Full Judgment Text
2025 INSC 1428
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 5405 OF 2023
MOIDEENKUTTY ….APPELLANT(S)
VERSUS
ABRAHAM GEORGE ….RESPONDENT(S)
J U D G M E N T
Mehta, J.
1. Heard.
2. The present appeal is directed against the final
th
judgment and order dated 11 March, 2022, passed
1
by the High Court of Kerala at Ernakulam in RFA
No.563 of 2014, arising out of Original Suit No.34 of
2010, whereby the High Court reversed the judgment
th
and decree dated 27 November, 2013, passed by the
2
Court of the Subordinate Judge, Manjeri . Vide the
impugned judgment, the High Court held the
Signature Not Verified
1
Hereinafter, referred to as the “High Court”.
2
Hereinafter, referred to as the “trial Court”.
Digitally signed by
SONIA BHASIN
Date: 2025.12.15
16:19:18 IST
Reason:
1
3
appellant to be in breach of the agreement (Exh. A-
4
1); allowed the appeal preferred by the respondent ,
and remanded the matter to the trial Court for the
limited purpose of examining whether the defendant-
respondent had suffered any compensable loss and
whether such loss could be set-off against the
plaintiff-appellant’s claim.
Factual Background
3. The facts relevant and necessary for the
adjudication of the present appeal, for the sake of
convenience, are mentioned herein.
4. The defendant-respondent entered into an
th
agreement for sale (Exh. A-1) on 10 September,
5
2008, undertaking to convey the land admeasuring
Seventy-Seven Acres and Twenty-Six Cents to the
plaintiff-appellant for a total consideration of
Rs.4,45,00,000/- (Rupees Four Crores Forty-Five
Lakhs only). It is not disputed amongst the
contracting parties that in due deference to the
contractual stipulation regarding earnest money, the
plaintiff-appellant paid the sum of Rs.50,00,000/-
3
Hereinafter, referred to as the “plaintiff-appellant”.
4
Hereinafter, referred to as the “defendant-respondent”.
5
Hereinafter, referred to as the “suit schedule property”.
2
CIVIL APPEAL NO(S). 5405 OF 2023
th
(Rupees Fifty Lakhs only) in two instalments on 10
th
September, 2008, and 10 October, 2008, to the
defendant-respondent. The balance sale
consideration was agreed to be tendered in two
th th
further tranches on 29 November, 2008 and 26
December, 2008, the latter being the date fixed for
execution of the sale deed.
5. Later, the plaintiff-appellant claims to have
received information that the defendant-respondent
had availed a substantial loan from the Federal Bank,
6
Pandikkadu Branch , by creating an equitable
mortgage over the suit schedule property, a fact
which, according to the plaintiff-appellant, was
deliberately suppressed by the defendant-respondent
contradicting the specific recital in the agreement
(Exh. A-1) affirming that the property was free from
all liabilities and encumbrances. Upon being
confronted, with this anomaly, the defendant-
respondent assured the plaintiff-appellant that
requisite steps were being taken to discharge the
outstanding debt; however, he kept on postponing
the matter. The plaintiff-appellant, entertained a
6
Hereinafter, referred to as the “Bank”.
3
CIVIL APPEAL NO(S). 5405 OF 2023
bona fide belief that the impediments would be
resolved and thus awaited the respondent’s response.
6. In the year 2009, the defendant-respondent
approached the plaintiff-appellant along with certain
mediators and represented that requisite measures
had been undertaken to discharge the outstanding
liability with the bank and the land would be freed
from mortgage at the earliest. To ameliorate the
inconvenience caused to the plaintiff-appellant owing
to the delay, the defendant-respondent also agreed to
reduce the sale consideration by Rs.35,00,000/-
from the originally agreed amount of
Rs.4,45,00,000/-. Acting upon such assurances and
understanding, the plaintiff-appellant paid a further
th
sum of Rs.5,00,000/- in cash on 17 August, 2009,
and also handed over a post-dated cheque for
Rs.3,55,00,000/- drawn on the Federal Bank
Limited, Valancherry branch to the defendant-
respondent.
7. However, the plaintiff-appellant came to know
that the defendant-respondent had not taken any
effective measures to redeem the mortgage and
perceived that he was being deceived. Hence, the
plaintiff-appellant did not arrange funds for
4
CIVIL APPEAL NO(S). 5405 OF 2023
encashment of the post-dated cheque, which
consequently came to be dishonoured for
insufficiency of funds.
8. The plaintiff-appellant asserts that he had
always been ready and willing to fulfil his obligations
under the contract and that the defendant-
respondent had committed breach by his fraudulent
conduct. Accordingly, the plaintiff-appellant
instituted the instant suit (OS No.34 of 2010) seeking
refund of the advance amount of Rs.55,00,000/-
together with interest @ 15% per annum from the
date of filing of the suit till realization, and further
prayed that the costs be recovered from the
defendant-respondent and his assets by creation of a
charge over the property.
