THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 03.10.2011
Judgment Pronounced on: 17.10.2011
+ CS(OS) 864/1999
INDIAN BANK ..... Plaintiff
Through Ms. Seema Gupta, Adv.
versus
GAWRI CONSTRUCTION UDYOG LTD & ORS
..... Defendants
Through Mr. M.L. Mahajan and Mr.
Gaurav Mahajan, Advs.
+ CS(OS) 865/1999
INDIAN BANK ..... Plaintiff
Through Ms. Seema Gupta, Adv.
versus
GAWRI CONSTRUCTION UDYOG LTD & ORS
..... Defendants
Through Mr. M.L. Mahajan and Mr.
Gaurav Mahajan, Advs.
AND
+ CS(OS) 985/1999
INDIAN BANK ..... Plaintiff
Through Ms. Seema Gupta, Adv.
versus
GAWRI CONSTRUCTION UDYOG LTD & ORS
..... Defendants
Through Mr. M.L. Mahajan and Mr.
Gaurav Mahajan, Advs.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 1 of 37
CORAM:-
HON'BLE MR JUSTICE V.K. JAIN
1.
Whether Reporters of local papers may
be allowed to see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported Yes
in Digest?
V.K. JAIN, J
1. By this common judgment, I will dispose of all the
three suits and counter-claim referred above. Defendant No.
1 entered into construction-cum-agreements dated 23rd
April, 1990 with the plaintiff-bank for construction on
various properties. The sale deed was to be executed within
30 days from the date of giving possession to the plaintiff.
Under the agreement, defendant No. 1 was to pay all taxes
on the properties subject matter of the agreements till
possession was delivered to the plaintiff-bank. The
agreement provided for payment of penalty to the plaintiff-
bank at the rate of 0.5% of the total sale consideration
subject to ceiling of 7.5% of the total consideration if
possession of the flats, to be constructed by defendant No.
1, is delayed beyond 18 months from the date of the signing
of the agreement. The bank was entitled to rescind the
CS(OS)No.864/1999, 865/1999, 985/1999 Page 2 of 37
agreement in case of delay beyond 15 weeks and in that
case the amount disbursed by it was recoverable with
interest from the date of disbursement.
2. Suit No. 864/1999 pertains to construction of 10
flats on Property No. C-17, Inder Puri. Suit No. 865/1999
pertains to construction of 12 flats of Property No. C-12,
Inder Puri. Suit No. 985/1999 pertains to construction of 12
flats of Property No. C-10, Inder Puri. Since defendant No. 1
has not executed the sale deeds in respect of the flats
constructed by it, despite delivering their possession to the
plaintiff, a decree for specific performance of the agreement
by directing defendant No. 1 to execute sale deed in respect
of the building constructed by it on the aforesaid plots has
been sought in all the three suits. In Suit No. 864/1999,
the plaintiff has also claimed a sum of Rs 5.20 lakh which it
claims to have paid as arrears of property tax for the period
prior to handing over of possession to the plaintiff which it
has paid to Municipal Corporation of Delhi. It is also
alleged that the plaintiff-bank has adjusted a sum of Rs
2,76,765/- towards price variation and liquidated damages
and a sum of Rs 50,000/- is payable by it to the defendant
which it is ready and willing to pay after settlement of the
CS(OS)No.864/1999, 865/1999, 985/1999 Page 3 of 37
accounts. .In Suit No. 865/1999, the plaintiff has, besides
execution of the sale deed in his favour, also sought a
direction to defendant No. 1 install meters in every flat,
constructed by it. It is alleged that since possession of the
flats was delayed by defendant No. 1, it was liable to pay a
penalty of Rs 39,000/- which the plaintiff-bank has already
adjusted. According to the bank, it was required to pay a
sum of 19,033/- to the defendant which it is ready and
willing to pay. In Suit No. 985/1999, the plaintiff has, in
addition to execution of the sale deed in his favour, has also
sought recovery of Rs 1108.76/-, being the excess amount
paid to defendant No. 1. It is alleged that defendant No. 1 is
liable to pay a sum of Rs 36,400/- for delay in handing over
the possession which the plaintiff-bank has already
adjusted.
3. The suit has been contested by defendants No. 1
and 2 who have taken a preliminary objection that the suit
is bad for mis-joinder of defendants No. 2 and 3, who are
neither a necessary nor a proper party to the suit. They
have also denied the competence of Mr M.S. Parthasarthy to
sign and verify the pleadings and institute the suit on behalf
of the plaintiff-bank. They have also claimed that the suit is
CS(OS)No.864/1999, 865/1999, 985/1999 Page 4 of 37
barred by limitation and is not properly valued for the
purpose of Court fee and jurisdiction. On merits, it is
alleged that defendant No.1 has also been ready and willing
to execute the sale deed and it is the plaintiff which is guilty
of breach of terms of the agreement, as they have failed to
pay the amount due to the defendants.
