Delhi High Court
Sobhag Narain Mathur vs Pragya Agrawal And Ors. on 27 April, 2007
Equivalent citations: 141(2007)DLT356
Author: Vipin Sanghi
Bench: Vipin Sanghi
JUDGMENT Vipin Sanghi, J.
1. The plaintiff has filed the present suit seeking a decree of specific performance in respect of, what is claimed to be, an agreement to sell, entered into with the defendant nos. 1 & 2, as contained in the "Bayana Receipt" dated 7.12.2006.
2. The case of the plaintiff is that he is a businessman settled in Rajasthan. He was interested in purchase of commercial property in Delhi to expand his business. He arrived in Delhi to look for suitable commercial property. Through one property dealer, Mr. S. P. Gupta, he came into contact with defendant No. 2. Defendant No. 1 is the wife of defendant No. 2 and is the agreement purchaser of commercial plots bearing No. A, B, C & D, Local Shopping Centre, Madangir, Delhi (the suit property). Defendant No. 1 is the de facto owner of the suit property and had the legal authority to deal with the same on the basis of the said documents.
3. The plaintiff contends that the defendants agreed to sell the suit property to the plaintiff for a total consideration of Rs. 6 crores 20 lacs. The defendant demanded part payment in advance and the amount of Rs. 20 lacs was immediately paid to them in cash. The remaining payment of Rs. 6 crores was agreed to be made by 15th February, 2007. It was further agreed that 10% of the agreed sale consideration would be paid by the plaintiff at the time of the execution of the detailed version of the agreement to sell, after adjusting the amount of Rs. 20 lacs paid on 7.12.2006. The date fixed for this purpose was 14.12.2006.
4. The admitted position is that on 7.12.2006, a "Bayana Receipt" was executed, which was signed by the plaintiff, and defendant No. 2, though in the name of defendant No. 1. Though defendant No. 1 is the person in whose favor various documents creating interest in the suit property exist, and defendant No. 2 is the husband of defendant No. 1, defendant No. 1 has not disowned the said receipt, and defendant No. 1 has not disputed the authority of defendant No. 2 to execute the said receipt and receive the amount of Rs. 20 lacs on her behalf.
5. As per the "Bayana Receipt", defendants represented that defendant No. 1 was the owner of plot nos. A, B, C & D, Local Shopping Centre, Madangir, New Delhi, that the area of each of the plot was 82.5 square metre, total admeasuring 330 square metre which approximates to about 400 square yards. "Bayana Receipt" further states that 'Pragya Aggarwal' i.e defendant No. 1 has agreed to sell to Sh. S. N. Mathur (plaintiff), for consideration of Rs. 6 crores 20 lacs, the suit property. She further acknowledges receipt of the Bayana amount i.e the earnest money of Rs. 20 lacs and it has been agreed that the balance payment of Rs. 6 crores would be made by 15.2.2007. She further records that the installments for making part payment would be settled at the time of making complete payment of earnest money of 10%, and that she would be responsible for removal of the Tea shop, Tyre Repair Vendor and Mechanic who were squatting in front of the suit property. She further records that "Pakka Agreement" would be executed on 14.12.2006 on receipt of the 10% of the consideration.
6. It is stated by the plaintiff that on 7.12.2006, defendant No. 2 delivered complete photocopy of title documents of one of the four plots and assured to supply the remaining documents of the remaining three plots on 13.12.2006, i.e., the date before the due date for next payment of Rs. 42 lacs and for execution of the formal agreement to sell. (I may note that the total sale consideration having been agreed as Rs. 6 crores 20 lacs only, 10% thereof comes to Rs. 62 lacs. After adjusting the initial payment of Rs. 20 lacs, the plaintiff as per the Bayana receipt was obliged to make payment of Rs. 42 lacs by 14.12.2006 to make a total earnest money deposit of Rs. 62 lacs).
7. The plaintiff has narrated in detail as to how he arrived in Delhi on 12th December, 2006, fully prepared to perform his part of the contract, contacted the deed writer on 13.12.2006 and thereafter made repeated efforts to contact defendant No. 2 in terms of the schedule fixed in the receipt. It is the case of the plaintiff that defendant No. 2 stated that he was out of town away to Lucknow and that he would be returning only on the evening of 14th December, 2006 or alternatively on 15th December, 2007. Defendant No. 2 assured the plaintiff that defendant No. 1 would execute the agreement on his return to Delhi. The plaintiff waited for defendant No. 2 to show up on the 15th December, 2006, but to no avail. According to the plaintiff, the defendants avoided to meet the plaintiff. Defendant No. 1, wife of the defendant No. 2 refused to sign any document in the absence of defendant No. 2. Eventually, the plaintiff returned Ajmer on 17.12.2006.
