Suresh Hotwani vs Sheikh Abdul Wahid

Challenge in this appeal is to the judgment and decree dated 29-1-2018 passed by the Sixth Additional District Judge, Durg, in civil suit No.35362-A/2011 whereby the suit for specific performance, possession and in alternate for return of amount of Rs.12.00 lacs with interest was dismissed. The appeal is by the plaintiff/appellant.

The appellant/plaintiff filed the suit pleading, inter alia, that the respondent/defendant agreed to sell his house situated at Block No.70, Plot No.5-A, Motilal Nehru Nagar, Bhilai (West), area 15x24 mtrs. (360 sq.mtrs.) for a sale consideration of Rs.44,51,000/- on 11-4-2008 and an amount of Rs.10.00 lacs was paid as earnest money. Subsequently, an amount of Rs.2.00 lacs was paid on 16-4-2008. According to the agreement, the sale deed was to be executed before 20-5-2008 and the balance amount was to be paid at the time of registry. The plaintiff further pleaded that to execute the sale deed in respect of the suit property, No Objection Certificate (NOC) was to be obtained from the Municipal Corporation, Bhilai. On 19-5-2008, the plaintiff asked the defendant to execute the sale deed, but the defendant sought for time on the ground that he could not obtain a house on rent and an amount of Rs.15.00 lacs was demanded. Accordingly, the amount of Rs.15.00 lacs was deposited in the account of the defendant, but to extend the time when the defendant was asked to sign another agreement, he refused to sign the same. Despite that, on 20-5-2008 the plaintiff prepared a pay order of Rs.32,51,000/- in the name of the defendant, but the defendant did not appear in the registry office and hence the sale deed could not be executed. Thereafter, the plaintiff sent a notice to the defendant, but despite service of notice, the defendant did not execute the sale deed. Thus, the suit was filed.

The defendant admitted to have executed the agreement to sell the suit property for a sale consideration of Rs.44,51,000/- and an amount of Rs.10.00 lacs was admitted to have been received, however, he refused to have received the subsequent amount of Rs.2.00 lacs on 16-4-2008 and Rs.15.00 lacs on 19-5-2008. It was stated that an amount of Rs.2.00 lacs was deposited by one Sonali Gupta in the account of the defendant without his knowledge. Likewise, the cheque amounting to Rs.15.00 lacs deposited by one Anil Jain in his account with whom he did not have any privity of contract. Subsequently, the amount of Rs.15.00 lacs was stopped payment, therefore, since the plaintiff himself was not interested to get the sale deed executed till 20-5-2008 and he did not have financial capacity to get the sale deed executed in his favour, he tried to replace the original agreement by an another agreement, which the defendant refused to sign. Consequently, the plaintiff himself was not ready and willing to execute the sale deed within time. It was specifically agreed that time was essence of the contract. The defendant also pleaded that the plaintiff, therefore, is not entitled for any relief.

On the basis of pleadings, the learned trial Court has framed as many as 11 issues. With respect to the agreement dated 11-4-2008 the Court held that the agreement was executed in favour of Anil Jain and an amount of Rs.2.00 lacs was also received by the defendant pursuant to the agreement. With respect to the payment of Rs.15.00 lacs and the ground that the defendant could not procure any rented house and consequently could not shift, the Court held in negative. The Court further held that the plaintiff failed to prove that the defendant was asked to sign the agreement to extend the time. Subsequently, dismissed the suit filed by the plaintiff. Hence, this appeal.

Learned counsel appearing for the appellant/plaintiff would submit that :

▪ initially the sale consideration of Rs.44,51,000/- was agreed to be paid and admittedly an amount of Rs.10.00 lacs was given to the defendant as advance;

▪ according to the agreement (Ex.P/1) it was a reciprocal in nature as the seller was required to get the NOC from the Municipal Corporation, Bhilai and then only the sale deed could have been executed;

▪ the finding in favour of the plaintiff that additional amount of Rs.2.00 lacs was received by the defendant against which no cross objection has been filed;

▪ in fact the plaintiff has performed his part of contract and the defendant has failed to do so;

▪ referring to the statement of defendant, learned counsel would submit that the defendant himself has admitted the fact that the original documents were to be supplied by the defendant and only stated that since the plaintiff has not approached, therefore, documents could not be supplied;

