Process of Nomination does not override the succession laws - 2023 INSC 1076

 Process of Nomination does not override the succession laws - 2023 INSC 1076

Therefore, offering a discharge to the entity once the nominee is in picture is quite distinct from granting ownership of securities to nominees instead of the legal heirs. Nomination process therefore does not override the succession laws. Simply said, there is no third mode of succession that the scheme of the Companies Act, 1956 (pari materia provisions in Companies Act, 2013) and Depositories Act, 1996 aims or intends to provide. 

2023 INSC 1076

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7107 OF 2017

SHAKTI YEZDANI & ANR. APPELLANT(S)

 VERSUS

JAYANAND JAYANT SALGAONKAR & ORS. RESPONDENT(S)

J U D G M E N T

Hrishikesh Roy, J.

1. Heard Mr. Abhimanyu Bhandari, learned counsel appearing

for the appellants. Also heard Mr. Rohit Anil Rathi, learned counsel

representing respondent no. 1. Mr. Aniruddha A. Joshi, learned

counsel appears for respondent nos. 4, 6, 7 and 8.

2. The appellants and respondent nos. 1 to 9 are the legal heirs

and representatives of an individual – Jayant Shivram Salgaonkar.

The family patriarch executed a will on 27.06.2011 making

provisions for the devolution of his estates upon the successors.

Page 1 of 43

Apart from the properties mentioned in the will, the testator had

certain fixed deposits (FDs) for the sum of Rs. 4,14,73,994/- in

respect of which the respondent nos. 2, 4 and appellant no. 2 were

made nominees. Additionally, there were certain mutual fund

investments (MFs) of the amount of Rs. 3,79,03,207/- in respect of

which appellants and Jay Ganesh Nyas Trust (respondent no. 9)

were made nominees. The testator Jayant Shivram Salgaonkar

passed away on 20.08.2013.

3. On 29.04.2014, the respondent no. 1 filed Suit No. 503/2014

with the prayer for declaration inter alia that the properties of the

testator may be administered under the court’s supervision and

seeking absolute power to administer the same. He also prayed for

permanent injunction restraining all other respondents and

appellants from disposing, transferring, alienating, assigning

and/or creating any third-party interests in respect of the

properties in Exhibit A.

4. In their reply to the notice of motion in Suit No. 503/2014, the

appellants pleaded that they were the sole nominee(s) to the MFs.

The essence of their claim was that the appellants being nominees

Page 2 of 43

were absolutely vested with the securities on the testator’s death.

The appellant no.2 was additionally nominated and entitled to the

FDs of the testator in the IDBI Bank. It was also the appellants’

contention that nominations made under/in Jayant Shivram

Salgaonkar’s MFs/shares were made as per Section 109A & 109B of

Companies Act, 1956 and bye-law 9.11.7 of the Depositories Act,

1996. Section 109A and 109B of the Companies Act, 1956 must be

read as a code in themselves, wherein the meaning of words ‘vest’

and ‘nominee’ are to be seen from the statute alone bearing in mind

the non-obstante clause contained therein. Therefore, the provisions

should be interpreted without reference to any outside

consideration.

5. On 31.03.2015, the learned Single Judge of the Bombay High

Court while passing the order in the Notice of Motion mainly

considered whether the law laid down in the case of Harsha Nitin

Kokate v. The Saraswat Co-operative Bank Limited and Others1

 was

per incuriam. Further, the contentions of the appellants were

rejected by the court by observing that S. 109A & S. 109B of the

Companies Act, 1956 cannot be read in a vacuum and it is

1

 (2010) SCC Online Bom 615.

Page 3 of 43

permissible for the court to look at pari materia provisions in other

statutes. The court, while considering the argument of a ‘statutory

testament’ raised in Sarbati Devi v. Usha Devi2

, expressly negated

those and opined that it would not be proper to limit the ratio in

Sarbati Devi (supra) to the narrow confines of Section 39 of the

Insurance Act, 1939. The same was thereafter reaffirmed in Vishin N.

Khanchandani and Anr. v. Vidya Lachmandas Khanchandani &

Anr.3

, Shipra Sengupta v. Mridual Sengupta & Ors.4

, Ramchander

Talwar & Ors. v. Devendra Kumar Talwar & Ors.5

, Nozer Gustad

Commissariat v. Central Bank of India & Ors.6 and Antonio Joao

Fernandes v. Asst. Provident Fund Commissioner7

. According to the

learned judge, the decision in Kokate (supra) failed to consider the

decision of the Supreme Court in Khanchandani (supra), Shipra

Sengupta (supra) or even those of the Single Judge of the Bombay

High Court in Nozer Gustad Commissariat (supra) and Antonio Joao

2

 (1984) 1 SCC 424

3

 (2000) 6 SCC 724

4

(2009) 10 SCC 680

5

 (2010) 10 SCC 671

6

 (1993) 1 Mah LJ 228

7

 (2010) 4 Mah LJ 751

Page 4 of 43

Fernandes (supra), although each of these decisions were binding on

the court, while it was deciding Kokate.

6. It was accordingly expressed that the decision in Kokate

(supra) is per incuriam as it was rendered without considering

relevant and binding precedents. The learned Judge also opined

that the fundamental focus of S. 109A & S. 109B of the Companies

Act, 1956 and Bye-law 9.11.7 of the Depositories Act is not the law of

succession nor it is intended to restrict the law of succession in any

manner. Addressing the mischief that was sought to be avoided by

the two statutory provisions, the court observed that it was

intended to afford the company or the depository in question, a

legally valid quittance so that it does not remain answerable forever

to succession litigations and endless slew of claims under the

succession law. It was therefore opined that the statutory provisions

allow for the liability to be moved from the company or the

depository to the nominee but the nominee continues to hold the

shares/securities in fiduciary capacity and is also answerable to all

claims in the succession law.

Page 5 of 43

7. With the above understanding of the legal provisions, the

learned Judge declared that the view in Kokate (supra) generates

inconsistencies as it renders a nomination under the Companies Act

the status of a ‘superwill’ that is bereft of the rigour applicable to a

will for its making or the test of its validity under the Indian

Succession Act, 1925. According to the ruling, S. 109A & S. 109B of

the Companies Act, 1956 and the Bye-law 9.11 of the Depositories

Act, 1996 does not displace the law of succession nor does it

stipulate a third line of succession.

8. Even while declaring Kokate (supra) to be per incuriam, it was

made clear that the aforesaid judgment (31.3.2015) does not

dispose of the Notice of Motion No. 822/2014 in Suit No. 503/2014

and Chamber Summons No. 72/2014 in Testamentary Petition No.

457/2014 and those were posted for final hearing on the basis of

the law as declared.

9. The appellants being aggrieved by the decision (dated

31.3.2015) of the learned Single Judge, filed Appeal No. 313/2015

to challenge the order. Appeal No. 311/2015 was also filed in the

Testamentary Petition No. 457/2014.

Page 6 of 43

10. While dealing with the appeals, the Division Bench at the

outset noticed that the consideration to be made is whether the

view taken by the learned Single Judge vis-a-vis the Kokate (supra)

judgment is the correct opinion. Accordingly, the following questions

were formulated for decision in the appeals:

“(i) Whether a nominee of a holder of shares or securities

appointed under Section 109A of the Companies Act, 1956

read with the Bye-laws under the Depositories Act, 1996 is

entitled to the beneficial ownership of the shares or

securities subject matter of nomination to the exclusion of all

other persons who are entitled to inherit the estate of the

holder as per the law of succession?

(ii)Whether a nominee of a holder of shares or

securities on the basis of the nomination made under the

provisions of the Companies Act, 1956 read with the Byelaws under the Depositories Act, 1996 is entitled to all rights

in respect of the shares or securities subject matter of

nomination to the exclusion of all other persons or whether

he continues to hold the securities in trust and in a capacity

as a beneficiary for the legal representatives who are

entitled to inherit securitie or shares under the law of

inheritance?

(iii) Whether a bequest made in a Will executed in

accordance with the Inidan Succession Act, 1925 in respect

of shares or securities of the deceased supersedes the

nomination made under the provisiosn of Sections 109A

and Bye Law No. 9.11 framed under the Depositories Act,

1996?”

11. To appreciate the precise ratio in Kokate (supra), the following

two paragraphs of the Kokate judgment were extracted by the

Division Bench:

Page 7 of 43

“24. In the light of these judgments section 109A of the

Companies Act is required to be interpreted with regard to the

vesting of the shares of the holder of the shares in the

nominee upon his death. The act sets out that the nomination

has to be made during the life time of the holder as per

procedure prescribed by law. If that procedure is followed, the

nominee would become entitled to all the rights in the shares

to the exclusion of all other persons. The nominee would be

made beneficial owner thereof. Upon such nomination,

therefore, all the rights incidental to ownership would follow.

This would include the right to transfer the shares, pledge the

shares or hold the shares. The specific statutory provision

making the nominee entitled to all the rights in the shares

excluding all other persons would show expressly the

legislative intent. Once all other persons are excluded and

only the nominee becomes entitled under the statutory

provision to have all the rights in the shares, none other can

have it. Further, section 9.11 of the Depositories Act 1996

makes the nominee's position superior to even a testamentary

disposition. The non-obstante Clause in section 9.11.7 gives

the nomination the effect of the Testamentary Disposition

itself. Hence, any other disposition or nomination under any

other law stands subject to the nomination made under the

Depositories Act. Section 9.11.7 further shows that the last of

the nominations would prevail. This shows the revocable

nature of the nomination much like a Testamentary

Disposition. A nomination can be cancelled by the holder and

another nomination can be made. Such later nomination

would be relied upon by the Depository Participant. That

would be for conferring of all the rights in the shares to such

last nominee.

25. A reading of section 109A of the Companies Act and byelaw 9.11 of the Depositories Act makes it abundantly clear

that the intent of the nomination is to vest the property in the

shares which includes the ownership rights thereunder in the

nominee upon nomination validly made as per the procedure

prescribed, as has been done in this case. These sections are

completely different from section 39 of the Insurance Act set

out (supra) which require a nomination merely for the payment

of the amount under the Life Insurance Policy without

confirming any ownership rights in the nominee or under

section 30 of the Maharashtra Cooperative Societies Act which

allows the Society to transfer the shares of the member which

would be valid against any demand made by any other

Page 8 of 43

person upon the Society. Hence these provisions are made

merely to give a valid discharge to the Insurance Company or

the Co-operative Society without vesting the ownership rights

in the Insurance Policy or the membership rights in the Society

upon such nominee. The express legislature intent under

section 109A of the Companies Act and section 9.11 of the

Depositories Act is clear.”

12. The Division Bench under the impugned judgment (dated

01.12.2016) observed that the object and provisions of the

Companies Act, 1956 is not to either provide a mode of succession

or to deal with succession at all. The object of S. 109A Companies

Act, 1956 is to ensure that the deceased shareholder is represented,

as the value of the shares is subject to market forces and various

advantages keep on accruing to the shareholders, such as allotment

of shares & disbursement of dividends. Moreover, a shareholder is

required to be represented in the general meetings of the Company

and therefore, the court opined that the provision is enacted to

ensure that commerce does not suffer due to delay on part of the

legal heirs in establishing their rights of succession and then

claiming shares of a Company. Adverting to and interpreting the

pari materia provisions relating to nominations under various

statutes, the Division Bench felt that the consistent view in the

various judgments of the Supreme Court and the Bombay High

Page 9 of 43

Court must be followed and those do not warrant any departure. It

was expressly opined that the so-called ‘vesting’ under S. 109A of

the Companies Act, 1956 does not create a third mode of succession

and the provisions are not intended to create another mode of

succession. In fact, the Companies Act, 1956 has nothing to do with

the law of succession. Accordingly, the Division Bench declared that

the nominee of a holder of a share or securities is not entitled to the

beneficial ownership of the shares or securities which are the

subject matter of nomination to the exclusion of all other persons

who are entitled to inherit the estates of the holders as per the law

of succession. Answering the third question, the Division Bench

held that a bequest made in a Will executed in accordance with the

Indian Succession Act, 1925 in respect of shares or securities of the

deceased, supersedes the nomination made under the provision of

S. 109A of Companies Act and Bye-law 9.11 framed under the

Depositories Act, 1996. The bench accordingly ruled that an

incorrect view was taken in Kokate (supra).

13. The object of S. 109A(3) of the Companies Act, 1956, according

to the Division Bench, is not materially different from S. 6(1) of the

Page 10 of 43

Government Savings Certificates Act, 1959 and S. 109B of the

Companies Act, 1956 is likewise similar to S. 45-ZA(2) of the Banking

Regulation Act, 1949. The law relating to S. 6(1) of the Government

Savings Certificates Act, 1959 has already been settled in the case of

N. Khanchandani (supra) where the Supreme Court upheld the law

declared in Sarbati Devi (supra).

14. Looking at the provisions relating to nominations under

different statutory enactments and the way the courts have

interpreted those to the effect that the nominee does not get

absolute title to the property which is the subject matter of

nomination, the Division Bench interpreting the provisions under S.

109A & S. 109B Companies Act, 1956 declared that they do not

override the law in relation to testamentary or intestate succession.

The judgment in Kokate (supra) was declared to be incorrect as it

failed to consider the law laid down in Khanchandani (supra) and

Talwar (supra) as these cases preceded Kokate (supra).

ARGUMENTS

15. The learned counsels for the appellants and the respondents

put forth the following arguments for consideration:

Page 11 of 43

15.1 Mr. Abhimanyu Bhandari, the learned counsel for the

appellants argues that the scheme of nomination as provided in the

Companies Act, 1956 is not analogous to nomination as provided

under other legislations. Unlike in other legislations, the term

‘vesting’ & ‘to the exclusion of others’ along with a ‘non-obstante

clause’ are placed together in the Companies Act, 1956. Therefore, it

would be incorrect to rely on the ratio of the judgments pertaining

to other legislations (such as the Insurance Act, 1939, Banking

Regulation Act, 1949, National Savings Certificates Act, 1959,

Employees Provident Fund and Miscellaneous Provisions Act, 1952) to

then interpret the provisions of S. 109A & S. 109B of the Companies

Act, 1956. Provisions pertaining to the same in other legislations

cannot be the basis for interpretation of the term ‘nomination’ under

the Companies Act as those are not pari materia with S. 109A & S.