8. It is stated that the decoy customer was sent to the defendants and defendant No. 2 entertained the decoy and offered to sell the suit property for an amount of Rs. 8 crores. The plaintiff also sent a notice dated 26.12.2006 to the defendants calling upon them to act in the direction of completing the sale/transfer of the suit property. A meeting was held with defendant No. 2 on 26.12.2006, wherein he showed his real intentions of resiling from the agreement. The plaintiff then got a public notice issued in respect of the agreement with the defendants. The defendants also came out with a public notice of their own.
9. Defendant No. 1 also sent a notice through her advocate on 2.1.2007. The stand taken by defendant No. 1 was that "it was mutually agreed between you and my client that in case you did not pay" the amount of Rs. 62,00,000/- in all by 14.12.2006, and "further failed to execute relevant agreement to this effect, this understanding/Bayana Receipt shall stand terminated and the said sum of Rs. 20,00,000/- (Rupees Twenty Lacs only) will be forfeited by my client.". It was claimed that on 14.12.2006 she waited for the whole day for the plaintiff's arrival, but the plaintiff deliberately avoided to meet the defendants and did not come forward to fulfilll his obligations and avoided executing the `earnest money agreement' with the defendant No. 1. It was asserted that this shows the intention of the plaintiff not to proceed with "the said transaction any further." Defendants demanded an amount of Rs. 10 lacs on account of loss of reputation due to publication by the plaintiff of a public notice in the newspaper, in relation to the transactions between the parties.
10. In the aforesaid circumstances, the plaintiff filed the present suit which came up before this Court on 31st January, 2007. The defendant nos. 1 and 2 were on Caveat. In the presence of the parties I passed the following order on the aforesaid application, i.e., 1091/2007:
Issue notice to the defendants. Mr. S.K. Tyagi, Advocate accepts notice on behalf of the defendants and seeks time to file his reply. Let the reply be filed within four weeks. Rejoinder within two weeks thereafter. Learned Counsel for the defendants, without prejudice to their contentions submits that the defendants shall not deal with the suit property in any manner whatsoever or part its possession to any third party. He further undertakes that the defendant shall not raise any construction on the suit property except for raising a Guard Room and repair of the existing boundary wall. The statement of the learned Counsel for the defendant is taken on record. Defendant No. 3 is also present in person and states that the defendant shall abide by this statement. The undertaking shall remain in force till the next date of hearing. Learned Counsel for the defendant offers in Court a Pay Order of Rs. 20 Lacs to the plaintiff drawn on Allahabad Bank. Learned Counsel for the plaintiff however, does not accept the same. Let him file a photocopy of the same on record. Consequently, learned Counsel for the defendant states that he would like to deposit the amount of Rs. 20 Lacs in Court in the name of Registrar General. Let the same be deposited and be placed in fixed deposit for the period of 6 months initially which shall be renewed on expiry for the said period from time to time. Let Money be deposited after getting the name in the existing Pay Order changed.
Learned Counsel for the plaintiff submits that the plaintiff is ready and willing to pay to the defendants, if so they accept, the balance consideration of Rs. 6 crores by 15th February, 2007 or in the alternative to deposit the same in Court.
Learned Counsel for the defendant submits that the proposal is not acceptable to them.
Let the plaintiff deposit the balance consideration of Rs. 6 crores in the name of Registrar General of this Court by 15th February, 2007. As soon as the amounts are deposited, the same shall be placed in a fixed deposit for a period of 6 months and shall be renewed on each expiry for a similar period till further orders.
List on 24th April, 2007.
11. The defendants have filed their written statement and reply to the aforesaid application. The main thrust of the defendants arguments is that there was no enforceable agreement to sell executed between the parties and that the "Bayana Receipt" cannot be considered to be an agreement to sell. According to the defendants, it is merely an agreement to enter into a further agreement. It is further stated that the essential terms of the agreement to sell were yet to be settled between the parties and that the Court cannot grant specific performance of an agreement, the terms whereof are incomplete. To buttress this argument, reliance is placed on its terms wherein it is recorded that the schedule of the installments to be paid would be fixed under the formal agreement to be executed on 14th December, 2006. It is also contended that the transaction itself was contingent upon grant of permission by the DDA, and the various terms and conditions upon which the DDA might grant permission to sell the suit property. The terms and conditions would include financial terms and conditions i.e the payment of "unearned increase" and this liability had neither been quantified, nor discussed and it was not agreed who would bear the said liability.
