i.8
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision:18th December, 2008
+ RFA 272/2004
RATTAN LAL (since deceased)
THR. HIS LEGAL REPRESENTATIVES ..... Appellant
Through: Mr. Vinay Bhasin, Sr. Advocate with
Mr. Kapil Kher, Advocate
versus
S.N.BHALLA & ANR. ..... Respondents
Through: Mr. A.S.Chandhiok, Sr. Advocate with
Mr. Raman Kapoor, Mr. J.N.Patel,
Ms. Geetika Panwar and Ms. Benu
Sodhi, Advocates
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE J.R.MIDHA
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?
: PRADEEP NANDRAJOG, J. (Oral)
1. Heard learned counsel for the parties.
2. The appellant, as plaintiff, has unsuccessfully fought
a litigation, seeking specific performance of an agreement to sell
dated 8.9.1978, Ex.P-5.
3. The suit was filed on 8.3.1982, admittedly the last
date on which the suit could have been filed, for the reason, the
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agreement in question stipulated that if within six months of its
execution the transaction could not be completed, the
agreement could be terminated.
4. The case of the appellant was that the subject
property was held by the sellers under a lease hold tenure
conveyed by DDA on account of the respondents being a
member of the Government Servants Cooperative Housing
Society and that the lease hold tenure could not be assigned
without the prior permission of DDA and that under the
agreement to sell, vide clause 2 thereof, the sellers i.e. the
respondents had to apply to DDA and other authorities to obtain
the requisite sale permission. It was pleaded that the agreed
sale consideration was Rs.5,90,000/- (Rupees Five Lac Ninety
Thousand Only) out of which Rs.50,000/- (Rupees Fifty Thousand
Only) was paid as earnest money cum part sale consideration as
recorded in the agreement to sell when the same was executed.
Alleging that the respondents did not furnish documents as
required by DDA, resulting in sale permission being not granted
and stating that the respondents could not rely upon the clause
in the agreement, being clause 9, which stipulated that if within
six months, the requisite sale permission was not obtained the
agreement would be determined and the respondents would
refund to the appellant the earnest money cum part sale
RFA 272/2004 Page 2 of 16
consideration received; stating that the appellant was always
ready and willing to pay the balance sale consideration, specific
performance of the agreement to sell was prayed for.
5. The defence projected was that the appellant had
under taken the requisite job to obtain the necessary sale
permission from DDA. It was pleaded that in any case, the exit
clause, being clause No.9 of the agreement was not hedged with
any condition and that as long as, for any reasons whatsoever,
sale permission was not granted by DDA within six months, the
agreement stood determined under the clause. It was also
pleaded that time was of the essence of the contract evidenced
by the fact that an exit clause was incorporated in the
agreement, being clause No.9. It was further asserted that on
expiry of the period of six months, no sale permission being
obtained, after determining the agreement, under cover of a
letter dated 12.3.1979, Ex.P-2, sum of Rs.50,000/- (Rupees Fifty
Thousand Only) received as earnest money was returned to the
appellant who encashed the same unconditionally and without
demur, meaning thereby, he accepted the determination of the
contract. It was further pleaded that the suit being filed on the
last date of limitation, notwithstanding suit being within
limitation, discretionary remedy of specific performance be not
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exercised in favour of the appellant, if the appellant were to
succeed otherwise.
6. On the pleadings of the parties, five issues were
settled vide order dated 1.11.1983. An additional issue was
settled vide order dated 19.2.1991. Issues settled vide order
dated 1.11.1983 read as under:-
“1) Whether the plaintiff has been ready and willing
to perform his part of agreement dated 8 th
September, 1978?
2) Whether the defendant has committed breach of
the said agreement?
3) Whether the agreement dated 8th September,
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 8th September,
1978 is void for uncertainty?”
7. Additional issue settled vide order dated 19.2.1991
reads as under:-
“1. Whether the time was the essence of the
contract and whether the agreement dated 8.9.1978
was rightly terminated?”
8. Many documents were exhibited at the trial.
Most of them were documents of no use. Indeed, learned Trial
Judge has not referred to them. No reference thereto has been
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made by learned counsel for the parties during arguments of the
appeal and hence while noting the evidence we shall note only
the relevant documents which are material for adjudication of
the controversy.
