Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5598 OF 2017
(Arising out of Special Leave Petition (C) No.15383 of 2015)
RAMESH CHAND AND ORS. …Appellants
VERSUS
M/S. TANMAY DEVELOPERS
PVT. LTD. & ORS. …Respondents
WITH
CIVIL APPEAL NO. 5600 OF 2017
(Arising out of Special Leave Petition (C) No.17007 of 2015)
rajinder singh AND ORS. …Appellants
VERSUS
M/S. TANMAY DEVELOPERS
PVT. LTD. & ORS. …Respondents
WITH
CIVIL APPEAL NO. 5601 OF 2017
(Arising out of Special Leave Petition (C) No.17168 of 2015)
mukhtiar singh AND ORS. …Appellants
VERSUS
M/S. capex projects
PVT. LTD. & ORS. …Respondents
AND
CIVIL APPEAL NO. 5606 OF 2017
(Arising out of Special Leave Petition (C) No. 13622 of 2017 (CC. No.12759
of 2015)
mehar chand (since Deceased)
thr. lrs. AND ORS. …Appellants
VERSUS
M/S. TANMAY DEVELOPERS
PVT. LTD. & ORS. …Respondents
J U D G M E N T
ARUN MISHRA, J.
1. Leave granted.
2. The appellants-herein are aggrieved by the common judgment and order
passed by the High Court of Punjab and Haryana at Chandigarh in F.A.
No.1941 of 2013, dated 4th February, 2015. The High Court by the impugned
judgment and order has directed refund of the earnest money by M/s. Tanmay
Developers Private Ltd. Five agreements to sell were entered into between
the M/s. Tanmay Developers Pvt. Ltd. and the land owners on 22.07.2006,
22.07.2006, 22.07.2006, 24.07.2006 and 21.06.2006. Out of the five
agreements, earnest money of Rs.54,25,000/- was paid out of the total sale
consideration of Rs,4,52,81,250/- as per agreement on 22.07.2006. As per
agreement dated 22.07.2006, Rs.1,56,000,00/- was paid as earnest money out
of total sale consideration of Rs.12,54,37,500/-. As per yet another
agreement on 22.07.2006, earnest money of Rs.21,00,000/- was paid out of a
sum of Rs.1,50,93,750/-. As per agreement dated 24.07.2006, earnest money
of Rs.90,00,000/- was paid out of total sale consideration of
Rs.7,71,31,250/-. As per agreement dated 21.06.2006, earnest money of
Rs.2,60,000/- was paid out of a total sale consideration or Rs.14,29,687/-.
Period for performance of agreement had expired in the month of
September/October, 2006. The land-owners on failure of purchaser to get the
sale deed executed forfeited earnest money.
3. A notification under Section 4 of the Land Acquisition Act, 1894 (for
short, “the Act”) was issued on 18.3.2008 for acquiring the land which was
the subject matter of the agreements. Three suits were filed for recovery
of earnest money in September, 2009 and one suit was filed for specific
performance of agreement to sell by the respondent- M/s. Tanmay Developer
in the month of March, 2008 which was decreed on 18.04.2014 and the appeal
filed by the land owners was pending at the time when the impugned judgment
and order was passed by the High Court. Similarly, three other suits which
were filed for recovery of the earnest money were pending. The Land
Acquisition Officer has passed the award on 19.09.2008. No reference under
Section 18 of the Act was sought by M/s. Tanmay Developers; however, during
the pendency of the suits/appeal the respondent had filed application under
Section 30 of the Act for referring the dispute to the Civil Court for
refund of earnest money alongwith interest. The Land Acquisition Officer
accordingly referred the matter.
4. The Reference Court on 7.12.2012 has passed an award rejecting the
prayer made by respondent No.1 on the ground that the dispute with respect
to the forfeiture of earnest money and whether M/s. Tanmay Developers Pvt.
