|REPORTABLE |
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5787 OF 2012
(Arising out of SLP(C)No.13490 of 2009)
1 Rattan Lal (since deceased)
2 Through His Legal Representatives … Appellant
Vs.
2 S.N. Bhalla & Anr. … Respondents
J U D G M E N T
ALTAMAS KABIR, J.
1. Leave granted.
2. The Respondents are perpetual Sub-lessees of Plot No.C-2/13, Vasant
Vihar, New Delhi, measuring 600 sq. yards, allotted to them through the
Government Servants Co-operative House Building Society Limited. They
erected a single-storeyed structure on the said land and vide Agreement
dated 8th September, 1978, they agreed to sell the said property to the
Appellant together with the building erected thereon for a consideration of
Rs.5,90,000/-. The Appellant paid a sum of Rs.50,000/- to the Respondents
in advance to enable them to apply for necessary permission for transfer
and to obtain Clearance Certificate from the Tax authorities. The Agreement
stipulated that on receipt of the said Clearance, the Respondents were to
inform the Appellant of its receipt, and, thereafter, the Appellant was
required to complete the sale within 60 days by paying the balance
consideration agreed to between the parties. In case the Respondents failed
to apply for permission to sell within 15 days from the date of the
Agreement, the Appellant had the option to determine the Agreement
whereupon the Respondents were required to refund the earnest money and to
pay damages to the Appellant assessed at Rs.50,000/-.
3. The provision in the Agreement which is crucial for a decision in
this Appeal is Clause 9, which is extracted hereinbelow :
“9. That if the Seller applies for sale permission within the time
stipulated in clause 8 above, but does not get it within 6
months, the Seller may determine this Agreement and the Seller
shall refund to the Purchaser the earnest money received by him
without any damages or interest, within a period of 15 days from
the date of determination of the Agreement.”
4. Inasmuch as, the sale was not being completed by the Respondents, the
Appellant filed Suit No.278 of 2003, in the Court of Additional District
Judge, Delhi, for specific performance of the contract.
5. Clause 2 of the Agreement to Sell stipulates that upon execution of
the Agreement, the Respondents would immediately apply to the Delhi
Development Authority (DDA) and the Competent Authority under the Urban
Land (Ceiling and Regulation) Act, 1976, for permission to transfer the
said property to the Purchaser/Appellant free from all encumbrances, after
obtaining requisite permissions from any other Body or Authority. In
Clause 3 of the Agreement, the Respondents also undertook to obtain the
Income Tax Clearance Certificate immediately on obtaining the sale
permission from the concerned authorities and to inform the
Purchaser/Appellant by Registered Post with Acknowledgment Due accordingly.
As indicated hereinabove, Clause 4 of the Agreement stipulates that on
being informed of the receipt of the requisite permission from the
Respondents, the Appellant would have to complete the sale within a period
of 60 days from the date of receipt of such intimation and on being
furnished with the copies of the permission and the Income Tax Clearance
Certificate.
6. Clause 8 of the Agreement to Sell is of special significance to the
facts of this case and is, accordingly, extracted hereinbelow :
“8. That if for any reason the Seller fails to apply for permission
to sell the said property to the Purchaser within a period of 15
days from the date of signing this Agreement, the Purchaser
shall have the option to determine this Agreement and in that
event the Seller shall refund the earnest money of Rs.50,000/-
(Rupees Fifty Thousand only) as received by him and pay to the
Purchaser damages which are assessed as the sum of Rs.50,000/-
(Rupees Fifty Thousand only).”
7. As will be evident from the aforesaid Clause, the Purchaser was given
the option to exit from the Agreement in case the Seller failed to apply
for permission for sale of the property within a period of 15 days from the
date of signing of the Agreement. Clause 9 of the Agreement which is
crucial for a decision in this appeal, contains the right of the Seller to
determine the Agreement and is extracted hereinbelow :
“9. That if the Seller applies for sale permission within the time
stipulated in clause 8 above, but does not get it within 6
months, the Seller may determine this Agreement and the Seller
shall refund to the Purchaser the earnest money received by him
without any damages or interest, within a period of 15 days from
the date of determination of the Agreement.”