12. It is further contended that the Bayana receipt itself stated that the "Pucca Agreement" would be entered into on 14.12.2006, implying thereby that the Bayana receipt itself was "Kuccha". i.e not certain or definite. Counsel also referred to the notice dated 26.12.2006 sent by the plaintiff wherein the plaintiff himself had required the defendant to execute the agreement to sell in respect of the suit property, meaning thereby, that there was no agreement to sell till then between the parties.
13. It is also contended that the plaintiff does not even state in the application that it has a prima facie case, that the balance of convenience is in its favor and in favor of the grant of injunction prayed for, and that the plaintiff would suffer irreparable loss and injury if the interim protection as prayed for is not granted.
14. In his rejoinder learned Counsel for the plaintiff contended that the Bayana receipt contains all the terms and conditions to constitute a certain, definite and enforceable agreement to sell. The mere desire of the parties to execute a formal agreement to sell subsequently does not imply that the "Bayana receipt" is not certain or enforceable as an Agreement to Sell. The absence of the detail with regard to the schedule for payment of the balance sale consideration does not vitiate the agreement contained in the Bayana receipt. The absence of a term with regard to the payment of unearned increase to the DDA, if any, does not impinge on the validity of the agreement or make it uncertain or unenforceable. Once the parties enter into an agreement to sell an immovable property, it is also an implied term that the seller would take all necessary steps to give effect to the agreement. He also contended that in fact the DDA has a policy of conversion from leasehold to freehold. It is an implied term that the defendant would apply for, and get the suit property converted from leasehold to freehold. In support of the aforesaid respective contentions, counsel for the parties have relied upon the various judgments which shall be referred to later.
15. Having considered the rival submissions of the parties, I am of the view that the plaintiff has made out a case for grant of an injunction as prayed for, and for confirmation of the order dated 31.1.2007.
16. I do not see merit in the defendants submission that in every case where the parties agree to enter into a formal agreement to sell, the initial agreement cannot be considered as a binding and enforceable contract.
17. In Kollipara Sriramulu v. T. Aswathanarayana and Ors. (1968) 3 SCR 388, the Supreme Court held as follows:
We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von Hatzfeldt-Wildenburg v. Alexander it was stated by Parker, J. as follows:
It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.
In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rossier v. Miller Lord Cairns said:
If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfillled no contract is to arise then you cannot find a concluded contract.
In Currimbhoy and Company Ltd. v. Creet the Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. in Von Hatzfeldt-Wildenburg v. Alexander was be applicable in India. The question in the present appeal is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of respondent No. 1 does not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document.
18. Therefore, a mere reference to a future formal contract will not in law prevent a binding bargain between the parties. The fact that the parties refer to the preparation of a formal agreement by which the terms agreed upon are to be put in a more formal shape, does not prevent the existence of a binding contract. The issue to be determined is whether it could be said that the parties did not intend to be bound by the first agreement until a formal contract was signed. This question is to be determined on the basis of the intention of the parties in the light of the special circumstances of each particular case. If the initial contract contemplates the execution of a further contract between the parties, the Court would determine whether the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed upon would go through. On a true construction of the first agreement, if it appears that the execution of a further agreement is a condition or term of the bargain, then it is merely an agreement to enter into another agreement, which is not enforceable, but if it appears that the requirement of execution of a formal agreement is a mere desire of the parties as to the manner in which the transaction already agreed upon will go through, the first agreement itself would constitute a binding and enforceable agreement to sell.
19. The Bayana receipt does not expressly or implicitly state that the signing of the further formal agreement is a condition or term of the bargain, and that if the formal agreement is not approved or signed there would be no concluded contract. It does not even state or convey the intentions of the parties that they did not intend to be bound by it until the formal agreement to sell is executed. It cannot be lost sight of that the plaintiff has made a substantial deposit of Rs. 20 lacs at the time of execution of the said Bayana receipt with the defendant. It does not stand to reason that the plaintiff would have agreed to pay such a large sum in cash to the defendant, without a definite, binding and enforceable commitment by them to go through the transaction. The payment of such a large sum by the plaintiff towards earnest money to the defendants, and that too when the next date for taking further steps was fixed only a week later, demonstrates a clear and unequivocal intention of the parties to enter into the parties to enter into a binding agreement to sell on 07.12.06 itself and not to make the same contingent or conditional on the execution of a further formal agreement to sell. The requirement of a further formal agreement in this case is nothing more than an expression of a desire of the parties as to the manner in which the transaction already agreed upon has to go through.
