Partly allowed

P N Madhava Kumar v. R Ramesha

Karnataka HC21 Nov 2023RFA/1191/2010

Case brief

AI extract

What is this about?

A first appeal against a decree for specific performance of an agreement of sale. The High Court partly allowed the appeal, setting aside the decree for specific performance due to hardship to the defendants and an alternative clause, but decreed refund of advance money with damages and interest.

What did the court decide?

The decree for specific performance was set aside; the suit was decreed for recovery of Rs.5,31,700 with interest at 10% per annum from the date of suit till realization; defendants to deposit 50% wit

P N Madhava Kumar Vs R Ramesha — Specific Performance | Karnataka HC (2023)

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NC: 2023:KHC:41819-DB RFA No. 1191/2010

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 21^ST DAY OF NOVEMBER, 2023

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PRESENT

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THE HON'BLE MRS JUSTICE K.S.MUDAGAL

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AND

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THE HON'BLE MR JUSTICE K V ARAVIND REGULAR FIRST APPEAL NO. 1191/2010 (SP)

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BETWEEN:

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P N MADHAVA KUMAR S/O LATE NARAYANA SETTY AGED ABOUT 51 YEARS

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P N SRIDHAR S/O LATE NARAYANA SETTY AGED ABOUT 46 YEARS

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BOTH ARE R/AT NO.648/91, 5^TH CROSS, 10^TH MAIN, 2^ND BLOCK, BSK I STAGE, BANGALORE – 560 050

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P N PADMANABHA S/O LATE NARAYANA SHETTY AGED ABOUT 48 YEARS

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Digitally signed by K S RENUKAMBA Location: High Court of Karnataka

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P N SUBRAMANYAM S/O LATE NARAYANA SHETTY AGED ABOUT 43 YEARS

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NOS.3 AND 4 ARE R/AT NO.14/296, MURUGAN TAKES ROAD,

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KUPPAM, ANDRAPRADESH … APPELLANTS

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(BY SRI.M.V.CHANDRASHEKAR REDDY, ADVOCATE)

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AND:

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R RAMESHA S/O LATE RANGAPPA AGED ABOUT 35 YEARS

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BHARATHI RAMESHA W/O R RAMESH AGED ABOUT 34 YEARS

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BOTH ARE R/AT 188/3, 3^RD CROSS, 14^TH MAIN, FIRST BLOCK, BSK I STAGE, HANUMANTHA NAGAR BANGALORE – 560 050 … RESPONDENTS

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(BY SRI. H R ANANTHA KRISHNA MURTHY, ADVOCATE)

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THIS R.F.A. IS FILED UNDER SECTION 96 OF CPC AGAINST THE JUDGMENT AND DECREE DATED 15.04.2010 PASSED IN OS.NO.5268/2005 ON THE FILE OF THE V ADDL. CITY CIVIL AND SESSIONS JUDGE, BANGALORE, DECREEING THE SUIT FOR SPECIFIC PERFORMANCE.

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THIS APPEAL COMING ON FOR DICTATION, THIS DAY, K.S.MUDAGAL J. , DELIVERED THE FOLLOWING:

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JUDGMENT

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Challenging the judgment and decree for Specific

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Performance granted in favour of the respondents, the defendants in O.S.No.5268/2005 on the file of the V Additional City Civil Judge, Bengaluru have preferred this appeal.

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The appellants were defendant Nos.1 to 4 and respondents were plaintiff Nos.1 and 2 in O.S.No.5268/2005. For the purpose of convenience, the parties are referred to henceforth according to their ranks before the trial Court.

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Plaintiffs filed O.S.No.5268/2005 before the trial Court against the defendants seeking decree for Specific

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Performance of agreement of sale dated 25.03.2005 and other

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alternative reliefs. The subject matter of the suit was residential building bearing No.648/91 situated at 5^th Cross, 10^th Main, II Block, Banashankari-I stage, Bangalore-50.

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The case of the plaintiffs in brief is as follows:

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i) That defendant Nos.1 to 4 are the absolute owners

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of the suit schedule property. The defendants agreed to sell the said property to the plaintiffs for a consideration of Rs.14,50,000/-. In pursuance of such agreement, they executed the agreement of sale dated 25.03.2005 receiving advance amount of Rs.3,00,000/-. Out of the said amount, Rs.2,90,000/- was paid by Demand Draft and Rs.10,000/- was paid in cash. Balance amount of Rs.11,50,000/- was agreed to be paid at the time of registration of the sale deed. Plaintiffs were always ready and willing to perform their part of the contract. They made arrangements for funds and purchased the demand drafts for balance sale consideration. Defendants started evading execution of the sale deed. Therefore, the plaintiffs got issued notice dated 20.05.2005 calling upon the defendants to execute the sale deed. The defendants did not respond to the said notice.

