Y.V. Narasimha Sarma and Others vs Soorampalli Appalaraju

M.N. Rao, J.—In the suit from out of which this appeal arises, the plaintiff, respondent herein, sought a decree against the appellants herein who are defendants 1 to 3 for specific performance of an oral contract for sale entered into on 16.11.1979 for purchase of the suit property comprising a terraced and tiled house with an appurtenant vacant site or about two and half acres situate at Dasannapeta, Vizianagaram town belonging to the first defendant. The plaintiff asked for an alternative relief by way of a decree for Rs. 75,000/- towards damages. The plaintiff and defendants 2 and 3 are residents of Vizianagaram. The first defendant, the owner of the suit property is resident of Anandapuram village about 20 kms from Vizianagaram. The case of the plaintiff as averred in the plaint is that the first defendant offered to sell the suit house to him through PW2 Simhambhada Lakshminadha Rao alias Sidhanthi of Vizianagaram and so they both went to Anandapuram on 7.11.1979, met the first defendant at his house and enquired about the sale of the suit property. The first defendant promised that he would come to Vizianagaram on 10.11.1979 and finalised the transaction. He came to Vizianagaram on 10.11.1979 to the house of PW2 and had preliminary negotiations, and fixed the date 16.1 11979 "for completion of the sale negotiation". On 16.11.1979 at about 2 P.M., the plaintiff and the first defendant met at the house of PW2 Sidhanthi. The first defendant finally agreed to sell the suit property for Rs.75.000/- and when the plaintiff offered an advance of Rs. 2,000/- the first defendant stated that the plaintiff would come to his house at Anandapuram along with PW2 on 21.11.1979 "pay him an advance of Rs. 20,000/- or Rs. 25,000/-" and asked the plaintiff to bring two non-judicial stamp papers worth Rs. 5/- each for drafting formal agreement of sale (locally known as Kraya Puroni) in duplicate. To this suggestion the plaintiff replied that he cannot adjust more than Rs. 20,000/- by that day and the first defendant agreed to the same. It was further averred that on 18.11.1979 the first defendant came to Vizianagaram and sent word to the plaintiff through PW2 Sidhanthi that the amount of Rs. 20,000/- may be brought either in currency notes of the denominations of ten each or fifty or alternatively by means of a draft drawn on the Co-operative Central Bank, Vizianagaram in favour of the 1st defendant. On 21.11.1979, the plaintiff obtained a demand draft for Rs. 20,000/- on the said bank and proceeded to Anandapur village along with PW2 in a taxi taking with him two non-judicial stamp papers. When they met the first defendant at his house at 3 PM on 21.11.1979, the latter insisted upon payment of Rs. 25,000/- as advance instead of Rs. 20,000/- as earlier agreed to. The plaintiff stated that he would adjust the additional sum of Rs. 5,000/- within a few hours and requested the first defendant to come along with him to Vizianagaram where the money would be paid. Alternatively he offered to bring that sum from Vizianagaram in a few hours by rushing there in the same taxi. It was alleged that because of the mischievous intervention of defends us 2 & 3 who meanwhile perhaps made higher officers, the first defendant evaded to execute the agreement of sale and receive the advance. The plaintiff got issued a registered notice Ex.A4 on 22.11.1979 through his advocate to which a reply notice Ex.A8 was sent by the first defendant stating that there was no oral agreement for sale on 16.11.1979 and that he entered into an agreement of sale with defendants 2 and 3 agreeing to convey the property and obtained an advance of Rs. 30,000/-. After issuing a rejoinder Ex.A9 to the first defendant making a copy of the same to the defendants 2 and 3, the suit was instituted stating that the plaintiff was always willing and ready to perform his part of the contract, and defendants 2 and 3 are not at all bona fide purchasers for valuable consideration and as such they are bound by the terms and conditions of the oral contract entered into by the first defendant with the plaintiff on 16.11.1979.

