The main legal point established is that novation requires the consent of both parties to substitute the original contract with a new one, and the right to forfeit the advance amount is subject to the principles outlined in Section 74 of the Contract Act.

First defendant in a suit for realisation of money is the appellant. Plaintiff and second defendant are the respondents in this appeal.

2. Heard the learned counsel for the appellant and the contesting respondent/plaintiff.

3. Basic facts are as follows :

Plaintiff and the first defendant entered into an agreement for sale of the property belonging to the latter having an extent of 35 cents. The price fixed per cent was R.28,500/-. Ext.A1 is the agreement to assign dated 15.05.2006. Plaintiff paid an amount of R.1,50,000/- as advance towards the part payment of sale consideration to the first defendant. As the first defendant was in need of money, even before the expiry of time fixed in Ext.A1, ten cents of property involved in the contract was purchased by the plaintiff from him as per Ext.A5 sale deed. Transaction relating to the remaining 25 cents should have been completed as per Ext.A1. It is an admitted fact that none of the parties filed a suit for specific performance of the contract. Later, the first defendant sold the remaining 25 cents to the second defendant as per Ext.A6 document. Hence the plaintiff filed the suit for return of advance money.

4. First defendant filed a written statement contending that Ext.A1 agreement between the parties was novated as per Ext.X1 agreement. Therefore, the plaintiff has no right to enforce any right under Ext.A1. Not only that the plaintiff himself had agreed to purchase ten cents of property out of 35 cents and relinquished all his claims over remaining 25 cents. Apart from that, the plaintiff purchased ten cents abutting a public road, thereby he got the prime portion of the property for a comparatively lesser price. Therefore, the first defendant suffered damage on account of the fact that the property on the back side fetched only a lesser value. There is a stipulation in Ext.A1 that in the event the plaintiff failed to perform his part of the agreement on time and to obtain assignment of the entire property, he would lose the advance amount paid. As the first defendant suffered damage on account of the act of the plaintiff, by operation of the said clause, the first defendant is entitled to forfeit the advance amount paid.

5. After an elaborate trial, the court below decreed the suit allowing the plaintiff to realise the amount claimed in the plaint. Court below found that there will be a charge under Section 55(6)(b) of the Transfer of Property Act, 1882. The first defendant took up the matter in appeal. Lower appellate court confirmed the decree of the trial court in part. But, it set aside the charge created over the remaining property of the first defendant in respect of the decree amount.

6. Learned counsel for the appellant raised the following points: Firstly, the execution of Ext.X1 agreement and sale of property as per the terms of Ext.X1 clearly indicate that Ext.A1 agreement had been novated by the parties and no right flowing from Ext.A1 could thereafter be enforced. Section 62 of the Contract Act deals with the concept of novation. The Section reads as follows:

"Effect of novation, rescission, and alteration of contract.-If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

It is well settled that in order to novate a contract, the parties should have decided to substitute the original contract with a new contract and the rights under the original contract should be relinquished or replaced by the new contract. This position is settled in Khardah Company Ltd. v. Raymon and Co. (India) Private Ltd. (AIR 1962 SC 1810). The Apex Court in H.R.Basavaraj (dead) by His Lrs. and another v. Canara Bank and others ((2010) 12 SCC 458) laid down that the basic principle described the concept of novation is the substitution of a contract by a new one only through the consent of both the parties to the same. Such consent may be expressed as in written agreements or implied throu