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Rajasthan High Court · body

2018 DIGILAW 144 (RAJ)

Gopal v. Omega Infrasturcture Limited

2018-01-10

PRAKASH GUPTA

body2018
JUDGMENT : PRAKASH GUPTA, J. 1. Under challenge is the order and decree dated 12.7.2016 passed by the Additional District Judge, No.10, Jaipur Metropolitan whereby the court rejected the plaint of the appellant-plaintiff under Order 7 Rule 11 CPC on the ground that the plaint failed to disclose any cause of action. Against this order and decree, the instant first appeal is filed. 2. Brief facts giving rise to this appeal are that the plaintiff appellant filed a suit for declaration to the effect that registered sale deed dated 5.12.2006 be declared null and void. It was pleaded in the plaint that the plaintiff-appellants had sold a property bearing No.340 situated at village Udaipuria, Tehsil Amer, District Jaipur to the respondents vide registered sale deed dated 5.12.2006. In lieu of the said property, a consideration of Rupees 48, 30, 000 was agreed to be paid by the respondent to the plaintiff-appellants. Out of the total consideration of 48,30,000, a sum of 1 lakh rupees was paid by the respondent through a cheque and for the remaining part of the consideration, three post-dated cheques of Rupees 40,00,000, 3,65,000 and 3,65,000 were given by the respondent to the plaintiffs. These three cheques, when sought to be en-cashed by the plaintiff-appellants, were returned with endorsement of "stop payment". It is the case of the plaintiffs-appellants that the respondent, with an intention to deceive the plaintiff-appellants, issued these cheques and subsequently directed the banks to stop the payment. 3. During the pendency of the suit, the respondent filed an application under Order 7 Rule 11 CPC contending therein that the non-payment of consideration did not amount to deceive and since the plaint failed to disclose any cause of action, the same was liable to be rejected within the provisions of Order 7 Rule 11 CPC. The respondent further contended that since the plaintiffs appellants had not sought the cancellation of the sale deed, therefore, the suit was not maintainable. Thus, the respondent prayed for the rejection of the plaint at the outset. 4. The learned trial court after hearing both the parties accepted the application and rejected the plaint vide the impugned order. Hence, the present first appeal is filed. 5. Mr. Thus, the respondent prayed for the rejection of the plaint at the outset. 4. The learned trial court after hearing both the parties accepted the application and rejected the plaint vide the impugned order. Hence, the present first appeal is filed. 5. Mr. R.K. Agarwal, learned senior counsel appearing on behalf of the plaintiffs-appellants contended that the trial court erred in rejecting the plaint of the plaintiffs-appellants as the case did not fall within any of the provisions of Order 7 Rule 11 CPC. The submission of Mr. Agarwal was twofold. First, he contended that since from the intention of the parties, it was made out that payment of consideration in the instant case was a pre-requisite for completion of the sale. Since the payment of consideration by the respondent to the plaintiffs-appellants was not complete and possession also did not get transferred, the sale itself was not complete. Mr. Agarwal contended that consideration was the essence of the agreement in this case and without the payment of the same, the sale could not have been completed. Since the sale was not complete, the plaintiff-appellants could ask for declaring the sale deed null and void. In order to support his contentions, Mr. Agarwal relied on the decisions of the Hon'ble Supreme Court in Kaliperumal Vs. Rajgopal and Another, (2009) 4 SCC 193 and Janak Dulari Devi and Another Vs. Kapildeo Rao and Another, (2011) 6 SCC 555 . The second submission of Mr. R.K. Agarwal was that promising to pay consideration and then directing the banks to stop the payment by the respondents showed mischief on their part and an intention to deceive the plaintiffs-appellants. Refusing to pay the balance consideration with an intention to deceive would come within the ambit of "fraud" and hence, the plaint did disclose a cause of action. In support of his arguments, Mr. Agarwal relied on the judgments of the Allahabad High Court in Rajendra Prakash Vs. Babita Gupta, (2000) 40 AllLR 196 and Gujrat High Court in the case of Parmar Narmadaben Vs. Amratilal Motibhai, 2017 AIR(CC) 540. 6. On the other hand, learned senior counsel appearing for the respondent Mr. In support of his arguments, Mr. Agarwal relied on the judgments of the Allahabad High Court in Rajendra Prakash Vs. Babita Gupta, (2000) 40 AllLR 196 and Gujrat High Court in the case of Parmar Narmadaben Vs. Amratilal Motibhai, 2017 AIR(CC) 540. 