Holding

The Supreme Court modified the decree, granting a monetary decree of Rs.21,000 with 12% interest and conditioning that specific performance will be enforced only upon default by the appellant.

Summary

The appellant borrowed Rs.35,500 from the respondent and his brother, paid Rs.20,000 and executed a promissory note for the balance of Rs.15,500 with 9% interest. On the same day he also executed an agreement to sell three plots of land for the same amount, intending the sale to discharge the note. The respondent sued for specific performance of the sale agreement; the trial court and two appellate courts decreed specific performance. The appellant appealed, arguing that the agreement was merely collateral security and not a true contract of sale. The Supreme Court held that the agreement was a sale contract but, exercising its discretion under the Specific Relief Act, modified the decree to a money decree of Rs.21,000 with 12% interest, ordering payment within six months and reserving the specific performance decree only if the appellant defaults. The appeal was disposed of with the modified decree.

Issues considered

The nature of the agreement of sale: whether it was a collateral security to the promissory note or a contract of sale enforceable by specific performance.
Whether the decree for specific performance should be confirmed or substituted with a monetary decree with interest.
The extent of the court's discretion under the Specific Relief Act and Article 136 of the Constitution in granting specific performance.

Legislation cited

Constitution of Indias. Art.13, s. Art.136
Specific Relief Act, 1963

Subjects

specific performanceagreement of salepromissory notecollateral securitycourt discretionmoney decreeinterestSpecific Relief ActConstitution of IndiaArt.136loan recovery

Judgment

S. RANGARAJU NAIDU A
v.
S. THIRUVARAKKARASU.

MARCH 8, 1995

[K. RAMASWAMY AND B.L. HANSARIA, JJ.] B

Specific Relief Act, 1963 :

Promissory note-Execution of towards money due-As collateral
security agreement to sell certain plots entered into-Suit for specific perfor- C
mance-Suit decreed by trial Court and confinned by first appellate Court and
High Court-Prominent object of suit· being recovery of money with interest
Court has discretion and not bound to grant specific perfomiance-Granting
of such relief depends on facts and cimunstances of each case.

Constitution of India, 1950 : D
Art.13-Discretion exercised by Courts below-'-Normally not interfered
Y
-,. but could be interfered with depending on fac.ts and circumstances of each
case.

1be appellant had taken some loan from the respondent and his E
brother. In order to recover the loan, the respondent and his brother filed
three suits. 1be decretal amount due was Rs. 35,500 which after payment
of Rs. 20,000 came to Rs. 15,500.

1be appellant executed a promissory note for.Rs.15,500 indusl~e of
interest @9% p.a. On the same day he also executed an agreement of sale, F
for the discharge of the very same promissory note debt, agreeing to sell
three plots of land. Respondent filed a dvil suit for specific performance
of the agreement. 1be trial Court decreed the suit. It was confirmed in
. appeal by the first appellate court as also by the High Court.
G
In this appeal, the appellant contended that the agreement of sale
was only collateral to the promissory note and that there was no consensus
ad idem to sell the land under the agreement.

1be Respondent contended that since the Courts below exercised
discretion, there was no need to interfere under Art.136 of the Constitution H
617 .
('·

.618 SUPREME COURT REPORTS [1995) 2 S.C.R.

A Disposing of the appeal, this Court

HELD : 1. The respondents are money-lenders and sought to recover
the amount due to them. Since the appellant was not in a position to pay
the amount due on the promissory note, he entered into the agreement to
sell the property and the agreement was sought to be enforced. Though the
B appellant had agreed to sell the property to respondents, the predominant
object thereby would be for recovery of the dues· with interest. He who
demands equity must do equity. Court has discretion. Court is not bound
to grant specific performance. It depends on facts and circumstances in -l
~
each case. (619-F-G]
c 2. The respondents had claimed in his suit alternative relief for the
recovery of Rs; 21,000 with interest thereof @12% per annum. Rs. 21,000
is inclusive of interest accrued on Rs. 15,500 @ 12% per auum. Therefore,
-;
in view of the facts of this case, justice would be met by granting the
alternative relief sought for in the suit, namely, the decree for refund of
D the money due to him with simple interest @12% per annum, as claimed
by him. The decree of the courts below is accordingly modified and there
shall be a money decree for Rs. 21,000 with interest @12% from the date
of the suit till the date of recovery. [619-H, 620-A-B] ~

3. The appellant has undertaken to pay the amount within a period
E of six months from the date of this order. In case he commits default in
the payment of the decreetal amount, the decree for specific performance
shall stand confirmed. (620-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3140 of
F 1986. ~
From the Judgment and Order dated .2.4.86 of the Madras High
Court in S.A. No. 197 of 1986.

