Case Note & Summary
The dispute arose out of an agreement to sell land situated in Kugallur village. The appellant (plaintiff) agreed to purchase the land from the respondents (defendants) for Rs.12,000 on 4 July 1956. A memorandum was executed the same day recording receipt of Rs.2,000 as advance by the defendants and stipulating that the balance was to be paid within sixty days. Three days later, the defendants wrote to the plaintiff stating that only Rs.350 had been paid, not Rs.2,000, and since the balance Rs.1,650 was not paid within three days as promised, they cancelled the agreement. The plaintiff immediately filed a suit for specific performance of the agreement and deposited Rs.10,000 in court as the balance purchase price. The defendants resisted the suit on two grounds: first, that only Rs.350 was actually paid and the plaintiff had obtained possession of the memorandum on a false promise to pay the remaining Rs.1,650 within three days; and second, that the memorandum had been materially altered after execution by the insertion of the words 'clear the debts and execute the sale deed free from encumbrances.' The trial court decreed specific performance, but on appeal the Madras High Court reversed that decree, holding that the plaintiff had not proved payment of the full advance and that the document was materially altered. The Supreme Court, in appeal, considered both questions. On the first, it held that the express recital in the memorandum that Rs.2,000 had been received by the defendants was strong evidence in the plaintiff's favour. The defendants, being educated and the second defendant a local panchayat president, could not reasonably have parted with a document containing a false recital without obtaining any writing from the plaintiff acknowledging the actual amount received. The court noted that the plaintiff's deposit of Rs.10,000 within ten days of the agreement indicated his financial capacity. The burden was on the defendants to disprove the recital, and they had failed to discharge it. The story that only Rs.350 was paid was rejected as untrue and a mere excuse to resile from the contract. On the second question, the court examined the allegation of material alteration. Even assuming the disputed sentence was added after execution, it did not alter the rights and liabilities of the parties or the legal effect of the instrument. The vendor is ordinarily obliged to convey the property free from encumbrances; the inserted clause merely stated this obvious duty. Moreover, there was no evidence that any encumbrance actually existed. The court relied on the principle that a material alteration is one that varies the rights, liabilities, or legal position of the parties, as stated in Halsbury's Laws of England and approved in Nathu Lal v. Mussamat Gomti Kuar. Consequently, the alteration, if any, was not material and did not discharge the contract. The Supreme Court accordingly allowed the appeal, set aside the High Court's judgment, and restored the trial court's decree for specific performance of the agreement.
Headnote
A) Contract Law - Specific Performance - Proof of Payment under Agreement - Law of Evidence - Where a written memorandum of agreement contains an express recital that a specified sum was received as advance, the recital is prima facie evidence of payment and the burden lies on the person denying receipt to prove the contrary; mere oral testimony in the face of a clear written acknowledgment is insufficient (Paras Not numbered). B) Contract Law - Alteration of Instruments - Material Alteration - General Principles of Contract - An alteration is material only if it varies the rights, liabilities or legal effect of the instrument; addition of a clause requiring the vendor to clear encumbrances before execution of sale deed, even if inserted after execution, does not constitute a material alteration because a vendor ordinarily has a duty to convey property free from encumbrances (Paras Not numbered).
Issue of Consideration
Whether the plaintiff paid only Rs.350 as advance and not Rs.2,000 as recited; whether the memorandum of agreement was materially altered after execution by adding a clause relating to clearance of encumbrances, thereby discharging the contract
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the decree of the Trial Court for specific performance of the agreement. It held that the defendants had failed to disprove the recital of advance payment and that the alleged alteration was not material.
Law Points
- Legal points not extracted
- Recital of receipt of advance in sale agreement is prima facie evidence of payment
- burden on party denying payment to disprove
- alteration of document must vary rights liabilities or legal effect to be material
- vendor ordinarily has duty to clear encumbrances before sale
