(Prayer: This RSA is filed under section 100 of CPC praying to set aside the judgment and decree dated 18.04.2021 passed by the xii additional district judge belagavi sitting at gokak in R.A. no.8027/2021 and consequently confirm the judgment and decree dated 27.11.2021 passed by the principal senior civil judge Gokak in o.s. no.109/2014 and etc.)

Cav Judgment:

1. The appellant/plaintiff has filed this appeal under Section 100 of the CPC, praying for setting aside the judgment and decree dated 18.04.2022 passed in R.A.No.8027/2021 on the file of XII Additional District and Sessions Judge, Belagavi, sitting at Gokak (hereinafter referred to as ‘the First Appellate Court’, for brevity), wherein the appeal was allowed in part with costs, and the decree of specific performance granted by the Trial Court was set aside and substituted with a decree for refund of ₹6,88,000/- to the plaintiff, by the appellant.

2. The suit in O.S.No.109/2014 filed by the plaintiff had been decreed by the Trial Court, directing the defendant to execute registered sale deed in terms of the registered agreement of sale dated 14.03.2012, by receiving balance sale consideration of ₹12,000/- within two months. Aggrieved by the same, defendant has preferred the first appeal, which was allowed in part with costs, and the decree of specific performance granted by the Trial Court was set aside and substituted with a decree for refund of ₹6,88,000/- to the plaintiff, by the appellant.

3. Aggrieved by the judgment and decree of the First Appellate Court, the plaintiff is before this Court.

4. The parties would be referred with their ranks as they were before the Trial Court, for the sake of convenience and clarity.

5. The following substantial questions of law were framed by this Court on 17.04.2023:

                  1) Whether the first Appellate Court was justified in considering unamended Section 20 of the Specific Relief Act despite substitution of Section 20 by Act No.18 of 2018?

                  2) Whether the first Appellate Court was justified in considering the stray sentences in the cross- examination of PW-1 to render agreement of sale at Ex.P-2 as a loan agreement without considering the totality of the evidence?

6. The case of the plaintiff before the Trial Court in a nutshell is that:

                  6.1. The defendant is the owner of the suit schedule property bearing Block No.218, measuring 2 acres out of a total extent of 8 acres 31 guntas, situated at Chikkanandi Village, Gokak.

                  6.2. The defendant was in dire need of money for his family necessities and for repayment of hand loans. Hence he put the above property for sale and disclosed his intention of selling the property.

                  6.3. The plaintiff, being interested in purchasing the same, entered into negotiations with the defendant. The defendant agreed to sell the property for a total consideration of ₹7,00,000/- and received an advance amount of ₹6,88,000/- by executing a registered agreement of sale dated 14.03.2012.

                  6.4. The plaintiff was and is always ready and willing to perform his part of the contract, however, defendant postponed execution of the sale deed on one or other pretext. Ultimately, the plaintiff issued a legal notice dated 19.02.2014 to the defendant through his counsel.

                  6.5. Despite service of the said notice, defendant has not come forward to execute the sale deed. Hence, the plaintiff filed the suit for the relief of specific performance of the agreement dated 14.03.2012, directing the defendant to execute a regular registered sale deed in his favour on receipt of the balance sale consideration of ₹12,000/-, along with costs and other appropriate reliefs.

                  6.6. Defendant filed his written statement contending that the suit is false, frivolous, vexatious, and mala fide, filed with an ulterior motive and is not tenable in law. He admitted the description of the suit schedule property and his ownership thereof, but he denied all other averments made in the plaint. He contended that no sale talks had taken place between the plaintiff and defendant, and that no advance or sale consideration was paid to him.

                  6.7. The defendant further contended that the suit schedule property is ancestral joint family property and that he has no exclusive right, title, or interest over the same. According to him, his wife, sons, and daughters have pre-existing rights over the suit schedule property. He also asserted that his financial condition was sound and that there was no legal necessity to sell the property.