4. As regards the claim of the plaintiff for the amount
paid by it to MCD towards arrears of property tax, it is
alleged that no house tax was payable when the building
was under construction and, therefore, the claim of the
Corporation for the years 1988-89, 1989-90, 1990-91 and
1991-92 was without any basis and the plaintiff had no
right to deal with the demand of MCD without involving the
defendants. In Suit No. 865/1999, the defendants have
denied their liability to pay any penalty to the plaintiff and
have claimed that it was the plaintiff which was responsible
for the delay in construction. It is also alleged that the
defendants are also entitled to interest on the amount of
Rs19,033/- which the plaintiffs admit to be payable to
defendant No. 1 and the amount of interest comes to Rs
33,878/-. In Suit No. 985/1999 defendants have denied
their liability to pay the amount of Rs 36,400/- which the
CS(OS)No.864/1999, 865/1999, 985/1999 Page 5 of 37
plaintiff claims to have adjusted.
5. A counter-claim of Rs 41,38,901/- had been filed
by defendant No. 1 in Suit No. 864/1999. It is alleged that
vide letters dated 13th August, 1988 and 1st January, 1990,
the plaintiff-bank accorded sanction for purchasing 33 flats
comprised in Property No. C-15, C-10 and C-12, Inder Puri
and 20 flats comprised in Property No. C-17 and C-40, Inder
Puri. However, on the suggestion of the plaintiff-bank, five
different agreements were executed. It is alleged that the
plaintiff made payment of Rs 22.35 lakh towards
construction of flats on Property No. C-40, Inder Puri. It is
alleged that the plaintiff-bank failed to approve the plan for
further construction as a result of which, construction
could not be started. The defendant raised a loan of Rs 1
crore from the bank. Since the sanction for the plans was
not forthcoming from the plaintiff-bank, defendant No. 1
requested it either to return the balance duly sanctioned or
cancel the agreement. While making payment towards
construction of flats, the plaintiff-bank adjusted the sum of
Rs 22.35 lakh which it had paid towards construction on
Property No. C-40, Inder Puri along with interest amounting
to Rs 11.77 lakh. It is alleged that defendant No. 1 was
CS(OS)No.864/1999, 865/1999, 985/1999 Page 6 of 37
forced to agree to the adjustments since original documents
were with the plaintiff bank and it was not ready to part
with them unless the aforesaid amount was adjusted
against the other amounts payable by the bank in respect of
other properties. Defendant No. 1 claimed that amount of
Rs 11.77 lakh along with interest on that amount which
comes to Rs 19.94 lakh. The defendants have also claimed
interest amounting to Rs 50,944/- on the liability of Rs
19,003/- admitted by the plaintiff-bank and Rs 1,23,500/-
towards interest on the liability of Rs 50,000/-. The
defendants have also claimed a sum of Rs 7,91,927/-
towards interest on delayed payment.
6. The following issues were framed on the pleadings
of the parties:-
i. Is shri M.S. Parthasathi, Assistant General Manager is
competent to sign verify and institute these suits on
behalf of the plaintiff bank?
ii. Are the suits of the plaintiff bad for misjoinder of the
defendants, as alleged in para 1 of the preliminary
objections?
iii. Are the suits being properly valued for the purposes of
court fee and jurisdiction? If not, with what effect?
CS(OS)No.864/1999, 865/1999, 985/1999 Page 7 of 37
iv. Are the suits of the plaintiff within time?
v. Did the plaintiff entered into only one transaction in
respect of 33 flats comprised in plot Nos. C-15, C-10
and C-12, Inder Puri, New Delhi and 20
flats comprised in plot Nos. C-17 and C-40, Inder Puri,
New Delhi.
vi. Whether the defendants have failed to complete all
legal formalities including obtaining completion
certificate in respect of the premises? OPP
vii. Whether there are some illegal and unauthorized
constructions made by the defendant and whether the
defendants are liable either to get the
buildings regularized or to pay damages for the loss to
be suffered by the plaintiff? OPP
viii. In view of the agreement to sell whether the defendants
can refuse execution of sale deed in favour of the
plaintiff? OPD
ix. Whether the defendants are entitled to receive any
amount from the plaintiff? If so, what amount? OPD
x. Whether the counter claim, arising out of a separate
contract, can be claimed in this suit by the
defendants? OPD
CS(OS)No.864/1999, 865/1999, 985/1999 Page 8 of 37
xi. Relief.
Issue No. 1
7. Mr M.S. Parthasarthy, who has signed and verified
the pleadings and instituted this suit on behalf of the
plaintiff-bank, filed his affidavit by way of evidence and was
partly examined on 23rd October, 2007. He was not
produced thereafter and the plaintiff-bank examined PW-3
Shri P.R. Pujari, Chief Manger with the plaintiff-bank. Mr
Pujari has identified the signature of Mr M.S. Parthasarthy
on the plaint and has also proved the copy of Power of
Attorney in favour of Mr M.S. Parthasarthy which is Ex.PW-
1/2 and which has been executed by Mr M.
Gopalakrishnan, Chairman and Managing Director of the
plaintiff-bank at the relevant time. A perusal of the Power of
Attorney Ex.PW-3/2 would show that vide this document,
Mr M.S. Parthasarthy was authorized to take all legal
proceedings whether civil or criminal for recovering and
receiving the debts of the bank and to institute, file and
prosecute all actions, including civil suits on behalf of the
plaintiff-bank. He was also authorized to sign, verify and file
vakalatnama, written statement, etc. on behalf of the
plaintiff-bank. The power of attorney purports to be
CS(OS)No.864/1999, 865/1999, 985/1999 Page 9 of 37
executed by the Chairman and Managing Director as well as
the Director and General Manager of the plaintiff-bank and
authenticated by public notary. Since, the power of
attorney in favour of Mr M.S. Parthasarthy has been
attested by Public Notary, there is a statutory presumption
under Section 85 of Evidence Act that the Power of Attorney
was executed by the person by whom it purports to have
been executed and the person who executed the power of
attorney was fully competent in this regard.
