Vivek Garg vs Y.C Kurele on 5 September, 2013

[Cites 7, Cited by 1]

Delhi High Court

Vivek Garg vs Y.C Kurele on 5 September, 2013

1. This is an application filed by the plaintiff under Order 39 Rule 1 and 2 CPC for interim injunction. The application came up for hearing along with the Suit on 17.5.2013 when this Court passed ex parte injunction order against the defendant restraining the defendant from alienating, encumbering or parting with possession of the suit property.

2. It is the contention of the plaintiff in the accompanying plaint that the defendant is the owner and is in possession of Plot Nos.154/696 and 154/697, Village Pooth Khurd, Lal Dora, Delhi. The area of the above CS(OS)NO.933 2013 Page 1 of 13 property is as under:

       Plot No.                        Area
       154/696                   2 Bigha 2 Biswa = 2116 Sq.Yards
       154/697                   2 Bigha 2 Biswa= 2116 Sq.Yards
       Total                     4 Bigha 4 Biswa= 4232 Sq.Yards

3. It is stated that on 19.10.2012 the defendant offered to sell the suit property at the rate of Rs.13,270/- per sq. yard to which the plaintiff agreed. A Sum of Rs.11 lacs was received by the defendant from the plaintiff as earnest money. Various other terms were also agreed upon. It is stated that on 20.10.2012 M/s. Triveni Bhoomi Vikas Pvt. Ltd., of which the plaintiff is Director, desired that the sale deed be got executed in the name of the said company. In pursuance of the same a sum of Rs.50 lacs by way of two post dated cheques of the said M/s.Triveni Bhoomi Vikas Pvt. Ltd.was paid by the plaintiff to the defendant on 20.10.2012 through Mr.Shiv Kumar. On 21.10.2012 the parties entered into an Agreement to Sell. The Agreement stipulated that a further sum of Rs.1 crore was to be paid by the plaintiff to the defendant on 20.12.2012 and the balance payment will be made by the plaintiff on or before 6 th March, 2013 and the Sale Deed was to be executed. The agreement confirmed that the defendant has received a sum of Rs.61 lacs as earnest money. One clause that was added regarding the date of execution of the sale deed which forms part of the preliminary narration reads as follows:-

"However if circle rate is increased, then second party shall CS(OS)NO.933 2013 Page 2 of 13 execute sale deed before effective date of new circle rate."

4. The plaintiff further contends in the plaint that on 21.11.2012 the Delhi Government announced increase in Circle rates of the property w.e.f. 5.12.2012. In view of the said announcement and in view of the above noted clause as stated in the narration of the Agreement, the Sale Deed had to be executed in terms of the said Agreement before 5.12.2012. It is stated that in view of this, the parties discussed necessary steps to implement the Agreement dated 21.10.2012. It was agreed that defendant would execute the Sale Deed on 26.11.2012 and that in respect of the part payment of Rs.1 crore payable by the plaintiff by 20.12.2012 post dated cheques would be issued for the dates around the said date and that for the remaining consideration amount of Rs.4,00,58,640/- payable by 6.3.2013 post dated cheques for the said date would be issued in favour of the defendant. The defendant was to execute the sale deed in favour of M/s.Triveni Bhoomi Vikas Pvt. Ltd.