6. On the other hand, learned senior counsel appearing for the respondent Mr. Sudhanshu Kasliwal supported the order of the trial court and argued that since the sale had been complete, the only remedy available for the plaintiffs-appellants was to sue for payment of consideration and they could not bring a suit for declaring the sale deed null and void, especially when no relief of cancellation was sought for. Mr. Kasliwal further argued that nonpayment of consideration cannot show deceit on part of the respondent and hence, there was no fraud and the plaint being without any cause of action, was rightly rejected by the court below. Mr. Kasliwal relied on the judgment of the Supreme Court in Vidhyadhar Vs. Mankikrao & Anr., (1999) 1 ApexCJ 438, to content that even if the part of the sale consideration is not paid, the sale would not become invalid. The property sold would stand transferred to the buyer, subject to the statuary charge for the unpaid part of the sale price. Mr. Kasliwal also relied on the judgment by Division Bench of this Court in the case of Mst. Munavirunnisa Begum & Ors. Vs. Mohd. Islam & Ors., (2015) 3 WLC(Raj) 1 to contend that title of the property passes by due execution and registration of sale deed irrespective of the payment of sale price and the only remedy available to an unpaid seller in such cases is to sue for recovery of the unpaid sale price. It is also contended by him while relying on the judgment of the Apex Court in the case of Church of Christ Charitable Trust And Educational Charitable Society Vs. Ponniamman Educational Trust, (2012) 8 SCC 706 , that if the averments made in the plaint do not disclose a clear right or material basis to sue, the plaint must be rejected under Order 7 Rule 11 CPC. Mr. Kasliwal has further relied on the judgment of the Supreme Court in the case of Suhrid Singh Alias Sardool Singh Vs. Ponniamman Educational Trust, (2012) 8 SCC 706 , that if the averments made in the plaint do not disclose a clear right or material basis to sue, the plaint must be rejected under Order 7 Rule 11 CPC. Mr. Kasliwal has further relied on the judgment of the Supreme Court in the case of Suhrid Singh Alias Sardool Singh Vs. Randhir Singh & Ors., (2010) 12 SCC 112 to contend that the executant of a sale deed has to file a suit for cancellation if he wants to get the sale deed annulled as opposed to a third party who can file a suit for declaration that the sale deed is non-est or void. 7. I have heard the learned counsels for both the parties. There are essentially three issues that arise for consideration in the present case. (i) Whether consideration formed the essence of the agreement in this case? In other words, did the parties intend that the title of the property would not pass until and unless the entire consideration was paid? (ii) Whether the sale was complete in the instant case and hence, the only remedy for the plaintiff appellants was to sue for the payment of consideration? (iii) Did the plaint disclose a cause of action by alleging fraud on part of the respondent? 8. In Kaliaperumal, the Hon'ble Supreme Court had an occasion to consider the effect of non-payment of consideration on sale even thought the sale-deed was executed and registered on a prior date. The Hon'ble Court held that if the parties intended that ownership of the property would be transferred only after receipt of the entire consideration, sale would not be deemed to be complete even though the sale-deed was executed and registered. The relevant paragraphs of the judgment are reproduced below:- "20. In this case, the execution of the sale deed on June 26, 1983 is not in dispute. The said instrument was presented for registration on October 21, 1983 and registered on October 26, 1983, as the first respondent/vendor appeared before the Sub-Registrar and admitted that the vendors had executed the documents, but refused to make an endorsement to that effect on the deed as the vendors had not received the balance consideration of Rs.40, 000/-. 21. The said instrument was presented for registration on October 21, 1983 and registered on October 26, 1983, as the first respondent/vendor appeared before the Sub-Registrar and admitted that the vendors had executed the documents, but refused to make an endorsement to that effect on the deed as the vendors had not received the balance consideration of Rs.40, 000/-. 