                  6.8. It was further contended that the defendant was addicted to bad vices, and to satisfy his unwarranted habits, the plaintiff, who is allegedly engaged in money-lending without a valid license, had advanced loans to him and others at exorbitant rates of interest. The defendant alleged that the suit agreement was a concocted document created by the plaintiff in collusion with others to recover the alleged loan amount.

                  6.9. The defendant also contended that the main occupation of family of defendant is agriculture; the suit schedule property is the only source of livelihood for his family, and its sale would render them without any means of income. He further claimed entitlement to discretionary relief under Section 20 of the Specific Relief Act. It is contended that the wife and children of defendant were not parties to the alleged agreement of sale, rendering the same illegal, void, and unenforceable in law.

                  6.10. The defendant denied receipt of any legal notice from the plaintiff and contended that there had been no partition among the defendant and other sharers of the family. On these grounds, he prayed for dismissal of the suit with costs.

                  6.11. During pendency of the suit, defendant died and his legal representatives, namely his wife and children, were brought on record as defendant Nos.1(a) to 1(e). However, prior to his death, defendant had already been examined as D.W.1.

                  6.12. After completion of pleadings, Trial Court framed the following issues:

                  1. Whether the plaintiff proves that, the defendant is owner of suit property proposed to sell them, plaintiff intended to purchase entered into an agreement of sale of Rs.7,00,000/-?

                  2. Whether he further proves that, by virtue of talks, he paid Rs.6,88,000/- to the defendant towards earnest money, defendant by receiving said amount agreed to execute registered sale deed within 3 years from the date of agreement of sale in favour of plaintiff?

                  3. Whether defendant proves execution of agreement of sale towards security of hand loan borrowed by him from the plaintiff?

                  4. Whether he further proves ever ready & willingness to perform his part of contract?

                  5. Whether plaintiff is entitled for the relief of specific performance of contract?

                  6. What order or decree?

                  6.13. After recording evidence of both sides and hearing their arguments, the Trial Court came to the conclusion that the plaintiff had proved due execution of the sale agreement by defendant and accordingly decreed the suit. It was further held that plaintiff was entitled for sale deed in his favour, and thus the suit was decreed in its entirety as prayed for in the plaint.

                  6.14. Aggrieved by the judgment and decree of the Trial Court, the legal representatives of defendant preferred an appeal before the First Appellate Court in R.A.No.8027/2021. After hearing arguments of both sides, First Appellate Court came to the conclusion that execution of the suit agreement was proved. However, it held that plaintiff was not entitled to the discretionary relief of specific performance. Placing reliance on an admission allegedly made by plaintiff that the agreement was executed as security for the loan advanced by plaintiff, the First Appellate Court directed the defendants to refund the earnest money to the plaintiff.

                  6.15. Aggrieved by the said judgment and decree, plaintiff/appellant is before this Court.

7. Sri.Gurubasavaraj J. K., learned counsel for the appellant would submit that there is no proper appreciation of evidence by the First Appellate Court. It is contended that the Court has exercised its discretion solely based on stray admission of plaintiff that the sale agreement was taken as security for a loan, and on that basis erroneously denied the relief of specific performance and directed refund of the advance amount, and even interest is also not awarded. Hence, he prays for allowing the appeal.

8. Per contra, learned counsel for the respondents would submit that;

                  8.1. The plaint itself is liable to be rejected, as the entire payment of ₹6,88,000/- is alleged to have been made in cash, which is in violation of the provisions of the Income Tax Act, 1961. He further submits that, in a recent judgment, the Hon’ble Supreme Court has held in a similar case that rejection of plaint is proper.

                  8.2. It is further contended that the amendment to the Specific Relief Act is prospective in nature, and therefore substantial question of law No.(1) is to be answered in negative.

                  8.3. He would further submit that, there was a compromise entered into between the agreement holder, his mother, wife and brother in O.S.No.156/2013, as per Ex.P.8, wherein the original defendant, his mother, and his wife received their shares of ₹2,43,000/-, ₹2,00,000/-, and ₹2,00,000/- respectively and relinquished their rights in favour of defendant No.4 therein. This shows that the suit schedule property was ancestral property of defendant, and thus his children had equal rights over the suit schedule property. Without impleading them as parties to the agreement and the suit, the suit was not maintainable. Hence, he prayed for dismissal of the appeal with costs.