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ii) The plaintiffs spent in all Rs.31,700/- for obtaining

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the documents etc. They are paying interest at 7.5% per annum towards loan borrowed by them from HSBC Bank and interest at 15% per annum towards loan borrowed from ICICI Bank. The plaintiffs are entitled for decree of Specific Performance. In the alternative, they are entitled to decree for Rs.16,81,700/- towards advance sale consideration, liquidated damages and expenses of the documents etc., Thus they sought decree accordingly.

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The defendants contested the suit by filing their written statement. The gist of the written statement is as follows:

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i) Ownership of the suit property was admitted. It was admitted that on 25.03.2005 they have executed Ex.P12. But according to them, Ex.P12 was executed as security for the loan of Rs.3,00,000/- borrowed by them for their family commitments. It was agreed that Ex.P12 is only a security document for the said loan and that was not intended to be acted upon. Despite defendants repaying the said loan amount and demanding the return of agreement of sale dated 25.03.2005, the plaintiffs did not return the same. To make

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unlawful gain, they have filed the suit. The value of the property during the relevant period was Rs.50,00,000/-. That also goes to show that the transaction was only a security transaction.

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ii) To the notice of the plaintiffs, the defendants issued suitable reply dated 18.06.2005. The readiness and willingness of the plaintiffs to perform their part of the contract was denied. The availment of the loan by the plaintiffs for the purpose of the transaction was also denied. The plaintiffs in collusion with some other interested persons have made false claim of agreement of sale and decree for Specific Performance. Out of loan of Rs.3,00,000/-, the plaintiffs deducted Rs.10,000/- by way of interest and only paid Rs.2,90,000/-. Therefore the allegation that Rs.3,00,000/- was paid as advance sale consideration is also disputed. The suit property is the only dwelling house of the defendants. If decree for Specific Performance is passed, they will be put to greater hardship. Thus they sought dismissal of the suit.

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On the basis of the said pleadings, the trial Court framed the following issues:

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i) Does the plaintiffs prove that the defendants executed an agreement of sale on 25.03.2005 for selling

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the schedule property to them for a consideration of Rs.14,50,000/- and that they paid Rs.3,00,000/- to them as earnest money?

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ii) Do the defendants prove that the agreement is just a nominal document executed by them by way of security for the hand loan that they obtained from the plaintiffs?

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iii) Do the plaintiffs prove that they are always ready and willing to perform their part of the contract?

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iv) Do the plaintiffs prove that they are entitled for relief of specific performance or for alternative relief as prayed for by them?

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v) What order or decree?

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In support of the case of the plaintiffs, plaintiff No.1

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was examined as PW.1. His mother-in-law and sister-in-law

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were examined as PWs.2 and 3 and on their behalf, Exs.P1 to P35 were marked. On behalf of defendants, defendant No.1 was examined as DW.1 and defendant No.4 was examined as DW.2, on their behalf Ex.D1 was marked.

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The trial Court on hearing the parties by the impugned judgment and decree held that the defendants admitted their signature and text of the document. Whereas they failed to prove their defence that the said document was only a security document, therefore, the plaintiffs’ claim that Ex.P12 the agreement of sale was proved. The plaintiffs have

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proved their readiness and willingness to perform their part of the contract. Thus, the trial Court decreed the suit for Specific Performance of agreement of sale. Defendants challenged the said judgment in the above appeal.

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Submissions of Sri. M.V.Chandrashekar Reddy, learned Counsel for the appellant/defendants:

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Though the defendants admitted their signature on Ex.P12, they were not well versed with English language. It was for the plaintiffs to prove the payment of the entire amount. Though it was claimed that Rs.10,000/- was paid in cash, the same was not proved. That substantiates the claim of the defendants that the transaction was a loan transaction and the plaintiffs deducted Rs.10,000/- out of the loan of Rs.3,00,000/- as advance interest.