21. Applying the above mentioned principles to the facts of this case, we find that the parties intended that ownership of the property would be transferred to the appellant only after receipt of the entire consideration by the vendors, as a condition precedent. The operative portion of the sale deed clearly states that the vendors have agreed to receive Rs.40, 000/- in the presence of the Sub- Registrar on the date of the registration of the sale deed and that in consideration of payment to be so made, the property was being conveyed to the purchaser. This makes it clear that the title was intended to pass only on the payment of balance consideration of Rs.40, 000/- in the presence of the Sub-Registrar. This is also supported by the evidence of DW-1 to DW-4. The Sub-Registrar has also clearly recorded that no amount was tendered or paid by the purchaser to the vendors in his presence. Therefore title in fact did not pass either on execution or registration of the sale deed. 22. There is yet another circumstance to show that title was intended to pass only after payment of full price. Though the sale deed recites that the purchaser is entitled to hold, possess and enjoy the scheduled properties from the date of sale, neither the possession of the properties nor the title deeds were delivered to the purchaser either on the date of sale or thereafter. It is admitted that possession of the suit properties purported to have been sold under the sale deed was never delivered to the appellant and continued to be with the respondents. In fact, the appellant, therefore, sought a decree for possession of the suit properties from the respondents with mesne profits. If really the intention of the parties was that the title to the properties should pass to the appellant on execution of the deed and its registration, the possession of the suit properties would have been delivered to the appellant." Similar observations were made by the Supreme Court in Janak Dulari Devi . If really the intention of the parties was that the title to the properties should pass to the appellant on execution of the deed and its registration, the possession of the suit properties would have been delivered to the appellant." Similar observations were made by the Supreme Court in Janak Dulari Devi . The relevant paragraph of the judgment is reproduced below:- "13. Where the sale deed recites that on receipt of the total consideration by the vendor, the property was conveyed and possession was delivered, the clear intention is that title would pass and possession would be delivered only on payment of the entire sale consideration. Therefore, where the sale deed recited that on receipt of entire consideration, the vendor was conveying the property, but the purchaser admits that he has not paid the entire consideration (or if the vendor proves that the entire sale consideration was not paid to him) , title in the property would not pass to the purchaser." 9. The two judgments cited above are to the effect that the ownership of a property is not transferred if it is the clear intention of the parties that ownership would be transferred only on the payment of the entire consideration, even though the sale-deed might have been executed and registered on a prior date. Such intention is primarily to be gathered from the recitals of the sale-deed and in case of insufficiency of the recitals of sale-deed, it is to be gathered from the circumstances and conduct of the parties. 10. As far the issue as to whether the sale was not complete in this case, is concerned, after duly analysing the above judgments, I am of the considered opinion that the said judgments are not applicable to the instant case. A perusal of the sale-deed clearly shows that the plaintiff-appellants did not intend that the ownership of the property would be transferred only upon the payment of the entire consideration. In the absence of clear intention, it cannot be said that the ownership was to get transferred only upon payment of consideration. However, despite this, whether the sale was complete or not in the instant case, is a question which is to be decided in the present case. In the absence of clear intention, it cannot be said that the ownership was to get transferred only upon payment of consideration. However, despite this, whether the sale was complete or not in the instant case, is a question which is to be decided in the present case. It is imperative to reproduce the provisions of Section 54 of the Transfer of Property Act, 1882:- "Sale" defined "Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made: Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale: A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property. 11. A bare perusal of the above provision makes it clear that sale is a transfer of ownership in the exchange for a price. Such price can be paid upfront, it can be promised to be paid later on or it can be part paid and part promised. The operative word here is "and", which makes it clear that in case a part payment of price is paid, the balance has to be promised. In the instant case, though part of the consideration i.e. Rupees 1 lakh was paid by the respondents and whether the defendant intended to make payment of the rest amount, is a question of fact which can be decided only by adducing evidence. In any case, whether presenting three post-dated cheques without the intention of letting them en-cash amounts to a promise or not is a question which cannot be determined without giving opportunity to adduce evidence. 12. In any case, whether presenting three post-dated cheques without the intention of letting them en-cash amounts to a promise or not is a question which cannot be determined without giving opportunity to adduce evidence. 