Delhi High Court
State Bank Of India vs Aditya Finance & Leasing Co. Pvt. Ltd. ... on 17 July, 1998
Equivalent citations: AIR1999DELHI18, 75(1998)DLT42, 1998RLR472, AIR 1999 DELHI 18, (1998) 75 DLT 42 (1999) 2 CIVILCOURTC 237, (1999) 2 CIVILCOURTC 237
Author: K.S. Gupta
Bench: K.S. Gupta
ORDER K.S. Gupta, J.
1. This order will govern the disposal of I. As. 9370 & 12532/96.
2. Suit was filed by State Bank of India, inter alia, alleging that it is a body, constituted under the State Bank of India Act, 1955 and has one of its branches at Swasthya Vihar, Vikas Marg. Delhi. Defendant No. 1 is a company registered under the Company Act, 1956 and defendant No. 2 is the director thereof. Defendant No. I owns property constructed on plot bearing No. 9 in New Rajdhani Enclave, Vikas Marg. Delhi. Swasthya Vihar brunch of the plaintiff at present is operating from premises No. A-13. As the plaintiff bank was in need of bigger accommodation for smooth running of the said branch by the letter dated 12th April, 1993 the defendants offered on lease said property No. 9 having basement, ground and the first floors. It is further alleged that in a meeting held on 4th July, 1994 between the officers of the plaintiff bank and defendant No. 2 defendants agreed to provide area of 6,600 sq. ft. in the said property on a monthly rent to be calculated @ Rs. 11/- per sq. ft. for the basement, @ Rs. 14/- per sq. ft. for the ground floor and @ Rs. 13.25 per sq. ft. for the first floor. Certain broad terms and conditions governing the lease were also discussed in that meeting. By the letter dated 10th October, 1994 defendants conveyed that the period of lease will be 15 years with enhancement @ 25% in therein after every five years. Thereafter, broad terms and conditions governing the lease were duly communicated by the plaintiff bank to the defendants by the letter dated 16th December, 1994. Defendant No. 2 in token of her acceptance of the terms and conditions noted in the said letter excepting condition No. (ix) which provided for the maintenance and upkeep of the property signed a copy of the said letter. Acceptance of condition No./(ix) was also later on communicated by the defendants to the plaintiff by the letter dated 27th January, 1995. Defendants by their another letter dated 10th January, 1995 requested the plaintiff bank to grant loan of Rs. 2.00 lakhs which the plaintiff bank paid on 24th July, 1995. By an undertaking dated 24lh July, 1995, defendants undertook to complete the entire construction in the aforesaid property as per the requirements and specifications of the plaintiff bank and to hand over possession thereof to it. Defendants further furnished indemnity bond on 9th May, 1995 thereby indemnifying the plaintiff from any loss or expenses which it may have to incur on account of running the branch in the said property. It is stated that the layout plan for construction of strong room & locker room etd. prepared by the engineer of the plaintiff bank was provided to the defendants on 16th February, 1995 while the blue prints thereof on 3rd April, 1995. On visit of the property by the civil engineer of the plaintiff bank on 25th September, 1995, he found that the construction work was not completed by the defendant as per the specifications provided. However, by the letter dated 28th September, 1995 shortcomings were conveyed by the plaintiff bank to the defendants. However, instead of removing the shortcomings by the letter dated 17th October, 1995 defendants intimated the plaintiff bank about the withdrawal of their offer to lease out the aforesaid property and to renegotiate the rent. Plaintiff bank was always willing and ready to take possession of the property. It was prayed that a decree of specific performance may be passed against the defendants directing them to complete the construction work in said property No. 1 and hand over possession thereof to the plaintiff bank at the agreed monthly rent of Rs. 82,600/- and also to execute lease deed for a period of 15 years in favour of the plaintiff bank. Direction is further sought for adjustment of the loan amount of Rs. 2.00 lakhs paid by the plaintiff bank towards the monthly rent payable.
