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 HON’BLE MR. JUSTICE SANDEEP MEHTA |
| Concurring or Dissenting Judges | SANDEEP MEHTA (concurred); no dissent |
| Precedent Value | Binding authority |
| Overrules / Affirms |
|
| Type of Law | Civil contract and property law |
| Questions of Law |
|
| Ratio Decidendi |
The Court held that the High Court erred in relying on an isolated admission without regard to:
Suppression of a material mortgage vitiates the contract, entitles the purchaser to rescind and recover the advance, and precludes the vendor from claiming set-off for losses arising directly from his breach. |
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court |
The vendor agreed to sell 77 acres for ₹4.45 crore, received ₹50 lakhs as earnest money, and falsely assured the property was unencumbered. Upon discovering a bank mortgage, the purchaser withheld further payments, sent a notice for refund, and the vendor reduced the price by ₹35 lakhs but later sold the land under distress, claiming set-off of ₹77.5 lakhs. The trial court found vendor fraud and granted refund; the High Court reversed on the basis of a stray admission; the Supreme Court restored the trial court decree. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts in India, including High Courts and subordinate courts |
| Overrules | High Court of Kerala judgment dated 11 March 2022 in RFA No. 563 of 2014 |
What’s New / What Lawyers Should Note
- Clarifies that concealment of a material mortgage by the vendor vitiates an agreement for sale and entitles rescission.
- Emphasises courts must assess the full context and not rely on isolated admissions to defeat claims of fraud.
- Highlights that a vendor’s voluntary reduction of consideration upon exposure of an encumbrance evidences deceit.
- Establishes that a vendor cannot seek set-off for losses flowing from his own breach of contract.
Summary of Legal Reasoning
- Trial Court found vendor suppressed a bank mortgage, justifying purchaser’s withholding of payments and decree for refund with interest.
- High Court reversed based on a single admission by the purchaser about antecedent knowledge, ignoring the vendor’s admissions, price reduction, and failure to reply to notice.
- Supreme Court examined all record admissions, including vendor’s acceptance of advance without redeeming the mortgage and subsequent distress sale at reduced price.
- Applied established contract law principles: suppression of a material fact vitiates consent and bars claims arising from the breach.
- Concluded High Court’s reliance on an abstract statement was unjustified; set aside its order, restored the trial court’s decree.
Arguments by the Parties
Petitioner (Plaintiff-Appellant)
- Vendor deliberately concealed bank mortgage despite agreement recitals of no encumbrance.
- Always ready and willing to pay; withheld balance due to fraud.
- Entitled to refund of ₹55 lakhs with interest; vendor’s set-off claim barred by limitation and unsustainable.
Respondent (Defendant-Respondent)
- Purchaser allegedly knew of mortgage on 25 August 2008 and did not inspect title deeds.
- Continued payments post-discovery and delayed suit despite expiry of contractual period.
- Claimed loss of ₹77.5 lakhs on subsequent distress sale; sought limited set-off.
Factual Background
In September 2008 the vendor agreed to sell 77.26 acres for ₹4.45 crore and received ₹50 lakhs earnest money. The purchaser later learned of a bank mortgage over the land—a fact concealed by the vendor—paid an additional ₹5 lakhs and issued a post-dated cheque for ₹3.55 crore, which was dishonoured. The purchaser sued for refund of advances; the vendor counter-claimed set-off for losses on a distress sale. The trial court found vendor fraud, granted refund; the High Court reversed on narrow grounds; the Supreme Court restored the trial court’s decree.
Alert Indicators
- ✔ Precedent Followed – Affirms established contract law on fraud and rescission
- 🔄 Conflicting Decisions – Reverses High Court’s reliance on isolated admissions