joint Hindu family. The suit property belong to the defendants. The defendants agreed to sell the suit properties for a sum of Rs. 2,10,000/- and executed an agreement to sell the suit properties on 25.11.2002 after receiving an advance amount of Rs. 1,90,000/-. The balance of sale consideration is payable within a period of 20 months from the date of agreement. If there is a default by the plaintiff, then he is liable to forfeit the right to get the sale deed executed apart from forfeiting the advance amount. If there is a default on the part of the defendants, then the plaintiff was at liberty to deposit the balance of sale consideration into court and to get the sale deed executed.
(ii) Though the plaintiff was ready and willing to perform his part of the contract, the defendants were evading. The plaintiff issued a notice calling upon the defendants to receive the balance of sale consideration and to execute the sale deed. The 1st defendant received the notice on 12.07.2004 but neither gave any reply nor executed the sale deed. Seeking specific performance, the suit was filed by the plaintiff.
The suit was resisted by the defendants by raising the following contentions:-
1) The so-called sale agreement dated 25.11.2002 is not a true document. The defendants did not receive Rs. 1,90,000/- as advance towards part of sale consideration. The plaintiff is a financier and he is running a financial institution in the name of KVS Finance at Ramanathapuram. The 1st defendant requested the plaintiff to pay a sum of Rs. 1,00,000/- towards family and agricultural expenses. He received a sum of Rs. 50,000/- on 07.05.1998 after executing a promissory note. The 1st defendant was paying a sum of Rs. 1,500/- every month towards interest. Thereafter, on 07.05.1999, the plaintiff paid a sum of Rs. 50,000/- after getting a promissory note from the 1st defendant. The 1st defendant has paid a sum of Rs. 29,000/- on several installments towards payment of interest. The plaintiff demanded a sale agreement when the 1st defendant was not able to pay the interest. Therefore, he executed a sale agreement on 19.06.2000. This was executed by the 1st defendant for himself and on behalf of the minors and also by the 2nd defendant. The sale consideration was stated to be Rs. 2,00,000/-. As per the terms of this agreement, advance was paid for a sum of Rs. 1,25,000/- and the balance of Rs. 75,000/- was payable within a period of 2-1/2 years.
2) According to defendants, no amount was received under that sale agreement. This document was executed as security for repayment of loan. The agreement was to pay a sum of Rs. 3,125/- towards interest (@ Rs. 2.50). The 1st defendant paid the interest and got the endorsement of payment of interest in the hand note book (Ex. B3). After payment of Rs. 30,000/-, the 1st defendant was not able to discharge the loan. The sale agreement dated 19.02.2000 was cancelled by the execution of cancellation deed dated 25.11.2002 (Ex. A7) and on the very same date, a fresh agreement to execute the sale deed was entered into between the plaintiff and the defendants (Ex. A1). The document was never intended to be operative. No consideration was paid under the alleged sale agreement. The property was never intended to be sold. It was an unenforceable document. The property under dispute would fetch more than Rs. 10,00,000/- and the sale consideration stated in the agreement which is grossly inadequate would speak against the nature of the transaction as spoken to under Ex. A1. As the 1st defendant''s son was not well, the 1st defendant was not able to give any reply. Mere non reply would not amount to admission of the claim made by the plaintiff.
The trial court framed the following three issues:-
1) Whether the plaintiff is entitled to the decree for specific performance?
2) Whether the contention of the defendants that the agreement was executed as a measure of security for repayment of loan and not by way of an agreement to sell the property is correct?
3) To what other relief the plaintiff is entitled to?
After consideration of oral and documentary evidence, the trial court came to the conclusion that the plaintiff is entitled to the decree for specific performance. The main finding of the trial court was that the plea taken by the defendants was beyond the terms of the agreement and that as per Section 92 of the Indian Evidence Act, no oral evidence can be admitted which would be contradictory to the terms of the written agreement. In other words, the finding is that, the contention of the defendants that the agreement was executed as a security for repayment of loan is not a legally permissible defence and that the oral evidence contradicting the terms of the sale agreement is inadmissible in evidence.
Aggrieved over these findings, the defendants preferred the first appeal. Interpretation of Section 92 of the Indian Evidence Act was the subject matter in the appeal also. The first appellate court also came to the conclusion that the defendants cannot be permitted to lead evidence which would be against the express terms of the agreement to sell the property and that the defence taken by the defendants is not legally permissible. Challenging the findings of the first appellate court, the second appeal has been filed.
The main contention of the learned counsel for the appellant/defendants is that the Courts below has misunderstood the scope and applicability of Section 92 of Indian Evidence Act to the factual aspects of this case and if the oral evidence adduced on the side of the defendants is construed as permissible, then the suit could not have been decreed.