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The witnesses examined by the plaintiffs were all interested witnesses. They were the close relatives of the plaintiffs. Though PW.1 claimed that he struck the deal through the broker by name Jayaram, he was not examined. The scribe of Ex.P12 was not examined. The loan borrowed by plaintiff No.1 was a personal loan. If really the loan was for purchasing the property, the plaintiffs should have taken the title deed and created lien on the same. Admittedly the original title deeds

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were with the defendants. That substantiated the claim of the

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defendants that the transaction was a loan transaction.

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As per Section 16(c) of the Specific Relief Act, 1963 (‘the Act’ for short) as applicable to the present case, the plaintiffs had the burden to prove that they were ready and willing to perform their part of the contract all along. As per Ex.P20, the plaintiffs surrendered the home loan before filing of the suit. Therefore, it cannot be said that the plaintiffs were always ready and willing to perform their part of the contract.

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The evidence adduced by the plaintiffs regarding execution of the document was very doubtful. Ex.P12 itself states that in the case of breach of terms of agreement, the plaintiffs were entitled only for refund of the amount with liquidated damages of Rs.2,00,000/-. Therefore, the trial Court was in error granting decree for Specific Performance. Even on proving the execution of the document and the readiness and willingness to perform the contract, Section 20 of the Act mandates that the Court has to exercise the discretion to grant Specific Performance of contract only if all the conditions stated therein are satisfied. In the present case, admittedly the plaintiffs owned three houses and suit property was the only dwelling house for the defendants. Therefore comparative

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hardship was on the defendants. On that count also, the decree

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for Specific Performance is unsustainable.

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In support of his submission he relies on the

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following judgments:

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(i) Mayawanti Vs Kaushalya Devi¹

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(ii) Sharadamma Vs Gunashekar²

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(iii) Smt. Asharaj and Others Vs S.G.Nagaraj @ Suga Nagaraj³

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(iv) Kali Dei and another Vs Brundaban Malik⁴

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(v) Ramjan Khan and others Vs Baba Raghunath Dass and others⁵

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(vi) N.K Giriraja Shetty Vs N.K Parthasarathy Shetty and others⁶

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(vii) B.R Mulani Vs Dr.A.B Aswathanarayana⁷

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(viii) Bal Krishna and Anr Vs Bhagwan Das (Dead) by L.Rs and Ors⁸

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(ix) Vimlesh Kumari Kulshrestha Vs Sambhajirao and Another⁹

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(x) U.N Krishnamurthy (Since Deceased) Thr.Lrs Vs A.M.Krishnamurthy¹⁰

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(xi) Shamsher Singh Vs Rajinder Kumar¹¹

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(xii) V Muthusami (dead) by LRS Vs Angammal and Ors¹²

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1 (1990) 3 SCC 1

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2 LAWS (KAR)-2008-9-26

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3 ILR 2014 Kar 5778

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4 AIR 1972 ORISSA 132

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5 AIR 1992 Madhya Pradesh 22

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6 ILR 2006 KAR 1692

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7 ILR 1992 KAR 2224

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8 AIR 2008 SC 1786

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9 (2008) 5 SCC 58

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10 AIR 2022 SC 3361

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11 2014 AIR SCW 3292

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12 AIR 2002 SC 1279

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(xiii) Ranganayakamma Vs Govinda Narayan¹³ (xiv) Bhaurao Dagdu Paralkar Vs State of Maharashtra¹⁴

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Submissions of Sri H.R.Anantha Krishna Murthy, learned Counsel for the respondents:

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The contention of the defendants that they were

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not well versed with the English language was not established. One of the defendants was a Government servant and the document was attested by the daughter of the first defendant who is an engineering student. Moreover, they admitted execution of the document, but according to them, the document was executed as security for repayment of the loan. Therefore the burden was on them to establish their defence. The defendants though claimed that they have paid the interest, except their self-serving evidence, there was nothing to prove the same.

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The evidence adduced by the plaintiffs shows that the document executed was agreement of sale and the plaintiffs were always ready and willing to perform their part of the contract. The contention that at the relevant time the property was valued more than Rs.50,00,000/- was not established. So

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far as hardship, the plaintiffs invested Rs.3,00,000/- in the

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13 ILR 1982 KAR 1211

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14 (2005) 7 SCC 605

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year 2005. Therefore, if Specific Performance is denied, plaintiffs will be put to greater hardship as the plaintiffs will not be in a position to acquire any such urban property for that price after about 20 years. There is no merit in the appeal. He sought for dismissal of the suit.

