Delhi High Court
M/S Shakti Residency Pvt. Ltd. vs Sanjiv Anand & Anr. on 1 July, 2019
Author: Vipin Sanghi
Bench: Vipin Sanghi, A. K. Chawla
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 12.02.2019
% Judgment delivered on: 01.07.2019
+ FAO(OS) 9/2017 and C.M. No.1265/2017
M/S SHAKTI RESIDENCY PVT LTD ..... Appellant
Through: Mr. Harish Malhotra, Senior
Advocate along with Mr. Chetan
Anand and Mr. Akash Kumar
Srivastava, Advocates.
versus
SANJIV ANAND & ANR ..... Respondents
Through: Mr. Dinesh Garg and Ms. Rachna
Agrawal, Advocates for respondent
No.1.
Mr. Arvind K. Nigam, Senior
Advocate along with Mr. Jatinderpal
Singh, Mr. Mehtab Singh Sandhu and
Mr. Pratishth Kaushal, Advocates for
respondent No.2.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
HON'BLE MR. JUSTICE A. K. CHAWLA
JUDGMENT
VIPIN SANGHI, J.
1. The appellant is aggrieved by the order dated 25.11.2016 passed by the learned Single Judge in I.A. No.11942/2016, whereby the application of FAO(OS) 9/2017 Page 1 of 29 the appellant (plaintiff in the suit) herein, for a judgment on admissions under Order XII Rule 6 C.P.C., came to be dismissed.
2. The appellant has filed the Civil Suit, i.e. C.S.(O.S.) No. 503/2016 against the two respondents - who are arrayed as defendants No.1 & 2 respectively, wherein the following reliefs have been sought:
"(iii) for the sum of Rs.15,15,00,822/- (Rupees Fifteen Crore Fifteen Lacs Eight Hundred and Twenty Two Only) against the Defendant No.1;
(iv) for the sum of Rs.10,91,78,904/- (Rupees Ten Crore Ninety One Lacs Seventy Eight Thousand Nine Hundred and Four Only) against the Defendant No.2;
(iii) for future and pendentile interest @18% per annum on the sum of Rs.9,00,00,000/- (Rupees Nine Crore Only) against the Defendant No.1;
(iv) for future and pendentile interest @18% per annum on the sum of Rs.6,50,00,000/- (Rupees Six Crore Fifty Lacs Only) against the Defendant No.2;"
3. The said claim arises in the background that the appellant - on the one hand, and the respondents, along with two others, namely Mrs. Rekha Sharma & Mrs. Rashmi Sharma - on the other hand, entered into an agreement to sell on 16.02.2012 in respect of property bearing No.46, Block-S, Panchshila Park, New Delhi, admeasuring 800 square yards (hereinafter referred to as the said property). The appellant was the agreement purchaser in the said transaction. The said agreement to sell - which is not disputed, inter alia, records that Smt. Rekha Sharma and Smt. Rashmi Sharma, who had 2/9th undivided share in the said property, had earlier agreed to transfer the same in favour of respondent No.1/ Sanjiv FAO(OS) 9/2017 Page 2 of 29 Anand vide agreements entered into by them with respondent No.1/ Sanjiv Anand on 17.01.2007 and 22.08.2005 respectively.
4. We may also observe that at the time when the agreement to sell was entered into on 16.02.2012, there was a third party claim made by Ms. Sangeeta Rajani, Ms. Deepika Rajani and Mr. Atul Rajani (hereinafter referred to as the Rajanis) - who had filed C.S.(O.S.) No. 1498/2010 for specific performance in this Court.
5. Before the agreement to sell was entered into involving the appellant and the respondents, a settlement was arrived between the two respondents herein on 28.01.2011 in R.F.A. No.738/2005. Under that settlement, respondent No.2/ Smt. Rani Sharma acknowledged the position that she had no claim over the 2/9th share each of Mrs. Rekha Sharma and Mrs. Rashmi Sharma, which had been purchased by respondent No.1/ Sanjiv Anand. She also agreed to sell her 5/9th undivided share in the said property to respondent No.1/ Sanjiv Anand for a total consideration of Rs.28 Crores - out of which, she had received Rs.50 Lakhs from him as advance payment, thus, leaving a balance of Rs.27.5 Crores.
6. Under the agreement to sell dated 16.02.2012 entered into between the appellant - on the one hand, and the two respondents along with Smt. Rekha Sharma and Smt. Rashmi Sharma - on the other hand, the appellant agreed to purchase the said property for a total consideration of Rs.50 Crores on the terms & conditions set out therein, which had to be split between respondent No.1/ Sajiv Anand to the tune of Rs.22.5 Crores, and respondent No.2/ Mrs. Rani Sharma to the tune of Rs.27.5 Crores. At the time when the FAO(OS) 9/2017 Page 3 of 29 agreement to sell was entered into the appellant, admittedly, paid Rs.12.50 Crores under the said agreement. The breakup of the said amount is as follows:
(i) Rs.15 Lakhs was paid to respondent No.1; (ii) An equal amount was paid to respondent No.2.
(iii) Rs.6.70 Crores was agreed to be paid to the Rajanis to settle their claim in C.S.(O.S.) No.1498/2010, which was paid.
(iv) Another Rs.3.15 Crores was paid to respondent No.1 to be utilized towards costs to be incurred for mutation of the property and for getting the leasehold rights converted into freehold.
