Nearly a century and a quarter ago, one finds this clear exposition of the principle of novation, in the judgement of the Court of the Judicial Commissioner at Nagpur in Ganpat v. Mahadeo 1925 Nag 26 :
“Where the question is whether one party is set free by the
action of the other, the matter for consideration is whether the
acts or conduct of the one do or do not amount to an
intimation of an intention to abandon and altogether to refuse
performance of the contract. The true question is whether the
acts and conduct of the party evince any intention no longer
to be bound by the contract: Mersay Steel and Iron
Company v. Naglir Benzon & Co. 9 A.C. 434 General Bill
Posting Co v. Atkinson (13). The Court requires as clear
evidence of the waiver as of the existence of the contract
itself and will not act upon less: Carolan v. Brabazon (1900)
A.C. 118 = 78 L.J.; C.H. 77=99 L.T. 913 = 25 T.L.R. 173.
What is then required is that an abandonment of the old
agreement, must be clearly made out. There must be clear
and precise evidence of a mutual intention to determine and
abandon the contract: Mathura Mohan Saha v. Ram
Kumar Saha [1946] 43 Cal. 700=23 C.L.J. 26 = 30 I.C.
305: 20 C.W.N. 370. Where the intention to substitute a new
contract is frustrated by the fact that the new contract is a
nullity, the original contract may be enforceable: see Har
Chandi Lal v. Sheoraj Singh 3 J & L 200 = 9 Ir. & E. 121.
Much more so, where the agreement itself is a contravention
of the statute and does not ripen into a contract in the legal
sense of the term.”
(Emphasis supplied)
A coordinate Bench of this Court has held, recently in Knowledge
Podium Systems Pvt Ltd v. S.M. Professional Services Pvt Ltd26,
that “a novation takes place only when there is a complete substitution of a new contract in place of the old”.
IN THE HIGH COURT OF DELHI AT NEW DELHI
Pronounced on: 22nd October, 2021
IAs 6433/2020 & IA 7643/2020 in
CS(COMM) INFRA 1/2020
M/S GROVY INDIA LTD Vs BALBIR SINGH
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
Dated: 22.10.2021
1. On 4th August, 2020, while issuing summons in CS (Comm)
(Infra) 1/2020, IA 6433/2020, filed by the plaintiff under Order
XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC),
was also taken up for preliminary hearing. Ad interim injunction was
granted, in favour of the plaintiff, restraining the defendant from
transferring, alienating, encumbering or further creating any third
party rights in respect of the suit property located at F-6, Kailash
Colony, New Delhi, or carrying out any further alteration in the suit
property.
2. The defendant filed IA 7643/2020, for vacating the aforesaid ad
interim order.
3. Arguments were heard on IA 6433/2020 and IA 7643/2020,
which are being disposed of, by this order.
Facts, as per the plaint
4. The dispute relates to a Property Development Agreement
(“PDA”), dated 14th January, 2020, executed between the plaintiff and
the defendant. The defendant has admitted this document. Clauses 2,
3, 4, 6, 14 and 19 of the PDA read thus:
“2. That the DEVELOPER shall demolish the existing
structure on the said plot of land and develop, construct and/or
build a building consisting of Basement, Stilt, Ground Floor,
First Floor, Second Floor and Third Floor with terrace, at its
own costs and expense.
3. That the DEVELOPER shall develop, construct and
complete the Building at its own costs and expenses after
procuring the requisite permissions, sanctions and approvals
for development construction and completion of the said
building on the said plot at DEVELOPER's cost.
4. That it has been clearly agreed between the parties that the
malba realised from the demolition of the existing structure of
the said property shall belong to the DEVELOPER who shall
have full right to sell the same and receive the proceeds
thereof, without any claim or right of the OWNER in the
same.
6. That in addition to the DEVELOPER incurring the
entire costs and expenses etc. for the construction, will pay a
sum of Rs. 49,00,000/- (Rupees Forty Nine Lakhs Only) to
the OWNER as the total consideration against the rights in the
property to be transferred in favour of the DEVELOPER or its
nominee/s. The abovesaid amount has been paid by the
DEVELOPER to the OWNER, in the following manner:
Rs.4,00,000/- (Rupees Four Lakhs Only) vide cheque
no. 406161 drawn on Axis Bank dated 14/01/2020.
The receipt of which the OWNER hereby admits and
acknowledges. The balance sum of Rs. 45,00,000/-
(Rupees Forty Five Lakhs) shall be made will be paid
by the DEVELOPER to the OWNER. at the time of
registration of the sale documents such as Agreement
to Sell, General Power of Attorney, Will, Affidavits
etc. on or before 5th February, 2020 as the full and final
settlement and discharge.
14. That in view of the above arrangement arrived at
between the parties hereto and in lieu of the DEVELOPER (a)
re-developing the said property at its own cost using its
infrastructure facilities, Man Power, Skill & expertise (b)
paying the aforesaid amount/consideration to the OWNER.
The parties shall be shall be entitled to the following portions
of the newly constructed building as under:
OWNER'S ALLOCATION
i) ENTIRE BASEMENT
ii) ENTIRE GROUND FLOOR
iii) ENTIRE FIRST FLOOR
iv) ENTIRE SECOND FLOOR
v) 77.5% SHARE/PORTION OF THE ENTIRE
STILT AREA FOR CAR PARKING AND
COMMON W.C. THEREIN
vi) USE OF COMMON AREAS, FACILITIES
AND SERVICES
vii) 77.5% UNDIVIDED, INDIVISIBLE AND
IMPARTIBLE OWNERSHIP RIGHTS IN
THE PLOT OF LAND MEASURING 531-
6/10 SQ. YDS.
DEVELOPER'S ALLOCATION
i) ENTIRE THIRD FLOOR
ii) ENTIRE TERRACE OVER AND ABOVE
THE ENTIRE THIRD FLOOR
iii) 22.5% SHARE/PORTION OF THE
ENTIRE STILT AREA WITH
INDEPENDENT BAY WITH SEPARATE
GATE FOR CAR PARKING AND
COMMON W.C. THEREIN (As per
attached plan)
iv) USE OF COMMON AREAS, FACILITIES
AND SERVICES
v) 22.5% UNDIVIDED, INDIVISIBLE AND
IMPARTIBLE OWNERSHIP RIGHTS IN
THE PLOT OF LAND MEASURING 531-
6/10 SQ. YDS.
19. The DEVELOPER and the OWNER shall be entitled
to sell, transfer. convey and assign their respective portions to
any prospective buyer and to receive the sale proceeds in
respect thereof, in their respective names, before, during or
after the completion of the construction, without any
objection or hindrance by the other. Further the
DEVELOPER and the OWNER shall be fully entitled to enter
into any Agreement(s) for the sale/ booking of their
respective allocations in the newly constructed building and
shall be entitled to accept cash/cheque in their respective
names. Further the OWNER hereby agree to confirm, execute
or enter into Agreement. if required by the DEVELOPER,
between the OWNER, DEVELOPER and the prospective
purchaser of the portion(s) falling to the share of the
DEVELOPER.”
