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Friday, May 9, 2014

Payment of Interest - agreement of sale - not carried out due to non- sanction of permission Under Tenancy & Land Reforms Act was not granted to full extent - suit for refund of amount on the doctrine of frustration - suit decreed with interest - appeal by defendants - negatived doctrine of performance - found that the plaintiff is at fault , awarded to go with sanctioned extent - Appeal filed but arguments are restricted only to the extent of payment of interest only - Apex court held that Therefore, award of interest in the judgment against the principal amount upto the date of the institution of the suit at 9% and 6% thereafter from the date of institution of case till the date of payment is legal and valid as the said amount has been utilized by the defendants in the liquor business but they have failed to prove not obtaining the sale deed in respect of the land agreed upon to be sold in favour of the plaintiffs to the extent of area for which permission was granted by the State Government.=GIAN CHAND & ORS. …APPELLANTS VERSUS M/S. YORK EXPORTS LTD. & ANR. … RESPONDENTS = 2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41492

 Payment of Interest - agreement of sale - not carried out due to non- sanction of permission Under Tenancy & Land Reforms Act was not granted to full extent - suit for refund of amount on the doctrine of frustration - suit decreed with interest - appeal by defendants - negatived doctrine of performance - found that the plaintiff is at fault ,  awarded to go with sanctioned extent  - Appeal filed but arguments are restricted only to the extent of payment of interest only - Apex court held that Therefore, award of interest in the  judgment  against  the  principal amount upto the date of the institution of  the  suit  at  9%  and  6% thereafter from the date of institution  of  case  till  the  date  of payment is legal and valid as the said amount has been utilized by the defendants in the liquor business but they have failed  to  prove  not obtaining the sale deed in respect of the land agreed upon to be  sold in favour of the plaintiffs to the extent of area for which permission was granted by the State Government.=

The plaintiffs (the respondents herein) and the defendants  (the
      appellants herein) executed an agreement to sell 164 bighas, 7  biswas
      of land in question on 2.8.1995.
 As pre-condition for sale, permission
      from the competent authority under Section 118 of the Himachal Pradesh
      Tenancy & Land Reforms Act  (hereinafter  referred  to  as  “the  Land
      Reforms  Act”)  was  necessary.  
The  onus  to  obtain  the   relevant
      permission was cast on the plaintiffs in the agreement  to  sell.  
The
      plaintiffs managed to obtain permission only for 145 bighas  of  land.
      
As the stipulated time for obtaining permission for  the  entire  area
      expired, the plaintiffs sought extension of time from the  defendants.
      
This extension was denied which eventually led to filing of  the  suit
      in question. 
In  the  suit,  the  plaintiffs  pleaded  frustration  of
      contract and sought refund of the money already  paid  with  interest.
      The learned single Judge decreed the  suit,  finding  that  there  was
      frustration of contract.=