109B (now S. 72 of the Companies Act, 2013) of the Companies Act,

1956.

15.2 It is contended that S. 109A & S. 109B (now S. 72 of the

Companies Act, 2013) introduced in the Companies Act, 1956 by the

legislature on 31.08.1988 with the language so used makes it clear

Page 12 of 43

that a nominee, upon the death of the shareholder/debenture

holder, will secure full and exclusive ownership rights in respect of

the shares/debentures for which he/she is the nominee. In fact,

adverting to the hierarchy laid down under the provision,

shareholding in an individual capacity (S. 109A(1)), then a joint

shareholder owning the shares jointly (S. 109A(2)) and then finally,

a nominee (S. 109A(3)) in whom the shares shall vest in the event of

death of the shareholder/joint shareholders, it is contended that the

intent is clear that such nomination would trump any disposition,

whether testamentary or otherwise.

15.3 It is further contended that S. 187C & S. 109A(3) of the

Companies Act, 1956 have to be read together, to mean that shares

shall ‘vest’ with the nominee to the exclusion of all other persons

unless nomination is varied or cancelled. It is argued that S. 187C

itself provides for the mechanism to vary the nomination by making

appropriate declaration and therefore, these provisions are to be

understood as complete codes within themselves. When read

together, no declaration varying the nomination would imply that

the intention was to grant beneficial ownership of the shares to the

Page 13 of 43

appellants through a mechanism of nomination of rights. As Mr.

Jayant S. Salgaonkar’s Will had categorically mentioned all other

properties of the deceased except the shares for which the

appellants were named as nominees, the implication is naturally

that the ownership rights of such shares would pass on to the

nominees after the death of the testator i.e., the appellants’

grandfather.

15.4 The learned counsel for appellants would then refer to Byelaw 9.11 of the Depositories Act, 1996 which provides for

transmission of securities in case of nomination. Within the

provision, the presence of a non-obstante clause would reasonably

imply that the effect of nomination under the said bye-law is that it

would vest in the nominee a complete title of the shares

notwithstanding anything contained in the testamentary

disposition(s) or nomination(s) made under other laws dealing with

securities.

15.5 In addition, it is argued that the nomination for shares i.e.,

Form SH-13 provided under Rule 19(1) of the Companies (Share

Capital & Debentures) Rules, 2014 indicates that the shareholder or

Page 14 of 43

joint shareholder may nominate one or more persons as nominee in

whom all rights of the holder shall vest. Since such nomination can

also be in the favour of a third party or a minor (who can never be a

trustee or executor), it is argued that the legislature under the

Companies Act intended to give complete ownership to the nominee.

15.6 Mr. Bhandari then refers to Regulation 29A of SEBI (Mutual

Funds) Regulations, 1996, by virtue of which an asset management

company is required to provide the option to its unit holder to

nominate a person in whom all rights of the units shall vest in the

event of the death of the unit holder. It is contended that when a

joint shareholder cannot make any change to the nomination

without the consent of the other joint shareholder (since such

shares continue in the ownership of the remaining shareholders in

the event of the death of one of the shareholders), the same cannot

be done by way of a Will or testamentary disposition or law of

succession either.

15.7 Therefore, as per Mr. Bhandari, the interpretation accorded

by the High Court is not in sync with the developments of law

intended by insertion of S. 109A & S. 109B to the Companies Act,

Page 15 of 43

1956. The ease of succession planning which the legislature

intended would be rendered otiose if the interpretation given by the

High Court on the implication for the nominee under S. 109A & S.

109B of the Companies Act is accepted.

16. Canvassing the opposite view, Mr. Rohit Anil Rathi, the

learned counsel appearing for Respondent No. 1 would argue that

on account of the consistent view taken by this Court while

interpreting various legislative enactments pertaining to

nominations and more particularly, in view of the latest

interpretation in the case of Indrani Wahi v. Registrar of Cooperative

Societies and Others8

, departure from the consistent view is not

warranted and ‘vesting’ provided under S. 109A would not create a

third mode of succession.

16.1 The learned counsel submits that the Companies Act has

nothing to do with the law of succession. In support of his

contention, Mr. Rathi would refer to Part IV of the Companies Act,

1956 which deals with share capitals and debentures as well as S.

108 to S. 112 in Part IV which relate to ‘transfer of shares and

8

 (2016) 6 SCC 440

Page 16 of 43

debentures’. Adverting to the aforesaid provisions, it is argued that

the limited object is to provide a facility for transfer of shares or

debentures through a proper instrument of transfer and

consequential actions such as registration and in case of

grievances, appeal thereof. The introduction of S. 109A & S. 109B

merely provides for facility of nomination aiding in the process of

such transfer. Therefore, no third mode of succession by way of

nomination has been contemplated and the position has remained

unaltered, despite numerous amendments made to the Companies

Act from time to time.

16.2 On the other hand, the object behind the Indian Succession

Act, 1925 is to provide for an act to consolidate and amend the law

applicable to intestate and testamentary succession. It is argued by

Mr. Rathi that the legislature in no uncertain terms recognised a

transfer being made by a legal representative as a valid mode of

transfer and the legal representative is vested with the properties of

the deceased as a custodian subject to devolution in terms of the

applicable law i.e., the Indian Succession Act, 1925 as per S. 211

within Part VIII of the same.

Page 17 of 43

16.3 Further, it is argued by the learned counsel for the

Respondent No. 1 that the terms ‘transfer’, ‘transmission’ and

‘transmission by operation of law’ are distinct and convey different

meanings, i.e., transfer inter vivos in case of the term ‘transfer’ and

devolution by operation of law in case of ‘transmission’. Since these

phrases have been retained even under the Companies Act, 2013,

there is no alteration of the position of law on transfer and

transmission of securities. In addition, several provisions provide

an unfettered power to a company to register any person to whom

rights to shares/debentures had been transmitted by operation of

law as a shareholder/debenture holder (second proviso, S. 108 of

the Companies Act, 1956). Moreover, there is an obligation to inform

the transferor, transferee or the person who gave intimation of

transfer, the reason for refusing the registration or transmission by

operation of law (S. 111 of the Companies Act, 1956).

17. Mr. Aniruddha Joshi, learned counsel for the Respondent

Nos. 4 and 6 to 8 would argue that in light of the consistent view

taken by this Court and most High Courts on the question of

nominee not becoming a full owner of the estate of which he has

Page 18 of 43

been nominated by the deceased owner of the property, the nominee

by virtue of S. 109A & S. 109B of the Companies Act, 1956 cannot

impact the rights of the legal heirs/legatees obtained through

application of the succession law.

17.1 The learned counsel accepts the position that the languages

used in the enactments interpreted by the court are not alike. Some

enactments possess a non-obstante clause while some do not. Few

use the term ‘vest’ while others do not. However, since none of the

Acts define the terms ‘nominee’ and ‘nomination’, it is contended by

Mr. Joshi that those terms are to be considered as ordinarily

understood by persons making the nomination, for their moveable

or immovable properties.

17.2 Mr. Joshi therefore argues that the term ‘vest’ must be

understood in a limited sense and would not necessarily confer

ownership. Addressing the implication of the non-obstante clause in

the Companies Act, the counsel submits that the same is intended

to offer a discharge to the company and to facilitate the company in

their dealings after the death of the shareholder/securities holder.

More specifically, it is to protect the company from being dragged

Page 19 of 43

into a succession litigation. Therefore, the term ‘vest’ must be

interpreted in a limited sense to the effect that the nominee would

deal with the company but not in the capacity as a title holder but

more in the nature of a trustee holding the estate for the lawful

successor(s) and would be accountable to the successor(s) of the

estate. In the same context, the term ‘vest’ as used in the Indian

Succession Act, 1925 would be understood to mean that neither the

administrator nor the executor would become the owner of the

property. Such vesting is therefore limited to the specific purpose of

distribution of the estate amongst the lawful successor(s).

17.3 The counsel submits that the Companies Act, 1956 and/or

the Companies Act, 2013 is referable to Entry 43 and/or Entry 44 of

List I, Schedule VII of the Constitution which provide for

incorporation, regulation and winding up of companies. Therefore,

the legislation deals with the limited aspects of birth of a legal

entity/company, its management/the affairs of the company and its

death/winding up of the company. It was argued that the widest

interpretation of the same would still not attract or cover succession

or estate planning of an individual, even if the said person were to

Page 20 of 43

be a member of a company. On the other hand, the Indian

Succession Act, 1925 or Hindu Succession Act, 1956 or other

enactments pertaining to succession relate to Entry 5 in List III,

Schedule VII of the Constitution. Therefore, their source of power is

entirely different. In light of the same, it is argued that a third mode

of succession not contemplated by laws would be provided through

an interpretative exercise instead of a legislative exercise.

17.4 As per Mr. Joshi, if the contention of appellants were to be

accepted, nomination would be rendered similar to a ‘will’ or a

‘testamentary disposition’ to the extent of securities, of a particular

company. However, the Indian Succession Act, 1925 prescribes a

detailed judicial process to obtain letters of administration or

succession certificates or probates, as the case may be. Therefore,

in case the contentions of the appellants are accepted, the judicial

process for determination of successors’ rights would not be

required at all and the nominee(s) would be able to claim the estate

without verification of the claimants’ rights by the prescribed

judicial process.

Page 21 of 43

17.5 Finally, it is submitted that as per Article 141 of the

Constitution, only this Court’s interpretation on provisions become

binding. It cannot however be said that the legislature has taken

note of the interpretation of the High Court judgment and accepted

the interpretation.

DISCUSSION

18. Before we proceed any further, it would be appropriate to

indicate the position of the contesting parties vis-à-vis the testator,

Jayant Shivram Salgaonkar.

Page 22 of 43

19. Having considered the submissions and the materials

placed on record, the following issues require our careful

attention and have been discussed at length below:

(i.) The scheme, intent & object behind the Companies

(Amendment) Act, 1999,

(ii.) The implication of the scheme of ‘nomination’ under the

Companies Act, 1956 as well as other comparable legislations,

(iii.) The use of the term ‘vest’ and the presence of the nonobstante clause within the provisions of the Companies Act, 1956,

(iv.) Nomination under the Companies Act, 1956 vis-à-vis law of

succession.

SCHEME OF THE COMPANIES ACT

20. Both sides’ lawyers have relied on the intent & purpose

behind the introduction of S. 109A & S. 109B in the larger context

of the Companies Act, 1956 or the pari materia provisions (Section

72, Companies Act, 2013) in support of their respective stand.

Having perused the scheme behind the Companies Act, 1956 and

the Companies (Amendment) Act, 1999 that also introduced S.

109A & S. 109B of the Companies Act, 1956, the relevant extracts

are reproduced as follows:

Page 23 of 43

“…………….2. (b) to provide for nomination facility to the holders of

shares, debentures and fixed deposit holders;

……………………………

…………………….. 3. The corporate sector is going through difficult

times. The capital market is also at low ebb, which requires

immediate morale boosting efforts on the part of the Government to

promote investors' confidence. Besides, the economy needs certain

impetus for promoting inter-corporate investments considering slow

flow of funds in new investments. In order to overcome these adverse

conditions faced by the corporate sector. it was felt that the company

should be permitted to buy-back their own shares, to make

investments or loans freely without prior approval of the Central

Government, to provide for nomination facility to the holders of

shares, deposits and debentures and also to make provision in law

for establishment of Investors Education and Protection Fund broadly

on the line of provisions contained in the Companies Bill,

1997…………………………………..”

9

“…………… Under the Companies (Amendment) Act, 1999, the

shareholders have been allowed to nominate a person for their

shares, debentures and deposits………. Earlier, holders of shares

and debentures in a company did not enjoy the nomination facility

for shares, debentures and deposits, which caused hardships to

them. They were required to obtain a letter of succession from the

competent authority. The facility of nomination is intended to make

the company law in tune with the present-day economic policies of

liberalisation and deregulation. This is also intended to promote

investors’ confidence in capital market and to promote the climate for

inter-corporate investment in the country.”10

21. The object behind the introduction of a nomination

facility as can be appreciated was to provide an impetus to the

corporate sector in light of the slow investment during those

times. In order to overcome such conditions, boosting investors’

confidence was deemed necessary along with ensuring that

9

 Statement of Objects & Reasons, The Companies (Amendment) Act 1999

10 Press Information Bureau, Press Release, July 23, 1999

Page 24 of 43

company law remained in consonance with contemporary

economic policies of liberalisation. In fact, the provision of

nomination facility was made in order to ease the erstwhile

cumbersome process of obtaining multiple letters of succession

from various authorities and also to promote a better climate for

corporate investments within the country. In contrast, one must

note that ownership of the securities is not granted to the

nominee nor there is any distinct legislative move to revamp the

extant position of law, with respect to the same.

22. At this juncture, it would hold us in good stead to note

what the Court succinctly held in Salomon v. Salomon & Co.11:

“In a Court of Law or Equity, what the Legislature intended

to be done or not to be done can only be legitimately

ascertained from that which it has chosen to enact, either

in express words or by reasonable and necessary

implication."

In this context, the act of the legislature to enact S. 109A in

the Companies Act, 1956 and provide a nomination facility to

holders also aids in ascertaining the intent. The Companies Act,

1956 and subsequent amendments as parliamentary legislations

are rooted in Entry 43, List I of Seventh Schedule, which deals

11 (1897) AC 22, 38

Page 25 of 43

with incorporation, regulation and winding up of corporations.

There is no mention of nomination and/or succession within the

provisions or the statement of objects & reasons or any other

material pertaining to the Companies Act, 1956. Same is also not

seen in subsequent amendments to the Act.

23. Reading the provision of nomination within the

Companies Act, 1956 with the broadest possible contours, it is not

possible to say that the same deals with the matter of succession

in any manner. There is no material to show that the intent of the

legislature behind introducing a method of nomination through

the Companies (Amendment) Act, 1999 was to confer absolute title

of ownership of property/shares, on the said nominee.

