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2005 DIGILAW 462 (AP)

Karri Venkata Rama Reddy v. Union Bank of India

2005-06-06

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( 1 ) HEARD the learned counsel on record. ( 2 ) THE 7th defendant in O. S. No. 37 of 1982, on the file of the learned Subordinate judge, Eluru, had preferred this appeal showing the Union Bank of India, the plaintiff alone, as the sole respondent. The other defendants being not necessary parties to the appeal. The limited ground on which the appellant herein-7th defendant contested the suit is on the strength of Ex. B. 32, the agreement of sale, executed by Polavarapu satyanarayana Chowdary in favour of Karri subbareddy. ( 3 ) AS can be seen from the respective pleadings of the parties, issues were settled and evidence was recorded. The appellant- 7th defendant herein was impleaded as a party to the suit only with a view to enforce the said debt as against the 7th defendant too relating to items 1 and 3. In the light of the agreement of sale standing in the name of the said Karri Subbareddy, the father of the appellant-7th defendant. There is no serious controversy relating to the genuineness of the document in question, the agreement of sale dated 5-4-1970. It is also not in serious controversy that the vendor under the said agreement of sale-Ex. B. 32, borrowed a sum of Rs. 15,000/- from the respondent-plaintiff bank for raising crop on 6-10-1976 by deposit of title deeds with an intention to create security for the loan amount, agreeing to repay the same with interest at 14% p. a. with quarterly rests. ( 4 ) SRI Srinivasamurty, learned counsel representing the appellant-7th defendant, in all fairness would contend that it is true that a mere agreement of sale would not create an interest in the property as such, but it creates an obligation annexed to the ownership of the immovable property not amounting to interest and the said obligation may be enforced against transferee. The learned counsel also placed strong reliance in Bai Dosabai v. Mathurdas Govinddas, AIR 1980 SC 1334 in this regard. ( 5 ) THE standing counsel representing the bank on the contrary would contend that in the event of the bank being unable to realize the decretal amount from the other items, liberty may be given to proceed as against items No. 1 and 3 also since bank is interested in recovery of the amount advanced as loan. ( 5 ) THE standing counsel representing the bank on the contrary would contend that in the event of the bank being unable to realize the decretal amount from the other items, liberty may be given to proceed as against items No. 1 and 3 also since bank is interested in recovery of the amount advanced as loan. ( 6 ) THE respective pleadings of the parties are as hereunder : it is pleaded in the plaint that on 6-10-1976 Polasani Satyanarayana Chowdary borrowed a sum of Rs. 15,000/- from the plaintiff-bank for raising crops in the plaint schedule lands, agreeing to repay the same with interest at 14l/2% p. a. with quarterly rests and deposited his title deeds with an intention to create security for the loan amount. The said P. S. N. Choudary also executed pronoles in favour of plaintiff-bank for Rs. 10,500/- on 6-10-1976, Rs. 1000/- on 9-11-1976; Rs. 2000/- on 17-11-1976 and Rs. 1500/- on 6-1-1976 towards the loan amount of Rs. 15,000/ -. The defendants 1 and 2 executed an indemnity and guarantee bonds in favour of plaintiff on the same day. The liability under the terms of the said indemnity and guarantee bonds is co-extensive with that of the principal borrower. The said P. S. N. Chowdary during his lifetime did not make any payments and clear the loan in spite of several requests made by the Officers of the plaintiff-bank, but only a single payment was made by transfer on 2-11-1997 of Rs. 1,620/ -. The said principal borrower Chowdary died intestate and without issues in the month of may, 1977. On enquiry and publication in"enadu paper, it is learnt that there were no heirs existing by the time of the death of satyanarayana Chowdary in the month of may, 1977 entitled to succeed under the hindu Succession Act and redeem the suit equitable mortgage. Under Section 29 of the hindu Succession Act, 1956 the properties including the plaint schedule properties of the deceased Satyanarayana Chowdary will revert back to the A. P. State Government on the failure or absence of legal heirs. The state Government is impleaded as defendant no. 3 as a consequence because the owner of the plaint schedule properties and is therefore, entitled to redeem the suit mortgage debt due to the plaintiff. The state Government is impleaded as defendant no. 3 as a consequence because the owner of the plaint schedule properties and is therefore, entitled to redeem the suit mortgage debt due to the plaintiff. The defendants 3 and 5 got issued a notice through their counsel to the plaintiff-bank on 117-9-1979 alleging thereunder that R. S. No. 7/ 2 (Ac. 2-40 cents) R. S. No. 9 (Ac. 4-40) and r. S. No. 8/2 (Ac. o-22 cents) totalling