JUDGMENT
1. The appeal is brought by the defendants against the judgment and decree of the V Additional Judge, City Civil Court, Hyderabad, in OS No.318 of 1981, dated 21-4-1986, decreeing the suit.
2. The appeal arises in the following circumstances: The respondent-plaintiff was allotted the suit schedule house situate at West Maredpalli, Secunderabad, under A.P. Housing Board Low Income Group Scheme under hire purchase system. As the respondent was in need of money, he approached the 2nd appellant (D2) for advancing loan and the 2nd respondent agreed to lend money in the name of the 1st appellant, who is his widowed sister, on the security of the suit schedule house. Originally, an amount of Rs.1,000/- was advanced and an agreement of sale was obtained from the respondent on 9-10-1975 instead of a document of loan. It was stipulated in the document that a further sum of Rs.28,000/- would be advanced on giving vacant possession of the house, as security. Accordingly the 2nd appellant paid another sum of Rs.28,000/- on 6-5-1976 and obtained the suit agreement on the same date in the name of the 1st appellant, as if it was a sale transaction. It is, however, an agreement of sale, even though it was purely a loan transaction. It was, however, agreed that the house would be redelivered to the respondent on repayment of the loan. It was stipulated in the agreement that the remaining amount of Rs.9,500/- will be paid to the respondent at the time of registration of sale deed. It was also stipulated that the sale deed would be executed in favour of the 1st appellant within one month from the date of registration of title deed in favour of the respondent by the Housing Board. The respondent has given vacant possession of the suit house to the 2nd appellant on 6-5-1976 itself. It was also mentioned in the agreement that in default of
either party the advanced amount will be refunded after deducting nominal penalty of Rs.500/- only towards liquidated damages and the house will be redelivered to the respondent. In any event there was no stipulation for sale of the suit house by the respondent to the appellants for the total consideration of Rs.38,500/-, as the value of the house was very high. The appellants, though were aware of the execution of the sale deed in favour of the respondent by the Housing Board on 14-4-1977, never demanded for execution of the sale deed in favour of the 1st appellant, as the transaction was only a loan transaction. The respondent was always ready and willing to repay the amount advanced by the appellant and requested the appellants to receive the same and to deliver vacant possession of the suit house. But the appellants declined to do so. On the other hand they had let out the house on a monthly rent of Rs.350/- p.m., which was not lawful for them and hence the appellants are liable to account for the rents and profits received by them. The respondent was also entitled for liquidated damages at the rate of Rs.500/- per month from 1-10-1977, as the appellants did not deliver the house and also for future mesne profits at the same rate. The respondent also claimed that the appellants have to adjust the loan amount from the amounts due and payable to the respondent. The respondent, therefore, filed the instant suit to redeliver the vacant possession of the suit house declaring the suit agreement as null and void and for mesne profits at the rate of Rs.500/- p.m. from July, 1977 till redelivery of the vacant possession of the suit house.
3. The 2nd appellant remained ex parte. The case of the 1st appellant is that the suit transaction is purely an agreement of sale and not money lending transaction. The respondent and the 1st appellant entered into a sale agreement and the appellant paid Rs.29,000/-to the respondent as part of the sale consideration and the balance of Rs.9,500/-was payable at the time of registration. There was no agreement to redeliver the possession
of the suit house or to repay the amount. The 1st appellant admitted taking vacant possession of the suit house. Ever since the date of sale agreement, the appellant was willing and ready to perform her part of agreement, but it was the respondent who evaded to execute the sale deed. It was also stated that as per the terms and conditions of the contract, if bom the parties wanted to dissolve the agreement and if it is at the first instance of the respondent, he has to pay to the appellant a sum of Rs.500/-along with the earnest money paid to him and similarly if it is at the instance of the appellant she has to forfeit Rs.500/- out of the earnest money paid and refund the balance to her. If there is no consensus between the parties to cancel the agreement, the forfeiture clause of sale agreement has no effect. It was averred in the written statement that the appellant was not aware of the registration of title deed dated 14-4-1977 by the Housing Board in favour of the respondent. Inspite of enquiries, the respondent did not disclose the same to the appellant. She was always ready and willing to perform her part of the agreement.