9. The defendant-respondent filed a written
statement denying the material averments of the
plaint. While the execution of the agreement for sale
(Exh. A-1) and the receipt of Rs.50,00,000/- as
advance were admitted, the defendant-respondent
refuted the allegation of having concealed the
existence of the loan and the equitable mortgage over
the suit schedule property. According to the
defendant-respondent, the agreement itself was
5
CIVIL APPEAL NO(S). 5405 OF 2023
executed with a clear understanding that the loan
liability with the Bank was to be discharged from the
sale consideration, and the plaintiff-appellant was
fully informed of this position from the outset of the
transaction. It was alleged that as the plaintiff-
appellant failed to adhere to the schedule of payment
stipulated in the agreement (Exh. A-1), the mortgage
could not be redeemed and the contract remained
unexecuted. The defendant-respondent further
pleaded that the Bank exerted pressure upon him to
settle the outstanding dues or part with the property,
and in that view of the matter, he called upon the
plaintiff-appellant to remit the balance consideration
to facilitate performance of the contract.
10. However, as the plaintiff-appellant failed to
honour the payment schedule stipulated in the
agreement (Exh. A-1), and feeling constrained to
liquidate the outstanding liability and avert the
Bank’s action of taking over the mortgaged property,
the defendant-respondent was compelled to execute
th
a subsequent agreement (Exh. B-8) dated 12
September, 2009 with a third party, whereby the suit
schedule property was sold at a reduced price of
6
CIVIL APPEAL NO(S). 5405 OF 2023
Rs.3,67,50,000/- (Rupees Three Crores Sixty-Seven
Lakhs and Fifty Thousand only).
11. Pursuant to the said arrangement, sale deeds
th st
dated 19 August, 2010 (Exh. B-10) and 31 August,
2010 (Exh. B-9) came to be executed in favour of the
third-party purchaser. The defendant-respondent
alleged that he had thereby suffered a financial loss
quantified at Rs.77,50,000/- and sought to hold the
plaintiff-appellant liable to compensate the same
along with interest @ 15% per annum by way of a
claim for set-off.
12. Upon appreciation of the evidence led by both
the parties, the trial Court found merit in the
plaintiff-appellant’s case that he had been misled into
executing the agreement (Exh. A-1) and that the
defendant-respondent had suppressed the subsisting
mortgage liability over the suit schedule property. It
was held that the plaintiff-appellant was justified in
withholding further payments under Exh. A-1 in view
of such concealment of material facts. The defendant-
respondent’s plea that he had suffered a loss of
Rs.77,50,000/- owing to a subsequent distress sale
of the property was rejected by the trial Court holding
that the alleged claim did not constitute a legally
7
CIVIL APPEAL NO(S). 5405 OF 2023
sustainable set-off and was in any event barred by
limitation. The suit was accordingly decreed in the
following terms: -
“a). That the plaintiff is entitled to realize an
amount of Rs. 65,43,750/- (Rupees Sixty five
lakh forty three thousand seven hundred and
fifty only) with interest at the rate of 13% per
annum from the date of suit till realization
from the defendant and his assets.
b). That the plaintiff is entitled to realize the
entire costs of litigation from the defendant.”
13. In the appeal preferred by the respondent–
defendant, the High Court placed substantial
reliance on a solitary admission elicited in the cross-
examination of plaintiff-appellant (PW-1), wherein he
conceded that he had become aware of the bank
th
liability over the suit schedule property on 25
August, 2008 itself. Proceeding on this solitary
premise, the High Court concluded that the plaintiff-
appellant was fully cognizant of the encumbrance
even on the suit schedule property well in advance
before execution of the agreement (Exh. A-1) dated
th
10 September, 2008. The Court further observed
that the plaintiff-appellant did not seek to clarify or
explain this aspect in re-examination and, therefore,
the foundation of the case pleaded by the plaintiff-
8
CIVIL APPEAL NO(S). 5405 OF 2023
appellant in the plaint stood contradicted by his own
admission.
14. Additionally, the High Court noted that even
subsequent to the self-acclaimed discovery of fraud,
the plaintiff-appellant continued to act in furtherance
th
of the transaction by paying Rs. 5,00,000/- on 20
July, 2009, by issuing a post-dated cheque for
Rs. 3,55,00,000/-, and refraining from initiating any
legal proceedings for over a year despite the expiry of
th
the contractual period on 26 December, 2008.
15. Furthermore, the High Court noted that the
plaintiff–appellant himself admitted that he had
never inspected the original title deeds of the property
prior to executing the agreement (Exh. A-1). The
Court rejected the explanation that the defendant–
respondent had informed the plaintiff-appellant that
the documents were kept in a bank locker and would
be shown to him during the course of the transaction.
The High Court held that such a plea was wholly
untenable, particularly when the agreed sale
consideration was Rs. 4,45,00,000/-, an amount that
cannot be treated as insignificant. It observed that
no ordinarily prudent purchaser would enter into a
transaction of such magnitude without verifying the
9
CIVIL APPEAL NO(S). 5405 OF 2023
original title documents or being satisfied about the
vendor’s title. This conduct, according to the High
Court, was incompatible with the allegation of
deception.