On the other hand, the contention of the learned counsel for the respondent/plaintiff is that the oral evidence adduced by the defendants which would amount to contradicting/varying/adding/subtracting the terms of the written sale agreement is certainly inadmissible as per the provisions of Section 91 and 92 of the Indian Evidence Act and the Courts below have rightly applied the law and has arrived at the correct conclusion.
From the contentions raised, the issue to be considered is whether the evidence adduced by the defendants would be hit by the provisions of Section 91 and 92 of the Indian Evidence Act or not.
It is the contention of the defendants that Section 92 of the Indian Evidence Act does not apply to fictitious documents. According to defendants, the sale agreement was a shame and nominal document and it was never intended to be operative as a sale agreement. The bar u/s applies only when it is sought to be proved that the terms of the transaction were different and that the bar will not apply when it was sought to be proved that the transaction itself was different than what it was purported to be is the main contention raised by the learned counsel for the defendant. In order to appreciate the contentions raised, it is necessary to look into the nature and terms of the documents filed on both sides.
Admittedly, there are two sale agreements and one cancellation agreement, in respect of the same property. The 1st sale agreement is dated 19.06.2000 (Ex. B1) which was executed by the 1st defendant and the 2nd defendant in favour of the plaintiff. At that point of time, the 3rd and 4th defendants were minors and therefore, the 1st defendant has signed it for himself and on behalf of D3 and D4 also.
Ex. A1 is the sale agreement dated 25.11.2002. This document bears the number 2316/25.11.2002. This is executed by all the defendants in favour of the plaintiff.
Ex. A7 is styled as cancellation deed executed by the 1st and 2nd defendants in favour of the plaintiff. The recitals in the cancellation deed would clinch the issue. Under Ex. A7, it is stated that it was not feasible for the 1st defendant to execute the sale deed in respect of the suit properties. The interesting recital is that as the 1st and 2nd defendants desired to retain the property for themselves, the plaintiff agreed to get the sale agreement cancelled. Only with these recitals, the cancellation deed has been executed. This document has been presented for registration between 04.00 to 05.00 P.M. at Vedasanthur Sub Registrar Office. Ex. A1 document has also been presented for registration at the same time at the same Registrar office. Comparison of Ex. A1 and A7 would go to show that both the documents have been written by one and the same person i.e. Mayilsamy (Document Writer) and signed by the same witnesses namely, K. Thirumurthy and R.M. Balasamy.
The comparison of Ex. A1/Ex. A7 coupled with Ex. B1 would clearly go to show that the document under Ex. A1 was not intended to operate as an agreement to sell the property, but ought to have been executed only for the purpose of having it as security for repayment of loan. The recitals in the Ex. A1 sale agreement are proved to be inoperative by the recitals made under Ex. A7 Cancellation Deed. It is relevant to point out that the execution and validity of Ex. A7 Cancellation Deed is not disputed by the plaintiff. When the recitals reveal that, plaintiff agreed to respect the wishes of the defendants that they wanted the properties for themselves and that they did not intend to sell the properties, then the inference is that the sale agreement ought to have been executed only as security for repayment of loan which was advanced by the plaintiff to the 1st defendant.
Even though the suit is based upon Ex. A1 sale agreement dated 25.11.2002, the document has to be construed/constructed by only taking into account the contemporaneous documents executed on the same day and also the documents executed between the same parties on an earlier occasion, in respect of the suit properties. This view is supported by the decision reported in S. Chattanatha Karayalar Vs. The Central Bank of India and Others, .
If the transaction is contained in more than one document between the same parties, they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. [323 C]. Manks v. Whiteley, (1912) 1 Ch. 735, applied; The provisions of Section 92 of the Evidence Act did not apply in the present case, because the appellant was not attempting to furnish evidence of any oral agreement in derogation of the promissory note but relied on the existence of a collateral agreement in writing the letter and the hypothecation agreement, which formed parts of the same transaction as the promissory note. [325 H]. Case law referred to.
It would be appropriate to quote Section 92 of the Indian Evidence Act as the applicability of Section 92 has been considered by the trial court while not accepting the case of the defendants.
Exclusion of evidence of oral agreement.- When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to the last section, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms: Proviso (1).--Any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, 1 [want or failure] of consideration, or mistake in fact or law. Proviso (2).--The existence of any separate oral agreement as to any matter on which a document is silent, and which is not inconsistent with its terms, may be proved. In considering whether or not this proviso applies, the Court shall have regard to the degree of formality of the document. Proviso (3).--The existence of any separate oral agreement, constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved. Proviso (4).--The existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents. Proviso (5).--Any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description, may be proved: Provided that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract. Proviso (6).--Any fact may be proved which shows in what manner the language of a document is related to existing facts.