4. On the above pleadings, the following issues were framed by the Court below:
(1) Whether the plaintiffs is entitled to the possession of the suit property?
(2) Whether the agreement of sale deed dated 6-5-1976 is invalid and not
binding on the plaintiff?
(3) Whether the plaintiff is entitled to mesne profits, if so to what extent?
(4) To what relief?
5. After considering the evidence adduced on behalf of the parties both oral and documentary, the Court below decreed the suit as stated supra. Hence the appeal.
6. The following points arise for consideration in the appeal:
(1) Whether the suit agreement Ex.Al is an agreement of loan transaction and not an agreement of sale?
(2) Whether the respondent is entitled to the possession of the suit house?
(3) Whether the suit, as framed, is not
maintainable?
Point No.1:
It is contended by Sri P.V.R. Sharma, learned Counsel for the appellant that the suit agreement Ex.A1 was an agreement of sale and not a document of loan transaction The lower Court has rightly found that it was only an agreement of sale. Sri R. Venugopal Reddy, learned senior Counsel for the respondent, however, contends that it is a transaction evidencing the loan and that on repayment of loan possession of the house should be delivered to the respondent.
7. To examine this question it is necessary to notice the terms and conditions of the suit agreement. The agreement was titled as agreement of sale and in the preamble it was clearly stated that the respondent has agreed to sell the premises to the 1st appellant, who agreed to purchase the same. As per the terms and conditions of the agreement the sale consideration was stated to be Rs.38,500/-. On the date of the agreement i.e., 6-5-1976, the 1st appellant paid Rs.29,000/- as earnest money and the respondent handed over vacant possession of the house. The 1st appellant agreed to pay the remaining amount of Rs.9,500/- at the time of registration of the sale deed. The respondent, however, agreed that the sale deed would be executed within one month from the date of registration of the title deed in his favour by the Housing Board. Clause 8 of Ex.A1 appears to be crucial and it is extracted as below:
“Term and Conditions
(8) If the first party fails to execute and register the sale deed within one month in favour of the second party from the date of the registration of the title deed in favour of the First party by the A.P. Housing Board, the agreement will become null and void and the First party shall be liable to
refund the earnest money to the tune of Rs.29,000/- (Rupees twenty nine thousand only) together an amount of Rs.500/-(Rupees five hundred only) as liquidated damages to the Second party. Similarly if the Second party fails to pay the remaining aforesaid balance amount of Rs.9,500/-(Rupees nine thousand five hundred only) and gets registration of the sale deed inspite of offer for execution and registration, the agreement will become null and void and Rs.500/- (Rupees five hundred only) out of the earnest money of Rs.29,000/-(Rupees twenty nine thousand only) will be forefeited by the First party and the remaining amount of Rs.28,500/- (Rupees twenty eight thousand and five hundred only) will be paid to the Second Party.”
Clause 8 of Ex.Al contains the consequences that would follow on the failure to perform the obligations of either party. The consequence on the failure of either party to perform its part of contract appears to make the contract null and void except for payment of Rs.500/-as penalty by the defaulting party and the clause for specific performance of the contract was intentionally omitted. None of the terms and conditions of Ex. A1 indicate that the suit house was taken possession by the appellant towards security for loan. In fact such loan agreement would amount to mortgage and the amount being more than Rs. 100/- it requires registration. The agreement consists of the stipulation regarding sale consideration of the house, a part of the sale consideration was paid and possession of the house was delivered and it was agreed that on payment of the remaining sale consideration sale deed would be executed. There was no whisper about the loan transaction between the parties nor a condition for reconveyance. The suit agreement does not appear to be an agreement intended to secure repayment of debt.
8. In view of the above discussion I am of the view that Ex.Al is an agreement of sale and not a loan transaction and the finding of the Court below on this aspect is confirmed. The point is answered accordingly.
