K. S. Satyanarayana vs V. R. Narayana Rao

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(SC) 757

1999(6) Supreme 227
Supreme Court of India
(From Karnataka High Court)
S. Saghir Ahmad & D.P. Wadhwa, JJ.
K.S. Satyanarayana -Appellant
versus
V.R. Narayana Rao -Respondent
Civil Appeal No. 4048 of 1999
(Arising out of SLP (C) No. 15173 of 1998)
Decided on 27-7-1999
Counsel for the Parties :
For the Appellant : S.K. Kulkarni, Advocate for Ms. Sangeeta Kumar, Advocate.
For the Respondent : E.C. Vidya Sagar, Advocate.

Headnote:(i) Indian Contract Act, 1872-Sections 70 and 72-Plaintiff paid Rs. one lakh to 1st defendant allegedly pursuant to sale agreement -Agreement to sell entered into with second defendant to whom 1st defendant had given authority-Sale agreement fell through-Authority given to 2nd defendant denied-Suit for return of money-Receipt of money not denied by 1st defendant but refusal to return money on ground there was no privity of contract between 1st defendant and plaintiff-Not tenable- Payment not gratuitous-Doctrine of undue enrichment would squarely apply-Plaintiff would be entitled to restitution. (Para 8)
       (ii) Code of Civil Procedure, 1908-Order X-Suit for return of earnest money paid pursuant to agreement to sell-Sale agreement entered into with defendant No. 2 who was allegedly authorised by defendant No.1-Defendant No. 1 denying authority given to defendant No. 1-Receipt of amount not denied-Plea that there being no privity of contract between defendant No. 1 and plaintiff, defendant No. 1 was not liable to repay amount-Trial Court upholding defendant No. 1’s plea-Not sustainable-Trial Court could have decreed suit of plaintiff at the State Order X.
       Held : It was a case where instead of going into a protracted trial, trial court could have decreed the suit of the plaintiff against the 1st defendant as well at the stage of Order X (Examination of Parties by the Court) of the Code of Civil Procedure. After the 1st defendant admitted having received rupees one lakh from the plaintiff he could not retain that money on the spacious plea that there was no privity of contract between him and the plaintiff. Amount of rupees one lakh had been given to him by the plaintiff as he wanted to purchase ground floor of his property. The agreement to sell for the purpose was entered into through the 2nd defendant whom the 1st defendant had authorised to enter into any such agreement on his behalf. The plaintiff could not have paid to the 1st defendant rupees one lakh but for the agreement to sell in respect of ground floor of his property. It is only on the basis of this agreement (Exh. P-2) which is entered into by the 2nd defendant on the strength of Exh. P-1 that the plaintiff paid rupees one lakh each to the 1st and 2nd defendants. If we accept the pleadings of the 1st defendant then the amount of rupees one lakh had been given by the plaintiff under some mistake. In any case, it was not a payment gratuitously made. Doctrine of undue enrichment would squarely apply in the present case and the plaintiff would be entitled to restitution. The courts below were not attentive to the procedural laws and their duty to do substantial justice in the case. Had that been so the plaintiff would have been spared the tribulations of knocking at the doors of the highest court of the land. Courts below fell into error in going into the question of privity of contract and lost sight of the basic issue involved in the case. (Paras 8 & 10)

Judgment

D.P. Wadhwa, J.-Leave granted.

2. This is plaintiff’s appeal against the judgment dated March 3, 1998 of the Karnataka High Court dismissing his appeal. Earlier plaintiff’s suit had been dismissed by the trial court against respondent, who was arraigned as 1st defendant. The suit had been partly decreed against the 2nd defendant.

3. Respondent - the 1st defendant-is the owner of the property in Malleswarm, Bangalore, which consisted of ground floor and two upper floors. 1st defendant entered into an agreement to sell dated December 26, 1991 respecting his said property with the 2nd defendant. Name of the 2nd defendant is R. Sridhar. 1st defendant further authorised in writing (Exh. P-1) R. Sridhar to enter into any sale agreement of this property with anyone. This writing is as under :

“Mr. R. Sridhar, s/o Sri Rama Raju, residing at No. 17/2, 7th Temple Road, Malleswarama, Bangalore, has got every right to enter into any Sale Agreement on my property bearing No. 25, 4th Temple Road, Malleswarama, Bangalore, consisting of Ground Floor, First Floor and Second Floor of my side measuring 30’ x 40 .”

4. On the strength of this writing 2nd defendant entered into agreement with the plaintiff to sell ground floor of the said property for a consideration of Rs. 5,55,000/-. The agreement to sell with R. Sridhar of the whole of the house envisaged consideration of Rs. 12,85,000/-. Towards sale consideration plaintiff gave an amount of Rs. 2 lakhs by means of cheques, one lakh was given to each of the defendants. Cheques when presented for payment were encashed by the respective payees. Sale agreement with the plaintiff, which was entered into by the 2nd defendant, is dated February 22, 1992. This sale agreement fell through. Plaintiff did not go for specific performance of agreement to sell against both the defendants. Rather he demanded his money back. While the 2nd defendant repaid him Rs. 50,000/- 1st defendant refused to return the money alleging breach of the agreement of sale between him and the 2nd defendant. In the suit filed by the plaintiff for recovery of Rs. 2,12,637 against both the defendants, he claimed Rs. 1,36,167/- from the 1st defendant and Rs. 76,470/- from the 2nd defendant. Both these amounts included interest at the rate of 14% par annum. The suit of the plaintiff was decreed against the 2nd defendant for Rs. 76,470/- with proportionate costs and future interest at the rate of 10% per annum on the principal amount of Rs. 50,000/- from the date of decree till realization. Suit against the 1st defendant was, however, dismissed on the ground that there was no privity of contract between the 1st defendant and the plaintiff. Plaintiff’s appeal to the High Court met the same fate. High Court was also of the view that the suit of the plaintiff against the 1st defendant was bad as there was no privity of contract between them.

5. Facts of the case which we have set out above are not in dispute. The issue on the basis of which the 1st defendant succeeded was : Whether the 1st defendants proves that he is not liable to pay the amount. There was some dispute if the writing (Exh. P-1) was signed by the 1st defendant. High Court noticed that the 1st defendant did not unequivocally deny the receipt of rupees one lakh from the plaintiff. But then the High Court proceeded even on the assumption that 1st defendant authorised the 2nd defendant to enter into a sale agreement in respect of his property with any one but said that that would not advance the case of the plaintiff any further.

6. Writing (Exh. P-1) was put to the 1st defendant when he appeared as witness in the court. He denied the writing and his signatures on it. He also denied his signatures on the agreement to sell, which was entered into between the plaintiff and the 2nd defendant (Exh. P-2). In fact he denied knowledge of any such agreement. His only plea was that he was not liable to pay any amount to the plaintiff since there was no privity of contract b

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1999 Supreme(SC) 757

Cases Referred (1)