1993 Supreme(AP) 534

Andhra Pradesh High Court
Judges : A.GOPAL RAO
Sha Peerchand - Appellant
Versus
Jandhyala Venkata Subramanya Jyosyulu - Respondent
Decided On : 11-29-93

A subsequent agreement-holder from a person who has already entered into an agreement to sell the property with another person, cannot claim to be a bona fide purchaser for value.

Headnote:

SPECIFIC PERFORMANCE - AGREEMENT OF SALE - BONA FIDE PURCHASER - NOTICE - CUSTOM - DELAY IN FILING SUIT - EQUITIES - SALE DEED EXECUTION - [A. GOPAL RAO, J.]

Fact of the Case:

Plaintiff filed a suit for specific performance of an agreement to sell, Ex. A-1, dated 19-9-1976. The agreed total consideration was Rs. 40,000/-. The property sought to be purchased is mentioned in plaint a schedule and specified in Ex. A-2, plan, attached to the sale agreement, Ex. A-1. Plaint b schedule property was given as security for due performance of the sale agreement. The suit property consists of two shops with open space the total area being 150 square yards. Under the agreement, an amount of Rs. 1,000/- was paid as advance. Plaintiff lent money to defendants 1 to 3 on different occasions under the promissory notes, viz. , Ex. A-3 dated 14-2-1976 for Rs. 22,000/- and Ex. A-4 dated 6-3-1976 for Rs. 10,000/-, repayable with compound interest at 24% per annum. Plaintiff also claims that the agreement, Ex. A-1, was executed in discharge of the amounts due under the two promissory notes, Exs. A-3 and A-4, and the balance, if any, payable by the plaintiff should be paid at the time of registration of the sale deed, and the sale deed should be executed and registered by defendants 1 to 3 in favour of the plaintiff or his nominee whenever the plaintiff requires them to do so. In spite of several demands made by the plaintiff, the defendants 1 to 3 failed to execute the sale deed in terms of the agreement and the plaintiff was always ready and willing to perform his part of the contract. Defendants 4 and 5 entered into an agreement to purchase the very same property from defendants 1 to 3 with notice of prior contract of sale in favour of plaintiff. Plaint b schedule property, which had been given as security under Ex. A-1, was also given as security to defendants 4 and 5, by defendants 1 to 3 for performance of the alleged agreement. Defendants 1 to 3 are making preparations to execute the sale deed in favour of defendants 4 and 5, in pursuance of the subsequent agreement. Coming to know about the same, plaintiff informed defendants 4 and 5, by telegrams Exs. A-5 and A-6,. dated 27-9-1978, about the agreement to sell, dated 19-9-1976, Ex. A-1, and asking them to desist from purchasing the property in question. Eventhough they received the above telegrams, no reply was given. Plaintiff claims that the agreement in favour of D-4 and D-5 will not bind him.

Finding of the Court:

The court held that defendants 4 and 5 are not bona fide purchasers for value without notice of Ex. A-1 in favour of plaintiff. The court also held that the plaintiff is entitled for the relief of specific performance in terms of the agreement of sale Ex. A-1, by defendants 1 to 5.

Issues: 1. Whether defendants 4 and 5 are bona fide purchasers for value? 2. Whether the lower Court is right in denying the relief of a decree for specific performance?

Ratio Decidendi: 1. The burden of proof lies heavily on defendants 4 and 5 to establish that they are bona fide purchasers for value without notice of the agreement, Ex. A-1 in favour of the plaintiff. 2. The plaintiff issued telegram notices Exs. A-5 and A-6 to the 4th and first defendants respectively within six months from the date of agreement Ex. B-5 in favour of defendants 4 and 5. 3. All the payments made by defendants 4 and 5 towards discharge of the debts due by defendants 1 to 3 to third parties are subsequent to the receipt of the telegram notice Ex. A-5 dated 27-9-1978. 4. There is no evidence on record to indicate that any attempt has been made by defendants 4 and 5 for cancellation of the agreement to sell Ex. A-1, in favour of plaintiff. 5. Except the self-serving evidence of defendants 1 and 2, there is no acceptable evidence that the plaintiff agreed to receive the sum of Rs. 40,000/- due to him under the promissory notes Exs. A-3 and A-4. 6. Under an agreement of sale, a person will not acquire any rights in the property covered by that agreement. 7. Defendants 4 and 5 are only subsequent agreement-holders from defendants 1 to 3, they (defendants 4 and 5) cannot claim that they are bona fide purchasers for value. 8. The specific ground on which the suit is resisted is that Ex. A-1 is not intended to be acted upon, but was executed only as a security for payment of the amount due under the promissory notes, Exs. A-3 and A-4, executed by the 1st defendant in favour of plaintiff. 9. Except the self-serving evidence of D. Ws. 1 and 2, there is no other independent and acceptable evidence on record to establish any such prevailing custom. 10. The defendants have not examined any creditor of the marwadi community to establish the existence of such a custom. 11. Admittedly, on the date when the suit was filed by the plaintiff, the promissory notes, Exs. A-3 and A-4 were not time barred, and are very much alive. 12. The amount due under these promissory notes, as on the date of execution of the sale deed, has to be given credit to, towards consideration for Ex. A-1 sale agreement and the balance, if any, should be paid by the plaintiff to defendants 1 to 3. 13. The very fact that the plaintiff has opted to file the suit for specific performance on he basis of Ex. A-l agreement without insisting for payment of the amount due under the promissory notes, Exs. A-3 and A-4, itself discloses that the plaintiff is interested in purchasing the property covered by Ex. A-1. 14. This conduct of the Plaintiff establishes that Ex. A-l was not intended to be a mere security for ensuring the recovery of amounts due under the two promissory notes, Exs. A-3 and A-4. 15. The delay in filing the suit is not a ground for refusing the relief of specific performance. 16. Merely because the plaintiff has prayed for the alternative relief of damages, in the event of not granting the relief of specific performance, it does not mean that the alternative prayer alone can be granted in order to maintain balance of convenience eventhough the plaintiff had successfully proved that he did not violate any of the conditions of the agreement, Ex. A-1. 17. Granting the relief of specific performance is an ordinary rule, unless there is any compelling reason to deny the same. 18. In this case, the defendants have failed to establish that Ex. A-1 agreement is not intended to beacted upon. 19. The equities, therefore, are in favour of granting specific relief sought for by the plaintiff. 20. The mere fact that defendants 4 and 5 have spent considerable amounts in purchasing the property and in improving the same, is not sufficient to deny the relief of specific performance of the agreement of sale Ex. A-1 in favour of the plaintiff.

Final Decision: The appeal is allowed accordingly with costs. Plaintiff shall deposit in the lower,court the balance of the amount of agreed consideration under Ex. A-1 agreement within one month from to-day. Plaintiff shall also deposit the required stamp papers and the registration charges within two months from to-day in the lower Court. On such deposits being made by the plaintiff in the lower Court, defendants 1 to 5 shall execute the sale deed for the property covered by Ex. A-1 in favour of the plaintiff. Defendants 1 to 3 will be entitled to withdraw the amounts, if any, deposited by plaintiff towards sale consideration. Defendants 4 and 5 shall be entitled to wihdraw the amount of Rs. 40,000/- deposited by them.