9. Substantial Question No.(i) Whether the first Appellate Court was justified in considering unamended Section 20 of the Specific Relief Act despite substitution of Section 20 by Act No.18 of 2018?

                  9.1. The suit schedule property is the only property for the respondents for their livelihood. Hence if the sale agreement is executed, they would put to relative hardship.

                  9.2. In this regard, learned counsel for the respondents relied upon the judgment of the Division Bench of this Court in the case of Sri.M.Suresh Vs. Smt.Mahadevamma and Others (R.F.A.No.1560 of 2011, disposed of on 23.10.2020) , wherein, referring to the judgment of the Hon’ble Supreme Court in State of Punjab vs. Mohar Singh ((1955) 1 SCR 893) and other decisions, it has been held that the amendment to the Specific Relief Act is prospective in nature and not retrospective.

                  9.3. Admittedly, the suit agreement in the present case is of the year 2002, whereas the amendment to the Specific Relief Act came into force in the year 2018. Therefore, the amended provisions, including the substitution of Section 20 of the Specific Relief Act, in no way affects the transaction between plaintiff and defendant in the year 2002. The discretionary relief under the unamended Section 20 of the Specific Relief Act continues to apply to transactions prior to the amendment. Hence, the First Appellate Court was justified in considering the unamended Section 20 of the Specific Relief Act, despite substitution of Section 20 by Act No.18/2018. Hence, it is crystal clear that the substantial question of law No.(i) is answered in negative.

10. Substantial question No.(ii) Whether the first Appellate Court was justified in considering the stray sentences in the cross-examination of PW- 1 to render agreement of sale at Ex.P-2 as a loan agreement without considering the totality of the evidence?

                  10.1. Learned counsel for the respondents also relies upon the judgment of the Hon’ble Supreme Court in the case of The Correspondence, RBANMS Educational Institution Vs. B. Gunashekar & Another (Civil Appeal No.5200 of 2025, disposed of on 16.04.2025) . Paragraphs 5, 18.1 to 19 of the said judgment read as under:

                  5. The respondents filed a suit bearing O.S.No.25968 of 2018 against the appellant, before the City Civil Court and Sessions Judge at Bangalore, seeking permanent injunction restraining the appellant from creating any third-party interest over the suit schedule property, based on an alleged agreement to sell executed by the respondents and Ramesh S. Reddy with one Maheshwari Ranganathan and others, in respect of the suit schedule property, on 10th April, 2018 for a sale consideration of Rs.9,00,00,000/-, for which, they claim to have paid Rs.75,00,000/- as an advance payment. It was alleged in the plaint that the appellant was trying to manipulate the title deeds of the suit schedule property with an intention to alienate or dispose of the same to third parties.

                  18.1. Further, through the averments made in the plaint and in the agreement, the respondents/plaintiffs have claimed to have paid huge sum towards consideration by cash. It is pertinent to recall that Section 269ST of the Income Tax Act, was introduced to curb black money by digitalising the transactions above Rs.2,00,000/- and contemplating equal amount of penalty under Section 271DA of the Act. As per the said provisions, action is to be taken on the recipient. However, there is also an onus on the plaintiffs to disclose their source for such huge cash. The Central Government thought it fit to cap the cash transactions and move forwards towards digital economy to curb the dark economy which has a drastic effect on the economy of the country. It will be useful to refer to the Budget Speech during the introduction of the Finance Bill, 2017 and the extract of the memo presented with the Finance Bill, 2017, which lay down the object:

                  Budget Speech:

                  “VII. DIGITAL ECONOMY

                  111. Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit.

                  India is now on the cusp of a massive digital revolution.

                  …..

