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2025 DIGILAW 440 (KAR)

Mustaf S/O. Goususab Halagali @ Holageri v. Gangadhar, S/o. Channamallappa Jadagoudar

2025-06-17

HANCHATE SANJEEVKUMAR

body2025
JUDGMENT : HANCHATE SANJEEVKUMAR, J. This appeal is filed by the defendant calling in question the judgment and decree dated 11.11.2024, passed by the Additional District and Sessions Judge, Fast Track Special Court-I, Bagalkot (First Appellate Court), in R.A.No.76/2020, thereby, the order dated 27.04.2017, passed by the I Additional Senior Civil Judge and JMFC, Bagalkot (trial Court), in O.S.No.142/2014, is reversed and remanded the matter to the trial Court for fresh consideration. 2. Heard the arguments of learned counsels appearing for both the sides and perused the material placed before the Court. 3. For the purpose of convenience and easy reference, ranking of the parties is referred to as per their status before the trial Court. 4. The plaintiff has filed suit for specific performance of contract in respect of the suit property by stating that defendant is owner of suit property and an agreement of sale was executed on 21.09.2004 for a total sale consideration of Rs.6,00,000/- and the plaintiff has paid the entire sale consideration amount and accordingly an unregistered agreement of sale was executed. But thereafter the defendant has not come forward to execute the registered sale deed. Therefore, the plaintiff has filed suit for specific performance of contract. 5. After service of summons, the defendant has entered appearance through advocate and filed the written statement and also filed I.A.No.4 under Order VII Rule 11(d) of the Civil Procedure Code, 1908, praying for rejection of plaint as the plaint is bared by law. The defendant asserted that there is a prohibitory clause of non alienation of property for a period of 10 years and the alleged agreement of sale is executed within the period of prohibitory/non alienation period. Therefore, the said transaction is barred by law/prohibited by law and prayed to consider the application positively. The trial Court has rejected the plaint as barred by law under Order VII Rule 11(d) of CPC. 6. Questioning the same, the plaintiff has preferred appeal in R.A.No.76/2020 and the First Appellate Court has allowed the appeal, set aside the order passed by the trial Court and remanded the case to the trial Court for fresh consideration on the reason that the plaintiff has filed a suit for specific performance of contract, alternatively to refund of earnest amount. Questioning the same, the plaintiff has preferred appeal in R.A.No.76/2020 and the First Appellate Court has allowed the appeal, set aside the order passed by the trial Court and remanded the case to the trial Court for fresh consideration on the reason that the plaintiff has filed a suit for specific performance of contract, alternatively to refund of earnest amount. Therefore, the plaintiff is entitled for refund of earnest amount in case the plaintiff fails to get a decree for specific performance of contract. Therefore, on these reasons the order passed by the trial Court is set aside and remanded the case to the trial Court for fresh consideration of the suit. 7. Heard the arguments of learned counsels appearing for both the sides and perused the material placed before the Court. 8. Now, the point that arises for consideration in this appeal is as follows: “Whether, under the facts and circumstances involved in the case, the provision under Order VII Rule 11(d) of CPC is applicable to judicial pronouncement of orders apart from law enacted by Legislature for the purpose of considering the case as barred by law under Order VII Rule 11(d) of CPC?” 9. Learned counsel for the appellant/defendant submitted that the defendant was allotted with suit property in the year 1999 and there is a prohibitory clause while allotting suit property to the defendant that the defendant shall not alienate or create any encumbrance or charge for a period of ten years. But the agreement of sale was executed on 21.09.2004 within the period of five years contrary to the conditions stipulated in the order of grant of suit property in favour of defendant. Therefore, such agreement is in violation of section 23 of the Indian Contract Act. Therefore, the defendant has rightly filed application under Order VII Rule 11(d) of CPC contending that the plaint is barred by law and it is rightly honoured by the trial Court. Thus, rejected the plaint. But the First Appellate Court without appreciating these admitted facts and law on this point has erroneously remanded the case to the trial Court for fresh consideration. It is further submitted that as per judgment of the Hon’ble Supreme Court in the case of Smt.Narayanamma and another Etc. Etc., vs. Govindappa and others Etc. Etc., reported in AIR 2019 SC 4654 , any agreement in contravention of prohibitory period is illegal. It is further submitted that as per judgment of the Hon’ble Supreme Court in the case of Smt.Narayanamma and another Etc. Etc., vs. Govindappa and others Etc. Etc., reported in AIR 2019 SC 4654 , any agreement in contravention of prohibitory period is illegal. Therefore when this being the public policy, therefore the dictum of Hon’ble Supreme Court is also law to be construed as barred by law under Order VII Rule 11(d) of CPC. But the First Appellate Court has not followed this, but erroneously set aside the order of the trial Court and remanded the matter to the trial Court, which is not correct. Therefore, prays to allow the appeal. 