Delhi High Court
Dharampal Satyapal Ltd vs Sanmati Trading And Investment Ltd And ... on 23 February, 2017
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 23rd February, 2017.
+ CS(OS) No.320/2006
DHARAMPAL SATYAPAL LTD. ..... Plaintiff
Through: Mr. Deepak Dhingra, Ms. Shivangi
Singh and Mr. Sumit Kr. Vats. Advs.
Versus
SANMATI TRADING AND INVESTMENT LTD.
AND ANR. ..... Defendants
Through: Mr. Yakesh Anand, Mr. Nimit Mathur
and Ms. Sonam Anand, Adv. for D-1.
Mr. Rohit K. Naagpal, Adv. for D-2
along with AR of D-2.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The suit is listed for hearing arguments on issue no.(i) ordered to be
treated as a preliminary issue vide order dated 5th October, 2016.
2. The counsel for the plaintiff states that FAO(OS) No.219/2016 and
FAO(OS) No.373/2016 arising from the order dated 2nd May, 2016 partly
allowing amendments of the plaint and order dated 5 th October, 2016 closing
the right to carry out amendments allowed on 2nd May, 2016 are pending
consideration before the Division Bench of this Court.
3. The counsel however admits that there is no stay of proceedings in the
present suit.
4. The counsel for the plaintiff though agrees that the orders aforesaid
CS(OS) No.320/2006 Page 1 of 14
from which the appeals aforesaid are pending have no bearing on the
preliminary issue but states that for decision of the preliminary issue, there
has to be a validly constituted plaint before this Court.
5. As far as this Bench is concerned, there is a plaint before this Court in
terms of the orders which though are in appeal before the Division Bench. It
thus cannot be said that there is no validly constituted plaint before this
Court. Per Order XLI Rule 5(1) of the CPC, an appeal shall not operate as a
stay of proceedings under a decree or order.
6. The plaintiff instituted this suit seeking the relief of specific
performance of an Agreement of sale of property no.3, Friends Colony
(West), New Delhi, pleading (i) that the defendant no.1 Sanmati Trading &
Investment Ltd. (STIL) is registered with the Reserve Bank of India (RBI)
to carry on the business as Non-Banking Financial Institution and defendant
no.2 Shri K. Sundaram is the Managing Director and his wife Smt. R.
Sundaram (defendant no.3) is the Director of the defendant no.1 STIL; the
defendant no.1 STIL is a closely held Company; (ii) that sometimes in
January-February, 2004 negotiations commenced between the plaintiff and
the defendants in respect of the said property; (iii) it was represented to the
plaintiff that the defendant no.1 STIL was the absolute and exclusive owner
of the said property and the property was free from any kind of
encumbrances; it was however informed that the original title documents of
the property were in the custody of the erstwhile Directors but the
defendants had filed a suit for declaration and recovery thereof and the same
was pending adjudication; the defendants promised to make available the
original title deeds of the property at the earliest possible date whereafter the
CS(OS) No.320/2006 Page 2 of 14
Sale Deed would be executed by them; (iv) it was further offered to the
plaintiff that if the defendants were unable to make available the original
title documents of the property, the parties may at the sole option of the
plaintiff agree to reach some alternative arrangement to convey a valid title
in the property from the defendant no.1 STIL to the plaintiff; (v) that on the
basis of the said assurances and promise of the defendants, the plaintiff
agreed to purchase the property and a concluded contract of sale of property
for a total sale consideration of Rs.16,29,00,000/- was made on 20th March,
2004; the agreement was oral; (vi) the plaintiff paid a sum of Rs.11,00,000/-
by account payee cheque and the said cheque was duly received and
encashed by the defendants; (vii) that after the said oral agreement, a
Memorandum of Understanding (MoU) (Agreement to Sell) was also
executed between the parties on 17th June, 2004 confirming the sale
transaction and as per agreement between the parties, was placed in a sealed
