Section 53A of the said Act would suggest, if a proposed transferee of an immovable property under an agreement for sale is put in possession and continues in possession in part performance of the contract and does some act in furtherance of the contract and is willing to perform the balance part, his possession would be protected and the transferor would be debarred from dispossessing him other than under a right expressly provided by the terms of the contract. The development agreement is also an agreement for sale subject to certain conditions. In short, it is an agreement for conditional sale.
If we look to Section 202 of the Indian Contract Act 1872, we would find, when the agent had interest in the property under the agency agreement in absence of an express provision the contract could not be terminated to the prejudice of such interest. Section 203 would permit the principal to revoke the authority of his agent subject however; when the agent partly exercised his authority such revocation would not be permissible under Section 204. If we read these three provisions together and try to answer the second query made to us by His Lordship we would find, the Power of Attorney so revoked by the owner should not be looked at in an isolated manner. The Power of Attorney generally issued to the developer, was in continuation of the original agreement for development of the property meaning thereby, the developer who was entrusted to develop the property would be given authority to do further act as per the contract including dealing with the property to the extent permissible under the contract. Hence, the Power of Attorney was nothing but an agency agreement executed in furtherance of the original contract.
If the original contract creates an interest in favour of the developer even if the Power of Attorney is revoked such interest would not evaporate.
A contract between a developer and an owner would also consist of reciprocal rights and obligations. The developer and the owner would have rights against each other. In my view, it would be preposterous to say that only the owner can maintain a suit against the developer for enforcing his rights and not vice versa. If the developer has a right under the contract he must be having a remedy in the form of approaching a forum for appropriate redressal. This is not to say that th
e developer will necessarily succeed in such a legal action. A question of maintainability of a suit is completely different from the question of whether the suit will succeed or not on the facts of the case and in the light of the applicable law. Section 14 (3)(c) of the Specific Relief Act can in no manner be interpreted as debarring a developer from approaching the legal forum for redressal of his grievance. To that extent, a suit at the instance of a developer is maintainable and not barred by Section 14(3)(c) of the Specific Relief Act.
Kolkata High Court (Appellete Side)
Ashok kumar jaiswal vs Ashim Kumar Kar For The on 13 February, 2014
I have gone through the painstaking well versed judgment of My Lord the Hon'ble Mr. Justice Sanjib Banerjee. I fully endorse his view. Yet I wish to add few lines looking at the problem slightly from a different angle.
The owners would contend, section 14(3)(c)(iii) would specifically debar a developer to file a suit for specific performance against the owner of the property. They would gain support from Vipin Bhimani (supra). They would also contend, we must give literal meaning to the provision that the Apex Court recognized as the golden principle of interpretation as observed in Lalu Prasad Yadav Vs. State of Bihar (supra).
The relevant extract of section 14 is set out below:
1) "The following contracts cannot be specifically enforced, namely; a) a contract for the non-performance of which compensation in money is an adequate relief;
b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the Court cannot enforce specific performance of its material terms;
c) a contract which is in its nature determinable;
d) a contract the performance of which involves the performance of a continuous duty which the Court cannot supervise.
2)...........................................
3) notwithstanding anything contained in Clause (a) or Clause (c) or Clause (d) of sub-section (i), the Court may enforce specific performance in the following cases :- a).......................................
b)........................................
c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land:
Provided that the following conditions are fulfilled, namely: i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work;
ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non- performance of the contract is not an adequate relief; and iii) the defendant has, in persuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed."
The golden rule of interpretation so observed by the Apex Court is well recognized for decades. There is one more rule prevalent i.e., the Court of law must interpret a provision by giving harmonious construction presuming, all statutory provisions are coherent and would have no conflict with each other unless it is apparent and unless it is made specific by a non-obstante clause. If we look to section 10, we would find, the contract could be enforced when there would exist no standard for ascertaining actual damage and damage, even if granted in terms of the money, would not afford adequate relief. The explanation would further make it clear that a breach of a contract to transfer immovable property could not be adequately relieved by compensation in money. Hence, a contract dealing with an immovable property under Section 10 along with its explanation would presumably suggest enforcement that would be controlled by Section 14.