24. In fact, while interpreting other enactments that are

similar in nature by virtue of the fact that the provision of

nomination within the statute begins with a non-obstante clause

and/or is armed with the term ‘vest’ such as the (Banking

Regulation Act, 1949, the Government Savings Certificate Act, 1959

and/or the Employees Provident Fund Act, 1952), multiple courts

have rejected the argument that the nominee would become the

Page 26 of 43

absolute owner to the exclusion of the legal heirs. To hold

otherwise would, in our opinion, exceed the scope and extent of S.

109A of the Companies Act, 1956.

NOMINATION UNDER VARIOUS LEGISLATIONS

25. In an illuminating list of precedents, this Court as well as

several High Courts have dealt with the concept of ‘nomination’

under legislations like the Government Savings Certificate Act

1959, the Banking Regulation Act, 1949, the Life Insurance Act,

1939 and the Employees Provident Fund and Miscellaneous

Provisions Act, 1952. It would be apposite to refer to what the

Court said on nomination, in reference to these legislations:

Case Law/Precedent Held

Sarbati Devi & Anr. v. Usha

Devi12

Nomination under S. 39 of the Insurance Act

1938 is subject to the claim of heirs of the

assured under the law of succession.

Nozer Gustad Commissariat

v. Central Bank of India13

Nomination under S. 10(2) of the EPF & Misc.

Provisions Act 1952 cannot be made in favour

of a non-family person. Relied upon Sarbati

Devi (supra) to state that the principles

therein were applicable to the Employees

Provident Funds Act as well and not merely

restricted to the Insurance Act.

Vishin N. Khanchandani & Nominee entitled to receive the sum due on

12 (1984) 1 SCC 424

13 (1993) 1 Mah LJ 228

Page 27 of 43

Anr. v. Vidya L.

Khanchandani14

the savings certificate under S. 6(1) of the

Govt. Savings Certificate Act 1959, but cannot

utilise it. In fact, the nominee may retain the

same for those entitled to it under the

relevant law of succession.

Ram Chander Talwar & Anr.

v. Devender Kumar Talwar &

Ors.15

Nomination made under provisions of S. 45ZA

of the Banking Regulation Act 1949 entitled

the nominee to receive the deposit amount on

the death of the depositor.

26. A consistent view appears to have been taken by the

courts, while interpreting the related provisions of nomination

under different statutes. It is clear from the referred judgments

that the nomination so made would not lead to the nominee

attaining absolute title over the subject property for which such

nomination was made. In other words, the usual mode of

succession is not to be impacted by such nomination. The legal

heirs therefore have not been excluded by virtue of nomination.

27. The presence of the three elements i.e., the term ‘vest’,

the provision excluding others as well as a non-obstante clause

under S.109A of the Companies Act, 1956 have not persuaded us

in the interpretation to be accorded vis-à-vis nomination, in any

14 (2000) 6 SCC 724

15 (2010) 10 SCC 671

Page 28 of 43

different manner. Different legislations with provisions pertaining

to nomination that have been a subject of adjudication earlier

before courts, have little or no similarity with respect to the

language used or the provisions contained therein. While the

Government Savings Certificates Act, 1959, Banking Regulation Act,

1949 and Public Debts Act, 1944 contain a non-obstante clause,

the Insurance Act, 1939 and Cooperative Societies Act, 1912 do

not.

28. Similarly, there are variations with respect to the word

‘vest’ being present in some legislations (the Employees Provident

Fund Act, 1952) and absent in others (the Insurance Act, 1939, the

Cooperative Societies Act, 1912). Looking at the dissimilarities and

the fact that uniform definition is not available relating to the

rights of ‘nominee’ and/or whether such ‘nomination’ bestows

absolute ownership over nominees, it is only appropriate that the

terms are considered as ordinarily understood by a reasonable

person making nominations, with respect to their movable or

immovable properties. A reasonable individual arranging for the

disposition of his property is expected to undertake any such

Page 29 of 43

nomination, bearing in mind the interpretation on the effect of

nomination, as given by courts consistently, for a number of

years. The concept of nomination if interpreted by departing from

the well-established manner would, in our view, cause major

ramifications and create significant impact on disposition of

properties left behind by deceased nominators.

29. The legislative intent of creating a scheme of nomination

under the Companies Act, 1956 in our opinion is not intended to

grant absolute rights of ownership in favour of the nominee

merely because the provision contains three elements i.e., the

term ‘vest’, a non-obstante clause and the phrase ‘to the exclusion

of others’, which are absent in other legislations, that also provide

for nomination.

EFFECT OF ‘VEST’ IN S. 109A OF THE COMPANIES ACT, 1956 & BYE-LAW

9.11.1 OF THE DEPOSITORIES ACT, 1996

30. The appellants’ case is grounded in the interpretation of

the term ‘vest’ in Section 109A of the Companies Act, 1956 and

Bye-law 9.11.1 under the Depositories Act, 1996, and according to

them, the use of the term ‘vest’ indicates the intent to bestow

Page 30 of 43

ownership of the securities upon the nominee on the

shareholder’s death. To address the aforesaid argument, it is

apposite to note how the term ‘vest’ or ‘vesting’ has been defined

by the courts, from time to time.

31. In Fruits & Vegetable Merchant Union v. Delhi Improvement

Trust,

16 the Supreme Court held that the term ‘vest’ has a variety

of meanings dependent on the context within which it operates.

“11. . . . . . . In this chapter occur Sections 45 to 48 which provide

for the vesting of certain properties in the Trust. Section 45 lays

down the conditions and the procedure according to which any

building, street, square or other land vested in the Municipality or

Notified Area Committee may become vested in a Trust. Similarly,

Section 46 deals with the vesting in the Trust of properties like a

street or a square as are not vested in a Municipality or Notified

Area Committee. These sections, as also Sections 47 and 48 make

provision for compensation and for empowering the Trust to deal

with such property vested in it. The vesting of such property is only

for the purpose of executing any improvement scheme which it has

undertaken and not with a view to clothing it with complete title. As

will presently appear, the term “vesting” has a variety of meaning

which has to be gathered from the context in which it has been used.

It may mean full ownership, or only possession for a particular

purpose, or clothing the authority with power to deal with the

property as the agent of another person or authority.”

(Emphasis supplied)

16 AIR 1957 SC 344

Page 31 of 43

32. In Vatticherukuru Village Panchayat v. Nori Venkatarama

Deekshithulu,17 this Court considered the question of the effect

of ‘vesting’ under S. 85 of the AP Gram Panchayat Act, 1964 of

the water works & appurtenant land on the Gram Panchayat. It

was held that the word ‘vesting’ in S. 85 did not confer absolute

title on the Gram Panchayat. Even after vesting, the

Government, in appropriate cases, was amenable to place

restrictions on the Gram Panchayat on enjoyment of such

waterworks & lands. It is apposite to refer to the discussion at

para 10, wherein the varied meaning of the term ‘vest’ was

considered:

“10. The word ‘vest’ clothes varied colours from the context and situation

in which the word came to be used in a statute or rule. Chamber's MidCentury Dictionary at p. 1230 defines ‘vesting’ in the legal sense “to

settle, secure, or put in fixed right of possession; to endow, to descend,

devolve or to take effect, as a right”. In Black's Law Dictionary, (5th edn.

at p. 1401) the meaning of the word ‘vest’ is given as : “to give an

immediate, fixed right of present or future enjoyment; to accrue to; to be

fixed; to take effect; to clothe with possession; to deliver full possession

of land or of an estate; to give seisin; to enfeoff”. In Stroud's Judicial

Dictionary, (4th edn., Vol. 5 at p. 2938), the word ‘vested’ was defined in

several senses. At p. 2940 in item 12 it is stated thus “as to the interest

acquired by public bodies, created for a particular purpose, in works

such as embankments which are ‘vested’ in them by statute”, see Port of

London Authority v. Canvey Island Commissioners [(1932) 1 Ch 446] in

which it was held that the statutory vesting was to construct the sea

17 1991 Supp (2) SCC 228

Page 32 of 43

wall against inundation or damages etc. and did not acquire fee simple.

Item 4 at p. 2939, the word ‘vest’, in the absence of a context, is usually

taken to mean “vest in interest rather than vest in possession”. In item 8

to ‘vest’, “generally means to give the property in”. Thus the word ‘vest’

bears variable colour taking its content from the context in which it came

to be used.” (Emphasis supplied)

33. In Municipal Corpn. of Greater Bombay v. Hindustan

Petroleum Corpn.,18 it was observed that the term ‘vesting’ is

capable of bearing the meaning of limited vesting, in title as well

as possession, and is referrable to the context and situation

within which it operates. The above would suggest that the

word ‘vest’ has variable meaning and the mere use of the word

‘vest’ in a statute does not confer absolute title over the subject

matter.

34. Further, the term ‘vesting’ is also used in other contexts

such as the Indian Succession Act, 1925 wherein S. 211 vests

the deceased’s estate in the administrator or executor, although

neither become the owner of the said property but merely hold

the same until it is distributed among the lawful successor(s).

The term ‘vests’ in S. 109A of the Companies Act 1956 is

therefore required to be interpreted in these logical lines.

18 (2001) 8 SCC 143

Page 33 of 43

35. In the context of the facts of the present case, S. 109A of

the Companies Act (pari materia to S. 72 of the Companies Act,

2013) provides for vesting of shares/debentures of a

share/debenture holder unto his nominee ‘in the event of his

death’. Similarly, Bye-law 9.11.1 under the Depositories Act,

1996 provides for ‘vesting’ of the securities unto the nominee on

the death of the beneficial owner. Applying the law laid down in

the aforenoted decisions of this Court, the use of the word ‘vest’

does not by itself, confer ownership of the shares/securities in

question, to the nominee. The vesting of the shares/securities

in the nominee under the Companies Act, 1956 and the

Depositories Act, 1996 is only for a limited purpose, i.e., to

enable the Company to deal with the securities thereof, in the

immediate aftermath of the shareholder’s death and to avoid

uncertainty as to the holder of the securities, which could

hamper the smooth functioning of the affairs of the company.

Therefore, the contrary argument of the appellants on this

aspect is rejected.

EFFECT OF NON-OBSTANTE CLAUSE

Page 34 of 43

36. In a similar vein, the appellants contend that the ‘nonobstante clause’ in S. 109A of the Companies Act, 1956 confers

overriding effect to the nomination over any other law and

disposition, testamentary or otherwise, and entitles the

nominee absolute rights over the shares/securities. Such a

clause was also found in the Banking Regulation Act, 1949 and

the Government Savings Certificate Act, 1959. However, while

interpreting the provision concerning nomination in those

enactments, this Court in Talwar (supra) rejected the argument

that the nominee would be the absolute owner of the subject

matter, to the exclusion of the legal heirs, because of the non

obstante clause. In addition, in Vishin N. Khanchandani v. Vidya

Lachmandas Khanchandani19, it was held that the non-obstante

clause is to be applied in view of the scheme and object of the

enactment in question. The relevant extract on the ruling is

reproduced herein:

“11. It is contended on behalf of the appellants that the non obstante

clause in Section 6 excludes all other persons, including the legal

heirs of the deceased holder, to claim any right over the sum paid on

account of the National Savings Certificates, to the nominee. There is

no doubt that by the non obstante clause the legislature devises

19 (2000) 6 SCC 724

Page 35 of 43

means which are usually applied to give overriding effect to certain

provisions over some contrary provisions that may be found either in

the same enactment or some other statute. In other words, such a

clause is used to avoid the operation and effect of all contrary

provisions. The phrase is equivalent to showing that the Act shall be

no impediment to the measure intended. To attract the applicability of

the phrase, the whole of the section, the scheme of the Act and the

objects and reasons for which such an enactment is made have to be

kept in mind.”

 (Emphasis supplied)

37. It is settled law that general words and phrases used in a

statute, regardless of their wide ambit, must be interpreted

taking into account the objects of the statute. The clauses &

sections within a statute are not to be read in isolation, but

their textual interpretation is determined by the scheme of the

entire statute.20 Notably, a non-obstante clause is to be

considered on the basis of the context within which it is used,

as has also been observed in R.S. Raghunath v. State of

Karnataka.21 Applying the aforestated rule of interpretation, the

non-obstante clause in S. 109A of the Companies Act, 1956

should also be interpreted keeping in mind the scheme of the

Companies Act, 1956 and the intent of introduction of

nomination facility under S. 109A & S.109B of the Companies

20 Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 1 SCC 424

21 (1992) 1 SCC 335

Page 36 of 43

Act, 1956 vide the Companies (Amendment) Act, 1999 wherein

emphasis was laid on building investor confidence and bringing

the company law in tune with policies of liberalisation &

deregulation. With this backdrop, it can be concluded that the

use of the non-obstante clause, serves a singular purpose of

allowing the company to vest the shares upon the nominee to

the exclusion of any other person, for the purpose of discharge

of its liability against diverse claims by the legal heirs of the

deceased shareholder. This arrangement is until the legal heirs

have settled the affairs of the testator and are ready to register

the transmission of shares, by due process of succession law.

38. As per Bye-law 9.11.7 of the Depositories Act, 1996, the

non-obstante clause confers overriding effect to the nomination

over any other disposition/nomination ‘for the purposes of

dealing with the securities lying to the credit of deceased

nominating person(s) in any manner’. Therefore, the purpose of

invoking such a non-obstante clause is clearly delineated and

limited to the extent of enabling the depository to deal with the

securities, in the immediate aftermath of the securities holder’s

Page 37 of 43

death. The upshot of the above discussion is that the nonobstante clause in both S. 109A(3) of the Companies Act, 1956 &

Bye-law 9.11.7 of the Depositories Act, 1996 cannot be held to

exclude the legal heirs from their rightful claim over the

securities, against the nominee.

NO THIRD LINE OF SUCCESSION CONTEMPLATED UNDER COMPANIES

ACT

39. The appellants also contend that a nomination validly

made under S. 109A of the Companies Act, 1956 and Bye-law

9.11 of the Depositories Act, 1996 constitutes a ‘statutory

testament’ that overrides testamentary/intestate succession. It

is worth noting that the argument of nomination as a ‘statutory

testament’ in respect of instruments such as life insurance

policies, government savings certificates, provident fund etc.

were considered and emphatically rejected by this Court in

multiple rulings.