20. In the present case, a perusal of the Bayana receipt would show that it embodies all the essential terms necessary to constitute the agreement to sell. The said Bayana receipt:
1. Identifies the property agreed to be sold with its area.
2. Identifies the owner, who has agreed to sell.
3. Identifies the purchaser.
4. Clearly states the total consideration for which the parties had agreed to complete the transfer of the property.
5. Clearly quantifies the total earnest money deposit to be made by the purchaser with the seller and the amount deposited at the time of execution of the Bayana receipt, and the date by which the balance earnest money deposit would be made.
6. The final date for making of payment and conclusion of the transaction.
21. However, according to the defendants, the Bayana receipt does not specify the following:
(i) The schedule for payment of the balance consideration i.e Rs. 5.58 crores (after deducting the 10% total earnest money deposit from the total consideration).
(ii) The party whose obligation it is to either get the permission of the DDA to transfer the lease hold rights in the property or to get the same converted from lease hold to free hold.
22. The question therefore is, whether the omission to expressly agree upon the aforesaid aspects, at the time of execution of the Bayana receipt can be said to take out the agreement contained in the Bayana receipt from the species of an enforceable agreement to sell an immovable property.
23. The emphasis laid by the defendant on the condition in the Bayana receipt that the future installments were to be agreed at the time of execution of the formal agreement, to my mind is not of such great significance.
24. In Kollipara (supra), it was observed:
As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr. Gokhale is unable to make good his argument on this aspect of this case.
25. In view of the fact that the final date by when the transaction was to be concluded had been agreed as 15.2.2007, the time available for making payment of the entire balance consideration was only two months. In my view, if the date of completion of the transaction had been farther away, there may have been some justification in contending that it was crucial and material for the parties to agree on the installments before the conclusion of the transaction. Merely because the installments could not be fixed, for reasons, prima facie, attributable to the defendants, it cannot be said that there was no binding agreement between the parties.
26. Coming now to the other contention related to absence of stipulation as to unearned increase, it is no where alleged that the plaintiff was to obtain any such permission and bear these expenses, nor is it alleged that this aspect was agreed to be negotiated upon later. What is alleged is that it was not discussed.
27. The legal notice dated 2-1-2007 of the defendants is totally silent upon the aforesaid aspects and these objections have been raised only in the written statement. It was not the defendants case that there was no concluded Agreement, or that the manner of payment of the balance sale consideration had not been agreed to. It was also not claimed that the parties had not settled their respective obligations with respect to the payment of unearned increase, if any, to the DDA. When a party enters into an agreement to sell it is an implied term of the contract that he would take necessary steps to complete the transaction, unless a contrary intention appears from the agreement itself or the buyer himself undertakes the responsibility to do the needful. Such a term is therefore, not a necessary term of a contract to sell, so as to be necessarily and expressly agreed upon. Therefore this contention is also without any force and is rejected. (Kindly see .
28. It is well settled that the Court has to look at the substance or the essence of the agreement rather than its form. A party cannot escape the consequences of law merely by describing an agreement in a particular form, though in essence and in substance it may be a different transaction (see ).
29. The decision relied upon by the defendant as reported in Highway Farms v. Chinta Ram and Ors. 85 (2000) DLT 355 and N.K. Bhatia v. Smt. R.K. Sood 1996 II AD (Delhi) 260 are decisions turning on their own facts. In Highway Farm's case two receipts, which were set up by the plaintiff as containing an agreement were dated 22.9.1991 for an amount of Rs. 21,000/-, and dated 3.10.1991 for Rs. 15,0000/- out of total sale consideration stated as Rs. 24,50,000/- and Rs. 11,87,500/- respectively. This Court took the view that normally 10% of the sale consideration is received and paid towards earnest money. It appears the tests laid down by the Hon'ble Supreme Court in Kollipara Sriramulu v. T. Aswathanarayna and Ors. (supra) were not even brought to the notice of the learned Single Judge, and the matter was examined in that light. Consequently the said decision is of little assistance in deciding the present application.
30. The other decision in N.K. Bhatia's case (supra) is a case of a collaboration agreement wherein the Court held that in relation to a collaboration agreement, there are various details and specifications which need to be agreed between parties before it could be said that an agreement has been arrived at between them. There can be no quarrel with this proposition. It is inherent in collaboration agreement that various material specifications have to be agreed upon by the parties. For example, the kind of finish, the quality of workmanship, the area to be constructed, the quality of materials to be used in construction, etc have to be agreed upon before a collaboration agreement, which is not merely a straightforward agreement to sell and open parcel of land, is entered into. The agreement contained in the Bayana Receipt is specific and clear and contains all the necessary ingredients of an enforceable agreement, such as the identity of the seller, purchaser, the property agreed to be sold, the sale consideration, the time within which the consideration is to be paid and the earnest money under the agreement. Consequently, in my view the said decision is of no avail.