Point No. 2:
It is seriously contended by the learned Counsel for the appellants that as the respondent has not informed the execution of sale deed in his favour by the Housing Board, the penal clause contained in Clause 8 of Ex.Al docs not come into operation. The respondent committed breach of the agreement, whereas the 1st appellant was always ready and willing to perform her part of the contract, as evidenced by the pleadings and the evidence of the 2nd appellant. On the other hand, learned senior Counsel for the respondent contended that the respondent has not committed any breach of contract and that it was the 1st appellant who was not ready and willing to obtain the sale deed by paying the balance of sale consideration and in fact there was no evidence for the appellants in support of their claim that 1st appellant was ready and willing to perform her part of contract. In any event, the agreement becomes null and void and the respondent was only liable to refund the amount and not to execute the sale deed even if there is violation of the conditions of Ex.Al on his part. The respondent was only allotted the suit house by the A.P. Housing Board at the time of executing Ex.Al. Hence, the respondent could only execute the sale deed after the Housing Board conveyed the title in his favour. On the date of Ex.Al, the 1st appellant has paid Rs.29,000/- out of Rs.38,500/- and has obtained possession of the house. It was agreed that the balance of the amount would be paid after the Housing Board executes the sale deed in favour of the respondent.
9. The plaintiff examined himself as PWf. He stated that in May, 1977, the Housing Board executed the title deed in his favour. He stated that as the 1st appellant did not obtain the sale deed within the stipulated time, she was bound to pay him Rs.500/-towards liquidated damages and therefore, he requested the 1st appellant to take the amount of Rs.28,500/- and re-deliver possession of the suit house. The appellants never asked him to convey the suit house in their favour.
He denied the suggestion that at any time after 14-4-1977 the 2nd appellant approached him on behalf of the 1st appellant to pay the balance consideration and obtain sale deed. The 1st appellant has not examined herself. The 2nd appellant was examined as DW1 and stated that 1st appellant (Dl) could not be examined as she was sick. It is in his evidence to show that though she came to the Court to give evidence, she did not go into the box. His evidence is that the respondent did not inform as to the execution of the sale deed by the Housing Board, hence they were not aware of the same. But he stated that he was not aware whether the 1st appellant knew about the fact of execution of sale deed by the Housing Board in favour of the respondent, of not. The Court below, considering the evidence on the aspect whether the respondent has intimated to the 1st appellant about the conveyance of the property by the Housing Board, found that there is no evidence to show that the respondent had ever informed about it to the 1st appellant, prior to filing of the suit. The Court below has taken the view that as the respondent has not executed the sale deed in favour of the 1st appellant within one month from 14-4-1977, Ex.A1 has become null and void and the respondent was liable to repay the amount of Rs.29,000/-together with liquidated damages of Rs.500/-and on such payment, the 1st appellant is liable to redeliver the vacant possession of the house to the respondent.
10. The contention of the learned Counsel for the appellants is that as the respondent failed to execute the sale deed, he committed breach of the obligation under Ex.Al. Hence the penalty clause will not come into play. I do not agree with this contention. From a reading of the terms and conditions of Ex.Al it does not appear that the respondent has to intimate about the fact of conveyance of title by the Housing Board in favour of the respondent. Clause 4 only says that sale deed would be executed within one month from the date of such conveyance by the Housing Board. There is no further condition that the
respondent should inform about the same to the 1st appellant- There is no evidence on record to show that the 1st appellant was not in fact aware of the conveyance by the Housing Board. She has not chosen to examine herself. DW1 only deposed about his knowledge. To the question whether the 1st appellant was aware of the fact of registration by the Housing Board or not, there was no categorical denial. He only says that he was not aware of the same. PW1 states that the 1st appellant was aware about the execution of sale deed by the Housing Board. If really the appellants are eager to obtain sale deed by tendering the remaining amount of Rs.9,500/-, the 1st appellant should have asked the respondent whether such a sale deed has been executed by the Housing Board or not, or she should have written a letter to the respondent to intimate to her about the same. DW1 also docs not say that they have ever tried to get the information with regard to conveyance by the Housing Board in favour of the respondent. As per condition-3 the burden of payment of remaining amount of Rs.9,500/- and obtaining registration of