8. In Jugraj Singh and Anr. Vs. Jaswant Singh and
Ors., AIR 1971 SC 761, the Power of Attorney attested by a
Public Notary was disputed on the ground that it did not
show on its face that the Notary had satisfied himself about
the identity of the executant. Supreme Court held that there
was a presumption of regularity of official acts and that the
Notary must have satisfied himself in the discharge of his
duties that the person who was executing it was the proper
person. In Rajesh Wadhwa vs. Sushma Govil, AIR 1989,
Delhi 144, it was contended before this Court that till it is
proved that the person who signed the said power of
attorney was duly appointed attorney, the court cannot
draw a presumption under Section 57 and 85 of the
CS(OS)No.864/1999, 865/1999, 985/1999 Page 10 of 37
Evidence Act. Repelling the contention, it was held by this
Court that the very purpose of drawing presumption under
Sections 57 and 85 of the Evidence Act would be nullified if
proof is to be had from the foreign country whether a
particular person who had attested the document as a
Notary Public of that country is in fact a duly appointed
Notary or not. When a seal of the Notary is put on the
document, Section 57 of the Evidence Act comes into play
and a presumption can be raised regarding the genuineness
of the seal of the said Notary, meaning thereby that the said
document is presumed to have been attested by a
competent Notary of that country.
In Punjab National Bank vs. Khajan Singh, AIR
2004 Punjab and Haryana 282, the Power of Attorney in
favour of a bank, which had been duly attested, was
rejected by the learned District Judge on the ground that
the presumption under Section 85 of Evidence Act was
available to a particular class of Power of Attorneys
described in the section and was confined to its execution
and authenticity alone. The High Court, however, rejected
the view taken by the learned District Judge holding that
absence of proof of resolution authorizing the executant to
CS(OS)No.864/1999, 865/1999, 985/1999 Page 11 of 37
execute the Power of Attorney could not be sustained and a
presumption in favour of the attorney would arise under
Section 85 Act. In United Bank of India v. Naresh Kumar
& Ors. (1996) 6 SCC 660, which was a suit instituted by a
bank, the issue which came up for consideration before the
Supreme Court was as to whether the plaint was duly
signed and verified by a competent person or not. The suit
in that case was instituted by one Mr. L.K.Rohatgi. The
Supreme Court noted that the suit had been filed in the
name of the appellant bank; full amount of the Court fee
had been paid by the bank; documentary as well as oral
evidence had been led on behalf of the appellant bank and
the trial of the suit had continued for about 02 years.
Supreme Court found it difficult in these circumstances,
even to presume that the suit had been filed and tried
without the appellant having authorized the institution of
the same. The Court felt that the only conclusion which it
could come to was that Shri L.K.Rohtagi must have been
authorized to sign the plaint and in any case it must be held
that the bank had ratified the action of Shri L.K.Rohtagi in
signing the plaint and therefore it continued with the suit.
During the course of the judgment, the Court inter alia
CS(OS)No.864/1999, 865/1999, 985/1999 Page 12 of 37
observed as under:
Reading Order 6 Rule 14 together with
Order 29 Rule 1 of the Code of Civil
Procedure it would appear that even in the
absence of any formal letter of authority or
power of attorney having been executed a
person referred to in Rule 1 of Order 29
can , by virtue of the office which he holds,
sign and verify the pleadings on behalf of
the corporation. In addition thereto and
dehors Order 29 Rule 1 of the Code of Civil
Procedure, as a company is a juristic
entity, it can duly authorize any person to
sign the plaint or the written statement on
its behalf and this would be regarded as
sufficient compliance with the provisions
of Order 6 Rule 14 of the Code of Civil
Procedure. A person may be expressly
authorized to sign the pleadings on behalf
of the company, for example by the Board
of Directors passing a resolution to that
effect or by a power of attorney being
executed in favour of any individual. In
absence thereof and in cases where
pleadings have been signed by one of its
officers a corporation can ratify the said
action of its officer in signing the
pleadings. Such ratification can be
express or implied. The Court can, on the
basis of the evidence on record, and after
taking all the circumstances of the case,
specially with regard to the conduct of the
trial, come to the conclusion that the
corporation had ratified the act of signing
of the pleading by its officer.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 13 of 37
This suit filed on behalf of Indian Bank has been
pending in this Court for the last about 12 years and no one
from the bank has come forward to repudiate this suit
which Mr. M.S.Parthasarthy has filed on behalf of the bank.
In these circumstances, it cannot be said that Mr.
M.S.Parthasarthy was not competent to institute the suit on
behalf of the plaintiff bank.
The issue is decided against the defendants and in
favour of the plaintiff.
Issue No. 2
9. The agreements for construction and sale of the
flats have been executed between plaintiff and defendant
No.1. Hence, the plaintiff has no cause of action against the
other defendants. The suits are bad for mis-joinder of other
defendants. The names of defendants other than defendant
No. 1 are therefore liable to be struck off from the array of
defendants.
The issue is decided accordingly.