5. Clause 6 of the PDA required the plaintiff to pay, to the
defendant, ₹ 49 lakhs. Of this, the payment of an amount of ₹ 4 lakhs,
vide cheque dated 14th January, 2020, stands acknowledged in the said
Clause itself. Clause 6 envisaged payment of the remainder of ₹ 45
lakhs “at the time of registration of the said documents such as the
Agreement to Sell, General Power of Attorney, Will, Affidavits etc.
on or before 5th February, 2020 as the full and final settlement and
discharge”. Out of this amount, according to the plaintiff, TDS of ₹
2,49,000/– and a further amount of ₹ 1 lakh, payable by the defendant
to the plaintiff as per an “Agreement for Construction”, to be executed
subsequently, were deductible, resulting in the net amount payable by
the plaintiff to the defendant reducing to ₹ 43,51,000/–. This amount,
according to the plaintiff, was offered, by way of a crossed cheque, to
the defendant, on 31st January, 2020, whereupon further documents, in
the form of an Agreement to Sell (ATS), Agreement for Construction
(AFC), General Power of Attorney (GPA), a receipt for the advance
payment, Will of the defendant, an affidavit by the Defendant
recognising creation of title interest of the plaintiff in the suit property,
a Power of Attorney by the defendant and possession letter, were
executed.
6. The defendant denies the offer of ₹ 43,51,000/–, by the plaintiff
to the defendant, as well as the execution of all the aforesaid
documents.
7. The plaintiff alleges that it was only at this stage that the
defendant informed the plaintiff that the suit property was mortgaged
with the Standard Chartered Bank (“the Bank”), thereby evidencing
that Recitals H and I in the PDA were untrue.
8. I may note, even at this juncture, that the defendant, having
admitted the PDA, has not chosen to deny the fact that the recital, in
the PDA, regarding the suit property being unencumbered, was not
correct. All that the defendant pleads, by way of a defence, is that,
during the course of discussions prior to execution of the PDA, the
plaintiff had been informed of the fact that the suit property stood
encumbered with the Bank, and that the defendant “blindly” signed
the PDA, “believing” that it was in line with the discussions that had
taken place prior thereto.
9. On 23rd March, 2020, the plaintiff wrote to the defendant,
asserting the above facts and, further, that, during the meeting which
took place on 10th February, 2020 (when, according to the plaintiff, it
had handed over, to the defendant, a cheque for ₹ 43,51,000/–), it was
mutually decided that the aforesaid documents (the ATS, AFC, and
other documents) would be exchanged with the plaintiff on receipt of
a No Objection Certificate (NOC) from the Bank. The letter alleged
that, despite this understanding, when the plaintiff met the defendant
on 12th March, 2020, the defendant refused to obtain the NOC from
the Bank or part with the original documents and threatened, instead,
to forfeit the advance paid by the plaintiff and to enter into an
agreement with another builder. The plaintiff, in the circumstances,
called upon the defendant to perform his part of the PDA, by
producing the original documents of the suit property, registering the
said documents such as the ATS, GPA, Will, PoA, affidavit and
possession letter in favour of the plaintiff, undertaking, in the bargain,
to comply with all its obligations under the PDA and pay the entire
remaining consideration. The plaintiff asserts that it had, thereby,
expressed its readiness and willingness to comply with its
responsibilities under the PDA.
10. The defendant responded, through Counsel, on 4th May, 2020,
alleging that, apart from an initial payment ₹ 4 lakhs, the remaining
amount of ₹ 45 lakhs had neither been paid, nor offered, by the
plaintiff to the defendant on or before 5th February, 2020 or even till
the date of the said communication. The plaintiff’s assertion that it
had offered, to the defendant, a cheque for ₹ 43,51,000/– was
categorically denied. Rather, alleged the defendant, the plaintiff was
circulating messages, offering the suit property for sale, concealing
the entitlements of the defendant. In view of the alleged breaches of
the PDA by the plaintiff, the defendant asserted that it had forfeited
the advance paid by the plaintiff.
11. It is in these circumstances that the plaintiff moved this Court
by means of the present suit.
12. The suit prays thus:
“Wherefore, in the light of the facts and circumstances as
aforementioned, it is humbly prayed that this Hon’ble Court
may be pleased to:
I. Pass a decree of Specific Performance and
Mandatory Injunction in favour of the Plaintiff and
against the Defendant, directing the Defendant to
perform his obligations as per the Property
Development Agreement dated 14.01.2020 including
handing over the peaceful possession of the said
premises to the Plaintiff, produce the original property
papers, hand over all the executed documents, and
further execute all necessary documents to fulfil the
contemplated terms of the Property Development
Agreement dated 14.01.2020.
II. Pass a decree of Specific Performance and
Mandatory Injunction directing the Defendant to seek a
discharge over the mortgage on the said premises, in
the event such a mortgage exists;
III. Pass a decree of Permanent Injunction
restraining the Defendants, their agents, supporters and
assigns from transferring, alienating, encumbrancing
(sic encumbering) or creating any further third-party
rights in any manner whatsoever in respect of the said
premises;
IV. Alternatively, direct the Defendant to return the
advanced payment and pay damages to the tune of ₹
2,00,00,100/– suffered by the plaintiff;
V. Award costs in favour of the Plaintiff;
VI. Pass such or other reliefs/order as this Hon’ble
Court may deem fit and proper in the circumstances of
the case and thus render justice.”
Rival Contentions
13. Mr. Rajiv Garg, learned Counsel for the defendant, has opposed
grant of interim relief to the plaintiff, on the following grounds:
(i) The PDA was unregistered and insufficiently stamped
and could not, therefore, confer any enforceable right on the
plaintiff.
(ii) Specific performance of the PDA could not be ordered by
the Court, in view of Section 14(1)(b) of the Specific Relief
Act, 19631. Reliance was placed, for the purpose, on the
judgment of the Supreme Court in Vinod Seth v. Devinder
Bajaj2 and of this Court in Prem Kumar Bansal v. Ambrish
Garg3.
(iii) The PDA stood novated, within the meaning of Section
624 of the Indian Contract Act, 1872 by the documents alleged,
by the plaintiff, to have been executed later, such as the ATS,
AFC, etc.
(iv) The plaintiff’s assertion of readiness and willingness to
perform his part of the PDA was a mere eyewash, as it did not
have the financial wherewithal to comply with its obligation.
Reliance was placed, for this purpose, on the Axis Bank
statement of the plaintiff.
(v) In fact, the plaintiff had, till date, paid only ₹ 4 lakhs, out
of the total amount payable by the plaintiff under the PDA or
even under Clause 6 thereof. Specific performance of the PDA
could not be claimed on payment of such a small amount.
1 14. Contracts not specifically enforceable. – The following contracts cannot be specifically enforced,
namely: -
(b) a contract, the performance of which involves the performance of a continuous duty
which the court cannot supervise;"
2 (2010) 8 SCC 1
3 230 (2016) DLT 360
4 62. Effect of novation, rescission and alteration of contract. – If the parties to a contract agree to
substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.
(vi) The plaintiff knew of the fact that the suit property was
mortgaged with the Bank at the time of execution of the PDA,
having been made aware of the mortgage during the course of
discussions prior to execution of the PDA. By its letter dated
23rd March, 2020, this fact was condoned and waived by the
plaintiff.
(vii) The defendant had signed the PDA blindly, believing that
it was in accordance with the discussions which had preceded
its execution.
14. To these objections, Mr. Aditya Wadhwa, learned Counsel for
the plaintiff, responded thus:
(i) As the PDA was not a contract for sale, and did not
create, by itself, any right or title, it was not required to be
registered, by virtue of Section 17 of the Registration Act5.