16.
On the defendant-respondent’s set-off claim,
the High Court held that the same was not barred by
limitation. The High Court took note of the
defendant-respondent’s concession restricting his
monetary claim to the extent of the plaintiff-
appellant’s suit amount. On this reasoning, the High
Court was of the view that the plaintiff-appellant
ought to be afforded an opportunity to contest the
modified set-off limited to the following aspects: -
a) whether the defendant-respondent suffered any
actionable loss;
b) if so, the quantification thereof; and
c) whether such a sum could legitimately be set-off
against the plaintiff-appellant’s claim.
17. Accordingly, the appeal of the defendant-
respondent was allowed, and the matter was
remanded to the trial Court vide the impugned
judgment, in the following terms: -
“In the result, the appeal is allowed. The
judgment and decree of the court below are set
10
CIVIL APPEAL NO(S). 5405 OF 2023
aside and the matter is remanded to the court
below to consider and adjudicate the aforesaid
issues on which there has been no adjudication.
Both the parties are at liberty to make necessary
additional pleadings, if so advised, on the
aforesaid points and also to adduce evidence in
support of their respective case. We make it clear
that the remand is not an open remand. The
questions available for consideration after remand
are only whether the defendant has suffered any
loss entitling him to damages, if so, the measure
of damages, and whether he is entitled to set-off
the amount adjudged as damages against the
plaint claim. The parties shall appear before the
court below on 23/05/2022. The suit being of the
year 2010, the· trial court shall make all earnest
efforts to dispose of the matter at the earliest.”
18. The above judgment of the High Court is the
subject-matter of challenge in the present appeal by
way of special leave.
Submissions on behalf of the plaintiff-appellant
19. Shri Raghenth Basant, learned senior counsel
representing the plaintiff-appellant invited the
Court’s attention to the statement of the plaintiff-
appellant (PW-1) and more particularly to his cross-
examination wherein, on the suggestion put forth on
behalf of the defendant-respondent, the plaintiff-
appellant stated that he came to know about the
availability of the property from one Raveendran and
11
CIVIL APPEAL NO(S). 5405 OF 2023
went to the house of the defendant-respondent for
th
the first time, on 5 September, 2008. The plaintiff-
appellant further clarified that he did not insist on
production of the original title deeds at that stage, as
the same are generally required to be verified at the
time of execution of the sale agreement.
20. Shri Basant further submitted that a plausible
explanation was given by the plaintiff-appellant for
this omission stating that he bona fide accepted the
version of the defendant-respondent that the original
title deeds were lying in the bank locker.
21. Shri Basant urged that the abstract admission
as appearing in the cross-examination of the plaintiff-
appellant that he became aware of the bank liability
th
on 25 August, 2008, is apparently an inadvertent
error/anomaly, inasmuch as the parties admittedly
th
never met before 5 September, 2008. Thus, the
plaintiff-appellant could have had no idea about the
property of the plaintiff-appellant before that date,
th
and hence, imputing prior knowledge (on 25
August, 2008) of the encumbrance to the plaintiff-
appellant is absolutely uncalled for.
22. He urged that the defendant-respondent
realized that he was on the wrong side of the law,
12
CIVIL APPEAL NO(S). 5405 OF 2023
which inference is fortified from the fact that the
consideration amount was subsequently reduced by
Rs. 35,00,000/- owing to the defendant-respondent’s
failure to disclose about the encumbrance and
redeem the mortgage at the time of entering into the
transaction.
23. Learned senior counsel further drew our
attention to the following admissions made by the
defendant-respondent in his cross-examination: -
“The contents of Ext. A1 Agreement are
correct. I entered into the agreement after fully
agreeing with the contents of the said agreement.
…….
I accepted amounts even after the period of
Ext. A1 Agreement only because I wanted to
somehow sell the property and clear the bank
liability.
…….
The day I accepted the cheque, my liability to
the bank was approximately Rs. 2.6 crores.
When I entered into Ext. A1 Agreement, my
liability to the bank was approximately Rs. 2.5
crores. The money received from PW1– I have not
used the same to repay the bank.
…….
The fact that the property was being sold to
clear the liability to the bank does not find
mention in Ext. A1.
…….
PW1 sent me a notice. The notice was sent
stating that the advance amount should be
13
CIVIL APPEAL NO(S). 5405 OF 2023
returned to me. In the said notice, it was stated
that I did not mention about the fact that the
property was mortgaged with the bank to PW1. I
did not send a reply to that notice. I was at the
hospital. I was at the hospital for almost one
month. Thereafter, after being discharged from
the hospital, I did not think of sending a reply.”
24. His emphasis was on the above admissions
made by the defendant-respondent in cross-
examination that he did not use the monies received
from the plaintiff-appellant towards liquidation of the
loan due to the bank and that a legal notice was
issued by the plaintiff-appellant seeking refund of the
advance, specifically alleging suppression of the
subsisting mortgage, to which the defendant-
respondent did not furnish any reply.