(v) An amount of Rs.2.35 Crores was paid to respondent No.2/ Smt. Rani Sharma.
7. We may also observe that since, at the time of entering into the agreement to sell dated 16.02.2012, there was a subsisting agreement between the two respondents inter se, further details with regard to account of the amount paid by the appellant were also incorporated. However, we are not concerned with those aspects in the present appeal.
8. The agreement further recorded that the first party, i.e. respondent No.1 herein and the conforming party, i.e. respondent No.2 confirm and acknowledge the receipt of Rs.12.50 Crores towards part sale consideration and that the balance amount payable by the appellant was payable as follows:
FAO(OS) 9/2017 Page 4 of 29"(i) To the First Party Rs. 14,80,00,000/-(Fourteen Crores Eighty Lakh Only) and
(ii) To the Confirming Party Rs. 22,50,00,000/-(Twenty Two Crores Fifty lacs)"
9. The said amount was payable at the time of execution of the sale deed in favour of the appellant or its nominee when, simultaneously, the physical possession of the entire property was to be handed over by the two respondents to the appellant, or its nominee. The two other parties to the agreement to sell, namely, Mrs. Rekha Sharma and Mrs. Rashmi Sharma confirmed that they would not make any claim towards the consideration, since they had received their share in the property from the first party, i.e. respondent No.1. Admittedly, a further sum of Rs.3 Crores was paid by the appellant to the two respondents in equal share on 20.06.2012.
10. Under Clause 6, it was agreed by the two respondents that they shall complete their obligations to, inter alia, mutate the said property in the joint names of respondent No.2, Mrs. Rekha Sharma and Mrs. Rashmi Sharma in the records of the DDA and; apply for and obtain the grant of conversion of leasehold rights to freehold rights from the DDA, and get executed and registered the conveyance deed jointly in favour of respondent No.1/ Mr. Sanjiv Anand and respondent No.2/ Mrs. Rani Sharma within a period of 120 days.
11. Clause 9 of the agreement is relevant, and the same reads as follows:
"9. Whereas the First Party and Confirming Party acknowledges that the Fifth Party is agreeing to purchase the FAO(OS) 9/2017 Page 5 of 29 said property and has paid part-consideration at the time of signing this Agreement to Sell with the clear understanding that the Parties shall diligently discharge their obligations in the manner stated above and complete the sale transaction within the time-lines agreed upon. In the event of any breach of performance of their respective obligations or failure to abide by the timelines specified above, the Fifth Party shall be entitled to claim and recover interest @18% p.a. on amount of Rs. 5,80,00,000/- from the First Party and Confirming Party i.e.(Rs.3,30,00,000/- from the First Party and on Rs.2,50,00,000/- from the Confirming Party),on the amount paid it under this Agreement to Sell from the 121st day from the date of this Agreement to Sell till the time the Sale Deed is executed in its favour. In the event the Fifth Party fails to pay in stipulated time The Fifth Party will pay an interest on 37,50,00,000/-@ the rate of 18% on receivables due to First Party and Confirming Party. If however the payment is not received from the fifth Party, within 60 days after the due date, then the transaction shall be cancelled and the sellers would be free to sell the property to any other buyer and on or before getting the sale deed registered from the new buyer The first Party and Confirming party will refund the amount after deducting a sum of Rs. 1,00,00,000 (Rupee one crore) to the Fifth Party. No interest or any other amount, would be refunded except the amount received after deducting Rs. 1,00,00,000 (Rupees one crore) by the first party and confirming party. In the event of first party and confirming party not performing their obligations of this agreement to Sell, the Fifth Party shall seek specific performance of this Agreement to Sell."
12. The case of the appellant in the suit is that the respondents failed to discharge their obligations within the period of 120 days, as aforesaid.
13. It appears that the respondents got the conveyance deed pertaining to the said property executed on 28.07.2014 in favour of respondent No.2, Smt. Rekha Sharma & Smt. Rashmi Khusrao (see Smt. Rashmi Sharma), and FAO(OS) 9/2017 Page 6 of 29 information in that regard was sent to the appellant by respondent No.1 on 08.08.2014.
14. Thereafter, disputes arose between the parties on the issue as to who was responsible for the delay - since the said obligations had to be performed within 120 days of the agreement to sell being executed, and also with regard to the claims made by the appellant - on the one hand, and by the respondent No.1 - on the other hand, for interest on account of the said delay. While the appellant claimed interest on the entire amount of Rs.15.50 Crores expended by it under the transaction, as aforesaid, respondent No.1 claimed interest on the balance sale consideration while denying the claim of the appellant. The same, eventually, led to issuance of notice dated 05.08.2015 by the appellant, wherein the appellant stated that on account of breach of the agreement to sell dated 16.02.2012 on the part of the sellers, namely the respondents, it was no longer interested to continue with the deal and, consequently, the appellant had cancelled the agreement. The appellant demanded refund of Rs.15.50 Crores along with interest @ 18% per annum from the date of receipt of the respective amounts, till the date of payment. The respondent No.1 - on the other hand, sent an e-mail on 21.09.2015 accepting the cancellation of the agreement to sell. Respondent No.1 suggested that the property could be sold to a third party, who, apparently, was willing to buy the same for Rs.48 Crores. The appellant suggested that the loss to the extent of Rs.2 Crores be shared equally between the appellant and the respondents, and the brokerage of 1% in respect of the fresh transaction be also shared between the parties. This, obviously, was not acceptable to the appellant, who sent the communication denying the said FAO(OS) 9/2017 Page 7 of 29 claim of respondent No.1. Thereafter the appellant has filed the suit in question.