5 17. Documents of which registration is compulsory. –
(1) The following documents shall be registered, if the property to which they relate is situate
in the district in which, as if they had been executed on or after the date on which, Act No. XVI of
1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian
Registration Act, 1877, or this Act came or comes into force, namely: -
(b) other non-testamentary instruments which purport or operate to create, declare,
assign, limit or extinguish, whether in present or in future, any right, title or interest,
whether vested or contingent, of the value of ₹ 100 or upwards, to or in immovable
property;
(c) non-testamentary instruments which acknowledge the receipt of payment of any
consideration on account of the creation, declaration, assignment, limitation or extinction
of any such right, title or interest;
*****
(2) Nothing in clauses (b) and (c) of sub- section (1) applies to –
*****
(v) any document other than the documents specified in sub-section (1A) not itself
creating, declaring, assigning, limiting or extinguishing any right, title or interest of the
value of one hundred rupees and upwards to or in any immovable property, but merely
creating a right to obtain another document which will, when executed, create, declare,
assign, limit or extinguish any such right, title or interest;
(ii) Having admitted the PDA, the defendant could not be
heard to contend that it was insufficiently stamped, as held in
Shyamal Kumar Roy v. Sushil Kumar Aggarwal6 and by this
Court in Sudir Engineering Co. v. Nitco Roadways Ltd7.
That apart, Article 23A of the Stamp Act was inapplicable to
the PDA. It was merely a contract envisaging sale of property,
not a contract selling the property as such. It did not
contemplate transfer of possession; ergo, Article 23A of the
Stamp Act would also not apply. Reliance was placed on the
judgements of the Supreme Court in Omprakash v.
Laxminarayan8 and Avinash Chauhan v. Vijay Mishra9.
Rather, stamp duty was payable, on the PDA, under Article 5 of
the Stamp Act.
(iii) Besides, injunction could be granted even on an
insufficiently stamped document, as held by the High Court of
Calcutta in GTZ (India Pvt Ltd) v. Power Electronics
Engineers10 and by the High Court of Bombay in Sanjay v.
Vishnupant11.
(iv) The PDA was not incapable of specific performance, for
the following reasons:
6 (2006) 11 SCC 331
7 1995 (34) DRJ 86
8 (2014) 1 SCC 618
9 (2009) 2 SCC 532
10 2009 SCC OnLine Cal 2162
11 (2007) 6 Mah LJ 550 : 2007 SCC OnLine Bom 610
(a) The PDA was not a mere construction agreement,
but also conferred ownership rights on the plaintiff.
(b) The PDA itself contained in a recital that breach of
its terms would entitle the aggrieved party to enforce the
PDA by suing for specific performance.
(c) The PDA contained detailed plans, layouts and
constructions for redevelopment of each floor of the suit
property. It did not, therefore, contemplate continuous
performance of mutual obligations, but was targeted at a
final result. Such a contract was not excepted from
specific performance under Section 14(b) of the Specific
Relief Act.
Mr. Wadhwa placed reliance on the judgements of the Supreme
Court in Suraj Lamps & Industries Pvt Ltd v. State of
Haryana12 and Sushil Kumar Agarwal v. Meenakshi
Sandhu13, the High Court of Bombay in Shapoorji Pallonji v.
Jignesh Shah14 and the House of Lords in Co-operative
Insurance Society Ltd v. Argyll Stores15. Vinod Seth2, it was
submitted, involved a vague oral agreement whereas, in Prem
Kumar Bansal3, the obligations, sought to be enforced, were
required to be performed by both parties; moreover, the
12 (2012) 1 SCC 656
13 (2019) 2 SCC 241
14 (2013) 6 Bom CR 575 : 2013 SCC OnLine Bom 709
15 1998 AC 1
judgment was rendered under the pre-amended Specific Relief
Act.
Analysis
15. The interim relief that was granted by this Court, and of which
the defendant seeks vacation, was a restraint against alienation or
creation of third party rights, or for carrying out any further alteration
in the suit property. The three considerations, which govern every plea
for grant of interim injunction under Order XXXIX of the CPC, are
the existence of a prima facie case, balance of convenience and the
likelihood of irreparable loss were injunction not to be granted. All
three considerations have to coalesce, for injunction to be justified.
16. The plaintiff has, in this suit, sought specific performance of the
PDA and thereby a direction to the defendant to hand over peaceful
possession of the suit property to the plaintiff, produce the original
property papers, handover all the executed documents, and further
execute all such other necessary documents to fulfil the contemplated
terms of the PDA. Additionally, a direction to the defendant, to have
the mortgage, in respect of the suit property, redeemed, has also been
sought.
17. Balance of convenience and irreparable loss:
17.1 The plaintiff seeks specific performance of an agreement
relating to immovable property, whereunder the plaintiff claims that
rights enure in its favour. In such a case, unless the claim is found to
be, prima facie, entirely insubstantial, considerations of equity and the
interests of justice would, classically, justify preservation of status
quo in respect of the corpus of the dispute. This is simply because, if,
ultimately, the case of the plaintiff is found to be without merit, the
defendant could deal with the property as it chooses, and also be
adequately recompensed for the prejudice, if any, which has been
caused by its inability to do so in the interregnum whereas, if the
status of the property, whether in respect of title or possession, alters
during the pendency of the lis, the resultant prejudice to the plaintiff
might well-nigh be irremediable. Principles of balance of
convenience too, therefore, normally justify maintenance of the status
quo during the pendency of the litigation.
17.2 Having said that, it is also true that the plaintiff cannot treat
itself as entitled to any interim relief unless it establishes the
existence, in its favour, of a prima facie case. Sans a prima facie
case, no interim relief can be granted to a litigant before the Court,
howsoever serious the consequence of refusal of the prayer might be.
17.3 Indeed, learned Counsel for the parties did not address any
submissions, to this Court, on the aspect of balance of convenience
and irreparable loss. Arguments were confined to the aspect of
entitlement, of the plaintiff, to the relief ultimately sought in the
plaint.
18. Prima facie merits of the case:
18.1 Mr. Garg, learned Counsel for the defendant, has not disputed
the fact that, contrary to recitals H and I in the PDA, the suit property
was, in fact, mortgaged with the bank even at the time when the PDA
was executed. Clearly, therefore, the recitals H and I in the PDA were
untrue. This fact, even by itself, tilts the equities of the case strongly
in favour of the plaintiff.
18.2 There is no material, whatsoever, to support Mr. Garg’s
contention that, prior to executing of the PDA, the defendant was
made aware of the fact that the suit property was mortgaged with the
Bank. Equally, his contention that the defendant had blindly signed
the PDA, believing the PDA to be in line with the discussions which
had purportedly taken place prior to its execution, is also too facile to
be believed at this prima facie stage. Any such case, if at all, would
have to be established by the defendant only consequent on trial. For
the time being, the position that stares the Court in the face is that the
PDA wrongly stated that the suit property was unencumbered, without
disclosing the fact that it stood mortgaged with the Bank.
19. In the face of all these facts and considerations, the Court is
only required to examine whether the submissions of Mr. Garg are
such as to disentitle the plaintiff to an interlocutory injunction qua
maintenance of status quo regarding the suit property, or whether a
case has been made out, to justify vacation of the injunction already
granted.