10. On the other hand, learned counsel for respondent/plaintiff submitted that the agreement of sale is only an agreement and the property has not been transferred. Therefore, this prohibitory clause is not applicable to the present case on hand. Though the agreement is after five years from the date of grant order, but before completion of non alienation period, the plaintiff has no right without obtaining permission from the competent authorities, the transaction is completed. Therefore, the trial Court has committed error in rejecting the plaint, which is rightly considered by the First Appellate Court. Therefore, submitted that the appeal be dismissed. 11. In support of the argument he has placed reliance on a judgment of this Court in the case of Subbireddy vs. K.V.Srinivasa Murthy, reported in MANU/KA/0475/2005. 12. Some of the admitted facts herein are that the defendant is owner of the suit property. The defendant was allotted with the suit property in the year 1999 and the defendant was issued with a grant order by the competent authority. The plaintiff entered into agreement of sale on 21.09.2004 and according to the plaintiff, he has paid the entire sale consideration amount of Rs.6,00,000/- to the defendant and the defendant has received the said amount. Therefore, admittedly the said agreement of sale is within the period of five years from the date of allotment of suit property to the defendant. 13. Therefore, admittedly the said agreement of sale is within the period of five years from the date of allotment of suit property to the defendant. 13. The trial Court has considered that there is a prohibitory clause in the grant order (hakku patra) issued by Bagalkote Town Development Authority, in the name of the defendant, in which one of the condition at clause No.6 is that the allottee shall not alienate or transfer the property by way of sale or by way of rent and shall not transfer the rights to any third party except for mortgaging to the scheduled banks, co-operative societies, LIC of India, for raising loan. Therefore, as per this clause there is a prohibitory clause not to sell the property within a period of 10 years from the date of issuance of ‘hakku patra’. Admittedly in the present case the agreement of sale dated 21.09.2004 is within a period of 05 years from the date of ‘hakku patra’. Thus, the question arises is, whether is it hit by section 23 of the Indian Contract Act. Section 23 of the Indian Contract Act reads as follows: 23. What considerations and objects are lawful, and what not.- The consideration or object of an agreement is lawful, unless— it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent ; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. 14. While making allotment of site/plot, a condition is stipulated for prohibiting making alienation to third parties, which is a public policy in the interest of allottee. Here, in the present case the Bagalkote Town Development Authority has allotted the site to the land losers, who have lost their land due to Upper Krishna Project. Therefore, such condition is put in the interest of allottee and their family members. This prohibition is as per public policy to give security to the family. Therefore, when this being the public policy, then whatever agreement entered as in the present case is opposed to the public policy. Therefore, such condition is put in the interest of allottee and their family members. This prohibition is as per public policy to give security to the family. Therefore, when this being the public policy, then whatever agreement entered as in the present case is opposed to the public policy. Hence, it attracts section 23 of the Indian Contract Act. 15. Therefore, in this context, the agreement of sale made in this case dated 21.09.2004 is opposed to public policy. Hence, as per Section 23 of the Indian Contract Act, the agreement would not be said to be lawful, since it is within the prohibitory period of 10 years as opposed to public policy. 