15. Both the respondents have filed their respective written statements defending the appellant's claim. Respondent No.1 submits that the only right available to the appellant is to seek the relief of specific performance in terms of clause 9, and that the appellant is not entitled to file the suit for recovery of the amount. Respondent No.1 also submits that the suit is barred by limitation. A technical plea with regard to signing and verifying of the plaint has also been raised. The execution of the agreement to sell has not been denied by either of the defendants. They also do not deny the fact that the appellant has defrayed the amounts - as claimed by it in the plaint, aggregating to Rs.15.50 Crores. Defendant No.1 disputes the plaintiff's claim in respect of the amount paid to Rajanis of Rs.6.70 Crores. Defendant No.1 states that he "was paid only a sum of Rs.3,30,00,000/-. Rest of the amount i.e. Rs.4,20,00,000/- was allegedly paid to Rajanis which was / is not the liability of the defendant No.1."
16. Defendant No.1 also does not dispute the fact that the plaintiff made payment of further amount of Rs.3 Crores after defraying the initial amount of Rs.12.50 Crores under the agreement. Defendant No.1 states in paragraph 12 that the plaintiff has paid "only a sum of Rs.4.80 crores (Rs.3.30 crores recorded under the Agreement and Rs.1.50 crores paid subsequent thereto)."
17. Defendant No.2 in her written statement states that it was the plaintiff who had committed default of the agreement to sell. She states that FAO(OS) 9/2017 Page 8 of 29 "Therefore, no amount whatsoever is payable to the Plaintiff by the answering Defendant, apart from a sum of Rs.5.5. crore (as stipulated in Clause 9)."
18. Defendant No.2 also avers that the plaintiff is liable to pay interest under the agreement on account of its default. Defendant No.2 in her written statement states that she reserves her right to initiate appropriate proceedings against the plaintiff in respect of her claim of Rs.24 Crores with interest @ 18% per annum from 08.08.2014.
19. Neither of the defendants have either claimed a set-off, or made a counter-claim in their respective written statements. Neither of them has claimed before us, that they have filed any suit for recovery of any amount from the plaintiff towards damages in terms of the agreement to sell. The termination notice was issued by the plaintiff on 05.08.2015 and, consequently, any such claim would be barred by limitation as on date.
20. The plaintiff had filed the suit under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act). The plaintiff moved I.A. No.11942/2016 under Order XIII-A of the Commercial Courts Act read with Order XII Rule 6 CPC for summary judgment. It appears that on 26.09.2016, the learned Single Judge ordered that the suit would be proceeded as an ordinary suit. The Registry was directed to renumber the suit as an ordinary suit. It was further directed that the aforesaid I.A. No.11942/2016 be only considered as an application under Order XII Rule 6 CPC.
FAO(OS) 9/2017 Page 9 of 2921. The premise on which the plaintiff moved I.A. No.11942/2016 was that the admitted position was that the parties had entered into the agreement to sell dated 16.02.2012; the defendants had admitted the termination of the said agreement to sell; the defendant No.1 had, admittedly, sent an e-mail on 21.09.2015, inter alia, stating that the plaintiff had paid Rs.15.50 Crores to date "and accordingly will be refunded this amount, after appropriate deductions as described above". What is described above in the e-mail is the sharing of the difference (loss) between the price settled with the appellant, and the price offered by the "present" buyer which too is mentioned in the e-mail as Rs.48 Crores.
22. The plaintiff relied upon Clause 9 of the agreement to sell dated 16.02.2012, which obliges the respondents to refund the amount received by them under the agreement to sell after deducting a sum of Rs.1 Crore in the event of the agreement being cancelled due to the default of the appellant/ agreement purchaser. The appellant averred in its application, inter alia, as follows:
"D. Because a total sum of Rs.9,00,00,000/- (Rupees Nine Crores Only) stands paid to the Defendant No.1 and Rs.6,50,00,000/- (Rupees Six Crores Fifty Lacs Only) to the Defendant No.2, under the said Agreement to Sell dated 16.02.2012. Thus, even assuming though not admitting that it is the Plaintiff who has committed the breach of the said Agreement, it is submitted that as per the express terms of Clause 9 of the the Agreement, the Defendants at most are liable to forfeit the maximum sum of Rs.1,00,00,000/- (Rupees One Crore) from the entire sum of Rs.15.50 Crores received as Part Sale consideration by them from the Plaintiff Company.FAO(OS) 9/2017 Page 10 of 29
E. Because the Defendant No.2 in her Written Statement have duly admitted the receipt of the aforesaid sums from the Plaintiff Company. The said Defendant further relying upon Clause 9 of the Agreement to Sell dated 16.02.2012, in paragraph no.9 of the preliminary submissions/ objections of her Written Statement has also admitted that the sum of Rs.5.50 Crores is payable to the Plaintiff Company by the said Defendant.