3. In the written statement by way of preliminary objection defendants have alleged that the agreement whose specific performance has been sought by the plaintiff bank is not an agreement to lease the property but an agreement to enter into agreement of lease on a future date which is not enforceable in law. Both the parties started negotiations in the year 1993 but were not able to settle all the terms and conditions which were to govern the lease agreement till the date of the filing of the present suit. During this period plaintiff bank made the defendants to spend huge amount in carrying out renovations/alterations as demanded by them in the property for which defendants had to secure loan of Rs. 2.00 lakhs from the plaintiff bank. On account of the failure to settle the terms and conditions of lease by the plaintiff bank, the defendants called off the proposed deal. It is stated that the defendants repeatedly requested the plaintiff bank to settle the lease deed and to take possession of the property latest by 31st August, 1995 which the bank failed to honour. It is alleged that the plaintiff cannot force the defendants to enter into an agreement for which alternate remedies are available to it in law. It is pleaded that under Section 14 and the other relevant provisions of Delhi Development Act it is not permissible to carry commercial activities in a residential area. Therefore, the jurisdiction of the Court cannot be invoked to force the defendants to do an illegal act. On merits, it is not disputed that the defendants had offered the plaintiff bank their property on lease and a meeting between the officers of the plaintiff bank and defendant No. 2 took place on 4th July, 1994 as alleged. It is stated that minutes of the said meeting would reveal that the terms and conditions which were to govern the agreement to lease to be entered in future were not settled. Plaintiff bank kept on suggesting new changes in the existing structure of the property and thus, made the defendants to keep the property vacant for such a long period. It is denied that the defendants are under any obligation to lease out the property to the plaintiff bank and the plaintiff bank is entitled to the reliefs sought for.
4. Along with the plaint aforesaid I.A. No. 9370/96 under Order XXXIX, Rules 1 and 2 read with Section 151, CPC was filed by the plaintiff bank and by the order dated 9th October, 1996 by way of ex parte ad interim injunction defendants were restrained from disposing of, leasing out or otherwise parting with possession of the whole or any portion of said property No. 9.
5. By filing I.A. No. 12532/96 under Order XXXIX, Rule 4, CPC defendants have sought the vacation of the order dated 9th October, 1996 on the defense taken in the written statement.
6. One of the objections taken by the defendants on which grant of the reliefs claimed by the plaintiff is opposed is that the agreement whose specific performance has been sought is not an agreement to lease the property but an agreement to enter into the agreement of lease on a future date which cannot be legally enforced. It is not in dispute that the defendants approached the plaintiff bank for leasing out property constructed on plot No. 9 in New Rajdhani Enclave and a meeting between the officers of the plaintiff bank and defendant No. 2 took place on 4th July, 1994. In this meeting defendant No. 2 offered to give on lease space admeasuring 2850 sq. ft. in the basement @ Rs. 11/- per sq. ft., 2100 sq. ft. on the ground floor @ Rs. 14/- per sq. ft. and 1650 sq. ft. on the first floor @ Rs. 13.25 per sq. ft. As is manifest from the minutes of the meeting placed on part III file at pages 19 to 22, it was provisionally agreed between the parties as under:--
"(i) Construction as per Bank's specifications at owner's cost,
(ii) The rent will commence from the date of handing over actual possession of the premises duly completed as per Bank's requirement including construction of the consent of the landlady.
(iv) Loan, at usual rate of interest, to he sanctioned equivalent to six months' rent."
7. Plaintiff has filed letters dated 5th October, 1994 sent by it to defendant No. 2, dated 10th October. 1994 received from defendant No. 2, dated 16th December, 1994 sent by it to defendant No. 2 and dated 27th January, 1995 received from defendant No. 2. By the letter dated 5th October, 1994, it was communicated to defendant No. 2 that the Chief General Manager had accorded in principle approval to take on lease the aforesaid property provided the lease period is extended to 15 years with an enhancement in rent @ 25% after every five years. In response to this letter, by the letter dated 10th October, 1994 defendant No. 2 intimated the plaintiff bank that the defendants were ready to give on lease the property for a period of 15 years with enhancement in rent @ 25% after every five years. It is further stated in the letter that the entire constructed area of the property is being let out to the bank except the terrace which will remain in possession of the defendants. Area in respect of the staircase will be shared by both the parties and the proportionate rent of the staircase area be calculated separately. Terms as contained in the letter dated 16th December, 1994 conveying the approval of the Local Board of the plaintiff for taking on lease the property which are relevant read thus :
(i) Construction as per Bank's specification at owner's cost.
(ii) The rent will commence from the date of handing over of actual possession of the premises duly completed as per Bank's requirements including construction of strong room/locker room under the supervision of Bank's Civil Engineer.
(iii) Initially the lease agreement will be executed for a minimum of 15 years with an increase of 25% in rent after expiry of every block of five years.
(iv) 6 months advance rent, to be paid to the landlords as security as per RBI norms.
(v) The landlords have contemplated not to avail any loan from the Bank.
(vi) Standard lease deed shall be executed by the landlord.
(vii) As the proposed premises violate local laws and payment of rent for nonconforming area attracts penalty, an express undertaking on stamp paper that composition fee/panel charges, if any, imposed by the DDA or any other civil authority shall be borne by the landlords and the bank shall have what-so-ever no liability for the same.