Let us now try to find out whether there was any specific bar stipulated in the said provision. It is true sub-Section (3) would start with a non-obstante clause that would, however, exclude sub-Section (1)(a) and (c) and not any other provision of the said Act. Sub-Section (1)(a) would grant adequate money relief whereas sub-Section (1)(c) would talk about a determinable contract. Sub-Section (3)(c) would make a contract relating to an immovable property enforceable in case of construction or execution of any other work on the said property. The proviso would, however, make certain contracts outside the purview that would include sub-Section (3)(c). The sub-Section would exclude the contract where the defendant obtains possession of the whole or the part of the property on which the building was to be constructed or other work to be executed. Vipin Bhimani would suggest, the sub-Section would debar a construction agreement that would include development agreement. We fail to appreciate. If Vipin Bhimani is correct and the developer is the plaintiff in a suit, the defendant obviously would be the owner. If we put the word "owner" in place of defendant in Clause (iii) the sub-Section would have no meaning at all. It would rather lead to the other interpretation. Clause (iii) would talk about a simpliciter construction agreement that a mason or a contractor would not be permitted to enforce by taking the plea of specific performance if the owner terminates its contract and prays for recovery of possession. Other way round, a mason or a construction contractor simpliciter would not be entitled to ask for specific performance of the construction contract. The logic is simple. When someone is asked to build a house on a specified consideration and the owner subsequently terminates the contract, even if the termination is held to be unlawful the contractor would be entitled to adequate money relief that he would get as and by way of compensation as he did not have any interest attached to the land in question, except permission to construct the house that too, as per the desire of the owner.
There is one more test that I would like to put Vipin Bhimani (Supra) to ascertain its veracity. Section 54 of the Transfer of Property Act 1882 would suggest, a contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property. So an agreement for sale would ipso facto not create any charge or interest over the property. Hence, the nature of the contract has to be ascertained.
Section 53A of the said Act would suggest, if a proposed transferee of an immovable property under an agreement for sale is put in possession and continues in possession in part performance of the contract and does some act in furtherance of the contract and is willing to perform the balance part, his possession would be protected and the transferor would be debarred from dispossessing him other than under a right expressly provided by the terms of the contract. The development agreement is also an agreement for sale subject to certain conditions. In short, it is an agreement for conditional sale. If we accept Vipin Bhimani and deny a developer specific performance of such a contract where he was put into possession by the owner and he continued to act in furtherance of the contract, we would still not be in a possession to permit the plaintiff to dispossess him in view of the express provision of Section 53A of the said Act of 1882. At the end, if a developer files a suit for specific performance of a contract and the owner files a suit for recovery of possession we would have to dismiss both on different logic, this would create a ridiculous situation. Court of law is duty bound to resolve the controversy as far as practicable that is brought before it. The Court of law is not entitled to complicate the issue by making the controversy more complicated. On that analogy Vipin Bhimani must fail.
If we look to Section 202 of the Indian Contract Act 1872, we would find, when the agent had interest in the property under the agency agreement in absence of an express provision the contract could not be terminated to the prejudice of such interest. Section 203 would permit the principal to revoke the authority of his agent subject however; when the agent partly exercised his authority such revocation would not be permissible under Section 204. If we read these three provisions together and try to answer the second query made to us by His Lordship we would find, the Power of Attorney so revoked by the owner should not be looked at in an isolated manner. The Power of Attorney generally issued to the developer, was in continuation of the original agreement for development of the property meaning thereby, the developer who was entrusted to develop the property would be given authority to do further act as per the contract including dealing with the property to the extent permissible under the contract. Hence, the Power of Attorney was nothing but an agency agreement executed in furtherance of the original contract.
If the original contract creates an interest in favour of the developer even if the Power of Attorney is revoked such interest would not evaporate. Hence, the analogy under the Contract Act would also lead to the conclusion; Vipin Bhimani did not speak of the correct proposition of law.
Thus I agree and fully endorse the view of My Lord.
(Ashim Kumar Banerjee, J.)
SANJIB BANERJEE, J. : -
The correctness of a Division Bench judgment that struck a discordant note in interpreting a provision that had been in the statute for over four decades - and which ruled out a class of civil actions in this State - is put to test in the present reference.
By an order of November 20, 2013 the then Acting Chief Justice has referred these four matters involving identical questions to this Bench. The questions have been originally framed in CO No. 1358 of 2010 by a single Judge of this court upon noticing the divergence of views in a Division Bench judgment reported at AIR 2006 Cal 209 (Vipin Bhimani v. Sunanda Das) and a previous Division Bench judgment reported at (2003) 2 CHN 95 (Bhaskar Aditya v. Minati Majumdar). The judgment in Bhaskar Aditya was not noticed in Vipin Bhimani. After recording the legal issues involved in the two Division Bench judgments, the order dated February 7, 2013 on CO No. 1358 of 2010 observed that the two Division Bench judgments "run counter to each other ..." The following questions were formulated for reference to a Special Bench:
"(i) Whether the suit at the instance of a developer is not maintainable in view of section 14 (3) (c) of the Specific Relief Act.