Resisting the suit the first defendant filed written statement averring that the property was worth one lakh rupees and he was getting offers from all intending purchasers and the offer was open to all and not exclusively to the plaintiff alone. He admitted that negotiations were carried on by him with the plaintiff but ultimately the same fell through as the plaintiff could not come up to his demand, that he was not willing to part with the house for less than Rs. 90,000/- and any intending purchaser must give an advance of Rs. 30,000/-. The offer of the plaintiff for Rs. 75,000/ - was hot accepted by him. Defendants 2 and 3 offered Rs. 85,000/- and paid an advance of Rs. 30,000/- under a written contract for sale executed on 24.11.1979 in duplicate, Exs.B1 and B3. It was also pleaded that the plaintiff was aware that the defendants 2 and 3 were also trying to purchase the suit property and having been frustrated in his attempts to secure the property the plaintiff came up with a false plea about a prior oral agreement of sale in his favour. The discussions with the plaintiff never passed beyond the stage of negotiations and they did not fructify into an oral agreement of sale. PW2-Sidhanthi, who is alleged to be the mediator and negotiator of the oral agreement is plaintiffs man and was not employed or commissioned by the first defendant to arrange the sale of the suit house.

The second defendant in his written statement pleaded that in order to have a wrongful gain for himself, the plain-tiff concocted the oral agreement for sale. He and the third defendant offered a sum of Rs. 85,000/- to the first defendant and paid an advance of Rs. 30,000/- and the deal was concluded on 24.11.1979, and an agreement in writing was executed on that day. The plaintiff was aware that the defendants were carrying on negotiations for purchasing the property.

The Learned Judge framed appropriate issues and after considering the evidence on record decreed the suit for specific performance. The Learned judge observed that unless that there ''was a prior agreement for sale, the plaintiff would not have obtained a draft for Rs. 20,000/- in favour of the first defendant. The first plaintiff purchased stamps on 19.11.1979 for preparing the agreement of sale and unless the terms were settled prior to that he would not have bought the same. The Learned Judge also observed that the reason for the first defendant in not executing the agreement of sale on 21.11.1979 was the offer made by the defendants 2 and 3 to purchase the suit property for Rs. 85,000/- and the payment of Rs. 30,000/- by them as advance. The Learned Judge further observed that the first defendant avoided till 29.11.1979 to take the registered notice Ex.A4 sent by the plaintiff on 22.11.1979. On that view, the Learned Judge granted the decree for specific performance. Aggrieved by that the present appeal was brought by the defendants 1 to 3.

The plaintiff gave evidence as PW1, PW2 Sidhanthi is the mediator who claimed to have settled the deal and in whose presence the oral contract for sale was finalised, PW3 is the taxi driver in whose vehicle PWs.1 and 2 went from Vizianagaram to Anandapuram village to the house of the first defendant on 16.11.1979 to settle the oral agreement. The first defendant figured as DW1 Suryanarayana, a relation of defendants 1 and 2 was examined as DW2: he deposed about the written agreement of contract for sale executed in duplicate on 24.11.1979 (Exs.B1 and B3) by which the 1st defendant agreed to convey the suit property for a consideration of Rs. 85,000/- to defendants 1 and 2 and received an advance of Rs. 30,000/-. He attested not only Exs.B1 and B2 but also the subsequent registered sale deed Ex.B2 dated 26.2.1980 which was executed after the suit was filed and the ex parte temporary injunction granted earlier was vacated by the trial court. Defendants 2 and 3 are affluent business men running motor transport business and DW2 looks after their business. DW3 Subrahmanyam is the son-in-law of PW2 Sidhanthi. The bargain in favour of the defendants-2 and 3 was settled by DW3 and he also attested the three documents Exs.B1, B2 and B3.

Sri Poornayya, Learned Counsel for the appellants contends that there was no concluded contract for sale on 16.11.1979 and what happened on that day did not go beyond the stage of negotiations. The offer made by the 1st defendant was open to all and as the defendants 2 and 3 offered higher amount a written contract for sale in their favour was executed. There is material divergence between pleadings and evidence. When the first defendant had higher offers it is absolutely unreasonable to presume that he agreed to part with his house for a lesser consideration of Rs. 75,000/-.

On the other hand, Shri Subrahmanya Narasu, Learned Counsel for the plaintiff argues that it was at the instance of Sidhanthi PW2 the parties met. The first defendant did not deny the factum of the negotiations held on 16.11.1979 but subsequently he was tempted with a higher offer by D2 and D3 which made him resile from the earlier commitment made on 16.11.1979. The plaintiff would not have purchased stamp papers on 20.11.1979 if there was no earlier contract for sale on 16.11.1979. As regards sale price, advance money to be paid and agreement to be taken in writing, there was consensus between the parties on 16.11.1979 and as nothing more is required for a contract for sale to be brought into, existence, the Learned Counsel contends, that the view taken by the court below was correct and should not be disturbed in this appeal.