12. The next issue that arises for consideration is whether the plaintiff-appellants by alleging fraud on part of the respondents have been able to disclose a cause of action or the trial court was right in rejecting the plaint for failure to disclose any cause of action. For deciding this issue, reference must be made to the two judgments cited by Mr. Agarwal. The first decision was rendered by the Allahabad High Court in the case of Rajendra Prakash. While dealing with a similar issue, the court while brushing aside the argument of the counsel for appellant that on completion of the sale, the only remedy left for the seller would be to sue for recovery of consideration and it would not be open for him to allege fraud, the Court observed that the question whether giving cheques which were likely to be dishonoured amounted to fraud or not was a question that could be decided only during trial and thus, it was not right to reject the plaint under Order 7 Rule 11 CPC. Relevant paras of the said judgment are reproduced as under:- "Section 54 of the Transfer of Property Act defines sale as a transfer of ownership in exchange of price paid or promised or part-paid and part-promised. In the present case, there was a recital in the deed that the price has been paid through cheque, which had since bounced on account of insufficient funds. There was no recital that it was promised or part-promised or part-paid in the deed itself. Whether the delivery of the cheque amounts to promise or not, cannot be decided at this stage. Since the question depends on the intention of the parties, which is to be gathered from the conduct of the parties and surrounding circumstances which can be had only after parties go to trial after the issues are framed and evidence are led. The majority of the decisions cited at the Bar by Mr. Prakash Krishna proceeds on the footing that whether nonpayment of consideration would make sale deed invalid is a question that is to be gathered from the intention of the parties. The majority of the decisions cited at the Bar by Mr. Prakash Krishna proceeds on the footing that whether nonpayment of consideration would make sale deed invalid is a question that is to be gathered from the intention of the parties. If there is intention of the parties to effect transfer by means of execution and registration of the sale deed in that event, there is a transfer by reason whereof there is a passing of title. From the pleadings made out in the plaint at least prima facie, it appears that the defendant did not intend that the cheque should be en-cashed or price is to be paid. On the other hand, it appears from the pleadings that despite notice to pay the consideration, defendant did not pay the amount. Even tilt today, the amount has not been paid which fact may not be gone into at this stage. But still then, it appears from the pleadings in the written statement that the defendant had been sought adjustment of certain amount due to the husband of the plaintiff. Whether this payment of consideration is again a question which is to be decided on the basis of the materials that might come in evidence. At least at this stage, it is not possible for this Court to conclusively determine that the title had passed on account of the intention of the parties which is evidenced by reason of the execution of the deed and the registration thereof. It is also a question whether Section 54 would be attracted if there is any amount of fraud within the meaning of Section 17 of the Indian Contract Act. Section 17 of the Indian Contract Act defines that "fraud" means when a person induces anyone to enter into a contract on the suggestion of a fact which is not true by the person himself who does not believe it to be true or who acts in an active concealment of fact having knowledge or belief of the fact or had made a promise without any intention of performing it or in other act fitted to deceive. In the present case, it cannot be conclusively determined that whether there was a fraud or not. In the present case, it cannot be conclusively determined that whether there was a fraud or not. But apparently, it appears from the pleadings that the cheque was delivered in exchange of the price being paid on the suggestion that the cheque would be honoured, when the defendants had reason to believe that he did not have sufficient funds and the cheque would be dishonoured which fact was not disclosed while inducing the vendor to execute and register the document. In not disclosing the fact that he docs not have sufficient fund to honour the cheque, it can be prima facie said that the defendant had concealed the fact that he had knowledge and believed that the cheque would be dishonoured. It is also prima facie apparent that even after the notice he did not pay. Therefore, he had issued the cheque with an intention that he would