▪ the defendant had not paid the dues of the Municipal Corporation, Bhilai, to get the NOC;

▪ reference was made to a copy of account statement (Ex.P/2) which shows that on 16-4-2008 the amount was paid from the account of Sonali Gupta to the defendant;

▪ further referring to the document i.e. certificate of the Union Bank of India, learned counsel would submit that cheque bearing No.126207 of Rs.15.00 lacs was presented at the Bank and the same was returned with the reasons ‘payment stop by the drawer’. The same would show the intention of the parties; and

▪ learned counsel would next submit that for the aforesaid reasons the plaintiff is entitled to get the sale deed executed in his favour or in alternate for refund of Rs.12.00 lacs with interest.

Learned counsel appearing for the respondent/defendant would submit that :

§  the plaintiff himself has failed to perform his part of contract;

§  the plaintiff did not have enough amount in his account albeit has agreed to purchase the suit property;

§  ‘earnest money’ means the earnest in the right interest with intention to purchase whereas in the present case the plaintiff failed to show that he has sufficient means to execute the sale deed;

§  without knowledge of the defendant, an amount of Rs.2.00 lacs was deposited in his account by one Sonali Gupta after 3-4 days of execution of the agreement;

§  thereafter, before the target date i.e. 20-5-2008 the plaintiff tried to deposit the cheque amounting to Rs.15.00 lacs in the account of the defendant through one Anil Jain, but after such deposit it was stopped for payment, which shows that the plaintiff did not have sufficient means;

§  the plaintiff failed to abide by the terms of the agreement in its letter and spirit;

§  according to the defendant because of such problem created by the plaintiff, he could not get the sale consideration and purchased the property as agreed some where else, which caused whopping loss to him; and

§  the impugned judgment & decree of the Court below is well merited, which do not call for any interference.

We have heard learned counsel appearing for the parties, perused the pleadings and the evidence available on record.

The initial agreement dated 11-4-2008 is marked as Ex.P/1 by the plaintiff. According to the contents of the same, the sale deed was for Rs.44,51,000/- and out of that an amount of Rs.10.00 lacs was paid on 11-4-2008 and the rest amount was to be paid before 20-5-2008. It was stated that if within time limit the registry is not done and payment is not made, the agreement would stand cancelled and the amount of earnest money would stand forfeited. It further purports that change of mutation of name be made through the Municipal Corporation, Bhilai and thereafter, after obtaining NOC the registry would be done and for doing all the formalities of mutation the original documents would be supplied by the defendant.

The defendant in his statement has stated that the target date was 20-5-2008 and before that date, the sale deed was required to be executed and if the sale deed was not executed before 20-5-2008 the agreement is deemed to be rejected. As per agreement after receipt of Rs.10.00 lacs, the rest of the amount was to be paid by 19-5-2008 or else the amount was to be forfeited. No agreement was there to extend the time of contract. With respect to payment of Rs.2.00 lacs, the defendant stated that the amount was deposited by one Sonali Gupta in his account and that too it was deposited without his knowledge. However, this part of the order of the trial Court that Rs.2.00 lacs was received by the defendant in addition to Rs.10.00 lcas has not been challenged by the defendant in this appeal.

Therefore, at this stage, we do not want to deliberate on such finding of fact.

With respect to Ex.P/1, the defendant admitted the fact that original documents were to be given by him to the plaintiff and volunteered that the plaintiff never came to him to receive the documents. Further the suggestion given to him to handover the original documents for mutation, a notice was never received by him from the plaintiff. He further stated that it was agreed that for mutation of name in the Municipal Corporation the plaintiff was required to take steps and the defendant agreed to give all support.