40. In Sarbati Devi (supra) this Court held that nomination

under S. 39 of the Life Insurance Act, 1938 does not contemplate

a third line of succession styled as a ‘statutory testament’ and

Page 38 of 43

any amount paid to a nominee on the policy holder’s death

forms a part of the estate of the deceased policy holder and

devolves upon his/her heirs, as per testamentary or intestate

succession. Further, in Ram Chander Talwar (supra), while

discussing the rights of a nominee of a deceased depositor (S.

45-ZA(2) Banking Regulation Act, 1949), this court concluded

that the right to receive the money lying in the depositor’s

account was to be conferred on the nominee but the nominee

would not become the owner of such deposits. The said deposit

is a part of the deceased depositor’s estate and is subject to the

laws of succession, that governs the depositor.

41. The appellants’ have contended that nominations under

S. 109A of the Companies Act, 1956 & Bye-law 9.11 of the

Depositories Act, 1996 suggest the intention of the shareholder,

to bequeath the shares/securities absolutely to the nominee, to

the exclusion of any other persons (including legal

representatives) and constitutes a ‘statutory testament’.

However, aforesaid argument is not acceptable for the following

reasons:

Page 39 of 43

a. The Companies Act, 1956 does not contemplate a

‘statutory testament’ that stands over and above the

laws of succession,

b. The Companies Act, 1956 as iterated above is concerned

with regulating the affairs of corporates and is not

concerned with laws of succession.

c. The ‘statutory testament’ by way of nomination is not

subject to the same rigours as is applicable to the

formation & validity of a will under the succession laws,

for instance, S. 63 of the Indian Succession Act, wherein

the rules for execution of a Will are laid out.

42. Therefore, the argument by the appellants of nomination

as a ‘statutory testament’ cannot be countenanced simply

because the Companies Act, 1956 does not deal with succession

nor does it override the laws of succession. It is beyond the

scope of the company’s affairs to facilitate succession planning

of the shareholder. In case of a will, it is upon the administrator

or executor under the Indian Succession Act, 1925, or in case of

intestate succession, the laws of succession to determine the

line of succession.

CONCLUSION

Page 40 of 43

43. Consistent interpretation is given by courts on the

question of nomination, i.e., upon the holder’s death, the

nominee would not get an absolute title to the subject matter of

nomination, and those would apply to the Companies Act, 1956

(pari materia provisions in Companies Act, 2013) and the

Depositories Act, 1996 as well.

44. An individual dealing with estate planning or succession

laws understands nomination to take effect in a particular

manner and expects the implication to be no different for

devolution of securities per se. Therefore, an interpretation

otherwise would inevitably lead to confusion and possibly

complexities, in the succession process, something that ought

to be eschewed. At this stage, it would be prudent to note the

significance of a settled principle of law. In Shanker Raju v.

Union of India, the Court held:22

“10. It is a settled principle of law that a judgment, which has held the field

for a long time, should not be unsettled. The doctrine of stare decisis is

expressed in the maxim stare decisis et non quieta movere, which means

“to stand by decisions and not to disturb what is settled”. Lord Coke aptly

described this in his classic English version as “those things which have

been so often adjudged ought to rest in peace”. The underlying logic of this

doctrine is to maintain consistency and avoid uncertainty. The guiding

22 (2011) 2 SCC 132

Page 41 of 43

philosophy is that a view which has held the field for a long time should

not be disturbed only because another view is possible.”

45. The vesting of securities in favour of the nominee

contemplated under S. 109A of the Companies Act 1956 (pari

materia S. 72 of Companies Act, 2013) & Bye-Law 9.11.1 of

Depositories Act, 1996 is for a limited purpose i.e., to ensure

that there exists no confusion pertaining to legal formalities

that are to be undertaken upon the death of the holder and by

extension, to protect the subject matter of nomination from any

protracted litigation until the legal representatives of the

deceased holder are able to take appropriate steps. The object of

introduction of nomination facility vide the Companies

(Amendment) Act, 1999 was only to provide an impetus to the

investment climate and ease the cumbersome process of

obtaining various letters of succession, from different

authorities upon the shareholder’s death.

46. Additionally, there is a complex layer of commercial

considerations that are to be taken into account while dealing

with the issue of nomination pertaining to companies or until

legal heirs are able to sufficiently establish their right of

Page 42 of 43

succession to the company. Therefore, offering a discharge to

the entity once the nominee is in picture is quite distinct from

granting ownership of securities to nominees instead of the

legal heirs. Nomination process therefore does not override the

succession laws. Simply said, there is no third mode of

succession that the scheme of the Companies Act, 1956 (pari

materia provisions in Companies Act, 2013) and Depositories Act,

1996 aims or intends to provide.

47. Upon a careful perusal of the provisions within the

Companies Act, it is clear that it does not deal with the law of

succession. Therefore, a departure from this settled position of

law is not at all warranted. The impugned decision takes the

correct view. The appeal is accordingly dismissed without any

order on cost.

...……………………J.

 [HRISHIKESH ROY]

………….…………..J.

[PANKAJ MITHAL]

NEW DELHI

DECEMBER 14, 2023

Page 43 of 43

(i). Whether the judgments of the Appellate courts below correct in allow the appeal execute sale deed in favourof plaintiff by the Respondents/ defendants all shares from the share holders/ owners, beyond agreement of all item 1 to 3 which are established his title Ex.B1 and Ex.B9 of plaint schedule property in support of the documentary evidence as property belongs to Hindu ancestral joint property, all the defendants are in possession? (ii) Whether the agree to perform an agreement of sale of minor property in Ex.B2 sale deed clearly show that while the 5th defendant and son of the 4th defendant were minors, the said property was purchased in their names, plaintiff have any right to deal with the minor’s property without have order from the competent court of law, the property as it no partition effect in the year of 1998 shows Ex.B8 4th defendant and his son filed suit in O.S.No. 812 of 2005?one suit is filed for grant of permanent injunction and another one is suit seeking for specific performance. 2023:APHC:43804

(i). Whether the judgments of the Appellate courts below correct in allow the appeal execute sale deed in favourof plaintiff by the Respondents/ defendants all shares from the share holders/ owners, beyond agreement of all item 1 to 3 which are established his title Ex.B1 and Ex.B9 of plaint schedule property in support of the documentary evidence as property belongs to Hindu ancestral joint property, all the defendants are in possession? 

(ii) Whether the agree to perform an agreement of sale of minor property in Ex.B2 sale deed clearly show that while the 5th defendant and son of the 4th defendant were minors, the said property was purchased in their names, plaintiff have any right to deal with the minor’s property without have order from the competent court of law, the property as it no partition effect in the year of 1998 shows Ex.B8 4th defendant and his son filed suit in O.S.No. 812 of 2005?one suit is filed for grant of permanent injunction and another one is suit seeking for specific performance. 2023:APHC:43804

Trial court decreed the injunction suit and dismissed the specific performance suit - but appeal was allowed - SA

held that 

it is pertinante to note that Ex. B8 proves the 4" defendant and his son filed OS.812/2005 against the defendants 1 and 5 herein for partition of Item No.1 of agreement of sale along with some other property and the said suit was decreed for partition of subject matter of the suit in two equal shares”

49. Whereas the trial court while answering the issue No.2 in O.S.No.29 of 2007 wherein, it is categorically held that “(4) It is pertinent to note that though it was recited on the top of Ex.A1- agreement of sale that the said document was executed by the defendants 1 and 2, the contents of the document show as if the said document was executed by the first defendant alone. At the second page of Ex.A1-agreement of sale, at the right bottom, wherein the signatures of the vendees naturally appear, the thumb impression said to be that of the second defendant and the signature said to be that of the first defendant were found. In between these two, somebody's signature was also found. That is to say, three persons executed the said Ex.A1-agreement of sale. When confronted, P.W.1, though admitted that there appear three signatures, he could not give out the name of the person who subscribed that middle signature. This being a document said to have been executed by the defendants 1 and 2, there is no need for 28 any other to subscribe his signature besides the defendants. Being custodian of the said Ex.A1-agreement of sale right from the inception of its execution till it was filed into Court, it is for the plaintiff to explain as to when and who subscribed the said signature. This also creates a doubt on the veracity on Ex.A1 - agreement of sale, as to what was the real intention of the parties to the said document and had there ever been any intention of the parties to use the said document as an agreement of sale”. 

 50. Since the suit filed for specific performance of agreement of sale, the plaintiff must express his readiness and willingness to perform his part of contract till conclusion of the proceedings as a responsibility, but same was not done. Further it is the contention of the plaintiff that he was handed over the possession of the suit schedule property i.e as per Ex.A1 agreement of sale. Whereas the 1st defendant would contend that the brother of the plaintiff has taken the said property on lease. Further the PW-1 was never in possession of the plaint schedule property as a tenant, but claiming possession of the property as per Ex.A1 agreement of sale, but the plaintiff did not shown any revenue records to prove his possession over the plaint schedule property. 

 51. Therefore, in the absence of any documentary evidence showing the possession of the plaintiff, the trial court relied on the evidence of PWs 1, 6 and 7 for conclusion that the plaintiff has been in possession and enjoyment of the suit schedule property and holding that by the introduction of Ex.A8, the agreement of sale vide Ex.A1 lost its significance and efficacy and the possession of plaintiff over the plaint schedule property cannot be believed. 52. The defendants 1, 4 and 5 in O.S.No. 29 of 2007 has filed a suit for permanent injunction in O.S.No.431 of 2010 contending that the 2nd defendant, who is brother of 1st defendant and plaintiff in O.S.No.29 of 2007 took the plaint schedule property on lease for one year and he fell in arrears of rent, they demanded him to pay the same, he filed a suit for permanent injunction. The trial court has rightly established the facts by relying on both documentary and evidence on record and held that the defendants in suit in O.S.No. 431 of 2010 are not in possession of the suit schedule property and that the plaintiffs are absolute owners of the plaint schedule property. Hence decreed the suit in O.S.No.431 of 2010 and consequently dismissed the suit in O.S.No. 29 of 2007 with clear findings.

1

HIGH COURT OF ANDHRA PRADESH :: AMARAVATI

THE HON’BLE DR.JUSTICE K. MANMADHA RAO

SECOND APPEAL Nos.135 and 147 of 2023

G SUBBA RAO
Versus
R CHIRANJEEVI

COMMMON JUDGMENT:

 Second Appeal No. 135 of 2023 has been filed assailing the

Judgment and Decree dated 20.09.2022, passed in A.S.No.156 of

2016 by the learned VIII Additional District Judge, Ongole (in short

“the first appellate court”) in reversing the Judgment and decree

dated 31.10.2016 in O.S.No.431 of 2010 passed by the learned

Principal Senior Civil Judge, Ongole (in short “trial court)”.

 Second Appeal No. 147 of 2023 has been filed assailing the

Judgment and Decree dated 20.09.2022, passed in A.S.No.157 of

2016 by the learned VIII Additional District Judge, Ongole (in short

“the first appellate court”) in reversing the Judgment and decree

dated 31.10.2016 in O.S.No.29 of 2007 passed by the learned

Principal Senior Civil Judge, Ongole (in short “trial court)”.

 2. The parties will herein after be referred to as they are

arrayed in the Original Suit for the sake of convenience.

 3. Since the facts and issue involved in all the Second

Appeals are one and the same, I find it expedient to decide these

matters by a Common Judgment.

 

2

 4. For the sake of convenience, S.A.No. 135 of 2023 is taken

as leading case.

 5. The appellants herein are the respondents/ plaintiffs and

respondents herein are the appellants/ defendants before the

courts below.

 6. Initially suit in O.S.No. 431 of 2010 on the file of trial

court for permanent injunction restraining the defendants, their

men from interfering with the plaintiffs’ peaceful possession and

enjoyment of the suit schedule property, claiming that the plaintiffs

are absolute owners of the plaint schedule property by virtue of

various sale deeds. The 1st plaintiff and his son filed a suit in

O.S.No.812 of 2005 against the plaintiffs 2 and 3 for partition of

Item No.1 therein another an extent of Ac. 1.91 cents situated in

Sy.No.181/1 and 180/2 and the said suit was decreed on

04.07.2005. Later the plaintiffs 1 and 2 effected oral partition

outside of the court and are enjoying item Nos 1 to 3 therein and

another extent of Ac. 1.91 cents. Subsequently there arose

disputes between the 2nd plaintiff and defendants. Therefore the

plaintiffs filed the suit for relief of permanent injunction.

 7. The 2nd defendant filed written statement by denying all

material allegations and mainly contended that the plaintiffs 2 and 

3

3 executed an agreement of sale deed dated 05.05.2005 in favour

of 1st defendant, having received the entire sale consideration of

Rs. 2,70,000/- agreeing to execute a sale deed and delivered

possession, since then the defendants have been in possession and

enjoyment of the suit schedule property. As the plaintiffs failed to

execute the registered sale deed, the 1st defendant issued legal

notice to the 2nd plaintiff and his mother calling upon them to

execute sale deed, but in vain. The 2nd plaintiff in collusion with

the 1st plaintiff filed O.S.No. 812 of 2005 and obtained exparte

decree in respect of Item No.1 only against the plaintiffs 2 and 3 to

avoid proper registration. Therefore the suit is liable to be

dismissed.

 8. Based on the above pleadings, the trial court eventually

framed the following issues for trial:

(1) Whether the Plaintiffs are entitled for permanent injunction as prayed

for?

(2) To what relief?

 9. So also, O.S.No.29 of 2007 was filed for specific

performance of the agreement of sale dated 05.05.2005 and for

permanent injunction restraining the defendants therein and

others from in any manner interfering with the plaintiff therein

peaceful possession and enjoyment of the plaint schedule property 

4

and contending that the defendants 1 and 2 therein are the

absolute owners of the Item No.1 to 3 of the plaint schedule and

they offered to sell the same to the plaintiff at Rs. 2,70,000/- on

05.05.2005 and having received the entire sale consideration, the

defendants 1 and 2 executed an agreement of sale in favour of the

plaintiff and delivered possession of the suit schedule property,

agreeing to execute the registered sale deed whenever demanded by

the plaintiff. Since then the plaintiff in the suit has been in

possession and enjoyment of the same. The defendants have

evading in registering the document, though registered notices

were sent to them. The defendants 1 and 2 colluded with their

family members and filed a suit through them for grant of

permanent injunction. Though, the plaintiff in the suit has been

cultivating the suit schedule property. Therefore the suit has been

instituted for specific performance and for permanent injunction.