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12. In support of his submissions, he relies on the

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following judgments:

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(i) Dattatraya Vs Rangnath Gopalrao Kawathekar (dead) by his LRs and others¹⁵

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(ii) Roop Kumar Vs Mohan Thedani¹⁶ (iii) Jayamma Vs Venkatesh Shetty and Ors¹⁷ (iv) Narayan Bhagwantrao Gosavi Balajiwale Vs Gopal Vinayak Gosavi¹⁸

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(v) Vishnu Vs Abdulgani¹⁹ (vi) K Prakash Vs B.R Sampathkumar²⁰ (vii) Zarina Siddiqui Vs A Ramalingam @ R Amarnathan²¹

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(viii) Basavaraj Vs Padmavathi²² (ix) Prakash Chandra Vs Narayan²³ (x) Ferrodous Estates (PVT)Ltd Vs P.Gopirathnam (dead) & ors²⁴

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15 AIR 1971 SC 2548

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16 AIR 2003 SC 2418

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17 2017(1)KarLJ 100

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18 AIR 1960 SC 100

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19 2013(1) KCCR105

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20 (2015) 1 SCC 597

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21 (2015) 1 SCC 705

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22 AIR 2023 SC 282

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23 (2012) 5 SCC 403

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24 Civil Appeal No.13516/2015 DD 12.10.2020

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On considering the submissions of both side and on examination of the records, the points that arise for consideration of this Court are:

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(i) Whether the finding of the trial Court that the defendants executed Ex.P12 agreeing to sell the suit property for Rs.14,50,000/- is sustainable?

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(ii) Whether the finding of the trial Court that the plaintiffs were always ready and willing to perform their part of contract is sustainable?

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(iii) Whether the trial Court was justified in granting decree for Specific Performance?

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ANALYSIS:

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Reg. Point No.1:

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To prove that the defendants executed the agreement to sell the suit schedule property for consideration of Rs.14,50,000/- on receiving advance consideration of Rs.3,00,000/-, the plaintiffs relied on the evidence of PWs.1 to 3 and Ex.P12 the agreement of sale. The defendants did not dispute that they were the absolute owners of the suit schedule property. As per Ex.P12 the agreement of sale, the defendants agreed to sell the suit property for consideration of Rs.14,50,000/- and they received advance sale consideration

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of Rs.3,00,000/-. Even out of that Rs.3,00,000/-,

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Rs.2,90,000/- was paid by different demand drafts, drawn on City Bank and ICICI Bank. The receipt of money under the demand drafts was also not disputed. As per clause-2 of Ex.P12, the defendants agreed to convey the property free of all encumbrances and execute the sale deed within three months of Ex.P12. The defendants agreed to execute the sale within three months from the date of the said document.

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On admitting the text of Ex.P12 and receipts of demand drafts, the burden was on the defendants to prove that Ex.P12 was executed as security for repayment of loan. It was for them to prove that they had received a sum of Rs.3,00,000/- mentioned in Ex.P12 as loan amount. It is no doubt true that the plaintiffs did not examine the scribe of the document or alleged broker, but on having admitted the documents, the burden was on the defendants to prove that the document was only a security document and was not intended to be acted upon. Though much was argued to contend that PWs.2 and 3 were interested witnesses, in the light of their own admission regarding execution of Ex.P.12,

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PWs.2 and 3 being the relatives of the plaintiffs cannot be blown out of proportion.

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The next question is “whether the defendants

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established their defence that Ex.P12 was only a security document and not the loan transaction”. The defendants in their written statement though contended that they were willing to return the loan amount and paid the interest accrued from the date of execution of the same, except their self serving statement, there was no proof of such payment of interest. If the plaintiffs were dragging the matter, taking advantage of Ex.P12, the normal course of conduct of a man of ordinary prudence is to first tender the amount and issue notice to the plaintiffs and call upon them to hand over the document. But the defendants did not take any steps till the plaintiffs issued notice to them as per Ex.P.33.

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Learned Counsel for the appellants submits that the plaintiffs issued notice even before the expiry of the stipulated period of three months, therefore, there was no need to issue notice before that. But according to the plaintiffs, the defendants were trying to alienate the property. Therefore they had to issue notice within stipulated time. Whatever it may be,

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to establish their defence, the defendants atleast could have examined the witnesses to the document. Admittedly, the first defendant’s daughter was a witness to the document and she was an engineering student. Atleast she could have been examined to show that the document was a nominal document not intended to be acted upon. Under the circumstances, the trial Court was justified in holding that the defendants failed to establish their defence that the document was a nominal document or a security document for the loan transaction.