Original Appeal 
Aggrieved by the same, the defendants filed an appeal before the
      Division Bench of the High Court.
The Division Bench  held that :- 
(i)
      the contract in question was not “frustrated” as understood in  Indian
      law in terms of Section  56  of  the  Contract  Act,  1872;  
(ii)  the
      plaintiffs were at fault for their failure  to  obtain  the  necessary
      permission for the  entire  area  as  the  obligation  to  obtain  the
      permission rested with them. The plaintiffs had  committed  breach  of
      the agreement, however, the defendants had not  committed  any  breach
      and 
(iii) permission having been obtained for at least 145  bighas  of
      land, sale could have been completed with regard to  this  substantial
      portion of the suit property. 
Aggrieved by the  same,  the  defendants have filed this appeal.=
Second Appeal
The Division Bench of the High Court has also examined the  said
      aspect of the matter by adverting to the provisions of Sections 73, 74
      and 75 in Chapter VI of the Indian Contract Act and  also  taken  into
      consideration the decisions of various High Courts and this Court  has
      held that the defendants have not proved that they sustained losses on
      account of the non performance of the contract by the plaintiffs.  The
      Division Bench of the High Court with reference to the allegation made
      by the defendants in their written statement that they  suffered  loss
      in the liquor business is not relatable to the contract and  the  same
      is not supported by  material  evidence  on  record.  It  was  further
      submitted by the learned senior counsel for the defendants that due to
      the breach of contract on the part  of  the  plaintiffs,  the  sum  of
         [pic]4,00,000/- in the agreement which is  the  earnest  money  and
      advance  of  [pic]4,00,000/-  shall  be  forfeited  towards  loss   of
      compensation. The  Division  Bench  after  proper  evaluation  of  the
      pleadings and  evidence  on  record  has  rightly  rejected  the  said
      contention and decreed the suit for  sum  of          [pic]39,20,000/-
      with 6% interest per annum from the date of institution  of  the  suit
      till the date of payment of money and  it  has  rightly  recorded  the
      concurrent finding  for grant of the decree in favour of the plaintiff
      directing the defendants for repayment  of  the  consideration  amount
      with interest as mentioned  above  after  holding  that  there  is  no
      frustration of contract  entered between the parties though  the  sale
      of the land could not take place for non grant of  permission  to  the
      entire extent of 165 bighas 7 biswas of land, the said finding of fact
      is accepted by this Court at the time of issuing notice and therefore,
      the correctness of the same has attained finality  for the reason that
      this Court at the  time  of  issuing  notice  to  the  plaintiffs  has
      clarified that this appeal is confined on  the  issue  of  payment  of
      interest awarded on  decreetal amount from the date of institution  of
      the civil suit till the payment to be made by the  defendants  to  the
      plaintiffs.  The  money  being  paid  as  part  consideration  to  the
      defendants  has  been  utilised  by  them  in  its  liquor   business.
      Therefore, award of interest in the  judgment  against  the  principal
      amount upto the date of the institution of  the  suit  at  9%  and  6%
      thereafter from the date of institution  of  case  till  the  date  of
      payment is legal and valid as the said amount has been utilized by the
      defendants in the liquor business but they have failed  to  prove  not
      obtaining the sale deed in respect of the land agreed upon to be  sold
      in favour of the plaintiffs to the extent of area for which permission
      was granted by the State Government. For the reasons stated supra, the
      award of interest on the principal amount and decreetal amount in  the
      impugned judgment is perfectly justifiable on the basis of  the  facts
      and circumstances of the case.


      11.   In view of the reasons stated supra, we do not find  any  reason
      whatsoever to interfere with the impugned judgment and decree  wherein
      the award of interest at the rate  of  6%  per  annum  on  the  amount
      decreed by the learned single Judge from the date  of  institution  of
      the suit need not be set aside by this Court. Accordingly,  the  Civil
      Appeal is dismissed, but with no order as to costs.


      2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41492

GYAN SUDHA MISRA, V. GOPALA GOWDA
                                              NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 4882 OF 2014
                  (Arising out of SLP(C) No. 35139 of 2012)


      GIAN CHAND & ORS.                       …APPELLANTS

                                 VERSUS

      M/S. YORK EXPORTS LTD. & ANR.           … RESPONDENTS


                               J U D G M E N T




      V. GOPALA GOWDA, J.




            Leave granted.




      2.    This Civil Appeal is directed against  the  judgment  and  order
      dated 14.6.2012 passed in Original Side Appeal No.9  of  2005  by  the
      High Court of Himachal Pradesh at Shimla, whereby it has dismissed the
      appeal of the appellants herein by concurring with  the  judgment  and
      decree dated 3.10.2005 passed in Civil Suit No.  31  of  1997  by  the
      learned Single Judge  in decreeing the suit for payment  of  money  at
      [pic]39,20,000/-  with  6%  interest  per  annum  from  the  date   of
      institution of the suit till the date of payment of decretal amount to
      the respondents giving its reasons in the impugned judgment though  it
      did not entirely agree with the reasonings provided   by  the  learned
      single Judge. Correctness of the same with regard to the interest from
      the institution of the suit till the date of payment is questioned  by
      the appellants, urging various facts and legal contentions.