F. Because the Defendant No.1 has admitted the receipt of Rs.3,30,00,000/- (Rupees Three Crores Thirty Lacs Only) as well as the further sum of Rs.1,50,00,000/- (Rupees one Crore Fifty Lacs Only) from the Plaintiff Company. However, as far as the balance sum of Rs.4,20,00,000/- (Rupees Four Crores Twenty Lacs Only) paid directly to Rajanis on account of the Defendant No. 1, the said Defendant has sought to deny the said liability by stating that the Plaintiff on his own entered into negotiations with the Rajanis at Rs.6.70 Crores and then forced the Defendant No.1 to share the liability of Rs.4,20,00,000/- (Rupees Four Crores Twenty Lacs Only), which the Defendant no. 1 agreed to bear under pressure. It is further contended that since the said amount was paid by the Plaintiffs to the Rajanis, the Defendant carries no liability as far as the amount of Rs.4.20 Crores is concerned.
x x x x x x x x x
I. Because as submitted hereinabove, the said deductions
cannot exceed the sum of Rs.1 Crore, as per express
terms of the Agreement to Sell dated 16.02.2012 as well as per Section 74 of the Contract Act, 1872." (emphasis supplied).
23. The plaintiff avers that even if, for the sake of arguments, it were to be accepted that the respondents were entitled to forfeit the amount of Rs.1.00 Crore, they were liable to refund the principle sum of: Rs.8.55 FAO(OS) 9/2017 Page 11 of 29 Crores payable by respondent No.1, and Rs.5.95 Crores payable by respondent No.2.
24. The respondents contested the said application by filing their respective replies. Essentially, the same pleas were raised by them in defence of the application, as raised in their respective written statements.
25. By the impugned order, the learned Single Judge has rejected the said application, i.e. I.A. No.11942/2016. The learned Single Judge has observed in the impugned order as follows:
"8. It is apparent from the above that the relief as prayed for by the applicant in the present application must be rejected as several contentious issues are raised. First of all, this Court is unable to readily accept that the plaintiff is entitled to demand the refund of the amount of Rs. 15.5 crores paid less ₹1 crores in terms of the clause 9 of the Agreement to Sell prior to sale of the property being registered in favour of the third party. Although, the plaintiff may be correct in interpreting clause 9 of the Agreement to mean that if the transaction is cancelled, the defendants would be liable to refund the amount paid less ₹1 crore, however, the said refund is payable before or on execution of the Sale Deed in favour of the third party. Thus, at best, the plaintiff would be entitled to demand the payment at the time of sale of the suit property to a third party but there is no admission on the part of the defendants that the amount is due and payable to plaintiff prior to the sale of the suit property to a third party.
9. Ms Seth also referred to Section 46 of the Indian Contract Act, 1872 and contended that where time for performance of promise is not specified, the same must be performed within a reasonable time. She submitted that although the defendants may be entitled to defer the payment till the sale of the property to the third party - subject to other claims of the plaintiff - the FAO(OS) 9/2017 Page 12 of 29 defendants cannot delay the refund of the money to the plaintiff indefinitely on the pretext of not finding a third party purchaser or executing a Sale Deed in his favour. In my view, the aforesaid contention also raises serious contentious issues which clearly cannot be considered at this stage. Suffice it is to say that there is no admission on the part of the defendants on the basis of which a decree can be passed.
10. The contentions advanced by Mr. Garg also clearly indicate that the question as to which party is in breach of the Agreement may also be one of the controversies that would be required to be adjudicated in the suit. In this view, this Court is unable to accept that there are clear averments in the Written Statement which warrant a judgment on admissions to be rendered at this stage."
26. The submission of Mr. Malhotra, learned senior counsel representing the appellant is that the dismissal of the aforesaid application was not justified. The learned Single Judge has failed to appreciate that irrespective of the issue as to which party was in breach, the amount paid by the appellant under the agreement was liable to be refunded after deducting, at the highest, an amount of Rs.1 Crore in terms of Clause 9 of the agreement. The learned Single Judge - while holding that the appellant plaintiff was not entitled to demand refund, prior to sale of the property being registered in favour of a third party, failed to appreciate that the said clause could not be construed in an unreasonable manner and the said clause does not give a carte blanche to the respondents to hold the amount refundable to the appellant indefinitely, by not proceeding to sell the property to a third party.
27. Mr. Malhotra submits that when no time is prescribed for the performance of an obligation under an agreement, the time has to be construed as a reasonable period. Mr. Malhotra submits that the learned FAO(OS) 9/2017 Page 13 of 29 Single Judge has failed to appreciate the purport of Section 46 of the Indian Contract Act, 1872, though he has taken notice thereof in the impugned order.
28. Mr. Malhotra has sought to place reliance on Hungerford Investment Trust Limited (In Voluntary Liquidation) Vs. Haridas Mundhra And Others, AIR 1972 SC 1826, to submit that when no time is prescribed for performance of an obligation under the agreement, the obligation has to be performed within a reasonable period. The Supreme Court held in this decision as follows:
"25. It was contended on behalf, of Mundhra that he was always ready and willing to pay the purchase money but since the decree did not specify any time for payment of the money, there was no default on his part. In other words, the contention was that since the decree did not specify a time within which the purchase money should be paid and, since an application for fixing the time was made by the appellant and dismissed by the Court, Mundhra cannot be said to have been in default in not paying the purchase money so that the appellant might apply for rescission of the decree. If a contract does not specify the time for performance, the law will imply that the parties intended that the obligation under the contract should be performed within a reasonable time. Section 46 of the Contract Act provides that where, by a contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time and the question "what is reasonable time" is, in each particular case, a question of fact........." (emphasis supplied)
29. Mr. Malhotra has also placed reliance on Dau Alakhram Vs. Mt. Kulwantin Bai & Another, AIR 1950 Nagpur 238. The Division Bench of the High Court in this decision observed as follows:
FAO(OS) 9/2017 Page 14 of 29"7. The learned Counsel for the Appellant, however, argued that time not being of the essence of the contract his client had not violated any essential term of the contract that on his part remained to be performed. There is no doubt that time was not of the essence of the contract in the sense that the plaintiff ought to have expressed his readiness and willingness within 15 days of the obtaining of the sanction to transfer sir land without reservation of rights of occupancy, and that under Section 46, Contract Act, it could be performed within a reasonable time but that very provision says that it must be performed within a reasonable time. So if there is unnecessary delay on the part of one party it should be open to the other party to put an end to the contract, and that is the law which, however, requires the other party to give him notice before he terminates it. Their Lordships of the Privy Council remarked in Jamshed Khodaram v. Burjorji Dhunjibhai 40 Bom. 289 at p. 299 :
(A.I.R. 1915 P.C. 83).