20. Re. PDA being unregistered:
20.1 Mr. Garg has sought to question the enforceability of the PDA
on the ground that it is unregistered and insufficiently stamped. As
such, he contends that it can confer no enforceable right on the
plaintiff.
20.2 It is necessary, at the first instance, to examine the PDA itself.
20.3 The PDA refers to the defendant Balbir Singh as the “Owner”
and the plaintiff Grovy India Ltd the “Developer”. Clauses A to E of
the PDA set out the manner in which the defendant became the sole,
absolute and exclusive owner of the suit property. Clause F evinces
the desire of the defendant to get the suit property
redeveloped/reconstructed after demolition of the existing structure,
for which the defendant approached the plaintiff. The plaintiff is
required, as per the said Clause, to develop the suit property on behalf
of the defendant at the plaintiff’s cost. Clause H contains the
representation that the suit property is free from all sorts of
encumbrances, charges, liens, claims, lease, prior agreements and
disavows the existence of any right, title or interest in the suit property
of any person other than the owner. The purportedly unencumbered
nature of the suit property is further emphasized in Clause I. Sub
clause (h) of Clause I reads thus:
“(h) That in case any of the representations/assurances
made by the OWNER are found to be untrue and/or if the
whole or any portion of the said DEVELOPER's Allocation
(fully described below) is ever taken away or goes out from
the possession of the DEVELOPER on account of any legal
defect in the ownership and title of the OWNER then the
OWNER will be liable and responsible to make good the loss
suffered by the DEVELOPER and shall keep the
DEVELOPER saved harmless and indemnified against all
such costs, damages, losses suffered by the DEVELOPER,
from his properties both movable and immovable.”
20.4 Clause J evinces the agreement, between the plaintiff and the
defendant, to develop, construct and build a fresh building on the area
occupied by the suit property, for which purpose the PDA was being
executed.
20.5 The substantive clauses of the PDA follow.
20.6 Clause 1 states that the defendant had got the building plans
sanctioned from the concerned authorities. Clauses 2, 3 and 5 set out
the duties and responsibilities of the plaintiff as developer. Clause 2
requires the plaintiff to demolish the existing structure on the suit
property and to develop/construct a building consisting of basement,
stilt, ground floor, first floor, second floor and third floor with terrace,
at the plaintiff’s cost and expense. Clause 3 requires the plaintiff to
procure the requisite permissions, sanctions and approvals for
executing the construction and completion of the building. Clause 5
records the plaintiff’s undertaking to modify the building plans in
accordance with the building bye-laws as applicable from time to time
and to make full efforts to obtain permission for the maximum area to
be covered on the suit property. It further records the requirements
that the total FAR (Floor Area Ratio) sanctioned on the plot of land
comprising the suit property is required to be divided equally on all
four floors. Clause 4 entitles the plaintiff to ownership of the malba
resulting from demolition of the structure existing on the suit property
as well as to sell the malba and appropriate the sale proceeds.
20.7 Clause 6 sets out the financial liabilities of the plaintiff under
the PDA. It requires the plaintiff to, apart from incurring the entire
costs and expenses for construction of the new building, additionally
pay a sum of ₹ 49 lakhs to the defendant as total consideration against
the rights in the property to be transferred in favour of the plaintiff.
The payment of ₹ 4 lakhs, out of the said amount, vide cheque dated
14th January, 2020, by the plaintiff to the defendant has also been
recorded. Apropos payment of the balance amount, Clause 6 requires
the payment to be made by the plaintiff to the defendant “at the time
of registration of the sale documents such as Agreement to Sell,
General Power of Attorney, Will, Affidavit etc. on or before 5th
February, 2020 as the full and final settlement and discharge”.
20.8 Clause 7 records the consent, of the defendant, to the plaintiff
carrying out necessary acts including demolition and reconstruction,
in accordance with the preceding terms and conditions of the PDA.
Clause 9 empowers the plaintiff to engage or employ architects to
carry out the construction at its own cost and expense and to apply for
permissions, sanctions and approvals to the municipal authorities.
Clause 10 defrays all expenses for carrying out construction,
development and completion of building, including architects’ charges
and fees, to the account of the plaintiff. This aspect is reiterated in
Clause 12.
20.9 Clause 11 requires the quality of construction of the building to
be of good standard.
20.10 Clauses 13 and 14 set out the allocation of the portion
reconstructed building, which would fall to the share of the plaintiff
and the defendant. Clause 15 further grants exclusive ownership and
user rights of the entire terrace over and above the third floor of the
property including right of further constructions thereon, to the
plaintiff. Clause 16 requires the plaintiff to install a lift in the building,
for common use of the owners/occupiers at all floors, and further
stipulates that the maintenance costs of the lift and of electricity for
use of the lift would be proportionately shared by owners/occupiers of
the building.
20.11 Clause 17 is a standard indemnity clause, indemnifying the
plaintiff from any liabilities arising in respect of the suit property,
during implementation of the PDA.
20.12 Clause 18 requires the defendant to pay all outstanding charges
and dues in respect of the suit property including house tax, property
tax and water and electricity charges, while retaining liability, towards
water and electricity charges, borne during the period of construction,
with the plaintiff. Consequent on completion of construction,
however, Clause 18 stipulates that house tax, water and electricity
charges would be borne by the defendant in respect of their respective
allocations in the building.
20.13 Clause 19 entitles the plaintiff and the defendant to sell,
transfer, convey and assign their respective portions in the building to
be constructed to any prospective buyer, and to receive sale
proceedings in respect thereof, either before, during or after the
completion of the construction. The plaintiff and the defendant are
also entitled, by the said clause, to enter into agreements for
sale/booking of their respective allocations in the newly constructed
building and accept payments in respect thereof.
20.14 Clause 20 records the undertaking of the defendant to join in the
execution of all necessary documents, to accord legal title to the
buyers of any flats or portions of the plaintiff’s share in the
constructed building, without further payment. Clause 21 requires the
building to be completed within 24 months of the date of handing over
of possession of the suit property to the plaintiff, subject to force
majeure, failing which Clause 22 requires the plaintiff to pay, to the
defendant, ₹ 3 lakhs per month as penalty.
20.15 Clause 23 indemnifies the defendant against any accident or
claim from any person, including neighbours, on account of the
construction of the proposed building, and renders the plaintiff solely
responsible in that regard. Clause 24 clarifies that the PDA would not
constitute a partnership, between the plaintiff and the defendant. In the
event of any deviation from the agreed specifications, Clause 25
requires the defendant to inform the plaintiff, who would rectify the
deviation at its own costs/arrangements, but otherwise proscribes any
interference, or obstruction, by the defendant, with the execution and
completion of the work of development and construction of the new
building. Financial liabilities, arising out of the sale of the respective
shares of the suit property, falling to the lot of the plaintiff and the
defendant, are, by Clause 26, to be borne by them.
20.16 Clauses 28 to 31 deal with the rights to use common areas of
the suit property during construction. Clause 32 requires that, upon
completion of construction, the plaintiff would first hand over
possession of the defendant’s share, complete in all respects, by way
of a written intimation, and requires the defendant to take possession
of his share within 15 days as of the said offer. Failure, on the part of
the defendant, to take possession within the said period of 15 days
would result in possession being deemed to have been handed over to
the defendant.
