Delhi High Court
Sarawjeet Singh vs Saraswati Builders And Ors. on 21 December, 2001
JUDGMENT V.S. Aggarwal, J.
1. By this common judgment, the following three suits can conveniently be disposed of together.
1. Suit No. 2210/97 Mrs. Sarawajeet Singh ... Plaintiff.
v.
M/s. Saraswati Builders and Ors. ... Defendants.
2. Suit No. 2211/97 Mr. M. Jha ... Plaintiff.
v.
M/s. Saraswati Builders and Ors. ... Defendants.
3. Suit No. 2212/97 Mrs. Sushila Devi Jha ... Plaintiff.
v.
M/s. Saraswati Builders and Ors. ... Defendants.
All the three suits had been consolidated by this Court vide order passed on 18.9.1998. Since the question involved are identical, for sake of convenience the same are being mentioned from Suit No. 2211/97.
2. The plaintiff N. Jha had filed the suit seeking a declaration, declaring the agreement to sell dated 13.1.1997, to be null and void and for recovery of Rs. 15,61,570/- besides pendente lite interest at the rate of 24% p.a. Rs. 5,50,000/- are claimed as damages suffered by the plaintiff by keeping blocked the amount of the plaintiff of Rs. 27.00 lakhs to honour its obligation under the agreement to sell dated 13.1.1997.
3. The facts alleged in the plaint are that defendant (M/s. Saraswati Builders) is a partnership firm and Mrs. Neena Seth represents herself to be the one of the partners. The defendant is a contractor and builder carrying on the business of construction of buildings. In January 1997, the defendant, through its partner approached the plaintiff and made certain representations and gave assurances which were later on found to be false and deceitful. The defendant represented to the plaintiff that under Collaboration Agreement dated 15.6.1996 entered with one M/s. Teprim Overseas Pvt. Ltd., it has constructed a building over Plot No. C-462, defense Colony, New Delhi. The defendant further represented that by virtue of and under the said collaboration agreement, the defendant was competent and entitled to enter into agreement to sell and deliver possession of the first floor of the property. It was represented further that by virtue of General Power of Attorney dated 20.6.1996, executed by one Pradeep Bakshi, a constituted attorney of the recorded owner Mr. H.B. Datar, in favor of Mrs. Neena Seth, the defendant would be able to execute a sale deed. It was told that the right of defendant to sell and deliver possession was unfettered and unrestricted. Relying on the said assurance given and the representation made, the plaintiff entered into an agreement of sale. Vide the agreement of sale, the defendant agreed to sell and plaintiff agreed to purchase portion of the first floor of the building, comprising of drawing/dining room, one servant quarter with common bath/WC. The total sale consideration was Rs. 41.00 lakhs. Out of the said sale consideration, the plaintiff made part payment of a sum of Rs. 14.00 lakhs. It was acknowledged by the defendant.
4. At the time of making the said representation by the defendant, it is contended that the defendant concealed the material defects in the suit property. It was not disclosed by the defendant that in Suit No. 1969 of 1996, entitled Dr. Mrs. Kiran Datar versus H.B. Datar, this court had restrained M/s. Teprim Overseas Private Limited and Mr. H.B. Datar to sell the property. In other words, it is claimed that the defendant, on the date of entering into agreement of sale, was not entitled to enter into any such agreement. Defendant was under a legal obligation to disclose the said material embargo to deal with the property. But the defendant intentionally, in order to defraud and induce the plaintiff suppressed these facts. The plaintiff had entered into the agreement believing the defendant that the property was free from all encumbrances including injunction orders.
5. It is further pleaded that as per the agreement of sale dated 13.1.1997 the defendant was liable to finish the entire construction of the suit property with complete facilities for the beneficial enjoyment of the said property by 15.3.1997 and hand over the possession thereof to the plaintiff on the said date. The defendant had failed to finish construction on the said property by the stipulated date and failed to hand over the possession to the plaintiff. In fact, it is claimed that defendant, contrary to its representation, constructed another floor above the terrace of the second floor of the building. In July 1997, when the plaintiff visited the suit property with a view to inspect the same, he was told by the neighbours about the injunction order in Suit No. 1969/96, referred to above. On gaining knowledge by the said litigation, the plaintiff made further inquiries. It was learnt that one Mrs. Kiran Datar, her son and daughter had instituted a suit against Shri H.B. Datar in which M/s. Teprim Overseas had also been arrayed as defendant. The plaintiff learnt that this court had passed restraint order against the defendants in that suit. The defendant claimed its right and title through M/s. Teprim Overseas Pvt. Ltd. and Shri H.B. Datar on basis of the collaboration agreement and power of attorney, referred to above. The plaintiff confronted the defendant with respect to the said injunction order. A joint meeting was held between the representatives of the parties. Defendant, thereupon, had agreed to relieve the parties of their respective obligations under the agreement dated 13.1.1997. Contending that the amount, as such, has not been paid and that the agreement of sale had been entered into on basis of the deceit practiced, the plaintiff has filed the present suit with respect to the reliefs mentioned above. It is also claimed that the plaintiff has suffered a loss of Rs. 5,50,000/- and to that effect damages are being claimed.
