Sub-Section 3 makes it clear that Courts decree specific performance where the plaintiff has done substantial acts in consequence of a contract/agreement to sell. Substantial acts obviously would mean and include payment of substantial amounts of money. Plaintiff may have paid 50% or more of the consideration or having paid a lesser consideration he could be in possession pursuant to the agreement to sell or otherwise is in the possession of the subject property or other substantial acts have been performed by the plaintiff, and acts which can be said to be substantial acts under Section 20(3). However, where the acts are not substantial i.e. merely 5% or 10% etc of the consideration is paid i.e. less than substantial consideration is paid, (and for which a rough benchmark can be taken as 50% of the consideration), and/or plaintiff is not in possession of the subject land, I do not think that the plaintiff is entitled to the discretionary relief of specific performance.
15. The Supreme Court in the recent judgment of Saradamani Kandappan vs. Mrs. S. Rajalakshmi, 2011 (12) SCC 18 has had an occasion to consider the aspect of payment of a nominal advance price by the plaintiff and its effect on the discretion of the Court in granting the discretionary relief of specific performance. Though in the facts of the case before the Supreme Court, it was the buyer who was found guilty of breach of contract, however, in my opinion, the observations of the Supreme Court in the said case are relevant not only because I have found in this case the plaintiff/ buyer guilty of breach of contract, but also because even assuming the plaintiff/buyer is not guilty of breach of contract, yet, Section 20 sub-Section 3 of the Specific Relief Act, 1963 as reproduced above clearly requires substantial acts on behalf of the plaintiff/proposed purchaser i.e. payment of substantial consideration.
Delhi High Court
M/S.A.D. Overseas vs Smt. Sneh Lata Sharma on 8 October, 2012
1. Three suits namely CS(OS) No.2421/1989 titled as M/s.A.D.Overseas vs. Bali Ram Sharma, CS(OS) No.2415/1989 titled as M/s. A.D.Overseas vs. Anil Sharma and CS(OS) No.2414/1989 titled as M/s. A.D.Overseas vs. Smt. Snehlata Sharma are being decided by the present judgment. By the order dated 26.7.1991, these three suits were consolidated, and it was ordered that evidence will be led in CS(OS) No.2421/1989. The facts of all the three cases are almost identical except the value of the sale consideration which varies because of the areas of the lands. For the sake of convenience, I am basically making reference to the facts of the CS(OS) No.2421/1989, the lead case.
2. The plaintiff has filed the subject suit seeking specific performance of the agreements to sell dated 18.8.1988, Ex.P1. The land which was agreed to be sold under this agreement was of 27 bighas comprised in khasra Nos. 767(2-16), 768(4-16), 769(0-10), 770/1-2(4-
10), 771(4-16), 779(4-16), 780(0-6), 781(4-10). The total sale consideration fixed was Rs.53,43,300/-. In CS(OS) No. 2414/1989 the area of land is 4 bighas and 16 biswas comprised in khasra no.777, village Chattarpur, Tehsil- Mehrauli, New Delhi. The sale consideration was Rs.9,50,000/-. In CS(OS) No.2415/1989, the area of the land is 23 bighas and 10 biswas situated in khasra nos. 795(0-17), 793(4-16), 792/2- 1(2-1), 792/3(0-5), 792/4(2-3), 794/1(3-10), 794/2(0-19), 798(4-9), 797(4-10), 803 min/(0-14), 803 min (2-5). The total sale consideration was Rs.52,34,455/-. The proposed buyer in all the three agreements was the same i.e. plaintiff no.2-Sh.Bhushan Kumar. The proposed seller in the suit being CS(OS) No.2421/1989 is Sh. Bali Ram Sharma, in CS(OS) No.2414/1989 Smt. Snehlata Sharma and in CS(OS) No.2415/1989 it is Sh.Anil Kumar Sharma. The defendant in CS(OS) No.2421/1989 Sh. Bali Ram Sharma is the husband of the defendant-Smt. Snehlata Sharma in CS(OS) No.2414/1989 and the father of defendant-Sh.Anil Kumar Sharma in CS(OS) No.2415/1989. All the three agreements to sellentered into are dated 18.8.1988, and they are identical in terms of the facts except of course the total sale consideration which varies in view of the area of lands.
3. The case of the plaintiff as set out in the plaint is that the defendant was guilty of breach of the contact inasmuch as it was the defendant who had to obtain the sale permission from the Income Tax Authority, but the defendant failed to obtain the sale permission. It is further averred that the original proposed buyer under the three agreements to sell namely Sh. Bhushan Kumar nominated the present plaintiff namely M/s. A.D.Overseas as buyer under a nomination agreement dated 28.9.1988. Readiness and willingness is averred with respect to the nominee M/s. A.D.Overseas, plaintiff no.1. As per the relief clauses in the plaint, the plaintiff seeks specific performance of the agreements to sell dated 18.8.1988 and in the alternative damages which are confined to the price of the property agreed to be purchased.