(ii) Whether the power of Attorney executed by the owner in favour of the developer for effectuating the terms and conditions of the development agreement gives a bare agency to the developer without any interest, in subject matter or not."
By a subsequent order on the same day on February 7, 2013, CO No. 1431 of 2007 was also referred to a larger Bench with the observation that "a similar and identical point is raised" in the matter as in CO No. 1358 of 2010. On August 29, 2013 another single Judge of this court noticed the dichotomy of the Division Bench views in Bhaskar Aditya and Vipin Bhimani and, in terms of the order of February 7, 2013 in the two other matters, referred the identical questions involved in CO No. 1222 of 2013 and CO No. 1502 of 2013 to the larger Bench.
Several judgments have been cited in course of the three sets of submission on behalf of the developers. It is asserted that it cannot be said that no suit for specific performance of the development agreement would be maintainable by a developer only by reason of Section 14(3)(c) of the Specific Relief Act, 1963. It is suggested that the agency created by the owner in favour of the developer pursuant to a development agreement, embodied in any power of attorney executed for such purpose, comes along with an interest in the property which forms the subject-matter of the agency. The substance of the submission on behalf of the developers is that the relief for specific performance, if claimed by a developer against an owner, may be declined on facts but it cannot be said that no suit for specific performance of the development agreement can be maintained by the developer in law.
The developers refer to the Specific Relief Act, 1877 and compare Section 21 of such Act with Section 14 of the 1963 Act. The developers point out that Section 14(3)(c) had no predecessor provision in the earlier enactment. The developers, however, tread with caution to suggest that an interest in the property is created in favour of the developer as a result of the development agreement such that a power of attorney executed by the owner in favour of the developer may not be terminated to the prejudice of such interest. The developers refer to Section 54 of the Transfer of Property Act, 1882 and the definition of a contract for sale therein which specifically records that a contract for sale of an immovable property does not, of itself, create any interest in or charge on such property.
The developers contend that there can be only three possibilities: first, any suit for specific performance lodged by a developer against the owner of the land which is the subject-matter of the development agreement would not be maintainable; or, second, that the suit may be maintainable but no relief may be granted for specific performance; or, third, that it would depend on the facts in every suit and the nature of the agreement which is the subject-matter of the suit as to whether the suit would be maintainable and as to whether some relief in the suit may be granted.
The developers first refer to a judgment reported at (1980) 3 SCC 545 (Bai Dosabai v. Mathurdas Govinddas) for the recognition therein that the equitable ownership in property recognised by equity in English law is translated into Indian law as an obligation annexed to the ownership of the property, not amounting to an interest in the property, but an obligation which may be enforced against a transferee with notice or a gratuitous transferee. The Supreme Court noticed the final paragraph in Section 54 of the Transfer of Property Act that a contract for sale of an immovable property does not, of itself, create any interest in or charge on such property and contrasted such provision against Section 40 of the Transfer of Property Act.
The first of the judgments of this court cited on the legal issues that have arisen is the one reported at (1982) 1 CHN 377 (State of West Bengal v. Anil Kumar Bhuiya). The question involved in that case was whether a contract for execution of a public utility work rescinded by the State could be specifically enforced by the contractor. The Division Bench held that a contract for carrying out construction work would not be specifically enforceable in view of Sections 10 and 14 of the 1963 Act except in exceptional cases; and, no exception had been made out in that case.
In the next judgment of this court, in order of time, placed by the developers, Bhaskar Aditya, the miscellaneous appeal to this court arose from the rejection of an interlocutory application for appointment of a receiver in a suit for partition and injunction. It is necessary that such judgment be looked at in some detail since the view in Vipin Bhimani is perceived to be contrary thereto and since the dictum in Bhaskar Aditya has been accepted in more than one Division Bench judgment despite noticing Vipin Bhimani.