16. In the similar circumstances, the Hon’ble Supreme Court in the case of Smt. Narayanamma and another Etc. Etc., V/s Govindappa and others Etc. Etc., AIR 2019 SC 4654 has held at paragraph Nos.23 to 25 as under: “23. The transaction between the late Bale Venkataramanappa and the plaintiff is not disputed. Initially the said Bale Venkataramanappa had executed a registered mortgage deed in favour of the plaintiff. Within a month, he entered into an agreement to sell wherein, the entire consideration for the transfer as well as handing over of the possession was acknowledged. It could thus be seen, that the transaction was nothing short of a transfer of property. Under Section 61 of the Reforms Act, there is a complete prohibition on such mortgage or transfer for a period of 15 years from the date of grant. Sub-section (1) of Section 61 of the Reforms Act begins with a non-obstante clause. It is thus clear that, the unambiguous legislative intent is that no such mortgage, transfer, sale, etc. would be permitted for a period of 15 years from the date of grant. Undisputedly, even according to the plaintiff, the grant is of the year 1983, as such, the transfer in question in the year 1990 is beyond any doubt within the prohibited period of 15 years. Sub- section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction. 24. Undisputedly, both, the predecessor-in-title of the defendant(s) as well as the plaintiff, are confederates in this illegality. Sub- section (3) of Section 61 of the Reforms Act makes the legislative intent very clear. It provides, that any transfer in violation of sub-section (1) shall be invalid and it also provides for the consequence for such invalid transaction. 24. Undisputedly, both, the predecessor-in-title of the defendant(s) as well as the plaintiff, are confederates in this illegality. Both, the plaintiff and the predecessor-in- title of the defendant(s) can be said to be equally responsible for violation of law. 25. However, the ticklish question that arises in such a situation is:“the decision of this Court would weigh in side of which party”? As held by Hidayatullah, J. in Kedar Nath Motani [ AIR 1960 SC 213 (supra)], the question that would arise for consideration is as to whether the plaintiff can rest his claim without relying upon the illegal transaction or as to whether the plaintiff can rest his claim on something else without relying on the illegal transaction. Undisputedly, in the present case, the claim of the plaintiff is entirely based upon the agreement to sell dated 15-5-1990, which is clearly hit by Section 61 of the Reforms Act. There is no other foundation for the claim of the plaintiff except the one based on the agreement to sell, which is hit by Section 61 of the Act. In such a case, as observed by Taylor, in his “Law of Evidence” which has been approved by Gajendragadkar, J. in Immani Appa Rao [ AIR 1962 SC 370 (supra)], although illegality is not pleaded by the defendant nor sought to be relied upon him by way of defence, yet the Court itself, upon the illegality appearing upon the evidence, will take notice of it, and will dismiss the action ex turpi causa non oritur actio i.e. no polluted hand shall touch the pure fountain of justice. Equally, as observed in Story's Equity Jurisprudence, which again is approved in Immani Appa Rao (supra), where the parties are concerned with illegal agreements or other transactions, courts of equity following the rule of law as to participators in a common crime will not interpose to grant any relief, acting upon the maxim in pari delicto potior est conditio defendantis et possidentis.” 17. In the above said case also, occupancy right was be granted by the land Tribunal and there was a clause of non-alienating the land for a period of 15 years, which is as per Section 61 of the Karnataka Land Reforms Act, 1961 (for short, ‘the Act’). Therefore, if any transaction takes place within a period of 15 years, the same will be hit by Section 61 of the Act. Section 61 of the Act is enacted in the public interest as a matter of public policy that whoever is granted occupancy rights, shall not alienate the land to any other third parties within fifteen years. This is law declared by legislature as a matter of public policy to give social security to the farmers. In the same way, in the present case, the defendant has lost the lands. Therefore, compensating him, the suit schedule property was allotted to defendant to give security to the family of the defendant. Therefore, when such prohibitory clause is imposed in the grant order, which is matter of public policy, any transactions including agreement of sale is contrary to the public policy which is hit by Section23 of the Contract Act. 18. Further, for considering the provision under Order VII Rule 11(d), it is invoked as plaint is barred by law. The law declared by legislature could not alone be considered as law but also the judicial pronouncement be considered as law declared for the purpose of considering Order VII Rule 11(d) of CPC. The Hon’ble Apex Court in the case of Bhargavi Constructions and another V/s Kothakapu Muthyam Reddy and others , (2018) 13 SCC 480 , has observed at paragraph Nos.24 to 32 reads as under: 24. In our