4. The defendants have filed the written statements. It is pleaded that it is the plaintiff who is guilty of breach of contract. It is further pleaded that in fact the nomination dated 28.9.1988 in favour of the plaintiff no.1 is a forged and fabricated document, and which has been created simply to bring in the financial capacity to specifically perform the agreement to sell, inasmuch as the plaintiff no.2 never had enough money to perform his part of the contract of making the payment of the balance sale consideration. It is also pleaded that the plaintiff is not entitled to the discretionary remedy of specific performance or the relief of damages as claimed.
5. The following issues were framed on 23.4.1992 in CS(OS) 2421/1989:-
"1. Whether plaintiff No. 1 was registered with the Registrar of Firms and Inder Mohan Bhatia‟s name was shown as partner of the firm at the time of institution of the suit?
2. Whether nomination letter dated 28.9.1988 is ante- dated and inadmissible in evidence for want of Stamp Duty and registration?
3. Whether Plaintiff No. 1 has locus standi to file this suit?
4. Whether Plaintiffs or either of them were ready and willing to perform their part of the contract at relevant points of time?
5. Whether specific performance of agreement to sell in respect of agricultural land is not permissible?
6. Whether the claim of the plaintiffs in the present case is against public policy and not entertainable?
7. In the event of denial of the claim of specific performance, is the plaintiff entitled to any damages and if so, what amount?
8. Whether on the facts and circumstances of the cases, there could be no exercise of discretion in favour of the plaintiffs?
9. Does the agreement fix „two months from the date of signing‟ as the period in which the payment was to be made?
10. Whether the defendants were in breach of their obligation?
11. Relief."
Issue nos. 1 & 5
6. Issue nos. 1 and 5 are not pressed on behalf of the defendants and are therefore decided in favour of the plaintiff. Issue no.6
7. Issue no. 6 will have to be dealt with at the outset inasmuch as if the agreement to sell itself is illegal and void, the plaintiff can claim no rights under the same. The admitted facts are that when the three agreements to sell dated 18.8.1988 were entered into, the land which was the subject matter of the three agreements to sell stood already acquired in the sense that an Award dated 5.6.1987 was already passed by the Land Acquisition Collector being Award No.15/1987-88. The issue is that are such agreements illegal, unenforceable and void in view of the provision of Section 3 of the Delhi Lands (Restriction on Transfer) Act, 1972.
8. I have had an occasion to consider this very aspect in the judgment dated 10.7.2012 in CS(OS) No.1154/1989 titled as Shri Jinesh Kumar Jain vs. Smt. Iris Paintal & Ors.. I have held in this judgment that if with respect to the lands which are proposed to be sold/purchased, there are only notifications under Sections 4 and 6 of the Land Acquisition Act, 1894, then the agreement to sell is not void but only voidable subject to the condition when permission is not granted by the appropriate authority acting under Section 4 of the Delhi Lands (Restriction on Transfer) Act,1972. If however with respect to the land an Award has been passed, it will be Section 3which will come into play, and which states that such agreements are in fact void. Paras 5 to 8 of the said judgment are relevant and reproduced below:-
"5. I will take up issue no.2 framed on 11.4.1991 at the outset. In this issue, though the reference is to Section 4 of the Act of 1972, really it is Section 3 which will apply inasmuch as whereas Section 3 applies where the land has been acquired i.e. Award has been passed in the land acquisition proceedings, Section 4 applies when land has not been acquired but it is proposed to be acquired because notifications have been issued under Sections 4 and 6 of the Land Acquisition Act, 1894. Since the issue really is an issue of law, I re-frame issue no.2 in exercise of my powers under Order 14 Rule 5 CPC which permits the Court to amend or strike out issues at any stage of the suit. Issue no.2 is therefore re-framed as under:-
"Whether the agreement to sell dated 26.9.1988 is barred under Section 3 of the Delhi Lands (Restriction of Transfer) Act, 1972 and is void under Section 23 of the Contract Act, 1872?"
6. The difference of language employed in Sections 3 and 4 of the Act of 1972 is very clear. This difference of language is apparent even from a plain reading of the same. Whereas under Section 3 there is an absolute bar with respect to transferring those lands which have already been acquired by the Government i.e. with respect to which Award has been passed, those lands which are in the process of acquisition i.e. Award has not been passed, then Section 4 of the Act of 1972 will apply, and as per which, there is no absolute bar with respect to such lands, and, transfer can take place subject to permission of appropriate authority being taken under Section 5 of the 1972 Act, and whose orders are appealable under Section 6 of the Act of 1972. The Supreme Court has with respect to difference between these two provisions observed as under in para 66 of the judgment in the case of Shanti Sports Club & Anr. vs. Union Of India & Ors., 2009 (15) SCC 705:-
"66. The distinction between the above-reproduced two provisions is that whileSection 3 contains an absolute prohibition on transfer of the acquired land by sale, mortgage, gift, lease or otherwise, Section 4 declares that no person shall, except with the previous permissions in writing of the competent authority, transfer or purport to transfer by sale, etc. of any land or part thereof, which is proposed to be acquired in connection with the scheme and in relation to which a declaration to the effect that such land or part thereof is needed for a public purpose has been made by the Central Government and the Central Government has not withdrawn from the acquisition under Section 48(1)."
