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IN THE HIGH COURT OF MADRAS
R. SUBRAMANIAN, R. SAKTHIVEL, JJ.
M. Balaji – Appellant
Versus
Perim Janardhana Rao & Others – Respondents
O.S.A. No. 35 of 2021
Decided On : 15-03-2024
Enforceable Debt - Real Estate Transaction - Negotiable Instruments Act, Section 138 - Indian Contract Act, Section 25(3) - Negotiable Instruments Act, Section 139 - Agent's Implied Authority - Ratification of Agent's Action
Fact of the Case:
The plaintiff, a real estate trader, sued the 1st defendant for recovery of a sum of Rs.1,21,66,000/- with interest at 18% p.a. The plaintiff claimed that the 1st defendant owed him a balance of Rs.79,00,000/- for the purchase of land and had issued a dishonoured cheque as an acknowledgment of the liability.
Finding of the Court:
The learned single Judge concluded that the plaintiff failed to prove the existence of an enforceable debt, accepting the defendant's claim that the acknowledgment and the cheques were created in collusion between the plaintiff and the 1st defendant's Power Agent. The Judge heavily relied on the fact that the plaintiff and the Power Agent were arrested on a complaint by the 1st defendant, and concluded that the acknowledgment and the cheques were created documents. The Judge also referred to the provisions of the Contract Act regarding the power of the Agent to acknowledge the debts of the principal to reject the acknowledgment.
Issues: The issues included the enforceability of the debt, the authority of the Agent to acknowledge the debt, and the validity of the dishonoured cheque as an acknowledgment of the liability.
Ratio Decidendi: The court found that the acknowledgment made by the Power Agent was not valid due to lack of authority, and the dishonoured cheque did not represent an enforceable debt.
Final Decision: The appeal was allowed, the judgment of the learned single Judge was set aside, and the suit was decreed in favor of the plaintiff with costs.
JUDGMENT :
R. Subramanian, J.
(Prayer: Original Side Appeal filed under Clause 15 of the Amended Letters Patent of 1865 and Order XXXVI Rule 1 of the Original Side Rules, against the judgment and decree dated 08.01.2020 passed in C.S.No.941 of 2010.)
1. Challenge in this appeal is to the dismissal of the suit in C.S.No.941 of 2010.
2. The plaintiff in the said suit is the appellant. The plaintiff sued for recovery of a sum of Rs.1,21,66,000/- with interest at 18% p.a. on the principal sum of Rs.79,00,000/- which according to the plaintiff is due and payable by the 1st defendant in the following circumstances.
3. The plaintiff has been doing real estate business, since 2002 and he had invested monies and entered into agreements of sale for properties in and around Bangalore. According to the plaintiff, the 1st defendant approached him expressing an interest in purchasing properties in Bangalore as an investment proposition. The plaintiff, being a real estate trader had showed certain lands to the 1st defendant, in fact, the 1st defendant purchased 50% of the share in 3 acres of land in Giddanahalli Village of Anekal Taluk, Bangalore Rural District. The plaintiff and the 1st defendant had various transactions between them and in the process, the 1st defendant also expressed interest in purchasing 5 acres 25 guntas of agricultural land, which was held by the plaintiff under an agreement, subject to the condition that it should be converted into non-agricultural land. The sale price was also finalized at Rs.46,00,000/- per acre. Believing the promise made by the 1st defendant, the plaintiff spent huge amounts in obtaining conversion of the land from agricultural to non-agricultural. The plaintiff also entered into agreements with land owners and paid huge advance to them.
4. In view of the confidence reposed on the 1st defendant, the plaintiff paid consideration to the land owners from out of his personal funds and get three sale deeds registered in the name of the 1st defendant. The 1st defendant was liable to pay a sum of Rs.2,56,00,000/- as consideration for the said sales and he had paid a sum of Rs.1,77,00,000/-, leaving a balance of Rs.79,00,000/-. When the plaintiff demanded the monies, the 1st defendant executed an acknowledgment of the liability through his Power of Attorney agent one, Krishnamurthy. The plaintiff subsequently, issued a cheque from the bank account of the 2nd defendant, in which, he was a partner and authorised signatory for a sum of Rs.79,00,000/-. The said cheque, on the presentation, was dishonoured by the Bank on 15.04.2008. The plaintiff also initiated proceedings under Section 138 of the Negotiable Instruments Act and unfortunately, those proceedings ended in acquittal on the sole ground that the partnership firm was not made a party to the proceedings.
5. Upon initiation of the proceedings under the Negotiable Instruments Act, the 1st defendant lodged a police complaint against the plaintiff and the 1st defendant's own Power Agent, Krishnamurthy and managed to secure their detention. However, the said First Information Report registered against the plaintiff and the said Krishnamurthy was quashed by this Court. Therefore, according to the plaintiff, he is entitled to payment of a sum of Rs.79,00,000/- with interest, which is covered by the dishonoured cheque and the acknowledgment made by the Power of Attorney on 15.04.2006.
6. The suit was resisted by the defendants contending that there is no concluded contract between the parties. It was also contended that there is no legally enforceable debt. According to the defendant, the bounced cheque was stolen by the Power Agent, Krishnamurthy who was also an employee of the 1st defendant. A criminal complaint was also lodged against the said Krishnamurthy and the plaintiff and they were arrested and remanded to judicial custody and First Information Report was also registered on 20.08.2007 and therefore, the cheque dated 30.10.2007 cannot be a valid document,
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