Ltd. was entitled for specific performance could not be adjudicated under
Section 30 of the Act and it would not be appropriate for the Reference
Court to decide these disputed issues between the parties in view of civil
suits/appeal. The Reference Court held that the dispute under Section 30
of the Act arising out of the apportionment of the compensation or any part
thereof involved the vexed question of title or the civil rights of the
parties arising out of such transaction could not be adjudicated by
substituting the judicial forum into the civil court. The Reference Court
could not decide question of refund of earnest money by applying the
provisions of Chapter 2 of Part II of the Specific Relief Act, 1963. Such
powers can be exercised by the Civil Courts. Aggrieved thereby the
respondent No.1 filed appeals before the High Court which have been allowed
by the impugned judgment and order.
5. The respondent No.1 had sought apportionment of the compensation only
on the ground that agreement for sale had been entered into by the land
owners and prayed for refund of the earnest money along with the interest
at the rate of 12 per cent per annum, since the agreement had become
incapable of being specifically performed due to the acquisition of land.
It was contended on behalf of the land owners that Respondent No.1 was not
ready and willing to perform its part of the contract. Time was essence of
the contract. There had been forfeiture of the earnest money on failure of
respondent No.1 to get the sale deed executed within stipulated period.
Respondent No.1 was not having requisite amount of money hence could not
be said to be ready and willing to purchase the property. In the facts and
circumstances, the right of forfeiture of earnest money had been rightly
exercised. Thus, respondent No.1 was not entitled for refund of the
earnest money or apportionment of compensation particularly due to pendency
of the civil suits/appeal.
6. The learned counsel appearing on behalf of the appellants urged that
High Court erred in directing refund of the earnest money along with
interest at 6% per annum out of the compensation amount determined by the
Land Acquisition Officer. The High Court has not decided various vital
questions. The Reference Court had rightly declined to entertain the
reference application under Section 30 of the Act seeking refund of earnest
money under guise of apportionment of compensation. As per the agreement,
earnest money had been forfeited much before the acquisition of the land
which was initiated by virtue of notification issued under Section 4 in the
year 2008. Civil Suits had been filed and one of the matter first appeal
had been filed against one of the judgment and decree of the Civil Court,
thus, those questions could not have been taken over for decision by the
Reference Court. Subsequent to filing of civil suits remedy of reference
had been sought under Section 30.
7. On the other hand, it was contended by the learned counsel appearing
on behalf of the respondent-developer that buyer would be a “person
interested” within the purview of Section 3 (b) and 9 of the Act. Any
person interested could have sought the reference which had rightly made as
the payment of earnest money under agreements was not in dispute. The High
Court has rightly exercised the power to apportion compensation by
directing refund of the earnest money along with interest.
8. It was not rightly disputed that several civil suits with respect to
refund of the earnest money and for specific performance of the agreement
to sale were filed by the respondent No.1 before reference was sought under
Section 30 of the Act. Once remedy in the form of civil suits had been
resorted to, in our considered opinion, it was not at all proper exercise
of power to invoke provisions under Section 30 of the Act with regard to
apportionment of the compensation by directing refund of earnest money. It
is not mandatory to make a reference to the civil court under Section 30
and adjudication of dispute in an appropriate case can be ordered by way of
the civil suit. In the instant case civil suits had already been preferred
by respondent No.1. It was not appropriate to decide same dispute under
Section 30.
9. In the instant case, there were serious disputed questions as to
whether earnest money had been rightly forfeited by the land owners due to
the failure of the respondent No. 1 to obtain the sale deeds executed
within stipulated time fixed under the agreements, whether respondents were
ready and willing to purchase the property and had arrangement of balance
consideration for payment to land owner. Whether the power of forfeiture
was rightly exercised by the land owners as claimed by them. The Civil
Court was already in seisin of the matter as such reference court had
rightly rejected the reference made under Section 30 of the Act and rightly
asked parties to await outcome of the regular civil suits.
10. The High Court in the impugned judgment has not decided aforesaid
objections raised by the appellants/land owners without examining facts and
circumstances of the case and due to pendency of civil suits, it was not
open to the High Court to order refund of the earnest money.
11. A perusal of Section 18 of the Act makes it clear that reference can
be sought to a civil court with respect (i) the measurement of the land,
(ii) adequacy and quantum of compensation, (iii) persons to whom it is
payable and (iv) the apportionment thereof amongst the persons interested.