7. A Division Bench of this Court in the case of Sh.Raghubir vs. Union of India, WP(C) No.3186/2000 decided on 19.5.2005, has held that contracts which have been entered into in violation of the 1972 Act are void. Paras 17 and 19 of this judgment are relevant and they read as under:-
"17. It cannot be disputed that the lands in question were acquired for a public purpose which can itself be a continuing public purpose like „Planned Development of Delhi‟. Large chunks of land are acquired for the development projects from time to time. Once a notification is issued under section 4 of the Act and it is clearly indicated by way of a notification for the benefit of public at large that the land is sought to be acquired by the appropriate Government, in such circumstances, any sale, mortgage or creation of a charge subsequent thereto would be ineffective. Such transactions would be in apparent conflict with the provisions of Delhi Land (Restriction onTransfer) Act as well as the Indian Contract Act, 1872. Under section 3 of the Delhi Land (Restriction on Transfer) Act, there is a complete prohibition to the effect that no person shall purport to transfer, sale, gift, lease or otherwise any land or part thereof situated in the Union Territory of Delhi which the Central Government under the Land Acquisition or any other law for acquisition of Land for public purpose. Sections 4 and5 of the abovesaid Act intends to regulate the transfer of the lands in regard to which acquisition proceedings have been initiated and the manner in which such an application is to be filed before the Competent Authority. Section 4 would come into the play where declaration under section 6 has been issued and the land has not been withdrawn by the Central Government under section 48 of the Act. In the case of Krishan Kumar Malik vs. Union of India and Ors. AIR 1985 Delhi 225, this Court has held that the effect of permission under the Act if that the same, may be recognized as valid for the purposes of claiming compensation or other benefits arising therefrom, which in absence of the permission would be deemed to be a void sale thus conferring no right at all. In the case of O.P.C.Jain vs. ADM 42 (1990) DLT 478, division bench of this court took the view that if no notification under Section 4 and 6of the Act has been issued, there is no need for obtaining a certificate or permission or no objection certificate under the Provisions under the Delhi Land (Restriction on Transfer), Act. In the case of Meera Sawhney & Ors. vs. Lt. Governor, 89 (2001) DLT 484, a Full Bench of this court took the view that the very object of 1972 Act was to curb such illegal transactions of sale and purchase of land. The Bench held as under:-
"16. We are of the view that NOC is of no legal consequence. We also hold that no permission under Section 5 of the 1972 Act was ever sought regarding transfer of land in question nor any permission was granted. The alleged transfer, therefore, is clearly in violation of the provision of the 1972 Act. It has no legal validity. The Act does not envisage any NOC. Section 5 only recognizes a permission in writing for transfer of lands under Sections 4 and 6 notifications and the permission is to be granted by the Competent Authority under the Act alone. In fact the learned Counsel for the petitioner did not dispute that permission was a sine qua non. His entire case, however, was that the alleged NOC amounted to permission under Section 5 of the Act. We are enable to accept this. The onus was clearly on the petitioners to show that they had applied for permission under Section 5 and they had obtained the same in accordance with the provisions of Section 5 of the 1972 Act. The petitioners have miserably failed to discharge this onus. The very object of the 1972 Act was to curb such illegal transactions of sale and purchase of lands and to protect unwary customers in this behalf. The object of the Act is given in the preamble which runs as under:
An Act to impose certain restrictions on transfer of land which have been acquired by the Central Government or in respect of which acquisition proceedings have been initiated by the Government, with a view to preventing large scales transactions of purported transfers, or, as the case may be, transfers of such lands to unwary public."
xxxx xxxxx xxxx
19.Further more the documents executed in favour of the petitioners (subsequent purchasers) are also opposed to the provisions of the Indian Contact Act in as much as they offend the provisions of Sections 23, 24 of the Act. The Supreme Court in the above judgment have clearly stated that they have no right as these contracts are void. One of the main essentials for a contract to be valid is that the agreement should not be opposed to public policy. Keeping in view the effect of acquisition policy of the State, public at large being beneficiary of such acquisition and there being specific restriction upon transfer of land in terms of the provisions of 1972 Act there can be no doubt that such contracts would be opposed to public policy. No right would vest in such purchasers to question the legality and validity of the notifications."(underlining added).
8. A reading of the aforesaid judgment of the Division Bench shows that contracts which are entered into in violation of the 1972 Act are against public policy and hence are of no legal effect. In the present case inasmuch as admittedly the agreement to sell dated 26.9.1988 was entered into after the land was acquired i.e. after an Award was passed (para 15 of the plaint states this in so many words) clearly, the agreement to sell dated 26.9.1988 is void. Though it is a moot question whether the plaintiff was or was not aware of the Award being passed, however, I would hold that in the facts of the present case it is inconceivable for the plaintiff not to have known when the agreement to sell was entered into that the subject lands were already acquired by an Award passed under the Land Acquisition Act, 1894. This I say so because no one agrees to pay lakhs of rupees unless the proposed buyer has taken some necessary steps for enquiring the status / title of the lands which are proposed to be bought. A reading of para 7 of the plaint also shows knowledge by the plaintiff that the land had already been acquired before the agreement to sell was entered into. In any case, even if I for the sake of the argument even presume that the plaintiff was not aware, or even both the parties were not aware of the Award having been passed with respect to the subject lands under the Land Acquisition Act, 1894, that cannot take away the binding effect of Section 3 of the 1972 Act which provides that any purported transfer of the land which has already been acquired is absolutely barred. In my opinion, counsel for the plaintiff is not right in contending that what Section 3 bars is only a sale deed and not an agreement to sell. This I say so because the Division Bench in the case of Sh.Raghubir (supra) has held that agreements in violation of the provisions of Sections 3 and 4 of the 1972 Act are void being against the public policy. The Division Bench in para 19 of its judgment reproduced above, has specifically held that the documents in the nature of a power of attorney, an agreement to sell, etc. are hit by Section 23 of the Contract Act, 1872 being voilative of the public policy and the intention of the Legislature enacting the 1972 Act, are hence void. I therefore hold that the agreement to sell dated 26.9.1988 itself was void in view of a complete bar to any agreement being entered into which "purport" to transfer by sale etc land which is acquired under the Land Acquisition Act, 1894 i.e. with respect to lands for which an Award has been passed."