20.17 Clause 32 inhibits the plaintiff from assigning or nominating the
PDA in favour of any third party, and contains the following specific
recital:
“The contract being personal in nature and dependent on
respective rights and obligations of the parties and thus is not
in the nature of contract for sale, as defined U/s 54 of the
Transfer of Property Act and not required to be registered U/s
17 (1) (A) of the Registration Act. 1908.”
(Emphasis supplied)
20.18 Clause 33 requires GST to be borne by the plaintiff. Clause 34
states that the PDA is irrevocable under all circumstances and Clause
35 entitles either party to, in the event of infringement, by the opposite
party, of any terms or conditions of the PDA, have the PDA enforced
through court by claiming specific performance.
20.19 As already noted, Clause 32 of the PDA itself states that it is
not in the nature of a contract for sale within the meaning of Section
54 of the Transfer of Property Act and that it is, therefore, required to
be registered under Section 17 (1) of the Registration Act.
20.20 Section 17(1)(b) of the Registration Act requires registration of
instruments which create right, title or interest in immovable property.
The various Clauses of the PDA, holistically read, merely set out the
obligations of the plaintiff and the defendant, and the rights and the
entitlements which flow therefrom. Clause 6 specifically envisages,
after completion of construction, execution of documents such as
agreement to sell, general power of attorney, will, affidavit, etc.,
which are referred to, in the said clause, specifically as “the sale
documents”. It cannot, therefore, prima facie, be said that transfer of
right or ownership in the suit property was conveyed by the PDA
itself, as would require its registration, mandatorily, under Section
17(1) of the Registration Act.
20.21 The objection of Mr Garg to the unregistered nature of the PDA
as a ground to non-suit the plaintiff from claiming interlocutory
reliefs, therefore, fails to impress.
21. Re: objection regarding insufficient stamping
21.1 Mr. Garg has sought to contend that the PDA was required to be
stamped in accordance with Article 23A of Schedule 1 of the Stamp
Act and that, not having been so stamped, the plaintiff could not
derive any rights therefrom. Article 23A of Schedule 1 of the Stamp
Act which provides for the requisite stamp duty on instruments reads
thus:
Description of instrument Proper Stamp Duty
23A. Conveyance in the nature
of Part Performance—
Contracts for the transfer of
immovable property in the nature
of part performance in any Union
territory under section 53A of the
Transfer of Property Act, 1882
(4 of 1882).
Ninety per cent of the duty as a
Conveyance (No. 23).
21.2 “Conveyance” is defined, in clause (10) of Section 2 of the
Stamp Act, thus:
“(10) Conveyance – “Conveyance” includes a conveyance
on sale every instrument by which property, whether
moveable or immovable, is transferred inter vivos and which
is not otherwise specifically provided for by schedule I”
21.3 Omprakash8, on which Mr. Wadhwa relies, precisely dealt
with the interpretation of this clause. In that case, specific performance
was sought, by the respondent before the Supreme Court, of an
agreement to sell. Para 11 of the report records that the agreement to
sell acknowledged “payment of the part of consideration money and
further giving actual physical possession to the purchaser by the
seller”. The question before the Supreme Court was whether the
agreement to sell was a “conveyance”, which was required to be
stamped in accordance with Article 23 of Schedule I-A of the Stamp
Act. Referring to the definition of “conveyance” in Section 2(10), the
Supreme Court held, in para 13 of the report, that it was “evident that
an instrument by which movable and immovable property is
transferred, comes within the expression “conveyance” ”. Transfer, it
was further held, required payment of the consideration in whole or in
part and handing over of the possession of the property. In this
context, the Supreme Court held that the recitals in the
document/deeds were relevant to determine whether the document was
required to be stamped.
21.4 Applying the said principle, it cannot be said that the PDA is a
document which conveys title in property, or results in transfer, by
handing over of possession against payment of consideration.
21.5 Three decisions of this Court further illumine this path.
21.6 A Division Bench of this Court has clearly held as follows, in
Pawandeep Singh v. Gurdeep Singh Virdi16:
“19. The law on this aspect is clear. An unregistered
Agreement to Sell cannot be used as a shield under Section 53
A of the TPA since Section 17(1-A) of the Registration Act,
1908 makes the documents containing a contract to transfer
for consideration, any immovable property for the purpose of
Section 53 A, compulsorily registrable. If such documents are
not registered, they shall have no effect for the purposes of
Section 53 A. For purposes of ready reference, Section 17 of
the Registration Act, 1908 is reproduced below:—
17. Documents of which registration is compulsory-
16 2019 SCC OnLine Del 9495
(1) The following documents shall be
registered, if the property to which they relate is
situate in a district in which, and if they have
been examined on or after the date on which,
Act XVI of 1864, or the Indian Registration Act,
1866 (20 of 1866), or the Indian Registration
Act, 1871 (8 of 1871), or the Indian Registration
Act, 1877 (3 of 1877), or this Act came or
comes into force, namely –
(a) instruments of gift of immovable
property;
(b) other non-testamentary
instruments which purport or operate to
create, declare, assign, limit or
extinguish, whether in present or in
future, any right, title or interest, whether
vested or contingent, of the value of one
hundred rupees and upwards, to or in
immovable property;
(c) non-testamentary instruments
which acknowledge the receipt or
payment of any consideration on account
of the creation, declaration, assignment,
limitation or extinction of any such right,
title or interest; and
(d) lease of immovable property from
year to year, or for any term exceeding
one year, or reserving a yearly rent;
(e) non-testamentary instruments
transferring or assigning any decree or
order of a Court or any award when such
decree or order or award purports or
operates to create, declare, assign, limit
or extinguish, whether in present or in
future, any right, title or interest, whether
vested or contingent, of the value of one
hundred rupees and upwards, to or in
immovable property:
Provided that the State Government may,
by order published in the Official Gazette,
exempt, from the operation of this sub-section
any leases executed in any district, or part of a
district, the terms granted by which do not
exceed five years and the annual rents reserved
by which do not exceed fifty rupees.
(1-A) The documents containing contracts to
transfer for consideration, any immovable
property for the purpose of Section 53-A of the
Transfer of Property Act, 1882 (4 of 1882), shall
be registered if they have been executed on or
after the commencement of the Registration and
Other Related Laws (Amendment) Act, 2001
and, if such documents are not registered on or
after such commencement, then, they shall have
no effect for the purposes of the said Section 53-
A.”
20. The remedy, if any, for the appellant no. 1 would have
been to sue for specific performance as Section 49 of the
Registration Act, 1908 states that a suit for specific
performance can be initiated on the basis of an unregistered
Agreement to Sell. Section 49 reads as under:
“49. Effect of non-registration of documents required
to be registered. – No document required by Section 17
or by any provision of the Transfer of Property Act,
1882 to be registered shall –
(a) affect any immovable property
comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any
transaction affecting such property or conferring
such power, unless it has been registered:
Provided that an unregistered document
affecting immovable property and required by this Act
or the Transfer of Property Act, 1882, to be registered
may be received as evidence of a contract in a suit for
specific performance under Chapter II of the Specific
Relief Act, 1877 or as evidence of any collateral
transaction not required to be effected by registered
instrument.”