The suit was filed by some of the co-sharers of the property against other co-sharers and the developer. The developer had entered into an agreement for developing the property with some of the parties who claimed to be, between themselves, the absolute owners of the property, but who, according to the plaintiffs, were only co-owners thereof. On the plaintiffs' interlocutory application an order was passed for maintaining status quo in respect of the nature, character and possession of the property. During the pendency of such application, the defendant- developer applied for the appointment of a receiver over the property. The application for receiver was rejected. An appeal against such order resulted in this court directing re-hearing of the application on merits since the rejection was only on the ground that there was a subsisting order of status quo in respect of the property. The defendant-developer's application for appointment of a receiver was thereafter rejected on merits against which an appeal was preferred in which the judgment in Bhaskar Aditya came to be pronounced. In the appeal, certain persons claiming to have entered into agreements for purchase of the flats constructed on the suit property were granted leave to intervene. The developer's prayer for appointment of a receiver was not for the receiver to merely be in symbolic or actual possession of the suit property or the three buildings constructed on a part of the suit property or even the flats in the three buildings; the prayer was for the receiver to execute deeds of conveyance in favour of those persons with whom the developer had entered into agreements for sale of some of the flats. It cannot be missed that both the plaintiffs and such of the defendants who claimed to be the exclusive owners of the land did not oppose the construction to be completed; they only objected to the flats being conveyed without the issue as to the ownership of the suit land being resolved.
It was in such context that the Division Bench observed in Bhaskar Aditya that a "development agreement is a kind of assignment of interest in the property somewhat similar to an agreement for sale ... it cannot be denied that the developer ... has acquired interest in the property after the development scheme is undertaken." (Paragraph 12.1) The Division Bench then went on to observe as follows at paragraph 12.2 of the report:
"12.2. When the owner enters into an agreement for development with a developer, the development undertaken by the developer is definitely that of the owner through the developer, who is also an agent as well. By reason of such development agreement as agent of the owner, the developer acquires an interest in the property being subject-matter of the development and agency, by reason of section 202 of the Indian Contract Act, 1872 (Contract Act). An agency, in which the agent acquires interest in the property being the subject-matter of the agency, cannot be terminated to the prejudice of such interest of the agent in the absence of an expressed (sic, express) contract."
The Division Bench also noticed Section 204 of the Contract Act, 1872 that disentitles a plaintiff from revoking the authority given to his agent after the authority has been partly exercised, "so far as regards such acts and obligations as arise from acts already done in the agency." In the context of the developer in that case having partly exercised the authority given to the developer as agent by the owner as principal, it was held at paragraph 12.4 of the report that the developer had acquired a right to specifically enforce the development agreement:
"12.4. The developer has acquired a right of specific performance of the contract under the provisions of section 14(3)(c) of the SR Act. Prima facie it appears that the fact of this case satisfies the requirement of the said section in favour of the developer."
Another Division Bench judgment reported at (2003) 1 CHN 14 (Satguru Nirman Pvt. Ltd v. Narayan Chandra Paul) is next cited by the developers. The appellant before this court had filed a suit claiming, inter alia, a permanent injunction restraining the defendant-owner from executing any construction work or undertaking the construction of any building at the suit premises through any person other than the plaintiff and for specific performance of the agreement between the parties. As would be evident from paragraph 2 of the judgment, the court regarded the plaintiff to be the developer and the defendant to be the owner of the suit land. The agreement between the parties was for the construction of a four-storied building whereat the owner would be entitled to 38% of the constructed area along with a further sum of Rs. 8 lakh. The issue that arose in the interlocutory appeal was whether the plaintiff therein was entitled to a temporary injunction to restrain the defendant from engaging any developer or other to commence or complete the construction work. It was asserted that possession of the suit property had been made over by the defendant to the plaintiff and some construction work had already been undertaken by the plaintiff. As an alternative to the blanket order of temporary injunction, a further interlocutory prayer was also made that the injunction as sought could remain in force till a joint inspection and measurement of the work undertaken by the plaintiff was completed. The Division Bench referred to the doctrine of lis pendens and the observation in a previous Division Bench judgment reported at AIR 1988 Cal 25 (Muktakesi Dawn v. Haripada Mazumdar) that though the principle of lis pendens takes care of all pendente lite transfers, if an injunction was not obtained against the owner and a third party purchased the property bona fide without notice of the pending litigation and incurred substantial expenses for improvement of the property, the court could exercise its discretion in declining to enforce the decree suffered by the original owner against the subsequent purchaser. The owner in Satguru Nirman Pvt. Ltd raised a defence under Section 14(3)(c) of the 1963 Act to suggest that the plaintiff did not come under the exceptions recognised therein and the court declined to interfere with the order merely on the following grounds as evident from paragraphs 27 and 28 of the report:
"27. As it will appear from clause(c) of sub-section(3) of section 14 of the above Act, where the suit is for enforcement of contract for the construction of any building the party seeking specific performance of such contract has to satisfy the three conditions indicated in the proviso. Provision has been made in the agreement itself for damages and the plaintiff/appellant, along with his prayer of specific performance, has also prayed for a decree for damages in the suit. Apart from the above, the plaintiff/appellant has not also obtained possession of the whole or any part of the land on which the building has to be constructed and in the application for temporary injunction the plaintiff/appellant has prayed for a direction upon the defendant/respondent to give physical vacant possession of the suit properties free from encumbrances to enable the plaintiff/appellant to commence and complete the construction work. From such prayer it is obvious that the plaintiff/appellant has not been put in possession of any portion of the suit property for development of the same, thus attracting the provisions of clause (iii) of the proviso to clause(c) of sub-section (3) of section 14 of the Act.