Now coming back to the statement of plaintiff, in the cross-examination, he stated that he deals in auto parts business wherein he is a partner wherefrom he gets an amount of Rs.3.00 to Rs.4.00 lacs per annum and except that, he does not have any source of income. He further stated that an amount of Rs.3.00 to Rs.4.00 lacs per annum which he used to earn and spend it. In the sales tax and in the books of accounts, it is shown that one Sanjay Hotwani is the owner of Auto Stores. Consequently, income of Rs.3.00 to Rs.4.00 lacs per annum was proved by the plaintiff. He further stated that his monetary demands were fulfilled by his brother Sanjay Hotwani. With respect to the specific period of time from 13-4-2008 to 20-5-2008, the plaintiff stated that his annual income was not more than Rs.3.00 lacs and in his bank account too by 20-5-2008, which was the last date for execution of agreement, amount of Rs.34,51,000/- was not there. As far as payment of Rs.10.00 lacs made on 11-4-2008, it is stated that the said amount was due to be paid to him from Hotwani Auto Stores and, as such, it was given to him in cash. From 11-4-2008 (date of agreement) to 20-5-2008 (target date for execution of agreement) he did not have the rest of amount of Rs.34,51,000/-.

The document (Ex.P/11) shows that the cheque amounting to Rs.15.00 lacs of a saving account was presented on 20-5-2008 by UCO Bank, Bhilai and the same was returned with the reason ‘payment stop by the drawer’. Ex.D/3 is the cheque of Rs.15.00 lacs and Ex.D/5 is the endorsement of the Bank wherein payment was stopped by the drawer. The plaintiff contended that he went to the house of the defendant on 19-5-2008 wherein the defendant wanted some time on the ground that he could not procure the rented house, therefore, some time was sought for. Under these circumstances, PW-2 Anil Jain asked the defendant to execute a fresh agreement for extension of time, which was denied by the defendant whereas the defendant has stated that the plaintiff was not capable to pay rest of the sale consideration by 19-5-2008, therefore, he wanted to introduce another purchaser. The defendant stated that the agreement to sell to Anil Jain was prepared by plaintiff whereas this defendant did not agree to any such sale transaction with Anil Jain. The said agreement is marked as Ex.D/1. Anil Jain (PW-2) in his cross-examination admitted the stamp of Ex.D/1 i.e. agreement to sell property was prepared by the plaintiff. The said agreement did not materialise, which would be evident from the fact that the cheque amounting to Rs.15.00 lacs was deposited by Anil Jain in the account of the defendant, got dishonoured by stop payment. If the cheque has been deposited by some one in the account of others that too without his consent/knowledge, it cannot be stated that the amount was validly tendered to infer any contract.

Normally, in the agreement of sale, the time is not shown to be essence of contract, but when there is a specific averment and express terms in the contract along with the conduct of the parties that needs to be evaluated. The intention to treat time as the essence of the contract may be evidenced by circumstances which are sufficiently strong to displace the normal presumption that in a contract of sale of land stipulation as to time is not the essence of the contract. The expression time is of the essence means that a breach of the condition as to the time for performance will entitle the innocent party to consider the breach as a repudiation of the contract.

Considering the evidence available in this case it shows that initially Ex.P/1 was entered in between the parties on 11-4-2008 for purchase of property for a sale consideration of Rs.44,51,000/-. Though the agreement contains that after mutation of name in the records of the Municipal Corporation, Bhilai, the sale deed would be executed, the defendant maintained his stand that the plaintiff failed to turn up and get the document to carry out necessary formalities in the Municipal Corporation. The evidence which has come on record cannot be ignored with the admission of the plaintiff, which shows that his yearly income was Rs.3.00 to Rs.4.00 lacs and only earnest money of Rs.10.00 lacs was paid to the defendant. The said amount obtained by the plaintiff from the Auto Stores towards his dues. In fact, the plaintiff did not have the capacity to pay the remaining amount of Rs.34,51,000/-. Under these circumstances it shows that PW-2 Anil Jain came into picture. In the cross-examination PW-2 Anil Jain admits the fact that Ex. D/1 which was a subsequent agreement sought to be executed between the defendant and Anil Jain at the behest of plaintiff. Whereas PW-1 Suresh Hotwani (Plaintiff) has stated that the cheque (Ex.D/3) was deposited in the Bank on 20-5-2008 and it was stopped by Anil Jain. This only demonstrates the fact that the purchaser/plaintiff tried to substitute a new purchaser Anil Jain, which eventually was not agreed upon.