5. In view of the said settlement it is stated that the plaintiff made preparations to implement the same. Three post dated cheques dated 18th, 19th and 20th December, 2012 totalling Rs.1 crore were handed over through the broker Virender Verma. On 23.12.2012 a demand draft for Rs.5,61,690/- in favour of DDODC, Distt. North Delhi was prepared. On 24.11.2012 the plaintiff purchased requisite stamp papers for a sum of Rs.33,70,000/- for the sale deed of the suit property. Further three post dated cheques worth Rs.2 crores dated CS(OS)NO.933 2013 Page 3 of 13 5.3.2013 and for Rs.1 crore dated 6.3.3013 and for Rs.100,58,640/- dated 7.3.2013 totalling 4,00,58,640/- were prepared. Thereafter the plaintiff visited the defendant's office on 24.11.2012 to intimate the defendant about getting the stamp paper for the Sale Deed to hand over the above post dated cheques and to fix the exact date for registration of the Sale Deed. However, the defendant was stated to be not available. The plaintiff is stated to have communicated with Mr.Shiv Kumar,an employee of the defendant and informed him about the preparations done by the plaintiff. The plaint further states that on 25/26.11.2012 the plaintiff and the dealer Virender Verma tried their best to contact the defendant in respect of the execution and registration of the Sale Deed for the suit property but the defendant was not available. Through his employee Mr.Shiv Kumar it was communicated that the defendant has refused to execute the Sale Deed of the property in favour of Shri Vivek Garg or his company M/s.Triveni Bhoomi Vikas Pvt. Ltd. On 21.12.2012 the plaintiff is stated to have written a communication to the defendant requesting the defendant to honour his commitment. It is further stated that the defendant vide letter dated 13.12.2012 and 25.12.2012 refused to perform his part of the Agreement and stated that he has cancelled the Agreement and forfeited the earnest money of Rs.61 lacs. On 14.1.2013 a legal notice was sent by the plaintiff. The defendant vide his reply dated 31.1.2013 refused to perform the Agreement and stated that he has cancelled the Agreement and forfeited the earnest money of Rs.61 lacs. On the basis of the above averments, the plaintiff has filed the present Suit for Specific Performance of the said CS(OS)NO.933 2013 Page 4 of 13 Agreement to Sell.

6. By the present application, the plaintiff seeks injunction order to restrain the defendant from selling, alienating or transferring the suit property during pendency of the suit. The defendant has filed his reply and the written statement. The defendant has stated that in terms of the said noted clause in the Agreement and in view of the enhancement of circle rates which were announced by the Delhi Government on 21.11.2012 the plaintiff was obliged to pay the balance sale consideration on or before the said date i.e. 5.12.2012 and concurrently the defendant would have registered the Sale Deed. It is contended that the claim of the plaintiff that there was any Agreement which permitted the plaintiff for making payment of balance consideration on the original dates as mentioned in the Agreement to Sell by means of a post dated cheque is absolutely incorrect. It is stated that it was never agreed upon that the defendant would execute and register the Sale Deed in favour of the plaintiff but would receive the balance consideration by post dated cheques subsequently. It is denied that any such agreement took place. It is denied that any post dated cheques were received by the defendant or anybody. Hence, it is contended that the defendant was justified in terminating the Agreement and forfeit the earnest deposit of Rs.61 lacs.

7. I have heard learned counsel for the parties. Learned counsel appearing for the plaintiff has relied upon the abovenoted Clause of the Agreement to Sell, namely, :-

CS(OS)NO.933 2013 Page 5 of 13

"However if circle rate is increased, then second party shall execute sale deed before effective date of new circle rate."

8. Relying on this clause, learned counsel for the plaintiff submits that in view of the said clause of the Agreement to Sell in case of change of existing circle rates, the defendant was obliged to execute and register the sale deed before the enhancement of the circle rates. He contends that the Agreement does not envisage that in such an eventuality the plaintiff is obliged to make payment of the balance consideration on the preponed date. The Agreement to Sell specifies a time schedule for payment of balance consideration, namely, Rs.1 crore before 20.12.2012 and balance before 6.3.2013. It is contended that this time schedule would remain unchanged even if on account of proposed change in circle rates the defendant was obliged to execute and register the sale deed on a preponed date. It is further contended that the plaintiff has been ready and willing to perform his part of the Agreement. After having paid Rs.61 lacs to the defendant alongwith the Agreement to Sell the plaintiff had already tendered two post dated cheques of Rs.1 crore dated 20.12.2012 and was willing to also pay the balance of Rs.4,00,58,640/ on 6.3.2013 vide post dated cheques. Even otherwise, he submits that time is not the essence of a contract for immoveable property. He relies upon Mrs.Saradamani Kandappan versus Mrs.S.Rajalakshmi & Ors. AIR 2011 SC 3234 to submit that time is not the essence of a contract and even if there was some delay on the part of the plaintiff the defendant could not have cancelled the agreement and forfeited the earnest deposit. He relies CS(OS)NO.933 2013 Page 6 of 13 upon Clauses 4 and 10 of the Agreement to Sell to contend that the agreement itself provides for extension of time and hence, the time in the present agreement was not the essence of the agreement. He further contends that in case injunction is not granted the plaintiff will suffer grave and irreparable loss and injury. He further submits that in case sale is effected by the defendant during pendency of the suit the suit may become infructuous.