 10. Subsequently the 2nd defendant in the suit died and her

legal representatives were brought on record as 3rd defendant and

subsequent to the filing of the suit in O.S.No. 858 of 2006 on the

file the trial court by the defendants 1, 4 and 5 therein for

permanent injunction in respect of the subject matter of this suit,

defendants 4 and 5 were brought on record. 

5

 11. The 1st defendant filed written statement before the trial

court by denying material allegations and mainly contended that

the defendants are the owners of Ac. 1.08 cents out of Ac. 2.16

cents in Item No.1 and the other land belongs to Gunji Subba Rao

and his right also declared in court. The Item No2 is belongs to son

of 1st defendant, which he got from his grandfather Smt.

Ankamma. The defendants are entitled to Ac. 0.04 cents, out of Ac.

0.08 cents in Item No.3, which was purchased by the 1st defendant

along with his brother under agreement of sale dated 20.05.1988.

With a view to nab the said property, the plaintiff fabricated and

forged the documents.

 12. The 4th defendant in the suit also filed written statement

by contending that the 4th defendant purchased Item No.1 of the

suit schedule property along with his brother Smt. Ankamma and

got it registered on 22.05.1984 and the defendants 4 and 5 in the

suit have been enjoying the same jointly.

 13. So also, the 5th defendant filed written statement by

contending that he is the absolute owner of the plaint schedule

property and his parental grandfather by name Ankamma

purchased Item No.2 on 07.08.1997 in his favour, when he was a

minor. The revenue authorities have also issued pattadar pass 

6

book and title deed in his favour. The suit schedule properties are

not the absolute properties of the defendants 1 and 2 and they

have no right to sell the share of 5th defendant i.e Item No.2.

Therefore the suit is liable to be dismissed.

 14. Based on the above pleadings, the trial court eventually

framed the following issues for trial:

(1) Whether the defendants are absolute owners of items of the schedule

property?

(2) Whether the agreement is true, valid and whether the plaintiff was put

in possession of the schedule property under the agreement of sale?

(3) Whether the plaintiff is entitled for permanent injunction as prayed for?

(4) To what relief?

Additional issues:

(1) Whether D4 is the absolute owner of Item No.2 of the schedule

property?

(2) Whether D5 is the absolute owner of the half share in Item No.1 and 3

of the schedule property?

 15. The trial court clubbed the suits i.e O.S.No. 29 of 2007

and O.S.No. 431 of 2010 on memo by the parties to the suits and

common evidence was recorded in O.S.No.29 of 2007 and the

witnesses examined on behalf of the plaintiff in O.S.No. 29 of 2007

are referred as PWs and the witnesses examined on behalf of the

defendants as DWs.

 

7

 16. During the course of trial PWs-1 to 11 were examined on

behalf of the plaintiffs and Ex.A1 to A8 got marked and on behalf of

the defendants, DWs-1 to 3 were examined and Ex.B1 to B9 were

marked.

 17. After elaborate trial, the trial court dismissed the suit in

O.S.No. 29 of 2007 and decreed the suit in O.S.No. 431 of 2010 by

granting permanent injunction restraining the defendants therein

and their men from interfering with the plaintiff’s peaceful

possession and enjoyment of the suit schedule property vide

common judgment dated 31.10.2016.

 18. Assailing the said Judgment and decree of the trial court,

the defendants in O.S.No. 431 of 2010 have filed appeal in A.S.No.

156 of 2016 before the first appellate court; so also, plaintiff in

O.S.No. 29 of 2007 have filed an Appeal in A.S.No. 157 of 2016

before the first appellate court.

 19. The first appellate court has framed the following points

for consideration in the Appeal:

1. Whether the Decree and Judgment passed by the trial court is factually

and legally sustainable?

2. Is it necessary to interfere with the findings of the trial court with regard

to answers and findings on the issues? 

8

 20. The First Appellate Court after considering the facts and

circumstances of the case allowed the appeal, while setting aside

the decree and judgment of the trial court in O.S.No. 29 of 2007

and directed the defendants therein to execute the registered sale

deed in favour of the plaintiff within one month from the date of

judgment and granted permanent injunction. Further, dismissed

the suit in O.S.No. 431 of 2010 on merits on 20.09.2022. Assailing

the Judgment of the First Appellate Court, the appellants herein,

the present Second Appeals came to be filed.

 21. This court while admitting the Second Appeal has framed

the following substantial question of law in S.A.No. 135 of 2023

and S.A.No.147 of 2003, which are as under:-

(i). Whether the judgments of the Appellate courts below correct in allow

the appeal execute sale deed in favourof plaintiff by the Respondents/

defendants all shares from the share holders/ owners, beyond agreement

of all item 1 to 3 which are established his title Ex.B1 and Ex.B9 of plaint

schedule property in support of the documentary evidence as property

belongs to Hindu ancestral joint property, all the defendants are in

possession?

(ii) Whether the agree to perform an agreement of sale of minor property in

Ex.B2 sale deed clearly show that while the 5th defendant and son of the

4th defendant were minors, the said property was purchased in their

names, plaintiff have any right to deal with the minor’s property without

have order from the competent court of law, the property as it no partition

effect in the year of 1998 shows Ex.B8 4th defendant and his son filed suit

in O.S.No. 812 of 2005? 

9

22. Heard Mr. Mr. Sridhar Thummalapudi, learned counsel

for the appellants and Mr. P.V.A.Padmanabham, learned counsel

for the respondents.

23. During hearing learned counsel for the appellants/

plaintiffs in S.A.No.135 of 2023 would contend that the plaintiff

claimed ancestral property without their being undivided shares,

all the defendants are has succeeded the plaint schedule property

from his ancestors, which is not considered by the first appellate

court as per evidence. Since the first appellate court negative

Ex.B1 to B9 and ought to have allow the appeal filed by the

appellants/ plaintiffs for the documents filed by the plaintiff as

Ex.A1 is sham, as there is no proper documents marked on behalf

of the respondents to show that the schedule property belongs to

the defendants and that they are in possession. It is further

contended that the first appellate court without ascertaining any

documents, declaring that the defendants claiming exclusive right,

title, interest and possessory title over the plaint schedule property

as illegal.

24. It is further contended that the trial court rightly pointed

out that Ex.B2 sale deed would show that 5th defendant and son of

the 4th defendant were minors and purchased the property in the 

10

name of minors. Therefore other defendants have no manner of

right to deal with the minors’ property. The first appellate court

committed an error in relying on the observations made by the

trial court both facts and law. Therefore the findings of the first

appellate court are based on mere surmises and that the same is

liable to be set aside.

25. During the course of hearing learned counsel for the

appellants placed on record the decision of the Hon’ble Apex Court

in “Bhagyashree Anant Gaonkar v. Narendra @ Nagesh

Bharma Holkar and Another”1 wherein the Hon’ble Apex Court

draws Section 100 of the C.P.C and also discussed various

decisions with regard to framing of substantial question of law in

the appeal and further remand the matter to the High Court for a

fresh consideration after ascertaining whether substantial

questions were framed at the time of admitting the matter and if

not, to frame the substantial question of law on hearing the

learned counsel for the respective parties and thereafter to dispose

of the second appeal in accordance with law.

26. Learned counsel for the appellants draws the attention

of this Court with regard to Section 8 of the Hindu Minority and

Guardianship Act and relied on a decision of the Hon’ble Apex

1

 Civil Appeal No. of 2023 in SLP (C) No. 12163 of 2023, dated 07.08.2023 

11

Court in “Panni Lal v. Rajinder Singh and Another”2, wherein

the Hon’ble Division Bench held as follows:

“4. Section 8 of the Hindu Minority and Guardianship Act

sets out the C powers of the natural guardian of a Hindu minor.

The natural guardian of a Hindu minor has power, subject to the

provisions of Section 8, to do all acts which are necessary or

reasonable and proper for the benefit of the minor or his estate.

The natural guardian, however, may not without the previous

permission of the court sell any part of the immovable property of

the minor. Any disposal of immovable property which is not

necessary or reasonable and proper for the benefit of the minor

or is without the previous permission of the court is voidable at

the instance of the minor.”

…..

7. In the present case, there is no evidence to show that

the father of the respondents was not taking any interest in their

affairs or that they were in keeping and care of the mother to the

exclusion of the father. In fact, his attestation of the sale deed

shows that he was very much existent and in the picture. If he

was, then the sale by the mother, notwithstanding the fact that

the father attested it, cannot be held to be a sale by the father

and natural guardian satisfying the requirements of Section 8.

27. Further, he relied on a decision in “Pemmada

Prabhakar and Others v. Youngmen’s Vysya Association and

Others”3, wherein the Division Bench of the Hon’ble Apex Court

held as follows:

2

 (1993) 4 SCC 38

3

 (2015) 5 SCC 355 

12

“28. It is an undisputed fact that the suit schedule

property is self-acquired property by late Pemmada

Venkateswara Rao as he had purchased the said property vide

sale deed Document No. 5174 of 1970 dated 24-11-1970 from

his vendors. It is also an undisputed fact that the said property

is intestate property. He is survived by his wife, three sons and

three daughters. The said property devolved upon them in view

of Section 8 of Chapter II of the Hindu Succession Act as the

defendants are Class I legal heirs in the suit schedule property.

Undisputedly, the agreement of sale, Ext. A-1 is executed only

by Defendants 1 and 2. The third son, mother and three sisters

who have got equal shares in the property have not executed the

agreement of sale. In view of the matter, the agreement of sale

executed by Defendants 1 and 2 who have no absolute right to

property in question cannot confer any right whatsoever upon

the plaintiffs for grant of decree of specific performance of

agreement of sale in their favour. The said agreement is not

enforceable in law in view of Section 17 of the Specific Relief Act

in view of the right accrued in favour of Defendants 3 to 6 under

Section 8 of the Hindu Succession Act.

28. In “Bhavyanath rep., by Power of Attorney Holder v.

K.V.Balan (dead) through L.Rs”4, wherein the Division Bench of

the Hon’ble Apex Court held as follows:

“20. In this regard there are two aspects which we would

think has not been considered by the High Court. We have

adverted to the statements in the reply notice sent dated

18-3-2008 by the plaintiff. The measurement took place on

16-3-2008. On measurement it appears to have been found that

the extent available with the defendant was 70.950 cents.

However, the plaintiff found that one cent out of the 70.950

cents was not with the defendant and instead was with one

4

 (2020) 11 SCC 790 

13

Kochammu and half of cent was with somebody else in the

northern side. However, when this was brought to the notice of

defendant, according to plaintiff, he wanted payment on the

basis that he had the whole of 70.950 cents. Therefore, the said

question related to the title of the defendant, a question relating

to the exact extent available for being conveyed. Secondly and

far more importantly, admittedly there was a mortgage over the

plaint scheduled property created in 1983 by the defendant.

Encumbrance certificates produced by the plaintiff has been

relied upon by the trial court to find that the mortgage had not

been cleared. The defendant in his evidence as DW 1 sets up the

case that the mortgage was cleared and release deed was

available with him. It was at his home. On the one hand, the

encumbrance certificates did disclose the mortgage and they did

not reveal the clearing of the mortgage. The defendant on the

other hand, though setting up the case that the debt was paid

off and mortgage was got released but did not choose to produce

the evidence which was in his possession.

21. The High Court has overlooked this aspect and came

to the conclusion that there was no dispute relating to the title.

Under Ext. A-1 agreement, it was incumbent upon the defendant

to convince the plaintiff about the title of the property and other

connected things. No doubt, the plaintiff had made a demand for

the original title deeds relating to the property, as he wanted to

use them for the purpose of taking a loan in connection with his

proposed construction. This we do not think he was entitled

under the contract and if the defendant refused the title deeds

we would not be in a position to blame him. We are, therefore, of

the view that the High Court has fallen into an error in reversing

the finding that the defendant was in breach of his obligations.” 

14

29. In “Waheed Baig v. Bangi Lakshmamma and

Others”5 wherein the Division Bench of Hon’ble Apex Court held

as follows:

“22. A copy of the agreement for sale has been filed

before us. This does not refer to any condition that after payment

of installment the lessee can become the owner and the

agreement for sale was to take effect. Since the appellant was

not the owner of the property, he could not have entered into an

agreement to sell a property of which admittedly he was not the

owner. Great emphasis is laid by learned counsel for the

respondents on Section 13 of the Specific Relief Act, 1963 (in

short "the Act'")……”

30. Whereas, learned counsel for the respondents would

contend that Ex.A1 agreement of sale is valid and enforceable. The

plaint schedule property fell to the share of 1st defendant by virtue

of partition as admitted by the 1st defendant. It is further

contended that the claim of half share and preliminary decree are

all result of collusion and fraud. The 1st defendant being natural

guardian has right under Minority and Guardians Act enter into

transaction on behalf of the minor son. Ex.A1 in respect of Item

No.2, minor’s property is voidable at the instance of the minor. The

4th defendant was minor when Ex.A1 Agreement of sale was

executed, when suit was filed but after his becoming major did not

exercise his option of avoidance or descent. The trial court

5

 (2008) 14 SCC 435 

15

exercised beyond its jurisdiction gone into irrelevant issues of title

of 4th defendant. Therefore, the Second Appeals are liable to be

dismissed.

 31. In support of his contention, learned counsel for the

respondents relied on a decision in “Biswanath Charit v.

Damodar Patra and Others”6 wherein it was held as follows:

“9…. We feel no hesitation in agreeing with and accepting

the view that it was competent for the natural guardian to enter

into and execute an agreement for sale as in the present case for

the benefit of the minors and such an agreement will not be void

altogether but only voidable at the instance of the minor if it can

be shown to be not for his benefit. But in our view the mere fact

that the agreement is not void would not by itself render it

straightway specifically enforceable at the instance of the

purchaser by the natural guardian….

….The matter can be, looked at from another angle, namely, that

even where the court grants such a decree and the natural

guardian executes the conveyance in terms of that decree, that

transfer can be set at naught at the instance of the minor merely

on the ground that such transfer is in contravention of subsection (2). No court is expected to pass such an infructuous

decree. But the question still remains what would happen to

such an agreement, particularly when as has been found in the

present case the agreement is within the competence of the

natural guardian and is for the benefit of the minor. Would it

remain an agreement not enforceable in law? In our view the

legal position is that such an agreement is enforceable but only

upon a previous permission being obtained from the court…..”.