"28. As observed hereinbefore, at this stage of the suit, it would not be proper for us to go into a detailed discussion regarding the merits of the case and our above discussion will suffice for disposing of the present appeal."
It is of some significance that despite specifically referring to Section 14 of the 1963 Act and clause (c) of sub-section (3) thereof in the discussion relevant in the judgment, the Division Bench did not find that the suit was altogether not maintainable. The judgment found that the developer in that case was not entitled to the interlocutory order sought; or, that the discretion had been judiciously exercised by the trial court and it did not call for any interference. In another Division Bench judgment of this court reported at AIR 2005 Cal 274 (Kalidas Sadhu v. Sushil Kumar Agarwal), a miscellaneous appeal was carried to this court by a defendant in a suit for declaration and injunction. The order impugned required the parties to maintain status quo as on the date of the order in respect of the suit property till the disposal of the suit. The declaration sought in the suit was that a letter issued by the defendant was void and the consequential injunction was for restraining the defendant from, inter alia, entering into any agreement with any third party for development of the suit property or making any construction thereon. The agreement in that case required the defendant-owner to hand over the suit property to the plaintiff free from all encumbrances. Upon it subsequently being discovered that there were huge liabilities in respect of the land, the defendant-owner required the developer to pay off the dues of the suit property. The developer incurred substantial further expenses for development of the site and took steps to have a building plan sanctioned for the construction to be made on the suit property. The parties subsequently agreed that a power of attorney would be executed in favour of the developer by the owner. Upon the developer preparing a draft power of attorney for the execution thereof by the owner, the owner denied the original agreement between the parties and any liability thereunder. After subsequent negotiations, the original agreement was modified and recorded in the minutes of a meeting attended by the parties. Pursuant to such modified agreement, the developer called upon the owner to discharge the owner's part of the bargain; whereupon the owner sought to cancel the agreement. The suit was filed challenging such cancellation and seeking an injunction in respect of the suit property. It was contended on behalf of the owner, on the basis of the dictum in Satguru Nirman Pvt. Ltd, that since the plaintiff had an alternative remedy of damages for breach of contract, no injunction should have been passed which would tantamount to specific performance of the agreement. The Division Bench modified the order impugned by making the injunction conditional upon a sum of Rs. 30 lakh not being deposited by way of security. The court did not find that the suit, in effect, for specific performance of the agreement, was not maintainable and the court, of its own accord, considered a possible relief in damages without the plaint indicating such a relief in terms of Section 21(5) of the 1963 Act. Paragraph 15 of the report is of some relevance:
"15. We are quite conscious of the position of law that this type of agreement for development may not be specifically enforceable in view of Section 14 of the Specific Relief Act as pointed out by a Division Bench of this Court in the case of Satguru Nirman (P) Ltd. v. Narayana Chandra Paul (2002 (2) WBLR 519) (supra), relied upon by Mr. Tandon. But in a case, where the plaintiff has in good faith spent about Rs. 30 lakh in course of last thirteen years in terms of the agreement on the assurance of the defendant, a Court is entitled to restrain the defendant from committing breach of such contract or causing the injury complained of unless the defendant gives appropriate security to the amount spent by the plaintiff in furtherance of the agreement which he is entitled to recover from the defendant in addition to compensation for its breach."
The next judgment in point of time referred to by the developers is the one rendered in Vipin Bhimani.
