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2016 DIGILAW 1061 (KER)

Krishnamenon, S/o Illathuparambil Parameswara Menon v. Pradeep Kumar, S/o Mangattu Veettil Parameswaran Nair

2016-12-02

ANIL K.NARENDRAN, V.CHITAMBARESH

body2016
JUDGMENT : Anil K. Narendran, J. The appellant is the plaintiff in O.S.No.190/97 on the file of the Additional Subordinate Judge's Court, North Paravur, a suit for realisation of advance sale consideration of Rs. 2,00,000/- paid to the 1st defendant together with interest at the rate of 18% per annum from the defendants, with charge on the plaint schedule property. The trial court by the judgment dated 15.1.2001 decreed the suit in part, allowing the plaintiff to realise a sum of Rs. 2,29,000/- together with interest at the rate of 18% per annum from the date of suit till the date of decree and thereafter at the rate of 6% per annum till realisation with costs from the 1st defendant and his assets. Challenging the judgment and decree of the trial court to the extent of holding the 2nd defendant a bona fide purchaser and declining charge on the plaint schedule property in the hands of the 2nd defendant for the purchase money paid to the 1st defendant, the plaintiff is before this Court in this appeal. 2. We heard the arguments of the learned counsel for the appellant/plaintiff, the learned counsel for the 1st respondent/1st defendant and also the learned Senior Counsel for the 2nd respondent/2nd defendant. 3. Going by the plaint averments, on 3.9.1996 the plaintiff and the 1st defendant has entered into Ext.A1 agreement for the sale of the plaint schedule property having an extent of 15 cents in Sy.No.182/11F of Koyyuvally Village for a total consideration of Rs. 4,00,000/-, out of which Rs. 1,00,000/- was paid as advance sale consideration on the date of execution of that agreement. The validity of the said agreement was for a period of 6 months, within which the 1st defendant had to measure out the property and convince the plaintiff as to its actual extent. The 1st defendant had also to clear encumbrances, if any, on that property and also the loan amount of Rs. 1,50,000/- outstanding with the Agricultural Development Bank, Ernakulam. On 2.12.1996, the 1st defendant demanded a further advance of Rs. 1,00,000/- in order to clear off the debts over the property. Accordingly, the plaintiff paid the 1st defendant a further sum of Rs. 1,00,000/- and an endorsement to that effect was also made on the back side of Ext.A1 agreement. At the instance of the 1st defendant, the validity of Ext.A1 agreement was extended till 3.9.1997. 1,00,000/- in order to clear off the debts over the property. Accordingly, the plaintiff paid the 1st defendant a further sum of Rs. 1,00,000/- and an endorsement to that effect was also made on the back side of Ext.A1 agreement. At the instance of the 1st defendant, the validity of Ext.A1 agreement was extended till 3.9.1997. Though the plaintiff had approached the 1st defendant for the sale of the plaint schedule property, he was not ready to pay heed to that demand. In the meanwhile, the 1st defendant executed Ext.A7 sale deed dated 13.5.1997 in respect of the plaint schedule property, in favour of the 2nd defendant, for a total consideration of Rs. 50,000/-. On 27.6.1997, the plaintiff came to know about Ext.A7 sale deed. Therefore, he filed the suit for realisation of the advance sale consideration of Rs. 2,00,000/- together with interests and costs. 4. The 1st defendant filed written statement denying the execution of Ext.A1 sale agreement. The 1st defendant contended that, he had borrowed a total sum of Rs. 1,00,000/- from the plaintiff (Rs. 50,000/- on 3.9.1996 and a further sum of Rs. 50,000/- on 2.12.1996), for the construction of his house. The plaintiff misused the signed blank stamp papers obtained from him and converted it as an agreement for sale. The 1st defendant had no intention to sell the plaint schedule property. Due to financial crunch, he could not repay the amount borrowed from the plaintiff. Therefore, he sold the plaint schedule property to the 2nd defendant, vide Ext.A7 sale deed. He is ready to repay Rs. 1,00,000/- to the plaintiff together with reasonable interest. The 1st defendant has also contended that, the plaintiff is not entitled to get any decree with charge on the plaint schedule property. 