(Emphasis supplied)
21.7 To the same effect, paras 24 and 25 of the judgment of a
coordinate single Bench of this Court in Rishi Raj v. Rakesh
Yadav17, reads thus:
“24. This decision has been followed by a Ld. Single Judge
of this Court in Vinod Kumar v. Ajit Singh18, where the
Court held:
“10. In the instant case, the plaintiff has not sought
relief based on part performance under Section 53A of
the Transfer of Property Act and that being so, Section
17(1A) of the Registration Act, which was only meant
for the provisions of Section 53A of the Transfer of
Property Act, was not attracted and thus, the agreement
did not require registration. Such an agreement falls
under the mischief of Section 17(2)(v) of the
Registration Act, and it itself does not create, declare,
assign, limit or extinguish any right, title or interest in
the property. Rather as held in Sukhwinder
Kaur (supra)19 it creates a right to obtain another
document which will, when executed, create, declare,
assign, limit or extinguish right, title or interest in the
property. Not only this, provisions of Section 49 of the
Registration Act make the position more clear. It
envisages that an unregistered document affecting
immovable property and required by this Act and the
Transfer of Property Act to be registered may be
received as evidence of a contract in a suit for specific
performance under Chapter-II of Specific Relief Act,
1877. As further held in Sukhwinder Kaur (supra), a
conjoint reading of Section 17(2)(v) and proviso of
Section 49 of the Act leaves no room for doubt that
agreement to sell property itself does not create any
17 2018 SCC OnLine 9425
18 (2013) 138 DRJ 324
19 AIR 2012 P&H 97
right or title over the property. It is the sale deed,
which when executed will create such right in the
property. Hence, an agreement to sell is not required to
be registered and the same is receivable in evidence in
a suit for specific performance under Chapter-II of the
Specific Relief Act, 1877.”
25. Based on the above judgments it is clear that it is
permissible in law to seek specific performance of an
unregistered agreement to sell, when possession of the
property has not been handed over. In this case, from the
evidence which has now come on record, it is clear that
physical possession of the property was not handed over to
the Plaintiff at the time of the execution of the documents
dated 6th August, 2013. As per the documents dated
6th August, 2013 no registration was required for the same.”
(Emphasis supplied)
21.8 And again, paras 7 and 8 of the judgment of another coordinate
Bench of this Court in Devender Singh v. Hari Singh20 ruled thus:
“7. Before the first appellate court an issue was raised that
the receipt-cum-agreement to sell dated 22.1.2002 is not
registered and hence cannot be looked into by virtue of
provision of Section 17(1)(a) of the Registration Act, 1908,
however, this contention is unsound, inasmuch as, an
unregistered agreement to sell cannot be looked into only for
seeking benefit of part performance under Section 53A of the
Transfer of Property Act, 1882 in view of Amendment of
Section 53A by Act 48 of 2001 with effect from 24.9.2001,
however, an unregistered agreement to sell can always be a
basis for a suit for specific performance in view of Section 49
of the Registration Act.
8. Learned counsel for the appellant/defendant relied
upon a judgment of a learned Single Judge of the Punjab and
Haryana High Court in the case of Gurbachan
Singh v. Raghubir Singh21, to argue that an unregisterd
agreement to sell cannot be a basis for a suit for specific
performance, however, with utmost respect and humility to
20 2017 SCC OnLine 8036
21 AIR 2010 P&H 77
the learned Single Judge, I cannot agree with the ratio of the
judgment because the ratio of the judgment is against the
direct and categorical language of Section 49 of the
Registration Act which permits an unregistered agreement to
sell for being looked into as a basis in a suit seeking specific
performance. An unregistered agreement to sell cannot be
used only if the same is sought to be used as one for seeking
benefit of Section 53A of the Transfer of Property Act
containing the doctrine of part performance, however, once,
the unregistered agreement to sell is not used for seeking
benefit of the doctrine of part performance under Section 53A
of the Transfer of Property Act, then by virtue of Section 49
of the Registration Act, surely a suit for specific performance
will lie on the basis of unregistered agreement to sell.”
21.9 The plaintiff, in the present case, seeks specific performance of
the PDA. The claim of the plaintiff is not for part performance under
Section 53A of the Transfer of Property Act.
21.10 Following the law laid down in the aforesaid decisions, prima
facie, the submission of Mr. Garg that the suit is not maintainable as
the PDA is unregistered and is insufficiently stamped, cannot pass
muster.
22. Re. Section 14(1)(b) of Specific Relief Act
22.1 Though, in the written submissions tendered by the defendant as
encapsulating the submissions advanced at the Bar, this contention has
not been raised, it was, in fact, argued, and I proceed, therefore, to
deal with it.
22.2 Section 14(1)(b) of the Specific Relief Act completely bars
grant of interlocutory relief as sought by the plaintiff, contends Mr.
Garg. The provision, as it stands today, reads thus:
“14. Contracts not specifically enforceable. – The
following contracts cannot be specifically enforced, namely:-
*****
(b) a contract, the performance of which involves
the performance of a continuous duty which the court
cannot supervise;”
This, however, is the amended avatar of Section 14. Prior to its
amendment by Section 5 of the Specific Relief (Amendment) Act,
2018, Section 14 (to the extent relevant) read as under:
“14. Contracts not specifically enforceable. –
(1) The following contracts cannot be specifically
enforced, namely: –
(d) a contract the performance of which involves
the performance of a continuous duty which the court
cannot supervise.
*****
(3) Notwithstanding anything contained in clause (a) or
clause (c) or clause (d) of sub- section (1), the court may
enforce specific performance in the following cases: –
*****
(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 nature that compensation in money
for non-performance of the contract is not an
adequate relief; and
(iii) the defendant has, in pursuance 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.”
Prior to its amendment, therefore, Section 14 required, for specific
performance of a contract for the construction of a building, the
contract to describe the building “in terms sufficiently precise to
enable the courts to determine the exact nature of the building or
work”. That requirement is now done away with. Decisions, which
have held a contract for construction of a building or other work not
to be capable of being enforced by way of specific performance on the
ground that the contract is imprecise or vague, relating to causes of
action arising during the currency of the pre-amended Section 14 of
the Specific Relief Act cannot, therefore, prima facie, constitute
valuable precedents, to guide cases arising after Section 14 was
amended.
22.3 Having said that, “a contract, the performance of which
involves the performance of a continuous duty which the court cannot
supervise” still remains impervious to enforcement by way of specific
performance.
22.4 Mr Garg has cited, in support of this submission, the judgement
of the Supreme Court in Vinod Seth2 and of this Court in Prem
Kumar Bansal3 whereas Mr. Wadhwa has relied on the judgment in
Sushil Kumar Agarwal13.
22.5 All the aforesaid decisions relate to the pre-amended Section 14
and involve a consideration, to one extent or the other, of the erstwhile
Section 14(3)(c) of the Specific Relief Act.
22.6 Vinod Seth2:
22.6.1 The issue before the Supreme Court in this case was peculiar, as
is apparent from the opening paragraph of the decision, which reads
thus:
“Leave granted. Heard. The validity of a novel and innovative
direction by the High Court, purportedly issued to discourage
frivolous and speculative litigation is under challenge in this
appeal. To understand the issue, it is necessary to set out the
facts and also extract relevant portions of the plaint and the
impugned orders of the High Court.”
