THIRNEEDHI CHANNAIAH versus GUDIPUDI VENKATA SUBBA RAO (D) BY LRS. & ORS.

Citation: [2007] 2 S.C.R. 960 · Decided: 20-02-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
THIRNEEDHI CHANNAIAH 
v. 
GUDIPUDI VENKA TA SUBBA RAO (D) BY LRS. & ORS. 
FEBRUARY 20, 2007 
[S:B. SINHA AND MARKANDEY KA TJU, JJ.] 
Contract Act, 1872-Frustration of Contract-Agreement to sell 
property-Advance paid-Another agreement containing forfeiture clause-
C Land Acquisition proceeding by State in respect of suit property-Claim of 
refund of advance by buyer refused by seller and advance forfeited-Challenge 
against-Held, seller cannot exercise right of forfeiture of amount-Directed 
to refund the advance amount. 
Respondent had entered into an agreement to sell suit property to 
D appellant Appellant made part payment of the consideration amount A regular 
sale deed was to be executed after the entire amount is paid. On the same day, 
they entered into another agreement whereupon it was agreed that on default 
of appellant to pay the balance of sale consideration by or before 25.2.1982, 
the advance amount paid by appellant would be forfeited. Before the deed of 
· sale could be executed, a Notification under S.4 of Land Acquisition Act, 1894 
E was issued. Respondent challenged the said Notification by filing writ petition 
before High Court. 
Appellant requested respondent to refund the advance amount as he was 
not informed about the said land acquisition proceeding. Respondent replied 
F that on account of failure to pay the balance amount, the money stood forfeited 
in terms of the agreement. Appellant filed suit for specific performance of 
contract of sale, which was decreed. On appeal, High Court set aside the 
decree. Hence the present appeal. 
G 
H 
Partly allowing the appeal, the Court 
HELD: 1.1. It is not the case of respondent that he had suffered any 
damage. He did not deny or dispute that after the Agreement of Sale was 
executed, a notification under Section 4(1) of the Land Acquisition Act had -
been issued. He himself raised a contention that the Agreement stood 
frustrated. It may be true that he not only questioned the validity of the said 
960 
THIRIVEEOHI CHANNAIAH v. GUOIPUDI VENKATA SUBBA RAO (DJ BY LRS. [S.B. SINHA.!.] 
96 J 
notification, but had also filed a suit, but indisputably the parties were aware A 
t 
that unless and until, the notification was set aside, the Agreement for Sale, 
in the aforementioned situation, cannot be enforced by either of them. 
(Para 12) [963-H; 964-A-B) 
1.2. In the aforementioned facts and circumstances, the respondent could 
B 
not have forfeited the amount of advance. The High Court committed a manifest 
error in that behalf in arriving at the finding that the respondent was justified 
in forfeiting the said amount. The High Court however rightly held that 
enforcement of agreement for sale would be inequitable. The respondent is 
--i 
directed to refund the amount of advance paid by the appellant to him. 
[Para 13, 14) (964-C-D) c 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 853 of 2007. 
From the Judgment and final Order dated 22.7 .2005 of the High Court 
of JUdicature, Andhra Pradesh at Hyderabad in FA No. 2692/1988. 
Venkateswara Rao Anumolu for the Appellant. 
D 
·~ 
L.N. Rao, G. Ramakrishna Prasad and Suyodhan Byrapaneni for the. 
Respondents. 
, 
The Judgment of the Court was delivered by 
E 
S.B. SINHA, J. I. Leave granted. 
2. This appeal is directed against the judgment and order dated 22.07 .2005 
passed by a learned Single Judge of the High Court of Judicature at Andhra 
Pradesh in First Appeal No. 2692 of 1988 whereby and whereunder the appeal F 
~ 
preferred by the respondents herein from a judgment and ·decree dated 
~ 
28.11.1998 passed by the Additional Subordinate Judge, Guntur in O.S. No. 
258 of 1984 decreeing the suit f~r specific performance of an agreement of sale 
dated 19.07.1981 was allowed. 
3. The basic fact of the matter is not in dispute. An Agreement of Sale G 
was entered into by and between the parties on 19 .07 .1981, in terms whereof 
the respondent offered to sell the suit property admeasuring 2.96 cents out 
of 11.82 cents for Rs.44,000/- per acre in D. No. 140 situate at Agatavareppadu 
Village in the District of Guntur. Appellant advanced a sum of Rs. 50,000/-
towards part payment of the said consideration. The balance amount of 
consideration was to be paid on or before 25.02.1982 whereupon a regular sale H 
962 
SUPREME COURT REPORTS 
(2007] 2 S. C.R. 
A deed was to be executed. On the said date, however, another agreement was 
entered into by the parties in terms whereof it was agreed that on 

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