25. He thus, urged that the High Court committed
grave error in facts as well as in law while setting
aside the well-reasoned judgment of the trial Court
and in remanding the matter to the trial Court on the
limited aspect of determining the quantum of
damages allegedly payable to the defendant-
respondent under the claim of set-off.
14
CIVIL APPEAL NO(S). 5405 OF 2023
Submissions on behalf of the defendant-
respondent
26. Per contra , Shri V. Chitambaresh, learned
senior counsel appearing for the defendant-
respondent, contended that the admission of the
plaintiff-appellant in his cross-examination,
indicating that he had knowledge of the subsisting
th
mortgage as early as 25 August, 2008, must be read
against him. On this basis, it was urged that the High
Court rightly rejected the plaintiff-appellant’s claim
and committed no infirmity in remanding the matter
to the trial Court for adjudication of the quantum of
set-off allegedly payable to the defendant-
respondent. He, therefore, prayed for dismissal of the
appeal and affirmation of the impugned judgment.
Discussion and Analysis
27. We have given our thoughtful consideration to
the submissions advanced by learned counsel at the
bar and have gone through the impugned
judgment(s) and the material available on record.
28. The following facts are admitted from record: -
(1) That the execution and the contents of the
th
agreement for sale (Exh. A-1) dated 10
15
CIVIL APPEAL NO(S). 5405 OF 2023
September, 2008 have been unequivocally
admitted by the defendant-respondent in his
evidence;
(2) That the defendant-respondent did not set up
a case either in his set-off claim or in his
evidence that he had provided the
information of the prior
mortgage/encumbrance on the suit schedule
th
property to the plaintiff-appellant on 25
August, 2008;
(3) That even as per the defendant-respondent’s
own case, the parties had no interaction prior
to September, 2008, and thus, the
defendant-respondent does not assert that
he had ever met the plaintiff-appellant before
that period.
29. Thus, the undue emphasis laid by the High
Court on an abstract sentence appearing in the
cross-examination of the plaintiff-appellant,
suggesting prior knowledge of the bank liability over
the suit schedule property, was totally misplaced and
uncalled for. The High Court ignored the vital
admissions as appearing in the version of the
16
CIVIL APPEAL NO(S). 5405 OF 2023
defendant-respondent that the contents of the
agreement (Exh. A-1) were unquestionable and
correct in their entirety.
30. Moreover, the fact that before instituting the
suit, the plaintiff-appellant sent a notice to the
defendant-respondent specifically mentioning about
the concealment of the mortgage, to which the
defendant-respondent chose not to furnish any reply,
clearly establishes that the case projected in the set-
off, that the plaintiff-appellant was aware of the
encumbrance on the suit schedule property from the
inception, was nothing but an afterthought, devised
solely to defeat the plaintiff-appellant’s legitimate
claim for refund.
31. Furthermore, the fact that pursuant to the
plaintiff-appellant raising this issue with the
defendant-respondent, he agreed to reduce the sale
consideration by a sum of Rs.35,00,000/- is also a
significant fact reflecting on the conduct of the
defendant-respondent which convinces us about the
deceit practiced by him upon the plaintiff-appellant.
It stands to reason that, upon being exposed, the
defendant-respondent was compelled to offer a
substantial reduction in the agreed sale price, which
17
CIVIL APPEAL NO(S). 5405 OF 2023
unmistakably reflects his culpable intent in
concealing the material factum of encumbrance on
the suit schedule property.
7
32. We feel that the aforesaid conclusion of the
High Court is unjustified in the peculiar facts of the
case. There was nothing unnatural in the explanation
offered by the plaintiff-appellant that he relied on the
assurance of the defendant-respondent that the
original title deeds would be handed over at the time
of execution of the sale deed. It may be noted that
the advance amount paid by the plaintiff-appellant
was around 10% of the total sale consideration and
thus, it cannot be said, unexceptionally, that the
plaintiff-appellant would not have entered into the
agreement without having a look at the original title
deeds. It is a common practice for landowners to
keep original title deeds in the bank lockers for
security purposes. Hence, the explanation offered by
the plaintiff-appellant for not insisting on the
inspection of the original title deeds, at the time of
entering into the agreement, was reasonable and
justified.
7
Supra para No.15.
18
CIVIL APPEAL NO(S). 5405 OF 2023
33. In wake of the above discussion, we are of the
firm opinion that the trial Court committed no error
whatsoever in decreeing the suit filed by the plaintiff-
appellant. The impugned judgment rendered by the
High Court does not stand to scrutiny and is, thus,
hereby set aside, and the judgment of the trial Court
is restored.
34. The appeal is allowed accordingly. No order as
to costs.
35. Decree be prepared accordingly.
36. Pending application(s), if any, shall stand
disposed of.
….……………………J.
(VIKRAM NATH)
...…………………….J.
(SANDEEP MEHTA)
NEW DELHI;
DECEMBER 15, 2025.
