Delhi District Court
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 1 Of 49 on 24 September, 2022
IN THE COURT OF SH. MOHINDER VIRAT
ADDITIONAL DISTRICT JUDGE - 05 (SOUTHWEST)
DWARKA COURTS : NEW DELHI
Civil Suit No: 17179/16
CNR No. DLSW01 0036392016
IN THE MATTER OF:
Jagdev Sharma (since deceased)
(Through his legal representatives)
1. Smt. Chanderwati Wd/o Late Jagdev Sharma.
2. Sanjeev Kumar s/o Late Jagdev Sharma.
3. Beena Devi W/o Late Rajesh Vats.
4. Mohit Vats s/o Late Rajesh Vats
5. Rohit Vats s/o Late Rajesh Vats
All R/o Village Samalkha, New Delhi.
6. Deepika Sharma w/o Sh. Rajesh Sharma,
d/o Late Rajesh Vats
R/o Village & PO Dera Fatehpur, New Delhi.
7. Monica d/o Vats s/o Late Rajesh Vats
Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 1 of 49
8. Kanta Bhardwaj w/o Sh. Dinesh Bhardwaj
D/o Late Jagdev Sharma
R/o H.No. 1549, Sector 15, PartII, Gurgaon, Haryana.
9. Manju w/o Sh. Ramesh Chand
D/o Late Jagdev Sharma
R/o Village Tajpurkhurd,
PO Chhawla, New Delhi. .......... Plaintiffs
Versus
1. Sarjeet Sharma
2. Jagdish Sharma
3. Vijay Kumar
4. Krishan Kumar
5. Virender
All Sons of Late Sh. Mange Ram
R/o Village & PO Pandwala Kalan,
New Delhi ......... Defendants
Date of Institution : 19.07.2010
Arguments concluded on : 12.09.2022
Date of decision : 24.09.2022
SUIT FOR RECOVERY OF RS.1,09,82,000/ ALONGWITH
PENDENTE LITE AND FUTURE INTEREST
Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 2 of 49
JUDGMENT
1. The instant suit has been initially filed by the plaintiff (now since deceased) against the defendants for recovery of Rs.1,09,82,000/ alongwith pendente lite and future interest.
2. Present suit was filed before the Hon'ble High Court of Delhi. Summons of the suit were issued to the defendants vide order dated 28.07.2010. Defendants were served on 16.09.2010.
3. Brief facts as stated in the plaint are that Jagdev Sharma (since deceased) was landlord and agriculturist owning lands in Village Samalkha and other villages and was interested to purchase more agricultural lands in Delhi for his bonafide needs. The defendants are inhabitants of village Pandwala Kalan, Tehsil Najafgarh, New Delhi and own and possess agricultural lands in this village. The defendants Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 3 of 49 approached Jagdev Sharma (since deceased) and offered to sell their 15 bighas and 4 Biswas of land situated in the revenue estate of village Pandwala Kalan, New Delhi (hereinafter referred to as the suit property). After negotiations, Jagdev Sharma (since deceased) agreed to purchase the said land at the rate of Rs.2,55,00,000/ per acre of 4840 sq. yards. The value of the 15 bighas and 4 Biswas of land amounted to Rs.8,07,50,000/.
M/s Raisina Villas pvt. Ltd., through its Director Sh. Rajeev Aggarwal offered to join Jagdev Sharma/plaintiff (since deceased) in purchasing the said land and accordingly, it handed over 5 pay orders of Rs.9 lacs each in favour of each defendant bearing pay order Nos. 07767, 07768, 07766, 07765, 53808 drawn on HDFC Bank. Thus, a sum of Rs.45 lacs was contributed by the said M/s Raisina Villas Pvt. Ltd., whereas Jagdev Sharma/plaintiff (since deceased) contributed Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 4 of 49 a sum of Rs.35,75,000/ at the time of entering into agreement with the defendants. Accordingly, on receipt of Rs.80,75,000/ by way of cash and cheques, the defendants executed Agreement to sell and receipt both dated 18.07.2007.