5. The 2nd defendant filed written statement, contending, inter alia, that he had purchased the plaint schedule property from the 1st defendant after paying full consideration, vide Ext.A7 sale deed dated 13.5.1997, and there is no collusion between them. After the sale, the 2nd defendant is in possession of the plaint schedule property and he is the bona fide purchaser. Hence, the plaintiff is not entitled to get any decree with charge on the plaint schedule property. 6. Before the trial court, Pws.1 to 3 were examined and Exts.A1 to A7 were marked on the side of the plaintiff. After the sale, the 2nd defendant is in possession of the plaint schedule property and he is the bona fide purchaser. Hence, the plaintiff is not entitled to get any decree with charge on the plaint schedule property. 6. Before the trial court, Pws.1 to 3 were examined and Exts.A1 to A7 were marked on the side of the plaintiff. On the side of the defendants, Dws.1 and 2 were examined and Exts.B1 to B9 were marked. 7. After considering the pleadings and evidence on record, the trial court arrived at a conclusion that the 1st defendant had entered into a contract with the plaintiff for the sale of the plaint schedule property and received a sum of Rs. 2,00,000/- as advance sale consideration. Before the expiry of the term of that agreement the 1st defendant sold the said property to the 2nd defendant, who is a bona fide purchaser, who had no notice of the prior contract between the plaintiff and the 1st defendant. As such, the plaintiff is not entitled for a decree with charge on the plaint schedule property. Accordingly the suit was decreed in part for Rs. 2,29,000/- with future interest at the rate of 18% per annum from the date of suit till the date of decree and thereafter at the rate of 6% per annum till realisation together with costs, against the 1st defendant and his assets. 8. The 1st defendant has not chosen to file any appeal against the judgment and decree of the trial court. In the absence of any such appeal, the findings of the trial court that, the 1st defendant had entered into an agreement with the plaintiff for the sale of the plaint schedule property and received a sum of Rs. 2,00,000/- as advance sale consideration and that, before the expiry of the term of the said agreement the 1st defendant sold the said property to the 2nd defendant, have attained finality. Therefore, the issue that arises for consideration in this appeal is as to whether the plaintiff is entitled for a decree for realisation of the advance sale consideration paid to the 1st defendant with charge on the plaint schedule property in the hands of the 2nd defendant. 9. Therefore, the issue that arises for consideration in this appeal is as to whether the plaintiff is entitled for a decree for realisation of the advance sale consideration paid to the 1st defendant with charge on the plaint schedule property in the hands of the 2nd defendant. 9. In the impugned judgment, the trial court declined charge on the plaint schedule property for the advance sale consideration paid to the 1st defendant on a finding that, the 2nd defendant is a bona fide purchaser, who had no notice of the prior contract between the plaintiff and the 1st defendant. The trial court has also held that, mere inadequacy of consideration will not lead to an inference that the transfer evidenced by Ext.A7 sale deed executed between the 1st and 2nd defendants was a fraudulent transfer within the meaning of Section 53 of the Transfer of Property Act, 1882. 10. Section 53 of the Transfer of Properties Act, 1882 deals with fraudulent transfer. As per sub-section (1) of Section 53 of the Act, every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. The second paragraph of sub-section (1) of Section 53 provides that, nothing in sub-section (1) shall impair the rights of a transferee in good faith and for consideration. 11. In C. Abdul Shukoor Saheb v. Arji Papa Rao ( AIR 1963 SC 1150 ) the Apex Court held that, where fraud on the part of the transferor is established, i.e., the terms of sub-section (1) of Section 53 being satisfied, the burden of proving that the transferee fell within the exception is upon him; and, in order to succeed, he must establish that he was not a party to the design of the transferor, he did not share the intention with which the transfer had been effected, and that he took the sale honestly believing that the transfer was in the ordinary and normal course of business. 12. In the instant case, the plaintiff has succeeded in proving the execution of Ext.A1 sale agreement with the 1st defendant for the sale of the plaint schedule property for a total sale consideration of Rs. 4,00,000/- and also the payment of a total sum of Rs. 2,00,000/- as advance sale consideration. 