6. In the written statement filed, the defendant M/s Saraswati Builders contested the suit. Preliminary objection has been taken that plaint does not disclose any cause of action. It is denied that the agreement of sale dated 13th January, 1997 is invalid. The value of the immovable property since the execution of the agreement of sale has gone down, as a result the plaintiff has rescind from the agreement and is trying to find fault with the title of the defendant.
7. On merits of the matter it was admitted that defendant is a partnership concern with Mrs. Neena Seth as one of the partners. It is denied that Mrs. Neena Seth had approached the plaintiff or gave a wrong assurance which was false. As per the defendant the true facts are that Ltd. A.K. Luthra had purchased the lease hold rights in perpetuity with respect to plot No. 462, Block C, defense Colony from the President of India vide a perpetual lease deed. Shri Luthra had constructed a building over the said plot comprising of ground floor, mezzanine floor and the first floor. He had mortgaged the property. The loan was repaid. Shri Luthra vide registered sale deed of 3rd July, 1993 sold the lease hold rights to H.R. Datar. H.R. Datar entered into an agreement of sale dated 18th December, 1995 and a supplementary agreement of sale dated 15th May, 1996 with Teprim Overseas Pvt. Ltd. and had received the entire sale consideration. In part performance of the agreement of sale he delivered possession of the property to M/s Teprim Overseas Pvt. Ltd. H.R. Datar in consideration of the agreement and the supplementary agreement of sale executed the registered irrevocable General Power of Attorney dated 15th May, 1996 if favor of Pradeep Bakshi. A collaboration agreement of 15th June, 1996 was executed between Teprim Overseas Pvt. Ltd. and and H.R. Datar and M/s. Saraswati Builders (the defendant). The defendant/builder after demolishing existing structure had undertaken to raise the construction over the plot. The defendant paid Rs. 45 lakhs to Teprim Overseas Pvt. Ltd. Since the entire consideration was paid Pradeep Bakshi as General Attorney and the recorded owner of H.R. Datar executed an irrevocable Power of Attorney in favor of Mrs. Neena Seth, partner of the defendant. The defendant by their own funds raised construction over the said plot. It is contended that defendant had a clear title and were entitled to the first floor and the servants quarter on the terrace. The defendant claimed that they are bona fide transferor for valuable consideration.
8. It has further been pleaded that plaintiff had approached the defendant and offered to purchase the first floor and the servant quarter for a consideration of Rs. 1 crore and 21 lakhs. Thereof were three agreement of sales of Rs. 40 lakhs, the other for Rs. 40 lakhs and one for Rs. 41 lakhs executed. One sale deed in his name, one in the name of Mrs. Sushila Devi Jha and the name of Mrs. Sravjeet Singh. The plaintiff is stated to be in real estate business and had been purchasing plots and properties. After being satisfied about title of the defendant an agreement of sale dated 13th January, 1997 was executed by the defendant in favor of each plaintiff. According to which defendant agreed to sell portion of the first floor comprising of one bedroom with attached bath room at the rear portion, one kitchen with proportionate parking space, all fittings and fixtures etc. Out of the total sale consideration the first Installment was agreed to be Rs. 8 lakhs, second of Rs. 12 lakhs and third of Rs. 10 lakhs and 4th Installment of Rs. 10 lakhs.
9. It is asserted that plaintiff had no arrangement to make the payment of the balance Installments. The property was ready for delivery of possession. The plaintiff did not have the arrangement for making the payments besides that prices of the immoveable property had fallen, thus the plaintiff is finding faults with the defendants. As regards the injunction order the defendants claim is that it was not a party to that suit. There is no injunction against the defendant in the said suit. Even Teprim Overseas Pvt. Ltd. or H.R. Datar did not inform the defendant about the pendency of such a suit. It is further alleged that even prior to the grant of ad interim injunction dated 21st August, 1996 against H.R. Datar or M/s Teprim overseas Pvt. Ltd. had made payments of the entire sale consideration to Shri Datar.
10. In this process it is denied that defendant had made any false representations or that the title was defective. The plaintiff is stated to have in July 1997 informed about the injunction order to the defendant but it is insisted that defendant was not a party to any such suit. In these circumstances the assertions of the plaintiff to the contrary have been denied. It is insisted that since the plaintiff did not have the funds and default has been committed by the plaintiff the earnest money so paid had been forfeited and plaintiff is not entitled to any such refund. It has also been pleaded that building was ready for delivery but plaintiff did not have the necessary funds.
11. In the replication filed the plaintiff by and large reiterated the pleas of the plaint. It was reiterated that agreement of sale dated 13th January, 1997 is valid and binding between the parties. The agreement dated 13th January, 1997 was stated to be void and vitiated due to deciet and fraud purported to have been palyed by the defendant in inducing the plaintiff to enter the said agreement. There is stated to be active concealment and suppression of material facts regarding operation of injunction order upon the property which was agreed to be sold. In the alternative it was asserted that in case the defendants case is taken to be correct regarding having no knowledge of injunction order in that event the agreement is vitiated and void due to mistake of the parties. It was denied that since the value of the immovable property since the execution of the agreement of 13th January, 1997 had gone down as such the plaintiff had resoled from the agreement and is trying to find fault with the title of the defendant.