8. In terms of Clause 9 of the Agreement extracted hereinabove, the
Respondents submitted a request application in terms of Clause 2 of the
said Agreement dated 12th September, 1978, i.e., well-within the period of
15 days contemplated in the said Clause. In response to the said
application made to the Delhi Development Authority (DDA) for grant of sale
permission, a letter dated 23rd/27th November, 1978, was addressed by DDA
to the Respondents asking for certain documents to be filed.
Interestingly, although, the said letter was addressed to the Respondents,
it was responded to by the Appellant. The said letter sent by the
Appellant has been marked as Ex.PW-1/3. On 7th March, 1979, the DDA
informed the Respondents of the decision not to grant sale permission on
the ground that the affidavit filed by Shri S.N. Bhalla, one of the two
vendors was defective. On receiving the said intimation from the DDA, the
Respondents sent a telegram to the Appellant on 8th March, 1979,
determining the Agreement to Sell in terms of Clause 9 of the Agreement, on
the expiry of the 6 months’ period for completion of the sale on 7th March,
1979. The Appellant was also informed that the earnest money paid by him
would be refunded within 15 days. Pursuant to such intimation, on 12th
March, 1979, the Respondents sent a Bank Draft of Rs.50,000/- to the
Appellant, being the earnest money received in terms of Clause 9 of the
Agreement to Sell dated 8th September, 1978.
9. Coincidentally, on 8th March, 1979 itself, the Appellant also
addressed a letter to the Respondents stating that the Lieutenant Governor,
Delhi, had granted permission for sale of House No.C-2/13, Vasant Vihar,
New Delhi (the property in question), in favour of the Appellant. However,
the same could not be communicated since the affidavit filed by Shri S.N.
Bhalla, the Respondent No.1 herein, was found to be defective and such
permission could be conveyed only on production of the correct affidavit as
required by the DDA. The Respondents were, accordingly requested by the
Appellant to file a proper affidavit in the Department and to file all the
necessary documents with the DDA to enable them to convey the required sale
permission. It was also mentioned that the failure to do so would make the
Respondents responsible for all costs and consequences thereof. The
original letter No. F.H.(199)78-CS/DDA dated 7th March, 1979, was attached
with the notice sent on behalf of the Appellant. The said letter was
followed up by a telegram sent by the Appellant indicating that time was
not the essence of the Agreement and that he was prepared to purchase the
house of the Respondents even beyond the period of 6 months since,
although, DDA was ready to give permission, the Respondents had defaulted
in filing the correct affidavit to enable DDA to grant permission.
10. Inasmuch as, no positive response was received by the Appellant from
the Respondents to his communications, he sent a legal notice to the
Respondents informing them that he was ready and willing to complete the
transaction and to have the Sale Deed executed in his favour for the
property in question by paying the balance price. The Respondents were
asked to inform the Appellant as to how the transaction could be completed
so that he could tender the sale consideration by Bank Draft. It was also
indicated in the notice that the Bank Draft sent by the Respondents
refunding the earnest money, had been encashed under protest, but it did
not mean that the contract was repudiated. The contract continued to
subsist and the Appellant was always ready and willing to perform his part
of the contract.
11. In the absence of a positive response to the said notice, the
Appellant filed Suit No.278 of 2003, on 8th March, 1982, for specific
performance of the Agreement to Sell dated 8th September, 1978. On the
pleadings of the parties, the following issues were settled by orders dated
1st November, 1983 and 19th February, 1991 :
“1) Whether the Plaintiff has been ready and willing to perform his
part of agreement dated 08.09.1978?
2) Whether the Defendant has committed breach of the said
Agreement?
3) Whether the agreement dated 08.09.1978 stands terminated or
frustrated as alleged by the defendant and there is no
subsisting agreement to sell?
4) Whether the plaintiff is to be granted relief of specific
performance in the facts and circumstances of the present case?
5) Whether the agreement dated 08.09.1978 is void for uncertainty?
6) Whether the time was the essence of the contract and whether the
agreement dated 08.09.1978 was rightly terminated?”
The last issue was an additional issue settled vide order dated 19th
February, 1991.
12. Considering Clauses 2, 8 and 9 of the Agreement to Sell dated 8th
September, 1978, the Trial Court dismissed the suit, inter alia, upon
holding that the Appellant had intentionally and without demur accepted
refund of the earnest money sent to him by Bank Draft and, thereafter, he
sent the lawyer’s notice on 26th April, 1979, stating that the said Draft
was encashed without prejudice to his rights and contentions in the Suit.
