Merely Because In Sale Agreement Property Was Shown For Marriage Expenses, It Cannot Be Treated As Loan/Security Document - SC

An appeal before the Supreme Court was filed against the judgment and order of the Punjab & Haryana High Court, by which the High Court had dismissed the said second appeal and has confirmed the judgment and decree passed by the First Appellate Court, granting the relief of specific performance of the agreement to sell.

In this case, Gurmeet Singh - Predecessor of the Defendants was the owner and in possession of land admeasuring 8 kanals situated in village Nilokheri, District Karnal. He executed an agreement to sell in favor of Jai Parkash - Plaintiff for consideration of Rs. 4 lakhs out of which a sum of Rs. 3.5 lakhs was paid in advance. In the agreement, it was also stated that if the vendor fails to perform his part of the agreement, then the vendee would be entitled to double the earnest money or in the alternative, to get the sale deed executed and registered through the Court. For the execution of the deed, plaintiffs got their presence marked by moving an application before the Sub Registrar and the plaintiff subsequently served a notice to the defendant replying to which the defendants totally denied the execution of the agreement to sell.

In the Trial Court, the question as to the validity of the agreement was answered in the affirmative but the specific performance of the contract was denied as it was held to be a security document/loan agreement. The matter was subsequently taken before the First Appellate Court which had set aside the order of the trial court. Further, a second appeal was rejected by the High Court.

Shri Tarun Gupta, Counsel for the appellant submitted that both, the First Appellate Court as well as the High Court have committed a grave error in holding that the agreement to sell is not a security document/loan agreement. It was further submitted by him that in the agreement itself, it had been specifically mentioned that as there was a marriage of the daughter of Gurmeet Singh, the was taken as a loan towards the expenses.

It was submitted by Shri Tathagat Harsh Vardhan, Counsel for the defendant that it was never the case on behalf of the defendants before the trial Court that the agreement was a loan agreement/security document.

The Apex Court after referring to the agreement held, "On reading the entire agreement, it cannot be said that the agreement dated 11.02.2004 can be said to be a loan agreement and/or security document. Merely because in the document the purpose of sale of the property was stated to be for the marriage expenses, the document which otherwise can be said to be an agreement to sell, will not become a loan agreement and/or security document. If the agreement as a whole is read, we find that it is an agreement to sell."

The Bench also held that both the First Appellate Court and the High Court had rightly not accepted the case on behalf of the Defendants that the agreement is a loan agreement and/or a security document.

"Once the execution of the agreement to sell for a sale consideration has been believed and it has been found that Jai Parkash and thereafter, the original plaintiffs were always ready and willing to perform their part under the agreement and in fact they remained present before the Sub Registrar, Nilokheri on 10.02.2005, which has been established and proved, the decree for specific performance is rightly passed by the first appellate Court, which is rightly confirmed by the High Court," the Court observed.

The Court held that in the facts and circumstances of the case, Section 20 (c) & (d) of the Specific Relief Act would not apply.

Accordingly, the Court directed the original plaintiffs to pay additional Rs.3,50,000/- to the appellants - original defendants, over and above the balance sale consideration of Rs.50,000/- (Rs.50,000/- to be paid with 6% interest from the date of execution of the Agreement to Sell i.e., 11.02.2004 to actual payment) and dismissed the appeal.