      3.    For the sake of brevity and convenience in  this  judgment,  the
      parties are referred to as per  the  rank  assigned  to  them  in  the
      original suit proceedings.


      4.    The plaintiffs (the respondents herein) and the defendants  (the
      appellants herein) executed an agreement to sell 164 bighas, 7  biswas
      of land in question on 2.8.1995. As pre-condition for sale, permission
      from the competent authority under Section 118 of the Himachal Pradesh
      Tenancy & Land Reforms Act  (hereinafter  referred  to  as  “the  Land
      Reforms  Act”)  was  necessary.  The  onus  to  obtain  the   relevant
      permission was cast on the plaintiffs in the agreement  to  sell.  The
      plaintiffs managed to obtain permission only for 145 bighas  of  land.
      As the stipulated time for obtaining permission for  the  entire  area
      expired, the plaintiffs sought extension of time from the  defendants.
      This extension was denied which eventually led to filing of  the  suit
      in question. In  the  suit,  the  plaintiffs  pleaded  frustration  of
      contract and sought refund of the money already  paid  with  interest.
      The learned single Judge decreed the  suit,  finding  that  there  was
      frustration of contract.


      5.    Aggrieved by the same, the defendants filed an appeal before the
      Division Bench of the High Court. The Division Bench  held that :- (i)
      the contract in question was not “frustrated” as understood in  Indian
      law in terms of Section  56  of  the  Contract  Act,  1872;  (ii)  the
      plaintiffs were at fault for their failure  to  obtain  the  necessary
      permission for the  entire  area  as  the  obligation  to  obtain  the
      permission rested with them. The plaintiffs had  committed  breach  of
      the agreement, however, the defendants had not  committed  any  breach
      and (iii) permission having been obtained for at least 145  bighas  of
      land, sale could have been completed with regard to  this  substantial
      portion of the suit property. Aggrieved by the  same,  the  defendants
      have filed this appeal.


      6.    This Court vide order dated 3.12.2012 passed the following order
      in the matter:-


                  “    We have heard learned counsel for the petitioners and
                  perused the record.  In our view, the impugned judgment as
                  also the judgment of the learned  Single  Judge  does  not
                  suffer from any legal infirmity insofar as the decree  for
                  payment of the principal amount is concerned.


                       Issue notice only  on  the  question  of  payment  of
                  interest by the petitioners on the amount which  they  had
                  received from the respondent in furtherance of the main as
                  well  as   the   additional   agreement,   returnable   on
                  06.02.2013.  Dasti, in addition, is permitted.


                       Issue notice on the petitioners’ prayer  for  interim
                  relief, returnable on 06.02.2013.  Dasti, in addition,  is
                  permitted.


                       In the meanwhile, operation of the impugned  judgment
                  as also the judgment of the  learned  Single  Judge  shall
                  remain stayed insofar as they relate to award of  interest
                  to the respondent.


                       The petitioners shall pay the principal  amount    to
                  the respondent within a period of six weeks from today.


                       It shall be  the  petitioners'  duty  to  serve   the
                  respondent before the next date of hearing failing   which
                  the    interim    order    passed   today   shall    stand
                  automatically vacated.”


      After service of notice in the Special Leave Petition, the  plaintiffs
      filed the counter affidavit and the defendants also  filed  additional
      documents. Thereafter, the matter was listed  before  this  Court  for
      hearing on 31.01.2014. After hearing Mr. Jayant Bhushan,  the  learned
      senior counsel appearing on behalf of the defendants  and  Mr.  Deepak
      Sibal, the learned counsel for the plaintiffs, this Court  passed  the
      order by assigning the following reasons.