12. In the instant case, the plaintiff has succeeded in proving the execution of Ext.A1 sale agreement with the 1st defendant for the sale of the plaint schedule property for a total sale consideration of Rs. 4,00,000/- and also the payment of a total sum of Rs. 2,00,000/- as advance sale consideration. He has also succeeded in proving that, before the expiry of the term of Ext.A1 agreement, the 1st defendant executed Ext.A7 sale deed in respect of the said property, in favour of the 2nd defendant for a paltry sum of Rs. 50,000/-. Admittedly, the plaintiff and the defendants are residents of the same locality, i.e., Kaitharam Kara of Kottuvally Village and the plaint schedule property is also situated in the same locality. The husband of the 2nd defendant, who was examined as DW2, has admitted that no enquiry with regard to encumbrances on the plaint schedule property or extent of the said property was made prior to the execution of Ext.A7 sale deed in favour of the 2nd defendant. 13. Once the plaintiff has succeeded in proving the execution of Ext.A1 sale agreement for Rs. 4,00,000/- and payment of an advance sale consideration of Rs. 2,00,000/-, the execution of Ext.A7 sale deed by the 1st defendant in favour of the 2nd defendant for the sale of the very same property for a paltry sum of Rs. 50,000/-, before the expiry of the term of Ext.A1 agreement and even without making any enquiry with regard to encumbrances on that property or its extent, made out a strong prima facie case of fraud in entering into Ext.A7 sale deed, shifting the burden on the 2nd defendant to prove that she was not a party to the design of the transferor and that, she did not share the intention with which the transfer had been effected and took the sale honestly believing that the transfer was in the ordinary and normal course of business. Since the 2nd defendant has miserably failed in discharging that burden, she will not fall within the exemption provided in the second paragraph of sub-section (1) of section 53 of the Act, i.e., a transferee in good faith and for consideration. Since the 2nd defendant has miserably failed in discharging that burden, she will not fall within the exemption provided in the second paragraph of sub-section (1) of section 53 of the Act, i.e., a transferee in good faith and for consideration. In that view of the matter, the finding of the trial court that the 2nd defendant was a bona fide purchaser of the plaint schedule property, who had no notice of the prior contract between the plaintiff and the 1st defendant, cannot be sustained. 14. We also notice that, when the suit filed by the plaintiff was for realisation of the advance sale consideration of Rs. 2,00,000/- paid to the 1st defendant and not one for specific performance of Ext.A1 sale agreement entered into between the plaintiff and the 1st defendant, or to set aside Ext.A7 sale deed executed between defendants 1 and 2 as a voidable transaction coming within the purview of Section 53 of the Transfer of Property Act, there was no necessity for the trial court to arrive at a finding whether the 2nd defendant was a transferee in good faith and for consideration. In such cases, the only question that has to be decided is as to the entitlement of the plaintiff for return of the advance sale consideration, in exercise of his rights as a buyer, under sub-section (6) of Section 55 of the Transfer of Property Act. 15. Section 55 of the Transfer of Properties Act, deals with rights and liabilities of buyer and seller. Sub-section (4) of Section 55, which deals with the rights of the seller and subsection (6) of Section 55, which deals with the rights of the buyer are extracted hereunder; "55. 15. Section 55 of the Transfer of Properties Act, deals with rights and liabilities of buyer and seller. Sub-section (4) of Section 55, which deals with the rights of the seller and subsection (6) of Section 55, which deals with the rights of the buyer are extracted hereunder; "55. Rights and liabilities of buyer and seller.