Section 92 of the Indian Evidence Act has to be read along with proviso No. 1 which speaks about facts invalidating the document; proviso No. 2 separate oral agreement as to matters which are silent and not inconsistent with the terms of the document; proviso No. 3 separate oral agreement constituting condition precedent to the attaching of any obligation; proviso No. 4, distinct subsequent oral agreement to rescind or modify any such contract or grant; proviso No. 5 usage or custom to annex incidence to contract "provided that annexing of such incidence would not be inconsistent" and proviso No. 6 extrinsic evidence of surrounding circumstances. In fact, Section 92 is controlled by the proviso 1 to 6 as enumerated u/s 92 of Indian Evidence Act.
It would be relevant to point out that there are opposite contentions with regard to true character of the writing (with reference to Ex. A1). It is the contention of the learned counsel for the appellant that when there is a dispute in regard to the true character of writing, evidence de horse the document can be let in to show that the writing was not the real nature of transaction but was only an illusory fictitious and colourable device which cloaked something else and that the apparent state of affairs was not the real state of affairs ( Smt. Krishnabai Bhritar Ganpatrao Deshmukh Vs. Appasaheb Tuljaramarao Nimbalkar and Others,
The decision reported in AIR 1936 70 (Privy Council) would go to show that oral evidence is admissible to show that a document executed by a person was never intended to operate as an agreement, but was brought in existence solely for the purpose of creating evidence about some other matter.
These decisions would clearly go to show that the defendants are at liberty to show that the documents filed did not reflect the true character of writing and it was brought out to have evidence for some other transactions.
The following circumstances would clearly go to show that the document under Ex. A1 was brought in existence only as a measure of security for the alleged loan transaction and not with an intention to sell the property.
Plaintiff is the financier. Ex. B2 is the certificate issued by the Registrar of Firms, Coimbatore, wherein the name of the plaintiff has been shown to be one of the partners in M/s. KVS Financier. The certificate is dated 26.02.2008 but issued during 20.12.2000. The place of business is stated to be Singanallur, Coimbatore. There is no necessity for the plaintiff to deny the fact that he is the financier, is more especially when a written document has been filed to show that he is a financier.
The plaintiff has not mentioned anything about the earlier transaction i.e. Earlier to Ex. A1. There is silence with regard to Ex. B1 sale agreement as well as Ex. A7 Cancellation Deed. The party seeking equitable relief is expected to approach the Court with clean hands.
Under Ex. B1 sale agreement, the period of performance has been fixed to be 2-1/2 years which would be indicative of the fact that the transaction could not have been a sale transaction.
The sale agreement under Ex. A1 is stated to be Rs. 2,10,000/- whereas, the consideration stated in the sale agreement under Ex. B1 is Rs. 2,00,000/-. There is no much difference between the two documents even though there is a long gap between those two agreements i.e. Ex. B1 dated 19.06.2000 and Ex. A1 dated 25.11.2002. Even after the expiry of two years and five months much increase has not been mentioned in the sale consideration.
It is admitted in the evidence of the plaintiff that he did not take care to find out whether there was any encumbrances over the suit property.
The reasons stated for cancellation of the sale agreement under Ex. A7 would bring the cat out of the bag. When the property and the persons involved in the transaction under Ex. A1 and B1 are the same, then the reasons stated for cancellation of sale agreement under Ex. B1 would be equally applicable to Ex. A1 also, more especially, when Ex. A7 and A1 are brought into existence on the same day.
While constructing the document under Ex. A1, whether it is permissible to look into the surrounding circumstances is the legal issue to be considered.
It has been held in the decisions reported below that while constructing the document, Court is entitled to take into account the surrounding circumstances.
A) M.D., Hindustan Fasteners Pvt. Ltd. Vs. Nashik Workers Union, .
Construction of a document so as to ascertain the intention of the parties is in no way controlled by the provisions of Sections 91 or 92 of the Evidence Act. The document has to be interpreted applying the known principles of construction and/or canons.
B) The Godhra Electricity Co. Ltd. and Another Vs. The State of Gujarat and Another, . The relevant observation in paragraph 11 reads thus:-
In the process of interpretation of the terms of a contract, then court can frequently get great assistance from the interpreting statements made by the parties themselves or from their conduct in rendering or in receiving performance under it. Parties can, by mutual agreement, make their own contracts; they can also, by mutual agreement, remake them. The process of practical interpretation application, however, is not regarded by the parties as a remaking of the contract; nor do the courts so regard it. Instead, it is merely further expression by the parties of the meaning that they give and have given to the terms of their contract previously made. There is no good reason why the courts should not give great weight to these further expressions by the parties, in view of the fact that they still have the same freedom of contract that they had originally. The American Courts receive subsequent actions as admissible guides in interpretation. It is true that one party cannot build up his case by making an interpretation in his own favour. It is the concurrence therein that such a party can use against the other party. This concurrence may be evidenced by the other party''s express assent thereto, by his acting in accordance with it, by his receipt without objection of performances that indicate it, or by saying nothing when knows that the first party is acting on reliance upon the interpretation (see Corbin on contracts, Vol. III, pp. 249 and 254-55).