      7.    At the time of issuing notice in the Special Leave  Petition  on
      03.12.2012, after  hearing  the  learned  counsel  on  behalf  of  the
      defendants, this Court issued notice only on the question  of  payment
      of interest by the defendants and the amount which they  had  received
      towards the part consideration from the plaintiffs in  furtherance  of
      the principal as well as the additional agreement. The learned  senior
      counsel Mr. Jayant Bhushan  has  questioned  the  correctness  of  the
      impugned judgment of the High Court in affirming the award of interest
      at the rate of 9% per annum on the part of consideration  amount  paid
      to the defendants. The interest was to be paid at the rate of  9%  per
      annum prior to the institution of the suit and 6% on the  said  amount
      from the date of decree till the date of payment. The  learned  senior
      counsel contended that the defendants are not liable to pay  the  same
      as the plaintiffs have committed breach of agreement entered with them
      in not purchasing the agricultural land to an extent of 145 bighas  of
      land in respect of which the State Government in exercise of its power
      under Section 118 of  the  Land  Reforms  Act  granted  permission  to
      purchase the same by the plaintiffs  for the purpose  of  establishing
      their factory, though the agreement of sale was intended  to  purchase
      164 bighas 7 biswas of land in Khata Khatauni No. 98/105,  Khasra  No.
      245, Mauza Beerh Plassi, Pargana  Plassi,  Tehsil  Nalagarh,  District
      Solan, Himachal Pradesh. The case of the plaintiffs is that as per the
      agreement between the parties  entered  on  2.8.1995,  the  defendants
      agreed to sell the aforesaid property at the rate of      [pic]50,000/-
       per bigha and further agreed that the sale deed was to be executed on
      31.5.1996 but prior to that date, the plaintiffs were required to  pay
      a sum of [pic]15,03,500/- to the defendants. Undisputedly, this amount
      was also paid to the defendants on 21.8.1995. The sale deed could  not
      be executed by the defendants in favour of the plaintiffs by 31.5.1996
      as the State Government  granted  permission  to  the  plaintiffs  for
      purchase of only 125 bighas of land under  Section  118  of  the  Land
      Reforms  Act.  Thereafter  the  parties  renewed  the   agreement   on
      31.5.1996. As per the renewed agreement, the plaintiffs  were  to  pay
                 [pic]18,00,000/- more which was also paid on  4.6.1996.  As
      per  this  agreement,  the  sale  deed  was  to  be  got  executed  by
      31.12.1996. The State Government did not grant permission to the  full
      extent of  land,  which  is  agreed  to  be  sold  in  favour  of  the
      plaintiffs. On the other hand, the State Government  allowed  only  to
      the extent of 145 bighas of  land  in  all  to  be  purchased  by  the
      plaintiffs. The plaintiffs did not get the sale deed executed.  As  to
      the extent of land for which  permission  was  granted  by  the  State
      Government, according to the plaintiffs, it  was  not  sufficient  for
      establishing the factory. Therefore, the plaintiffs contended that the
      contract is frustrated and therefore, they filed Civil Suit No. 31  of
      1997 before the learned single Judge of the High Court for recovery of
      the amount paid towards the part consideration along with interest  at
      the rate of 9% per annum up to the date of finalization  of  the  suit
      and 6% per annum from the date of institution of the civil  suit.  The
      said claim was opposed by the defendants traversing  plaint  averments
      contending that the contract is  not  frustrated  as  pleaded  by  the
      plaintiffs under Section 56 of the Indian Contract Act, 1872  and  the
      plaintiffs are not entitled for the  decree  of  money  including  the
      interest as claimed by them and hence they have prayed  for  dismissal
      of the suit.


