2017 (5) TMI 1837 - HC - Indian Laws

Dismissal of the suit which has been filed for recovery of the advance amount paid pursuant to the agreement - statutory charge created over the property for the price paid by the buyer (plaintiffs) was continuing on the date of the suit or not - plaintiffs are entitled to recover the suit amount as claimed or not - suit not been filed within a period of three years - HELD THAT - From the evidence of P.W. 1 it could be easily seen that after entering into contract on 28.11.1995 and paying a sum of Rs. 5, 00, 000/- as advance towards the sale consideration the plaintiffs have not taken any steps to perform their part of the contract. They never shown their readiness and willingness during the relevant period. Whereas the defendants have issued legal notice Exs. B1 dated 11.09.1996 showing their readiness to execute the sale deed in favour of the plaintiffs. But the plaintiffs except sending legal notice under Ex. B1 have not taken any steps to get the sale registered in their favour. Whereas for the first time under Ex. A6 dated 30.6.2005 almost after a lapse of 10 years the plaintiffs have issued notice to the defendants for return of Rs. 5, 00, 000/- which has been paid on the date of agreement and the same was also replied by the defendants. In K. Shamugam and another v. C. Samiappan and Others 2013 (9) TMI 1320 - MADRAS HIGH COURT the learned single judge of this Court by relying upon the judgment of the Hon ble Supreme Court has held that as regards the charge Art. 62 of the Limitation Act is applicable. In P. Muthusamy v. K. Arumugam 2016 (11) TMI 1768 - MADRAS HIGH COURT the learned single judge of this Court after taking into consideration the ratio laid down by the Hon ble supreme Court in the judgment referred above has held that limitation to enforce charge is 12 years and for recovery of refund of advance amount would be governed under Article 62 of the Limitation Act. Section 54 of the Transfer of Property Act shows that mere agreement itself does not create any interest or charge in the property. Section 54 in fact requires an act of parties for creating any right or interest in any such property meaning thereby mere simple agreement for sale would not create any charge. Whereas Section 55(6)(b) of the Transfer of Property Act otherwise creates a statutory charge which can be said to have been created by the act of parties. The charge created under Section 55(6)(b) also depends upon certain contingencies that when buyer has improperly declined to accept delivery of the property or when he properly declines to accept delivery. Only the plaintiffs have committed default and for the first time in the year 2005 only they sent a legal notice. Therefore this Court is of the view that even though statutory charge has been created in respect of the agreement it has been lost due to subsequent default by the plaintiffs. In fact they failed to get the sale deed executed in their favour and take delivery in spite of readiness shown by the respondents. Therefore it is clear that due to their (plaintiffs) own default the statutory charge attached with the property has been lost. Therefore the plaintiffs cannot now contend that they are entitled to recover the amount paid by them. This Court is of the view that finding of the trial Court holding that the limitation to enforce charge is for three years cannot be sustained in law in view of the period of limitation governed under Article 62 of the Limitation Act. Admittedly Article 62 of the Limitation Act prescribes 12 years period for filing the suit to enforce charge. However in view of the conduct of the plaintiffs i.e. in view of their own default the charge created over the property has been lost the suit for recovery of money has necessarily to fail. In Videocon properties limited case 2003 (12) TMI 592 - SUPREME COURT the Hon ble supreme Court has categorically held that the charge gets attracted and attaches to the property for the benefit of the buyer the moment he pays any part of the purchase money and is only lost in case of purchaser s own default or his improper refusal to accept delivery. In any event the suit for recovery of money cannot be maintainable in view of the fact that statutory charge created for the price money has been lost due to plaintiffs own default. Conclusion - A statutory charge under Section 55(6)(b) is lost if the buyer defaults or improperly refuses delivery. The limitation period for enforcing such a charge is 12 years under Article 62 of the Limitation Act. Though the finding of the trial Court holding that the limitation to enforce charge is for three years is hereby set aside the appeal is dismissed and the judgment and decree of the trial Court dismissing the suit is hereby confirmed on the aforesaid factual aspects.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in the judgment are:

1. Whether the statutory charge created over the property for the price paid by the buyer (plaintiffs) was continuing on the date of the suit.