to ac. 7-02 cents) consisting of a single plot was sold to the husband of the 4th defendant and 5th defendant by P. S. N. Chowdary under a registered sale deed dated 7-7-1969 and the suit mortgage does not bind them in respect of the said property. The said sale was not disclosed in the Encumberance certificate issued by the Sub-Registrar s office, chintalapudi for the year, 1964 to 1976. The r. S. Nos. given in the notice differ from the r. S. Numbers mentioned in the title deeds in respect of the suit schedule properties. The defendants 4 and 5 are also not in possession of the plaint schedule properties. The alleged sale even if true, is not a transaction binding on the plaintiff. The 6th defendant got issued a notice by his counsel dated 17-9-1979 to the plaintiff alleging thereunder that he purchased Ac. 1-00 from p. S. N. Chowdary under a registered sale deed dated 2-8-1971 and another Ac. 1-00 of land, and therefore, the plaintiff cannot proceed against the said lands, for which the plaintiff got issued a reply notice alleging that the transaction appears to be not a genuine one and binding on the plaintiff. The 7th defendant got issued a registered notice through his advocate dated 5-10-1981 stating that his late father Subbireddi purchased an extent of Ac. 18-45 cents in r. D. No. 20081 from P. S. N. Chowdary under an agreement of sale dated 5-4-1970 and that the said Subbireddi and after him, the 7th defendant have been in possession of the same. The said agreement of sale is a spurious or benami transaction and therefore is not binding on the plaintiff. None of the above alleged purchasers ever approached the plaintiff-bank making a claim to any part of the part plaint schedule properties. The said agreement of sale is a spurious or benami transaction and therefore is not binding on the plaintiff. None of the above alleged purchasers ever approached the plaintiff-bank making a claim to any part of the part plaint schedule properties. On enquiries made by the A. P. , chinthalapudi, revealed that the 8th defendant has been managing the estate of the deceased Polavarapu Satyanarayana chowdary including the plaint schedule lands and therefore he is also impleaded as a party to the suit, Act IV of 1938 and Act vii of 1977 are not applicable to the suit loan. ( 7 ) THE other defendants also filed the respective written statements and the same may not be necessary for the present purpose. The 7th defendant-appellant herein filed a separate written statement disputing the allegations and pleading as hereunder : this defendant s father purchased Ac. 18-45 cents from P. S. Chowdary for a valuable consideration of Rs. 4000/- and the terms they had agreed upon were incorporated in the agreement of sale deed 5-4-1970. At the time of sale agreement, an amount of Rs. 3500/- out of the consideration was paid to the said P. S. Chowdary, and ever since he is in possession of the said land as per the agreement of sale in part-performance thereof. At the time of sale transaction, the said P. S. Chowdary represented that the land agreed to be sold constituted as one plot, though purchased by him from two different persons under two separate sale deeds, one from Vadapalli Satyanarayana and another from Veerla Gangaraju and that some portion out of the extent covered by the first document was already alienated in favour of Matumumulli Paddayya and another. As the land sold to late Subbireddi was acquired by the vendor under two different sale deeds, constituting as a single plot, the said land was described in the sale agreement by its popular name with the annum T. D. No. with its correct boundaries. In the year, 1972, the A. P. Agricultural Land (Prohibition of Alienation) Ordinance and acts were passed. The said P. S. Chowdary had excess of land over the ceiling area. The ordinance and the Act prohibited transfer by way of sale etc. In the year, 1972, the A. P. Agricultural Land (Prohibition of Alienation) Ordinance and acts were passed. The said P. S. Chowdary had excess of land over the ceiling area. The ordinance and the Act prohibited transfer by way of sale etc. , and in view of the prohibition on alienation of lands and as P. S. Chowdary was advised that the present sale agreement comes within the purview of the act he extended the period of performance of the said agreement of sale on 15-6-1972 and endorsed the same on the back of the said agreement and signed it. As the enquiry into the declaration of the said P. S. Chowdary before the Land Reforms Tribunal was not yet over and as the prohibition against sales etc. , was in force, the said P. S. Chowdary subsequently got written another endorsement dated 15-6-1975 reciting the said reasons for extending the time for performance of the sale agreement till after the enquiry before the Tribunal was over. The said P. S. Chowdary received from late subbareddi garu the balance of consideration also i. e. Rs. 500/- after 15-6-1972 and before 15-6-1975 and also got it recited in the above mentioned 2nd endorsement dated 15-6-1975. The