cover and the sealed cover was signed from outside and is duly taped and is
in possession of the plaintiff; a copy of the MoU without signatures was
being filed as Annexure-A to the plaint; (viii) the defendants, inspite of
repeated reminders of the plaintiff to complete the sale, kept on deferring the
same; and, (xi) in paras 23 to 26:-
"23. That defendant no.1 Company (under the
signature of defendant no.2), instead of answering the
queries of the plaintiffs and out of mala fides wrote a
letter dated 1st March, 2005 and sent cheque
no.605337 drawn on Bank of Baroda, Bhikaji Cama
Place, New Delhi dated 1st March, 2005 for
Rs.11,00,000/- in favour of the plaintiff stating that the
amount was refund of the amount paid by the plaintiff
earlier and that the agreement signed by the parties
CS(OS) No.320/2006 Page 3 of 14
and kept in a sealed cover be cancelled and returned to
them. Copy of the said letter is Annexure-B hereto;
24. That in response, the plaintiff sent Registered
Letter dated 14th March, 2005 stating the factual
position and expressed serious protest and further
vehemently denied its contents. It was specifically
pointed out that the communication dated 1st March,
2005 was plainly motivated and false. It was also
stated that the plaintiff had always been and still was
ready and willing to pay the balance sale consideration
and was eager to have a meeting with the defendants at
their (defendants') convenience to draw and execute
the necessary documents so that sale transaction was
completed without further delay at one go. The plaintiff
also returned the original cheque no.605337 dated 1 st
March, 2005 for Rs.11,00,000/-. Copy of the said letter
is Annexure-C hereto;
25. That instead of taking any corrective measures,
the defendant no.1 Company (under the signature of
defendant no.2) wrote letter dated 22nd March, 2005
making false and dishonest contentions therein that the
cheque returned by the plaintiff with its letter dated
14th March, 2005 was not found enclosed. Copy of the
said letter is Annexure-D hereto. In response, the
plaintiff sent letter dated 28th March, 2005 and
demanded that the defendants take immediate steps for
execution and registration of the Sale Deed. Plaintiff
further reiterated that it was willing to have an
extended meeting as suggested in its letter dated 14th
March, 2005 to resolve any impediments in completion
of the agreed sale transaction. Copy of the letter is
Annexure-E hereto;
26. Thereafter the matter was also discussed on
telephone but did not bring any positive results.
Therefore, a legal notice dated 6th May, 2005 was sent
by the plaintiff through its Advocate. Copy of the said
CS(OS) No.320/2006 Page 4 of 14
notice is Annexure-F hereto. No reply to this notice has
been received."
7. On the aforesaid averments, the following reliefs were claimed in the
plaint:-
"1. A decree for specific performance of the
Agreement to Sell in respect of property commonly
known as 3 Friends Colony (West), New Delhi,
measuring 3,520.93 sq.mtrs. (4,211 sq. yds.), as
detailed above, be passed in favour of the plaintiff and
against the defendants and the defendants be directed
to specifically perform the agreement i.e. accept the
balance price (Rs.16.18 Crores) and transfer the said
land and built-up property by means of a sufficient
instrument along with vacant physical possession to the
plaintiff.
2. In case the defendants fail to do the needful, an
officer of the Court may be appointed to receive the
balance money on their behalf - or these be allowed to
be deposited in Court - and execute and register the
necessary documents and to deliver the actual, vacant,
physical possession of the property in suit to the
plaintiff for which warrants may kindly be issued."
8. The counsel for the plaintiff states that defendants no.2&3 Shri K.
Sundaram and Smt. R. Sundaram have since been deleted (vide order dated
6th March, 2014) from the array of defendants and the subsequent purchaser
of the property namely Veejay Buildwell Pvt. Ltd. impleaded (vide order
dated 18th March, 2014) as defendant no.2.