"But equity will not assist where there has been undue delay on the part of one party to the contract, and the other has given him reasonable notice that he must complete within a definite time."
In that very case their Lordships further remarked at p. 297:
"Their Lordships do not think that this section (Section 55, Contract Act, 1872) lays down any principle which differs from those which obtain under the law of England as regards contracts to sell land."
The law has been summarized by Pollock and Mulla in their Indian Contract and Specific Relief Acts, 7th Edn. (1944) at p. 303 in the following words:
"Either party's general right to have the contract performed within a reasonable time according to the circumstances is of course, unaffected by the FAO(OS) 9/2017 Page 15 of 29 fact of time not being of the essence; and in case of unnecessary delay by one party the other may give him notice fixing a reasonable time after the expiration of which he will treat the contract as at an end; and where there has been inordinate delay on both sides, it may be inferred that the contract has been abandoned, although no such notice has been given.""
30. On the other hand, learned counsel for the respondent No.1 has, firstly, argued that triable issues arise in the suit with regard to the party who was in breach of the agreement to sell. Till those issues are decided, it cannot be concluded that the respondents are liable to refund any amount whatsoever to the appellant.
31. He further submits that under Clause 9 of the agreement, the only right available to the plaintiff is to seek specific performance of agreement to sell. The plaintiff has not sought the said relief in the suit, and consequently, the suit is not maintainable, as framed.
32. He further submits that out of the amount of Rs.15.50 Crores defrayed by the appellant plaintiff, Rs.6.70 Crores have been paid to the Rajanis, and that amount has not been pocketed by the respondents. Thus, no claim can be made in respect of the said amount, in any event of the matter. Moreover, Rs.3.15 Crores was paid to respondent No.1 to be used towards meeting costs for mutation of the said property, and to meet the expenses relating to conversion of leasehold rights to freehold. Thus, learned counsel for the respondent No.1 submits that since the said respondent has not received the aforesaid amounts and not pocketed the same, there is no question of passing a decree on admission in respect of the said amount. He FAO(OS) 9/2017 Page 16 of 29 submits that there is no admission made by respondent No.1 of any liability towards the appellant/ plaintiff. Learned counsel further submits that the right to claim refund of its amount by the appellant/ plaintiff would arise only in the eventuality of the sale of the property in favour of a third party. In this regard, reliance is placed on Clause 9 of the agreement to sell which, inter alia, states that in the event of default on the part of the appellant in payment of the balance consideration of Rs.37.50 Crores within 60 days of the due date, "the transaction shall be cancelled and the sellers would be free to sell the property to any other buyer and on or before getting the sale deed registered from the new buyer. The first Party and Confirming party will refund the amount after deducting a sum of Rs.1,00,00,000 (Rupee one crore) to the Fifth Party."
33. Mr. Nigam, learned senior counsel for the respondent No.2 has also opposed the present appeal and supports the impugned order. He has advanced his submissions on the same lines as learned counsel for the respondent No.1.
34. Mr. Nigam submits that by entering into agreement to sell in question the appellant, in fact, took over the liability of respondent No.1 to pay the balance amount of Rs.27.50 Crores payable by respondent No.1 under its agreement with the respondent No.2.
35. Having heard learned counsel for the parties, perused the record and given our thoughtful consideration to the matter in the light of the decisions relied upon, we are inclined to partially allow the present appeal.
FAO(OS) 9/2017 Page 17 of 2936. The agreement to sell dated 16.02.2012 is not in dispute. It is also not in dispute that under the agreement to sell, the appellant/ plaintiff has indeed paid Rs.6.70 Crores to the Rajanis - which was a part of the total sale consideration and was liable to be adjusted against the agreed sale consideration of Rs.50 Crores. Admittedly, the appellants initially paid Rs. 15 Lakhs to each of the respondents. In addition, they paid Rs.3.15 Crores to respondent No.1 - to be used for meeting the costs for mutation of the said property and the expenses relating to conversion of the leasehold rights to freehold rights of the said property. They have also paid an amount of Rs.2.35 Crores to respondent No.2 for and on behalf of the respondent No.1. Admittedly, a further payment of Rs.1.50 Crores each was made by the appellant/ plaintiff to the two respondents on 20.06.2012.