19
CIVIL APPEAL NO(S). 5405 OF 2023
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 5405 OF 2023
MOIDEENKUTTY ….APPELLANT(S)
VERSUS
ABRAHAM GEORGE ….RESPONDENT(S)
J U D G M E N T
Mehta, J.
1. Heard.
2. The present appeal is directed against the final
th
judgment and order dated 11 March, 2022, passed
1
by the High Court of Kerala at Ernakulam in RFA
No.563 of 2014, arising out of Original Suit No.34 of
2010, whereby the High Court reversed the judgment
th
and decree dated 27 November, 2013, passed by the
2
Court of the Subordinate Judge, Manjeri . Vide the
impugned judgment, the High Court held the
Signature Not Verified
1
Hereinafter, referred to as the “High Court”.
2
Hereinafter, referred to as the “trial Court”.
Digitally signed by
SONIA BHASIN
Date: 2025.12.15
16:19:18 IST
Reason:
1
3
appellant to be in breach of the agreement (Exh. A-
4
1); allowed the appeal preferred by the respondent ,
and remanded the matter to the trial Court for the
limited purpose of examining whether the defendant-
respondent had suffered any compensable loss and
whether such loss could be set-off against the
plaintiff-appellant’s claim.
Factual Background
3. The facts relevant and necessary for the
adjudication of the present appeal, for the sake of
convenience, are mentioned herein.
4. The defendant-respondent entered into an
th
agreement for sale (Exh. A-1) on 10 September,
5
2008, undertaking to convey the land admeasuring
Seventy-Seven Acres and Twenty-Six Cents to the
plaintiff-appellant for a total consideration of
Rs.4,45,00,000/- (Rupees Four Crores Forty-Five
Lakhs only). It is not disputed amongst the
contracting parties that in due deference to the
contractual stipulation regarding earnest money, the
plaintiff-appellant paid the sum of Rs.50,00,000/-
3
Hereinafter, referred to as the “plaintiff-appellant”.
4
Hereinafter, referred to as the “defendant-respondent”.
5
Hereinafter, referred to as the “suit schedule property”.
2
CIVIL APPEAL NO(S). 5405 OF 2023
th
(Rupees Fifty Lakhs only) in two instalments on 10
th
September, 2008, and 10 October, 2008, to the
defendant-respondent. The balance sale
consideration was agreed to be tendered in two
th th
further tranches on 29 November, 2008 and 26
December, 2008, the latter being the date fixed for
execution of the sale deed.
5. Later, the plaintiff-appellant claims to have
received information that the defendant-respondent
had availed a substantial loan from the Federal Bank,
6
Pandikkadu Branch , by creating an equitable
mortgage over the suit schedule property, a fact
which, according to the plaintiff-appellant, was
deliberately suppressed by the defendant-respondent
contradicting the specific recital in the agreement
(Exh. A-1) affirming that the property was free from
all liabilities and encumbrances. Upon being
confronted, with this anomaly, the defendant-
respondent assured the plaintiff-appellant that
requisite steps were being taken to discharge the
outstanding debt; however, he kept on postponing
the matter. The plaintiff-appellant, entertained a
6
Hereinafter, referred to as the “Bank”.
3
CIVIL APPEAL NO(S). 5405 OF 2023
bona fide belief that the impediments would be
resolved and thus awaited the respondent’s response.
6. In the year 2009, the defendant-respondent
approached the plaintiff-appellant along with certain
mediators and represented that requisite measures
had been undertaken to discharge the outstanding
liability with the bank and the land would be freed
from mortgage at the earliest. To ameliorate the
inconvenience caused to the plaintiff-appellant owing
to the delay, the defendant-respondent also agreed to
reduce the sale consideration by Rs.35,00,000/-
from the originally agreed amount of
Rs.4,45,00,000/-. Acting upon such assurances and
understanding, the plaintiff-appellant paid a further
th
sum of Rs.5,00,000/- in cash on 17 August, 2009,
and also handed over a post-dated cheque for
Rs.3,55,00,000/- drawn on the Federal Bank
Limited, Valancherry branch to the defendant-
respondent.
7. However, the plaintiff-appellant came to know
that the defendant-respondent had not taken any
effective measures to redeem the mortgage and
perceived that he was being deceived. Hence, the
plaintiff-appellant did not arrange funds for
4
CIVIL APPEAL NO(S). 5405 OF 2023
encashment of the post-dated cheque, which
consequently came to be dishonoured for
insufficiency of funds.
8. The plaintiff-appellant asserts that he had
always been ready and willing to fulfil his obligations
under the contract and that the defendant-
respondent had committed breach by his fraudulent
conduct. Accordingly, the plaintiff-appellant
instituted the instant suit (OS No.34 of 2010) seeking
refund of the advance amount of Rs.55,00,000/-
together with interest @ 15% per annum from the
date of filing of the suit till realization, and further
prayed that the costs be recovered from the
defendant-respondent and his assets by creation of a
charge over the property.