The learned Trial Court held that encashing the Bank Draft amounted to
acceptance of the contract being determined. The learned Trial Court also
was of the view that in view of his conduct it would be clear that the
Appellant had abandoned his claim under the contract and he was no longer
ready and willing to pursue his remedies under the contract. The Trial
Court also took note of the fact that although the Agreement contemplated
that the Respondents would take steps to obtain the necessary sale
permission and the Income Tax Clearance Certificate, the same was pursued
by the Appellant and that it was the Appellant who was in default in
complying with the requests made by DDA, which had resulted in the sale
permission not being granted. The Trial Court categorically held that there
was deficiency in respect of the documents to be filed. Even on the
question of the Suit being filed on the last date of limitation, the same
was construed to mean that the Appellant was not ready and willing to
complete the sale transaction.
13. Aggrieved by the judgment and decree passed by the learned Additional
District Judge on 10th February, 2004, the Appellant filed a Regular First
Appeal before the Delhi High Court, being RFA No.272 of 2004, which was
dismissed by the impugned judgment.
14. The Division Bench of the Delhi High Court in effect, accepted the
reasoning of the Trial Court and indicated further that a contract, which
is by its nature determinable, is incapable of being specifically enforced
under Section 14(1)(c) of the Specific Relief Act, 1963. The Division
Bench held that in terms of Clause 9 of the Agreement to Sell, the contract
was determinable if the sale permission was not forthcoming within a period
of 6 months from the date of execution of the Agreement. The Division
Bench also referred to Section 20 of the aforesaid Act to indicate that
relief of specific performance is discretionary and in the instant case,
such discretion should not be exercised in favour of the Appellant who had
approached the Court on the last date of limitation, i.e., within 3 years
from the date when cause of action for the suit had accrued. Observing that
it was a matter of common knowledge that between 1979 and 1982 the price of
property had risen very sharply in Delhi, the Division Bench also observed
that it could not also be lost sight of that the Appellant had accepted the
refund of Rs.50,000/-, which had been paid by him to the Respondents as
earnest money-cum-part Sale consideration. It is on the basis of such
reasoning that the appeal was dismissed by the Division Bench of the Delhi
High Court.
15. Mr. Altaf Ahmad, learned Senior Advocate, who appeared in support of
the Appeal, contended that in terms of Clause 2 of the Agreement to Sell,
the Sellers were under an obligation to apply to the DDA and the Competent
Authority under the Urban Land (Ceiling and Regulation) Act, 1976, to
obtain the requisite permission to transfer the property to the Appellant,
free from all encumbrances. Mr. Ahmad submitted that the liberty given to
the Respondents/Sellers under Clause 9 of the Agreement to exit therefrom
could not be taken advantage of by the Sellers in case they were in default
in obtaining the said permission within the stipulated time, without making
serious and conscientious efforts to obtain the same. Mr. Ahmad submitted
that in the instant case, the Respondents had been informed by the DDA of
the deficiencies in the affidavit filed by them, but they did not take any
step to remove the deficiencies. Mr. Ahmad submitted that it is no doubt
true that the Appellant/Purchaser had taken upon himself the burden of
acquiring the sale permission and Income Tax Clearance Certificate, but it
was only to assist the Respondents and the same did not absolve the
Respondents of their responsibility of performing the tasks that they were
required to perform under the Agreement. Mr. Ahmad contended that the role
played by the Appellant in the entire episode was at best that of a
facilitator in his own interest.
16. Mr. Ahmad submitted that both the Trial Court, as well as the High
Court, had erred in holding that the Appellant was not ready and willing to
complete the sale transaction and the same would be evident from the fact
that he filed the suit for specific performance on the last date of
limitation. Mr. Ahmad submitted that the very fact that the Appellant took
on himself the burden of assisting the Respondents to procure the necessary
sale permission and Income Tax Clearance Certificate, indicated his
willingness and anxiety to complete the transaction. Learned counsel
submitted that despite the Appellant’s readiness and willingness to
complete the sale transaction, he was unable to do so on account of the
deficiencies on the part of the Respondents in complying with the
instructions of the DDA. Learned counsel submitted that both the Courts
below had dealt with the issues in the suit without properly understanding
the case made out by the Appellant vis-à-vis the terms and conditions of
the Agreement to Sell dated 8th September, 1978, and the judgment and
decree of the Trial Court as well as the judgment of the High Court were
liable to be set aside.