considered view, the aforesaid law laid down by this Court is binding on all the courts in the country by virtue of mandate of Article 141 of the Constitution. This Court, in no uncertain terms, has laid down that challenge to the award of Lok Adalat can be done only by filing a writ petition under Article 226 and/or Article 227 of the Constitution of India in the High Court and that too on very limited grounds. This Court, in no uncertain terms, has laid down that challenge to the award of Lok Adalat can be done only by filing a writ petition under Article 226 and/or Article 227 of the Constitution of India in the High Court and that too on very limited grounds. In the light of clear pronouncement of the law by this Court, we are of the opinion that the only remedy available to the aggrieved person (respondents herein/plaintiffs) was to file a writ petition under Article 226 and/or Article 227 of the Constitution of India in the High Court for challenging the award dated 22-8-2007 passed by the Lok Adalat. It was then for the writ court to decide as to whether any ground was made out by the writ petitioners for quashing the award and, if so, whether those grounds are sufficient for its quashing. 25. The High Court was, therefore, not right in by-passing the law laid down by this Court on the ground that the suit can be filed to challenge the award, if the challenge is founded on the allegations of fraud. In our opinion, it was not correct approach of the High Court to deal with the issue in question to which we do not concur. 26. We also do not agree with the submissions of Mr Adinarayana Rao, learned Senior Counsel for the respondents when he urged that firstly, the expression “law” occurring in clause (d) of Rule 11 Order 7 does not include the “judicial decisions” and clause (d) applies only to bar which is contained in “the Act” enacted by the legislature; and secondly, even if it is held to include the “judicial decisions”, yet the law laid down in State of Punjab cannot be read to hold that the suit is barred. Both these submissions, in our view, have no merit. 27. Black's Law Dictionary (9th Edn.)defines the expression “law”. It says that “law” includes the “judicial precedents” (see at p. 962). Similarly, the expression “law” defined in Jowett's Dictionary of English Law (3rd Edn., Vol. 2, (pp. 1304/1305) says that “law is derived from judicial precedents, legislation or from custom. When derived from judicial precedents, it is called common law, equity, or admiralty, probate or ecclesiastical law according to the nature of the courts by which it was originally enforced”. 28. Similarly, the expression “law” defined in Jowett's Dictionary of English Law (3rd Edn., Vol. 2, (pp. 1304/1305) says that “law is derived from judicial precedents, legislation or from custom. When derived from judicial precedents, it is called common law, equity, or admiralty, probate or ecclesiastical law according to the nature of the courts by which it was originally enforced”. 28. The question as to whether the expression “law” occurring in clause (d) of Rule 11 of Order 7 of the Code includes “judicial decisions of the Apex Court” came up for consideration before the Division Bench of the Allahabad High Court in Virendra Kumar Dixit v. State of U.P. The Division Bench dealt with the issue in detail in the context of several decisions on the subject and held in para 15 as under : (SCC OnLine All) “15. Law includes not only legislative enactments but also judicial precedents. An authoritative judgment of the courts including higher judiciary is also law.” 29. This very issue was again considered by the Gujarat High Court (Single Bench) in Hermes Marines Ltd. v. Capeshore Maritime Partners FZC The learned Single Judge examined the issue and relying upon the decision of the Allahabad High Court quoted supra held in para 53 as under : (Hermes case, SCC OnLine Guj) “53. In the light of the above discussion, in the considered view of this Court, it cannot be said that the term “barred by any law” occurring in clause (d) of Rule 11 of Order 7 of the Code, ought to be read to mean only the law codified in a legislative enactment and not the law laid down by the courts in judicial precedents. The judicial precedent of the Supreme Court in Liverpool & London Steamship Protection and Indemnity Assn. Ltd. v. M.V. Sea Success I has been followed by the decision of the Division Bench in Croft Sales & Distribution Ltd. v. M.V. Basil. It is, therefore, the law as of today, which is that the Geneva Convention of 1999 cannot be made applicable to a contract that does not involve public law character. Such a contract would not give rise to a maritime claim. As discussed earlier, the word “law” as occurring in Order 7 Rule 11(d) would also mean judicial precedent. If the judicial precedent bars any action that would be the law.” 30. Such a contract would not give rise to a maritime claim. As discussed