9. I may state that an appeal was filed against the judgment in Jinesh Kumar Jain (supra) case and a Division Bench of this Court vide its judgment dated 31.8.2012 in RFA(OS) No.75/2012 has dismissed the appeal by confirming this finding with respect to the agreement to sell being illegal as the same was in violation of Section 3 of the 1972 Act.
10. Learned Senior counsel for the plaintiffs sought to distinguish the judgment in the case of Shri Jinesh Kumar Jain (supra) by making reference to the judgment of the Supreme Court in the case of Special Land Acquisition Officer, Bombay & Ors. vs. M/s. Godrej & Boyce, 1988 (1) SCC 50 which holds that government becomes the owner of the acquired land only when possession of land is taken under Section 16 of the Land Acquisition Act, 1894 and therefore, since ownership continued to vest with the defendants in these cases, the agreements to sell are not void.
I am unable to agree with this argument in view of the categorical language of Section 3 as compared to Section 4 of the 1972 Act which only talks of land being „acquired‟ and acquisition is complete when Award is passed by the Land Acquisition Collector. When the Award is passed land is acquired. In the case of Shri Jinesh Kumar Jain (supra) I have referred to not only the Division Bench judgment of our Court in the case of Sh.Raghubir vs. Union of India, WP(C) No.3186/2000 decided on 19.5.2005, but also the judgment of the Supreme Court in the case ofShanti Sports Club & Anr. vs. Union Of India & Ors., 2009 (15) SCC 705, and both of which judgments specifically hold that once an Award is passed, an agreement to sell entered into with respect to such land, is illegal and void. In the Shanti Sports Club's case (supra) the Supreme Court was dealing with the case when possession was not taken under Section 16 of the Land Acquisition Act, and yet the agreement to transfer the acquired land was held to be hit by the 1972 Act. Taking of possession and the transferring of ownership is one aspect of the matter but illegality of the agreements in this case stems from Section 3 of the 1972 statute which required the land to be „acquired‟ only. Once a statute states that in particular circumstances i.e after an Award, an agreement to sell is illegal, the mere fact that ownership may not have formally been transferred as possession has not been taken from the owners of the land under Section 16 of the Land Acquisition Act, 1894 will make no difference. In fact if possession of the acquired land is taken by the Government then the right which remains will only be to take compensation and no agreement to sell would be entered into at that stage.
11. In view of the aforesaid, all the three agreements themselves are illegal and void. Once the agreements are illegal and void, no relief whatsoever can be granted in the subject suits, much less of specific performance or of damages.
Issue no.2
12. That takes me to issue no. 2 as to whether there exists a nomination agreement dated 28.9.1988 by the original proposed purchaser/plaintiff no.2 in favour of the present plaintiff no.1/M/s. A.D.Overseas. The nomination document dated 28.9.1988 has been proved and exhibited by the plaintiff as Ex.PW1/5.
13. In my opinion, the mere fact that the plaintiff has exhibited this document as Ex.PW1/5, the same cannot mean that the said document is proved as being genuine. For the following reasons, I am of the opinion that the said document is forged and fabricated viz ante-dated by the plaintiff in order to avoid the disability of the original proposed purchaser/plaintiff no.2 not having the necessary financial wherewithal to complete his obligation of making payment of the balance price:-
i) If the so-called nomination agreement dated 28.9.1988 had come into existence on the date of its alleged execution, surely, plaintiff no.2 would have thereafter immediately referred to the same in the subsequent correspondence, whether with the defendant or with the Income Tax Authority. However, the fact of the matter is that the existence of this agreement came to be brought forth for the first time around four months later in January, 1989 when a public notice was sought to be given on behalf of the plaintiff no.1 claiming that it is the nominee of the plaintiff no.2 on the basis of the alleged nomination agreement dated 28.9.1988. Before this issuing of public notice on 31.1.1989, the following correspondence was entered into, and in which there is no whisper whatsoever of this alleged nomination agreement dated 28.9.1988:-
(a) Letter dated 11.10.1988, Ex.P6, written by the plaintiff no.2 to the appropriate authority under Section 269 UC of the Income Tax Act, 1961. There is no reference in this Ex.P6 dated11.10.1988 of the alleged nomination agreement dated 28.9.1988 having been entered into.