9. Ex.P-5, needless to state, the agreement to sell, is a
material document and is an admitted document between the
parties. The applicable clauses thereof being relied by the
parties are clause No.2, 8 and 9. The same reads as under:-
“2. That the Seller shall immediately apply to the
Delhi Development authority and the competent
authority under the Urban Land (Ceiling and
Regulation) act, 1976, to obtain the requisite
permission to transfer the said property to the
Purchaser and convey the said property to the
Purchaser free from all encumbrances after obtaining
the said permission and other requisite permissions
from any other body or authority.
x x x x
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).
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.”
RFA 272/2004 Page 5 of 16
10. It is apparent that the parties contemplated
finalization of the sale within six months of entering into the
agreement to sell. It is not in dispute that the respondents
promptly submitted the requisite application within 15 days of
the agreement to sell vide their request dated 12.9.1978. The
appellant applied to the Central Government Cooperative
Housing Society for being enrolled as a member because he
could not have got the lease hold rights transferred in his favour
unless he became a member of the society and for said purpose
he deposited Rs.3,000/- (Rupees Three Thousand Only) with the
society. In response to the request made to DDA for grant of
sale permission, vide Ex.PX-1, a letter dated 23/27.11.1978
addressed by DDA to the respondents, DDA sought certain
documents to be filed. The said letter was responded by the
appellant vide Ex.PX-3. The letter is undated. Two affidavits,
Ex.PW-1/5 and Ex.PW-1/6, deposed to by the respondents, with
respect to the sale permission were furnished to DDA.
11. On 7.3.1979, vide Ex.PW-1/3, DDA informed the
refusal to grant the sale permission recording therein that the
same was declined in view of the defective affidavit filed by
Sh.S.B.Bhalla, one out of the two sellers.
RFA 272/2004 Page 6 of 16
12. Immediately on receipt of Ex.PW-1/3, the respondents
sent, Ex.P-3, a telegram informing the appellant that since six
months’ time contemplated by the agreement to sell was
expiring and DDA had not granted the necessary sale
permission, the agreement stood determined and that earnest
money would be refunded and that by way of the telegram an
advance intimation was being sent that the agreement stood
determined in terms of clause 9 thereof. The telegram was
replied to by the appellant vide Ex.P-4 alleging that the
respondents were at default and could not take advantage of
their own wrong.
13. Thereafter, the respondents wrote a letter dated
8.3.1979, Ex.P-7, informing that under clause 9 of the
agreement, since six months were over and necessary sale
permission had not been obtained, the agreement stood
determined. It was stated therein that the earnest money in
sum of Rs.50,000/-(Rupees Fifty Thousand Only) would be
returned.
14. Under cover of letter dated 12.3.1979, Ex.P-2, the
sum of Rs.50,000/-(Rupees Fifty Thousand Only) was returned by
a bank draft.
15. The letter along with the bank draft was received by
the appellant on 14.3.1979. The draft was encashed on
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15.4.1979. On 26.4.1979, vide Ex.P-1, a lawyers’ notice was
served by the appellant upon the respondents intimating that
the action of the respondents in terminating the agreement was
void and that the bank draft was being encashed under protest.
On 17.7.1980, vide Ex.D-2, the appellant applied for and
obtained refund of Rs.3,000/- (Rupees Three Thousand Only)
from the Central Government Cooperative House Building
Society and abandoned the request for being enrolled as a
member of the society.
16. In respect of the issues which were framed, in light of
the aforenoted documentary evidence, finding returned by the
learned Trial Judge pertaining to issue No.1 is that the appellant
accepted unconditionally and without demur, the return of the
earnest money sent to him vide Ex.P-2 on 12.3.1979; he
encashed the bankers’ draft on 15.4.1979 and thereafter sent
the lawyers’ notice Ex.P-1 on 26.4.1979 stating therein that the
bankers’ draft is being encashed; the fact being that the
bankers’ draft in question was encashed much prior. Finding
returned is that this evidences the acceptance of the contract
being determined.
17. From the fact that the plot of land was held by the
respondents under a lease hold tenure being members of the
Government Servants’ Cooperative House Building Society and
RFA 272/2004 Page 8 of 16
no person could acquire the perpetual lease hold rights in the
land if he was not a member of the society and that after the
respondents informed the appellant that the agreement stood
determined and returned the earnest money received which was
accepted by the appellant, he chose to obtain refund of
Rs.3,000/- (Rupees Three Thousand Only) paid by him to the
society for being enrolled as a member, learned Trial Judge has
concluded that this evidenced the intention of the appellant to
abandon his claim under the agreement to sell.