17. On the other hand, appearing for the Respondents, Mr. Mukul Rohatgi,
learned Senior Advocate, contended that despite the obligation cast upon
the Respondents to obtain the necessary sale permission and Income Tax
Clearance Certificate, the Appellant had taken upon himself the
responsibility to obtain the same and the Respondents could not be made
responsible for the Appellant’s failure to obtain the same. Mr. Rohatgi
submitted that the Respondents/Sellers were fully justified in invoking
Clause 9 of the Agreement to Sell and to terminate the same.
18. In order to drive home his point, Mr. Rohatgi submitted that the
letters dated 27th November, 1978 and 7th March, 1979, which had been
addressed to the Respondents by the Executive Officer, DDA, requesting that
a proper affidavit be filed in the department to enable the DDA to take
further steps in the matter, had been received by the Appellant and
forwarded to the Respondents in original with his letter dated 8th March,
1979.
19. Mr. Rohatgi urged that from his conduct it would be clear that the
Appellant was not ready and willing to complete the sale and both the
Courts had rightly dismissed the Appellant’s suit.
20. Mr. Rohatgi referred to various decisions on Section 20 of the
Specific Relief Act, 1963, to bolster his submissions, but the same are all
peculiar to the facts of each case. Relying on the Constitution Bench
decision of this Court in Shri Balwantrai Chimanlal Trivedi Vs. M.N.
Nagrashna and Others [(1961) 1 SCR 113], Mr. Rohatgi lastly submitted that
the Supreme Court is not bound to interfere under Article 136 of the
Constitution when dealing with an appeal where there is no failure of
justice.
21. What emerges from the submissions made on behalf of the respective
parties is that the Appellant’s suit was dismissed by the Trial Court on
the finding that he had intentionally and without demand, accepted refund
of the earnest money, though, without prejudice to his rights and
contentions in the suit. The learned Trial Court also found that by
encashing the Bank Draft, the Appellant had clearly indicated that he was
no longer interested in completing the sale transaction. The Trial Court
also took note of the fact that although under the Agreement it was for the
Respondents to obtain the sale permission and Income Tax Clearance
Certificate, it was the Appellant who had elected to pursue the matter and
was, therefore, responsible for the failure to obtain the same within the
stipulated period of six months, which entitled the Respondents/Sellers to
terminate the Agreement under Clause 9 thereof.
22. The High Court approved the view taken by the Trial Court, but adding
that in view of Section 14(1)(c) of the Specific Relief Act, 1963, the
contract, which was by its very nature determinable, was incapable of being
specifically enforced. The High Court, for abundant caution, also referred
to Section 20 of the aforesaid Act to indicate that the relief of specific
performance was purely discretionary and dependent on the facts of each
case. The High Court also took note of the steep rise in the prices of
real estate while dismissing the Appellant’s suit for specific performance.
23. In our view, the reasoning of both the Trial Court and the High
Court, cannot be supported on several grounds. Firstly, the acceptance of
refund of the earnest money paid by the Appellant to the Respondents was
not considered by the Trial Court as also the High Court in its proper
perspective, as both the Courts appeared to have ignored the fact that such
refund had been accepted by the Appellant, without prejudice to his rights
and contentions in the suit. That the said amount was received under
protest has not been considered either by the Trial Court or by the High
Court, which had relied mainly on the provisions of Clauses 2 and 9 of the
Agreement to Sell in dismissing the Appellant’s suit for specific
performance. We do not find from the materials on record that the
Appellant had ever given up his claim under the Agreement or that he was
not ready and willing to perform his part of the contract.
24. Secondly, the Trial Court also quite erroneously absolved the
Respondents of their obligation under the Agreement to obtain sale
permission and Income Tax Clearance Certificate, which were required for
completion of the sale. We reiterate that the role of the Appellant was
merely that of a facilitator and the primary responsibility for obtaining
permission and clearance from the Income Tax Authorities remained with the
Respondents. In fact, there is nothing on record to indicate that by his
acts, the Appellant ever agreed to play a role other than that of a
supportive role and that too in his own interest, in obtaining the
necessary clearances.
