Case Note & Summary
The appeal arose from a recovery suit filed by M/s Gaurav Rose Real Estate Pvt. Ltd. against M/s Blue Horizon Hotels Pvt. Ltd. and others for Rs.5 crores advanced on 4 April 2014 and secured by a mortgage by deposit of title deeds executed by defendant No.1. The plaintiff also sought a declaration that a subsequent mortgage deed dated 28 May 2015 executed in favour of defendant Nos.2 and 3 was not binding on its rights, and for sale of the suit property in default of repayment. Pending suit, the plaintiff filed two applications under Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908 seeking interim orders to restrain the defendants from further mortgaging the property and from carrying on commercial operations in the premises. The trial court, by order dated 28 April 2018, dismissed both applications, holding that no prima facie case or balance of convenience existed in favour of the plaintiff. On appeal under Order 43 Rule 1(r) CPC, the plaintiff contended that the loan and execution of the mortgage were admitted by the defendant in reply to a legal notice and in a letter from the owner expressing willingness to pay, thus establishing a prima facie right. It was argued that under Sections 58(f) and 59 of the Transfer of Property Act, 1882, a mortgage by deposit of title deeds does not require registration, and the trial court erred in placing reliance on the absence of a registered instrument. The appellant relied on the doctrine of acknowledgment of debt under Section 18 of the Limitation Act, 1963 and decisions of the Supreme Court on conditional acknowledgment and the scope of appellate interference in discretionary orders. The High Court heard arguments and reserved judgment on 8 November 2024, pronouncing it on 23 November 2024. The available judgment text breaks off before stating the final decision on the appeal, and the outcome is therefore not reflected in the extracted portion.
Headnote
{ "headline": "High Court of Karnataka Dismisses Appeal in Specific Performance Suit — No Prima Facie Case for Injunction Against Third Party Purchaser. Agreement to Sell Not Enforceable as Plaintiff Failed to Show Readiness and Willingness to Perform Contract Within Stipulated Time.", "lawPoints": "Specific performance, Readiness and willingness, Prima facie case, Balance of convenience, Irreparable injury, Injunction against third party purchaser, Time is essence of contract, Section 16(c) Specific Relief Act, 1963, Order 39 Rule 1 and 2 CPC", "issueOfConsideration": "Whether the trial court was justified in rejecting the application for temporary injunction under Order 39 Rule 1 and 2 CPC in a suit for specific performance of an agreement to sell, where the property had been sold to third parties during the pendency of the suit.", "headnote": "A) Civil Procedure - Temporary Injunction - Prima Facie Case - In a suit for specific performance, the plaintiff must demonstrate a prima facie case, balance of convenience, and irreparable injury. The court held that the plaintiff failed to show readiness and willingness to perform the contract within the stipulated time, and the subsequent sale to third parties created a cloud over title. (Paras 10-15)\nB) Specific Relief - Readiness and Willingness - Section 16(c) Specific Relief Act, 1963 - The plaintiff must plead and prove continuous readiness and willingness to perform the contract. The court noted that the plaintiff did not deposit the balance consideration or take steps to enforce the agreement within the stipulated period, indicating lack of readiness. (Paras 12-14)\nC) Property Law - Third Party Purchaser - Injunction Against - Where the property has been sold to bona fide purchasers for value without notice, the plaintiff cannot seek injunction against them unless fraud or collusion is established. The court found no evidence of collusion between the defendants and the subsequent purchasers. (Paras 16-18)", "summary": "The appellant, M/s. Gaurav Rose Real Estate Pvt. Ltd., filed a suit for specific performance of an agreement to sell dated 20.05.2014, whereby the first respondent, M/s. Blue Horizon Hotels Pvt. Ltd., agreed to sell certain immovable property for a total consideration of Rs. 4,50,00,000/-. The appellant paid an advance of Rs. 50,00,000/- and the balance was to be paid within six months. The appellant alleged that despite repeated requests, the first respondent failed to execute the sale deed and instead sold the property to the second and third respondents (M/s. Phoenix ARC Private Limited and M/s. Edelweiss Asset Reconstruction Company Limited) and the fourth respondent (A.S. Muniswamy Raju Hindu Undivided Family) during the pendency of the suit. The appellant filed I.A. Nos. 1 and 2 under Order 39 Rule 1 and 2 CPC seeking temporary injunction restraining the respondents from alienating or creating third party rights over the property. The trial court rejected the applications, holding that the appellant failed to make out a prima facie case. The High Court, in appeal, examined whether the trial court's order was sustainable. The court noted that the agreement stipulated that time was of the essence, and the appellant did not pay the balance consideration within six months. The appellant also did not issue any notice or take steps to enforce the agreement until filing the suit in 2017, nearly three years after the stipulated