9. The defendant-respondent filed a written
statement denying the material averments of the
plaint. While the execution of the agreement for sale
(Exh. A-1) and the receipt of Rs.50,00,000/- as
advance were admitted, the defendant-respondent
refuted the allegation of having concealed the
existence of the loan and the equitable mortgage over
the suit schedule property. According to the
defendant-respondent, the agreement itself was
5
CIVIL APPEAL NO(S). 5405 OF 2023
executed with a clear understanding that the loan
liability with the Bank was to be discharged from the
sale consideration, and the plaintiff-appellant was
fully informed of this position from the outset of the
transaction. It was alleged that as the plaintiff-
appellant failed to adhere to the schedule of payment
stipulated in the agreement (Exh. A-1), the mortgage
could not be redeemed and the contract remained
unexecuted. The defendant-respondent further
pleaded that the Bank exerted pressure upon him to
settle the outstanding dues or part with the property,
and in that view of the matter, he called upon the
plaintiff-appellant to remit the balance consideration
to facilitate performance of the contract.
10. However, as the plaintiff-appellant failed to
honour the payment schedule stipulated in the
agreement (Exh. A-1), and feeling constrained to
liquidate the outstanding liability and avert the
Bank’s action of taking over the mortgaged property,
the defendant-respondent was compelled to execute
th
a subsequent agreement (Exh. B-8) dated 12
September, 2009 with a third party, whereby the suit
schedule property was sold at a reduced price of
6
CIVIL APPEAL NO(S). 5405 OF 2023
Rs.3,67,50,000/- (Rupees Three Crores Sixty-Seven
Lakhs and Fifty Thousand only).
11. Pursuant to the said arrangement, sale deeds
th st
dated 19 August, 2010 (Exh. B-10) and 31 August,
2010 (Exh. B-9) came to be executed in favour of the
third-party purchaser. The defendant-respondent
alleged that he had thereby suffered a financial loss
quantified at Rs.77,50,000/- and sought to hold the
plaintiff-appellant liable to compensate the same
along with interest @ 15% per annum by way of a
claim for set-off.
12. Upon appreciation of the evidence led by both
the parties, the trial Court found merit in the
plaintiff-appellant’s case that he had been misled into
executing the agreement (Exh. A-1) and that the
defendant-respondent had suppressed the subsisting
mortgage liability over the suit schedule property. It
was held that the plaintiff-appellant was justified in
withholding further payments under Exh. A-1 in view
of such concealment of material facts. The defendant-
respondent’s plea that he had suffered a loss of
Rs.77,50,000/- owing to a subsequent distress sale
of the property was rejected by the trial Court holding
that the alleged claim did not constitute a legally
7
CIVIL APPEAL NO(S). 5405 OF 2023
sustainable set-off and was in any event barred by
limitation. The suit was accordingly decreed in the
following terms: -
“a). That the plaintiff is entitled to realize an
amount of Rs. 65,43,750/- (Rupees Sixty five
lakh forty three thousand seven hundred and
fifty only) with interest at the rate of 13% per
annum from the date of suit till realization
from the defendant and his assets.
b). That the plaintiff is entitled to realize the
entire costs of litigation from the defendant.”
13. In the appeal preferred by the respondent–
defendant, the High Court placed substantial
reliance on a solitary admission elicited in the cross-
examination of plaintiff-appellant (PW-1), wherein he
conceded that he had become aware of the bank
th
liability over the suit schedule property on 25
August, 2008 itself. Proceeding on this solitary
premise, the High Court concluded that the plaintiff-
appellant was fully cognizant of the encumbrance
even on the suit schedule property well in advance
before execution of the agreement (Exh. A-1) dated
th
10 September, 2008. The Court further observed
that the plaintiff-appellant did not seek to clarify or
explain this aspect in re-examination and, therefore,
the foundation of the case pleaded by the plaintiff-
8
CIVIL APPEAL NO(S). 5405 OF 2023
appellant in the plaint stood contradicted by his own
admission.
14. Additionally, the High Court noted that even
subsequent to the self-acclaimed discovery of fraud,
the plaintiff-appellant continued to act in furtherance
th
of the transaction by paying Rs. 5,00,000/- on 20
July, 2009, by issuing a post-dated cheque for
Rs. 3,55,00,000/-, and refraining from initiating any
legal proceedings for over a year despite the expiry of
th
the contractual period on 26 December, 2008.
15. Furthermore, the High Court noted that the
plaintiff–appellant himself admitted that he had
never inspected the original title deeds of the property
prior to executing the agreement (Exh. A-1). The
Court rejected the explanation that the defendant–
respondent had informed the plaintiff-appellant that
the documents were kept in a bank locker and would
be shown to him during the course of the transaction.
The High Court held that such a plea was wholly
untenable, particularly when the agreed sale
consideration was Rs. 4,45,00,000/-, an amount that
cannot be treated as insignificant. It observed that
no ordinarily prudent purchaser would enter into a
transaction of such magnitude without verifying the
9
CIVIL APPEAL NO(S). 5405 OF 2023
original title documents or being satisfied about the
vendor’s title. This conduct, according to the High
Court, was incompatible with the allegation of
deception.
