High Court of Karnataka Delivers Judgment in Two Regular First Appeals Against Common Decree for Specific Performance of Agreements of Sale of Immovable Property. The Appellants Contended That the Agreements Were Sham and Without Consideration, While the Respondents Claimed Breach of the Right of Pre-emption Under a Lease Deed.

Case Note & Summary

The appeals before the High Court of Karnataka arose from two suits (O.S. No. 6281/1994 and O.S. No. 4361/1997) filed for specific performance of two agreements of sale dated 17.03.1993. The defendant, A.C. Rathnakar, was the admitted owner of properties bearing Municipal Nos. 187 to 190, situated at Old Taluk Kacheri Road, Chickpet, Bangalore. The plaintiffs in the two suits were the lessees under a registered lease deed dated 22.12.1983, executed by the defendant in their favour. The lease was for a period of 32 years and required the plaintiffs to demolish the existing structures and construct a new non-residential multi-storied building. The lease specifically contained a right of pre-emption, obliging the defendant to offer the property to the plaintiffs first if he ever desired to sell. The plaintiffs claimed that in early 1993, the defendant approached them expressing his intention to sell. Negotiations took place at the residence of the defendant’s father-in-law, D.A.V. Rathnam Setty, who was also the defendant’s power of attorney holder for managing the property. It was agreed that the entire property would be sold in two separate transactions for a total consideration of Rs.16 lakhs. The plaintiffs in O.S. 6281/1994 were to purchase the western portion for Rs.8 lakhs, and the plaintiffs in O.S. 4361/1997 the eastern portion for Rs.8 lakhs. Two separate agreements of sale were executed on 17.03.1993, and a sum of Rs.50,000 was paid as advance through a cheque drawn on Karur Vyshya Bank. Subsequently, the power of attorney holder informed the plaintiffs by letter dated 20.05.1993 that the cheque was misplaced and requested a fresh one. The plaintiffs issued another cheque for Rs.50,000 on 28.05.1993, which was encashed through the defendant’s account. The plaintiffs alleged that the defendant failed to satisfy them about his marketable title and did not produce the necessary title deeds, encumbrance certificate, or obtain income tax clearance under Section 230-A(1) of the Income Tax Act, despite reminders and a legal notice. They wrote on 23.12.1993 and sent an advocate’s notice on 02.05.1994. The defendant replied on 18.07.1994, denying any intention to sell. He contended that the agreements were sham transactions executed when he was in a dejected state of mind and had no intention of giving effect to them. He further asserted that the advance cheque proceeds were not actually received as he had objected to the encashment and the bank had retained the amount in a suspense account. He also maintained that the property was worth much more, and there was no valid consideration. The plaintiffs then filed the suits seeking specific performance. The Trial Court (XI Additional City Civil Judge, Bangalore) framed issues covering the proof of the agreement, payment of advance, readiness and willingness, and entitlement to specific performance. By a common judgment dated 21.04.2012, the Trial Court decreed both suits with costs, directing the defendant to execute sale deeds. The defendant, through his legal representatives (he having died during the proceedings), preferred these Regular First Appeals under Section 96 read with Order XLI Rule 1 of the Code of Civil Procedure, 1908. The appeals were heard by the High Court on 17.11.2022 and judgment was reserved. On 03.02.2023, the Court pronounced its judgment. The text provided in the excerpt, however, does not include the Court’s analysis, findings on the issues, or the final operative portion. The excerpt ends with the framing of issues by the Trial Court. Consequently, the specific reasoning and outcome of the appeals remain unknown based solely on this excerpt.

Issue of Consideration

Law Points