Supreme Court Upholds Partial Refund in Property Sale Dispute: R. Radhakrishna Prasad vs. Swaminathan & Anr. (2024)

Introduction

Date of the Judgment: July 8, 2024

Citation: 2024 INSC 463

Judges: Vikram Nath, J., Prashant Kumar Mishra, J.

Can a buyer claim a full refund of the advance sale amount if a property sale agreement fails? The Supreme Court of India recently addressed this question in a case where a buyer sought specific performance of a sale agreement, or alternatively, a refund of the advance payment. The court examined whether the High Court was correct in reducing the refund amount awarded by the Trial Court. This judgment clarifies the evidentiary standards required to prove payment of advance sale consideration in property disputes.

Case Background

The case involves a dispute over a property sale agreement dated March 26, 1998, between R. Radhakrishna Prasad (the appellant/plaintiff) and Swaminathan (defendant no. 1). Swaminathan agreed to sell his property for ₹30,00,000, and the agreement stipulated that vacant possession would be handed over within six months. The plaintiff claimed to have paid an initial advance of ₹3,00,000 and later an additional ₹15,00,000, totaling ₹18,00,000. The plaintiff also stated that he was always ready and willing to pay the balance amount but the sale deed could not be executed due to the defendant’s laches. Defendant no. 1, however, denied the entire transaction, claiming he had no acquaintance with the plaintiff and that the agreement was fabricated.

Timeline

Course of Proceedings

The Trial Court, based on the evidence, concluded that the agreement was indeed executed by defendant no. 1. However, considering the equitable principles under Section 20 of the Specific Relief Act, 1963, the Trial Court denied specific performance, directing defendant no. 1 to refund ₹18,00,000 with interest. The High Court, in appeal, modified the decree, allowing the plaintiff to recover only ₹3,00,000 with interest. The High Court found that the payment of the additional ₹15,00,000 was not sufficiently proven.

Legal Framework

The case primarily revolves around Section 20 of the Specific Relief Act, 1963, which deals with the court’s discretion in granting specific performance. It states that the court is not bound to grant specific performance merely because it is lawful to do so. The court must also consider the circumstances of the case and whether the plaintiff has proven their case. The court also considered the aspect of whether the plaintiff has proved the payment of the advance sale consideration.

Section 20 of the Specific Relief Act, 1963 states:

“20. Discretion as to decreeing specific performance.—(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.”

Arguments

Appellant (Plaintiff)’s Arguments:

• The plaintiff argued that the Trial Court correctly directed the refund of ₹18,00,000, as they had paid ₹3,00,000 initially and an additional ₹15,00,000.
• The plaintiff contended that the endorsement on the agreement, exhibit A-1(a), along with the plaintiff’s testimony, was sufficient proof of the additional payment.
• The plaintiff stated that the High Court erred in disbelieving the evidence regarding the payment of ₹15,00,000.

Respondent (Defendant No. 1)’s Arguments:

• Defendant no. 1 denied the entire transaction, asserting that the agreement was fabricated and that he had no acquaintance with the plaintiff.
• He claimed that he had signed blank papers and cheques, which were misused to create a forged agreement.
• He contended that the plaintiff failed to produce any corroborative evidence for the alleged payment of ₹15,00,000.

Innovativeness of the argument: The defendant’s argument that the plaintiff misused blank signed papers was an innovative defense to avoid liability.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the plaintiff has proved payment of ₹3,00,000 initially and another sum of ₹15,00,000, totaling ₹18,00,000 to defendant no. 1.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court did not rely on any specific authorities (cases or books) in this judgment. The court’s reasoning was based on the facts of the case and the evidence presented.

Judgment

How each authority was viewed by the Court?

✓ The Court considered Section 20 of the Specific Relief Act, 1963* to emphasize that 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.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the lack of corroborative evidence for the payment of ₹15,00,000. The court noted that the plaintiff’s testimony alone was insufficient to prove such a substantial payment, especially given the unusual sequence of signatures on the endorsement and the absence of any mention of this payment in the suit notice. The court emphasized the need for positive evidence to establish such a claim. The High Court’s decision was upheld based on the lack of evidence.

The Court’s reasoning was based on the principle that a claim for a substantial amount of money must be supported by sufficient evidence, and the plaintiff’s sole testimony was not enough to prove the additional payment. The Court also considered the unusual sequence of signatures on the endorsement, where the witness signed before the defendant, which was deemed irregular. The absence of any mention of the additional payment in the suit notice further weakened the plaintiff’s case.

The Supreme Court stated, “On this aspect, the only evidence is that of the plaintiff himself without any corroboration from any other witness.”

The Court also noted, “Ordinarily, in any agreement witnessing payment of money, the party signs first and the witness(s) puts his signature(s) below that endorsement.”

Further, the Court observed, “There is no reason why payment of such substantial amount of Rs. 15,00,000/- (Fifteen Lakhs only) would be missing in the suit notice.”

Key Takeaways

• In property sale disputes, the burden of proof lies on the plaintiff to demonstrate payment of advance sale consideration.
• Testimony of the plaintiff alone may not be sufficient to prove payment of a substantial amount; corroborative evidence is necessary.
• The sequence of signatures on a document can be a relevant factor in determining its authenticity.
• The absence of a significant detail in a suit notice can weaken a party’s case.

Directions

The Supreme Court did not issue any specific directions in this case. The appeal was dismissed, and the High Court’s order was upheld.

Development of Law

The ratio decidendi of this case is that in disputes relating to advance sale consideration, the plaintiff must provide sufficient corroborative evidence to prove the payment, especially for substantial amounts. The court reiterated that the plaintiff’s sole testimony is not sufficient to prove such payments. This judgment reinforces the principle of evidentiary standards in civil cases and does not change any previous position of law.

Conclusion

The Supreme Court dismissed the appeal, upholding the High Court’s decision to allow a refund of only ₹3,00,000 with interest. The Court emphasized the need for corroborative evidence to prove payment of substantial amounts in property sale disputes. This judgment reinforces the importance of maintaining proper documentation and evidence in financial transactions.

Category

Parent Category: Specific Relief Act, 1963

Child Category: Section 20, Specific Relief Act, 1963

Parent Category: Civil Law

Child Category: Property Disputes

FAQ

Q: What was the main issue in this case?

A: The main issue was whether the plaintiff had sufficiently proven the payment of an additional advance sale consideration of ₹15,00,000, apart from the initial ₹3,00,000.

Q: What did the Supreme Court decide?

A: The Supreme Court upheld the High Court’s decision, which allowed the plaintiff to recover only ₹3,00,000 with interest, as the additional payment of ₹15,00,000 was not sufficiently proven.

Q: What kind of evidence is required to prove payment of advance sale consideration?

A: The court emphasized that the plaintiff’s testimony alone is not sufficient. Corroborative evidence, such as receipts or witness testimony, is necessary to prove such payments.

Q: What is the significance of the sequence of signatures on a document?

A: The court noted that the usual practice is for the party to sign first, followed by the witness. An unusual sequence can raise doubts about the authenticity of the document.

Q: What does Section 20 of the Specific Relief Act, 1963, state?

A: Section 20 of the Specific Relief Act, 1963, states that 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.