18. The conclusion drawn by the learned Trial Judge is
that afore said conduct of the appellant showed his acceptance
of the contract being terminated or to put it differently, he
abandoned the claim under the contract, meaning thereby that
he was no longer ready and willing to pursue his remedies under
the contract. Issue No.1 has been held against the appellant.
19. Pertaining to issue No.2, needless to state, the
parties debated as to who was responsible for DDA not granting
the necessary sanction. It be noted that DDA refused the
necessary sanction on account of deficiency in the documents
filed. Whereas the appellant projected the claim under clause 2
of the agreement which stipulated that the sellers had to apply
for and obtain the necessary permissions, which necessarily
included the obligation to submit the requisite documents; the
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respondents asserted to the contrary and referred to Ex.PX-1
and the response thereto by the appellant vide Ex.PX-3, as also
the affidavits, Ex.PW-1/5 and Ex.PW-1/6.
20. The learned Trial Judge has noted that vide Ex.PX-1,
on 23/27.11.1978, DDA had required three documents to be
submitted by the sellers to process the application seeking the
necessary sale permission. Response thereto was not given by
the sellers but was given by the buyer i.e. the appellant vide
Ex.PX-3. The two affidavits deposed to by the sellers and
submitted to DDA, while seeking the necessary sale permissions,
were on a stamp paper of Rs.2/- each. The endorsement on the
stamp paper by the vendor evidences that the two stamp papers
were purchased by the buyer i.e. the appellant.
21. Conclusion drawn by the learned Trial Judge is that
the afore said evidence probablizes that the buyer i.e. the
appellant was pursuing the matter with DDA pertaining to the
sale permission to be granted by DDA for the sale to be
completed and hence was under an obligation to ensure a timely
approval being granted by DDA.
22. The finding returned by the learned Trial Judge on
issue No.2 is that the buyer i.e. the appellant was in default
which resulted in the sale permission not being granted for the
reason the relevant documents established that the appellant
RFA 272/2004 Page 10 of 16
was pursuing the matter with DDA. It has been held that if there
was any deficiency in the documents the same had to be to the
account of the appellant.
23. Issue No.3 and additional issue No.1 were decided
together. Needless to state, as a sequel to the decision
pertaining to issue No.1 and 2; with reference to clause 9 of the
agreement to sell, the learned Trial Judge has opined that on
expiry of the six months period, sale permission not being
granted, the sellers could exit the agreement. An additional
reason has been given by the learned Trial Judge to disentitle
the plaintiff to any claim, being that the suit was filed on the last
date of limitation. It has been held that the agreement to sell
giving an option clause to terminate the same if sale permission
was not received within six months, evidences the intention of
the parties to treat time as essence of the contract.
24. In view of the afore said findings pertaining to issues
No.1, 2 and 3 and additional issue No.1, needless to state, issue
No.4 had to be decided against the appellant.
25. Issue No.5 whether the agreement was void on
account of it not being recorded therein as to who would pay the
unearned increase to DDA, finding returned is that the
agreement is not void.
RFA 272/2004 Page 11 of 16
26. This finding in favour of the appellant is not in
challenge in the instant appeal as no cross objections have been
filed and hence we need not note the reasoning of the learned
Trial Judge pertaining thereto.
27. The thrust in the appeal during arguments today by
learned senior counsel for the appellant is that in the teeth of
clause 2 of the agreement to sell wherein, in writing, it is
recorded that the sellers shall obtain the necessary sale
permission from DDA, the learned Trial Judge has committed
serious irregularity by permitting parole evidence to be led and
thereafter consider the same. Counsel urges that once parties
have recorded their bargain in writing, the terms of the bargain
has to be culled out from the writing. Learned senior counsel
urges that if this be so, since sale permission was declined on
account of deficiency in the documents, the defaulting party has
to be the sellers i.e. the respondents. Learned senior counsel
urges with reference to Ex.P-1, that though written on 26.4.1979
after the bankers’ cheque refunding earnest money was
encashed (encashment being on 15.4.1979), the appellant duly
informed the respondents that the same was under protest and
hence the learned Trial Judge could not have returned a finding
that the appellant accepted the refund without demur.