The suit property is agricultural land, therefore, the law and practice required the seller to obtain 'no objection certificate' from the Revenue Authorities and Land Acquisition Collector before execution of the sale deed. Such a covenant was also agreed to and included in the Agreement to Sell dated 18.07.2007. Jagdev Sharma (since deceased) on the day of the agreement itself handed over duly filled up and signed NOC forms to the defendants for procuring the NOC. However, the defendants neither applied for NOC nor ever intimated Jagdev Sharma (since deceased) about having obtained the NOC.
It is further stated that the defendants appeared to had Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 5 of 49 developed illegal and malafide intentions to unsurp the advance amount received from Jagdev Sharma (since deceased) and, therefore, they on 06.06.2008 served a legal notice through their counsel Sh.B.D.Sharma, Advocate, calling upon the plaintiff to obtain NOC and execute the sale deed or else to suffer forfeiture of the advance amounts paid. However, as per agreement, the defendants were bound to obtain the NOC and other clearances. In this regard, Jagdev Sharma/plaintiff (since deceased) through his counsel Sh.Davender Bhardwaj sent a reply to the counsel for defendants as well as the defendants on 30.06.2008 wherein he clarified that he was always ready and willing to perform his part of the bargain and that he was possessed with sufficient finances.
It is further stated that the defendants appeared to be facing difficulties in obtaining NOC as they had other land in Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 6 of 49 the same village and unless and until they intended to sell/transfer entire land (which was less than 8 standard acres), they could not obtain the NOC for the suit property as such, sale would violate Section 33 of the Delhi Land Reforms Act 1954. The defendants neglected to obtain the NOC, probably as the prices of lands were steadily rising and the defendants were hopeful of finding some other buyer at a higher price. In November 2009, Jagdev Sharma (since deceased) came to know that the defendants were negotiating for sale of the suit property to other parties and, therefore, he moved application before the Tehsildar (Notification) and other authorities requesting them not to issue NOC in favour of others as he had a valid and subsisting agreement with the defendants.
The defendants had no intention to convey the suit property in terms of Agreement dated 18.07.2007 and Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 7 of 49 deliberately neglected and failed to act, and since there is no possibility of obtaining the land without protracted litigation and also from suffering the fear of action for violation of Section 33 of the DLR Act 1954, therefore, Jagdev Sharma (since deceased) was left with no option but to seek refund of the advance amounts paid to the defendants alongwith damages. Hence, the present suit.
4. Defendants filed Written Statement in which they have refuted all the claims made by plaintiff (since deceased) and, interalia, submitted that the parties to the suit are governed by the terms of the contract and the relief sought for by the Late Jagdev Sharma in the present suit are beyond the terms of the contract. It is stated that present suit is not sustainable in the eyes of law and merits dismissal. Late Jagdev Sharma had never shown any readiness and willingness to perform his part of the contract at any point of time, as a result of which, the Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 8 of 49 transaction could not succeed by reason of the fault or failure of Late Jagdev Sharma. It is further stated that the suit is barred by time.
5. It is stated that as per para 7 of the agreement to sell, both the parties shall obtain the 'No objection' from the Tehsildar (Notification), Delhi or other concerned authority at the cost of second party as the agreement to sell is a bilateral transaction and cooperation of both the parties is required in obtaining the NOC or other permission. It is further stated that there was no privity of contract between M/s Raisina Villa Pvt. Ltd and the defendants in respect of the suit property. It is also stated that the contract between the parties does not confer any right upon the plaintiff for recovery of money by way of the present suit as the money stands forfeited because Late Jagdev Sharma did not perform his part of the contract.
6. In his replication, plaintiff (since deceased) has stated Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 9 of 49 that the Written Statement is untenable and he has reiterated his prayer.
7. Vide order dated 06.03.2012, following issues were framed by the Hon'ble Delhi High Court: (1) Whether the suit is barred by time? OPD (2) Whether the plaintiff had committed breach of his obligation as contained in Agreement to Sell dated 18.07.2007? OPD (3) Whether the suit is without any cause of action?