                  Promoting Digital Economy

                  162. The Special Investigation Team (SIT) set up by the Government for black money has suggested that no transaction above Rs.3 lakh should be permitted in cash. The Government has decided to accept this proposal. Suitable amendment to the Income-tax Act is proposed in the Finance Bill for enforcing this decision.” Extract from Memo of Finance Bill, 2017 “Restriction on cash transactions In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating are source crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.

                  In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more,—

                  (a) in aggregate from a person in a day;

                  (b) in respect of a single transaction; or

                  (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

                  It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office, savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.

                  It is also proposed to insert new section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner. It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees. These amendments will take effect from 1st April 2017.” However, when the Bill was passed, the permissible limit was capped under Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs. When a suit is filed claiming Rs.75,00,000/- paid by cash, not only does is create a suspicion on the transaction, but also displays, a violation of law. Though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:

                  (A) Whenever, a suit is filed with a claim that Rs.2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any, (B) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law, (C) Whenever, a sum of Rs.2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action, (D) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs.2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions.

                  19. In light of the above discussion, we are of the firm view that the plaint ought to have been rejected under Order VII Rule 11(a) and (d) CPC. Hence, the orders passed by the High Court as well as the trial Court rejecting the application filed by the appellant, cannot be sustained in law and deserve to be set aside.

                  10.2. In the aforesaid case, the suit was filed only for the relief of permanent injunction, and therefore the Trial Court was justified in rejecting the plaint when there was an efficacious alternative remedy available to the plaintiff.

                  10.3. In the aforesaid judgment, it is held that the Courts have to inform the Special Investigation Team set up by the Government regarding black money transactions involving agreements where the consideration exceeds ₹2,00,000/- and is paid in cash and it is not held that in such an event, the suit for specific performance of the agreement is to rejected.

                  10.4. In the instant case, the alleged sale transaction is for ₹6,88,000/-, out of which ₹6,00,000/- is stated to have been paid in cash. Thus, the transaction exceeds ₹2,00,000/-. Under such circumstances, the transaction ought to have been carried out through banking channels as per the provisions of the Income-tax Act. However, it is for the Income-tax authorities to examine the matter and take action against the erring parties. For that reason, the plaint cannot be rejected.

                  10.5. The relief prayed for in the aforesaid case and present case is entirely different. As discussed above, in that case there was only the relief of permanent injunction sought, which is clearly barred under Section 41(h) of the Specific Relief Act, and hence the plaint was rejected under Order VII Rule 11(d) of the CPC. However, that is not the situation in the present case, as the relief sought herein is different. Hence the aforesaid judgment is not helpful for the respondents to claim that the plaint is liable to be rejected.

11. With this background, the oral evidence led by both parties is to be considered only for the limited purpose of determining whether the transaction between the plaintiff and the defendant was in fact a loan transaction and whether the exercise of discretion by the First Appellate Court in granting only refund is justified.

12. The main contention of the legal representatives of defendant is that, the suit schedule property is the only property available for their livelihood and that their main occupation is agriculture. However, it is relevant to note that Ex.P.6 is the compromise decree passed in the suit filed by some of the relatives of defendant, against defendant and others for the relief of partition and separate possession. In the said suit, the mother and wife of defendant are also made as parties to the suit as defendant Nos.3 and 5. In the said suit, all the parties have entered into compromise, which was accepted by the Court. The compromise petition is filed as per Ex.P.8. In that compromise petition, the present defendant was defendant No.1 and he has taken ₹2,43,000/- towards his share and relinquished his right over property to his uncle defendant No.4 – Yamanappa; likewise, mother of defendant No.1 - Tayawwa (defendant No.3) and wife of defendant No.4 - Smt.Kasturewwa (defendant No.5) have taken their share of ₹2,00,000/- each in cash and relinquished their respective rights in favour of defendant No.4 - Yamanappa.

13. The property relinquished by defendant Nos.1, 3 and 5 in favour of defendant No.4 in that suit is the present suit schedule property. The said suit was filed in the year 2013 and compromise was entered into on 09.11.2015. The present suit agreement was in the year 2002 and the suit was pending before the First Appellate Court at the time of entering into this compromise. This compromise has not been questioned by the legal representatives of the defendant. Notably, the first legal representative, Smt.Kasturewwa, was one of the parties to the said compromise and she has relinquished her rights.