12. It was further pleaded that plaintiff at all times was ready and willing to perform his part of the contract. The defendant was to complete the construction of the property agreed to be sold by 15th March, 1997. Despite plaintiffs repeated reminders the defendant neither completed the construction nor came forward for joint inspection to verify the claim of having allegedly completed the construction. On the other hand, the defendant is concealing material facts as to the operation of the injunction order on the property agreed to be sold illegally collected the consideration that had been paid. It was insisted that when the attention of the defendant was drawn to this fact a joint meeting was held on 12th July, 1997 in presence of the parties counsel and their representative and that the plaintiff had agreed to give time to the defendant to arrange for money for refund and not to seek any interest in the event of payment by 5.8.97. In case of delay of refund beyond 5.8.97 the defendant was to pay interest at the rate of 24% p.a. It was denied that the money paid was an earnest money. It was denied further that the defendant was entitled to forfeit the money paid by the plaintiff because as per agreement M/s Teprim Overseas Pvt. Ltd. was also a party. The defendant was liable to complete the construction and hand over possession of the property. The defendant had failed to complete the construction within time. At the time of entering into agreement the defendant had not become entitled in his own right to the immovable property. The defendant was claiming its rights to enter into an agreement under and through the collaborator M/s Teprim Overseas Pvt. Ltd. under the collaborationa greemtn dated 15.6.96. Under the said agreement of 15.6.96 defendatn would have become entitled to the immovable property only on discahring of the obligations regarding payment of monetary consideration and completion of building etc. On these counts it was insisted that the plaintiff was entitled to the claim.
13. From the pleadings of the parties, this court on 18th September, 1998 had framed the following issues:
1(a) Whether the agreement to sell dated 13th January, 1997 is illegal and void for the reasons stated in the plaint?
(b) Whether the defendant while entering into the said agreement of sale concealed the defects int he suit property and induced the plaintiff to enter into the agreement?
2(a) Whether the parties agreed to rescind the agreement to sell dated 13th January, 1997 in a meeting held on 12th July, 1997? If so;
(b) Whether the defendant agreed to refund the advance amount on the said score?
3. What amount, if any, is the plaintiff entitled to recover from the defendant by way of damages?
4. Whether the plaintiff is entitled to interest? If so, at what rate and to what amount?
5. Whether the defendant came to know with regard to the injunction order from the plaintiff in July, 1997? If so, its effect?
6. Whether the property in suit was ready for delivery in March, 1997 and the plaintiff had no arrangement to make the balance payment of Rs. 31 lakhs? If so, its effect.
7. Whether the plaintiff committed the breach of agreement dated 13th January, 1997 in not making the payment of the balance Installments? If so, its effect?
8. Whether the plaintiff paid to the defendant a sum of Rs. 14 lakhs or Rs. 13 lakhs in part payment of the sale consideration?
14. Issues 1(a), 1(b), 5, 6 and 7 : All these issues are inter connected and can conveniently be taken up together because impact of one issue and decision thereon will have its direct impact on the other.
15. In support of the said issues plaintiff had examined Girdhari Singh from the office of the Sub Registrar, PW1 who stated that the power of attorney copy of which is Ex. PW1/1 had been duly registered. It is purported to have been executed by one Hanumant Rao. One Alok Sharma from the office of the Registrar of this court had been examined as PW2 but he stated that there is a civil suit pending No. S 1969/96 'Dr. Mrs. Kiran Dattar v. H.B. Dattar'. It was found that order of 21st August, 1996 was not on the record. Therefore, the said witness had been discharged. The plaintiff appeared as PW3 and supported his case and his evidence has to be discussed as and when the occasion would arise. The last witness examined was Rajiv Jain, PW4 who is stated to be a property broker. The witness stated that he had shown the said property to the plaintiff. He had never told the plaintiff that there was any temporary injunction granted by this court vis-a-vis the property in question. However, on 12th September, 1997 he is purported to have accompanied the plaintiff in the meeting held in the house of Shri Sanghi, advocate. It was discussed and the defendant Mrs. Neena Seth is stated to have told that she was not aware of the injunction order. She wanted 10/15 days to get the stay vacated or the money would be refunded. During cross-examination he added that on behalf of the defendant it was stated that within 10/15 days injunction would be vacated and plaintiff could purchase the property.
16. As against the said evidence the defendant Mrs. Neena Seth appeared as DW1 to support her pleas in the written statement and further examined Jai Kishan DW2. He too is a property dealer. The witness stated that he knows Saraswati Builders and Mrs. Neena Seth. He had introduced the plaintiff to the defendant through Shri Rajiv Jain. The sale consideration had been entitled. Then witness stated as to how the Installments had to be paid. The payment of 2nd and 3rd Installments has not been made on behalf of the plaintiff since some finishing work was left. According to him the finishing work had been completed by end of February, 1997. It was in June 1997 that broker of the plaintiffs told that there is some injunction order passed by the court but no such order had been shown. A meeting was held in the house of Shri Sanghi, Advocate. Shri Sanghi advised that there is no doubt about the title of the first floor of the property and one could go ahead with the sale. During cross-examination he added that meeting in the house of Shri Sanghi was held because the plaintiff had said there was some property dispute pertaining to the first floor in question. He had mentioned about an injunction order of the court. The witness stated towards the end of June 1997 he had come to know that there was a stay order issued with respect to the house in question in which defendant was not a party. He had told this fact to the defendant some time in middle of July 1997. He denied that in the house of Shri Sanghi, advocate defendant had assured that either injunction would be vacated or she will refund the money.