said Subbireddi garu and after his death, this defendant have always been ready and willing to perform their part of the sale agreement and if a proper sale deed was not executed, it was only due to the delay and laches of the said Chowdary. In views of the fact that the said Chowdary received the balance consideration of Rs. 500/- also he could not execute the sale deed, the interest clause in the agreement of sale was agreed to be given up. Ever since they have been in possession and enjoyment of the said extent of Ac. 18-45 cents with absolute rights and they effected improvements by spending about Rs. 12,000/ -. This defendant identified items 1 and 3 of the plaint schedule as the land conveyed to them under the above said sale agreement dated 5-4-1970. This defendant or his father were informed about the alleged mortgage transaction either by P. S. Chowdary or by plaintiffs officials. So, neither P. S. Chowdary nor the bank has any right in or over the property of this defendant after the execution of the sale agreement dated 5-4-1970. This defendant or his father were informed about the alleged mortgage transaction either by P. S. Chowdary or by plaintiffs officials. So, neither P. S. Chowdary nor the bank has any right in or over the property of this defendant after the execution of the sale agreement dated 5-4-1970. The plaintiff-bank is negligent in not verifying the actual title and possession of the property covered by the sale deeds deposited with them and especially the sale deeds deposited with them and especially the sale deeds relating to this defendant s property. Therefore, this defendant is not a necessary and proper party to this suit. ( 8 ) SEVERAL issues were settled and ultimately, the suit was decreed against all the defendants and aggrieved by the same, inasmuch as the appellant-7th defendant is interested in Items 1 and 3 of the plaint schedule, this appeal had been preferred. Issue No. 7 was settled by the trial Court as hereunder : whether the 7th defendant is a bona fide purchaser in possession under an agreement of sale dated 5-4-1970 and not liable for the suit claim? ( 9 ) BEFORE the trial Court, P. Ws. 1 and 2 were examined and Exs. A1 to A21, Exs. B. 1 to B. 53 were marked. The 7th defendant was examined as D. W. 5 and Ex. B. 32-agreement, dated 5-4-1970 and Ex. B. 33 endorsement and Ex. B. 34, yet another endorsement, also had been marked. The attestor of the said agreement of sale was examined as D. W. 6. ( 10 ) ON the material available on record, the following points arise for consideration in this appeal: 1. Whether the appellant-7th defendant and items 1 and 3 of the plaint schedule also can be made liable for the suit debt in the facts and circumstances? 2 To what relief? ( 11 ) THE facts are not in serious dispute and as can be seen from the evidence available on record, D. Ws. 5 and 6 and also Exs. B. 32 to 34, there is no serious controversy about the agreement of sale Ex. B. 32, entered into on 5-4-1970. It is also not in serious controversy that the person, who entered into the said agreement of sale with father of the appellant-7th defendant, contracted the suit debt from the bank in question, which is subsequent thereto i. e. on 6-10-1976. B. 32, entered into on 5-4-1970. It is also not in serious controversy that the person, who entered into the said agreement of sale with father of the appellant-7th defendant, contracted the suit debt from the bank in question, which is subsequent thereto i. e. on 6-10-1976. It is nobody s case that to defeat the suit debt an agreement of sale was brought into existence, which is an antedated one. The only contention argued in elaboration is that the agreement of sale simpliciter will not create interest in an immovable property. In Bai Dosabai s case, AIR 1980 SC 1334 while dealing with the contracts it may be a specifically enforced obligation annexed to ownership of the property not amounting to an interest in property and the nature of trust which can be specifically enforced. In the light of Section 3 of the Indian Trusts Act and also Sections 40 and 54 of the Transfer of Property act, 1882 and Sections 12 and 16 of the specific Relief Act, the Apex Court held (Para 3, 6, 9 and 10) : we do not wish to go in any detail into the question whether the English Equitable doctrine of conversion of realty into personality is applicable in India. However, we do wish to say that the English doctrine of conversion of realty into personality cannot be bodily lifted from its native English soil and transplanted in statute-bound Indian law. But, we have to notice that many of the principles of English Equity have taken statutory form in India and have been incorporated in occasional provisions of various indian statutes such as the Indian Trusts act, the Speciiic Relief Act. Transfer of Property Act etc. , and where a question of interpretation of such Equity based statutory provisions arises we will be well justified in seeking aid from the Equity Source. The concept and creation of duality of