22.6.2 In Vinod Seth2, the appellant Vinod Seth was a builder. He
sued the respondent Devender Bajaj for specific performance of an
alleged oral agreement for “commercial collaboration for business
benefits”, in connection with premises of which Devender Bajaj was
the owner.
22.6.3 The matter came up before a learned Single Judge of this Court
who held that, as the agreement was undocumented, all terms thereof
would have to be established by evidence. As such, the prayer for
specific performance of the agreement would require constant
supervision by the Court, which was difficult. Opining, therefore, that
the suit was unlikely to succeed, the learned Single Judge deemed it
appropriate to indemnify the defendant, in advance, so as to “equalize”
the plaintiff and the defendant. He, therefore, directed the plaintiff to
file an undertaking to pay the defendant a sum of ₹ 25 lakhs in the
event of the plaintiff failing in the suit.
22.6.4 This direction was upheld by the Division Bench of this Court,
compelling the plaintiff to approach the Supreme Court. The main
issue before the Supreme Court was whether a direction to pay the
defendant, in the case of the plaintiff failing to succeed in the suit, a
sum of ₹ 25 lakhs, was sustainable in law.
22.6.5 The Supreme Court ultimately answered this question in the
negative, essentially on the premise that necessary safeguards, against
frivolous suits and their prosecution, were already inbuilt in the CPC,
and the Court could not, even acting ex debito justitiate, innovate and
pass directions which were not envisaged by the CPC. Clearly, this
aspect of the decision in Vinod Seth2 does not concern us in the
present matter.
22.6.6 The Supreme Court, however, expressed its broad agreement
with this Court that, “on the material presently on record, the
likelihood of the appellant succeeding in the suit or securing any
interim relief against the defendant (was) remote”.22 The Supreme
Court went on to set out the reasons for this tentative conclusion. The
first was that it was “doubtful whether the collaboration agreement, as
22 Refer para 11 of the report
alleged by the appellant, (was) specifically enforceable, having regard
to the prohibition contained in Sections 14(1)(b) and (d) of the
Specific Relief Act, 1963”. It was observed that the agreement was
not a usual agreement for sale/transfer, which was enforceable in
nature. In this context, para 15 of the report merits reproduction, thus:
“15. The alleged agreement being vague and incomplete,
requires consensus, decisions or further agreement on several
minute details. It would also involve performance of a
continuous duty by the appellant which the court will not be
able to supervise. The performance of the obligations of a
developer/builder under a collaboration agreement cannot be
compared to the statutory liability of a landlord to reconstruct
and deliver a shop premises to a tenant under a rent control
legislation, which is enforceable under the statutory
provisions of the special law. A collaboration agreement of
the nature alleged by the appellant is not one that could be
specifically enforced. Further, as the appellant has not made
an alternative prayer for compensation for breach, there is
also a bar in regard to award of any compensation under
Section 21 of the Specific Relief Act.”
(Italics and underscoring supplied)
22.6.7 The Court was, therefore, in Vinod Seth2, dealing with a vague,
imprecise and oral agreement. A reading of the decision makes it
clear that the difficulty which, in the opinion of the Court, would arise
in attempting specific performance of such an undocumented
agreement was one of the main considerations which compelled the
Supreme Court to agree with the view of this Court that the agreement
was incapable of specific performance.
22.6.8 In appreciating the law enunciated in Vinod Seth2, the Court
cannot, in my view, proceed unmindful of the nature of the
controversy, and, especially, the agreement, which was before the
Supreme Court. Judgements of courts, including the Supreme Court,
it is trite, are not to be treated as analogous to Euclid’s theorems, and
followed blindly, without appreciating the fact-situation in which they
came to be rendered.23
22.7 Sushil Kumar Agarwal13:
22.7.1 As against this, Sushil Kumar Agarwal13, also by a Bench of
two Hon’ble Judges of the Supreme Court, involved a suit for specific
performance of a written development agreement. It is unnecessary to
delve into the specifics of the disputes in that case. Suffice it to
reproduce paras 18, 19 and 24.3 of the report, which read as under:
“18. When a pure construction contract is entered into, the
contractor has no interest in either the land or the
construction which is carried out. But in various other
categories of development agreements, the developer may
have acquired a valuable right either in the property or in the
constructed area. The terms of the agreement are crucial in
determining whether any interest has been created in the land
or in respect of rights in the land in favour of the developer
and if so, the nature and extent of the rights.
19. In a construction contract, the contractor has no interest
in either the land or the construction carried out on the land.
But, in other species of development agreements, the
developer may have acquired a valuable right either in the
property or the constructed area. There are various incidents
of ownership in respect of an immovable property. Primarily,
ownership imports the right of exclusive possession and the
enjoyment of the thing owned. The owner in possession of the
thing has the right to exclude all others from its possession
and enjoyment. The right to ownership of a property carries
with it the right to its enjoyment, right to its access and to
other beneficial enjoyments incidental to it. [B.
23 Refer Union of India v Major Bahadur Singh (2004) 1 SCC 368; Chintels India v Bhayana Builders
Pvt Ltd (2021) 4 SCC 602; Amar Nath Om Prakash v State of Punjab (1985) 1 SCC 345
Gangadhar v. B.G. Rajalingam, (1995) 5 SCC 238, para 6].
Ownership denotes the relationship between a person and an
object forming the subject-matter of the ownership. It consists
of a complex of rights, all of which are rights in rem, being
good against the world and not merely against specific
persons. There are various rights or incidents of ownership all
of which need not necessarily be present in every case. They
may include a right to possess, use and enjoy the thing owned;
and a right to consume, destroy or alienate it. [Swadesh
Ranjan Sinha v. Haradeb Banerjee, (1991) 4 SCC 572] .
An essential incident of ownership of land is the right to
exploit the development, potential to construct and to deal
with the constructed area. In some situations, under a
development agreement, an owner may part with such rights
to a developer. This in essence is a parting of some of the
incidents of ownership of the immovable property. There
could be situations where pursuant to the grant of such rights,
the developer has incurred a substantial investment, altered
the state of the property and even created third-party rights in
the property or the construction to be carried out. There could
be situations where it is the developer who by his efforts has
rendered a property developable by taking steps in law. In
development agreements of this nature, where an interest is
created in the land or in the development in favour of the
developer, it may be difficult to hold that the agreement is not
capable of being specifically performed. For example, the
developer may have evicted or settled with occupants, got
land which was agricultural converted into non-agricultural
use, carried out a partial development of the property and
pursuant to the rights conferred under the agreement, created
third-party rights in favour of flat purchasers in the proposed
building. In such a situation, if for no fault of the developer,
the owner seeks to resile from the agreement and terminates
the development agreement, it may be difficult to hold that the
developer is not entitled to enforce his rights. This of course is
dependent on the terms of the agreement in each case. There
cannot be a uniform formula for determining whether an
agreement granting development rights can be specifically
enforced and it would depend on the nature of the agreement
in each case and the rights created under it.
*****
24.3. In order to determine the exact nature of the agreement
signed between the parties, the intent of the parties has to be
construed by reading the agreement as a whole in order to
determine whether it is an agreement simpliciter for
construction or an agreement that also creates an interest for
the builder in the property. Where under a development
agreement, the developer has an interest in land, it would be
difficult to hold that such an agreement is not capable of
being specifically enforced.”