The miscellaneous appeal in that case was at the instance of the plaintiffs upon the refusal of the trial court to grant an ad interim order in a suit where the primary relief sought was for specific performance of an agreement for development and construction of a part of a property. The agreement envisaged that the plaintiffs would arrange for the suit property to be vacated by the tenants and occupants through negotiation; obtain necessary permissions and sanction of the building plan; and, construct a new building where 58% of the constructed area with the proportionate share in the land, common areas, roof and car parking place would be allotted to the defendants and the balance 42% would be available for the plaintiffs. Irrevocable powers of attorney were executed by the two defendants in favour of the plaintiffs. A formal agreement in writing recording the terms and conditions of the development of the suit property was drafted and apparently approved by the owners and, though the security deposit of Rs.30 lakh was also deposited by the plaintiffs, the owners refused to sign the agreement. The plaintiffs had also expended substantial amounts to have the occupants at the suit property agree to make over vacant possession thereof and even an architect had been appointed for designing the proposed building after obtaining clearances from the Urban Land Ceiling authorities and the fire services.
The court found, at paragraph 11 of the report, "that a suit for specific performance of a development agreement at the instance of a developer is clearly hit" by the provisions of Section 14(3)(c) of the 1963 Act. The Division Bench also observed that a suit for specific performance of such agreement would be "maintainable at the instance of the owner if possession is already handed over to the developer and clauses (i) and (ii) of section 14(3)(c) are complied with." As to the powers of attorney executed by the owners in that case, the Division Bench held that the plaintiffs were not entitled to any injunction on the basis thereof. Paragraphs 11 and 16 of the report must be seen to discern how the questions raised in the present reference were answered in that judgment by the Division Bench:
"11. From the provisions contained in section 14(3)(c) of the Act, it is clear that a suit for specific performance of a development agreement at the instance of a developer is clearly hit by the provisions contained therein. However, a suit for specific performance of such agreement at the instance of the owner of the building would be maintainable if possession is already handed over to developer and clauses (i) and (ii) of section 14(3)(c) are complied with."
"16. We are not impressed by the submission of Mr. Roy Chowdhury that a so-called irrevocable Power-of-Attorney cannot be revoked in any circumstances. By virtue of such Power-of-Attorney if an owner of the building gives agency to a person to act on his behalf, the contract by itself is determinable at any point of time. The concept of irrevocable Power-of- Attorney thereby conferring agency for all time to come is unknown in jurisprudence unless such power is coupled with an interest, meaning thereby, the conferment of power to do some act conveyed to an agent along with an interest in the subject-matter of the power. When such power coupled with an interest is given, the holder of such power does not hold the same for the benefit of the principal but for his own benefit and for the above reason, such authority is not recognised as true "agency power" and is termed as "proprietary power". In the case before us, no such "propriety power" has been given to the developer. Section 202 of the Contract Act recognises such propriety power and as provided in section 203 thereof, except in the cases covered by section 202, all other agencies are revocable at the instance of the principal. After going through the Power-of-Attorney involved herein, we find that such agency was given only to give effect to the earlier agreement for development of the immoveable property which by itself does not create any interest over the property in view of the provisions contained in section 54 of the Transfer of Property Act."
The judgment next in point of time cited by the developers is reported at (2006) 2 Cal LT 187 (HC) (Bimal Kumar Khetawat v. Dhan Daulat Holding Limited) by the same Division Bench which rendered the verdict in Vipin Bhimani. The suit in that case was instituted by a person claiming to be the assignee of the developer's interest in the development agreement who had paid substantial monies to the original developer and had incurred expenses for the development of the property. The formal agreement of assignment of the original developer's rights was not executed and the grievance of the plaintiff was that the original developer had refused to sign a draft agreement since the original developer was seeking to have the project completed by a third party. An ad interim order of injunction was refused. On a first miscellaneous appeal from such order of refusal of the ad interim injunction, a limited order of status quo as regards the nature and character of the property was passed at the initial stage of the appeal. The original developer applied before this court for vacating the ad interim order of injunction passed in the appeal. The injunction earlier granted was modified and the trial court was directed to dispose of the injunction application before it within a specified time. The modified order of injunction restrained the first defendant-original developer from assigning the rights under the development agreement to any other person. The injunction application was disposed of by the trial court by directing status quo to be maintained in respect of transfer, sale and alienation of the developer's allocation of the constructed property. It was such final order of interlocutory injunction that was the subject-matter of the judgment cited. The Division Bench noticed the conduct of the first defendant- developer in not being willing to refund the money obtained from the plaintiff, made a distinction between the developer's allocation of the constructed area and the second defendant-owner's allocation thereof and modified the impugned order by allowing the original developer to deal with his allocation of the constructed area subject to refund of the money due to the plaintiff. The reasoning in support of such order appears from paragraphs 12 and 13 of the report:
"12. In our view, at this stage as the building is complete, no purpose will be served by restraining the defendants from selling out the property but at the same time, the Court cannot lose sight of the fact that the defendant No. 1's intention is not bona fide as would appear from the fact that by this time he has refunded a paltry amount Rs. 5,00,000/- out of Rs. 40,00,000/- and odd admittedly paid by the plaintiff by account payee cheque.