16.
On the defendant-respondent’s set-off claim,
the High Court held that the same was not barred by
limitation. The High Court took note of the
defendant-respondent’s concession restricting his
monetary claim to the extent of the plaintiff-
appellant’s suit amount. On this reasoning, the High
Court was of the view that the plaintiff-appellant
ought to be afforded an opportunity to contest the
modified set-off limited to the following aspects: -
a) whether the defendant-respondent suffered any
actionable loss;
b) if so, the quantification thereof; and
c) whether such a sum could legitimately be set-off
against the plaintiff-appellant’s claim.
17. Accordingly, the appeal of the defendant-
respondent was allowed, and the matter was
remanded to the trial Court vide the impugned
judgment, in the following terms: -
“In the result, the appeal is allowed. The
judgment and decree of the court below are set
10
CIVIL APPEAL NO(S). 5405 OF 2023
aside and the matter is remanded to the court
below to consider and adjudicate the aforesaid
issues on which there has been no adjudication.
Both the parties are at liberty to make necessary
additional pleadings, if so advised, on the
aforesaid points and also to adduce evidence in
support of their respective case. We make it clear
that the remand is not an open remand. The
questions available for consideration after remand
are only whether the defendant has suffered any
loss entitling him to damages, if so, the measure
of damages, and whether he is entitled to set-off
the amount adjudged as damages against the
plaint claim. The parties shall appear before the
court below on 23/05/2022. The suit being of the
year 2010, the· trial court shall make all earnest
efforts to dispose of the matter at the earliest.”
18. The above judgment of the High Court is the
subject-matter of challenge in the present appeal by
way of special leave.
Submissions on behalf of the plaintiff-appellant
19. Shri Raghenth Basant, learned senior counsel
representing the plaintiff-appellant invited the
Court’s attention to the statement of the plaintiff-
appellant (PW-1) and more particularly to his cross-
examination wherein, on the suggestion put forth on
behalf of the defendant-respondent, the plaintiff-
appellant stated that he came to know about the
availability of the property from one Raveendran and
11
CIVIL APPEAL NO(S). 5405 OF 2023
went to the house of the defendant-respondent for
th
the first time, on 5 September, 2008. The plaintiff-
appellant further clarified that he did not insist on
production of the original title deeds at that stage, as
the same are generally required to be verified at the
time of execution of the sale agreement.
20. Shri Basant further submitted that a plausible
explanation was given by the plaintiff-appellant for
this omission stating that he bona fide accepted the
version of the defendant-respondent that the original
title deeds were lying in the bank locker.
21. Shri Basant urged that the abstract admission
as appearing in the cross-examination of the plaintiff-
appellant that he became aware of the bank liability
th
on 25 August, 2008, is apparently an inadvertent
error/anomaly, inasmuch as the parties admittedly
th
never met before 5 September, 2008. Thus, the
plaintiff-appellant could have had no idea about the
property of the plaintiff-appellant before that date,
th
and hence, imputing prior knowledge (on 25
August, 2008) of the encumbrance to the plaintiff-
appellant is absolutely uncalled for.
22. He urged that the defendant-respondent
realized that he was on the wrong side of the law,
12
CIVIL APPEAL NO(S). 5405 OF 2023
which inference is fortified from the fact that the
consideration amount was subsequently reduced by
Rs. 35,00,000/- owing to the defendant-respondent’s
failure to disclose about the encumbrance and
redeem the mortgage at the time of entering into the
transaction.
23. Learned senior counsel further drew our
attention to the following admissions made by the
defendant-respondent in his cross-examination: -
“The contents of Ext. A1 Agreement are
correct. I entered into the agreement after fully
agreeing with the contents of the said agreement.
…….
I accepted amounts even after the period of
Ext. A1 Agreement only because I wanted to
somehow sell the property and clear the bank
liability.
…….
The day I accepted the cheque, my liability to
the bank was approximately Rs. 2.6 crores.
When I entered into Ext. A1 Agreement, my
liability to the bank was approximately Rs. 2.5
crores. The money received from PW1– I have not
used the same to repay the bank.
…….
The fact that the property was being sold to
clear the liability to the bank does not find
mention in Ext. A1.
…….
PW1 sent me a notice. The notice was sent
stating that the advance amount should be
13
CIVIL APPEAL NO(S). 5405 OF 2023
returned to me. In the said notice, it was stated
that I did not mention about the fact that the
property was mortgaged with the bank to PW1. I
did not send a reply to that notice. I was at the
hospital. I was at the hospital for almost one
month. Thereafter, after being discharged from
the hospital, I did not think of sending a reply.”
24. His emphasis was on the above admissions
made by the defendant-respondent in cross-
examination that he did not use the monies received
from the plaintiff-appellant towards liquidation of the
loan due to the bank and that a legal notice was
issued by the plaintiff-appellant seeking refund of the
advance, specifically alleging suppression of the
subsisting mortgage, to which the defendant-
respondent did not furnish any reply.
