Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-005405-005405 – 2023 |
| Diary Number | 26670/2022 |
| Judge Name | HON’BLE MR. JUSTICE VIKRAM NATH |
| Bench | HON’BLE MR. JUSTICE VIKRAM NATH and HON’BLE MR. JUSTICE SANDEEP MEHTA |
| Concurring Judges | HON’BLE MR. JUSTICE VIKRAM NATH; HON’BLE MR. JUSTICE SANDEEP MEHTA |
| Precedent Value | Binding authority on vendor’s duty to disclose encumbrances and limits on set-off claims |
| Overrules / Affirms | Overrules Kerala High Court’s remand order; affirms trial Court decree |
| Type of Law | Civil law – contract (agreement for sale) and property |
| Questions of Law |
|
| Ratio Decidendi | The vendor’s suppression of a subsisting equitable mortgage, despite a clear contractual recital of a clean title, justified the purchaser in withholding further performance and seeking refund of all advances. Stray admissions in cross-examination cannot override unchallenged pleadings and written admissions. A set-off claim must be pleaded, supported by evidence and within limitation; it cannot be raised as an afterthought to defeat a purchaser’s legitimate contract rescission. |
| Logic / Jurisprudence / Authorities Relied Upon |
|
| Facts as Summarised by the Court | The vendor agreed to sell 77.26 acres for ₹4.45 cr, received ₹55 lakh in advances, but concealed a bank mortgage. On discovery, he promised to redeem the mortgage, reduced the price by ₹35 lakh, took further payments, then sold to a third party at ₹3.675 cr and claimed a set-off of ₹77.5 lakh loss. The trial Court granted refund; the High Court remanded; the Supreme Court restored the refund decree. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | High Courts and lower tribunals in civil contract and property disputes |
| Overrules | Kerala High Court in RFA No. 563 of 2014 (final judgment remanding for set-off quantification) |
| Follows | Trial Court, Subordinate Judge, Manjeri (judgment dated 27-11-2013) |
What’s New / What Lawyers Should Note
- Vendor’s concealment of an existing equitable mortgage, despite contractual recital of a clean title, entitles the purchaser to rescind and recover all advances.
- A single stray admission in cross-examination cannot negate unchallenged written pleadings or clear admissions in the agreement.
- Late set-off claims for alleged distress-sale losses must be specifically pleaded and supported by evidence; they cannot be raised as an afterthought.
- A vendor’s post-notice reduction of sale consideration evidences culpable concealment and strengthens the purchaser’s claim.
- Failure to reply to a purchaser’s legal notice requesting refund underscores the vendor’s awareness of breach.
Summary of Legal Reasoning
- Admissions in the agreement for sale were unequivocal and admitted by the vendor; no pleading or evidence was produced to show prior disclosure of the bank liability.
- The High Court’s reliance on an isolated cross-examination statement (prior knowledge of the mortgage) ignored the vendor’s own admissions and the undisputed fact that the parties had not met before the agreement date.
- The purchaser issued a legal notice highlighting the concealment; the vendor neither replied nor justified the concealment and instead reduced the price by ₹35 lakh—a clear inference of culpability.
- Common commercial practice allows title deeds to remain in bank lockers; the purchaser’s explanation for not insisting on immediate inspection was reasonable.
- Set-off claims require specific pleading, evidence and must fall within limitation; the vendor’s claim of ₹77.5 lakh distress-sale loss was barred as an afterthought.
- The trial Court’s decree for refund and costs was legally sound; the High Court’s remand was unwarranted and was overruled.
Arguments by the Parties
Petitioner
- Contractual recital guaranteed a clear title; vendor concealed a substantial bank mortgage.
- Purchaser paid ₹55 lakh in good faith and, upon discovering concealment, validly withheld further performance.
- Vendor’s reduction of price by ₹35 lakh and failure to reply to refund notice confirm breach.
- Late set-off claim was neither pleaded nor supported by evidence and is barred by limitation.
Respondent
- Alleged purchaser knew of the bank liability as early as 25-08-2008 (based on cross-examination).
- Purchaser did not inspect original title deeds and delayed legal action despite contract expiry.
- Claimed a ₹77.5 lakh loss on distress sale and sought to set it off against the refund claim.
Factual Background
The vendor agreed on 10 Sept 2008 to sell 77.26 acres for ₹4.45 cr, and the purchaser paid ₹50 lakh in two instalments. The purchaser later learned of an undisclosed equitable mortgage for a bank loan. The vendor promised redemption, reduced the price by ₹35 lakh, took a further ₹5 lakh and a post-dated cheque for ₹3.55 cr. Upon failure to redeem, the purchaser dishonoured the cheque and sued for refund of ₹55 lakh plus interest. The vendor sold the property to a third party at a lower price and claimed set-off for alleged distress-sale loss.
Dissenting / Concurring Opinion Summary
All members of the two-judge bench (Justices VIKRAM NATH and SANDEEP MEHTA) delivered a single, unanimous judgment; no separate dissent or concurrence was recorded.
Alert Indicators
- ✔ Precedent Followed – Reaffirms established principles on misrepresentation and set-off.
- 🔄 Conflicting Decisions – Overrules the Kerala High Court’s remand order.