(b) Alongwith this letter, Ex.P6, the plaintiff had attached Form 37(I) under Section 269 UC of the Income Tax Act, 1961 as then existing, and in which, once again there is absolutely no reference by name of the plaintiff no.2. The only fact which is stated in the Form 37(I) in Para 2 is that there can be an agreement in favour of the nominee as per Clause 3 of the agreement. If by this date nomination had taken place, then, surely the nomination agreement dated 28.9.1988 and the existence of plaintiff no.1, would surely have found mention in this Form 37(I) annexed to Ex.P-6.
(c) The letter dated 10.10.1988, Ex.P4, was written by the Income Tax Authority to the plaintiff no. 2 making reference to the Form 37(I) filed, and once again this letter is addressed to the plaintiff no.2 and not to the nominee/plaintiff no.1.
(d) A telegram dated 17.10.1988, Ex.PW-1/4, was sent by the plaintiff no.2-Sh. Bhushan Kumar to the defendant-Sh.Bali Ram Sharma in CS(OS) No.2421/1989 and once again in this telegram dated 17.10.1988, and which is subsequent to the nomination dated 28.9.1988, there is no mention of the alleged nomination agreement dated 28.9.1988.
14. In view of the aforesaid, I have no hesitation to hold that the nomination agreement dated 28.9.1988, Ex.PW1/5 is clearly a forged and fabricated document and has been ante-dated for the purpose of creating evidence of financial capacity for performance and payment of balance consideration under the three agreements to sell dated 18.8.1988. I will also advert to this aspect while dealing with the issue of willingness and readiness.
15. In my opinion, there is another reason for me to wholly ignore the so-called nomination, Ex.PW1/5 dated 28.9.1988. This is for the reason that rights under a contract can be assigned but liabilities under a contract cannot be assigned. This is relevant because a party very much wants to be confident about the person with whom he enters into the contract that such person is capable of performing his contractual obligations. There is also the issue of a level of comfort with the concerned individual with whom the contract is entered into. It is settled law now that obligations under a contract cannot be transferred, and reference need only be made to the Constitution Bench judgment of the Supreme Court in the case of Khardah Company Ltd. vs. Raymon and Company (India) Pvt. Ltd., AIR 1962 SC 1810. Para 21 of this judgment is categorical in holding that obligations under an agreement cannot be transferred, and which para reads as under:-
"..............
21. The contract with which we are concerned in these appeals was entered into on September 7, 1955, when the notification aforesaid was in force, and so it would be hit by it, unless it is a non-transferable specific delivery contract and the point for decision is whether it is that. There is no dispute between the parties that it is a specific delivery contract. It is between named buyers and sellers the goods are specified, as also the period during which they have to be actually delivered and their price is fixed. What is in controversy is whether it is transferable or non-transferable. There was considerable argument before us on the question as to assignability of a contract. The law of the subject is well settled and might be stated in simple terms. An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognized distinction between these two classes assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promise, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand rights under a contract are assignable unless the contract is personal in its nature the rights are capable of assignment either under the law or under an agreement between the parties." (underlining added)
16. I may further elaborate to what I have partially indicated above that when a contract is entered into between two parties, one or both may want to ensure that he has a particular comfort level with the opposite party with whom the contract is entered into. Take for example that the seller in this case would have been comfortable in entering into a contract with plaintiff no.2, but not with anybody else, whom the seller may not have been able to trust. It is for this reason that obligations under a contract cannot be assigned. Another reason is that for example in an extremely theoretical and absurd case, obligations under an agreement may be transferred to a totally undesirable person who can make the position of the other party to the contract difficult. If assignments of obligations are permitted to undesirable persons, then, there would be an unnecessary and sometime illegal pressure upon an opposite party to the contract, and possibly this may be one of the rationale for holding that assignment of obligations under a contract is illegal.
17. I therefore hold that even assuming there was existing a nomination agreement Ex.PW1/5 (in any case which is a forged and fabricated document), yet, there does not arise any issue of transferring of the obligations by the plaintiff no.2 under the three agreements to sell dated 18.8.1988 to the plaintiff no.1 as the same is legally prohibited, and admittedly, no consent of the defendants/sellers to the nomination was taken.
18. Issue no.2 is therefore decided in favour of the defendants and against the plaintiff.
Issue no.3
19. In view of the decision of the issue no.2 in favour of the defendant, issue no.3 will also stand decided in favour of the defendants and against the plaintiff.
Issue nos. 9 & 10
20. These issues pertain to essentially the fact as who is guilty of breach of contract being the agreement to sell dated 18.8.1988. On behalf of the plaintiff it is argued that it was the defendant who had breached the agreement to sell because he had to obtain the necessary permission of the Income Tax Authority under Section 269 UC of the Income Tax Act, 1961, but he did not do so. The defendant has however argued to the contrary.
21. In my opinion, this issue has to be decided in favour of the plaintiff and against the defendants, because it is a seller who has to ensure that he makes himself capable of performing the agreement to sell, if the same has to be performed. In the agreement to sell dated 18.8.1988, there is no reference as to who will take the permission from the Income Tax Authority, much less of the agreement stating this liability was upon the plaintiff. Once there is no liability upon the plaintiff to take the necessary permission from the Income Tax Authority, in my opinion, this liability has to naturally fall upon the defendant inasmuch as, it is always a seller who has to ensure that he makes himself capable of ensuring performance of his part of the contract. I therefore hold that the defendant is guilty of failing to take the necessary permission from the Income Tax Authority.