ownership, legal and equitable, on the execution of an agreement to convey immovable property, as understood in England is alien to indian Law which recognizes one owner i. e. the legal owner: vide Rambaran Prasad v. Ram Mohit Haqra, (167) 1 SCR 293 : AIR 1967 SC 744 and Narandas Karsondas v. S. A. Kamtam, (1977) 2 SCR 341 : AIR 1977 sc 774 . The ultimate paragraph of Section 54 of the Transfer of Property Act, expressly enunciates that a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property. But the ultimate and penultimate paragraphs of section 40 of the Transfer of Property Act make it clear that such a contract creates an obligation annexed to the ownership of immovable property, not amounting to an interest in the property, but which obligation may be enforced against a transferee with notice of the contract or a gratuitous transferee of the property. Thus, the equitable ownership in property recognized by Equity in England is translated into indian law as an obligation annexed to the ownership of property, not amounting to an interest in the property, but an obligation which may be enforced against a transferee with notice or a gratuitous transferee. . . . . . . . . . . . . . . . . . . . We may now consider the deed dated February 25, 1946 the important and relevant terms of which we have either summarized or extracted earlier. We have also pointedly mentioned some peculiar features of the deed. From the terms of the deed we gather that the right of the lessor, basically is to get the full sale price of Rs. 1,29,111-8-0 either from the lessee or by selling the property by public auction if the lessee does not himself want to buy, the lessee however, making up deficit, The lessor is under an obligation to sell the land to the lessee if the latter so desires within a period of seven years and pays the purchase price and, if he dpes not so desire, to sell the land by public auction and to recoup the balance of the stipulated price. The lessor is under an obligation to pay the excess price, if any, realized by the sale by public auction to the lessee. To sell, the property by public auction is thus both a right and an obligation. The obligation of the lessee is to pay one-fourth of the stipulated price in advance and to pay the balance if he desires to purchase the property or to pay the deficit, if any. if the lessor is obliged to sell the property consequent on his failure to purchase. The obligation of the lessee is to pay one-fourth of the stipulated price in advance and to pay the balance if he desires to purchase the property or to pay the deficit, if any. if the lessor is obliged to sell the property consequent on his failure to purchase. His right is to obtain a sale deed by paying the balance price or to get any excess amount realized at the public auction. Whatever happens, is not entitled to get a refund of the advance of one fourth of the purchase price paid by him, and whatever happens the lessor is bound to sell the property either to the lessee or by public auction. We do not have any doubt, on a consideration of the terms of the deed and the relevant statutory provisions earlier referred, that the obligation of the lessor to sell the land by public auction and pay the excess price to the lessee is an obligation annexed to the ownership of the property, not amounting to an interest in the property, that it is an obligation in the nature of a trust, and, therefore, an obligation which may be specifically enforced. It is no doubt true that an agreement of sale, per se, may not create any interest in an immovable property. In the light of the peculiar facts that inasmuch as it is nobody s case that the agreement of sale is an antedated one with a view to defeat the suit debt and also taking into consideration the recitals of Exs. A. 32 to 34 and also the oral evidence, D. Ws. 5 and 6, available in this regard, this Court is of the considered opinion that the transaction is a bona fide transaction and the suit debt had been contracted long thereafter. Apart from this aspect to the matter it is not the stand taken by the bank that the bank is unable to realize the amount from the other items available. In the light of the peculiar facts the trial Court erred in fastening the liability as against the appellant-7th defendant, also in relation to Items 1 and 3 of the plaint schedule. This point is answered accordingly. In the light of the peculiar facts the trial Court erred in fastening the liability as against the appellant-7th defendant, also in relation to Items 1 and 3 of the plaint schedule. This point is answered accordingly. ( 12 ) IN the light of the evidence recorded above, the appeal is allowed to the extent indicated above, so far as it relates to the appellant-7th defendant is concerned, holding that the plaintiff-bank is not entitled to proceed as against items 1 and 3 and appellant-the 7th defendant for the purpose of realising the suit debt. ( 13 ) ACCORDINGLY, the appeal is allowed to the extent indicated above. No order as to costs. Order accordingly.