6

 1982 SCC OnLine Cal 16 

16

 32. The Hon’ble Apex Court categorically discussed the

scope of Section 100 CPC in “Gurdev Kaur v. Kaki” 7, which

reproduced hereunder:

“70. Now, after the 1976 Amendment, the scope of Section

100 has been drastically curtailed and narrowed down. The

High Courts would have jurisdiction of interfering under Section

100 CPC only in a case where substantial questions of law are

involved and those questions have been clearly formulated in the

memorandum of appeal. At the time of admission of the second

appeal, it is the bounden duty and obligation of the High Court to

formulate substantial questions of law and then only the High

Court is permitted to proceed with the case to decide those

questions of law. The language used in the amended section

specifically incorporates the words as substantial question of

law' which is indicative of the legislative intention. It must be

clearly understood that the legislative intention was very clear

that the legislature never wanted the second appeal to become

'third trial on facts' or 'one more dice in the gamble'. The effect of

the amendment mainly, according to the amended section, was:

 (i) The High Court would be justified in admitting the

second appeal only when a substantial question of law is

involved;

 (ii) The substantial question of law to precisely state such

question;

 (iii) A duty has been cast on the High Court to formulate

substantial question of law before hearing the appeal;

 (iv) Another part of the section is that the appeal shall be heard

only on that question.”

7

 (2007) 1 SCC 546 

17

 33. In “Sansar Chand v. Swami Vivekanand Adarsh

Vidha Mandir”8, wherein the Division Bench of Hon’ble Apex

Court as follows:

“8……It was also held that a suit must be filed by a minor

in order to avoid the transaction within the period prescribed

under Article 60 of the Limitation Act. The High Court did not

consider the issue of limitation at all in view of its finding on the

effect of a violation of Section 8(2) of the Act. As conclusion of the

High Court on this aspect of matter is unsustainable, the

impugned decision must be set aside”.

 34. In “T.S.Bellieraj v. Vinodhini Krishnakumar and

others”9, wherein the Madras High Court followed the decision

cited below, which reproduced hereunder:

“12. In the decision reported in (State of Maharashtra vs.

Pravin Jethalal Kamdar (dead) by LR’s) AIR 2000 SC 1099

wherein in para-6 it was stated thus:-

 “6. …..When possession has been taken by the appellants

pursuant to void documents, Article 65 of the Limitation Act will

apply and the limitation to file the suit would be 12 years. When

these documents are null and void, ignoring them a suit for

possession simplicitor could be filed and in the course of the suit

it could be contended that these documents are nullity. In Ajudh

Raj v. Moti S.o Mussadi (1991) 3 SCC 136: (1991 AIR SCW 1576:

AIR 1991 SC 1600) this Court said that if the order has been

passed without jurisdiction, the same can be ignored as nullity,

that is, non- existent in the eyes of Law and is not necessary to

set it aside: and such a suit will be governed by Article 65 of the

8

 (2010) 15 SCC 155

9

 2005(4) L.W.606 

18

Limitation Act. The contention that the suit was time barred has

no merit. The suit has been rightly held to have been filed within

the period prescribed by the Limitation Act.”

 35. In “Shub Karan Bubna Alias Shub Karan Prasad

Bubna”10, wherein the Hon’ble Apex Court held as follows:

“19. The three decisions relied on by the petitioner

(referred to in para 4 above) are not relevant for deciding the

issue arising in this case. They all relate to suits for mortgage

and not partition. There is a fundamental difference between

mortgage suits and partition suits. In a preliminary decree in a

mortgage suit (whether a decree for foreclosure under Rule 2 or a

decree for sale under Rule 4 of Order 34 of the Code), the

amount due is determined and declared and the time within

which the amount has to be paid is also fixed and the

consequence of non-payment within the time stipulated is also

specified. A preliminary decree in a mortgage suit decides all the

issues and what is left out is only the action to be taken in the

event of non-payment of the amount. When the amount is not

paid the plaintiff gets a right to seek a final decree for

foreclosure or for sale.

 20. On the other hand, in a partition suit the preliminary

decrees only decide a part of the suit and therefore an

application for passing a final decree is only an application in a

pending suit, seeking further progress. In partition suits, there

can be a preliminary decree followed by a final decree, or there

can be a decree which is a combination of preliminary decree

and final decree or there can be merely a single decree with

certain further steps to be taken by the court. In fact, several

applications for final decree are permissible in a partition suit. A

decree in a partition suit ensures to the benefit of all the co-

10 (2009) 9 SCC 689 

19

owners and therefore, it is sometimes said that there is really no

judgment-debtor in a partition decree.

 21. A preliminary decree for partition only identifies the

properties to be subjected to partition, defines and declares the

shares/rights of the parties. That part of the prayer relating to

actual division by metes and bounds and allotment is left for

being completed under the final decree proceedings. Thus the

application for final decree as and when made is considered to

be an application in a pending suit for granting the relief of

division by metes and bounds.

 36. In “S. Sai Reddy v. S. Narayana Reddy and

Others”11, wherein the Hon’ble Apex Court held as follows:

“7. ……When a suit for partition is filed in a court, a

preliminary decree is passed determining shares of the members

of the family. The final decree follows, thereafter, allotting

specific properties and directing the partition of the immovable

properties by metes and bounds. Unless and until the final

decree is passed and the allottees of the shares are put in

possession of the respective property, the partition is not

complete. The preliminary decree which determines shares does

not bring about the final partition. For, pending the final decree

the shares themselves are liable to be varied on account of the

intervening events. In the instant case, there is no dispute that

only a preliminary decree had been passed and before the final

decree could be passed the amending Act came into force as a

result of which clause (ii) of Section 29-A of the Act became

applicable.

 37. In “Prema v. Nanje Gowda and Others”12, wherein the

Hon’ble Apex Court held as follows:

11 (1991) 3 SCC 647 

20

“16. …..If the rights of the parties to the suit change due to other

reasons, the court seized with the final decree proceedings is not

only entitled, but is duty-bound to take notice of such change and

pass appropriate order.

 38. In “Kasturi v. Iyyamperumal and Others”13, wherein

the Hon’ble Apex Court held as follows:

“19. …..Accordingly, it was submitted that the presence of

Respondents 1 and 4 to 11 would be necessary for proper

adjudication of such dispute. This argument which also weighed

with the two courts below although at the first blush appeared to be

of substance but on careful consideration of all the aspects as

indicated hereinearlier, including the scope of the suit, we are of the

view that it lacks merit. Merely in order to find out who is in

possession of the contracted property, a third party or a stranger to

the contract cannot be added in a suit for specific performance of the

contract for sale because Respondents 1 and 4 to 11 are not

necessary parties as there was no semblance of right to some relief

against Respondent 3 to the contract. In our view, the third party to

the agreement for sale without challenging the title of Respondent 3,

even assuming they are in possession of the contracted property,

cannot protect their possession without filing a separate suit for title

and possession against the vendor. It is well settled that in a suit

for specific performance of a contract for sale the lis between the

appellant and Respondents 2 and 3 shall only be gone into and it is

also not open to the Court to decide whether Respondents 1 and 4 to

11 have acquired any title and possession of the contracted property

as that would not be germane for decision in the suit for specific

performance of the contract for sale, that is to say in a suit for

specific performance of the contract for sale the controversy to be

decided raised by the appellant against Respondents 2 and 3 can

only be adjudicated upon, and in such a lis the Court cannot decide

12 (2011) 6 SCC 462

13 (2005) 6 SCC 733 

21

the question of title and possession of Respondents 1 and 4 to 11

relating to the contracted property.”

 39. In “Nazir Mohamed v. J. Kamala and Others”14,

wherein the Hon’ble Apex Court held as follows:

“28. To be "substantial", a question of law must be debatable, not

previously settled by the law of the land or any binding precedent,

and must have a material bearing on the decision of the case

and/or the rights of the parties before it, if answered either way.

29. To be a question of law "involved in the case", there must be

first, a foundation for it laid in the pleadings, and the question

should emerge from the sustainable findings of fact, arrived at by

courts of facts, and it must be necessary to decide that question of

law for a just and proper decision of the case.

30. …..

31. Whether a question of law is a substantial one and whether

such question is involved in the case or not, would depend on the

facts and circumstances of each case. The paramount overall

consideration is the need for striking a judicious balance between

the indispensable obligation to do justice at all stages and the

impelling necessity of avoiding prolongation in the life of any lis.

This proposition finds support from Santosh Hazari v.

Purushottam Tiwari15.

 40. In “Manga Ram v. Har Lal”16, wherein the High Court

of Rajastan at Page No. 538 held as follows:

“The learned Judge also referred to the observation made in Peart

Mohan Shaha v. Durlavi Dassya (4) which did not follow the view

14 (2020) 19 SCC 57

15 (2001) 3 SCC 179

16 1959 SCC OnLine Raj 164 

22

expressed in Sayam Ramamoorthi Dhora's case (1). Again turning to

the Evidence Act it was pointed out by the learned Judge that "secs.

41 and 42 draw a distinction between Judgments in rem and

judgments in personam and it seems to me to be clear from the

sections that a Judgment which does not fall within sec. 41 can only

be evidence but cannot be used for the purpose of preventing the

other side from proving facts which he sets up". It was further

observed that "it is not open to us to import considerations as to

convenience in dealing with matters which have been codified and

dealt with by Evidence Act, however attractive the theory may be

and however much one would like to have the principle embodied by

the legislature in the codes". I entirely agree with the view

expressed above. It is clear from what has been discussed above

that sec. 11 C.P.C. would not apply in terms to the present case as

Harlal was not a party to the previous suit for declaration. The

judgment in the previous suit being a judgment in personam, it is

not conclusive under sec. 41 of the Evidence Act and it can only be

evidence under sec. 42 of the Evidence Act.”

 41. In “Ganesh Singh v. Hari Singh and Others”17

wherein the High Court of Rajastan held as follows:

“3. The provisions of Sections 41 to 43 of the Act make it clear that

if a judgment of the court is a judgment in rem, it is binding in

subsequent proceedings on that issue though the parties may not be

same. But if it is a judgment in personam, it does not have any

binding effect in subsequent proceedings. This issue was considered

by the Privy Council in Mahomed Saddique Yousuf v. Official

Assignee of Calcutta (1), wherein it was held that in proceedings of

insolvency, an order passed on adjudication is of a binding nature

being a judgment in rem and a person, who may not be a party in

the insolvency proceedings, cannot challenge the said order for the

reason that the order of adjudication was conclusive in nature and

cannot be disputed.

17 2002 SCC OnLine Raj 473 

23

 42. In “S.P.Chengalvaraya Naidu (dead) by L.Rs v.

Jagannath (dead) by L.Rs and Others”18 wherein the Hon’ble

Apex Court held as follows:

“5. ……The principle of “finality of litigation” cannot be pressed to

the extent of such an absurdity that it becomes an engine of fraud in

the hands of dishonest litigants. The courts of law are meant for

imparting justice between the parties. One who comes to the court,

must come with clean hands. We are constrained to say that more

often than not, process of the court is being abused……

6……A litigant, who approaches the court, is bound to produce all

the documents executed by him which are relevant to the litigation.

If he withholds a vital document in order to gain advantage on the

other side then he would be guilty of playing fraud on the court as

well as on the opposite party”.

 43. In “Periyanayagam v. Rajendran and Others”19

wherein the Madras High Court held as follows:

“5. ……

 "A valid agreement is one which is fully operative in

accordance with the intent of the parties. A void agreement is one

which entirely fails to receive legal recognition or sanction, the

declared will of the parties being wholly destitute of legal eiticacy. A

voidable agreement stands midway between these conal and not

asilty, but its on of snie detect in its origin it is liable to be destroyed

or cancelled at the option of one of the parties to it. On the exercise

of this power, the agreement not only ceases to have any efficacy,

but is deemed to have been void ab initio. The avoidance of it relates

back to the making of it. The hypothetical or contingent efficacy

18 (1994) 1 SCC 1

19 1988-1- L.W 

24

which has earlier been attributed to it wholly dis-appears, as if it

had never existed. In other words, a voidable agreement is one

which is void or valid at the election of one of the parties to it."

…..

 It is thus seen from the passages above that the avoidance or

repudiation by a minor whatever be its form, renders the transaction

so repudiated void since its inception. It would also be useful in this

connection to refer to the observation of the Full Bench of this Court

in Ramaswami Iyengar v. Ranga Chariar20. Though that case

related to the question of court fee with reference to the provisions of

Court-fees Act, VII of 1870, the Full Bench considered the question

whether, under the substantive law by which the party is governed,

he is bound to sue for a declaration of cancellation in respect of

transactions to which the plaintiff is made a party…..”

…..

 “The above extracted observations of the Full Bench

referring to two other earlier decisions clearly establish that an

election to avoid may as well be by instituting an action to recover

possession of the property. It would, therefore in my view suffice if

the transaction-under Ex.B1 is avoided by the institution ofl the suit

for recovery of possession”.

 44. Perused the record.

 45. It is the contention of the learned counsel for the

appellants that the trial court has rightly came to a conclusion

how the agreement is forged one, the signature and also the dates

of the agreement Ex.A1. It is further contended that PW-1

admitted that the three signatures and also could not give the

20 51 L.W.11= 1940 -1 MLJ 32 (FB) 

25

name of the person, who subscribed the middle signature, which

are the latches in the agreement, but the same was not proved by

way of evidence, but the first appellate court went wrong notion

and simply set aside the judgment of the trial court without given

valid reasons.

 46. As per Ex.A7 shows that the 4th defendant is having half

share in Item No.1 of plaint schedule property, so also the trial

court also held that the 4th defendant is the absolute owner of the

half share of Item No.1 and 3; the 5th defendant is the absolute

owner of the Item No.2 of plaint schedule property. The defendants

1 and 2 have got nothing to do with the same.