37. It is also the admitted position that the only clause in the agreement to sell, which provides for forfeiture of any amount is Clause 9 thereof, which entitles the respondents to forfeit, at the highest, an amount of Rs.1 Crore in the event of the transaction being cancelled by the respondents due to non- payment of the balance sale consideration of Rs.37.50 Crores within the stipulated period after the due date. Thus, there can be no doubt that in the worst case scenario for the appellant/ plaintiff, the appellant/ plaintiff would be entitled to refund of Rs.14.50 Crores (Rs.15.50 Crores minus Rs.1 Crore) only.
38. Clause 9 of the agreement to sell has been set out hereinabove. The same has been looked at by the learned Single Judge as well. So far as the right of the appellant/ plaintiff/ purchaser to get refund of the amount "on or FAO(OS) 9/2017 Page 18 of 29 before getting the sale deed registered from the new buyer" is concerned, we may observe the following:
(i) The said clause would come into operation only in the eventuality of the appellant/ plaintiff/ purchaser being in breach of the agreement to sell, and not otherwise.
(ii) The said clause does not state that the refund of the amount, after deducting the sum of Rs.1.00 Crore, would be made at the time of getting the sale deed registered in favour of the new buyer. It uses the expression "on or before getting the sale deed registered from the new buyer".
(iii) The said clause does not stipulate any time limit within which the refund would be made, even if it is subject to deduction of Rs.1 Crore on account of the breach of the agreement to sell being attributable to the appellant/ plaintiff/ purchaser.
39. The respondents cannot, possibly, appropriate the entire amount received by them, or paid on their behalf to the Rajanis under the agreement to sell since there is no clause for forfeiture. At the highest, they may deduct a sum of Rs.1 Crore from the amount expended by the appellant under the agreement to sell and paid either to the respondents, or on their behalf. Even this deduction is subject to the condition that the breach is on the part of the appellant/ plaintiff i.e. it fails to make payment within 60 days after the due date. Thus, the respondents are bound to refund the amount received by them, or paid on their behalf under the agreement, and this is also evident from the e-mail communication of respondent No.1 dated 21.09.2015, FAO(OS) 9/2017 Page 19 of 29 wherein he, inter alia, stated "the present Agreement holder, M/s Shakti Fincap has paid Rs.15.50 Crores to date and accordingly will be refunded this amount, after appropriate deductions as described above". Referring to the two respondents, the said e-mail further states that "The other 2 Stakeholders will get their shares in the same way, making the total cost to the buyer at Rs.48 Crores. I do hope this clarifies the matter". We have already noticed that the deductions spoken of by respondent No.1 are the difference between Rs.50 Crores - the consideration payable by the appellant under the agreement to sell, and Rs.48 Crores - payable by a third party buyer with which the respondents evidently negotiated with.
40. The obligation of the respondents to refund the amount received from the appellant under the agreement to sell (with or without deduction of Rs.1 Crore) is definite, irrespective of whether the breach of the agreement is by the appellant, or by the respondents. The determination of the said issue in favour of the respondents could, at the highest, entitle the respondents to deduct a sum of Rs.1.00 Crore from the amount of Rs. 15.50 crores and no more.
41. Since the said obligation of the respondents to refund the consideration (with or without deduction of Rs. 1.00 crore) is open-ended, in the light of the aforesaid decisions cited by learned senior counsel for the appellant, the said obligation had to be performed within a reasonable time. As to what is a reasonable time would be determined by examining the terms of the contract and by taking into account stipulation as to the time laid down in the contract for performance of other related obligations of one or the other party. The respondents had agreed in Clause 6 to get the FAO(OS) 9/2017 Page 20 of 29 property mutated in the joint names of Mrs. Rekha Sharma, Mrs. Rashmi Sharma and respondent No.2/ the confirming party within 120 days, and also to apply for and obtain within the same period conversion of leasehold into freehold rights from the DDA. Within 30 days of discharge of the said obligation, the appellant was obliged to make payment of the balance consideration of Rs.37.50 Crores.
42. Thus, the time frame within which the parties had agreed to conclude the transaction from beginning till end was about five months. Taking the aforesaid aspects into consideration, we are of the view that when the appellant moved the application under Order XII Rule 6 CPC in the year 2016 (the termination of the agreement having taken place on 05.08.2015), it certainly could not be said that a reasonable period had not expired within which the appellant should have been refunded the amount paid by it, even if the respondents were to make a deduction of Rs.1 Crore since they claim that the breach of the agreement to sell lay at the door of the appellant. The impugned order was passed even thereafter, i.e. on 25.11.2016, and by then, about 1 year, 3 months and 20 days had expired from the termination of the agreement.
43. If the submission of the respondents were to be accepted - that they are not obliged to refund any amount received under the agreement to sell till they find a suitable buyer and get the sale deed registered in favour of the suitable buyer, it would tantamount to saying that the said obligation is indefinite; open-ended and contingent upon the respondents intending to sell the said property; taking effective steps in that direction; finding a suitable buyer, and; actually transferring the property to a third party. These FAO(OS) 9/2017 Page 21 of 29 developments fall entirely in the realm of voluntary actions that the respondents may, or may not, choose to take for years on end. They continue to remain in the actual physical possession of the said property and to enjoy the same. They continue to derive the fruits of the expenditure incurred by the appellant to the tune of Rs.15.50 Crores. They have warded off the claim of the Rajanis by utilizing the amount of Rs. 6.70 crores provided by the appellant. They have got the property converted from leasehold to freehold, and they have also got the conveyance deed executed in favour of respondent No.2, Smt. Rashmi Sharma and Smt. Rekha Sharma. With a view to evade paying the huge amount of Rs.15.50 Crores, or at least Rs.14.50 Crores (even if the appellant is assumed to be in default of agreement to sell), they may well choose never to find a buyer whom they consider to be "suitable", and to execute a registered sale deed in favour of such a buyer. Really speaking, they have nothing to lose. On the other hand, the appellant is out of pocket of Rs.15.50 Crores. The appellant has possession of no part of the said property, and it has no surviving interest or stake in the said property, since the agreement to sell stands terminated.