sale deed lies upon the 1st appellant. In fact as per condition-4 they should do so within one month from the date of execution of sale deed by the Housing Board. Learned Counsel for the appellants contends that in cases of immovable property, time is not an essence of the agreement. Learned Counsel relied upon several decisions in support of the above proposition. There is no quarrel with the above proposition. But it should be remembered that this is not a suit filed for specific performance seeking an equitable relief, where the considerations whether time is the essence of contract or not would arise. As per the evidence of PW1, as the Housing Board conveyed the property in May, 1977, he waited for quite some time for the appellants to offer the amount of Rs.9,500/- and to obtain the sale deed. As the 1st appellant has not come forward, he asked her to redeliver the house and take back the amount of Rs.28,500/-deducting the amount of Rs.500/- towards liquidated damages. Learned Counsel for the appellants seriously contends
that the 1st appellant was always ready and willing to perform her part of contract. As stated supra, there is no evidence in support of this plea. In the absence of evidence of 1st appellant in this regard, the evidence of DW.l, which at best is a corroborative evidence, cannot be accepted. Though the written statement of the 1st appellant mentions about the fact that she was ready and willing to perform her part of contract, that will not amount to evidence. Pleadings should be supported by evidence, oral or documentary. Thus, the state of evidence in this case does not support the contention of the learned Counsel for the appellants that the 1st appellant was ready and willing and that it was the respondent who violated the obligations under the contract.
11. In Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial, , the learned Judge, in a suit for specific performance of contract, found that the vendees were always willing and performed their part of the contract and that it was the vendor who wilfully refused to perform her part of contract and that time was not essence of the contract. In the instant case, the appellants did not file a suit for specific performance seeking to enforce the terms of the agreement. Having got possession of the house in 1976, the appellants have been enjoying the rents. The finding is that the appellants were not ready to perform their part of the contract. Hence the above decision has no application to the facts of the case. In Tandra Venkata Subrahmanyam v. Vegesana Viswawdharaju, , the only point decided is whether time could be made essence of the contract by subsequent notice by any one of the parties and as to essentials of such notice. Similarly the case Koyana Suryanarayana Reddy v. C. Hellayyamma, , deals with the effect of notice. These cases are of no assistance in the present case. The decision in S. V. Harihara Iyer v. Mathew George, , reiterates the proposition of taw that a defaulter is not entitled to recover what he had paid under the contract to the
other party who still holds on to the contract and is ready and willing to perform his part. There is no dispute with the proposition. But in view of the findings given by me supra that the respondent is not a defaulter under Ex.Al and it was only the 1st appellant who was not willing to pay the balance of sale consideration and obtain the sale deed, this decision will not help the appellant. The case Vegi Venkateswara Rao v. Vegi Venkatamma Rao Raja Babu, , deals with reciprocal promises and emphasises the proposition thatthe plaintiff who conies to the Court seeking performance of the contract should satisfy the Court that he is ready and wiling to perform his part of contract. This case also will not come to the aid of the appellants in view of the findings given by me supra.
12. As I have held that it was the fault of the appellants in not obtaining the sale deed from the respondent by tendering the remaining amount of Rs.9,500/-, the penalty clause comes into play and as per the terms and conditions of Clause 8 of Ex.Al, the agreement becomes null and void. The respondent, is therefore, entitled to seek delivery of the vacant possession of the suit house from the 1st appellant after returning the amount of Rs.28,500/- deducting the amount of Rs.500/- towards liquidated damages. The point is answered accordingly confirming the finding of the Court below.
Point No. 3:
It is true that the suit was filed stating that Ex.Al is a loan transaction. But it should be seen that the respondent has also taken alternate plea that even if Ex.Al is an agreement of sale, the agreement should be held as null and void as the appellants have not performed their part of contract, having not obtained the sale deed so far. Whatever may be the plea raised by the plaintiff in the suit with regard to the nature of a document, it is for the Court to decide, on the basis of its terms and conditions, whether in
law the said document is a loan transaction or an agreement of sale. Hence, the suit is maintainable as framed. The point is accordingly answered.
13. In the result, the appeal is dismissed with costs. The judgment and decree of the Court below are confirmed.