17. On basis of these pleadings of the parties and the controversy the first question that comes up for consideration is as to whether the defendant had the title to the property to enter into the agreement of sale. During the course of argument certain facts which were not disputed can conveniently be re-listed. One Ltd. Col. A.K. Luthra is purported to have purchased the lease hold rights with respect to the plot in question measuring 325 sq. yds, defense Colony, New Delhi. A perpetual lease had been executed. Shri Luthra had constructed a building over the plot and had mortgaged the same with the President for a consideration of Rs. 16800/-. Shri Luthra sold the lease hold rights and super structures to one Hanumant Rao Dattar. The said H.R. Dattar entered into an agreement of sale of 18th December, 1995 with a supplementary agreement of sale on 15th May, 1996 with Teprim Overseas Pvt. Ltd. He delivered the possession of the premises in part performance of the contract. He also executed an irrevocable general power of attorney in favor of one Pradeep Bakshi. The collaboration agreement of 15th July, 1996 was executed between M/s Teprim Overseas Pvt. Ltd. and H. R. Dattar through his attorney Pradeep Bakshi and M/s Saraswati Builders (of which defendant is a partner). The defendant firm after demolishing the existing structure undertook to raise the construction since the entire sale consideration is stated to have been paid. It is on basis of these facts that it was urged at the bar that the defendant did not have a clear title to the property therefore it could not enter into an agreement of sale. On the contrary, it was vehemently pointed that the defendant had paid the sale consideration and irrevocable powers of attorney executed were with interest and therefore could not be cancelled and consequently the defendant could enter into the agreement of sale.
18. A Division Bench of this court in the case of Harbans Singh v. Shati Devi 1977 RLR 487 had considered the similar question. The main question for consideration before the court was whether the general power of attorney or special power of attorney which had been executed in favor of one Shri Gulati was cancelled validly by a notice or not. This court held that if a person owning a property executes an agreement of sale and executes an irrevocable general power of attorney in respect of the same property in favor of her husband then he cannot cancel or revoke the power of attorney an account of interest or right created in the subject-matter so as to prejudice the said interest. The court had observed and held:-
.....But in the context of the Contract Act, it cannot be said that a persons who is the beneficiary of an agreement of sale has no right or interest in the subject-matter of the same. He has a legally enforceable right and interest in enforcing the contract of sale by the execution of a sale deed and in getting possession of the property agreed to be sold under the provisions of the Specific Relief Act. In the English Common Law, the specific performance of contracts was a part of the law of contract. This is why Chapter IV of the Contract Act, deals with the performance of contracts which includes the performance of Contracts relating to immovable property also. In fact, Section 4 of the Transfer of Property Act says that the Chapters and sections of that Act which relate to Contracts shall be taken as part of the Indian Contract Act, 1872. Therefore, the respondent in whose favor the appellant had executed an agreement for sale of an immovable property had an interest in the subject-matter of the contract namely, the shop, for the purposes of Section 202 of the Contract Act if not for the purposes of the Transfer of Property and the Registration Act.
19. The same principle had been followed by this court again in the case of Prem Raj v. Babu Ram 1991 RLR 458. It was held that if an agent on basis of power of attorney is appointed for consideration then ordinarily the power of attorney cannot be revoked or cancelled. Same view prevailed with this court in the case of Kuldip Singh Suri v. Surinder Singh Kalra and Anr. . This court had against referred to Section 202 of the Contract Act and held that when power of attorney was executed in favor of a person only to facilitate execution of the sale deed then Section 202 interdicts termination of the agency where an agent has an interest in the subject-matter. The court had taken note of the fact that large number of such transactions are taking place. Lastly at this stage it would be advantageous even to take note of the fact that this fact was known to the plaintiff that a general power of attorney had been executed. This is apparent from the agreement of sale Ex. P1. The tri-partite agreement was between the plaintiff, defendant and Tarim Overseas Pvt. Ltd. Consequently the plaintiff indeed cannot make an issue out of this fact and in any case since it was an irrevocable general power of attorney which fact had not been disputed it must follow therefore that the defendant though could not pass the title of the property but could pass the rights that were available with the defendant or to the defendant. When the facts to that extent were clear indeed on that count it cannot be said that the agreement of sale in this regard could not be executed or would be not valid. The argument so much thought of on behalf of the plaintiff must fail.