Issue No.3
10. The plaintiff bank has paid the requisite Court fee.
No arguments on this issue were advanced. The issue is
decided against the defendants and in favour of the plaintiff.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 14 of 37
Issues No. 5, 6, 8, 9, 10 & 11
11. These issues are inter connected and can be
conveniently decided together.
The main dispute between the parties is with
respect to the amount of Rs 41,38,901/- for which a
counter claim has been filed in CS(OS) No. 864/1999. The
break up counter-claim is a under:
(a) Interest deducted by the plaintiff on the payments
which it had made to defendant No. 1 for
construction of flats in Property No. C-40, Inder
Puri, New Delhi: Rs. 11,77,765/-
(b) Interest on the aforesaid amount of Rs 11,77,765/-
for the period from 27th December, 1992 to 30th
August, 1999: Rs 19,94,765/-
(c) Interest on delayed payments made by the
plaintiff-bank: Rs 7,91,927/
(d) Amount payable to defendant No. 1 in respect of
Property No. C-12, Inder Puri along with interest
CS(OS)No.864/1999, 865/1999, 985/1999 Page 15 of 37
on that amount: Rs 50,944/-
(e) Amount to defendant No. 1 in respect of Property
No. C-17, Inder Puri along with interest on that
amount: Rs 1,23,500/-
12. Defendant No.1 had entered into an agreement
with the plaintiff-bank for construction of flats on property
No. C-40, Inder Puri and sale of those flats to it. The case of
the plaintiff, as set out in the counter claim and affirmed in
affidavit by Mr Vipin Gwari, director of the defendant No. 1-
company by way of evidence in this regard, is that the
plaintiff-bank made payment of Rs 22.35 lakh to it for
construction of flats on Property No. C-40, Inder Puri. This
is also the case of defendant No. 1 that construction up to
basement stage was completed by it and the plans for
raising further construction were submitted to the bank for
approval, but the bank failed to take action in this regard
for more than 11 months, despite request by defendant No.
1. Since defendant No. 1 had taken a loan of Rs 1 crore
from Citi Bank to complete the construction, it requested
the bank either to approve the plans or to cancel the
agreement. The bank acceding to the request of defendant
No. 1, cancelled the agreement for construction of flats on
CS(OS)No.864/1999, 865/1999, 985/1999 Page 16 of 37
Property No. C-40, Inder Puri, New Delhi, subject to
payment of interest at the rate of 18% per annum and
adjusted the amount which it had paid to defendant No. 1
along with a sum of Rs 11.77 lakh towards interest. The
adjustment was made out of the amount which had to pay
to defendant No. 1 for construction of other flats. In his
affidavit by way of evidence, Shri Vipin Gwari, Director of
defendant No. 1-company has stated that defendant No. 1
was forced to agree to the adjustment of illegal demand of
interest because original documents of the property were
with the bank, which was not ready to part with them
unless the aforesaid amount was adjusted. Ex.PW-3/D-10
is the letter dated 05th March, 1991, written by defendant
No. 1 to the plaintiff-bank, requesting that either the bank
may get the building constructed as per the sanctioned
plan or it may get the building constructed as per their own
design, at its own risk. It was further requested that in the
event of the bank failing to give an early reply, they suggest
that the bank may cancel the agreement and take back the
amount paid so far. This letter was followed by a reminder
dated 30th March, 1991 which is Ex-PW-3/D-11. Vide
letter dated 22nd June, 1991, Ex.PW-3/D-26, the plaintiff-
CS(OS)No.864/1999, 865/1999, 985/1999 Page 17 of 37
bank, with reference to defendant No. 1’s letter dated 19th
May, 1991, informed defendant No. 1 that its Head Office
had permitted cancellation of the agreement for C-40, Inder
Puri, New Delhi after recovery of the amount paid to it
along with interest. Defendant No. 1 was accordingly
requested to pay back the amount which it had received
from the plaintiff for this project along with interest at the
rate of 18% per annum. Admittedly, defendant No. 1
agreed to adjustment of not only the principal sum which it
had received from the plaintiff-bank for this project, but
also for the interest on that amount. It appears from the
letter dated 16th September, 1992 (Ex.DW-1/8), written by
defendant No. 1 to the plaintiff that it wanted to pay
interest at the rate of 18% per annum from the date of the
cancellation of the agreement, i.e., 22nd June, 1991 to 22nd
September, 1992, which worked out to Rs 5,02,875/-.