The question whether defendants 2 & 3 are bona fide purchasers for valuable consideration without knowledge of the alleged earlier contract for sale does not arise for consideration in this appeal: this was not argued in the court below and Shri Poornayya, Learned Counsel for the appellants very rightly says that unless the alleged contract for sale dated 16.11.1979 is established this question will not arise.

On the contentions advanced before me, the only question for decision in this appeal is whether there was a concluded contract for sale in respect of the suit property on 16.11.1979 between the plaintiff and the first defendant? It is for the plaintiff to establish by cogent and acceptable evidence about the alleged contract for sale between him and the first defendant on 16.11.1979. According to his evidence as PW1, on 7.11.1979 he and PW2 Sidhanthi went to the house of the first defendant at Ananda purarn and informed him that they were prepared to purchase the suit property. The first defendant replied that on 10.11.1979 he would come to Vizianagaram to the house of PW2 for negotiations. The negotiations were accordingly held on 10.11.1979 at the house of PW2 Sidhanthi where the offer made by first defendant to sell his house was for rupees one lakh but the counter offer made by him was for Rs. 50,000/- to 60,000/-. The first defendant left the place stating that he would again come to the same place on 6.11.1979 for negotiations and the crucial negotiations were held on 16.11.1979 at the house of PW2. It was asserted by the plaintiff that the bargain was settled for Rs. 75,000/- and he offered to pay an advance of Rs. 1,000/- or 2,000/- but the first defendant asked him to bring Rs. 20,000/-or 25.000/- to Anandapuram and asked PW2 Sidhanthi to fix the Muhurthan and the fatter fixed the auspicious time on 21.11,1979. In the meantime the first defendant came to the house of PW2 and asked that the money should be paid either by way of a bank draft drawn on the Cooperative Central Bank, Vizianagaram or in currency notes of the denominations of Rs. 10 or 50. The first defendant also informed them to bring stamp papers for within the draft agreement. Accordingly the plaintiff purchased two stamp papers on 20.11.1979 Exs.A1 and A2 worth Rs. 5/- each obtained a bank draft for Rs. 20,000/- and went to the house of the first defendant along with PW2 on 21.11.1979 in the taxi of PW3. He says that the first defendant asked whether they brought the bank draft. They replied that they brought a draft for Rs. 20,000/-. Then the first defendant remarked as to why they did not bring the draft for Rs. 25,000/-. To this the plaintiff replied that he would pay Rs. 5,000/- on the same day but the first defendant refused to execute the agreement. In the cross examination, PW1 state that when the negotiations took place at the house of PW2 he was having Rs. 4,000/- cash with him and when he offered the same by way of advance the first defendant wanted him to bring Rs. 20,000/- or 25,000/-.

Even from the evidence of PW1, it is not possible to draw the inference as to whether there was any specific agreement regarding the advance money to be paid. It is difficult to believe that there was concluded contract for sale in the absence of any specific understanding as to the advance amount to be paid. The negotiator PW2 Sidhanthi in the cross-examination admitted that "the first defendant wanted Rs. 25,000/- as advance. There is no agreement between the parties with regard to the quantum of advance to be paid. I suggested the agreement should be executed between the parties on 21st November 1979." Having stated so PW2 went back on that statement and came out with a different version and this is how this evidence was recorded by the court below: "The witness says again the first defendant agreed for advance of Rs. 20,000/-. I settled the advance amount also as Rs. 20,000/-." That the first defendant demanded higher amount and insisted that he would not settle for less than Rs. 90,000/- was admitted by PW1. The mediator also admitted that the first defendant asked him to inform other persons also about the suit property being available for sale. He also stated that on 16.11.1979 the first defendant told them that there were offers for Rs. 80,000/-. It is difficult to believe that a person who had higher offers, agreed to settle for lower consideration. There does not appear to be any special reason to infer that contrary'' to the normal conduct expected of reasonable and prudent persons he agreed to settle the price for Rs. 75,000/ -. It was the statement of the mediator PW2 that the "first defendant stated that there are offers for Rs. 85,000/-. After some discussion and negotiations I mediated and settled the sale price at Rs. 75,000/- for which the parties agreed. The first defendant then insisted on advance payment of not less than Rs. 20,000/- and not more than Rs. 25,000/-. "Even on 7th November 1979, when the talks were held for the first time, PW2 admitted in the cross-examination that the plaintiff offered Rs. 75,000/- and the first defendant replied that he was getting offers for Rs. 85,000/-.

