[S.55 (6)(b) TP Act] When Both Buyer & Seller Not Eager To Perform Agreement, Buyer Entitled To Charge Over Property Due To Consideration Paid: Kerala HC

Section 55 of the TP Act describes the rights and liabilities of the buyer and seller. The charge was provided under Section 55(6)(b) which reads: “The buyer is entitled— unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the seller's interest in the property, for the amount of any purchase- money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.”

Justice Sathish Ninan stated that three situations were possible on analysing the terms of the section- (i) properly declined, (ii) improperly declined, and (iii) where there is neither a proper nor improper declining.

Clarifying the section, the Court stated that improperly declining to accept delivery of property by the buyer negates the charge. The Court went on to explain that there would be cases where the sale of the property would not occur for no fault of either the buyer or the seller. It added that there might also be instances where both the buyer as well as the seller would have contributed to the non-performance of the sale agreement. It also stated that there could be instances where the seller was unable to perform his part of the agreement.

Explaining the scope of the term 'improperly declined', it held that, in many situations, it cannot be stated that the buyer was at fault or that he had improperly declined to accept delivery of property. The Court stated:

“Thus understanding the scope of the first limb of Section 55(6)(b), it is held that, where the non- performance is not due to the fault of the buyer and the seller, or where both are at blame/default, or where the default occurred at the hands of the vendor, it cannot be said that the buyer has improperly declined to accept delivery and hence he is entitled for charge over the property for the purchase price paid and interest..”,

In the present case, the defendant had agreed to sell the residential house to the plaintiff and advance sale consideration was also paid. Alleging a breach of agreement, the plaintiff filed suit against the defendant. On the other hand, the defendant pleaded that it was the plaintiff who breached the agreement by failing to pay the balance sale consideration. The Trial Court dismissed the suit and the appeal was preferred by the plaintiff before the High Court.

It stated that Section 55 (6) (b) deals with two contingencies; firstly, where the buyer has not improperly declined to accept delivery of the property and secondly, where the buyer properly declines to accept delivery.

Thus, the Court stated that when the buyer has not improperly declined to accept delivery of the property, he is entitled to charge over the property for the purchase money paid and also interest. It added that when the buyer has properly declined delivery of the property, along with the charge for the sale consideration paid, he was also entitled to charge for the earnest money if any.

In the facts of the case, the Court stated that both the plaintiff and defendant were at fault or were not eager for the performance of the agreement, as a result of which breach occurred.

“ As held supra, in such a situation, when both the plaintiff and the defendant are at fault or were not eager in the performance of the agreement, the plaintiff is entitled for charge over the property for the sale consideration paid. A decree is liable to be granted to the plaintiff, as above,” it held.

Accordingly, the Court held that the plaintiff was entitled to charge over the property and allowed the appeal.

Counsel for Plaintiff: Advocates P B Krishnan, R Parthasarathy

Counsel for Respondents: Advocates Anchal C Vijayan, M Narendra Kumar

Citation: 2024 LiveLaw (Ker) 146

Case title: Ahammedkutty Bran v Sukumaran

Case number: RFA NO. 349 OF 2022

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