The application under Section 18 is required to be filed within stipulated
time whereas no limitation is prescribed under Section 30 of the Act. It
is discretionary upon the court to refer a dispute under Section 30 of the
Act. The same is confined to the apportionment of the compensation or as to
a person to whom the same is payable. The scope of Section 30 of the Act
is narrow as compared to Section 18 as laid down in G.H. Grant v. State of
Bihar AIR 1966 SC 237 and in Sharda Devi v. State of Bihar (2003) 3 SCC
128.
12. We need not go into the question whether holder of agreement is
“person interested” as defined in Section 3(b) of the Act. As we are
satisfied that respondent No. 1 could not have resorted to the remedy of
reference for refund of the earnest money as for this very purpose he had
filed civil suit earlier in point of time. In the reference petition refund
of earnest money had been prayed with interest at the rate of 12 per cent
per annum. In civil suit refund had been sought with 18 per cent interest
per annum and in one suit specific performance was prayed.
13. The High Court has relied upon the decision of this Court in
Thiriveedhi Channiah v. Gudipudi Venkata Subba Rao (Dead) by Lrs. & Ors.
(2009) 17 SCC 341, in which the appellant demanded refund of the advance
amount on the premise that due to notification under Section 4(1), property
could not be sold whereas the plea of forfeiture was advanced by the
respondents. This High Court had ignored and overlooked that case arose
out of the civil suit in which specific performance of agreement to sale
was sought. This Court has found that parties were aware of the
notification under Section 4(1) as such right of forfeiture could have been
exercised. The facts in the said case were different and the said decision
could not have been utilized by the High Court for setting aside the well
reasoned award passed by the reference court declining to entertain the
prayer made by the respondents, in view of the availing remedy of the civil
suits. The High Court should have in fairness reflected that the said
decision was rendered by this Court in the context of civil suit. The High
Court has referred it in the manner as if it was a case which has been
decided under Section 30 of the Act with respect to the apportionment of
the compensation.
14. The learned counsel on behalf of the respondent has relied upon the
decision of Bombay High Court in Mohammad Akil Khan v. Premraj Jawanmal
Surana and Anr. AIR 1972 Bom. 217. The decision is distinguishable as the
civil suit had not been filed in the said case. Thus, we need not go into
the correctness of the aforesaid decision. Reliance has also been placed
on Delhi Development Authority v. Bhola Nath Sharma (Dead) by Lrs. & Ors.
(2011) 2 SCC 54; and Sunderlal v. Paramsukhdas & Ors. AIR 1968 SC 366 to
contend that definition under Section 3(b) of the “person interested” is
“inclusive” definition. Reliance for this purpose has also been placed on
U.P. Jal Nigam, Lucknow Through Its Chairman & Anr. v. Kalra Properties (P)
Ltd., Lucknow & Ors. (1996) 3 SCC 124, laying down that a purchaser is
entitled to step into the shoes of the owner to claim compensation though
could not question the notification for acquisition. In our opinion even if
it is held that respondent No.1 was the “person interested” within the
meaning of Section 3(b) of the Act its case is not advanced so as to seek
adjudication of the questions in the facts of this case in the reference
under Section 30 of the Act which remedy was discretionary. The land
owners also relied upon Coromandel Indag Products Private Limited v. Garuda
Chit and Trading Company Private Limited and Another (2011) 8 SCC 601
wherein this Court dealt with question when time is essence of the contract
and in what circumstances earnest money could be forfeited. This question
has to be gone into in civil suits.
15. Resultantly, the appeals are allowed. The impugned judgment and order
passed by the High Court is hereby set aside. The land owners are entitled
for disbursement of the compensation. Obviously, it will be subject to the
outcome of the civil suits in which refund of the earnest money along with
interest had been sought by the respondent No.1. In case the appellants
fail and refund is directed in civil suits, the landowners shall have to
pay it as per the judgment and decree which may be passed. No costs.
…………………………..J.
(Arun Mishra)
..................................J.
(MOHAN M. SHANTANAGOUDAR)
NEW DELHI
APRIL 26, 2017