not perform the part for honouring the cheque by making fund sufficient. On the pleadings, it is also prima facie apparent that he had issued the cheque to deceive the vendor. Thus, it appears on the face of the pleadings that there are certain elements of fraud. If there is an element of fraud, how the same will affect the definition of sale given in Section 54 which makes a contract valid even when consideration is not paid at the time of transaction is a question to be answered and which is possible only when issues are framed and evidence is adduced or other materials are produced. Sale is definitely a contract but it stands on a different footing because of the provision contained in the Transfer of Property Act defining sale in Section 54 thereof read with subsection (4) of Section 55 of the said Act, where nonpayment of consideration makes it a charge on the property. Therefore, by expressed provision contained in Section 54 despite sale being a contract, there has been a departure from the provision contained in the Indian Contract Act particularly. Section 25 thereof. By reason of special provision relating to special statute governing transfer or sale, Section 25 of the Indian Contract Act if comes in conflict or is inconsistent in that event, it would yield to the extent of the special statute contained in the Transfer of Property Act. Section 25 thereof. By reason of special provision relating to special statute governing transfer or sale, Section 25 of the Indian Contract Act if comes in conflict or is inconsistent in that event, it would yield to the extent of the special statute contained in the Transfer of Property Act. But still then, it would not to be completely overridden by reason of the definition contained in Section 54 of the Transfer of Property Act, having regard to the question of fraud defined in Section 17 of the Indian Contract Act. Sale defined in Section 54 of the Transfer of Property Act has to be bona fide with an intention between the parties to pass on the title even on non-payment of the consideration. Thus, on the basis of the pleadings of the plaint, at this stage it cannot be conclusively said that there was an intention between the parties to effect the transfer and passing of the title by reason of the execution and registration of the sale deed or that there was a promise to pay or that there was any payment. Therefore, at this stage the plaint cannot be rejected under Order VII, Rule 11 of the Code of Civil Procedure." Similar observations were made by the Gujrat High Court in Parmar Narmadaben . 13. Coming to the facts of this case, the respondents were obliged to pay the balance consideration to the plaintiff-appellants and at the time of executing and registering the sale deed, they gave three post-dated cheques to the plaintiff-appellants, making the plaintiff-appellants believe that they had sufficient balance in their account. Later on, they asked the bank to stop the payment for whatever the reason might have been. Thus, inducing the plaintiff-appellants to execute the sale deed by giving three post-dated cheques and concealing the fact that they would later on ask the bank to stop the payment, whether this amounts to fraud or not, again is a question which can be determined only at the time of trial. 14. The judgment cited by Mr. Kasliwal will be of no help to the respondent. The question, whether the plaintiffs-appellants are entitled to any relief or not, is a different issue altogether. 14. The judgment cited by Mr. Kasliwal will be of no help to the respondent. The question, whether the plaintiffs-appellants are entitled to any relief or not, is a different issue altogether. As observed by the Gujrat High Court in Parmar Narmadaben , it is possible that the plaint discloses a cause of action but the plaintiffs are not entitled to any relief after adducing the evidence. In such cases, the plaint cannot be rejected out-rightly under Order 7 Rule 11 CPC. In other words, if the plaintiff does not sue for cancellation of sale deed, he might not be able to get a relief from the Court but that does not mean that his plaint does not disclose a cause of action. 15. In view of the above discussions, I am of the considered view that the plaint discloses a cause of action and therefore, the trial court erred in rejecting the plaint under Order 7 Rule 11 CPC. 16. Consequently, this first appeal is allowed and the order and decree dated 12.07.2016 of the learned trial court are set aside and application under Order 7 Rule 11 CPC is rejected and the trial court is directed to decide the suit in accordance with law. However, I am making it clear that I have not expressed any opinion on the merits of the case and the trial court is supposed to decide the suit without getting influenced from any of the observations made in this judgment. Both the parties are directed to remain present in the trial court on 17.02.2018. 17. There shall be no order as to costs.