earlier, the word “law” as occurring in Order 7 Rule 11(d) would also mean judicial precedent. If the judicial precedent bars any action that would be the law.” 30. Similarly, this very issue was again examined by the Bombay High Court (Single Judge) in Shahid S. Sarkar v. Mangala Shivdas Dandekar. The learned Judge placed reliance on the decisions of the Allahabad High Court in Virendra Kumar Dixit v. State of U.P. and the Gujarat High Court in Hermes Marines Ltd. and held as under : (Shahid case, SCC OnLine Bom paras 18 &19) “18. … The law laid down by the highest court of a State as well as the Supreme Court, is the law. In fact, Article 141 of the Constitution of India categorically states that the law declared by the Supreme Court shall be binding on all courts within the territories of India. There is nothing even in CPC to restrict the meaning of the words “barred by any law” to mean only codified law or statute law as sought to be contended by Mr Patil. In the view that I have taken, I am supported by a decision of the Gujarat High Court in Hermes Marines Ltd. [Hermes Marines Ltd. … 19. One must also not lose sight of the purpose and intention behind Order 7 Rule 11(d). The intention appears to be that when the suit appears from the statement in the plaint to be barred by any law, the courts will not unnecessarily protract the litigation and proceed with the hearing of the suit. The purpose clearly appears to be to ensure that where a defendant is able to establish that the plaint ought to be rejected on any of the grounds set out in the said Rule, the Court would be duty-bound to do so, so as to save expenses, achieve expedition and avoid the court's resources being used up on cases which will serve no useful purpose. A litigation, which in the opinion of the court, is doomed to fail would not further be allowed to be used as a device to harass a defendant.” 31. Similarly, issue was again examined by the High Court of Jharkhand (Single Judge) in Mira Sinha v. State of Jharkhand. The learned Judge, in para 7 held as under :(SCC OnLine Jhar) “7. Similarly, issue was again examined by the High Court of Jharkhand (Single Judge) in Mira Sinha v. State of Jharkhand. The learned Judge, in para 7 held as under :(SCC OnLine Jhar) “7. In the background of the law laid down by the Hon'ble Supreme Court, it is apparent that Order 7 Rule 11(d) CPC application is maintainable only when the suit is barred by any law. The expression “law” included in Rule 11(d) includes the law of limitation and, it would also include the law declared by the Hon'ble Supreme Court.” 32. We are in agreement with the view taken by the Allahabad, Gujarat, Bombay and Jharkhand High Courts in the aforementioned four decisions which, in our opinion, is the proper interpretation of the expression “law” occurring in clause (d) of Rule 11 of Order 7 of the Code. This answers the first submission of the learned counsel for the respondents against the respondents. 19. Therefore, when application is filed under Order VII Rule 11(d) of CPC, the wordings used in the said provision “barred by law” also includes judicial pronouncements declared by Hon’ble Apex Court. Accordingly, I answer the point framed in this case “in the affirmative”. Therefore, when this being the factual matrix and law involved in the present case, the trial Court is correct in rejecting the plaint invoking Order VII Rule 11(d) of CPC. The first Appellate Court has committed error in remanding the matter to the trial Court for fresh consideration. The purpose of remanding the case for trial Court is for enabling the plaintiff to make claim of refund of earnest amount. Only for this purpose for refund of earnest amount, if the case is remanded, then, it would take some more time. Therefore, what would happen in future if the same is granted here, then it would meet the ends of justice to both parties and is also in the interest of equity. Therefore, the defendant is directed to refund the earnest amount of Rs.6,00,000/- received by the plaintiff along with interest at the rate of 9% p.a. from the date of the agreement till realization. 20. For the foregoing reasons, I proceed to pass the following: ORDER i. The appeal is allowed. ii. The order dated 11.11.2024, passed by the Additional District and Sessions Judge, Fast Track Special Court-I, Bagalkot (First Appellate Court), in R.A.No.76/2020 is set aside. iii. 20. For the foregoing reasons, I proceed to pass the following: ORDER i. The appeal is allowed. ii. The order dated 11.11.2024, passed by the Additional District and Sessions Judge, Fast Track Special Court-I, Bagalkot (First Appellate Court), in R.A.No.76/2020 is set aside. iii. The appellant/defendant shall refund the earnest amount of Rs.6,00,000/- to the respondent/plaintiff with interest at the rate of 9% p.a. from the date of agreement till realization within a period of 3 months from the date of receipt of copy of the order.