The conduct of the parties, therefore, by the evidence would show that despite the fact that the plaintiff did not have sufficient amount in his account he tried to transfer the agreement of sale in favour of third party, which the defendant refused whereas the plaintiff came out with a plea that defendant sought for time to vacate the house and demanded Rs.15.00 lacs. The question which looms large the plaintiff is not capable to any purchase and did not have any sufficient financial capacity how the defendant can be compelled to receive the amount from a third party. Consequently, the readiness and willingness on the part of the plaintiff is completely absent.

The Supreme Court in the matter of His Holiness Acharya Swami Ganesh Dassji v. Sita Ram Thapar (1996) 4 SCC 526 observed that in order to arrive at a decision of compliance of clause (c) of Section 16 of the Act, 1963 to demonstrate the readiness and willingness of the plaintiff to perform his part of contract, it should be adjudicated on the facts as there is a distinction between readiness to perform the contract and willingness to perform the contract. The readiness may be meant the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. For determining his willingness to perform his part of contract, the conduct has to be properly scrutinized.

The question, therefore, arises for consideration is whether the time was of the essence of the contract ? While looking at the initial agreement (Ex.P/1), it shows the intention of the parties wherein the duty of execution was up till 20-5-2008. The evidence which has come on record would show that the plaintiff tried to substitute the purchaser and introduced one Anil Jain who gave a cheque of Rs.15.00 lacs, but it was not agreed upon by the defendant. The defendant has also corroborated the same fact that till 20-5-2008 no payment was made. By examining the conduct of the purchaser it shows the cheque got deposited by third party got bounced by stop payment, it shows that the plaintiff was in know of the fact that time for performance was the essence of contract and the agreement contains specific averment that if the amount is not paid in full up till 20-5-2008 the agreement would be deemed to be cancelled thereby a repudiation of the contract. The agreement further contains that in case there is a breach there would be a forfeiture of earnest money and it has been made legal.

While considering the case of like nature, the Supreme Court in the matter of Satish Batra v Sudhir Rawal (2013) 1 SCC 345 held thus at para 10 :

10) In DDA v. Grihstrapana Coop. Group Housing Society Ltd., this Court following the judgment of the Privy Council in Har Swarup and Shree Hanuman Cotton Mills, held that the forfeiture of the earnest money was legal. In V. Lakshmanan v. B.R. Mangalgiri, this Court held as follows: (SCC p.36, para 5)

“5. The question then is whether the respondents are entitled to forfeit the entire amount. It is seen that a specific covenant under the contract was that the respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default committed by the appellant, as part of the contract, they are entitled to forfeit the entire amount.”

Further more the terms of agreement would show that the vendor made the time to be the essence of contract for payment of money by 20-5-2008 and the different evidence which has come on record shows the purchaser, without the consent of seller got deposited an amount in the account of seller by third party, but the amount of Rs.15.00 lacs was not realized for stop payment. It shows that the purchaser is in guilt of gross default and tried to commit an act which is unheard off, entitled the vendor to rescind the contract.

In the matter of Shree Hanuman Cotton Mills and Others v Tata Air Craft Limited (1969) 3 SCC 522, the Supreme Court has interpreted the word ‘earnest’ at para 21, which is quoted below :

21) From a review of the decisions cited above, the following principles emerge regarding "earnest":

(1) It must be given at the moment at which the contract is concluded.

(2) It represents a guarantee that the contract will be fulfilled or, in other words, 'earnest' is given to bind the contract.

(3) It is part of the purchase price when the transaction is carried out.

(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.

(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.

The aforesaid principles laid down in the matter of Shree Hanuman Cotton Mills (supra) have also been reiterated by the Supreme Court in the matter of Satish Batra (supra).

Applying the aforesaid text to the present case, we hold that ‘earnest money’ is part of the purchase price when the transaction goes forward and here as the evidence has come to the effect that the transaction falls through by reasons of the fault or failure of the purchaser/appellant, thereby the sale deed could not be executed it would amount to breach of contract on the part of the purchaser/ appellant. (Also see: Videocon Properties Ltd. v Dr. Bhalchandra Laboratories and Others (2004) 3 SCC 711).

In view of the settled principles of law and for the foregoing reasons, we are of the view that no ground is made out to interfere with the impugned judgment and decree passed by the learned trial Court. The same is just and proper. 24. As a sequel, the present appeal, sans merit, is liable to be and is hereby dismissed, leaving the parties to bear their own cost(s).

A decree be drawn accordingly.