25. The other point raised on behalf of the Respondents regarding the
import of Clause 9 of the Agreement to sell is also not of much substance.
In our view Clause 9 was never meant to provide the Respondents with an
escape route if they themselves failed to discharge their responsibility of
not only applying for sale permission, but to also follow up the matter
with the authorities in order to obtain the same within the stipulated
period of six months. In the absence of any material on record to show
that the Respondents had made positive efforts for procuring the necessary
sale permission and clearance certificates, they were not entitled to
determine the Agreement in terms of Clause 9.
26. The last point, and, in our view the most substantive point, is the
steep hike in the value of real estate which has been taken note of by the
High Court. However, in the absence of definite evidence to show that the
Appellant/purchaser was not ready and willing to conclude the sale
transaction, the Respondents cannot be given the benefit of the delay in
concluding the same.
27. Both the Courts below have attached a good deal of importance to the
fact that the Appellant filed the suit for specific performance on the last
day of limitation, which, according to the learned Judges, indicated that
the Appellant was not ready and willing to complete the sale transaction,
as otherwise he would have filed the suit earlier. We have no hesitation
in rejecting the said contention, since the Appellant filed the suit within
the period of limitation and his readiness and willingness to conclude the
sale transaction was quite obvious from the fact that he had taken upon
himself the burden of pursuing the matter with the authorities for
obtaining sale permission and Income Tax Clearance Certificate. The role
played by the Appellant in this regard cannot, therefore, be applied to his
disadvantage. In our view, the approach of both the Courts below to the
problem was coloured by the fact that the Appellant had actively involved
himself in the matter of obtaining the sale permission as well as Income
Tax Clearance Certificate. The fact that the Appellant had made several
requests to the Respondents to file a proper affidavit, as requested by the
DDA, is another indication that the Appellant was ready and willing to
complete the sale transaction. Both the Courts below dealt with the suit
filed by the Appellant, as though the Respondents had no obligation under
the agreement for completing the sale and this appears to have influenced
their judgment in dismissing the Appellant’s suit for specific performance.
28. Issue Nos.1, 3 and 4 as settled by the Trial Court on 1st November,
1983 and 19th February, 1991, are, therefore, answered in favour of the
Appellant and the remaining issues are answered against the Respondents. In
the light of what has been indicated hereinabove, we are of the view that
the Agreement to Sell dated 8th September, 1978, has been wrongly
terminated.
29. This, however, brings us face to face with a rather difficult
situation having regard to the fact that the Agreement to Sell was executed
34 years ago on 8th September, 1978, in respect of the suit property. We
cannot shut our eyes to the fact that during this period the price of real
estate has escalated sharply. In addition to the above, the Appellant has
not suffered any material loss, since only the earnest money of Rs.50,000/-
had been paid by him to the Respondents and the balance consideration was
yet to be paid when the agreement came to be terminated. Even the said sum
of Rs.50,000/- was returned to the Appellant immediately upon termination
of the Agreement and the said amount was duly accepted by the Appellant,
though by recording his objections subsequently. The Appellant, therefore,
has not suffered any monetary loss, and, on the other hand, the value of
the property must have sky-rocketed during the period between the execution
of the Agreement till date. In fact, that is why there is no prayer in the
alternative for return of any sums advanced, which is one of the usual
prayers in suits for specific performance.
30. However, we are also of the view that the Appellant should be
compensated for the time spent by him in pursuing his remedy in respect of
the Agreement to Sell. Accordingly, we decree the suit, but instead of
decreeing the suit for specific performance of the Agreement, we direct
that the Respondents shall pay the Appellant costs for the litigation right
throughout, assessed at Rs.25,00,000/-, to be paid by the Respondents to
the Appellant within one month from date, without the Appellant having to
proceed in execution for recovery of the same. In the event, the
Respondents fail to pay the said amount to the Appellant within the
aforesaid period, the Appellant will be entitled to put this decree for
costs into execution before the Trial Court and the said amount will carry
simple interest at the rate of 18% per annum from one month after the date
of the decree till its realization.
31. The Appeal is disposed of, accordingly.
………………………………………………………J.
(ALTAMAS KABIR)
………………………………………………………J.
(J. CHELAMESWAR)
New Delhi
Dated:8.8.2012.
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