-In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next following, or such of them as are applicable to the property sold:- xxx xxx xxx xxx "(4) The seller is entitled- (a) to the rents and profits of the property till the ownership thereof passes to the buyer; (b) where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer, [any transferee without consideration or any transferee with notice of the non-payment]*, for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part [from the date on which possession has been delivered]*. [*inserted by Section 17 of Act 20 of 1929] xxx xxx xxx xxx "(6) The buyer is entitled-- (a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof; (b) unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, [xxx]* to the extent of the seller's interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission. [*The words 'with notice of the payment' omitted by Section 17 of Act 20 of 1929] xxx xxx xxx xxx " 16. [*The words 'with notice of the payment' omitted by Section 17 of Act 20 of 1929] xxx xxx xxx xxx " 16. The omission of the words 'with notice of the payment' from clause (b) of sub-section (6) of Section 55 of the Transfer of Property Act, by Act 20 of 1929 makes the charge of the buyer, for the amount of any purchase-money properly paid in anticipation of the delivery and for interest on such amount, effective not only against the seller but also against all persons claiming under him, irrespective of notice of such payment. On the other hand, by the insertion of the words "any transferee without consideration or any transferee with notice of the nonpayment" in clause (b) of sub-section (4) of Section 55 of the Transfer of Property Act, by Act 20 of 1929 the seller's charge embodied in clause (b) of sub-section (4) for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part, is extended to a transferee from the buyer, but with the qualification that he must be a transferee without consideration or with notice of the non-payment. 17. In Ayyakutty Chettiar v. Imbichiamina Bi ( 1962 KLT 728 ) this Court held that, where the sale has not been completed, on fulfilling the conditions set forth in clause (b) of sub-section (6) of Section 55 of the Transfer of Property Act, the buyer is entitled to a charge on the property, as against the seller and all persons claiming under him, to the extent of the sellers interest in the property, for the amount of any purchase money properly paid by him. After the amendment of clause (b) of subsection (6) of Section 55, by Act 20 of 1929, such charge is enforceable also against all persons claiming under the seller, whether they have notice of the charge or not. Para.2 of the judgment is extracted hereunder; "2. The contention of the learned-counsel for the second defendant was, that Section 55(6) clause (b) of the Transfer of Property Act, under which the Judge gave a charge, has to be read subject to Section 100 of the Transfer of Property Act, and that in any event, Ext.A1 being unregistered, the plaintiff is not entitled to any relief as against the properties transferred to the second defendant. Section 55(6)(b) provides, that on the fulfilment of certain conditions, which it is not necessary to set forth, where the sale has not been completed, the buyer is entitled to a charge on the property, as against the seller and all persons claiming under him, to the extent of the sellers interest in the property, for the amount of any purchase money properly paid by him. Prior to the Amending Act of 1929, the words with notice of the payment occurred after the words all persons claiming under him and therefore the buyers charge was not available against a transferee without notice. It is plain that under the section in its present form, the charge is enforceable also against all persons claiming under the seller, whether they have notice of the charge or not. Section 55(6) is, in my opinion, a special provision while Section 100 is a general provision which must therefore yield to the former. This was held by the Bombay High Court in Hari Bapuji v. Bhagu Sadhu (AIR 1937 Bom. 142) and in Abdul Hamid Khan v. Mohamed Ali ( AIR 1952 Bom. 67 )." 18. In Madhava Kammathi v. Gopala Pai ( 1965 KLT 877 ) this Court held that, the extension of the charge provided by clause (b) of sub-section (6) of Section 55 of the Transfer of Property Act to all persons claiming under the seller irrespective of whether they were bona fide transferees for value or not was deliberate and not a slip, as is clear from the observations made by the Special Committee to which the Bill, which later became Act 20 of 1929, was referred to. Para.1 of the judgment is extracted hereunder; "1. ...... Before the amendment introduced by Act 20 of 1929, there appeared the words, 'with notice of the payment' in Section 55(6)(b) so that the charge provided in the section was available, so far as persons claiming under the seller were concerned, only against those with notice of the payment and not against a bona fide transferee for value. Those words were omitted by Act 20 of 1929, and it is to be remarked