Thus, defendant No. 1 at that time made no protest about
payment of interest though it wanted to pay it only from the
date the agreement came to be cancelled. As noted earlier,
the agreement in respect of the flats to be constructed on
Property No. C-40, Inder Puri, New Delhi was cancelled by
the plaintiff-bank on the specific request of defendant No.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 18 of 37
1. The bank cancelled the agreement subject to defendant
No. 1 paying interest at the rate of 18% per annum on the
amount which it had received from the bank. If the
condition imposed by the plaintiff-bank for cancellation of
the agreement, on the request of defendant No. 1, was not
acceptable to it, defendant No. 1 could very well have
refused to accept the cancellation on payment of interest
and could have decided to go ahead with the agreement
which it had executed with the plaintiff-bank. If defendant
No. 1 was suffering any loss on account of the delay on the
part of the bank in approving the building plans, defendant
No. 1 could have sued the plaintiff-bank for damages. If
defendant No. 1 felt that bank had committed breach of the
by not approving the building plans within a reasonable
time, it could have rescinded the agreement between the
parties, instead of requesting the bank to cancel the
agreement and then accepting that cancellation on the
condition imposed by the bank. But, having accepted the
conditional cancellation of the agreement, defendant No. 1
cannot deny its liability to pay interest on the amount
which it had received from the plaintiff-bank. As regards
the stand taken by defendant No. 1 in its letter dated 16th
CS(OS)No.864/1999, 865/1999, 985/1999 Page 19 of 37
September, 1992 (EX-DW-1/8), I am of the view that the
bank was justified in seeking interest from the date it had
made payment to defendant No. 1 towards construction on
Property No. C-40, Inder Puri, New Delhi. In any case, if
this was not acceptable to defendant No. 1, it ought to have
rejected the conditional cancellation, instead of accepting
the adjustments made by the bank. A perusal of Ex.D-A,
which is the letter dated 28th November, 1992 from the
plaintiff-bank, would show that the amount paid by the
plaintiff-bank to defendant No. 1 towards construction of
Property No. C-40, Inder Puri, New Delhi was adjusted in
the following manner:
Date Particulars Amount
21.09.90 By 5% payment on C-15 flats at 3,72,500/-
Inderpuri.
19.11.92 By 5% payment towards C-17 2,98,500/-
flats Inderpuri.
27.11.92 By adjustment of balance 1,00,000/-
of payment towards C-15 flats
Inderpuri.
-do- By payment Recd. From SIDBI by 26,41,765/-
Cheque No. 644731 dt. 27.11.92
It is thus evident that defendant No. 1 had
CS(OS)No.864/1999, 865/1999, 985/1999 Page 20 of 37
accepted the adjustments made by the plaintiff-bank. If a
plaintiff-bank was unreasonably withholding the documents
of title of C-40, Inder Puri, defendant No. 1 could have
taken appropriate legal proceedings against the bank for
recovery of those document from it, but, having accepted
the term offered by the plaintiff-bank for cancellation of the
agreement, defendant No. 1 cannot now avoid payment of
interest to the bank on the ground that it was forced to
accept the condition of the bank on account of the original
documents of the property being in possession of the bank.
13. It has come in evidence that the plaintiff-bank has
charged compound interest on the amount which it had
advanced to defendant No. 1 towards construction of flats
on Property No. C-40, Inder Puri at the rate of 18% per
annum. The letter of the plaintiff-bank Ex.PW-3/D-26 does
not stipulate payment of compound interest though it does
stipulate payment of interest at the rate of 18% per annum.
It has also come in evidence that for another project the
bank charged simple interest and not compound interest on
the amount which it had advanced to the builder. A perusal
of the letter dated 08th January, 1993 (EX.PW-3/D-18) sent
by defendant No. 1 to the plaintiff-bank would show that the
CS(OS)No.864/1999, 865/1999, 985/1999 Page 21 of 37
difference between the compound interest and the simple
interest comes to Rs 2.18 lakh. I, therefore, hold that
defendant No. 1 is entitled to payment of Rs 2.18 lakh from
the plaintiff-bank.
14. As regards payment of interest on the aforesaid
amount of Rs 2.18 lakh, the only provision under which
defendant No. 1 can claim interest on this amount is
Section 3 of Interest Act, 1978, which to the extent it is
relevant, provides that in any proceedings for the recovery of
any debt or damages or in any proceedings in which a claim
for interest in respect of any debt or damages already paid is
made, court may, if it thinks fit, allow interest to the person
entitled to the debt or damages or to the person making
such claim, as the case may be, at a rate not exceeding the
current rate of interest: from the date mentioned in this
regard in a written notice given by the person entitled or the
person making the claim to the person liable that interest
will be claimed, to the date of institution of the proceedings.
EX-DW1/10 is the letter dated 22 nd March, 1993
sent by defendant No. 1 to the plaintiff-bank, whereby
defendant No. 1 reiterated the demands which it had been
making to the plaintiff-bank for payments of the amounts
CS(OS)No.864/1999, 865/1999, 985/1999 Page 22 of 37
due to it in respect of the projects at residential flats in
Inder Puri. Regarding payment of interest by the bank, this
letter reads as under:
“Since this period is already over we
demand the Bank to pay the same rate of
interest on all delayed payments since
the signing of the agreement as charged
by the Bank in cases of delayed
possession.”
This letter fulfils the requirement of a notice under
Section 3 of Interest Act. In the facts and circumstances of
the case, I am of the view that plaintiff-bank should pay
interest at the rate of 12% per annum on the aforesaid of Rs
2.18 lakh to defendant No. 1 w.e.f. 8th January, 1993 till
30th August, 1999 which comes to Rs 1,73,819/-
Therefore, defendant No. 1 is entitled to recover
Rs1,73,819/-
15. The case of defendant No. 1 is that the plaintiff-
bank did not make payments as per the schedule fixed in
the agreements and, therefore, it is entitled to interest on
that amount as per the calculations made in the chart
Ex.DW-1/2. I have carefully gone through the agreements
executed between the plaintiff and defendant No. 1. There
is absolutely no provision in the agreements for payment of
CS(OS)No.864/1999, 865/1999, 985/1999 Page 23 of 37
any interest by the plaintiff in case delay in payment on its
part. Since there is no agreement between the parties for
payment of interest on delayed payments, defendant No. 1 is
not entitled to recover any amount from the plaintiff-bank in
this regard.