"13. Therefore, at this stage, the plaintiff has at least made out a strong prima facie case to have a decree for recovery of the amount already advanced with damages and the ingredients of Order 39 Rule 1(b) of the Code of Civil Procedure are very much established."
Two subsequent judgments of another Division Bench have next been placed by the developers. In the judgment reported at AIR 2007 Cal 293 (Bimal Ghosh v. Kalpana Majumdar) the issue in an appeal from an order passed on a petition under Section 9 of the Arbitration and Conciliation Act, 1996 was whether a negative covenant in a development agreement could be the basis for an injunction in aid thereof. Though Section 42 of the 1963 Act was not specifically referred to in the judgment, it was such principle which was applied while distinguishing the dictum in Vipin Bhimani. Paragraph 12 of the report also indicates that the Division Bench harboured reservations as to the ratio decidendi in Vipin Bhimani, but did not go into such aspect since it was not necessary in the context.
The second judgment of the same Bench is reported at AIR 2008 Cal 171 (Partha Sarathi Ghosh v. Maa Construction). The appellant in that matter contended that in view of Section 14(3)(c) of the 1963 Act and the dictum in Vipin Bhimani, the injunction granted by the trial court at the instance of the developer was liable to be vacated. The Division Bench construed the developer's prayer for injunction to be based on the negative covenants contained in the development agreement and also observed that it could not be said that the agreement did not create any right over the land in favour of the developer. Paragraph 19 of the report is apposite in such context:
"19. In the agreement it was provided that the owners would not do any act or deed or matter or thing which would cause hindrance to develop property in terms of the said agreement. The owners also undertook by the said agreement not to create any kind of charge or mortgage or would not let out or lease out or deliver possession of the said premises or any portion thereof to any third party without the consent of the developer. It was also provided that the said agreement could not be terminated by the owner in any way as long the flats, shops, garage etc. belonging to the developer's allocation were sold out and deeds of conveyance were made accordingly. Under the said agreement 32% of the constructed area of the proposed building was to be given to owner and balance 68% of the total constructed area was to be retained by the developer. Hence, it could not be said that the said agreement did not create any right over the land in question in favour of the developer."
A single Bench judgment of this court reported in abridged form at AIR 2008 NOC Cal 782 (Eden Realty Ventures Pvt. Ltd v. M.A. Construction & Trading Co. Pvt. Ltd) has been placed where the nature of the agreement as envisaged in the expression "contract for the construction of any building or the execution of any other work on land" in Section 14(3)(c) of the 1963 Act was seen to be of limited import and not be applicable to agreements which involve more than a mere construction of any building or the mere execution of any other work on land. In the unreported full version of the judgment in Eden Realty Ventures Pvt. Ltd, Section 10 of the 1963 Act was referred to for the Explanation thereto that unless and until the contrary was proved, the court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money. In that case, on the strength of the dictum in Vipin Bhimani, one of the defendants in the suit had applied for rejection of the plaint under Order VII Rule 11 of Code of Civil Procedure, 1908. The application in the nature of demurrer was repelled with the observations in the following passages which are relevant in the present discussion:
"In the temporal sense there are few contracts for which
compensation in money would not be adequate relief, and fewer still in the commercial realm. An interest asserted in an immovable property is, arguably, covered by the first limb of the explanation to Section 10 of the Act. If such interest in immovable property gives rise to a presumption recognised by the statute, however susceptible to rebuttal the presumption may be, it needs a rebuttal nonetheless. If on a meaningful reading of a plaint an assertion of interest in land can be discerned, the suit for specific performance has to progress to trial. For, whatever may be urged in defence by the defendant cannot be taken into account for the purpose of assessing the maintainability of the action. A notoriously bad case on merits is bound to fail, but cannot be rejected off hand as being not maintainable. A plaintiff can only be shooed away ahead of the trial if the plaint, ex facie, reveals that the claim is barred by law or it does not disclose a cause of action. The defects under clauses (b) and (c) of Order VII Rule 11 of the Code are curable and rejection is consequent upon default, not necessarily the immediate consequence of the original defect. The newly-introduced clauses (e) and (f) of the Rule are irrelevant in the present context."