      8. The learned single  Judge  of  the  High  Court  vide  order  dated
      3.10.2005 in Civil Suit No.  31  of  1997  framed  9  issues  for  his
      adjudication. After the trial, the contentious issues  framed  in  the
      civil suit were answered in favour of the plaintiffs  and  passed  the
      decree to a sum of [pic]39,20,000/- with 6% interest  per  annum  from
      the date of institution of the suit till the date of payment of money.
      The  correctness  of  the  reasons  and  findings  answered   on   the
      contentious issues in the judgment of the  learned  single  Judge  was
      challenged before the Division Bench  of  High  Court  urging  various
      legal contentions. The Division Bench of the High Court, on the  basis
      of the  rival  legal  contentions  urged  on  behalf  of  the  parties
      formulated the following two points for its adjudication :-


                     “1. Whether the contract stood frustrated by the  fact
                     that the plaintiff did not get permission to  purchase
                     164 bighas 7 biswas of land?


                     2. Whether the defendants were entitled to retain  the
                     amount paid to them by the plaintiff  and  if  so,  to
                     what amount?”



          After examining the correctness of reasons recorded by the learned
      single Judge in holding that the non-grant of permission by the  State
      Government to purchase 164 bighas 7 biswas of land in  favour  of  the
      plaintiffs in terms of  the  agreement  entered  between  the  parties
      amounts to frustration of contract as provided under Section 56 of the
      Contract Act was examined by the Division Bench of the High Court. The
      Division Bench of  the  High  Court  with  reference  to  the  reasons
      recorded by the learned  single  Judge  in  the  civil  suit,  on  the
      question of the frustration of the contract between the parties, after
      adverting to the relevant provisions  of  Section  56  of  the  Indian
      Contract Act, by assigning its own reasons, has answered the  same  by
      holding that the decision that the contract between the parties stands
      frustrated is erroneous in law.


         The Division Bench of the High Court held that the finding recorded
      by the learned single Judge on non-grant of permission to  the  entire
      164 bighas 7 biswas of land as agreed between the parties to  sell  in
      favour of the  plaintiffs  does  not  amount  to  the  frustration  of
      contract for the reason that the State  Government  at  first  granted
      permission to the plaintiffs for purchase of 125 bighas and thereafter
      granted permission to  purchase  145  bighas  of  land.  Further,  the
      Division Bench of the High Court has held that there is  virtually  no
      material on record to  show  that  after  the  second  permission  was
      granted, the plaintiff took further steps to get permission  from  the
      State Government for purchasing  the  remaining  land.  Even  if  such
      permission was not granted and permission  was  specifically  refused,
      the contract between the parties would not  stand  frustrated.  It  is
      further rightly held by the Division Bench of the High Court that  the
      parties at the time of agreement could  not  have  presumed  that  the
      permission must be granted. Further it has observed that supposing the
      State Government refused to grant permission  for  purchase  of  land,
      then obviously, it would be a case of the contract not being  able  to
      be performed. But, when the State Government grants the permission for
      a lesser area of land than the agreed upon area in  the  agreement  by
      the defendants, plaintiffs could not  have  elected  to  purchase  the
      lesser area, i.e. 145 bighas, for which the  permission  was  granted.
      Further, the learned Division Bench of  the  High  Court  has  rightly
      rejected the argument of the plaintiffs that permission  for  purchase
      of 145 bighas of land granted by the State Government in favour of the
      plaintiffs, was not sufficient to set up the plant as in  this  regard
      no evidence worth the name to support this plea of the plaintiffs  has
      been produced before the Court. Further, the High  Court  has  rightly
      assigned its reasons on the  basis  of  the  project  reports  of  the
      plaintiffs, the State Government and  the  Department  of  Industries,
      taking all  relevant  aspects  into  consideration  has  decided  that
      permission should be granted in favour  of  the  plaintiffs  only  for
      purchase of 145 bighas of land. This fact would clearly indicate  that
      according to the Industries Department, sale of land of 145 bighas  in
      favour of the plaintiffs by the defendants was sufficient  to  set  up
      the industry for which purpose the plaintiffs  have  entered  into  an
      agreement with the defendants. Further, in the impugned  judgment  the
      High Court assigned its reasons stating that the parties  may  or  may
      not get permission for the purchase of the entire  land.  However,  in
      the absence of such condition expressed in the agreement, the contract
      between  the  parties  does  not  frustrate  particularly,  when   the
      plaintiffs had alternative to purchase 145 bighas  of  land  from  the
      defendants. The Division Bench of the  High  Court  on  the  issue  of
      frustration of contract has relied upon the decisions  of  this  Court
      and various High Courts in support of its reasons which  are  adverted
      in the impugned judgment, which  need  not  be  referred  to  in  this
      judgment.