9. The suit came up for framing of issues on 5th October, 2016 when in
CS(OS) No.320/2006 Page 5 of 14
the light of submissions contained in paras 23 to 26 of the plaint re-produced
hereinabove and in the light of the prayer paragraph also re-produced above
of the plaint and yet further in the light of the law laid down by the Supreme
Court in I.S. Sikandar Vs. K. Subramani (2013) 15 SCC 27, the following
issue no.(i) framed on that date was ordered to be treated as a preliminary
issue:-
"(i) Whether the plaintiff is not entitled to the relief
of specific performance for the reason of having not
claimed the relief of declaration of the termination
admittedly effected by the defendant no.1 vide letters
dated 1st March, 2005 and 22nd March, 2005 of the
Agreement to Sell, as void? OPPr"
10. The counsel for the defendant in his arguments of course has referred
only to I.S. Sikandar supra.
11. The counsel for the plaintiff has argued (i) that a suit for declaration
under Section 34 of the Specific Relief Act, 1963 is not required to be filed
in a case of specific performance of an Agreement of Sale of immoveable
property; (ii) that in every suit for specific performance, the relief of
declaration is not required to be claimed; it is required to be claimed when
the document is covered by Section 34 of the Specific Relief Act; on being
further asked to specify, the counsel states that a document would be
covered by Section 34 of the Specific Relief Act when it is covered by
Section 55 of the Indian Contract Act, 1872 or like provisions; (iii) reliance
is placed on Sanjay Kaushish Vs. D.C. Kaushish AIR 1992 Delhi 118
where a Single Judge of this Court held that "the well settled principle of
law is that if a particular document or decree is void the person affected by
CS(OS) No.320/2006 Page 6 of 14
the said document or decree can very well ignore the same and file a suit
seeking substantive relief which may available to him without seeking any
declaration that the said decree or document is void or any consequential
relief of cancellation of the same" and on Sushila Kumari Vs. Rama Stores
AIR 2005 Delhi 401 also of another Single Judge following the earlier
judgment in the context of a suit for recovery of possession of property; and,
(iv) that the document dated 1st March, 2005 by which the Agreement to Sell
in the present case has been cancelled is not such for which relief of
declaration needs to be claimed.
12. After the attention of the plaintiff has been drawn to I.S. Sikandar
supra, the counsel for the plaintiff has further argued (i) that the document of
which Supreme Court held cancellation or declaration was required was
different from the document dated 1st March, 2005 in the present case; (ii)
that the Supreme Court in that case was concerned with an Agreement to
Sell of which time was held by the Supreme Court to be the essence of the
Agreement and which time had expired and which is not so in the present
case; and, (iii) in the document before the Supreme Court, the purchaser had
been called upon to pay the sale consideration and which is not so in the
present case.
13. Before proceeding to adjudicate, it is deemed appropriate to set-out
hereinbelow the letter dated 1st March, 2005 supra:-
"K. Sundaram 3, Friends Colony West
New Dehli - 110065
1st March, 2005.
Shri Ashok Agarwal,
Dharampal Satyapal Ltd.
CS(OS) No.320/2006 Page 7 of 14
NOIDA.
This is in continuation of the discussion I had with you and Shri
Rajiv Gupta yesterday in your office in the presence of Mrs. R.
Sundaram and Shri Vishal Sood of Richard Ellis concerning the
sale of property No.3, Friends Colony West, New Delhi - 110
065.
For close to one year now your representatives either directly
by themselves or through Shri Vishal Sood were collecting
documents/information from me about the property and the
deal. You yourself had 3-4 meetings with me and Mrs. R.
Sundaram. Your lawyer Shri Harish and Shri S.K. Agarwal,
lawyer of Richard Ellis had also one meting each with me. I
have fully co-operated in these meeting and in handing over
documents/information demanded and nothing whatsoever has
been concealed. You have taken unusually long time for due
diligence and have not completed your part of the deal by
paying sale consideration despite of several requests made to
you. In yesterday's meeting you said that you are not satisfied
with the documents/information. I have no more
document/information to give to you. In this background I have
no legal or moral right to keep the sum of Rs.11 lakhs paid by
you in February 2004. Accordingly, in refund cheque no.605337
dated 1st March, 2005 for Rs.11 lakhs is sent herewith. It is
requested that the agreement signed by me and you and kept
sealed in locker be cancelled and returned to me.