(viii) The expenses for execution" of lease deed shall be shared between the bank and the landlords on 50 : 50 basis.
(ix) An express undertaking that the landlords shall be responsible for maintenance and upkeep of the branch premises shall be obtained and kept on branch records.
(x) Meanwhile, please advise the landlords to contact Assistant Engineer (Civil) at this office for finalisation of the structural changes/construction of strong/locker room as per Bank's norms.
(xi) An acknowledgement from the landlords in token of their having agreed to and accepted the terms and conditions referred to above, may please be obtained on duplicate of this letter and forwarded to us for our record."
8. Below the said letter, endorsement admittedly bearing the signature of defendant No. 2 together with seal of defendant No. 1 appears to the following effect :--
"We are in receipt of your acceptance of our proposal regarding branch premises. Our observations in this regard are as follows :--
(i) Terms of your offer are accepted except for item No. ix regarding maintenance.
(ii) As per our offer dated 11th October, 1993 we have proposed maintenance charges @ 0. 25 per sq. ft. to the structure of the building.
We would like to discuss the matter further regarding maintenance to be provided by us."
9. In terms of the letter dated 27th January, 1995, defendants conveyed to the plaintiff bank that clause No. (ix) of the terms in the letter dated 16th December, 1994 was also acceptable to them.
10. It is now settled law that a contract can come into existence between the parties by exchange of letters (see Ram Krishan Singhal v. Executive Engineer . On a combined reading of the minutes of the meeting and the correspondence referred to above, it is prima facie evident that a concluded contract was made between the parties to give on lease the aforesaid property on the terms finally indicated in the aforementioned letter dated 16th December, 1994 and it is not a case to enter into an agreement of lease on a future date as alleged by the defendants.
11. It was contended by Sh. R.K. Anand, Sr. Advocate appearing for the defendants that the contract in question was vague and uncertain in as much as it did not provide for the extent of the area to be leased out and the date of commencement of tenancy. According to him such a contract cannot be enforced in law. Reliance was placed on the decisions in Dhanrajmal Gobind Ram v. Shamji Kalidas, , Kollipara Sriramulu (dead) by his legal representative v. T. Aswatha Narayana (dead) by his legal representative, and Saral Trading Co. v. Mahesh Steel Traders AIR 1987 Delhi 4. Submission has no force. Minutes of the aforesaid meeting dated 4th July, 1994, and letters dated 10th October, 1994 and 16th December, 1994 clearly point out that entire property No. 9 excepting the terrace having an area of approximately 6600 sq. ft. was agreed to be let out by the defendants to the plaintiff bank. Further, as is evident from the aforementioned correspondence the tenancy was to commence a actual possession of the property duly completed as per the bank's requirements and specifications being handed over to the plaintiff bank. As there is no vagueness or uncertainty in the contract in question the decisions referred to above have no application to the facts of the present case.
12. Next submission advanced on behalf of the defendants was that specific performance of the contract in question cannot be enforced it being in violation of Section 14 of the Delhi Development Act, 1957. In support of the submission strong reliance was placed on a decision in Waman Shriniwas Kini v. Ratilal Bhagwandas and Co., . In this decision one of the terms of the lease as contained in a document dated 7th June, 1948 executed between the parties provided that the appellant/tenant could keep subtenant(s) in the portion of the new building in the same manner as he was doing in the old chawl 'Fida Ali Villa in Kalyan. In special leave against the judgment of the High Court of Bombay, confirming the order of rejection passed by the Assistant Judge, Thane one of the submissions advanced on behalf of the appellant was that Section 15 of Bombay Rents, Hotel Rates and Lodging Houses Rates (Control) Act, 1944 did not apply to the contract between the landlord and tenant and, therefore, it did not preclude any agreement between the parties as to subletting. While dealing with that issue the Supreme Court held in paras 6-10 of the report on page 692 thus :--
(6) "It was then argued that under Section 15 of the Act there is no prohibition against a contract of subletting, the nonobstante clause being confined to other laws. The section when quoted runs as follows :--
"Notwithstanding anything contained in any law it shall not be lawful after the coming into operation of this Act for any tenant to setlet the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein :
Provided that the (State) Government may, by notification in the Official Gazette permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notification."