20. As already pointed above the main controversy herein had been as to if there was any injunction order with respect to the property in dispute when the agreement of sale was entered into between the parties. The plaintiff had appeared as PW3 to state that when he entered into the agreement he had never been informed that there is any stay granted by the court with respect to this property at that time. In July 1997 while he was standing one Inderbir Singh Alag came from the next property, he informed the counsel of the plaintiff that there is a stay order passed by this court and that the plaintiff was in a difficult situation. Thereupon he informed the plaintiff that Delhi High Court has passed the said order pertaining to sale and alienation. He had immediately contacted Mrs. Neena Seth around 9th July, 1997. He was seeking a meeting with all concerned and the meeting was arranged in the house of Shri Sanghi, Advocate. They met in the house of Shri Sanghi, Advocate at that time his counsel Dharmesh Mishra, his broker Rajiv Jain were also present. The defendant Mrs. Neena Seth had told that she will get the stay vacated within 15 days or would refund the money with interest. During cross-examination the witness added that he had not seen the order passed by the Delhi High Court but his counsel had seen it. he admitted that he has seen the irrevocable power of attorney executed by H.R. Dattar in favor of Pradeep Bakshi. He denied that in July 1997 Mrs. Neena Seth had told him that she was not aware of any temporary injunction granted by this court as she was not a party to any litigation. He denied that it was only through him that Mrs. Neena Seth came to know of the temporary injunction against Teprim Overseas Pvt. Ltd.
21. As against this evidence Mrs. Neena Seth added that no suit had been filed against M/s Saraswati Builders for temporary or permanent injunction. There was no suit filed against her. She had no knowledge if against Teprim Overseas Pvt. Ltd. any civil suit had been filed for injunction. She stated that the plaintiff had sought the opinion of Shri Sanghi, Advocate and was advised that if he had been in place she would not have gone ahead with the contract. Thereupon one more weeks time was given to the plaintiff for making the payment of the balance amount. She stated that she had signed the agreement on behalf of Saraswati Builders and on behalf of Teprim Overseas Pvt. Ltd.
22. On the strength of this witness the learned counsel for the defendant contended that no copy of the injunction order has been produced. There is no injunction order on the record and the defendant was not aware of any such injunction order purported to have been passed by this court. While the plaintiff's plea was that defendant No. 1 admitted this fact in the pleadings that such an injunction order existed.
23. The position int his regard with respect to the pleadings of the parties is not subject of much controversy. In terms of Order 8 of the Code of Civil Procedure the pleadings have to be clear and specific. Reference in this connection can be made to the decision of the Supreme Court in the case of Badat and Co. v. East India Trading Co. .
The Supreme Court held that written statement must deal specifically with each allegation of fact in the plaint and even if it has to be denied it should not be denied evasively. If the denial is not specific then it can well be taken to be an admission. The precise findings of the Supreme Court in this regard are:-
".....The written statement must deal specifically with each allegation of fact in the plaint and when a defendant denies any such fact, he must not do so evasively, but answer the point of substance. If his denial of a fact specific but evasive, the said fact shall be taken to be admitted. In such an event the admission itself being proof, no other proof is necessary....."
24. This court had also int he decision rendered in the case of M/s Thompson Press (India) Ltd. v.
M/s. Megh & Co. and Ors. concluded that when there was no specific denial on the pleadings and reading of the written statement as a whole reveals that the fact contended in the plaint have not been denied, it can well be taken to be an admission.
25. In other words, the obvious conclusion is that each paragraph of the plaint has to be specifically denied in the written statement. The denial has to be specific and unambiguous. If its is evasive the court would be within its powers to take it that there is no specific denial and it an will be taken to be an admission.
26. With this backdrop one can revert back to the pleadings of the parties. Repeatedly the defendant has been stating that she was not a party to any such civil suit but in paragraph 2 of the written statement it had been averred:
.....It is also wrong to allege that there was any defect in the suit property or in the title of the defendant, as alleged. The defendant was not a party in suit No. 1969 titled Dr. (Mrs.) Kiran B. Dattar and Ors. v. H.B. Dattar and Ors. There was no injunction against the defendant in the said suit. Even Teprim Overseas Pvt. Ltd. or Shri Hanumant Rao Dattar or any other person did not inform the defendant, about the pendency of the said suit and the alleged ad-interim injunction against Mr. Hanumant Rao Dattar or M/s. Teprim Overseas Pvt. Ltd. It is submitted that prior to the grant of the ad-interim injunction dated 21st August, 1996, against H.B. Dattar or M/s. Teprim Overseas Pvt. Ltd. M/s. Teprim Overseas Pvt. Ltd. had made payment of the entire sale consideration to Hanumant Rao Dattar. M/s. Teprim Overseas Pvt. Ltd. have transferred their right in the property in suit, by entering into a Collaboration Agreement dated 15-6-1996 and had received the entire consideration. The defendant was not a party to the suit for injunction filed by D. (Mrs.) Kiran B. Dattar and the defendant has no knowledge of the same.
27. Similar allegations find a place in paragraph 9 which is also being reproduce for the sake of facility:
".....No body informed to the replying defendant when the building was under
construction, about the injunction order against M/s. Teprim Overseas Pvt. Ltd. or against Hanumant Rao Dattar. The plaintiff for the first time in July 1997 informed about the injunction order against Shri H.B. Dattar and M/s Teprim Overseas Pvt. Ltd. They have already transferred their right in respect of the property in favor of the defendant for a valuable consideration."