Learned senior counsel urges that clause 9 of the agreement
RFA 272/2004 Page 12 of 16
could not be treated as an escape route by the defaulting party
to avoid the obligation under the agreement to sell. Learned
senior counsel further urges that the six months period would
have been over on 11.3.1978 and under no circumstances could
the contract be terminated on 8.3.1979 as was sought to be
done under cover of letter Ex.P-7.
28. We find no force in either submission made by
learned senior counsel for the appellant.
29. Suffice would it be to state that under proviso 4 to
Section 92 of the Indian Evidence Act 1872, the existence of a
distinct subsequent oral agreement to rescind or modify any
contract in writing is permissible to be shown provided the
contract is not one of an account which requires registration in
law.
30. Thus, notwithstanding clause 2 of the agreement to
sell which records that the sellers shall apply and obtain the
necessary sale permission, it was permissible for the sellers to
lead evidence of a distinct agreement to modify or rescind the
said clause.
31. The evidence of the said distinct agreement has
come in the form of Ex.PX-1, Ex.PX-3, Ex.PW-1/5 and Ex.PW-1/6.
The nature of the documents and the contours of the evidence
flowing therefrom has been noted by us while narrating the
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evidence. Ex.PX-1 was addressed by DDA to the respondents on
23/27.11.1978 asking for certain documents to be submitted.
Response thereto was given by the appellant vide an undated
letter Ex.PX-3. This shows that the appellant was pursuing the
matter with DDA. Further, Ex.PW-1/5 and Ex.PW-1/6 show that
the stamp papers on which the affidavits were deposed by the
respondents, which affidavits were submitted to DDA to process
the application for sale permission to be granted, were
purchased by the appellant. This also evidences that it was the
appellant who was doing the needful pertaining to sale
permission being obtained.
32. Clause 9 of the agreement is not hedged with any
condition of default. Clause 9 stipulates that if within 6 months
the necessary sale permissions are not obtained, the sellers
shall have an option to refund to the purchaser the earnest
money within a period of 15 days thereof. Be that as it may, we
need not expound on the arguments advanced by learned senior
counsel for the appellant pertaining to the default liability to be
read in clause 9 for the reason we have concurred with the view
taken by the learned Trial Judge that Ex.PX-1, Ex.PX-3, Ex.PW-
1/5 and Ex.PW-1/6 evidence that the appellant was to pursue the
matter with DDA; thus, any default committed, resulting in sale
RFA 272/2004 Page 14 of 16
permission being refused has to be to the account of the
appellant.
33. Pertaining to the plea that the respondents could not
exit the agreement on 8.3.1979 as six months time was yet to
be over, suffice would it be to state that the agreement to sell is
not a statute. Principles applicable to the date when limitation
commences relatable to statutes would not apply to the
agreement. A layman would understand six months’ time to be
over reckoned with effect from 8.9.1978. So understood by a
common man, the same would be over on 8.3.1979.
34. In any case, the final parting of company was when
under Ex.P-2, sellers’ letter dated 12.3.1979, the sum of
Rs.50,000/- (Rupees Fifty Thousand Only) was refunded to the
appellant. We note that in the instant case the sale permission
was applied on 12.9.1978 and the said letter dated 12.3.1979 is
exactly six months thereafter.
35. It is not in dispute between the parties that the
necessary sale permission never came within the period of six
months envisaged under the agreement.
36. We note that under clause c of the sub-Section 1 of
Section 14 of the Specific Relief Act 1963, a contract which in its
nature is determinable is incapable of being specifically
enforced. Instant contract was capable of being determined on
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the non-happening of an event within six months i.e. non-grant
of the necessary sale permission.
37. Before concluding we would refer to Section 20 of the
Specific Relief Act 1963. Relief of specific performance is
discretionary. In the instant case the discretion cannot be
exercised in favour of the appellant who approached the Court
on the last date of limitation i.e. three years when cause of
action accrued. It is a matter of common knowledge that in the
interregnum i.e. between 1979 till 1982 price of property rose
very sharply in Delhi. It has also not to be lost sight of that the
buyer took back Rs.50,000/- which was paid by him to the
respondents as earnest money cum part sale consideration.
38. We find no merits in the appeal.
39. The same is dismissed with costs.
PRADEEP NANDRAJOG, J.
J.R.MIDHA, J.
DECEMBER 18, 2008
mm
RFA 272/2004 Page 16 of 16