I, also at this stage, am taking up the issue that once two months‟ time is fixed for the period within which payment has to be made, would the failure to make payment within the period of two months be a breach of contract on the part of the plaintiff. In my opinion, at least so far as this two months‟ time is concerned, and I am not stating with respect to the latter period which will be dealt with under the issue of readiness and willingness, it cannot be held that it was the plaintiff who was guilty of breach of contract. The liability to make payment of the balance consideration would have only arisen within two months if the defendant had obtained permission from the Income Tax Authority, and had informed the plaintiff accordingly, and such is not the case as set up by the defendant.
Issue No.4
22. That takes me to the issue of readiness and willingness as required under Section 16(c) of the Specific Relief Act, 1963. This is issue no. 4 framed in the suit.
23. There is no dispute that the plaintiff no.2 with whom the agreement to sell was entered into, has categorically admitted in so many words in his cross-examination on 31.3.2001 that he did not have the required consideration to purchase the suit property. Therefore, so far as the plaintiff no.2 is concerned, obviously he has miserably failed to prove his readiness and willingness. Readiness and willingness is an expression of being ready and willing not only at the relevant time when the contract has to be performed, but in fact Section 16(c) provides that the readiness and willingness aspect is with the expression "has always been and continues to be", indicating that the existence of the financial capacity must be shown in some form or the other also on the date of filing of the suit and even till the stage of final arguments. Of course, it is not necessary that ready cash must be available with the seller, however, seller must be shown to have sufficient means so as to pay the balance sale consideration.
24. In view of the categorical admission made by the plaintiff no.2, I hold that the plaintiff may be ready and willing at an initial stage, inasmuch as the defendant failed to obtain permission from the Income Tax Authority, however, it cannot be said that the plaintiff has always been and continues to be ready and willing inasmuch as not only no documents whatsoever have been filed of the financial capacity of the plaintiff no. 2 to pay the balance consideration but also he has categorically admitted that he did not ever have the required balance consideration to purchase the suit property. I therefore hold that the plaintiff no.2 was not always/at all point of time ready and willing to perform his part of the contract. So far as the plaintiff no.1 is concerned, I have already held that the nomination is forged and fabricated, besides being illegal, and therefore, I do not have to look into the readiness and willingness of the plaintiff no.1.
25. Issue no.4 is therefore decided in favour of the defendants and against the plaintiffs.
Issue no.8
26. The next issue to be decided is issue no.8 of whether the plaintiffs are entitled to the discretionary relief of specific performance. It may be noted that only 10% consideration has been paid under the three agreements to sell. Even the possession of the suit property is with the defendant and not with the plaintiff. In such circumstances, I am of the opinion that the plaintiff cannot be entitled to the discretionary relief of specific performance, and rationale for which I have given in the following paragraphs of the judgment in the case of Shri Jinesh Kumar Jain (supra) and which read as under:-
13. Now let us assume that the agreement to sell dated 26.9.1988 was not hit by the 1972 Act; the defendants were guilty of breach of their obligation to perform their part of contract; and that the plaintiff was ready and willing to perform his part; even then, can it be said that the plaintiff is yet entitled to the discretionary relief of specific performance. It will be appropriate at this stage to refer to Section 20 of the Specific Relief Act, 1963, and more particularly sub-Section 3 thereof. Section 20 reads as under:-
20. Discretion as to
decreeing specific
performance.-
(1) The jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capably of correction by a court of appeal.
(2) The following are cases in which the court may properly exercise discretion not to decree specific performance:-
(a) where the terms of the contract or the conduct of the parties at the time of entering into the contract or the other circumstances under which the contract was entered into are such that the contract, though not voidable, gives the plaintiff an unfair advantage over the defendant;
or
(b) where the performance of the contract
would involve some hardship on the defendant which he did not foresee, whereas its non- performance would involve no such hardship on the plaintiff; or (C) where the defendant entered into the contract under circumstances which though not rendering the contract voidable, makes it inequitable to enforce specific performance.
(3) The court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable of specific performance.
(4) The court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the party."
14. Sub-Section 3 makes it clear that Courts decree specific performance where the plaintiff has done substantial acts in consequence of a contract/agreement to sell. Substantial acts obviously would mean and include payment of substantial amounts of money. Plaintiff may have paid 50% or more of the consideration or having paid a lesser consideration he could be in possession pursuant to the agreement to sell or otherwise is in the possession of the subject property or other substantial acts have been performed by the plaintiff, and acts which can be said to be substantial acts under Section 20(3). However, where the acts are not substantial i.e. merely 5% or 10% etc of the consideration is paid i.e. less than substantial consideration is paid, (and for which a rough benchmark can be taken as 50% of the consideration), and/or plaintiff is not in possession of the subject land, I do not think that the plaintiff is entitled to the discretionary relief of specific performance.
