RATTAN LAL (D) THR.LRS. Vs S.N.BHALLA .
Bench: ALTAMAS KABIR,J. CHELAMESWAR
Case number: C.A. No.-005787-005787 / 2012
Diary number: 10703 / 2009
Advocates: BHARGAVA V. DESAI Vs
P. S. SUDHEER
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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)
Rattan Lal (since deceased) Through His Legal Representatives … Appellant
Vs.
S.N. Bhalla & Ors. … Respondents
J U D G M E N T
ALTAMAS KABIR, J.
1. Leave granted.
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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
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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
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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
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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).”
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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,
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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
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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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