From the mere circumstance that the plaintiff purchased the stamp papers and obtained the bank draft for Rs. 20,000/-. I find it difficult to hold there was an oral contract for sale. The discussions that took place on 16.11.1979 did not result in a contract for sale. There was no agreement as to the exact amount of advance to be paid. Even the plaintiff was not sure whether the advance amount agreed to be paid was Rs. 20,000/- or 25,000/-; he merely stated vaguely that the advance was Rs. 20,000/- or Rs. 25,000/- The first defendant who admittedly was having better offers would not have agreed to sell for lesser price of Rs. 75,000/- in the absence of any special circumstances compelling him to opt for such a course of action. No prudent person would agree to part with this property for a lesser price when there are offers for higher amounts. The conduct of the plaintiff in purchasing the stamp papers and obtaining bank draft do not necessarily suggest that there was a completed bargain on 16.11.1979. As negotiations were still going on there was nothing wrong or strange on his part in securing the stamp papers and bank draft; perhaps he thought that he could pin down the first defendant to agree for Rs. 75,000/- and persuade him to enter into an agreement in writing. The first defendant was also making attempts for getting agreement of sale executed in favour of persons who offered the highest amount. That is the reason why on 20.11.1979 he also purchased stamp papers Ex.B1 hoping that they would be in a position to settle the deal as by then several persons were making offers. It is in the evidence of DW3 that he settled the bargain for Rs. 85,000/-. The person who negotiated on behalf of defendants 2 & 3 was DW2. Both these witness attested the documents Exs.B1 & B3 is the counter part of Ex.B1. D2 and D3 purchased the stamp papers Exs.B1 and B3 whereas the first defendant purchased stamp papers for Ex.B1. DW3 is the son-in-law of PW2 Sidhanthi. They both tendered evidence on behalf of rival parties. The son-in-law''s (DW3) evidence is that his father-in-law informed him that the bargain between the plaintiff and the first defendant failed and that the first defendant did not agree to the offer of plaintiff to sell the property for Rs. 75,000/-.

From the evidence of PWs.1 and 2, I am inclined to draw the inference that the negotiations carried on 16.11.1979 were only provisional, a preclude to giving a concrete shape to the deal. The bargain failed to materialize on 21.11.1979. It could not, therefore, be said that there was "a concluded oral contract for sale even by 16.11.1979 itself u/s 54 of the Transfer of Property Act, it is not necessary that an agreement for sale should be in writing. There is no prohibition against oral contracts for sale. In every case where a party comes up with a plea of oral contract of sale it is the duty of the court to scrutinize the evidence very carefully before accepting that plea. When valuable properties are involved normally the parties do not conclude the bargain by oral arrangement but when a party comes to the court pleading that he is entitled to a specific performance based on an alleged oral contract for sale, the burden lies heavily upon him to establish by acceptable and cognant evidence what he pleaded. This rigorous test is warranted in order to prevent miscarriage of justice. The risk of owners of property being defrauded by resourceful litigants in the absence of the court adopting a strict and rigorous test in respect of oral contract for sale, is real. In AIR 1923 47 (Privy Council) speaking for the Board observed:

Whether an agreement is a completed bargain or merely a provisional arrangement depends on the intention of the parties as deducible from the language used by the parties on the occasion when the negotiations take a concrete shape.

The view expressed by Parker, J. in (1912)1 Ch. 284 was approved by the Privy Council in AIR 1946 97 (Privy Council) :

....it is a question of construction whether the execution of the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through.

(at p.289)

Lord Du Parcq speaking for the Board in the above case (2 supra) observed very realistically:

By the law of India, such an oral contract is valid and enforceable. It was however, natural enough that the parties should wish to have their agreement put in writing and drawn up in a proper form.

The plaintiff''s assertion in the instant case that there was a concluded and binding agreement on 16.11.1979 is not deducible from the evidence on record. The parties did not intend to finalize the agreement on 16.11.1979 and in fact the negotiations held on 16.11.1979 did not attain any finality. Defendants 2 and 3, as the evidence shows, are more affluent people running motor transport business; they were in need of suit property for keeping their vehicles and so they offered higher price and obtained a written contract for sale which subsequently culminated in Ex.B2, registered sale deed.

For the foregoing reasons, the judgment and decree of the court below are set aside and the appeal is allowed but in the circumstances without cost.