9. Learned senior counsel appearing for the defendant, however, contends that the default of the plaintiff is writ large on the facts of the case. He submits that it is his own submission of the plaintiff in the plaint that in view of the aforenoted clause of the Agreement to Sell the transaction had to be completed before 5.12.2012. He submits that there was no question of the defendant registering the sale deed for the suit property in favour of the plaintiff without being paid the full consideration as agreed upon. He argues that the Agreement to Sell clearly stipulates that in case the date for execution and registration of the sale deed stands preponed due to enhancement of circle rates, the date of the payment of balance consideration would also stand preponed. He points out that as the plaintiff failed to make the payment of the balance sale consideration before 5.12.2012, the defendants have on 13.12.2012 informed the plaintiff about his failure to perform his part of the contract and that the agreement stands cancelled and earnest money of Rs.61 lacs stands forfeited. He points out that this was again reiterated by the defendant when he received a letter which was posted on 21.12.2012 from the plaintiff. The CS(OS)NO.933 2013 Page 7 of 13 defendant replied to this letter on 25.12.2012 reiterating the above contention. The said communications sent by the defendant clearly stated that they have received no cheque for Rs.1 crore. It was reiterated in the said letter that the plaintiff was to pay the entire agreed amount and get the sale deed executed on or before the effective date of increase in circle rate.

10.The issue that now arises is as to whether the injunction order earlier passed by this Court on 17.05.2013 should be continued or not in the light of the reply/written statement filed by the defendant and the submissions made. Prima facie, there is merit in the contention of the learned senior counsel for the defendant that on announcement by the Delhi Government that circle rates are being enhanced, the date for execution and registration of the Sale Deed and the payment of the balance sale consideration got preponed. Reference may be had to relevant clause of the Agreement. Relevant part of Clause 1 of the Agreement to Sell dated 21.10.2012 dealing with the payment reads as follows:-

" The second party will pay Rs.1,00,00,000/- (Rupees One Crore only) before 20th December, 2012. The balance payment will be paid by the second party to the first party on or before 6th March, 2013 as and when the first party will execute the sale deed."

11. A reading of the said clause clearly states that the balance Rs.1 crore was to be paid before 20.12.2012 and the balance payment was to be made on or before 6.3.2013 when the first party will execute the Sale Deed. Hence, the balance payment was linked to execution of sale CS(OS)NO.933 2013 Page 8 of 13 deed. This is clear on a reading of the last line of the said clause. It would prima facie follow that when the date for execution of the sale deed is preponed, the date for making the balance payment consideration also stands preponed. It is clear that the plaintiff failed to make the necessary payment before 5.12.2012 which was the preponed date in view of the increase in circle rates notified by the Delhi Government. To that extent, the contention of the defendant appears to be correct. The plaintiff is thus in default of having not made the payment as on 5.12.2012.

12.The issue, however, now arises is whether in view of the said default by the plaintiff, the defendant could terminate the contract as done the defendant on 13.12.2012 by writing to the plaintiff terminating the contract and forfeiting the earnest deposit. Reference may be had to the relevant portion of Section 55 of the Indian Contract Act, 1872:-

"55. Effect of failure to perform at a fixed time, in contract in which time is essential.- When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promise, if the intention of the parties was that time should be of the essence of the contract."

13. The learned counsel for the plaintiff relying on the said provisions has strongly urged that in an agreement for Sale of immoveable property time can never the essence of contract. He has urged that in view of the same even if there were some delay on the part of the CS(OS)NO.933 2013 Page 9 of 13 plaintiff in making the payment, the defendant could not terminate the contract and forfeit the earnest deposit of the plaintiff. To support his arguments, he relied upon the observations of the Hon'ble Supreme Court in paragraph 19 of the said judgment of Mrs.Saradamani Kandappan versus Mrs.S.Rajalakshmi & Ors.(supra). Relevant portion relied upon by the learned counsel for the plaintiff is paragraph 19 which reads as follows:-