16. Admittedly, a sum of Rs 1108.71/- is payable by
the plaintiff to defendant No. 1 in respect of flats
constructed on Property No. C-40, Inder Puri, New Delhi, a
sum of Rs 19,032.90 is payable towards balance amount for
the construction of flats on Property No. C-12, Inder Puri
and a sum of Rs 50,000/- is payable to defendant No. 1
being the balance sale consideration towards purchase of
flats constructed on Property No. C-17, Inder Puri, New
Delhi. Defendant No. 1 is entitled to recover these amounts
from the plaintiff-bank. However, no interest is payable by
the plaintiff-bank on these amounts, firstly because there is
no agreement between the parties for payment of interest
on account of delayed payments by the plaintiff-bank and
secondly because as per the agreements between the
parties, 5% of the balance sale consideration was to be paid
on handing over possession along with completion
certificates and though possession has been handed over to
CS(OS)No.864/1999, 865/1999, 985/1999 Page 24 of 37
the plaintiff-bank, there is no evidence of defendant No. 1
having obtained the completion certificate at any time prior
to filing of this suit. I, therefore, hold that defendant No. 1 is
not entitled to interest on these amounts and can recover
only a sum of Rs 70,141.61/- being the aggregate of the
aforesaid sums of Rs 1108.71/-, Rs 19,032.90/-, and Rs
50,000/-.
17. In Suit No. 864/1999, the plaintiff has also
claimed a sum of Rs 5.2 lakh which it had paid to MCD
towards arrears of property tax for the period prior to its
receiving possession of the flats from defendant No. 1. In
this regard, the agreement between the parties provided that
defendant No. 1 shall pay and discharge all rates, taxes,
levies, etc, levied by any other local authority and any other
competent authority on the property subject matter of the
sale, till the possession of the same was handed over to the
bank as stipulated in the agreement. After taking
possession, these charges were to be borne by the plaintiff-
bank. The plaintiff claims to have paid Rs 39,920/- for the
year 1988-89, Rs 50,148 for the year 1989-90, Rs
2,42,140/- for the year 1990-91 and Rs 1,87,640/- for the
year 1991-92 towards arrears of property tax. EX-P-D is
CS(OS)No.864/1999, 865/1999, 985/1999 Page 25 of 37
the notice issued by MCD to defendant No. 1, requiring it to
show-cause why penalty of Rs 1,06,968/- be not imposed
on it on account of its failure to pay arrears amounting to
Rs 6,66,819/-. Vide this notice, defendant No. 1 was
informed that on account of failure on its part to pay the
arrears, by due date, it was being treated as a defaulter
under Section 155 of Delhi Municipal Corporation Act. It
was further informed that in case the amount was not
received by prescribed date along with reply to the notice,
the penalty shall be levied and further action as per Section
156(2), 158 and 162(1) of DMC Act shall follow for effecting
the recovery of the tax, including the amount of penalty.
EX-P-E is the letter dated 09th March, 1998, written by the
plaintiff-bank to MCD informing it that they had purchased
the property from defendant No. 1 in the year 1992 and had
paid property tax from 01.04.1992 to 31.03.1998. MCD
was requested to recover arrears prior to 01.04.1992 from
defendant No. 1. A writ petition being, CW No. 1381/1998,
was also filed by the plaintiff-bank against the MCD,
challenging the show-cause notice dated 04th March, 1998.
In the writ petition, the plaintiff-bank claimed that no action
had been taken by MCD on its representation dated 09th
CS(OS)No.864/1999, 865/1999, 985/1999 Page 26 of 37
March, 1998. The plaintiff-bank undertook to pay the
amount which was found legitimately due and payable to
MCD on account of house tax. The writ petition was
disposed of with the direction to MCD to dispose of the
representation made by the plaintiff-bank after affording
opportunity of hearing to it. It was also directed that if after
hearing the plaintiff-bank, any amount was found due and
payable by the bank, the same would be paid within four
weeks from the date of the order. The entire amount
demanded by MCD was deposited by the plaintiff-bank vide
receipts Ex. P-B along with forwarding letter Ex.P-C.
This is not the case of defendant No. 1 that arrears
of property tax till the date possession was handed over to
the plaintiff-bank, come to less than Rs 5.2 lakh. The case
of defendant No. 1 in this regard is that no property tax was
payable since the building was still under construction at
the relevant time. In my view, defendant No. 1 cannot deny
its liability to pay property tax on the ground that it was not
payable at all to MCD. Since the property in question at the
relevant time stood in the name of defendant No. 1, it was
for defendant No. 1 to challenge the demand raised by MCD.
This is more so when the demand was raised on defendant
CS(OS)No.864/1999, 865/1999, 985/1999 Page 27 of 37
No. 1 and not on the plaintiffs, as is evident from the notice
dated 04th March, 1998. It was not for the plaintiff-bank to
dispute and contest the liability of defendant No. 1 for the
period up to the date possession of the flats was received by
it. In fact, the plaintiff-bank did not have locus standi to
challenge the demand of property tax for the period prior to
receiving possession of the flats from defendant No. 1.
