Kareemsaheb Nabeesaheb Nadaf Vs. Basavantappa Shankarappa Pattanshetti (Deceased) by L.Rs - Court Judgment

Excerpt:
- section 25: [ajit j. gunjal, j] auction sale of properties - petitioner was the successful auction purchaser in the auction conducted by debt recovery tribunal - recovery officer failed to deliver possession of auctioned property held, apparently, an interim application was filed before the debt recovery tribunal and the debt recovery tribunal was of the view that the recovery officer 2 will not be in a position to do justice to the party. hence, he has withdrawn the matter from recovery officer 2 and has entrusted the same to recovery officer 1. in the given set of circumstances, if recovery officer 2 is not in a position to do justice and recovery officer 1 is not available, she having been repatriated, it was incumbent upon the presiding officer himself to deal with the matter......order1. this second appeal raises an interesting but equally significant and substantial question of law namely the vexed issue as to whether a court should enforce a contract if it is vitiated by the doctrine of unconscionability. the brief facts giving rise to this appeal are that the appellant before me who was the original defendant entered into a registered agreement for sale of his house on 1-8-1973, recording a consideration of rs. 12,000/- for the property against which rs. 6,000/- was received by him from the plaintiff. it is unnecessary for me to set out the terms of the agreement which is a very simple one and i must say to the credit of the appellant, that unlike the normal order of the day defences wherein everything right upto the plaintiffs name and address is denied and.....

Judgment:
ORDER

1. This second appeal raises an interesting but equally significant and substantial question of law namely the vexed issue as to whether a Court should enforce a contract if it is vitiated by the doctrine of unconscionability. The brief facts giving rise to this appeal are that the appellant before me who was the original defendant entered into a registered agreement for sale of his house on 1-8-1973, recording a consideration of Rs. 12,000/- for the property against which Rs. 6,000/- was received by him from the plaintiff. It is unnecessary for me to set out the terms of the agreement which is a very simple one and I must say to the credit of the appellant, that unlike the normal order of the day defences wherein everything right upto the plaintiffs name and address is denied and disputed, that the defendant honestly accepted having executed the agreement and having received the amount of Rs. 6,000/-. The agreement prescribed a period of 2 years for completion of the contract and the plaintiff served a notice on the defendant to receive the balance amount of Rs. 6,000/-, enter into the sale deed and hand over possession whereupon the defendant disputed his liability to do so. The defendant's case was that he was hard pressed for money at the relevant time because of his daughter's marriage and he contends that the transaction was nothing more than in the nature of a mortgage but that the plaintiff who is not only an affluent man but a person who also did regular money lending business bound him down to the registered agreement which he had entered into because of the need in which he was placed. Essentially, the defendant contended that he and his family members resided in the house and that he had no other place to go to and that the value of the property even on the date of the transaction was far more than what is reflected in the agreement.

2. In the course of the evidence, it did emerge that the plaintiff is a very well placed person, that he owns several properties which he has even gifted to his children and that he is also a land holder and furthermore, that he also owns an oil mill. All this evidence was brought up in order to establish before the Trial Court the fact that there is a yawning gap between the parties insofar as the defendant was a man of comparatively meagre economic means and furthermore, what has been established is that the value of the property was very much more than what is recorded. Apart from the plaintiff having admitted this, two defence witnesses were produced to substantiate the evidence of the defendant that the value of the house even in August 1973 was around Rs. 35,000/-whereas the agreement to sell reflected a figure of Rs. 12,000/-. The Trial Court has considered the various aspects of the case and has held that a Court before whom a plea for specific performance is presented is obliged by law to consider all relevant aspects and the Court came to the conclusion that having regard to the disparities between the parties, if the decree came to be passed, immensely greater hardship would be caused to the defendant and his family would be rendered houseless and that was one of the main grounds on which the Trial Court refused a decree of specific performance to the plaintiff. However, in view of the admission that the defendant had received the amount of Rs. 6,000/- the Trial Court passed a decree whereby the defendant was directed to repay the amount of Rs. 6,000/- along with interest computed at 10% per annum. The plaintiff preferred an appeal against this order and the Appeal Court reversed the findings of the Trial Court. The Appeal Court held that the considerations on the basis of which the decree was refused were unfounded and unacceptable and that once the defendant has accepted the execution and the fact that part consideration has been received by him, that the Court had no option except to pass a decree for specific performance. Accordingly the plaintiffs suit was decreed. This second appeal is directed against the appellate decision.

3. I have recounted in some detail the facts and circumstances of the case because they have some bearing on the point of law that is involved in this second appeal. The appellant's learned Counsel submitted that undoubtedly this Court will not re-examine or re-appreciate the evidence but insofar as the record unmistakably indicated that there was a wide disparity between the fair market value of the property in question and what was recorded in the agreement, that it becomes vulnerable and that therefore the Trial Court was fully justified in having refused enforcement. Secondly, learned Counsel submitted before me that where the law enjoins upon the Trial Court to examine all relevant circumstances and where the suit property consists of a dwelling house that the consequences of dispossessing the defendant of that property is something which needs to be carefully gone into and that therefore, the Trial Court was fully justified in having refused a decree also on the ground of comparative hardship. The third contention raised by the learned Counsel was that it is now well-settled law that where the plaintiff himself puts forward an alternate plea or prayer for damages or compensation that the Court should normally opt in favour of awarding monetary compensation or damages rather than enforcing the contract in a situation where the equities are in favour of the defendant. Reliance was sought to be placed on two decisions the first of them reported in Parakunnam Veetill Joseph's Son Mathew v Nedumbara Kuruvilla's Son and Others, wherein the Supreme Court has expounded the well-settled principle of law that a Court is not required to mechanically pass decrees in all suits for specific performance and that judicial discretion is required to be validly exercised because Section 20 of the Specific Relief Act itself postulates that all relevant circumstances must be evaluated. The second decision is the one reported in Tejram v Patirambhau, wherein the Supreme Court has laid down circumstances wherein it would be justified in refusing a decree for specific performance rather than granting if the interest of justice so required. The appellant's learned Counsel submitted that these decisions heavily reinforce his arguments and that therefore this Court must interfere in the present proceeding.