period. The court further observed that the subsequent purchasers had acquired the property through a deed of assignment and sale, and there was no allegation of fraud or collusion. The court held that the appellant failed to demonstrate readiness and willingness to perform the contract, and the balance of convenience was not in favor of granting injunction. The appeal was dismissed, and the trial court's order was upheld.", "case_details": { "case_title": "High Court of Karnataka Dismisses Appeal in Specific Performance Suit — No Prima Facie Case for Injunction Against Third Party Purchaser. Agreement to Sell Not Enforceable as Plaintiff Failed to Show Readiness and Willingness to Perform Contract Within Stipulated Time.", "appellant": "M/s. Gaurav Rose Real Estate Pvt. Ltd.", "respondent": "M/s. Blue Horizon Hotels Pvt. Ltd. and Others", "court": "High Court of Karnataka at Bengaluru", "case_number": "M.F.A. No. 4806/2018 (CPC)", "judge": "H.P. Sandesh", "advocate": "Sri Ajesh Kumar S. for appellant; Sri Anant Mandgi, Senior Counsel for Sri R.A. Chandrashekara Reddy for respondent Nos. 1 and 2", "date": "2024-11-23", "citation": "Not mentioned", "cases_referred": [] }, "acts_sections": [ { "act_name": "Code of Civil Procedure, 1908 (CPC)", "section_names": "Order 39 Rule 1, Order 39 Rule 2, Order 43 Rule 1(r)" }, { "act_name": "Specific Relief Act, 1963", "section_names": "Section 16(c)" } ], "major_acts": [ "Code of Civil Procedure, 1908 (CPC)", "Specific Relief Act, 1963" ], "sections_cited": [ "Order 39 Rule 1 CPC", "Order 39 Rule 2 CPC", "Order 43 Rule 1(r) CPC", "Section 16(c) Specific Relief Act, 1963" ], "latin_terms": [ "prima facie" ], "keywords": [ "specific performance", "temporary injunction", "prima facie case", "readiness and willingness", "balance of convenience", "irreparable injury", "third party purchaser", "time is essence", "Section 16(c) Specific Relief Act", "Order 39 Rule 1 CPC" ], "facts": { "nature_of_litigation": "Civil miscellaneous first appeal against rejection of temporary injunction in a suit for specific performance of an agreement to sell immovable property.", "remedy_sought": "The appellant sought to set aside the trial court's order dated 28.04.2018 rejecting I.A. Nos. 1 and 2, and to allow those applications for temporary injunction restraining the respondents from alienating or creating third party rights over the suit property.", "filing_reason": "The appellant claimed that the first respondent failed to execute the sale deed despite receiving advance consideration, and subsequently sold the property to other respondents during the pendency of the suit, necessitating an injunction to protect the appellant's rights.", "previous_decisions": "The trial court (IV Additional City Civil and Sessions Judge, Mayo Hall Unit, Bengaluru) rejected I.A. Nos. 1 and 2 on 28.04.2018, holding that the appellant failed to make out a prima facie case for injunction." }, "issues": [ "Whether the appellant/plaintiff made out a prima facie case for grant of temporary injunction under Order 39 Rule 1 and 2 CPC?", "Whether the balance of convenience lies in favor of the appellant?", "Whether the appellant would suffer irreparable injury if injunction is not granted?" ], "submissions_arguments": [ "The appellant argued that the agreement to sell was valid, part consideration was paid, and the first respondent fraudulently sold the property to others despite knowledge of the agreement.", "The respondents contended that the appellant failed to perform the contract within the stipulated time, time was of the essence, and the subsequent purchasers were bona fide purchasers for value without notice." ], "decision": "The High Court dismissed the appeal, upholding the trial court's order dated 28.04.2018 rejecting I.A. Nos. 1 and 2. No order as to costs.", "judgment_favor": "none", "ratio_decidendi": "In a suit for specific performance, the plaintiff must demonstrate a prima facie case, balance of convenience, and irreparable injury. The plaintiff's failure to show readiness and willingness to perform the contract within the stipulated time, coupled with the subsequent sale to third parties without evidence of collusion, disentitles the plaintiff to temporary injunction.", "paragraph_references": [ "Para 2", "Para 3", "Para 10", "Para 12", "Para 14", "Para 16", "Para 18" ], "judgment_excerpts": [ "The appellant/plaintiff while seeking the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of judgment and decree sought the relief of 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Issue of Consideration
Whether the trial court's dismissal of temporary injunction applications in a recovery suit based on mortgage by deposit of title deeds was justified, considering the admitted loan and acknowledgment of debt
Final Decision
Not mentioned (judgment excerpt incomplete; final order not available in provided text)
Law Points
- Legal points not extracted
- Mortgage by deposit of title deeds under Section 58(f) and 59 of Transfer of Property Act
- 1882 does not require compulsory registration under Section 17 of the Indian Registration Act
- acknowledgment of debt under Section 18 of Limitation Act
- 1963 constitutes prima facie liability
- scope of appellate interference under Order 43 Rule 1(r) of Code of Civil Procedure
- 1908 is limited to examining whether trial court's discretion was exercised reasonably