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"Section 10 of the Act is subject to the other provisions in Chapter II of the Act but if a presumption arises that the breach of a contract to transfer immovable property cannot be relieved by compensation in money, the fact that Section 14(1)(a) figures elsewhere in Chapter II would not obliterate the presumption. The explanation to Section 10 of the Act indicates how the presumption may be rebutted. The opening words of the explanation, "unless and until the contrary is proved", leaves little room for any doubt in that regard. And this is hardly the stage of the proceedings where the first defendant may be permitted to prove to the contrary or its attempt at such proof can be invited or countenanced."
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"The expression "the execution of any other work on the land" in Section 14(3)(c) of the Act has to take colour from the expression "the construction of any building" preceding it in the clause and even if the latter is regarded as a stand-alone expression, it gives rise to involved arguments that may need to be sustained on facts and evidence. The adjudication of such question, thus, has necessarily to be postponed to trial. For the moment it is sufficient to recognise that the contract is not one that would clearly fall within the one or the other expression in the opening line of clause (c)."
The supporting argument on behalf of the developers harps on the impermissibility of the revocation of a power of attorney granted in connection with a development agreement. The judgments reported at AIR 2005 Orissa 147 (Birat Chandra Dagara v. Taurian Exim Pvt. Ltd); AIR 1964 Allahabad 441 (Loon Karan Sethiya v. Ivan E. John); and, (1969) 1 SCR 122 (Seth Loon Karan Sethiya v. Ivan E. John) have been cited in such regard.
In Birat Chandra Dagara a mining lease was obtained by the defendant which the defendant was unable to exploit for want of technical know-how and funds (There appears to be a scam in every mining lease!). The defendant-lessee executed an irrevocable power of attorney against an advance payment to allow the plaintiff to operate the mine with the idea that an assignment of the lease would ultimately be obtained. The power of attorney was sought to be revoked within a week of its execution, but after receipt of the payment of a substantial sum. The grant of an interlocutory order of injunction in the suit challenging the revocation was upheld by the Orissa High Court on the basis of Section 202 of the Contract Act and the recognition that an interest was created in favour of the plaintiff in the property which was the subject-matter of the agency. Apart from the fact that the virtual assignment of a mining lease as in that case was impermissible in law without the previous permission of the lessor, which the judgment overlooked, it was the failure of the lessee to refund the payment received by it that was the basis for the order.
In the judgment reported at AIR 1964 Allahabad 441 (Loon Karan Sethiya v. Ivan E. John), a bank's debtor made an agreement under which the debtor executed a power of attorney authorising the bank to execute a decree obtained by the debtor against a third person and credit the realisation to the debtor's bank account. The revocation of the power of attorney was found to be invalid in view of Section 202 of the Contract Act. The judgment is an illustration of how the rule as recognised in Section 202 of the Contract Act applies but throws no light on a development agreement of the kind that is the subject-matter of the four sets of proceedings in which the reference has been made. The Allahabad Division Bench judgment was affirmed in the Supreme Court judgment which has also been cited and which is found to be equally inapposite in the present context.
The second set of supporting argument on behalf of the developers revolves around the Supreme Court judgment reported at (2008) 10 SCC 345 (Faquir Chand Gulati v. Uppal Agencies Pvt. Ltd) and an unreported Division Bench judgment of this court delivered on August 22, 2013 in APO No. 177 of 2013 (Jaichandlal Ashok Kumar and Co. Pvt. Ltd v. Nawab Yussef). The issue before the Supreme Court was whether the owner of a land who had entered into a collaboration agreement for the construction of an apartment building and for sharing the constructed area was a consumer entitled to make a complaint against the builder under the Consumer Protection Act, 1986. Though the legal implication of such an agreement between the owner and the builder (the builder in that case substantially resembles the developer in the agreements in the four sets of proceedings that form the subject-matter of this reference and also in the several judgments of this court referred to above) is discussed in the report, the judgment throws no light on the legal issues which arise in the present discussion. Similarly, the unreported judgment in Jaichandlal Ashok Kumar and Pvt. Ltd is of no relevance in the immediate milieu.
The submission on behalf of the owners emphasises on the wording of Section 14(3)(c) of the 1963 Act and the impermissibility of any suit for the specific performance of a development agreement at the behest of a developer. The owners also suggest that what cannot be done directly by seeking specific performance may also not be done indirectly by framing other reliefs that, through crafty drafting, conceals the relief for specific performance in any declaration or injunction claimed towards the same end. The owners suggest that if no final relief
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