Neither the plaintiff bank was under a legal obligation to
dispute and contest the demand of property tax raised by
MCD against defendant No. 1 nor did it have legal
competence to challenge that demand.
Section 69 of Contract Act, to the extent it is
relevant, provides that a person who is interested in the
payment of money which another is bound by law to pay,
and who therefore pays it, is entitled to be reimbursed by
the other. Therefore, if it can be said that the plaintiff was
interested in payment of property tax, demanded by MCD
and defendant No.1 was bound by law to pay that money to
MCD, it will be entitled to reimbursement of the amount
which it paid to MCD on behalf of defendant No. 1. Since
the bank had agreed to purchase the flats constructed on
these properties from defendant No. 1, the construction of
CS(OS)No.864/1999, 865/1999, 985/1999 Page 28 of 37
the flats was financed by it and the possession of the flats
had also been taken by it from defendant No. 1, it is difficult
to dispute that the plaintiff-bank was interested within the
meaning of Section 69 of Contract Act, in a payment of
property tax to MCD. The payment of property tax is a
charge on the property and MCD is entitled in law to attach
that property to recover the arrears of property tax. Section
156(1) of DMC Act, to the extent it is relevant, provides that
if the person liable for payment of tax does not pay the
amount within 30 days from the service of notice of
demand, the amount may be recovered by sale of immovable
property of defaulter.
Since MCD could have attached these properties to
recover the arrears of property tax from defendant No. 1,
attachment of the properties would have adversely affected
the interest of the plaintiff-bank which had not only
financed from construction, but had also received
possession from defendant No. 1.
In the record of MCD, the properties stood in the
name of defendant No. 1 and it was the person primarily
responsible for payment of property tax in respect of those
properties to MCD, it cannot be disputed that defendant No.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 29 of 37
1 was legally bound to pay the arrears of property tax,
demanded by MCD. Section 69 of Contract Act is based
upon the doctrine of unjust enrichment so that a person,
who is unjustifiably enriched at the expense of another is
made to make restitution. In fact, Section 69 of Contract
Act does not require that a person, to be interested in
payment, should at the same time have a legal proprietary
interest in the property in respect of which the demand is
made. The interest envisaged in Section 69 of Contract Act
is an interest in order to avert some loss or to protect some
interest which would otherwise be lost to the person making
the payment. Moreover, defendant No. 1 was legally bound
to pay arrears of property tax up to the date it handed over
possession of the flats to the plaintiff in terms of the
agreements, executed between the parties. This contractual
obligation would also be covered within the expression
“bound by law to pay” used in Section 69 of Contract Act.
A similar issue came up for consideration before
Privy Council in Govindram Gordhandas Seksaria and
Another vs. State of Gonday AIR (37) 1950 Privy Council
99. In that case, the appellant company had entered into a
sub-agreement to purchase two mills, but no formal sale
CS(OS)No.864/1999, 865/1999, 985/1999 Page 30 of 37
deed had been executed in his favor. There were unpaid
municipal dues in respect of those mills. Those dues were
paid by the appellant. It was contended before Privy Council
that a person cannot be said to be interested in payment of
money within the meaning of Section 69 of Contract Act,
unless he was at the same time entitled to some legal
interest in the property in respect of which payment was
made. The contention, however, was rejected. Setting aside
the decision of the High Court, Privy Council, inter alia, held
as under:
“The learned Judges of the High Court in
appeal held that the appellant company
could not establish a right under this
section because it was not interested in
the payment of the money that it paid.
The view that it was not interested was
based on the fact that at the date of the
payment the company had no property
interest in the mills in respect of which
the taxes were claimed. And in
accordance with this view, the company’s
payment was described by the learned
Judges as a voluntary one. To their
Lordships it seems to have been very
unlike a voluntary payment. The
company had contracted to buy these
mills, and they were imminently
threatened with a forced sale which
would, of course, defeat its purchase.
Money had to be found for the taxes if the
mills were to be saved. Neither the
Maharajah nor the trustees showed any
sign of paying the Municipality. So theCS(OS)No.864/1999, 865/1999, 985/1999 Page 31 of 37
appellant company paid. But to describe
it in those circumstances as having made
a voluntary payment appears to their
Lordships to involve some misuse of
language. Nor do they appreciate why it
should not properly be described as
interested in the payment. In any
ordinary use of language, the company
was interested in the taxes being paid at
the time when they were paid since only
through the payment could it realize the
fruit of the contract that it had entered
into. The words themselves do not
require about a person to be interested in
a payment should at the same time have
a legal proprietary interest in the property
in respect of which the payment is made.
But the general purport of the section is
reasonably clear; to afford to a person
who pays money in furtherance of some
existing interest an indemnity in respect
of the payment against any other person
who, rather than he, could have been
made liable at law to make the payment.
So interpreted, S.69 appears to their
Lordships to apply to the payment made
by the appellant company in this case.
Certainly too, there is authority in the
Courts of India for the proposition that
“bound by law” covers obligations of
contract or tort. Accepting this
interpretation, as their Lordships do, they
hold that the act of payment by the
appellant company gave to it a right of
action against the Maharajah to obtain
reimbursement of the sums so paid.
Thus, as against him, both the plaintiffs
in this suit ought to have been held to
have good, though alternative, rights of
action.”