that by that very statute, the seller's charge embodied in Section 55(4)(b) was extended to a transferee from the buyer but with the important qualification added that he must be a transferee without consideration or with notice of the non payment. Those words were omitted by Act 20 of 1929, and it is to be remarked that by that very statute, the seller's charge embodied in Section 55(4)(b) was extended to a transferee from the buyer but with the important qualification added that he must be a transferee without consideration or with notice of the non payment. That the extension of the charge provided by Section 55(6)(b) to all persons claiming under the seller irrespective of whether they were bona fide transferees for value or not was deliberate and not a slip is clear from the following observation by the Special Committee to which the bill which later became Act 20 of 1929 was referred in its notes on the clause providing for the deletion of the words, 'with notice of the payment' from Section 55(6)(b); "Sub-clause (b) of clause (6) of the same section relates to the buyer's lien and provides that it can be enforced against the seller and other persons claiming under him with notice of the payment. It also provides that the buyer's lien can only be enforced against a person claiming under the seller, if such person has notice of the payment of the purchase money. The "transferees and legal representatives of a seller are thus enabled to escape any liability for the amount received by the seller by pleading that they had no notice of the payment of the purchase money. The reasons for limiting the seller's lien against third persons who have notice of the sale do not hold good in the case of the buyer's lien against persons claiming under the original seller. The words "with notice of the payment" in sub-clause (b) of clause (6) should, therefore, be omitted." 19. The reasons for limiting the seller's lien against third persons who have notice of the sale do not hold good in the case of the buyer's lien against persons claiming under the original seller. The words "with notice of the payment" in sub-clause (b) of clause (6) should, therefore, be omitted." 19. In Madhava Kammathi's case (supra) this Court, after referring to the saving in the second paragraph of Section 100 of the Transfer of property Act that, "save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge", held that the protection afforded is to a bona fide transferee for consideration from a person against whom a charge is given either by act of parties or operation of law, not to the very person against whom the charge is thus given even if it be that he is himself a bona fide transferee for consideration. Clause (b) of sub-section (6) of Section 55 of the Act gives the charge "as against the seller and all persons claiming under him" without any exception made in favour of a bona fide transferee for value. Therefore, such a person is also a person against whom the law itself provides a charge and it follows that he is not entitled to the protection in the second paragraph of Section 100 of the Act. 20. In Delhi Development Authority v. Skipper Construction Co. (P) Ltd. ( 2000 (10) SCC 130 ) the Apex Court held that, the charge on the property under clause (b) of sub-section (6) of Section 55 of the Act is enforceable not only against the seller but also against all persons claiming under him. Before the amending Act of 1929, the words "with notice of payment" occurred after the words "all the persons claiming under him". These words were omitted as they allowed a transferee without notice to escape. After the amendment of 1929, notice to the purchaser has now become irrelevant. 21. Before the amending Act of 1929, the words "with notice of payment" occurred after the words "all the persons claiming under him". These words were omitted as they allowed a transferee without notice to escape. After the amendment of 1929, notice to the purchaser has now become irrelevant. 21. The legal position that emerges from the decisions referred to above is that, the provisions under clause (b) of subsection (6) of Section 55 of the Transfer of Property Act, as amended by Act 20 of 1929, makes the charge of the buyer for the purchase-money properly paid effective not only against the seller, but also against all persons claiming under him, irrespective of notice of such payment of purchase-money. Therefore, the charge provided under clause (b) of sub-section (6) of Section 55 of the Act is available even as against a bona fide transferee for value from the seller. 