28. In paragraph 12 the defendant again pleaded that she had no knowledge about suit filed by D. Mrs. Kiran Dattar against H.B. Dattar and Taprim Overseas Pvt. Ltd. It was for the first time that defendant learnt from plaintiff in July 1997 about the injunction order to which the defendant is not a party. Similar allegation almost identically worded is in paragraph 16 of the written statement that defendant was not a party to the injunction suit filed by D. Mrs. Kiran Dattar against H.B. Dattar and Tapirm Overseas Pvt. Ltd. and that defendant has no knowledge of such a suit.
29. Though the learned counsel for the defendant read the few paragraphs reproduced above and similar other paragraphs of the written statement so as to urge that the defendant has never admitted in the written statement about the knowledge of the injunction order passed by this court, still as to what is being argued vehemently in keeping in view the plain language of the written statement does not prompt one to accept it. Reading of the written statement reveals that though knowledge of the injunction order is denied the factum is admitted. There is no specific denial about such an injunction order having been issued. It is unfortunate that when the witness was called to appear from the registry of this court he could not reveal about the injunction order because that page was missing. It is directed that necessary steps should be taken to reconstruct the same in this regard. But the fact that an injunction order had been issued is not only admitted in the written statement but it is also apparent from the statement of defendants witnesses Jai Kishan, DW2 who during the cross examination stated "towards the end of June 1997 I had come to know that there was a stay order issued in respect of C-462, defense Colony, New Delhi in which Mrs. Neena Seth was not a party". He added that he had told this fact to the defendant. In other words, the defendant at the relevant time had come to know of this fact at least in July 1997. There are other factors which prompt the court to come to such a conclusion. It is in the statement of the plaintiff as well as of the defendant that the plaintiff had protested to the defendant about the injunction order having been passed. Thereafter when the counsels of the parties, their property brokers and the parties there was meeting in the house of Shri Sanghi, Advocate and it is not in dispute that Shri Sanghi had advised that there is no injunction order against the defendant Mrs. Neena Seth. The impact thereto is clear that admittedly there is an injunction order because thereafter came the advise of the advocate in whose house they had met. Otherwise if there was no injunction order the question of holding a meeting in this regard did not arise. Ultimately the advise of the counsel also clearly show that the injunction order in fact was there in which Taprim Overseas Pvt. Ltd. was a party. It is admitted by the defendant during the statement that she was an authorised agent and could sign on behalf of Taprim Overseas Pvt. Ltd. In other words, the conclusions are unescapable that injunction order issued was to the knowledge of the defendant and that even if in the facts of the present case, the copy of the same has not been produced. The passing of the order is obvious that the parties in that suit had been injuncted and the civil suit was with respect to the property in question.
30. Ex. P1 is an admitted document and is the agreement of sale. It was executed between the defendant and Taprim Overseas Pvt. Ltd. The defendant Mrs. Neena Seth had signed on behalf of Taprim Overseas Pvt. Ltd. besides for M/s Saraswati Builders. She described herself as the General Power of Attorney of Taprim Overseas Pvt. Ltd. Paragraphs 5 and 6 of the said agreement reads:-
5. That it is agreed between the parties that the seller shall hand over to the purchaser peaceful vacant possession of the said portion/property on 15/03/97 in complete finished condition i.e. to say with all the furnishings attached, complete with marble flooring, complete wood work, complete electric fittings with complete load and separate electric meter for first floor, water connection with separate meter for first floor, geysers, fans, wall completely plastered with Plaster of Paris, Bathrooms fitted with tiles and flooring, lift along with proportionate undivided and indivisible rights, interest, liens and titles in the land beneath the said property and also to the right of usage of common passages, lift, services & easements, and shall also handover the photocopies of all the original title documents, deeds, agreements and agree to produce and/or cause to be produced originals as and when requested to be produced by the purchaser by giving a 2 days notice in writing.
6. That the seller has assured the purchaser that the seller has unfettered and unrestricted right and also the consent to sell the said portion/property, and excepting the seller nonelse has any rights, title, claim or interest of any nature whatsoever in the said portion/property. The said portion/property hereby sold is free from all sorts of encumbrances such as mortgage, gift, loan, lien, lease, security, surety, acquisition, injunctions, income tax/wealth tax attachments and/or any other registered or unregistered encumbrances of any nature whatsoever and the seller undertakes to keep the purchaser harmless if it is ever proved otherwise and shall indemnify the losses, that may be suffered, incurred and/or sustained by the purchaser as a result thereof. Relying upon the said representations, assurance made and undertaking given by the seller the purchaser has agreed to purchase the said portion/property.
31. It is abundantly clear from the agreement of sale that Mrs. Neena Seth had assured the plaintiff besides other things that property is free from all injunctions. As already held above in fact there was an injunction order that had been issued with respect to the property. Thus what was stated and conveyed through the agreement of sale can well be taken to be not a correct fact. Therefore, there was a misrepresentation.