44. We are conscious of the fact that the defence of the respondents is that the breach of the agreement to sell lay at the door of the appellant. Even if that plea were to be accepted, at the highest, they would be entitled to argue
- at the hearing of the suit, that the plaintiff is not entitled to a decree for refund of Rs.15.50 Crores, but only for an amount of Rs.14.50 Crores. As noticed above, neither of the defendants has claimed a set-off, much less, made a counter-claim. That being the position, their averment that they are FAO(OS) 9/2017 Page 22 of 29 entitled to claim interest on the balance consideration of Rs.37.50 Crores is of no avail.
45. In our view, the learned Single Judge - while passing the impugned order, has failed to notice the aforesaid aspects of the matter and despite the appellant having relied upon Section 46 of the Contract Act which reads:
"Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time. Explanation.--The question "what is a reasonable time" is, in each particular case, a question of fact.", the learned Single Judge has failed to invoke the said provision by observing that the said contention "also raises serious contentious issues which clearly cannot be considered at this stage".
46. The submission of learned counsel for the respondents that under clause 9 of the agreement to sell, the only right available to the appellant was to seek a relief of specific performance of the agreement to sell is completely misplaced. This is for the reason that the relief of specific performance would have been sought by the appellant/ plaintiff/ agreement purchaser, if the appellant intended to enforce the agreement. Clearly that was an option available to the appellant. However, that was not the only course of action open to the appellant and the appellant had the option of terminating the agreement to sell, which it did. That termination was also accepted by the respondents. Thus, the agreement to sell has been put to an end, and there was no question of the appellants seeking specific performance of the agreement to sell. The appellant was entitled to, and has, FAO(OS) 9/2017 Page 23 of 29 in fact, sought to claim refund of the amount paid under the agreement to sell, which it was entitled to, under the same clause 9.
47. The question as to what is a reasonable time in a particular case is a question of fact. Being a question of fact, it has to be determined by the learned Single Judge at the hearing of the suit after the trial. Thus, even though, prima facie, it appears to us that looking to the timelines agreed to between the parties, the reasonable time for refund of the amount paid by the appellant under the agreement to sell may be over, it would not be correct for us to return a definite finding in that regard in these proceedings. We, therefore, refrain from doing so.
48. Even though the appellants application in question is one under Order XII Rule 6 CPC, it did not prevent the learned Single Judge from passing orders - with a view to balance the rights and equities between the parties, inter alia, by invoking Order 39 Rule 10 CPC and in exercise of its inherent power preserved by Section 151 CPC. Section 151 CPC recognizes the inherent power of the Court to pass such orders as it may deem necessary for the ends of justice, and to prevent abuse of the process of the Court.
49. In Brig. S. S. Puri (AVSM) (Retd.) v. R. Chander Shekar, 53 (1994) DLT 186, this court considered a similar claim of the landlord against the tenant. This court in para 13 of this decision observed as follows:
"13. The combined effect of Order 12 Rule I and Order 39 Rule 10 of the Code of Civil Procedure is that a Court can, in a case of this kind, in fair exercise of its judicial discretion order for deposit of money pending decision of a suit. Surely, the provisions of Section 151 of the Code of Civil procedure can be FAO(OS) 9/2017 Page 24 of 29 invited in aid to cover all such cases as are analogous to these principles. This being the position, invocation of Section 151 in the present case would neither be in conflict with what has been expressly provided in the Code nor against the intention of the legislature".
50. We may also take notice of a decision of this Court in Sanjay Gupta v. Cottage Industries Exposition Ltd, 2008 (102) DRJ 234 rendered by one of us (Vipin Sanghi, J.). This was a case where the plaintiff-landlord had filed the suit against the defendant-tenant for ejectment from the tenanted premises, and had also raised a claim for damages and mesne profits for the continued use and occupation of the premises by the defendant-tenant after the termination of the lease. The plaintiff moved several applications under Order 39 Rule 10 CPC to require the defendant to pay the outstanding rent/ damages/ occupation charges. The said applications were opposed by the defendant tenant. The primary contention of the defendant-tenant was that the purpose of the lease was for commercial and office use. The plaintiff had obstructed and prohibited the defendant from using the premises for the said purpose and, consequently, the defendant entitled to suspend the payment of rent/ occupation charges.
51. This Court rejected the said defence of the defendant and held that the defendant was not entitled to suspend the payment of rent/ damages. The plaintiff had made a claim towards maintenance charges @ Rs.1.36 lakhs per month. That claim of the plaintiff was not allowed under Order 39 Rule 10 CPC on the premise that it was for the plaintiff to establish whether he had rendered services for which maintenance charges were claimed under FAO(OS) 9/2017 Page 25 of 29 the agreement. It was held that at the pre-trial stage, the court would not require the defendant to pay, or deposit in Court, the amount claimed by the plaintiff towards maintenance charges @ Rs.1.36 lakhs per month. This court, thereafter, proceeded to consider the plaintiffs claim towards the outstanding rent/ damages/ occupation charges. The discussion in relation to the said claim under Order 39 Rule 10 CPC is relevant and the same reads as follows:
"37. Now I come to the defendant's argument that no relief can be granted under Order 39 Rule 10 CPC since there is no admission by the defendant that he holds any money as a trustee for the plaintiff, or that it belongs to the plaintiff.