Thanking you,
Yours faithfully,
(K. Sundaram)"
14. The only question for consideration is whether the answer to the
preliminary issue, in the facts of the present case is covered by I.S. Sikandar
CS(OS) No.320/2006 Page 8 of 14
supra.
15. A reading of I.S. Sikandar supra particularly of paragraphs 1 to 31
thereof does not show that till the suit for specific performance subject
matter thereof travelled to the Supreme Court, the question, whether the
relief of declaration with respect to notice/letter of termination of the
Agreement to Sell is required to be claimed as a pre-condition for claiming
the relief of specific performance was not raised. Rather, Supreme Court in
para 32 of the judgment has observed that "after perusal of the impugned
judgment of the High Court" and "the questions of law framed by the
defendant No.5 in this appeal, the following points would arise for
determination of this Court":-
"32.1 (i) Whether the original suit filed by the plaintiff
seeking a decree for specific performance against the
defendant Nos. 1-4 in respect of the suit schedule
property without seeking the declaratory relief with
respect to termination of the Agreement of Sale vide
notice dated 28.3.1985, rescinding the contract, is
maintainable in law?
32.2 (ii) Whether the reversal of the findings of the trial
court on the issue Nos. 3, 4 and 5 by the High Court and
answering the same in favour of the plaintiff in the
impugned judgment and granting the decree for specific
performance in favour of the plaintiff in respect of the
schedule property is legal and valid?
32.3 (iii) Whether the grant of decree of specific
performance in favour of the plaintiff despite Clause 12
of the Agreement of Sale dated 25.12.1983 is legal and
valid?
32.4 (iv) Whether the grant of the decree is in
conformity with sub- sections (1) and (2) of Section 20 of
CS(OS) No.320/2006 Page 9 of 14
the Specific Relief Act and whether the learned Judge of
the High Court has exercised his discretionary power
reasonably in granting the same in favour of the
plaintiff?
32.5 (v) What decree or order to be passed?"
16. The judgment thereafter, under the heading "Answer to Point (i)", in
paras 33 to 38 is as under:-
"33. The first point is answered in favour of Defendant
5 by assigning the following reasons: it is an
undisputed fact that there is an agreement of sale
executed by Defendants 1-4 dated 25-12-1983 in favour
of the plaintiff agreeing to sell the schedule property in
his favour for a sum of Rs 45,000 by receiving an
advance sale consideration of Rs 5000 and the plaintiff
had further agreed that the remaining sale
consideration will be paid to them at the time of
execution of the sale deed. As per Clause 6 of the
agreement of sale, the time to get the sale deed
executed was specified as 5 months in favour of the
plaintiff by Defendants 1-4, after obtaining necessary
permission from the competent authorities such as the
Urban Land Ceiling Authority and the Income Tax
Department for execution and registration of the sale
deed at the cost and expenses of the plaintiff. If there is
any delay in obtaining necessary permission from the
above authorities and the payment of layout charges,
the time for due performance of agreement shall further
be extended for a period of two months from the date of
grant of such permission.
34. In the instant case, permission from the above
authorities was not obtained by Defendants 1-4. The
period of five months stipulated under Clause 6 of the
agreement of sale for execution and registration of the
sale deed in favour of the plaintiff had expired. Despite
CS(OS) No.320/2006 Page 10 of 14
the same, Defendants 1-4 got issued a legal notice
dated 6-3-1985 to the plaintiff pointing out that he has
failed to perform his part of the contract in terms of the
agreement of sale by not paying the balance sale
consideration to them and getting the sale deed
executed in his favour and called upon him to pay the
balance sale consideration and get the sale deed
executed on or before 18-3-1985.
35. The plaintiff had issued reply letter dated 16-3-
1985 to the advocates of Defendants 1-4, in which he
had admitted his default in performing his part of
contract and prayed time till 23-5-1985 to get the sale
deed executed in his favour. Another legal notice dated
28-3-1985 was sent by the first defendant to the
plaintiff extending time to the plaintiff asking him to
pay the sale consideration amount and get the sale
deed executed on or before 10-4-1985, and on failure
to comply with the same, the agreement of sale dated
25-12-1983 would be terminated since the plaintiff did
not avail of the time extended to him by Defendants 1-
4.