22. In Molly Ajith Kumar v. Vimala Sasidharan ( 2012 (1) KLT 555 ), this Court held that the statutory charge under clause (b) of sub-section (6) of Section 55 of the Transfer of Property Act would never be lost to the vendor even though he has not filed a suit for specific performance on the basis of the agreement for sale. For the purchase price paid by him, he is entitled to a charge over the property and the legal requirement is that he has not improperly declined to accept delivery of the property. 23. In the instant case, the defendants have no case that the plaintiff ever improperly declined to accept delivery of the plaint schedule property on the basis of Ext.A1 sale agreement. On the other hand, it has come out in evidence that during the validity of Ext.A1 sale agreement, the 1st defendant executed Ext.A7 sale deed in favour of the 2nd defendant by which the plaint schedule property was sold for a paltry sum of Rs. 50,000/-. On the other hand, it has come out in evidence that during the validity of Ext.A1 sale agreement, the 1st defendant executed Ext.A7 sale deed in favour of the 2nd defendant by which the plaint schedule property was sold for a paltry sum of Rs. 50,000/-. Since the statutory charge under clause (b) of sub-section (6) of Section 55 of the Act comes into force the moment the buyer pays the purchase money or any part thereof and such charge would be lost only if the buyer commits default, conclusion is irresistible that the plaintiff is entitled for a decree for the advance sale consideration paid to the 1st defendant together with interest and cost, with charge on the plaint schedule property in the hands of the 2nd defendant. The finding to the contra by the trial court cannot be legally sustained. 24. In Delhi Development Authority v. Skipper Construction Co. (P) Ltd. ( 2000 (10) SCC 130 ) the Apex Court held that, as per sub-section (6) of Section 55 of the Transfer of property Act the buyer is entitled to interest on the amount of purchase money paid and that, interest is payable from the date of payment of the purchase money to the seller till the date of delivery of property to the purchaser or till the execution of the sale deed, whichever is earlier. 25. Section 3 of the Interest Act, 1978 deals with the power of the Court to allow interest. As per sub-section (1) of Section 3 of the said Act, in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the periods enumerated in clauses (a) and (b) of that sub-section. 26. In M/s. MSK Projects (I) (JV) Ltd. v. State of Rajasthan ( 2011 (10) SCC 573 ) the Apex Court held that, the provisions in Section 3 of the Interest Act empower the Court to award interest at the rate prevailing in the banking transactions. 26. In M/s. MSK Projects (I) (JV) Ltd. v. State of Rajasthan ( 2011 (10) SCC 573 ) the Apex Court held that, the provisions in Section 3 of the Interest Act empower the Court to award interest at the rate prevailing in the banking transactions. Thus, impliedly, the Court has a power to vary the rate of interest agreed by the parties. 27. In the instant case, the trial court granted interest for the advance sale consideration at the rate of 18% per annum, which is on a higher side considering the rate of interest prevailing at that point of time in the banking transactions. As such, keeping in mind the law laid down by the Apex Court in the decisions referred to above, and considering the facts and circumstances of the case, we deem it appropriate to scale down the rate of interest from 18% per annum to 9% per annum from the date of payment of the advance sale consideration till the date of decree. Thereafter, the plaintiff shall be entitled for interest at the rate of 6% per annum, as granted by the trial court. In the result, the plaintiff is allowed to realise a sum of Rs. 2,00,000/- together with interest at the rate of 9% per annum for Rs. 1,00,000/- from 3.9.1996 till the date of decree and interest at the said rate for the balance sum of Rs. 1,00,000/- from 2.12.1996 till the date of decree, together with future interest at the rate of 6% per annum till realisation and costs from the 1st defendant and his assets and also by proceeding against the plaint schedule property in the hands of the 2nd defendant, in view of the statutory charge on that property under clause (b) of sub-Section (6) Section 55 of the Transfer of Property Act. The judgment and decree of the trail court is modified to the extent indicated above. The appellant/plaintiff shall also be entitled to costs of this proceedings.