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KARNATAKA HIGH COURT
N. Kumar and B. Manohar, JJ.
U. Vijaya Kumar and Anr. —Appellants
versus
Smt. Malini V. Rao —Respondent
R.F.A. No.813 of 2012
Decided on 30.5.2016
AIR 2001 SC 2607; RFA 1745/2007 – Referred
(b) Specific Relief Act, 1963 – Section 34 and 37 and 38 – Distinction – Declaration
u/s 34 cannot be granted where further relief is capable of being granted – On the other hand, u/s 37 and 38 there is no such restriction for granting injunction – Though declaration may be inherent in grant of injunction. (Para 23)
(c) Specific Relief Act, 1963 – Section 34 – Instantly plaintiff seeking recovery of prpoety while claiming declaration – Not seeking cancellation of the sale deed – Marked distinction between suit for cancellation of a deed affecting certain property and suit for declaring the deed to be inoperative as against plaintiff – Instantly agent executing sale deed in favour of his wife – Void – Section 215, Contract Act, 1923 – No third party interest involved – No need to pray for relief of cancellation of the sale deed. (Para 27, 28)
(d) Specific Relief Act, 1963 – Section 34 – Coming to know od fraudulent transaction, plaintiff canceling GPA and repudiating the transaction – The relief sought for recovery of possession is the further relief after declaration of title – Such decree has the effect of nullifying the sale-deed – No need to seek cancellation of the sale-deed. (Para 31)
(e) Indian Contract Act, 1872 – Section 215 – Principal does not sell to his agent – In absence of his express consent the principal my repudiate any transacton by the agent – Instantly defenadant 1, agent of plaintiff, selling property to his wife for nominal consideration – Concealing the transaction from plaintiff – Plaintiff rightly repudiating the sale – No infirmity in impugned judgment. (Para 34, 36, 43)
Result: Apeal dismissed.
The principle that a sale deed executed by an attorney in favor of his own wife without the principal's knowledge constitutes a violation of Section 215 and allows the principal to repudiate the transaction is based on the following points:
Agent's Duty to Act within Authority: An agent must act within the scope of authority granted by the principal. Any act outside this scope, especially for personal benefit or involving a conflict of interest, is invalid and can be repudiated by the principal (!) .
Fiduciary Duty and Good Faith: An attorney has a fiduciary duty to act in the best interests of the principal. Executing a sale in favor of a close relative, such as his wife, without disclosure or approval breaches this duty, rendering the transaction invalid (!) .
Violation of Section 215: Section 215 of the Indian Contract Act stipulates that an agent must not deal on his own account or for his own benefit without the principal's consent. Executing a sale deed to his wife without such consent is a breach of this section (!) .
Principal's Right to Repudiate: Due to the breach of fiduciary duties and violation of statutory provisions, the principal has the right to repudiate or rescind the transaction, as it was made without proper authority and in breach of trust (!) .
These points collectively support the Court's decision that such a transaction is invalid and can be repudiated by the principal.
N. Kumar, J.—This is the defendants’ regular first appeal challenging the judgment and decree dated 24.02.2012 in O.S.No.2405/2010 passed by the XII Addl. City Civil Judge, Bangalore, decreeing the plaintiff’s suit by declaring that the sale-deed dated 17.2.2009 in respect of ‘B’ schedule property, executed by the 1st defendant as the GPA holder of M/s. Tex X International in favour of the 2nd defendant is null and void and not binding on the plaintiff etc. and for damages at the rate of Rs.50,000/- p.m.
2. For the sake of convenience, the parties are referred as per their original rank before the trial court.
3. The subject matter of the suit is ‘B’ schedule property measuring 12070 Sq. feet forming the western portion of ‘A’ schedule property, an industrial shed measuring 2074 Sq. meters.
4. The plaintiff’s case is that she is the proprietress of M/s. Tex X International, Bangalore: Karnataka Industrial Area Development Board (for short ‘KIADB’) allotted and sold ‘A’ schedule property in favour of the said Firm under registered sale-deed dated 04.05.1995. The 1st defendant is her brother and the 2nd defendant is his wife. When the 1st defendant lost his job and was unemployed for nearly an year in 1988, she arranged for rent free accommodation for him and his family at her sister-in-law’s house bearing No. 42, P&T Colony, 2nd Cross, R.T. Nagar, Bangalore; the defendants resided there for a period of six years. In 1989 she constructed an industrial shed on the ‘A’ schedule property, entrusted its management to the 1st defendant with the intention of generating income to help him. The 1st defendant let out the said property and utilized the entire income derived therefrom: and he has not spent any money from his pocket towards managing the said property.
5. On 27.5.2005, she and the 1st defendant entered into a memorandum of understanding that the 1st defendant should pay her a sum of Rs.5,00,000/- towards the past usage of ‘A’ schedule property and the rental income; a sum of Rs.2,00,000/- towards rental income for 2005-06 and 2006-07 and a sum of Rs.6,00.000/- from May 2005 till March 2007. It was further agreed that the 1st defendant should pay enhanced rent at the rate of 107c on Rs.2,00,000/- from the end of 2006 till March 2010 towards the rental income. The said rental income of Rs.2,00,000/- is also a meager amount compared to the prevailing rent in that area. The 1st defendant had sent a number of e-mails to her about the difficult times and that he is depending on the rental income derived from the ‘A’ schedule property.
6. She and her husband were carrying on business in the USA. So while going to USA. she handed over all the original records pertaining to the ‘A’ schedule property to the 1st defendant. Their business in the USA suffered as her husband was down with bone cancer for seven years and she had to manage the business in the USA single handed and also look after him. On account of this, they decided to wind up the business in the USA and settle down in Bangalore; they also purchased a villa in Bangalore with that intention. The rental income from ‘A’ schedule property was sufficient to lead a decent and comfortable life.
7. During January 2009, when she requested the 1st defendant to send the original title deeds of ‘A’ schedule property and the khata extract, the 1st defendant postponed it on one pretext or the other. On 08.01.2009 and 27.01.2009, the 1st defendant had sent e-mails advising her to wait for two years, not to go for distress sale of the property as the real estate market had hit a low and to permit him to run the industry for 5 more years. She grew suspicious of the said conduct and got applied for the khata extract of ‘A’ schedule property through a friend at Bangalore in August 2009 and came to know that while the original Khata No. 37 stood in the Firm’s name, khata No. 37/A pertaining to ‘B’ schedule property was mutated in the name of the 2nd defendant on the basis of a sale-d
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