25. He thus, urged that the High Court committed
grave error in facts as well as in law while setting
aside the well-reasoned judgment of the trial Court
and in remanding the matter to the trial Court on the
limited aspect of determining the quantum of
damages allegedly payable to the defendant-
respondent under the claim of set-off.
14
CIVIL APPEAL NO(S). 5405 OF 2023
Submissions on behalf of the defendant-
respondent
26. Per contra , Shri V. Chitambaresh, learned
senior counsel appearing for the defendant-
respondent, contended that the admission of the
plaintiff-appellant in his cross-examination,
indicating that he had knowledge of the subsisting
th
mortgage as early as 25 August, 2008, must be read
against him. On this basis, it was urged that the High
Court rightly rejected the plaintiff-appellant’s claim
and committed no infirmity in remanding the matter
to the trial Court for adjudication of the quantum of
set-off allegedly payable to the defendant-
respondent. He, therefore, prayed for dismissal of the
appeal and affirmation of the impugned judgment.
Discussion and Analysis
27. We have given our thoughtful consideration to
the submissions advanced by learned counsel at the
bar and have gone through the impugned
judgment(s) and the material available on record.
28. The following facts are admitted from record: -
(1) That the execution and the contents of the
th
agreement for sale (Exh. A-1) dated 10
15
CIVIL APPEAL NO(S). 5405 OF 2023
September, 2008 have been unequivocally
admitted by the defendant-respondent in his
evidence;
(2) That the defendant-respondent did not set up
a case either in his set-off claim or in his
evidence that he had provided the
information of the prior
mortgage/encumbrance on the suit schedule
th
property to the plaintiff-appellant on 25
August, 2008;
(3) That even as per the defendant-respondent’s
own case, the parties had no interaction prior
to September, 2008, and thus, the
defendant-respondent does not assert that
he had ever met the plaintiff-appellant before
that period.
29. Thus, the undue emphasis laid by the High
Court on an abstract sentence appearing in the
cross-examination of the plaintiff-appellant,
suggesting prior knowledge of the bank liability over
the suit schedule property, was totally misplaced and
uncalled for. The High Court ignored the vital
admissions as appearing in the version of the
16
CIVIL APPEAL NO(S). 5405 OF 2023
defendant-respondent that the contents of the
agreement (Exh. A-1) were unquestionable and
correct in their entirety.
30. Moreover, the fact that before instituting the
suit, the plaintiff-appellant sent a notice to the
defendant-respondent specifically mentioning about
the concealment of the mortgage, to which the
defendant-respondent chose not to furnish any reply,
clearly establishes that the case projected in the set-
off, that the plaintiff-appellant was aware of the
encumbrance on the suit schedule property from the
inception, was nothing but an afterthought, devised
solely to defeat the plaintiff-appellant’s legitimate
claim for refund.
31. Furthermore, the fact that pursuant to the
plaintiff-appellant raising this issue with the
defendant-respondent, he agreed to reduce the sale
consideration by a sum of Rs.35,00,000/- is also a
significant fact reflecting on the conduct of the
defendant-respondent which convinces us about the
deceit practiced by him upon the plaintiff-appellant.
It stands to reason that, upon being exposed, the
defendant-respondent was compelled to offer a
substantial reduction in the agreed sale price, which
17
CIVIL APPEAL NO(S). 5405 OF 2023
unmistakably reflects his culpable intent in
concealing the material factum of encumbrance on
the suit schedule property.
7
32. We feel that the aforesaid conclusion of the
High Court is unjustified in the peculiar facts of the
case. There was nothing unnatural in the explanation
offered by the plaintiff-appellant that he relied on the
assurance of the defendant-respondent that the
original title deeds would be handed over at the time
of execution of the sale deed. It may be noted that
the advance amount paid by the plaintiff-appellant
was around 10% of the total sale consideration and
thus, it cannot be said, unexceptionally, that the
plaintiff-appellant would not have entered into the
agreement without having a look at the original title
deeds. It is a common practice for landowners to
keep original title deeds in the bank lockers for
security purposes. Hence, the explanation offered by
the plaintiff-appellant for not insisting on the
inspection of the original title deeds, at the time of
entering into the agreement, was reasonable and
justified.
7
Supra para No.15.
18
CIVIL APPEAL NO(S). 5405 OF 2023
33. In wake of the above discussion, we are of the
firm opinion that the trial Court committed no error
whatsoever in decreeing the suit filed by the plaintiff-
appellant. The impugned judgment rendered by the
High Court does not stand to scrutiny and is, thus,
hereby set aside, and the judgment of the trial Court
is restored.
34. The appeal is allowed accordingly. No order as
to costs.
35. Decree be prepared accordingly.
36. Pending application(s), if any, shall stand
disposed of.
….……………………J.
(VIKRAM NATH)
...…………………….J.
(SANDEEP MEHTA)
NEW DELHI;
DECEMBER 15, 2025.
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CIVIL APPEAL NO(S). 5405 OF 2023