K.S. SATYANARAYANA versus V.R. NARAYANA RAO

Citation: [1999] 3 S.C.R. 1213 · Decided: 27-07-1999 · Supreme Court of India · Bench: S. SAGHIR AHMAD · Disposal: Appeal(s) allowed

Judgment (excerpt)

, 
r 
K.S. SATY ANARA Y ANA 
A 
v. 
V.R. NARA YANA RAO 
JULY 27, 1999 
[S. SAGHIR AHMAD AND D.P. WADHWA, JJ.] 
B 
Contract Act, 1872: Sections 70 and 72. 
c 
I 
Undue enrichment-Privily of contract-Lack of -Plaintiff entered 
into an agreement to sell, with defendant No. 2, on being so authorised in 
writing and signed by defendant 1 (owner)-Plaintiff paid Rs. 1 lakh each to 
defendants Nos. 1 and 2-Agreement to sell fell through-Plaintiff demanded 
money back and filed suit for recovery against both defendants-Suit decreed 
against defendant No. 2, but dismissed against defendant 1 for lack privily . 
of contract-Held: Lack of privily of contract is a specious plea when defendant D 
No. 1 received the money and payment was not gratuitously made-High 
Court and Trial Court not attentive to procedural laws and their duty to do 
substantial justice-Courts below erred in going into the question of privily 
of contract and in dismissing plaintiffs suit against defendant No. 1. 
Code of Civil Procedure, 1908: Order JO, Rule 2. 
E 
Substantial justice-Defendant did not deny receiving money but denied 
his signatures on the written authorisation, written statement and 
vakalatnama-Held: Falsehood is writ large on the face of such denial-
Trial Court should have probed into the matter and also recorded the 
statement of defendant's counsel-Instead of going into a protracted trial, p 
Trial Court could have decreed the suit for recovery at the stage Order X 
C.P.C. (Examination of Parties by the Court) itself-Practice and Procedure. 
Evidence Act, 1872: Section 73. 
Signature-Comparison of-Defendant denied his signatures on various G 
documents, vakalatnama and written statement-Held: Trial Court should 
have compared the signatures with the admitted signature of the defendant. 
Words and Phrases: 
"Specious plea" and "quasi contract"-Meaning of 
1213 
H 
1214 
SUPREME COURT REPORTS 
[1999) 3 S.C.R. 
A 
Doctrines: 
Doctrine of undue enrichment-Doctrine of restitution. 
The respondent-defendant No. 1 entered into an agreement with 
defendant No. 2 to sell his property. Defendant No.1 further in a signed 
B written letter authorised defendant No. 2 to enter into any sale agreement 
of the said property with anyone. On the strength of this written authorisation, 
defendant No. 2 entered into an agreement with the appellant-plaintiff to sell 
the ground floor of the said property for a certain consideration. The appellant-
plaintiff also made payments by cheque of Rs. 1. lakh each to defendant Nos. 
C 1 and 2. The agreement to sell with defendant No. 2, however, fell through 
and the appellant demanded his money back. Defendant No. 2 repaid Rs. 
50,000, but defendant No.1 refused to return the money. 
The appellant filed a suit for recovery against defendant No.1 for Rs. 
1 lakh and for the balance amount against defendant No. 2. At the trial 
D respondent-defendant No.1 did not unequivocally deny the receipt of Rs. 1 
lakh form the appellant-plaintiff but stated that defendant No •. 2 had handed 
over the cheque to him. Defendant No.1 also denied his signatures on the 
written autborisation, the agreement to sell entered into between the appellant 
and defendant No. 2 the written statement and the vakalatnama in favour of 
his counsel. The suit was decreed against defendant No. 2 but dismissed 
E against defendant No.1 on the ground that there was no privity of contract 
between the appellant and defendant No.1. The appellant's appeal to the High 
Court met with the same fate. Hence this appeal. 
Allowing the appeal, this appeal. 
F 
HELD : 1. After the 1st defendant admitted having received rupees one 
lakh from the plaintiff he could not retain that money having received on the 
specious plea that there was no privity of contract between him and the 
plaintiff. The plaintiff had given the amount of rupees one lakh to him, as 
he wanted to purchase the grouno floor of his property. The agreement to 
G sell for this purposeiwas entered into through the 2nd defendant whom the 
1st defendant had authorised to enter into any such agreement on his behalf. 
The plaintiff could not have paid to the 1st defendant rupees one lakh but for 
the agreement to sell in respect of the ground floor of his property. It is only 
on the basis of this agreement which is entered into by the 2nd defendant 
on the strength of the written authorisation, that the plaintiff paid rupees one 
H lakh each to the 1st and 2nd defendants. If the pleadings of t

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