31. Turning to the facts of this case, I find that the plaintiff has stated in great detail the efforts made by him to meet the defendants on 14.12.2006 for the purpose of making payment of the balance amount of Rs. 42 lakhs and for the execution of the formal agreement to sell. On record I find the call details provided to the plaintiff by the service provider Air Tel in respect of the plaintiff's mobile telephone connection No. 9928013149. On 13.12.2006, two calls are recorded as having been made on telephone number 9811268682, which is stated to be the telephone number of the deed writer, Mr. Kamal Agnihotri to obtain from him the formal agreements to be executed between the parties. In consonance with the averment made in para 14 of the plaint, I find from the call details that the plaintiff made a call on mobile number 9891980000, which is stated to be the mobile telephone number of defendant No. 2 at 11.21 a.m. Similarly the incoming call from Neeraj Aggarwal from his mobile number 9350277088 is also reflected in the said call statement.
32. The defendants do not dispute the factum of the calls having been made and telephonic conversation having taken place with the plaintiff. What is disputed is the content of the conversation. It is claimed by the defendants that the plaintiff desired more time to make payment on 14th of December, 2006, and that thereafter the plaintiff desired the return of his money from the defendants. Pertinently, this version is not found in the defendants legal notice dated 2nd January, 2007.
33. The content of the discussion that took place between the plaintiff and the defendants would be a matter to be decided in the course of trial. However, prima facie, it appears that the plaintiff was ready to proceed with the agreement and to fulfill his part of the deal. This is evident from the bank statement of the plaintiff's account with the Bank of Baroda which shows that on 10.12.2006 the plaintiff had made a deposit of Rs. 42 lakhs in his account and the balance standing as on 12.12.2006 and thereafter was at least Rs. 42,77,602.60. He has also filed on record a certificate issued by the Bank of Baroda dated 10.1.2007 wherein the bank has certified that it has started CBS facility from 24.7.2006 and that the bank has issued cheque book No. 780461-780480 in respect of Savings Bank Account No. 01230100001984 in the name of the plaintiff. What this means is that the plaintiff could have issued a cheque payable at par, while in Delhi on 14.12.2006, from his bank account with the Bank of Baroda at Ajmer. It is also evident that he had taken effective steps to obtain the cheque book with the aforesaid facility on 12.12.2006 in preparation for the meeting fixed with the defendants on 14.12.2006. The fact that the plaintiff came to Delhi on the 12th of December, 2006, prima facie, is established from the train ticket of Shatabdi AC express running between Agra and Delhi which has been filed on record. The plaintiff has also deposited the amount of Rs. 6 crores in this Court.
34. The submission of the defendant that the plaintiff has not made averments to the effect that he has a prima facie case, that the balance of convenience is in his favor and that he would suffer irreparable loss and injury in case the injunction is not granted, to my mind is a hypertechnical objection. In my view there is no magic in the mere recital of such stereotyped averments. What is essential is that the plaintiff has to satisfy the Court that he has a prima facie case, and that the balance of convenience is in favor and that he would suffer irreparable loss and injury if the injunction is not granted. A mere recital of such averments ipso facto would not lead to the inference that the averments are correct. Similarly the absence of such averments would not lead to the conclusion fact that the plaintiff's case does have these ingredients for grant of an injunction. It for the Court to assess on the basis of the pleadings of the parties, and the documents on record, and on evaluation of the entire facts and circumstances of the case, whether in fact the conditions for grant of an injunction are meted out or not.
35. In my view, the plaintiff has made out a prima facie case as discussed above. The balance of convenience is also in favor of the plaintiff since the plaintiff has not only paid a substantial amount of Rs. 20 lakhs to the defendants, but he has also deposited the balance consideration of Rs 6 crores in this Court. This, prima facie, shows the willingness of the plaintiff to perform his obligations under the agreement between the parties. In case the defendants are permitted to deal with the suit properties, third party rights are likely to be created, which would not only lead to multiplicity of proceedings but could also complicate matters for the plaintiff.
36. I therefore confirm the ad interim order of injunction dated 31.12.2007, till the disposal of the suit. The application stands disposed of.
37. The parties may file any further documents if they so desire within four weeks.
38. List before the Joint Registrar on 26th July, 2007 for admission/denial of documents.