2. Whether the plaintiffs are entitled to recover the suit amount as claimed.

3. Whether the lower court was right in holding that the suit fails on the ground of limitation since the suit has not been filed within a period of three years.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Statutory Charge Over the Property

Relevant Legal Framework and Precedents: The relevant legal framework is Section 55(6)(b) of the Transfer of Property Act, which provides that a buyer has a charge on the property for the purchase money paid unless the buyer improperly declines to accept delivery. The court referenced several precedents, including Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories and Delhi Development Authority v. Skipper Construction Co. (P) Ltd., which clarify the nature of statutory charges.

Court's Interpretation and Reasoning: The court interpreted that the statutory charge is created when the purchase money is paid, and it continues unless the buyer defaults or improperly refuses to accept delivery. The court found that the plaintiffs failed to perform their contractual obligations and improperly declined to accept delivery when the defendants were ready to execute the sale deed.

Key Evidence and Findings: The court emphasized that the defendants had expressed readiness to execute the sale deed within the agreed time, but the plaintiffs did not take steps to complete the transaction. The plaintiffs' inaction for over ten years and the lack of evidence showing their readiness and willingness to perform their part of the contract were crucial in the court's findings.

Application of Law to Facts: The court applied the principle that a statutory charge is lost if the buyer defaults or improperly refuses delivery. Based on the evidence, the court concluded that the plaintiffs' inaction constituted a default, thereby losing the statutory charge.

Treatment of Competing Arguments: The plaintiffs argued that the statutory charge continued, citing various precedents. However, the court found these arguments unpersuasive due to the plaintiffs' failure to act within the contractual timeframe.

Conclusions: The court concluded that the statutory charge was lost due to the plaintiffs' default, and thus they could not claim a refund based on the charge.

Issue 2: Entitlement to Recover the Suit Amount

Relevant Legal Framework and Precedents: The court examined the agreement terms and the principles under Section 55(6)(b) of the Transfer of Property Act regarding the buyer's entitlement to recover the advance amount.

Court's Interpretation and Reasoning: The court reasoned that the plaintiffs were not entitled to recover the advance amount because they failed to perform their contractual obligations within the stipulated time, leading to the forfeiture of the earnest money as per the agreement.

Key Evidence and Findings: The court noted the defendants' willingness to execute the sale deed and the plaintiffs' lack of action to complete the transaction. The plaintiffs' claim for recovery was undermined by their failure to act within the contractual period.

Application of Law to Facts: The court applied the agreement terms and legal principles to conclude that the plaintiffs' conduct resulted in the forfeiture of the advance amount.

Treatment of Competing Arguments: The defendants argued that the plaintiffs' inaction justified the forfeiture of the advance amount. The court agreed, finding the defendants' arguments consistent with the agreement terms.

Conclusions: The court concluded that the plaintiffs were not entitled to recover the advance amount due to their default and the agreement's forfeiture clause.

Issue 3: Limitation Period for Filing the Suit

Relevant Legal Framework and Precedents: The court considered Article 62 of the Limitation Act, which provides a 12-year limitation period for enforcing a charge.

Court's Interpretation and Reasoning: The court found that the trial court's conclusion regarding a three-year limitation was incorrect. However, due to the plaintiffs' default, the statutory charge was lost, rendering the limitation period irrelevant for recovery.

Key Evidence and Findings: The court noted that the plaintiffs filed the suit on the last day of the limitation period, which indicated speculative litigation.

Application of Law to Facts: The court applied Article 62 but found it inapplicable due to the plaintiffs' loss of the statutory charge through default.

Treatment of Competing Arguments: The plaintiffs argued for a 12-year limitation under Article 62, but the court found that the charge was lost due to their default.

Conclusions: The court concluded that the suit was not maintainable due to the plaintiffs' default, despite the correct limitation period being 12 years.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The charge gets attracted and attaches to the property for the benefit of the buyer the moment he pays any part of the purchase money and is only lost in case of purchaser's own default or his improper refusal to accept delivery."

Core Principles Established: A statutory charge under Section 55(6)(b) is lost if the buyer defaults or improperly refuses delivery. The limitation period for enforcing such a charge is 12 years under Article 62 of the Limitation Act.

Final Determinations on Each Issue: The court determined that the plaintiffs lost the statutory charge due to their default, were not entitled to recover the advance amount, and the suit was not maintainable despite the correct limitation period being 12 years.