14. Therefore, the contention of the legal representatives of the defendant that the suit schedule property is the only source of livelihood and if it is parted with they would suffer hardship cannot be accepted, because admittedly they have handed over this property to one of their relatives i.e., defendant No.4. Hence, as it is, even if it is held that defendants are put to hardship and plaintiff is directed to return only earnest money, the defendants will not get any property and the property is already not in possession of the defendants as per their own compromise entered in another suit with their family members.

15. The defendant is not disputing the sale agreement made by him. According to him, there was no necessity for him to sell the suit schedule property, however, he was addicted to bad vices and plaintiff has given loan and took his signature to the sale agreement. In this regard, the defendant, who was examined as D.W.1, has stated the above said facts in his affidavit evidence, and in the cross-examination, it was admitted that Yamanappa is his uncle. He admitted about filing of O.S.No.56/2013, entering into compromise by pleading his ignorance that he does not know reading and writing, but he identified the photographs which are affixed on the said compromise petition. Thus, the compromise petition was marked through him. In the further cross-examination, D.W.1 categorically admitted that, at his convenience some times, he would put signature and sometimes he would put LTM to the documents.

16. The plaintiff, in his cross-examination, has categorically admitted that the suit schedule property is the ancestral property of the defendant and that he is not aware as to whether there was any partition between the defendant and his sisters. He further deposed that the defendant had informed him that there were some family problems, but he did not enquire into the nature of such problems or the necessity for sale of the property.

17. According to the plaintiff, he has paid a sum of ₹6,88,000/- in cash to the defendant by bringing the said amount from his house. He deposed that the said amount was not kept in any bank but was kept in his house since eight years. He further deposed that, except the sale agreement, there is no document to show that he has paid the aforesaid amount to the defendant.

18. As per the recitals of the sale agreement, the total sale consideration was ₹7,00,000/-, out of which plaintiff has paid an advance amount of ₹6,88,000/-. Thus, substantial amount that is more than 90% of the consideration was paid by the plaintiff to defendant. However, despite such substantial payment, the plaintiff did not take possession of the suit schedule property at the time of registration of the sale agreement. Further, the plaintiff did not institute the suit immediately, but filed it only in the year 2014, that is nearly two years after the date of the sale agreement.

19. Furthermore, in the agreement itself there is recital that three years time was given to defendant to complete the terms and conditions imposed on him. It is agreed that three years time is fixed for payment of the balance consideration and execution of the sale deed. If such substantial amount of ₹6,88,000/- out of ₹7,00,000/- was paid as earnest money, nobody would wait for three years to get the sale deed. Even possession was also not handed over to the plaintiff in this agreement.

20. Furthermore, in paragraph 10 of the cross- examination, a suggestion was put to plaintiff that, in villages, it is common practice to execute documents such as agreements of sale as security for loans. P.W.1 categorically admitted the said suggestion. In that regard, the trial Court put a question to the plaintiff as to whether for giving loan he has obtained the document. He categorically admitted the said suggestion, which reads as under:

                 

                 

21. These admissions clearly indicate that the transaction between the plaintiff and the defendant was in the nature of a loan transaction and not an out-and-out sale transaction.

22. In view of these aspects, the First Appellate Court has rightly exercised its discretion in directing refund of the earnest money. However, the amount ought to have been directed to be refunded with interest and not the mere agreement amount, as it is the loan transaction.

23. Hence, this Court passes the following:

                  ORDER

                  Appeal Filed under Section 100 CPC is partly allowed. The judgment and decree dated 18.04.2022 passed in R.A.No.8027/2021 on the file of XII Additional District and Sessions Judge, Belagavi, sitting at Gokak, is modified as follows:

                  Legal Representatives of defendant are directed to refund the advance sale consideration of ₹6,88,000/- to plaintiff with up to date interest at 8% p.a. from the date of suit till realization.

                  Draw decree accordingly.