38. Order 39 Rule 10 of the CPC reads as follows:
10. Deposit of money etc. in Court. - Where the subject-matter of a suit is money or some other thing capable of delivery and any party thereto admits that he holds such money or other thing as a trustee for another party, or that it belongs or is due to another party, the Court may order the same to be deposited in Court or delivered to such last-named party, with or without security, subject to further direction of the Court.
39. In a landlord tenant dispute where their relationship is admitted, the obligation of the tenant to pay rent for the tenanted premises during the period that the tenant is in occupation of the premises cannot be disputed. Inherent in this admission is embedded an obligation to pay the rent/occupation charges, because the admission of the said relationship excludes a claim based on any other title to the property. The relationship between a landlord and a tenant is one where the tenant agrees to pay the rent/occupation charges in consideration for the right granted to him by the landlord to use and occupy the premises. Therefore, he cannot, while being in use or occupancy of the premises, not pay the rent/occupation charges therefor. However, the tenant may set FAO(OS) 9/2017 Page 26 of 29 up defences to justify suspension of his obligation to make payment of rent, of the kind raised in the present case. Once those defences have been been considered and rejected by the court, it necessarily follows that the obligation of the tenant to pay the rent is established and the tenant holds the money due on account of rent on behalf of landlord. In Sangeeta Prints v.
Hemal Prints and Ors., AIR1986 Bombay 423 the Bombay High Court relied upon its earlier Division Bench Judgment in the case of Chandrakant Shankarrao Deshmukh v. Haribhau Tukaramji Kathane, 1983 Mah.LJ 88 to hold that in case of a landlord and a tenant, the tenant cannot dispute his liability to pay rent to the landlord although the quantum of such rent may be in dispute. The tenant, in fact, is deemed to admit some money is due to the plaintiff. In such situation the court can direct the tenant to deposit such amount as the court may deem fit under Order XXXIX Rule 10 CPC.
40. Also, in Surjit Singh v. H.N. Pahilaj,65 (1997)DLT22 this Court while considering the object of Order 12 Rule 6 CPC, held that relief under the said provision was also available where liability to pay is not denied but being avoided on untenable pleas. The power in such cases could also be exercised under Order XXXIX Rule 10 CPC. The court held that under Section 151 every court is constituted for the purpose of doing justice according to law and must be deemed to possess, as a necessary corollary and as inherent in its very constitution, all such powers as may be necessary to do the right and to undo a wrong in the course of the administration of justice. In appropriate cases the Court can exercise powers under Section 151 CPC where Order 12 Rule 6 or Order 39 Rule 10 CPC may not be applicable for the purpose of doing justice or to prevent abuse of the process of the court. (emphasis supplied)
52. The situation in the present case is somewhat similar inasmuch, as, the agreement to sell between the parties is admitted; the fact that the appellant has paid Rs.15.50 crores to, or on account of the defendants, is FAO(OS) 9/2017 Page 27 of 29 admitted, and; the obligation of the respondents to refund the said amount at least to the extent of Rs.14.50 crores is undeniable - even if the breach of the agreement to sell lay at door of the appellant. In so far as the aspect of refund of the amount of Rs.14.50 crores is concerned, the only aspect that needs adjudication is the aspect of "reasonable time", which, prima facie, has already expired.
53. The power of the Court to grant a smaller relief than the one claimed by the plaintiff is preserved. In Rajendra Tiwary v. Basudeo Prasad & Anr., AIR 2002 SC 136, the Supreme Court observed:
"14. Where the relief prayed for in the suit is a larger relief and if no case is made out for granting the same but the facts, as established, justify granting of a smaller relief. Order VII, Rule 7 permits granting of such a relief to the parties. However, under the said provisions a relief larger than the one claimed by the plaintiff in the suit cannot be granted."
54. In our view, the present was a fit case for invocation of the said power by the learned Single Judge, keeping in view the facts & circumstances we have taken note of hereinabove. The learned Single Judge should, therefore, have directed the respondents to deposit in the Court the amount of Rs.14.50 Crores, assuming for the present in favour of the respondents/ defendants, that they would succeed in their defence that the breach of the agreement to sell was on the part of the appellant, in which case they would be entitled to appropriate, at the highest, an amount of Rs.1 Crore in terms of clause 9 of the agreement.
FAO(OS) 9/2017 Page 28 of 2955. In view of the aforesaid discussion, we partially allow the present appeal. We direct respondent no.1 to deposit an amount of Rs.8.55 crores and we also direct respondent no.2 to deposit Rs.5.95 crores in this court within two months from today. The amounts so deposited shall be placed in a fixed deposit in the name of Registrar General and the disbursal of the said amounts shall abide by the orders that the learned Single Judge may pass in the suit.
56. The appeal stands disposed of in the aforesaid terms.
(VIPIN SANGHI) JUDGE (A. K. CHAWLA) JUDGE JULY 01, 2019 FAO(OS) 9/2017 Page 29 of 29