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As rightly pointed out by the learned Counsel for the plaintiffs/respondents, Section 91 of the Indian Evidence Act, 1872 bars leading of oral evidence to prove the terms of the contract, if the contract itself is reduced to the form of a document. Having executed Ex.P12 as the agreement of sale the defendants were excluded from adducing any oral evidence contrary to the terms stated thereon in view of Section 91 of the Evidence Act. Even otherwise, the defendants failed to prove that there was loan transaction and they had paid the interest, etc. Therefore, defendants cannot be permitted to lead any evidence to the exclusion of terms of Ex.P12, that too,

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when they do not contend that the said document was obtained

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from them by any fraud or coercion.

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Reg. Readiness and willingness:

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There is no dispute with regard to the legal proposition that to claim relief of specific performance, the proof of execution of the agreement of sale itself is not sufficient. Section 16(c) of the Act as it stood in the year 2005 mandated that the plaintiffs have to aver and prove that they were always ready and willing to perform their part of the contract. Pleading and proving the same was the statutory requirement under Section 16(c) of the Act.

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According to the defendants themselves, plaintiff Nos. 1 and 2 were both employed and they were earning handsome income. It is suggested by the defendants themselves to PW.1 that plaintiff Nos.1 and 2 were in the habit of lending money and getting such documents executed. To substantiate that defendants themselves produced Ex.D1 the certified copy of the plaint in OS No.9162/2004. The defendants contend that similar to the present case, plaintiff No.2 got executed agreement of sale in respect of property belonging to one Shanmugaraj and filed similar suit

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against him for specific performance of contract. Thereby it becomes clear that financial affordability of the plaintiffs was not in dispute.

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Further the defendants themselves claim that

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plaintiffs owned three properties. As per the defendants themselves the plaintiffs had paid Rs.2,90,000/-, though not Rs.3,00,000/-. They failed to establish that Rs.10,000/- out of Rs.3,00,000/- was deducted as interest in advance. The plaintiffs contend that to pay the balance sale consideration they had availed loan from HSBC Bank. To prove that they relied on Ex.P1 letter of HSBC Bank, Ex.P10 loan sanction letter and Ex.P11 loan cancellation letter.

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To prove that they were always ready and willing to perform their part of the contract and were pooling funds, the plaintiffs relied on Ex.P20 the letter said to have been issued by HSBC Bank along with transaction details. The defendants in the cross examination of PW.1 suggested that was a personal loan. On that ground also the trial Court was justified in holding that the plaintiffs were always ready and willing to perform their part of the contract. We do not find any perversity or illegality in the finding of the trial Court in that regard.

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Reg. Relief of specific performance:

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23. The defendants contested the granting of the relief of specific performance on two points. First one is that, as per the stipulation under the head of breach of contract in Ex.P12, plaintiffs were entitled only for refund of the earnest money and liquidated damages of Rs.2,00,000/- and not for specific performance. The second ground is that suit property is the only dwelling house for all the four defendants together. Whereas the plaintiffs owned three houses and they are financially far above the defendants. If the suit for specific performance is decreed, they become homeless. Such greater hardship to them disentitles the plaintiffs to seek the decree for specific performance.

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PW.1 in his cross examination has admitted that except the suit property the defendants have no other shelter. He also admits that they have three houses for their living. It is settled law that, even if the plaintiffs establish execution of agreement of sale and their readiness and willingness, the grant of decree of specific performance is not a matter of course or a matter of right. That is discretionary relief. Section 20 of the Specific Relief Act as it was applicable to the parties

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at the relevant time specifically states that the jurisdiction to

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decree the specific performance is discretionary and the Court is not bound to grant such relief merely because it is lawful to do so. Section 20 further states that discretion of the Court shall not be arbitrary but sound and reasonable, guided by judicial principles.

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Section 20(2)(b) and (c) of the Act at the relevant time which are relevant for the purpose of this case reads as follows:

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“20. Discretion as to decreeing specific performance.—

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(1) The jurisdiction to decree specific performance is discretionary , and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal.

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(2) The following are cases in which the court may properly exercise discretion not to decree specific performance:—

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(a) xxxxxxxx

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(b) where the performance of the contract would involve some hardship on the defendant which he did not foresee, whereas its non-performance would involve no such hardship on the plaintiff; or

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(c) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance.”