 47. Whereas it is the contention of the respondents that the

plaint schedule property consists of three items and the entire

land fell to the share of 1st defendant only by virtue of partition

deed dated 27.06.1998 between 1st defendant and 4th defendant,

but the said document was not filed, though admitted the

partition. Further during the cross examination of DW-1 he

admitted that he and his brother Ankamma partitioned the

properties under partition deed dated 27.06.1998 and Item No.1 to

3 fell to his share. The first appellate court held that considering

the evidence of PWs 1 to 4 coupled with Ex.A1 and also 

26

admissions of DW-1 find that the defendants 1 and 2 are entitled

to execute Ex.A1 agreement of sale in favour of the plaintiff in

respect of Item No.1 to 3 of the plaint schedule.

 48. Further the first appellate point out with regard to

finding of the trial court that “the 5th defendant and son of 4th

defendant are entitled for equal shares subject matter of the sale

deed is also beyond the scope of suit and it is not sustainable. As

discussed above the title of the defendants cannot be declared in a

suit for specific performance filed by the plaintiff and the court has

to see whether the plaintiff proved the execution of Ex.A1, I find the

conclusion of the trial court that the contents of Ex.A1 agreement of

sale do not show that the defendants 1 and 2 under took to prevail

over the vendor under Ex.B1 and that he would also join the

execution of sale deed it shows by the date of execution of Ex.Al

plaintiff does not even though the nature of execution of Item No.3 of

plaint schedule is also not based on the evidence on record. There is

no such presumption under law that whenever any transaction is

based on agreement the said fact would be recited in subsequent

agreement. In my considerable opinion it is for the plaintiff to face

the consequences if the defendants 1 and 2 have no right to execute

the registered sale deed in his favour. But refusing specific

performance on the ground that the persons who are not parties to 

27

Ex.A1 is having right over the plaint schedule property is not proper.

It is pertinent to note that Ex. B8 proves the 4" defendant and his

son filed OS.812/2005 against the defendants 1 and 5 herein for

partition of Item No.1 of agreement of sale along with some other

property and the said suit was decreed for partition of subject

matter of the suit in two equal shares”.

 49. Whereas the trial court while answering the issue No.2

in O.S.No.29 of 2007 wherein, it is categorically held that “(4) It is

pertinent to note that though it was recited on the top of Ex.A1-

agreement of sale that the said document was executed by the

defendants 1 and 2, the contents of the document show as if the

said document was executed by the first defendant alone. At the

second page of Ex.A1-agreement of sale, at the right bottom,

wherein the signatures of the vendees naturally appear, the thumb

impression said to be that of the second defendant and the

signature said to be that of the first defendant were found. In

between these two, somebody's signature was also found. That is to

say, three persons executed the said Ex.A1-agreement of sale.

When confronted, P.W.1, though admitted that there appear three

signatures, he could not give out the name of the person who

subscribed that middle signature. This being a document said to

have been executed by the defendants 1 and 2, there is no need for 

28

any other to subscribe his signature besides the defendants. Being

custodian of the said Ex.A1-agreement of sale right from the

inception of its execution till it was filed into Court, it is for the

plaintiff to explain as to when and who subscribed the said

signature. This also creates a doubt on the veracity on Ex.A1 -

agreement of sale, as to what was the real intention of the parties to

the said document and had there ever been any intention of the

parties to use the said document as an agreement of sale”.

 50. Since the suit filed for specific performance of agreement

of sale, the plaintiff must express his readiness and willingness to

perform his part of contract till conclusion of the proceedings as a

responsibility, but same was not done. Further it is the contention

of the plaintiff that he was handed over the possession of the suit

schedule property i.e as per Ex.A1 agreement of sale. Whereas the

1st defendant would contend that the brother of the plaintiff has

taken the said property on lease. Further the PW-1 was never in

possession of the plaint schedule property as a tenant, but

claiming possession of the property as per Ex.A1 agreement of

sale, but the plaintiff did not shown any revenue records to prove

his possession over the plaint schedule property. 

29

 51. Therefore, in the absence of any documentary evidence

showing the possession of the plaintiff, the trial court relied on the

evidence of PWs 1, 6 and 7 for conclusion that the plaintiff has

been in possession and enjoyment of the suit schedule property

and holding that by the introduction of Ex.A8, the agreement of

sale vide Ex.A1 lost its significance and efficacy and the

possession of plaintiff over the plaint schedule property cannot be

believed.

 52. The defendants 1, 4 and 5 in O.S.No. 29 of 2007 has

filed a suit for permanent injunction in O.S.No.431 of 2010

contending that the 2nd defendant, who is brother of 1st defendant

and plaintiff in O.S.No.29 of 2007 took the plaint schedule

property on lease for one year and he fell in arrears of rent, they

demanded him to pay the same, he filed a suit for permanent

injunction. The trial court has rightly established the facts by

relying on both documentary and evidence on record and held that

the defendants in suit in O.S.No. 431 of 2010 are not in

possession of the suit schedule property and that the plaintiffs are

absolute owners of the plaint schedule property. Hence decreed

the suit in O.S.No.431 of 2010 and consequently dismissed the

suit in O.S.No. 29 of 2007 with clear findings. 

30

 53. After close scrutiny of the judgment of the first appellate

court, this Court finds that the first appellate court has not

applied its mind in right perspective. The view taken by the trial

court and first appellate court are different. Therefore there was a

confusion to deal with the issues. Further the first appellate court

discussed the issues beyond jurisdiction. Therefore, I find

impropriety and irregularity in the judgment of the first appellate

court and that the same is liable to be set aside.

 54. Both the counsel relied on catena of decisions of various

High Courts and also Hon’ble Apex Court substantiate of their

respective pleas. In the instant case, the decisions relied on by the

learned counsel for the appellants are applicable to the facts of the

case. Whereas, learned counsel for the respondents mainly relied

on the aspect of framing of substantial question of law and

submitted a case law. Since the suits were clubbed together and

common evidence was recorded by the trial court. Therefore the

issues framed and the evidence recorded in the suit would become

common in both the suits and there is no need or necessity to

frame further issues in any manner. Once the parties agrees to

decide the suits by common judgment by conducting joint trial

with regard to same subject matter, question of framing additional

issues does not arise. The learned counsel for the respondents 

31

would contend that as there is vast difference with regard to issues

involved in both the suits, since one suit is filed for grant of

permanent injunction and another one is suit seeking for specific

performance. Therefore independent issues have to be framed to

avoid conflict findings. The said plea can be agitate before the trial

court only, but not in Second Appeal, if they have any objections.

But the in the instant case, the parties and also the suit schedule

property is one and same and that the suit decided by a common

judgment by the trial court at the request of both the parties.

Therefore the contention of learned counsel for the respondents as

referred above cannot be looked into at this stage. If such pleas

allowed, any amount of prejudice will be caused to the parties;

more so, there is no end for the litigation.

 55. In view of the foregoing discussion, this Court is inclined

to setting aside the common judgment of the first appellate court

by confirming the judgment of the trial court.

 56. In the result, the Second Appeals are allowed, by a

Common Judgment. There shall be no order as to costs. 

32

As a sequel, miscellaneous applications pending, if any,

shall also stand closed.

___________________________________

DR.JUSTICE K. MANMADHA RAO

Date: 24.11.2023.

KK 

33

THE HON’BLE Dr.JUSTICE K. MANMADHA RAO

SECOND APPEAL Nos.135 and 147 of 2023

Date: 24.11.2023.

KK

1.Whether the courts below are right in decreeing the suit for specific performance basing on the pleadings of the plaintiff about his financial capacity and the readiness and willingness expressed by him in the plaint without there being any evidence both oral and documentary and the 1st defendant specifically denied Ex.A1 agreement of sale? 2.Whether the courts below are right in decreeing the suit without giving any specific finding with regard to the plea taken by the 2nd defendant about the bona fide purchase made by him for value without notice ? 2023:APHC:47562

1.Whether the courts below are right in decreeing the suit for specific performance basing on the pleadings of the plaintiff about his financial capacity and the readiness and willingness expressed by him in the plaint without there being any evidence both oral and documentary and the 1st defendant specifically denied Ex.A1 agreement of sale?

2.Whether the courts below are right in decreeing the suit without giving any specific finding with regard to the plea taken by the 2nd defendant about the bona fide purchase made by him for value without notice ?  2023:APHC:47562

suit for specific performance of sale agreement dated 22.03.2011 - The plaintiff paid Rs.5,00,000/- towards advance to the 1st defendant on condition that the balance sale consideration should be paid on or before 9.5.2011, and in case of default, the plaintiff has to pay interest @ 2% p.m. Further, in case of default by 1st defendant, she has to pay interest at the same rate on the advance amount and the interest shall be deducted out of the balance consideration. - The plaintiff issued registered notice 20.4.2011 demanding the 1st defendant to receive the balance consideration of Rs.2,53,778/- and execute registered sale deed on or before 9.5.2011. During pendency of the said suit, the 1st defendant executed a registered sale deed dated 5.5.2011 in favour of the 2nd defendant in order to defeat the rights of the plaintiff. The sale deed will not bind the plaintiff. The 2nd defendant also executed registered sale deed. Hence the plaintiff filed the suit before the trial Court.- 

held that 

20. It is an admitted fact that the appellant herein is a bona fide purchaser for value without notice under Ex.B4. Further, when the 1st defendant/2nd respondent herein requested the plaintiff/1st respondent herein to send the document for giving a detailed reply, the plaintiff/1st respondent without sending the document filed the suit for specific performance. 

This Court further observed that, according to plaintiff/1st respondent, he paid Rs.5,0,000/- substantial portion, but there is no explanation as to why he did not pay the remaining balance on the same date and obtained the sale deed. The 1st defendant/2nd respondent herein totally denied the execution of Ex.A1 agreement of sale and her signatures on Ex.A1. Moreover, without comparing the signatures on Ex.A1 with that of admitted signatures of Ex.B1 decreed the suit. 

where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in Court any money except when so directed by the Court. In the present case, the balance of sale consideration has to be paid by the plaintiff/1st respondent on or before 9.5.2011, whereas, the Ex.A2 notice was sent on 20.04.2011 i.e., just 19 days prior to expiry of the date fixed for paying the balance of sale consideration. Moreover, the suit was filed on 03.05.2011 even before the date fixed for payment of balance sale consideration. Further, according to plaintiff/1st respondent that he paid Rs.5,00,000/- substantial portion, but there is no explanation as to why he did not pay the remaining balance on the same date. 

23. In view of the foregoing discussion and considering the submissions made by both the learned counsels, whatever the substantial questions of law raised by the appellant are satisfied and hence this Court is of the view that, the judgments and decrees passed by the Courts below are not proper and liable to be set aside.

HIGH COURT OF ANDHRA PRADESH :: AMARAVATI

+SECOND APPEAL No.207 of 2023

Between:

# Devatha Venkata Satya Naga Sridhar Subbarao

 S/o. Venkataratnam.

 … Appellant

And

$ Kodi Venkata Subbarao, S/o Satyanarayana Murthy

 Busienss, D.No.33-2-1, 17th Ward, Atchugatlapalem

 Palakol and 7 others.

 …. Respondents

JUDGMENT PRONOUNCED ON 18.08.2023

THE HON’BLE DR.JUSTICE K. MANMADHA RAO

1. Whether Reporters of Local newspapers

 may be allowed to see the Judgments? - Yes -

2. Whether the copies of judgment may be marked

to Law Reporters/Journals - Yes -

3. Whether Their Ladyship/Lordship wish to see

the fair copy of the Judgment? - Yes -

___________________________________

DR.JUSTICE K. MANMADHA RAO 

2

* THE HON’BLE DR.JUSTICE K. MANMADHA RAO

+SECOND APPEAL No.207 of 2023

% 18.08.2023

Between:

# Devatha Venkata Satya Naga Sridhar Subbarao

 S/o. Venkataratnam.

 … Appellant

And

$ Kodi Venkata Subbarao, S/o Satyanarayana Murthy

 Busienss, D.No.33-2-1, 17th Ward, Atchugatlapalem

 Palakol and 7 others.

 …. Respondents

! Counsel for the Petitioner : Sri P. Rajasekhar,

Sri E.V.V.S Ravi Kumar

Counsel for Respondent: Sri M. Lakshmi Narayana

<Gist :

>Head Note:

? Cases referred:

1. 2006(4) Supreme 131

2. Civil Appeal Nos.2843-2844 of 2010, dated 27.8.2020

3. Appeal (Civil) No.418 of 2001

4. Appeal (Civil) No.6764 of 2001 

3

HON’BLE DR. JUSTICE K. MANMADHA RAO

SECOND APPEAL No.207 of 2023

JUDGMENT:

The present Second Appeal is preferred by the

appellant aggrieved by the Decree and Judgment dated

31.10.2022 passed in A.S.No.40 of 2015 on the file of X

Additional District Judge, Narsapur, confirming the decree

and judgment dated 06.04.2018 passed in O.S No.125 of

2011 on the file of Senior Civil Judge, Narsapuram.

2. The appellant herein is the 2nd defendant, the 1st

respondent is the plaintiff and the respondents No.2 to 8 are

the legal heirs of the 1st defendant in the suit. Originally the

suit in O.S No.125 of 2011 was filed before the Senior Civil

Judge, Narsapuram (for short “the trial Court) by the 1st

respondent/plaintiff for specific performance of sale

agreement dated 22.03.2011.

3. For convenience the parties are hereinafter referred

to as arrayed before the Additional District Judge,

Narsapuram (for short “the first appellate Court”) in

A.S.No.40 of 2015. 

4

4. The 1st defendant is the absolute owner of 94.2

square yards of site in the 9th ward (presently 16th ward),

Shahakarpeta, Palakol i.e., plaint schedule property. She

purchased the same under a registered sale deed dated

18.6.1990 and she offered to sell it to the plaintiff for

Rs.7,53,778/-. The plaintiff paid Rs.5,00,000/- towards

advance to the 1st defendant on condition that the balance

sale consideration should be paid on or before 9.5.2011, and

in case of default, the plaintiff has to pay interest @ 2% p.m.

Further, in case of default by 1st defendant, she has to pay

interest at the same rate on the advance amount and the

interest shall be deducted out of the balance consideration.

