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P. Vaidyanathan v. K. Sundaram - (High Court of Madras) (02 Jan 2017)

If Court finds that transaction is not for agreement of sale, no relief of refund of advance can be granted



Principal District Judge accepted case of Defendant in toto and rejected relief of specific performance. However granted decree for refund of a sum of Rs. 2,00,000/- with subsequent interest at 12% per annum from 12th November, 2001 till date of realization. Plaintiff’s suit for specific performance accompanied by an alternative prayer for refund of advance amount was decreed in part granting the prayer for refund of advance amount alone, as against claim of Rs. 5,50,000/-.

Recently in judgment in Rajammal and another v. M. Senbagam reported in MANU/TN/2873/2016 : 2016 (6) CTC 225, this Court held that, plea to the effect that, agreement was not intended to be acted upon can be entertained by Courts. Defendant cannot be precluded from taking the plea that, agreement was not intended to be acted upon as an agreement of sale, but it was executed for some other purposes namely, as security for loan transaction. Such plea would fall within exceptions under Section 92 of Evidence Act,1872 because, it is actually a invalidating circumstance which is pleaded before Court of law and by pleading so, Defendant is not attempting to vary terms of contract. Actual attempt is to show that, contract is not one, which was intended to be acted upon.

In instant case, there are three agreements, under all three agreements balance of sale consideration payable is only Rs. 50,000/-, which is comparatively a small portion of total consideration. However, under all three agreements unusually long period of 15 months, 12 months and 11 months have been fixed for performance. This by itself would show that, actual purpose of the agreement is not that of sale. According to plaint and evidence, categorical case of the Plaintiff is that he paid Rs. 3,00,000/-, Rs. 2,00,000/- and Rs. 50,000/- totalling to Rs. 5,50,000/-. Whereas a perusal of agreements marked as Exs. A1 to A3 would show that there is no reference to earlier agreements in Ex. A2 and Ex. A3. Exs. A2 and A3 are so worded that, parties enter in an agreement for first time. It is also categorically stated that, a sum of Rs. 5,00,000/- was paid on date of Ex. A2 and Rs. 5,50,000/- was paid on the date of Ex. A3. Whereas, pleadings as well as evidence is different.

Agreements in question were not intended to be acted upon as agreements for sale. They were executed only for the purpose of securing loan transaction. The learned Principal District Judge, had on examination of evidence on record has come to the conclusion that the plaintiff has claimed contradictorily and has obtained the above documents as security to secure the principal amount with exorbitant interest.

Pleadings and oral evidence relating to payments of advance, are totally different from contents of documents. Neither Plaintiff nor witnesses have come forward to speak the truth. Therefore, no decree could be passed on basis of documents. In V.P. Murugesan v. P. Shiek Mideen reported in MANU/TN/4123/2015 : 2015 (6) CTC 810, it was held that if Court finds that transaction is not for agreement of sale, no relief of refund of advance can be granted. Therefore, Plaintiff cannot seek relief of refund of advance Rs. 5,50,000/-. But, however in case on hand, on admission of borrowings Rs. 2,00,000/-, trial Court granted a decree for Rs. 2,00,000/- with interest at 12% per annum. Defendant has not filed any appeal against said decree. Therefore, Court affirmed the decree that has already been granted in favour of Plaintiff.

Relevant : Rajammal and another v. M. Senbagam MANU/TN/2873/2016: 2016 (6) CTC 225, V.P. Murugesan v. P. Shiek Mideen MANU/TN/4123/2015: 2015 (6) CTC 810, Section 92 of Indian Evidence Act, 1872


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