4. The respondents' learned Advocate vehemently submitted that the entire reasoning adopted by the Trial Court was unjustified because the learned Munsiff has imported the principles that are enunciated in proceedings under the Rent Act which have no bearing or relevance in a suit of the present type. As far as this argument is concerned, I need to record that there are no watertight compartments in the field of law and that Courts are often required to go into aspects of the case which may be off the beaten track, if it is essential to do so for purposes of giving substantial justice. The Trial Court had only gone into the aspect of comparative hardship because the defendant had pleaded it and because it was a relevant consideration. It is well-settled law that in cases where specific performance is asked for, that if it is possible to monetarily compensate the party, then a Court may refuse passing of the decree which would cause greater hardship. It is in exercise of this very principle that the Trial Court refused the decree and to my mind the Trial Court was fully justified in having adopted this reasoning.

5. The respondents' learned Advocate also submitted that the entire gamut of the evidence with regard to the valuation was effectively inconclusive. He submits that by making comparisons or estimates the Court cannot go back in point of time and definitely fix as to what the fair value of the property at that time would have been. He submits therefore that the findings that there was a wide disparity between the recorded price and the actual price was totally unjust and that the Appeal Court was well within its right in having totally brushed aside all this evidence. Here again, the contention is unacceptable because the evidence has conclusively established that the value of the property was at least three times that which was recorded and this itself would indicate that something was seriously wrong with the transaction. The Trial Court has not struck down the contract on this ground but has only used it as one of the circumstances for refusing specific performance. To my mind, this was a very necessary consideration because it is something that states one in the face. The defendant had given evidence and once it was established that he was a man of modest means and he was placed in a situation in which he was under pressure, there could be no two opinions that he would have to part with the property for whatever price he was being offered.

6. This virtually brings one to the essential issue that is at the core of this dispute namely the question as to whether the doctrine of unconscionability will have to be applied in this case. The doctrine which has its roots in English Law has been enforced by the Courts in this country, though on a few occasions. The first essential ingredient is that it must be demonstrated that having regard to the economic disparity between the parties which is manifest in the transaction, the agreement becomes unacceptable or unfair insofar as it is a transaction between unequals wherein the effort is to get hold of the property for a price that one's conscience cannot justify. The basic test and in fact that second principle which the Courts would cull out from a situation such as this is the aspect of exploitation which really flows from the first principle and where the contract clearly indicates that it is unfair because the fair market value of the property is far far above what has been offered, the Court would put itself on guard and even assuming the contract as is executed, a Court would refuse enforcement. It is this principle really that is embodied in the substantial point of law that falls for determination in the present case and to my mind, while Courts are required to exercise judicial discretion the contract would have to pass the test of scrutiny on the rule of fairness and legality. The present record unmistakably indicates that the value of the property would have been more than three times than what has been indicated and also indicates that having regard to the two years period which was prescribed, that the defendant did not really intend or want to sell the property but that he had entered into the agreement because he needed the money in the hope that within the period of two years he would be able to have his house. The whole transaction is a colourable one and once the Court comes to this decision, the enforcement of such an agreement will have to be refused.

7. I have no hesitation as on the present state of the record in holding that the Trial Court was fully justified in having refused specified performance and in having directed repayment of the money with 10% interest. That order was perfectly fair and legal. It is necessary to point out that irrespective of the fact that appeals may be mechanically preferred, that the basic duty of an Appeal Court is not to interfere with an order or a judgment that is essentially fair and legal merely because some other view may be argued or pleaded. It is essential before the Appeal Court interferes, that it must be demonstrated that the decision of the lower Court is manifestly wrong that it infringes upon the well-settled principles of law or that it is perverse and unless these factors are there, interference would be unjustified. A reading of the appellate judgment in this case leaves no room for doubt about the fact that the interference by the Appeal Court on the state of the present record was totally and completely unjustified.

8. Having regard to this situation, the present appeal succeeds. The appellate order is set aside and the decree passed by the Trial Court is restored. The respondents' learned Advocate submitted that a long period of time has passed and that economic conditions have changed and he made a strong plea that even if the decree for specific performance is refused that the Court must raise the rate of interest and his submission was that interest at the rate of 18% should be awarded. On the facts of the present case, I am not inclined to do so because even though this is an old transaction, the record indicates that the plaintiff was offered not only the original amount but a much higher amount and that he had refused it at that point of time. He cannot be allowed to blow hot and cold and no interference is called for as far as the decree of the Trial Court is concerned.

9. The appeal accordingly succeeds. No order as to costs.