15. The Supreme Court in the recent judgment of Saradamani Kandappan vs. Mrs. S. Rajalakshmi, 2011 (12) SCC 18 has had an occasion to consider the aspect of payment of a nominal advance price by the plaintiff and its effect on the discretion of the Court in granting the discretionary relief of specific performance. Though in the facts of the case before the Supreme Court, it was the buyer who was found guilty of breach of contract, however, in my opinion, the observations of the Supreme Court in the said case are relevant not only because I have found in this case the plaintiff/ buyer guilty of breach of contract, but also because even assuming the plaintiff/buyer is not guilty of breach of contract, yet, Section 20 sub-Section 3 of the Specific Relief Act, 1963 as reproduced above clearly requires substantial acts on behalf of the plaintiff/proposed purchaser i.e. payment of substantial consideration. Paras 37 and 43 of the judgment in the case of Saradamani Kandappan (supra) are relevant and they read as under:
"37. The reality arising from this economic change cannot continue to be ignored in deciding cases relating to specific performance. The steep increase in prices is a circumstance which makes it inequitable to grant the relief of specific performance where the purchaser does not take steps to complete the sale within the agreed period, and the vendor has not been responsible for any delay or non-performance. A purchaser can no longer take shelter under the principle that time is not of essence in performance of contracts relating to immovable property, to cover his delays, laches, breaches and "non-readiness". The precedents from an era, when high inflation was unknown, holding that time is not of the essence of the contract in regard to immovable properties, may no longer apply, not because the principle laid down therein is unsound or erroneous, but the circumstances that existed when the said principle was evolved, no longer exist. In these days of galloping increases in prices of immovable properties, to hold that a vendor who took an earnest money of say about 10% of the sale price and agreed for three months or four months as the period for performance, did not intend that time should be the essence, will be a cruel joke on him, and will result in injustice. Adding to the misery is the delay in disposal of cases relating to specific performance, as suits and appeals therefrom routinely take two to three decades to attain finality. As a result, an owner agreeing to sell a property for rupees one lakh and received rupees ten thousand as advance may be required to execute a sale deed a quarter century later by receiving the remaining rupees ninety thousand, when the property value has risen to a crore of rupees.
xxxxxx xxxxxxx xxxxxxx
43. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanandam.
(i) The courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored.
(ii) The courts will apply greater scrutiny and strictness when considering whether the purchaser was "ready and willing" to perform his part of the contract.
(iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. The courts will also "frown" upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean that a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance. The three-year period is intended to assist the purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part-performance, where equity shifts in favour of the purchaser."
(emphasis is mine)
16. A reading of the aforesaid paras shows that Courts have a bounden duty to take notice of galloping prices. Surely it cannot be disputed that the balance of convenience i.e. equity in the present case is more in favour of the defendants who have only received 10% of the consideration. If the hammer has to fall in the facts of the present case, in my opinion, it should fall more on the plaintiff than on the defendants inasmuch as today the defendants cannot on receiving of the balance consideration of `44,00,000/-, and even if exorbitant rate of interest is received thereon, purchase any equivalent property for this amount. Correspondingly, the plaintiff has had benefit of 90% of sale consideration remaining with him (assuming he has any) and which he could have utilized for purchase of assets including an immovable property. In specific performance suits a buyer need not have ready cash all the time and his financial capacity has to be seen and thus plaintiff can be said to have taken benefit of the 90% balance with him. It is well to be remembered at this stage that in a way that part of Specific Relief Act dealing with specific performance is in the nature of exception to Section 73 of the Contract Act, 1872 i.e. the normal rule with respect to the breach of a contract under Section 73 of the Contract Act, 1872 is of damages, and, the Specific Relief Act, 1963 only provides the alternative discretionary remedy that instead of damages, the contract in fact should be specifically enforced. Thus for breach of contract the remedy of damages is always there and it is not that the buyer is remediless. However, for getting specific relief, theSpecific Relief Act, 1963 while providing for provisions of specific performance of the agreement (i.e. performance instead of damages) for breach, requires discretion to be exercised by the Court as to whether specific performance should or should not be granted in the facts of each case or that the plaintiff should be held entitled to the ordinary relief of damages or compensation.
17. I have recently in the case titled as Laxmi Devi vs. Mahavir Singh being RFA No. 556/2011 decided on 1.5.2012 declined specific performance, one of the ground being payment of only nominal consideration under the agreement to sell. Para 11 of the said judgment reads as under:-
"11. Besides the fact that respondent/plaintiff was guilty of breach of contract and was not ready and willing to perform his part of the contract lacking in financial capacity to pay the balance consideration, in my opinion, the facts of the present case also disentitle the respondent/plaintiff to the discretionary relief of specific performance. There are two reasons for declining the discretionary relief of specific performance. The first reason is that the Supreme Court has now on repeated occasions held that unless substantial consideration is paid out of the total amount of consideration, the Courts would lean against granting the specific performance inasmuch as by the loss of time, the balance sale consideration which is granted at a much later date, is not sufficient to enable the proposed seller to buy an equivalent property which could have been bought from the balance sale consideration if the same was paid on the due date. In the present case, out of the total sale consideration of `5,60,000/-, only a sum of `1 lakh has been paid i.e. the sale consideration which is paid is only around 17% or so. In my opinion, by mere payment of 17% of the sale consideration, it cannot be said that the respondent/plaintiff has made out a case for grant of discretionary relief or specific performance..............."