(7) This section prohibits subletting and makes it unlawful for a tenant to assign or to transfer his interest in the premises let to him. The nonobstante clause would mean that even if any other law allowed subletting e.g. Section 108 of the Transfer of Property Act the subletting would, because of Section 15, be unlawful. This would apply to contracts also as all contracts would fall under the provisions of the law relating to contracts i.e. Contract Act. An agreement contrary to the provisions of that Section (Section 15) would be unenforceable as being in contravention of the express provisions of the Act which prohibits it. It is not permissible to any person to rely upon a contract the making of which the law prohibits. (Section 23 of the Contract Act.) (8) Counsel for the appellant contended that the view of the Bombay High Court in P. D.Aswani v. Kavashah Dinshah, 56 Bom LR 467 : was erroneous and that the correct rule was laid down by that Court in Cooper v. Shiavaz Cowasji Cambatta, AIR 1949 Bombay 131. That was a case under Section 10 of Bombay Rents. Hotel Rates and Lodging Houses Rates (Control) Act (Bom VII of 1944) which in express terms allowed subletting as follows :--
"Notwithstanding anything to the contrary in any law for the lime being in force a tenant may sublet any portion of his premises to a subtenant, provided he forthwith intimates in writing to his landlord the fact of his having so sublet the premises and also the rent at which they have been sublet."
It was contended that the nonobstante clauses in Section 10 of the Act VII of 1944 and of Section 15 of the Act being similar in language must be similarly interpreted. The nonobstante clause has to be read in conjunction with the rest of the section. Section 10 of the Act of 1944 permitted subletting on certain conditions. By Section 9 of the Act provision was made for a contract between the landlord and the tenant prohibiting subletting and in AIR 1949 Bombay 131 the two provisions were reconciled by saying that a contract under Section 9 prevailed over the permission given by Section 10. But Section 15 expressly prohibits subletting and, therefore, a contract to the contrary cannot neutralise its prohibitory effect. The nonobstante clause of the two sections, Section 10 of the Act of 1944 and of Section 15 of the Act, therefore, cannot be said to have the same effect.
(9) The respondent's suit for ejectment was brought under Section 13(1 )(e) which provides :
"Notwithstanding anything contained in this Act (but subject to the provisions of Section 15) a landlord shall be entitled to recover possession of any premises if the Court is satisfied..............
(c) that the tenant has, since the coming into operation of this Act, sublet the whole or part of the premises or assigned or transferred in any other manner his interest therein."
(10) It was contended that Section 13(1)(e) had to be read separately and not in conjunction with Section 15 of the Act. The section itself makes it quite clear that it is subject to the provision of Section 15 and the two sections must, therefore, be read together. The appellant pleaded that under the agreement between him and the respondent he was entitled to sublet the premises. Such an agreement, in our opinion, is void because of the provisions of Section 15 of the Act and Section 23 of the Contract Act and enforcement of the agreement would produce the very result which the law seeks to guard against and to prevent and by sustaining the plea of the appellant the Court would be enforcing an agreement which is prohibited and made illegal.
13. Turning to said Section 14 of the Delhi Development Act the same provides as under:--
"After the coming into operation of any of the plans in a zone no person shall use or permit to be used any land or building in that zone otherwise than in conformity with such plan :
Provided that it shall be lawful to continue to use upon such terms and conditions as may be prescribed by; regulations made in this behalf any land or building for the purpose and to the extent for and to which it is being used upon the date on which such plan comes into force".
14. Violation of the provision of said Section 14 has been made punishable with fine which may extend to Rs. 5,000/- and in the case of a continuing offence with further fine which may extend to Rs. 250/- for every day during which such offence continues after conviction for the first commission of the offence, under Section 29 (2) of the Act. It is common case of the parties that as per the Master plan aforesaid property No. 9 can be used only for residential purpose. Therefore, use of the property by the plaintiff for nonconforming purpose i.e. for running bank obviously would he in violation of the provisions contained in said Section 14. Needless to say that under Section 23 of the Contract Act an agreement is lawful unless it is forbidden by law or is of such a nature that, if permitted it would defeat the provisions of any law or is fraudulent or involves or implies, injury, to the person or property of another, or the Court regards it as immoral or opposed to public policy. In each of these cases, the agreement is unlawful and void. Taking note of the ratio in Waman Shriniwas Kinny's case (supra) the contract whereof specific performance is sought by the plaintiff being in contravention of the aforesaid Section 14 is prima facie unlawful and void under Section 23 and the same thus cannot be legally enforced against the defendants. From the said discussion it must follow that the plaintiff has not made out prima facie case for grant of ad interim injunction prayed for.
15. Consequently, I.A. No. 9370/96 is dismissed. I. A. No. 12532/96 is allowed and the ex 'parte ad interim injunction granted by the order dated 9th October, 1996 is hereby vacated. No order as to costs.