      9.    The Division Bench of the High Court did not accept the  finding
      of the learned single Judge who had conducted the trial of  the  suit,
      who has erroneously held that the  contract  stands  frustrated  under
      Section 56 of the Contract Act.


      10.   The Division Bench of the High Court has also examined the  said
      aspect of the matter by adverting to the provisions of Sections 73, 74
      and 75 in Chapter VI of the Indian Contract Act and  also  taken  into
      consideration the decisions of various High Courts and this Court  has
      held that the defendants have not proved that they sustained losses on
      account of the non performance of the contract by the plaintiffs.  The
      Division Bench of the High Court with reference to the allegation made
      by the defendants in their written statement that they  suffered  loss
      in the liquor business is not relatable to the contract and  the  same
      is not supported by  material  evidence  on  record.  It  was  further
      submitted by the learned senior counsel for the defendants that due to
      the breach of contract on the part  of  the  plaintiffs,  the  sum  of
         [pic]4,00,000/- in the agreement which is  the  earnest  money  and
      advance  of  [pic]4,00,000/-  shall  be  forfeited  towards  loss   of
      compensation. The  Division  Bench  after  proper  evaluation  of  the
      pleadings and  evidence  on  record  has  rightly  rejected  the  said
      contention and decreed the suit for  sum  of          [pic]39,20,000/-
      with 6% interest per annum from the date of institution  of  the  suit
      till the date of payment of money and  it  has  rightly  recorded  the
      concurrent finding  for grant of the decree in favour of the plaintiff
      directing the defendants for repayment  of  the  consideration  amount
      with interest as mentioned  above  after  holding  that  there  is  no
      frustration of contract  entered between the parties though  the  sale
      of the land could not take place for non grant of  permission  to  the
      entire extent of 165 bighas 7 biswas of land, the said finding of fact
      is accepted by this Court at the time of issuing notice and therefore,
      the correctness of the same has attained finality  for the reason that
      this Court at the  time  of  issuing  notice  to  the  plaintiffs  has
      clarified that this appeal is confined on  the  issue  of  payment  of
      interest awarded on  decreetal amount from the date of institution  of
      the civil suit till the payment to be made by the  defendants  to  the
      plaintiffs.  The  money  being  paid  as  part  consideration  to  the
      defendants  has  been  utilised  by  them  in  its  liquor   business.
      Therefore, award of interest in the  judgment  against  the  principal
      amount upto the date of the institution of  the  suit  at  9%  and  6%
      thereafter from the date of institution  of  case  till  the  date  of
      payment is legal and valid as the said amount has been utilized by the
      defendants in the liquor business but they have failed  to  prove  not
      obtaining the sale deed in respect of the land agreed upon to be  sold
      in favour of the plaintiffs to the extent of area for which permission
      was granted by the State Government. For the reasons stated supra, the
      award of interest on the principal amount and decreetal amount in  the
      impugned judgment is perfectly justifiable on the basis of  the  facts
      and circumstances of the case.


      11.   In view of the reasons stated supra, we do not find  any  reason
      whatsoever to interfere with the impugned judgment and decree  wherein
      the award of interest at the rate  of  6%  per  annum  on  the  amount
      decreed by the learned single Judge from the date  of  institution  of
      the suit need not be set aside by this Court. Accordingly,  the  Civil
      Appeal is dismissed, but with no order as to costs.


                         ………………………………………………………………………J.
                                    [GYAN SUDHA MISRA]


                                        ………………………………………………………………………J.
                                    [V. GOPALA GOWDA]



      New Delhi,
      April 25, 2014



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