32. Even if for sake of argument the defendants contention that she was not aware of any such injunction order is taken to be correct net result would well be the same. As already referred to above the factum of the injunction order qua the property in dispute is established. If defendants version is taken to be correct and plaintiff was also not aware of it then there would be a mistake of fact between the parties. Section 20 of the Contract Act in clear and unambiguous terms prescribe that an agreement is void of both the parties to the agreement were under a mistake with respect to an essential fact to the agreement. The mistake has to be mutual and in that view of the matter it is a mistake of both sides only.
In any case taking the assertions of the defendant on its face value also one necessarily has to conclude that there was a mistake of fact and plaintiff could plead the agreement to be void.
33. In the case of Tarsem Singh v. Sukhminder Singh there was a contract between the parties. Both the parties were under a mistake as to the matter of the fact that is the area of land essential to an agreement of sale of land. There was an agreement containing a stipulation regarding forfeiture of earnest money of the buyer in case of non-performance by the buyer and his part of the contract. Since there was a mutual mistake keeping in view the provisions of Section 20 of the Contract Act it was held that agreement would be void. Identical is the position herein.
34. It was further urged that the plaintiff in fact is a property broker himself. He purchasers property and sells it at premium subsequently and that once the prices in the Delhi market of immovable properties and fallen the plaintiff did not want to purchase the property. According to the defendants learned counsel the building was ready in March 1997 and the contention of the plaintiff that building was not ready is only an after thought to wriggle out of the contract. Cross-examination of the defendant reveals that in the first instance she stated that completion certificates with respect to the buildings were not being issued. She takes a somersault and adds that she dos not know if completion certificate had been applied and then clarified that it is the job of the architecture. In other words, there is no Form "C" & "C" certificates have been produced and therefore the court necessarily has to hold that the building was not ready, namely the first floor which was to be given to the plaintiff.
35. Co-related with the same contention was the argument that controversy is to if earnest money or advance that had been made. Learned counsel for the defendant, in the first instance, pointed that in statement the plaintiff has clearly mentioned that it was earnest money and therefore the defendant had the right to forfeit the same.
36. While appreciating the said argument it must be admitted that in different lines of the statement of the plaintiff he has used the expression that earnest money had been paid. But to a layman the fine distinction between advance and earnest money would not be clear. It would be indeed to much therefore to draw an adverse inference to this fact. This is for the added reason that even defendant has been making a contradictory version in this regard. Ex DW1/4 is the notice on behalf of the defendant Mrs. Neena Seth addressed to the plaintiff and the others dated 2.1.1997. Herein the defendant though serving the notice clearly stated "we had agreed to give you further time of one week to make the balance payment and take over possession and in case you fail to make the balance payment within one week advance of money could stand forfeited". In other words, the defendant herself was using it as advance money rather than earnest money. Therefore certain facts that have cropped in the pleading or in the statements ignorant of the implication between the advance and the earnest money cannot be taken very strictly while construing the words advance or earnest money.
37. The difference between the earnest money and advance money had been drawn by the Supreme Court in the case of Shree Hanuman Cotton Mills and Anr. v.
Tata Air Craft Ltd. . After reviewing large number of precedents in paragraph 24 the conclusions provided by the Supreme Court were:
24. From a review of the decisions cited above, the following principles emerge regarding "earnest":
(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfillled or, in other words, "earnest" is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.
38. The decision had been referred to time and again and in the case of Delhi Development Authority v. Grihsthapana Cooperative Group Housing Society . The society had deposited earnest money and had formally applied for the allotment. Allotment had been made by the DDA. Before delivery of possession there was an enhancement of the premium. Society failed to make the payment within time. The amount was forfeited. It was held that the forfeiture was valid because it was earnest money that had been paid. Same view had been accepted by the Supreme Court in the case of HUDA and Anr. v. Kewal Krishan Goel And Ors. AIR 1996 SC 1981 and in paragraph 12 the Supreme Court reiterated the same and held:-
12. This being the legal position and the allottee having accepted the allotment and having made some payment on Installment basis then made the request to surrender the land, has committed default on his part and, therefore, the competent authority would be fully justified in forfeiting the earnest money which had been deposited and not the 10% of the amount deposited as held by the High Court. The High Court was totally in error in issuing the direction in question on the ground that the respondents were not in a position to deliver the possession of the land to the allottee. It may be stated that in the letter of allotment no period was stipulated within which the possession of the land was to be delivered. The land in question was required to be developed and then to be delivered and in absence of any period in the letter of allotment, it was required to be delivered within a reasonable period. In the facts and circumstances, it cannot be said that the responsibility had lapsed particularly when the allottees had not paid up the entire Installment due and merely paid a part thereof.
39. It has transpired and it becomes unnecessary to refer to the document because it is admitted that the plaintiff had paid the first Installment and thereafter the payment had not been forthcoming. But with respect to the question as to whether it was earnest money or not, the reference can well be made to the agreement of sale which is Ex. P1. It was provided that in case the purchaser defaults in the payment of Installments in such an event the purchaser would be liable to pay interest at the rate of 18% p.a. on the balance Installments from the date such Installment became due. When such is the clause which provides a penalty, it can not be termed that it was an earnest money which could be forfeited. It must be held therefore that it was not earnest money which could be forfeited.