The rule that obtains in other jurisdictions is also, the same
"In France construction of a contract is within the sole province of the judges of fact who are entirely free to use whatever material seems relevant to them... The rule is the same in Germany where since 1888 it is established that even statements made by one of the contracting parties to a third person about the content of the contractual intentions are admissible guides to interpretation. In Italy, Art. 1362(2) provides in impressively succinct language. The Vienna convention on the law of Treaties of 1969 (which to a large extent merely codifies earlier international practice) enjoins the interpreter of a treaty to take into account ''any subsequent practice in the application of the treaty which establish the agreement of the parties regarding its interpretation'', Art. 31(3)(b)" (see Notes by F. A Mann on L Schuler A.G. v. Wickman Machine Tool Sales Ltd. (1973) 2 W.L.R. 683), Law Quarterly Review, Vol. 809, pp. 464-465).
Notwithstanding the provisions of Section 92 of the Evidence Act, the court is bound to examine the surrounding circumstances to find out the true nature of transaction. This proposition is supported by the decision reported in Uday Chand Dutt (Deceased) through his Lrs. Vs. Saibal Sen (Deceased) through his Lrs. and Another,
7...... notwithstanding the provisions of Section 92 of the Evidence Act, the Court was bound to examine the surrounding circumstances to find out the true nature of the transaction. He drew our attention to the definition of the term "loan" contained in Sub-section (12) of Section 2 of the aforesaid Act. A perusal of that definition shows that any transaction which is in substance a loan except transactions of any of the categories set out in Clauses (a) to (i) of that sub-section is included within the meaning of the term "loan" for the purposes of the said Act. In our view, there is no need to consider this question at all because both the courts below have, in fact, proceeded on the footing that notwithstanding the clear terms of the said document, they were bound to examine the evidence relating to the surrounding circumstances to find out the true nature of the transaction in question.
The same proposition is supported by another decision reported in The Godhra Electricity Co. Ltd. and Another Vs. The State of Gujarat and Another,
And in Chapman v. Bluck, Park, J. said "The intention of the parties may be collected from the language of the instrument and may be elucidated by the conduct they have pursued." Odgers observers (1)
In the case of an ambiguity, judicial notice will be taken of the way in which the parties themselves have interpreted their rights and duties under the document.
Therefore, it is clear that the parties to the so-called sale agreement never intended to enforce the document as sale agreement. The fact remains that the plaintiff is the financier and his interest is to recover more interest and not to purchase the property. Therefore, the courts below are not in right in decreeing the suit for specific performance. The courts below omitted to take note of the terms of the document itself which would go to show that the intention of the plaintiff is not to purchase the property. The plaintiff has issued notice at the fag end of the expiry of the 20th month calling upon the defendants to receive the balance. Moreover, when the plaintiff has agreed for cancellation and in fact cancelled the earlier sale agreement and has entered into subsequent agreement without any acceptable cause, then the natural inference is that the sale agreement was not intended to be operative. Therefore, the second appeal is allowed, setting aside the judgments of the courts below.
The next issue to be decided is what is the remedy open to the plaintiff when the transaction in terms of loan has been admitted by the defendants, even though the claim for specific performance is disputed. Pleadings by admission can also form the basis for the decree. According to defendants, they are liable to pay a sum of Rs. 1,00,000/- to the plaintiff towards principal amount and a sum of Rs. 25,000/- towards interest as on August 2000. It is further stated in the evidence that later on a sum of Rs. 30,000/- has been paid. In the sale agreement, the amount stated is Rs. 1,90,000/-. Probably, this must be the amount due from the defendants. Therefore, the defendants are liable to repay a sum of Rs. 1,90,000/- (which represents the principal amount as well as interest due as on 25.11.2002) and also interest @ 6% per annum on Rs. 1,00,000/- from 25.11.2002 till payment, within a period of six months from the date of receipt of a copy of the judgment, failing which, it is open to the plaintiff to execute the same. The second appeal is partly allowed subject to the above terms. Judgment and decree dated 29.10.2009 made in A.S. No. 43 of 2008 on the file of the Additional District Judge cum Fast Track Court, Dindigul, confirming the judgment and decree dated 20.06.2008 made in O.S. No. 214 of 2004 on the file of the Additional Subordinate Judge, Dindigul are hereby set aside. There shall be a money decree in favour of the plaintiff for a sum of Rs. 1,90,000/- along with interest @ 6% per annum on the principal sum of Rs. 1,00,000/- from 25.11.2002 till date of payment. Consequently, connected miscellaneous petition is closed. No costs.