(Italics and underscoring supplied)
22.7.2 Where, therefore, as in the present case, the agreement is not
merely for development or construction on the property, but also
envisages valuable rights enuring, in favour of the developer, in the
constructed edifice, the Supreme Court itself holds, unequivocally,
that it would be difficult to treat the agreement as incapable of specific performance.
22.8 The requirement of precision, in the construction contract, as a
pre-condition for its enforceability, is relatable to the erstwhile Section 14(3)(c)(iii) of the Specific Relief Act. That requirement no longer figures on the statute book, after the amendment of Section 14 by the 2018 Amendment Act. In my prima facie opinion, lack of precision in the construction agreement can no longer be regarded, by itself, as a sufficient disqualification to its enforceability by specific performance. Else, it would be re-introducing, by a side wind, the consideration in the erstwhile Section 14(3)(c)(iii), which the legislature has consciously removed from the statute. Such an
exercise is necessarily to be eschewed, as it would militate against the legislative intent.
22.9 The sequitur would, therefore, be that a construction contract
can no longer be regarded as incapable of specific performance merely because its terms are imprecise or vague. If, however, owing to such imprecision or vagueness, any direction for specific performance would require continuous supervision by the Court, that would, even now, render the agreement incapable of specific performance by virtue of Section 14(b). For that, however, the Court would have to arrive at a finding that, owing to the imprecision of the agreement, or for any other reason, any direction for specific performance would require continuous supervision by the Court. In the scenario of Section 14 as it exists today, and without the support of the erstwhile Section 14(3)(c) and its various clauses, this would, in almost every case, be arguable at the very least.
22.10 Prima facie, in view of the above legal position, I am unable to
convince myself to hold, prima facie, that the defendant has been able
to make out a case of the PDA being incapable of specific
performance, by operation of Section 14(b) of the Specific Relief Act,
as would justify vacation of the interim direction to maintain status
quo in respect of the suit property.
23. Re. Section 62 of the Contract Act and the plea of novation
23.1 Section 62 of the Contract Act, which accords statutory
recognition to the principle of novation of a contract, states that where
the parties to a contract consciously elect to substitute the existing
contract with another, the original contract need not be performed.
The submission of Mr. Garg is that the PDA stood novated by the
execution of the ATS, AFC and other agreements.
23.2 Prima facie, the plea of novation, as advanced by Mr. Garg is
completely misconceived on facts as well as in law. There is no
evidence of any inclination, much less indication, of the plaintiff and
defendant having agreed to substitute the PDA with any other
contract. This argument is, in fact, belied even by Clause 4 of the
PDA, which envisages the execution, at a later point of time, of the
ATS, AFC, GPA etc. The PDA and the documents to be executed
subsequently, form, therefore, a composite transaction. The
documents to be executed subsequently are intended to facilitate the
transfer of title and possession, as envisioned in the PDA. They owe
their existence, therefore, to the PDA. It would be militating against
the very intent of the PDA to hold that it stood novated with the
execution of the ATS, AFC etc.
23.3 On a holistic reading of the ATS and AFC, vis-à-vis the PDA, I
am unable to subscribe to the submission of Mr. Garg that there was
any such glaring inconsistency, between the documents, as would
evince an intent, on the part of the contracting parties, to do away with
the PDA and substitute the ATS, AFC and other documents in its
place.
23.4 On novation, the Supreme Court held, in Purbanchal Cables &
Conductors Pvt Ltd v. Assam State Electricity Board24, thus (in
para 82 of the report):
24 (2012) 7 SCC 462
“In our opinion the ground or issue of novation of contract is
a mixed question of fact and law and it is being raised for the
first time at the time of hearing of the case before us, which
cannot be permitted to be raised. The said fact of novation or
alteration of contract is required to be urged evidentially and
scrutinised by the courts below. In absence of such factual
findings, it is not possible to decide such a mixed question of
law and facts. In Shakti Tubes Ltd. v. State of Bihar,
(2009) 7 SCC 673 : (2009) 3 SCC (Civ) 258, the issue of
novation of contract was raised before this Court for the first
time at the time of hearing. This Court declined to entertain
such ground as being a mixed question of law and fact. This
Court further observed that even on the merits of the case the
escalation of price, reduction of the quantity of the supply
order and extension of the date of supply does not amount to
novation or alteration in the supply order.”
(Emphasis supplied)
Nearly a century and a quarter ago, one finds this clear exposition of
the principle of novation, in the judgement of the Court of the Judicial Commissioner at Nagpur in Ganpat v. Mahadeo 1925 Nag 26 :
“Where the question is whether one party is set free by the
action of the other, the matter for consideration is whether the
acts or conduct of the one do or do not amount to an
intimation of an intention to abandon and altogether to refuse
performance of the contract. The true question is whether the
acts and conduct of the party evince any intention no longer
to be bound by the contract: Mersay Steel and Iron
Company v. Naglir Benzon & Co. 9 A.C. 434 General Bill
Posting Co v. Atkinson (13). The Court requires as clear
evidence of the waiver as of the existence of the contract
itself and will not act upon less: Carolan v. Brabazon (1900)
A.C. 118 = 78 L.J.; C.H. 77=99 L.T. 913 = 25 T.L.R. 173.
What is then required is that an abandonment of the old
agreement, must be clearly made out. There must be clear
and precise evidence of a mutual intention to determine and
abandon the contract: Mathura Mohan Saha v. Ram
Kumar Saha [1946] 43 Cal. 700=23 C.L.J. 26 = 30 I.C.
305: 20 C.W.N. 370. Where the intention to substitute a new
contract is frustrated by the fact that the new contract is a
nullity, the original contract may be enforceable: see Har
Chandi Lal v. Sheoraj Singh 3 J & L 200 = 9 Ir. & E. 121.
Much more so, where the agreement itself is a contravention
of the statute and does not ripen into a contract in the legal
sense of the term.”
(Emphasis supplied)
A coordinate Bench of this Court has held, recently in Knowledge
Podium Systems Pvt Ltd v. S.M. Professional Services Pvt Ltd26,
that “a novation takes place only when there is a complete substitution of a new contract in place of the old”.
23.5 No such substitution of the PDA with the ATS, AFC and other
documents subsequently executed, in terms of Clause 4 of the PDA
itself, can, prima facie, be said to have taken place.
23.6 This argument of Mr. Garg, too, does not convince me to vary
the status quo order already passed.
24. Re. financial wherewithal of the plaintiff: Mr Garg has also
sought to plead that the plaintiff did not have the financial
wherewithal to comply with its obligation under the PDA. Mr
Wadhwa has disputed this contention, and has reiterated his client’s
willingness in this regard. At this stage, it is not possible for me, prima
facie, to hold that the plaintiff to be incapable of complying with its
obligations. The mere reference to the Axis Bank statement of the
plaintiff is hardly sufficient for the Court to be satisfied, even prima
facie, on this aspect. Of course, it would be for the defendant to
establish, during trial, its capability to adhere to its obligations under
26 278 (2021) DLT 348
the PDA.
Conclusion
25. As a result, I am of the opinion that the defendant has not been
able to make out any case to vacate the interim order passed by this
Court on 4th August, 2020.
26. Resultantly, I.A.7643/2020 is dismissed and the interim order
passed in I.A.6433/2020 is made absolute, pending disposal of the
suit. I.A. 6433/2020 stands allowed accordingly.
C. HARI SHANKAR, J.
OCTOBER 22, 2021
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