40. Before proceeding further in this context strong reliance can well be placed on the decision of this court in the case of Jaswant Rai v. Abnash Kaur 2nd (1974) 1 Delhi 689 . The principles enunciated by the Supreme Court in the case of Shree Hanuman Cotton Mills (supra) referred to approve were reiterated but it was held that where there is a defect in the property then the buyer has to be made of it otherwise he might well not have entered into a contract. It is the duty of the vendor to inform the intending purchaser that property is subject to a claim which might result in a law suit or is subject to pending litigation. When this fact is not disclosed or the parties were not aware indeed it must follow and be held that defendant could not be justified in forfeiting the money that had been paid.
41. Co-related with the same controversy is as to if the time was the essence of the contract or not. The perusal of the agreement of sale clearly reveal that the parties had agreed to make the payment by a specific date in Installments in case of default the interest was to be paid. Subsequently when it is asserted that there was a meeting held in the house of Shri Sanghi, Advocate as per the defendant the plaintiff was given a weeks time to make the payment. These factors clearly show that time was being extended more often than once and though it was mentioned that it has to be paid the amount had to be paid by a specific date but still default clauses provided payment of interest and it cannot be taken that time was the essence of the contract.
42. The doctrine that equity does not ordinarily regard time as essence of the contract would apply in the facts of the present case. Consequently it must follow that it cannot be termed that time was the essence of the contract in the facts of the present case because the schedule was revised time and again as is apparent from Ex. P2 and subsequently even in the house of Shri Sanghi.
43. For these reasons it must follow that agreement of sale must be held to be void even if the defendant did not know about the defects, namely the injunction order that had been issued. The defendant in any case was aware of the injunction order in July 1997 and property was not ready for delivery of possession in March 1997. Thus it is the defendant who had committed the breach of the agreement. Issues are decided accordingly.
Issues No. 2A and 2B
44. It is in the statement of the plaintiff that when the fact of the injunction order was brought to the notice of Mrs. Neena Seth they had met along with their property dealers as well as counsel in the house of Shri Sanghi, advocate and the plaintiff goes on to state that it was agreed that if the injunction order is not vacated within 10-15 days the contract would be rescinded and the amount paid would be refunded. The defendant on the contrary denies this fact and her statement indicates that an advice was given by Shri Sanghi, Advocate that there is no injunction order against the defendant and therefore the sale transaction could take place. According to her a week's time was given to the plaintiff to make the payment of the balance amount.
45. The best witness in this regard would have been Shri Sanghi, Advocate in whose house the meeting took place and he had given the advise. The property brokers of each of the witness have made statements supporting their principal persons but in the absence of Shri Sanghi indeed it cannot be termed that the plaintiff proved that the contract was rescinded or that the defendant had agreed to refund the advance amount. Issue is decided against the plaintiff.
Issues 3 and 8:
46. Dispute in this regard pertained to the fact as to whether Rs. 13 lakhs or Rs. 14 lakhs had been paid. The defendant appeared and in this context had been cross-examined. Here attention was drawn to the receipt Ex. PW3/4. She stated that when she signed this receipt the plaintiff had stated that he had the money in his vehicle and he will pay to the property broker. She went on to state that property broker later told her that money had not been paid. However, the contents of the said receipt are clear and unambiguous that Rs. 1 lakh had been paid by the plaintiff to the defendant Mrs. Neena Seth. Signatures on the receipt have been admitted and therefore it must be held that the payment of this amount has been proved and consequently in all Rs. 14 lakhs had been paid.
47. It has already been held above that contract was void and in any case there was an injunction order and therefore the plaintiff could avoid the contract. The amount could not be forfeited because of the reasons already recorded above and therefore the plaintiff would be entitled to the refund of the entire amount of Rs. 14 lakhs that had been paid.
48. Certain amounts had been claimed by the plaintiff by way of damages but there is no evidence to establish the damage suffered by the plaintiff. The same therefore must be disallowed. In suit no. 2212/97 the plaintiff would be entitled to the refund of Rs. 10 lakhs paid but no damages would be entitled to the plaintiff. In suit No. 2210/97 the plaintiff would be entitled to the recovery of Rs. 9 lakhs that had been paid without any damages that have been claimed. Issues are decided accordingly.
Issue No. 4:
49. Plaintiff claims interest at 18% p.a. This was agreed between the parties that in case of default on the part of the defendant the plaintiff would be entitled to interest at the rate of 18% p.a. Since this was the agreed interest therefore on the principal amount till the filing of the suit, the plaintiff would be entitled to the interest at the above said rate on the principal amount referred to above.
50. For these reasons the civil Suit Nos. 2211/97, 2212/97 and 2210/97 are decreed. The agreements are held to be not valid. The suits are further decreed for Rs. 14.00 lakhs, Rs. 10.00 lakhs and Rs. 9.00 lakhs respectively with interest at the rate of 18% from the date of payment of the amounts till the civil suit was filed. From the date of the filing of the suit till final payment is made, the plaintiff would be entitled to interest at the rate of 12% p.a. on the principal amount.
V.S. Aggarwal, J.
1. For detailed order, please see judgment of even date in Suit No. 2211 of 1997.