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Reading of the above provision shows that even if

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the contract entered into between the parties is not voidable,

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looking to the circumstances under which the Court is satisfied

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that it is inequitable to enforce specific performance, the Court can reject the specific performance. Section 20(2)(b) of the Act states that, if the contract involves some hardship to the defendant which he did not foresee at the time of entering into the contract, then discretion may not be exercised to grant specific performance. In the present case, the evidence on record shows that defendant Nos.1 to 4 were economically not well placed as compared to the plaintiffs. Secondly, in Ex.P12 the plaintiffs’ own document i.e., agreement, it is stated that vendors agreed to sell the suit property to meet the expenses towards domestic and legal necessities of their family. The evidence on record shows that defendants entered into the agreement to meet out the expenses of marriage of defendant No.4 and for the purpose of higher education of the daughter of the first defendant. That substantiates the contention of the defendants that Ex.P12 was executed under compelling financial pressure.

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The next thing to be seen is, what was the understanding of the parties regarding the consequences that entail, if they fail to comply the terms of the contract. In the

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agreement the term that is enlisted under the head ‘Breach of

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Terms of conditions of the agreement”, clause-A says what shall be done if the purchaser fails to perform his part of the contract. Clauses-B and C read as follows:

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“B. In the event of default committed by the VENDORS regarding their duties and obligations under this agreement of Sale, the PURCHASERS shall be entitled to claim refund of the advance of Rs.3,00,000/- (Rupees Three Lakh only) already paid to the VENDORS with an additional amount of Rs.2,00,000/- (Rupees Two Lakh only) by way of liquidated damages.

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C. Both the parties are at liberty to approach the appropriate court of law for specific performance of this agreement in case of breach of the terms and conditions of this agreement against the defaulting party.”

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The reading of the above conditions in the agreement shows that in case of default on the part of the vendors, firstly the parties agree that advance amount shall be refunded with additional amount of Rs.2,00,000/-. Thereafter

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by way of general condition, they say that both parties are at liberty to approach the appropriate Court of law for specific performance of agreement. When there are clauses containing specific and general conditions, the clauses containing the specific condition shall prevail. Moreover such clauses dilute the

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agreement aiming at the relief of only specific performance of the contract.

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In a similar circumstance, the Hon'ble Supreme Court in paras 14, 15 and 16 of the judgment in Mayawanti ’s case referred to supra held that, when a promise is made in an alternative form, it may be that on proper construction of the contract, that it contains alternative obligations namely promise of either to execute the sale deed or pay back the advance or compensation, the promisor has the option either to do or abstain from doing. It was held that the Court may treat the covenants to perform or to pay as alternative where specific performance would work unreasonable results. It was further held that in such circumstances specific performance can be rejected. Needless to say that need for relief of specific performance is an equitable relief, the same has to be granted on pragmatically examining all the facts and circumstances of the case.

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The above facts and circumstances show that the defendants agreed to sell the property when there was financial stress. The agreement contained an alternative clause to specific performance, for refund of the earnest money with

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damages which diluted the general condition that the parties

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are entitled to specific performance. In case of breach even in the judgment in Ferrodous Estates Pvt . Ltd’s case relied on by learned counsel for the respondents, the Hon'ble Supreme Court declined to interfere in the judgment of the High Court denying the specific performance and granting decree for refund of earnest money with damages.

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So far as the other judgments relied on by both side, suffice it to say that they all are covered under Section 20 of the Act and the other two judgments referred to above. Therefore, it is not necessary to refer to other judgments relied on by both counsel.

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On evaluation of the aforesaid facts and circumstances, in the considered opinion of the Court, granting specific performance in favour of the plaintiffs is inequitable and causes undue hardship to the defendants. However, as the defendants have enjoyed Rs.3,00,000/- since 2005, they are liable to refund the earnest money with agreed damages of Rs.2,00,000/- and Rs.31,700/- spent by the plaintiffs which comes to Rs.5,31,700/- with interest.

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What shall be rate of interest is the question. The

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agreement does not contain any clause regarding rate of interest on the earnest money. The defendants contended that Rs.3,00,000/- was lent by way of loan which shall carry interest at 9% per annum. This matter is dragged nearly for two decades and the defendants have not even deposited the agreed sum. Therefore it would be just to award interest at 10% per annum. The appeal deserves to be allowed in part. Hence, the following:

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ORDER

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i) The appeal is partly allowed.

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ii) The impugned judgment and decree so far it relates

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to the specific performance of contract is hereby set aside.

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iii) Suit in O.S.No.5268/2005 is partly decreed.

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iv) The prayer in the suit for specific performance is