CS(OS)No.864/1999, 865/1999, 985/1999 Page 32 of 37
I, therefore, hold that that the plaintiff-bank is
entitled to recover the aforesaid amount of Rs 5.2 lakh from
defendant No. 1. On payment of the aforesaid amounts to
it, defendant No. 1 is legally bound to execute sale deed in
favour of the plaintiff-bank in respect of the flats
constructed by it on properties No. C-10, C-12 and C-17,
Inder Puri and it has no justification in law to refuse such
execution. The issues are decided accordingly.
Issue No. 7
There is no evidence of any illegal and
unauthorized construction having been made by defendant
No. 1. Admittedly, no notice alleging any unauthorized
construction had been received by the plaintiff-bank.
Therefore, there is no question of defendant No. 1 seeking
regularization of any unauthorized construction or paying
any damages to the plaintiff for such construction. In any
case, no particular amount has been claimed as damages in
this regard.
Issue No. 4
18. Article 54 of Limitation Act provides that the period
of limitation in a suit for specific performance of a contract
is three years from the date fixed when the performance or if
CS(OS)No.864/1999, 865/1999, 985/1999 Page 33 of 37
no such date is fixed where the plaintiff has notice that
performance is refused. The Court before deciding the issue
of limitation has to find out what the terms of the contract
between the parties were and whether there was a definite
date for performing a contract. If the case is covered by first
part of Article, the period of limitation would commence
from the date fixed for performance of the contract and in
case it is covered by second part of the Article, the period of
limitation would commence from the date on which the
plaintiff has noticed of refusal of performance by the
defendant. The words “date fixed for performance” need not
be ascertainable in the face of the document and may be
ascertainable on the happening of a certain contingent event
specified in the contract. “Date fixed” would, therefore,
mean either the date fixed expressly in the contract between
the parties or a date that can be fixed with reference to a
future event which is certain to happen.
The agreement between the plaintiff and defendant
No. 1 provided for execution of the sale deed within 30 days
of defendant No. 1 obtaining completion certificate and
putting the plaintiff-bank in possession of the property
agreed to be sold to it. There is no evidence of defendant No.
CS(OS)No.864/1999, 865/1999, 985/1999 Page 34 of 37
1 having obtained completion certificates within three years
prior to institution of these suits. Had defendant No. 1
obtained the completion certificates, the last date stipulated
for execution of sale deed in favour of the plaintiff-bank
would have been a date 30 days from the date completion
certificate was obtained by defendant No. 1 and receipt of
completion certificate by defendant No. 1 was conveyed to
the plaintiff. This is not the case of defendant No. 1 that it
had obtained completion certificate more than three years
before filing of these suits and had informed the plaintiff-
bank in this regard. Therefore, computed in terms of first
part of Article 54, the period of limitation had not expired
when these suits were filed.
If the period of limitation is computed in terms of
second part of Article 54 of Limitation Act, the suits are still
within time for the simple reason that defendant No. 1 has
never refused to execute the sale deed in favour of plaintiff.
The correspondence between the parties seeking shows that
defendant No. 1 had time and again been expressing its
willingness to execute the sale deeds in favour of the
plaintiff bank. Ex. PW-2/13 is the letter of defendant No. 1
dated 28th November, 1998 seeking certain payments from
CS(OS)No.864/1999, 865/1999, 985/1999 Page 35 of 37
the plaintiff-bank and expressing willingness to execute the
sale deed in its favour. Similar willingness was shown in the
letter dated 23rd June, 1997 (EX.PW-2/11), letter dated 23rd
September, 1996 (Ex.PW-2/10), letter dated 1st January,
1996 (Ex.PW-2/9), letter dated 22nd April, 1995 (Ex.PW-2/6)
and letter dated 04th September, 1996 (Ex.DW-1/15). I,
therefore, hold that specific performance of the agreements
executed by defendant No. 1 in favour of plaintiff-bank for
construction and sale of flats in properties Nos. C-10, C-12
and C-17, Inder Puri is not barred by limitation.
As regards claim of recovery of Rs 5.2 lakh paid to
MCD towards arrears of property tax, since the plaintiff
bank made payment only on 04th May, 1998 and had no
cause of action to recover the aforesaid amount before that
date, the suit having been filed in April, 1999 is well within
limitation. The issue is, therefore, decided in favour of the
plaintiff and against the defendant No. 1.
ORDER
In view of my findings on the issues, the names of
defendants other than defendant No. 1 M/s Gawri
Constructions Udyog Ltd. are struck off from the array of
defendants. After adjustment of the amounts payable to
CS(OS)No.864/1999, 865/1999, 985/1999 Page 36 of 37
defendant No. 1, the plaintiff-bank is entitled to recover the
balance amount of Rs 58,039.39/- from defendant No. 1.
Defendant No. 1 is directed to execute sale deed in favour of
the plaintiff-bank in respect of the buildings constructed by
it on properties No. C-10, C-12 and C-17, Inder Puri, New
Delhi within 8 weeks. Defendant No. 1 is also directed to
pay a sum of Rs 58,039.39/- to the plaintiff-bank, along
with pendente lite and future interest on that amount at the
rate of 6% per annum. In the facts and circumstances of the
case, there shall be no order as to costs.
Decree sheet be drawn accordingly.
(V.K. JAIN)
JUDGE
OCTOBER 17, 2011
VN/BG
CS(OS)No.864/1999, 865/1999, 985/1999 Page 37 of 37