"19. The legal position is clear from the decision of a Constitution Bench of this Court in Chand Rani v. Kamal Rani [1993 (1) SCC 519: (AIR 1993 SC 1742:1993 AIR SCW 1371)], wherein this Court outlined the principle thus:

It is a well-accepted principle that in the case of sale of immovable property, time is never regarded as the essence of the contract. In fact, there is a presumption against time being the essence of the contract. This principle is not in any way different from that obtainable in England. Under the law of equity which governs the rights of the parties in the case of specific performance of contract to sell real estate, law looks not at the letter but at the substance of the agreement. It has to be ascertained whether under the terms of the contract the parties named a specific time within which completion was to take place, really and in substance it was intended that it should be completed within a reasonable time. An intention to make time the essence of the contract must be expressed in unequivocal language.

Relying upon the earlier decisions of this Court in Gomathinayagam Pillai v. Pallaniswami Nadar [1967 (1) SCR 227: (AIR 1967 SC 868)] and Govind Prasad Chaturvedi v. Hari Dutt Shastri [1977 (2) SCC 539:

(AIR 1977 SC 1005)], this Court further held that fixation of the period within which the contract has to be performed does not make the stipulation as to time the CS(OS)NO.933 2013 Page 10 of 13 essence of the contract. Where the contract relates to sale of immovable property, it will normally be presumed that the time is not the essence of the contract. Thereafter this Court held that even if time is not the essence of the contract, the Court may infer that it is to be performed in a reasonable time: (i) from the express terms of the contract; (ii) from the nature of the property and (iii) from the surrounding circumstances as for example, the object of making the contract."

14.Hon'ble Supreme Court recorded the legal position pertaining to specific performance of Agreement to Sell in case of delay in making payment by the purchaser, as per stipulation in the Agreement in paragraph 28 of the judgment which reads as follows:-

"28. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanadam (AIR 1997 SC 175]: 1997 AIR SCW 956) (supra):

(i) Courts, while exercising discretion in suits for specific performance, should bear in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored.

(ii) Courts will apply greater scrutiny and strictness when considering whether the purchaser was 'ready and willing' to perform his part of the contract.

(iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. Courts will also 'frown' upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean a purchaser can wait for 1 or 2 years to file a suit and obtain specific CS(OS)NO.933 2013 Page 11 of 13 performance. The three year period is intended to assist purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been delivered in part performance, where equity shifts in favour of the purchaser."

15.In the facts of this case, what follows is that both the parties accepted that the contract had to be performed by 5.12.2012. Within 7 to 8 days of the said date, the defendant has cancelled the Agreement and forfeited the earnest deposit. There appears to be no justification for the defendant to have within 7 to 8 days of delay cancel the agreement and forfeit the earnest deposit. The said action of the defendant prima facie is contrary to the settled legal position that time is not the essence of the contract in cases of sale of immoveable property. It is, of course, open to the defendant to rebut this presumption at the time of final adjudication of the matter. It is well settled law that whether time is intended to be an essence of the contract can be discerned by examining the intent of the parties at the time of entering the agreement, contents of the agreement and events subsequent thereto the agreement. The fact that in the present Agreement to Sell dated 21.10.2012, time was not the essence of the contract is supported by Clause 10 of the Agreement to sell which states that time may be extended with the mutual consent of both the parties. Clause 4 of the said Agreement also speaks of extension of time in making payment.

16.In my view, the plaintiff has succeeded in making out a prima facie case in his favour. Balance of convenience is also in favour of the plaintiff CS(OS)NO.933 2013 Page 12 of 13 inasmuch as any subsequent sale by the defendant would create third party rights and innumerable problems for the plaintiff in complying with a decree of the specific performance if passed. Hence, the defendants are restrained by way of injunction from selling, alienating or creating third party rights in the suit property till pendency of the present Suit. Needless to add that the conclusions arrived herein are only prima facie conclusions for the purposes of disposal of the present application. Parties would be free to raise all their contentions and submissions at the time of final adjudication of the suit.

17.The application is disposed of.

CS(OS) 933/2013 List before the Joint Registrar on 27th November, 2013 for further proceedings.

JAYANT NATH, J SEPTEMBER 05, 2013 CS(OS)NO.933 2013 Page 13 of 13

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