The plaintiff issued registered notice 20.4.2011 demanding

the 1st defendant to receive the balance consideration of

Rs.2,53,778/- and execute registered sale deed on or before

9.5.2011. During pendency of the said suit, the 1st

defendant executed a registered sale deed dated 5.5.2011 in

favour of the 2nd defendant in order to defeat the rights of

the plaintiff. The sale deed will not bind the plaintiff. The

2nd defendant also executed registered sale deed. Hence the

plaintiff filed the suit before the trial Court. 

5

5. The 1st defendant filed written statement and

denied all the averments made in the plaint. It is stated

that there is long standing business rivalry between the

plaintiff and the husband of 1st defendant and agreement

might have been, therefore fabricated by forging the

signatures of 1st defendant in collusion with his associates

and followers. It is also stated that the 1st defendant issued

a reply notice dated 28.4.2011 and the same was received

by the plaintiff. Further, the 1st defendant reserves right to

take criminal action against the plaintiff under Sections 468

and 420 IPC. Hence, prayed to dismiss the suit.

6. The 2nd defendant also filed written statement and

denied the plaint averments and alleged what 1st defendant

did in her written statement. It is stated that he is a bona

fide purchaser for consideration. The suit is bad for misjoinder of parties. Hence, prayed to dismiss the suit.

7. On the impleadment of 2nd defendant, 1st defendant

filed additional written statement pleading that 2nd

defendant is a bona fide purchaser for valuable

consideration. 

6

8. Basing on the above pleadings, the trial Court

framed the following issues:

1. Whether the agreement of sale dated 22.03.2011 is true, valid

and binding on the defendant?

2. Whether the plaintiff is entitled to the suit claim as prayed

for?

3. To what relief?

9. Thereafter, an additional issue was also framed after the

impleadment of 2nd defendant:

 1. Whether the 2nd defendant is a bona fide purchaser for

consideration?

10. During course of trial, on behalf of the plaintiff, he

himself was examined as PW.1, the first attestor of the

agreement was examined as PW.2; PW.3 was also examined

but did not appear for cross examination and Exs.A1 to A4

were marked. On behalf of the defendants, DWs.1 to 4 were

examined and Exs.B1 to B5 were marked.

 11. After considering the oral and documentary

evidence, the trial Court decreed the suit and directed the

plaintiff to deposit an amount of Rs.2,53,778/- on or before

6.6.2018, and on such deposit, the 1st and 2nd defendants

are directed to execute a registered sale deed in favour of the

plaintiff, within a period of two(2) months from the date of 

7

such deposit. The trial Court further held that the 1st

defendant is entitled to receive the above said amount on

execution of registered sale deed and the defendants do pay

to the plaintiff a sum of Rs.85,848/- towards costs of the

suit. Aggrieved by the same, the 2nd defendant preferred an

appeal in A.S No.40 of 2015 before the first appellate Court.

After hearing the both sides, the first appellate Court has

framed points for consideration as under:

i) Whether the 2nd defendant is a bona fide purchaser for

consideration or not?

ii) Whether the findings under the impugned judgment dated

06.04.2018 made by learned Senior Civil Judge,

Narasapur need to be interfered for getting the impugned

judgment and decree set aside?

iii) If so, to what relief?

 12. Basing on the facts and circumstances of the case,

the first appellate Court has dismissed the Appeal suit

holding that it is inevitable to hold that the learned Senior

Civil Judge, Narasapur, after having considered overall

pleadings of both parties to the suit and evaluated both the

oral and documentary evidence let in on their behalf in

proper perspective, rightly decreed the suit and therefore

interference with the findings made by learned Trial Court is 

8

absolutely unwarranted. Challenging the same, the present

second appeal came to be filed.

13. While both counsels prepared to argue the matter

finally, this Court also decided to dispose of the matter at

the admission stage with the consent of both the counsels.

Further, the appellant counsel has raised the following

substantial questions of law in the grounds appeal:

i) Whether the courts below are right in decreeing the

suit for specific performance basing on the pleadings of the

plaintiff about his financial capacity and the readiness and

willingness expressed by him in the plaint without there

being any evidence both oral and documentary and the 1st

defendant specifically denied Ex.A1 agreement of sale?

ii) Whether the courts below are right in decreeing the

suit without giving any specific finding with regard to the

plea taken by the 2nd defendant about the bona fide

purchase made by him for value without notice?

iii) Whether the alleged admissions of DW.1 pointed

out by the courts below would benefit the plaintiff without

their being any material showing his readiness and

willingness in the above matter?

14. Heard Sri P. Rajasekhar, learned counsel

representing Sri E.V.V.S. Ravi Kumar, learned counsel

appearing for the appellant and Sri M. Lakshmi Narayana,

learned counsel appearing for the respondent. 

9

15. Learned counsel for the appellant mainly

contended that the Courts below erred in holding that the

1st defendant herein executed Ex.A1 agreement of sale and it

is true, valid and binding on the parties. The Courts below

should have seen that the appellant herein is a bona fide

purchaser for value without notice under Ex.B4 and also

should have seen that the case of the plaintiff is that the

balance of sale consideration has to be paid on or before

9.5.2011, whereas, the Ex.A2 notice was sent on 20.4.2011

i.e., just 19 days prior to expiry of the date fixed for paying

the balance of sale consideration. However, the suit is filed

on 03.05.2011 even before the date fixed for payment of

balance sale consideration. He further submits that the

Courts below should have seen that according to plaintiff

that he paid Rs.5,00,000/- substantial portion, there is no

explanation as to why he did not pay the remaining balance

on same date and obtained the sale deed and also should

have seen that the 1st defendant totally denied the execution

of Ex.A1 Agreement of sale and her signatures on Ex.A1.

Moreover without comparing the signature on Ex.A1 with

that of admitted signatures of Ex.B1, decreed the suit 

10

erroneously. He further submits that the Courts below

failed to appreciate the contents of reply notice dated

20.04.2011 while decreeing the suit. He mainly contended

that the Courts below failed to give any finding with regard

to the bona fide purchase made by the appellant herein.

16. To support his contentions, learned counsel for

the appellant has relied upon a decision of Hon’ble Supreme

Court reported in Hero Vinoth (Minor) versus

Seshammal1, wherein the Hon’ble Apex Court held that :

“The principles relating to Section 100 CPC, relevant for this case,

may be summerised thus:-

(i) An inference of fact from the recitals or contents of a document is

a question of fact. But the legal effect of the terms of a document is

a question of law. Construction of a document involving the

application of any principle of law, is also a question of law.

Therefore, when there is misconstruction of a document or wrong

application of a principle of law in construing a document, it gives

rise to a question of law.

(ii) The High Court should be satisfied that the case involves a

substantial question of law, and not a mere question of law. A

question of law having a material bearing on the decision of the

case (that is, a question, answer to which affects the rights of

parties to the suit) will be a substantial question of law, if it is not

covered by any specific provisions of law or settled legal principle

emerging from binding precedents, and, involves a debatable legal

issue. A substantial question of law will also arise in a contrary

situation, where the legal position is clear, either on account of

express provisions of law or binding precedents, but the court

below has decided the matter, either ignoring or acting contrary to

such legal principle. In the second type of cases, the substantial

question of law arises not because the law is still debatable, but

1

 2006 (4) Supreme 131 

11

because the decision rendered on a material question, violates the

settled position of law.

(iii) The general rule is that High Court will not interfere with

concurrent findings of the Courts below. But it is not an absolute

rule. Some of the well recognized exceptions are where (i) the

courts below have ignored material evidence or acted on no

evidence;

(ii) the courts have drawn wrong inferences from proved facts by

applying the law erroneously; or (iii) the courts have wrongly cast

the burden of proof. When we refer to 'decision based on no

evidence', it not only refers to cases where there is a total dearth of

evidence, but also refers to any case, where the evidence, taken as

a whole, is not reasonably capable of supporting the finding.

17. On the other hand, learned counsel for the

respondents submits that though the 1st defendant issued

reply, the plaintiff falsely pleaded that no reply was issued.

The signatures of 1st defendant on the agreement are not the

same. He further submits that there is no proof that the

plaintiff’s readiness and willingness. Expressing readiness

and willingness is not sufficient without deposit of balance

consideration. The suit was filed to defeat 2nd defendant’s

sale deed. The plaintiff is a broker n real estate, well0versed in litigation, filed suits in Palakol, having criminal

cases against him. The suit is one of such cases the 2nd

defendant is a bona fide purchaser for consideration and

possession was handed over to 2nd defendant, 2nd defendant

is paying taxes, hence sale deed is genuine. 

12

18. To support of his contentions, the learned counsel

for the respondents has relied upon a judgment reported in

(i) Nazir Mohamed versus J.Kamala and Ors.2, wherein the

Hon’ble Apex Court held that :

. To be a question of law “involved in the case”, there must

be first, a foundation for it laid in the pleadings, and the question

should emerge from the sustainable findings of fact, arrived at by

Courts of facts, and it must be necessary to decide that question of

law for a just and proper decision of the case.

(ii) In a case of M.M.S. Investments, Madurai and

Ors. V. V.Veerappan and Ors.3, wherein the Apex Court

held that:

“After the conveyance, the only question to be adjudicated

is whether the purchaser was a bona fide purchaser for value

without notice. In the present case the only issue that can be

adjudicated is whether the appellants were bona fide purchasers

for value without notice. The question whether the appellants were

ready and willing is really of no consequence.”

(iii) In a case of Guruswamy Nadar versus

P.Lakshmi Ammal(D) through LRs. & Ors.4, wherein the

Apex Court held that :

“..the only question which was argued was whether the

principle of lis pendens will be applicable or Section 19 of the

Specific Relief Act will have overriding effect to which we have

already answered. In the present case the principle of lis pndens

will be applicable as the second sale has taken place after the

2

 Civil Appeal Nos.2843-2844 of 2010, dated 27.8.2020

3

 Appeal (Civil) No.418 of 2001

4

 Appeal (civil) No.6764 of 2001 

13

filing of the suit. Therefore, the view taken by the Division Bench of

the High Court is correct…”

19. On a perusal of the material available on record

this Court observed that, as per the evidence of plaintiff, he

issued legal notice under Ex.A20 on 20.04.2011 and he did

not obtain the postal acknowledgment from the 1st

defendant. The 1st defendant issued reply dated 28.04.2011

under Ex.B2 and the same was received by the plaintiff on

02.05.2011. This Court further observed that there is no

date on Ex.B3 acknowledgment about the receipt of reply

notice by the plaintiff. This Court further observed that as

per Ex.B4 the consideration was mentioned in the sale deed

executed by 1st defendant for Rs.6,12,500/- whereas the

consideration mentioned in the agreement of sale under

Ex.A1 is Rs.7,53,778/-. This Court further observed that

as per Ex.A2 notice which was received by the 1st defendant

clearly reveals that the 1st defendant executed a sale

agreement for the consideration mentioned therein and

other terms and conditions of the agreement.

20. It is an admitted fact that the appellant herein is

a bona fide purchaser for value without notice under Ex.B4. 

14

Further, when the 1st defendant/2nd respondent herein

requested the plaintiff/1st respondent herein to send the

document for giving a detailed reply, the plaintiff/1st

respondent without sending the document filed the suit for

specific performance. This Court further observed that,

according to plaintiff/1st respondent, he paid Rs.5,0,000/-

substantial portion, but there is no explanation as to why he

did not pay the remaining balance on the same date and

obtained the sale deed. The 1st defendant/2nd respondent

herein totally denied the execution of Ex.A1 agreement of

sale and her signatures on Ex.A1. Moreover, without

comparing the signatures on Ex.A1 with that of admitted

signatures of Ex.B1 decreed the suit.

21. It is pertinent to mention here that as per Section

16(c) of the Specific Relief Act, 1963 (for short “the Act”),

specific performance of a contract cannot be enforced, which

reads as under:

“16. Personal bars to relief : Specific performance of a

contract cannot be enforced in favour of a person –

(a)…

(b)….

(c). Who fails to aver and prove that he has performed or

has always been ready and willing to perform the essential terms

of the contract which are to be performed by him, other than

terms the performance of which has been prevented or waived by

the defendant.” 

15

And as per Section 19 (b) and 20 of the Act, reads as

under:

19. Relief against parties and persons claiming under

them by subsequent title:- Except as otherwise provided by this

Chapter, specific performance of a contract may be enforced

against –

(a)….

(b) any other person claiming under him by a title arising

subsequently to the contract, except a transferee for value who

has paid his money in good faith and without notice of the

original contract;

……

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.”

22. On a perusal of above sections, it clearly

established that, where a contract involves the payment of

money, it is not essential for the plaintiff to actually tender

to the defendant or to deposit in Court any money except

when so directed by the Court. In the present case, the

balance of sale consideration has to be paid by the

plaintiff/1st respondent on or before 9.5.2011, whereas, the

Ex.A2 notice was sent on 20.04.2011 i.e., just 19 days prior

to expiry of the date fixed for paying the balance of sale

consideration. Moreover, the suit was filed on 03.05.2011

even before the date fixed for payment of balance sale 

16

consideration. Further, according to plaintiff/1st respondent

that he paid Rs.5,00,000/- substantial portion, but there is

no explanation as to why he did not pay the remaining

balance on the same date.

23. In view of the foregoing discussion and

considering the submissions made by both the learned

counsels, whatever the substantial questions of law raised

by the appellant are satisfied and hence this Court is of the

view that, the judgments and decrees passed by the Courts

below are not proper and liable to be set aside.

24. Accordingly, the Second Appeal is allowed. The

impugned judgment and decree dated 31.10.2022 passed in

A.S.No.40 of 2015 on the file of the X Additional District

Judge, Narsapur, confirming the judgment and decree dated

06.04.2018 passed in O.S No.125 of 2011 on the file of the

Senior Civil Judge, Narsapur, are hereby set aside.

Consequently, the O.S.No.125 of 2011 on the file of the

Senior Civil Judge, Narsapur, stands dismissed. There shall

be no order as to costs.

As a sequel, all the pending miscellaneous

applications shall stand closed.

______________________________

DR. K. MANMADHA RAO, J.

Date : 18-08-2023

Note : L. R copy to be marked. 

17

(b/o)Gvl

HON’BLE DR. JUSTICE K. MANMADHA RAO

SECOND APPEAL No.207 of 2023

Date : 18 .08.2023

Gvl