M.N. Krishnamani and T.Raja for the Appellant.
G
K.R. Choudhary for the Respondent.

The following Order of the Court was delivered : ,/

~
This appeal by special leave arises from the judgment and decree in
H Second Appeal No. 197/86 dated April 21, 1986 passed by the single Judg~
S.R. NAIDU v. S. TIIIRUVARAKKAR.ASU 619

of the Madras High Court. The facts are very simple. The respondent had A
filed three suits : O.S. Nos. 27/63 and 53/63 by him and O.S. No. 32/63 by
his brother Sathappa Chettiar, in the court of the Subordinate Judge,
Selam, to recover certain amounts taken by the appellant from the respon-
dent and his brother. The decreetal amounts due thereon were made up
of a total sum of Rs. 35,500 which after payment of Rs. 20,000, came to Rs.
15,500. Therefore, on December 30, 1977, the appellant executed a promis-
B
sory note, Ex.A-1, for the payment of Rs. 15,500 inclusive of interest @9%
per annum. On the same day, the appellant had also executed an agree-
ment of sale, for the discharge of the very same promissory note debt, and
since he \\'.as not in a position to pay the same, he agreed to sell three plots
of land of an extent of 7,500 sq. ft. for the same consideration, i.e., Rs. C
15,500. Since the appellant had not executed the sale deed, the respondent
filed the civil suit in the Court of Subordinate Judge for specific perfor-
mance of the agreement. The trial court decreed it and the appellate court
has agreed that the agreement is specifically to be enforced. In the Second
Appeal, it was confirmed. Thus this appeal by special leave.
D
Though the learned counsel for the appellant sought to contend that
the agreement of sale was only collateral to the promissory note and that
there was no consensus ad idem t.o sell the land under the agreement but
only as a collateral security, the High Court has gone into the question and
gave findings that it was not given as collateral security, but an agreement E
to sale, with which we are broadly in agreement. But the question is
whether the decree for specific performance is to be confirmed. It is true
as rightly pointed out by Shri K.R. Choudhary, learned counsel for the
respondent, that since the High Court and the courts below have exercised
discretion, it may not normally be interfered with under Art. 136 of the F
Constitution, but the fact remains that the respondents are money-lenders
and that they sought to recover the amounts due to them. Since the
appellant was not in a position to pay the amount due on the promissory
note, he entered into the agreement to sale the property and the agreement
was sought to be enforced. Though the appellant liad agreed to sell the
property to respondents, ·the pre-dominant object thereby would be for G
recovery of the dues with interest. He who demands equity must do equity.
Court has discretion. Court is not bound to grant specific performance. It
depends on facts and circumstances in each case.

Rightly, the respondent had claimed in his suit alternative relief for H
620 SUPREME COURT REPORTS [1995] 2 S.C.R.

A the recovery of Rs. 21,000 with interest thereon @12% per annum. Rupees
21,000 is inclusive of interest accrued on Rs. 15,500 @12% per annum.
Therefore, in view of the facts of this case, we think that justice would be
met by granting the alternative relief sought for in the suit, namely, the
decree for refund of the money due to him with simple interest @12% per
B annum, as claimed by him. The decree of the courts below is accordingly
modified and there shall be a money decree for Rs. 21,000 with interest .
@12% from the date of the suit till the date of recovery. The decree of the
courts below is accordingly modified.

The appellant has undertaken to pay the amount within a period of
C six months from today. In case he commits default in the payment of the
decreetal amount, the decree for specific performance shall stand con-
firmed.

G.N. Appeal disposed of.