18. Therefore, whether we look from the point of view of Section 20 sub-Section 3 of the Specific Relief Act, 1963 or the ratio of the judgment of the Supreme Court in the case of Saradamani Kandappan (supra) or even on first principle with respect to equity because 10% of the sale consideration alongwith the interest will not result in the defendants even remotely being able to purchase an equivalent property than the suit property specific performance cannot be granted. In fact, on a rough estimation, the property prices would have galloped to at least between 30 to 50 times from 1988 till date. I take judicial notice of this that in the capital of our country, like in all other megapolis, on account of the increase in population and rapid urbanization, there is a phenomenal increase in the prices of urban immovable property.
I therefore hold and answer issue no. 5 against the plaintiff and in favour of the defendants holding that the plaintiff is not entitled to discretionary relief of specific performance." (underlining is supplied)
27. The ratio in the case of Shri Jinesh Kumar Jain (supra) squarely applies to the facts of the present case which are almost identical to the case of Shri Jinesh Kumar Jain (supra). The Division Bench of this Court in RFA(OS) No.75/2012 has specifically upheld this finding with respect to persons who pay just 10% consideration, and do not have possession of the suit property, are not entitled to the discretionary relief of specific performance inasmuch as Section 20 sub-Section 3 of the Specific Relief Act, 1963 requires that substantial acts have to be performed i.e acts have to be plural and acts have to be substantial, and payment of 10% of the consideration is not substantial act (s).
28. Learned senior counsel for the plaintiff sought to argue that the provision of Section 20 sub-Section 3 is not exhaustive and there can be other reasons for refusing specific performance, therefore, in the facts of the present case specific performance ought to be granted. In fact I fail to understand this argument because if Section 20 is not exhaustive, all that it means is that in addition to the grounds which are contained under Section 20 of the Specific Relief Act, specific performance can also otherwise be refused, but that would not mean that the reasons as stated in Section 20 sub-Section 3, which provide that specific performance should be refused, do not prevail, and specific performance can be granted although the discretion in terms of Section 20should not be exercised in the facts of a case. I therefore reject this argument urged on behalf of the plaintiff.
29. In view of the above not only the agreements between the parties are illegal, the plaintiff no.1 has no locus standi as the nomination in its favour is forged and also illegal, the plaintiff no.2 was never ready and willing to perform his part of the contract and hence I hold that plaintiffs are not entitled to discretionary relief of specific performance. Issue no.7
30. The next issue which arises is whether plaintiff is entitled to the relief of damages and if so at what amount. This is the subject matter of the issue no.7.
31. Learned senior counsel for the plaintiff could not dispute that no evidence whatsoever has been led on behalf of the plaintiff, much less credible documentary evidence, to show what was the difference in the price of the subject immovable property on the date of breach than as compared to the price as stated in three agreements to sell. Though I have held that agreements to sell are illegal being violative of Section 3 of the Delhi Lands (Restriction on Transfer) Act, 1972, even assuming the agreements were valid, since the plaintiffs have miserably failed to prove any damages, there does not arise any issue of grant of any damages to the plaintiff.
Epilogue
32. I may finally state that there is no other issue which is framed or any other relief which is pressed/prayed before me at the stage of final arguments, except the aspects which I have dealt with hereinabove.
33. I must also state that efforts were made by the defendants to make payment of some sort of reasonable compensation for the amount paid by the plaintiff no.2 to the defendants in each of the cases, i.e return of the amounts with a high rate of interest of 21% per annum simple, but, the plaintiffs have failed to positively respond to this reasonable offer which was made by the defendants so that this litigation could stand concluded.
Relief
34. In view of the above, the suits of the plaintiffs are wholly misconceived and without any merit. In fact, in my opinion, the suits are basically speculative actions on behalf of the plaintiffs in order to make money from illegal transactions. The lack of bonafides and dishonesty of conduct of the plaintiffs become clear from the fact that a forged nomination agreement dated 28.9.1988, Ex.PW1/5 is relied upon, and which was so done to bring in the plaintiff no.1 so that plaintiff no.2 does not falter with respect to his financial capacity which the plaintiff no.2 admittedly never had. It is necessary that speculative litigations such as the present must be very severely dealt with. Accordingly, I dismiss the suits for specific performance as also damages and hold that the defendants will be entitled to actual costs which have been incurred for conducting of the present suits. I exercise my powers under Rule 14 of the Delhi High Court (Original Side) Rules 1967 in the facts of the present case to exempt the applicability of the Rules with respect to costs, and apply the ratio of the judgment of the Supreme Court in the case of Ramrameshwari Devi and Others v. Nirmala Devi and Others, (2011) 8 SCC 249 which holds that it is high time that actual costs be granted. Let the defendants file affidavits within a period of 4 weeks from today as regards the costs incurred by them in the suits for payment to their lawyers and which affidavits shall be supported by the certificates of the lawyers of having received the fees in these cases. The amount of costs as stated in these affidavits will form the costs payable by the plaintiffs to the defendants in the present cases. Suits are accordingly dismissed. Decree sheets be prepared.
No comments:
Post a Comment