36. Since the plaintiff did not perform his part of
contract within the extended period in the legal notice
referred to supra, the agreement of sale was terminated
as per notice dated 28-3-1985 and thus, there is
termination of the agreement of sale between the
plaintiff and Defendants 1-4 w.e.f. 10-4-1985.
37. As could be seen from the prayer sought for in the
original suit, the plaintiff has not sought for
declaratory relief to declare the termination of
agreement of sale as bad in law. In the absence of such
prayer by the plaintiff the original suit filed by him
before the trial court for grant of decree for specific
performance in respect of the suit schedule property on
the basis of agreement of sale and consequential relief
of decree for permanent injunction is not maintainable
CS(OS) No.320/2006 Page 11 of 14
in law.
38. Therefore, we have to hold that the relief sought for
by the plaintiff for grant of decree for specific
performance of execution of sale deed in respect of the
suit schedule property in his favour on the basis of non-
existing agreement of sale is wholly unsustainable in
law. Accordingly, Point (i) (see para 32.1) is answered
in favour of Defendant 5."
17. Thereafter under the heading "Answer to Point (ii)", in paras 39 to 43
and under the heading "Answer to Point (iii)", in paras 44 to 52, the other
questions as recorded to be arising for decision were dealt with.
18. The counsel for the plaintiff refers to paras 42,43,49 and 55 but which
are on the issues of readiness and willingness framed by the Trial Court and
of time being of the essence of the contract.
19. The conclusion reached by the Supreme Court in "Answer to Point
(i)" in paragraphs 37 to 38 is nowhere dependent on, whether the plaintiff in
that case was ready or willing or not and whether the time for performance
or for payment of balance sale consideration was of the essence of the
agreement or not. All that the Supreme Court has held is that since the
Agreement to Sell had been terminated, on the date of institution of the suit
for specific performance there was no Agreement to Sell in existence of
which the relief of specific performance could have been claimed. The
Supreme Court did not ascribe the said reasoning to the aspect of readiness
and willingness or of time being of the essence of the contract.
20. As far as the contentions of the counsel for the plaintiff, that in the
present case the time for performance had not reached, and that it was
CS(OS) No.320/2006 Page 12 of 14
dependent upon future events, is concerned, a perusal of the letter dated 1 st
March, 2005 shows that the defendants thereby purported to refund the sum
of Rs.11,00,000/- paid by the plaintiff and also sought cancellation and
return of the Agreement signed by the parties and kept sealed in a locker.
Though the counsel for the plaintiff has sought to also carve out a distinction
by stating that the defendants had only called upon the plaintiff to cancel and
return the document and had not cancelled the Agreement to Sell but in my
opinion the language would not make any difference. A perusal of the
judgment aforesaid of the Supreme Court would show that the letter of
cancellation dated 28th March, 1985 in that case also demanded the balance
sale consideration on or before 10th April, 1985 and on failure thereof the
Agreement to Sell was to stand terminated. It is thus not as if the
cancellation in that case also was in any more equivocal terms than in the
letter dated 1st March, 2005 in the present case. I therefore do not find
anything in the present case to distinguish the same from I.S. Sikandar
supra .
21. Following I.S. Sikandar supra, it has but to be held that the plaintiff
cannot be held to be entitled to the relief of specific performance of the
Agreement of Sale.
22. The preliminary issue no.(i) is thus decided in favour of the
defendants and against the plaintiff.
23. It is however deemed appropriate to defer dismissal of the suit
awaiting the outcome of the appeals aforesaid pending before the Division
Bench.
CS(OS) No.320/2006 Page 13 of 14
24. List on 24th July, 2017.
RAJIV SAHAI ENDLAW, J.
FEBRUARY 23, 2017 „pp‟..
(corrected and released on 6th March, 2017).
CS(OS) No.320/2006 Page 14 of 14