OPD (4) Whether the plaintiff has settled the matter with M/s Raisina Villas Pvt. Ltd.? If so, its effect? OPP (5) Whether the plaintiff is entitled to suit amount? OPP.
(6) Whether the plaintiff is entitled to interest? If so, its
effect? OPP
(7) Relief.
8. Plaintiff Jagdev Sharma expired on 25.05.2012 and vide order dated 04.03.2015 on the application under Order 22 Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 10 of 49 Rule 3 CPC, LRs of the deceased plaintiff were impleaded as plaintiffs/parties.
9. Vide order dated 04.03.2016 of Hon'ble Delhi High Court, present matter has been transferred to the District Courts because of the enhancement of the pecuniary jurisdiction of this court.
10. In order to prove his case, the plaintiffs examined 3 witnesses.
11. PW1 Sh. Sanjeev Kumar who filed his evidence by way of affidavit which is Ex.PW1/1 wherein he reiterated the averments made in the plaint. During his deposition, he relied upon and exhibited the following documents: Sr. No. Document particulars Exhibits
1. Agreement to sell dated Mark A 18.07.2007
2. receipt dated 18.07.2007 Mark B Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 11 of 49
3. Legal notice dated 06.06.2008 Mark C and D alongwith its envelope
4. Reply dated 30.06.2008 Mark E and F alongwith its postal receipts
5. Application to Tehsildar dated Mark G 13.11.2009
6. Application to Subregistrar IX Mark H dated 19.11.2009
7. Application to ADM (SW) dated Mark I 19.11.2009
8. Copy of Board Resolution dated Mark J 06.11.2007
9. Agreement dated 07.11.2007 Mark K. PW2 Sh. Rajesh Kumar tendered his evidence by way of affidavit Ex.PW2/A. He relied upon documents i.e. : (1) Certified copy of Board Resolution dated 06.11.2017, Ex.PW 2/1; and (2) Original agreement dated 07.11.2017 between plaintiff and M/s Raisina Villas Pvt. Ltd., as Ex.PW2/2. He also identified the signature of Rajiv Aggarwal on that document at point A on first page, at point A1 on second page and at point A2 on third page. He also identified signatures of Late Jagdev Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 12 of 49 Sharma at point B on first page, at point B1 on second page and at point B2 on third page. He also identified the handwritten note on Ex.PW2/2 of Late Jagdev Sharma at point Y and signatures of Rajiv Aggarwal at point 3.
PW3 Sh. Rajeev Pandey tendered his evidence by way of affidavit Ex.PW3/A. He relied on documents i.e., agreement to sell dated 18.07.2007 Ex.PW3/1 and receipt Ex.PW3/2. He identified signatures of Sarjeet Sharma at point A, A1 and A2 on Ex.PW3/1. He identified signatures of Jagdish Sharma at points A, A1 and A2 on Ex.PW3/1. He also identified signatures of Krishan Kumar/defendant no.4 at points D, D1 and D2 on Ex.PW3/1 and that of Virender at E, E1 and E2 on Ex.PW3/1. He identified the signatures of Sarjeet Sharma/defendant no.1 at point A3, of Jagdish Sharma/defendant no.2 at point B3, of Vijay Kumar/defendant no.3 at point C3, Krishan Kumar/defendant no.4 at point D3 Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 13 of 49 and Virender/defendant no.5 at point E3 on Ex.PW3/2 (i.e. receipt).
PWs were also crossexamined by the Ld. Counsel for defendants. Thereafter, evidence of the plaintiffs was closed.
12. Defendants examined three witnesses i.e., DW1 Sarjeet Sharma, DW2 Sh. Raj Kumar from office of SubRegistrar, Dwarka and DW3 Sh. Ashok. DWs were also crossexamined on behalf of the plaintiffs. Thereafter, DE was closed and matter was fixed for final arguments.
13. I have heard the Ld. Counsels for the parties and perused the record carefully.
14. On the basis of material available on record, my findings on all issues are as under: Since issue no. (1) and (3) are legal issues, the same are taken up prior to other issues.
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 14 of 49 Issue no. (1): Whether the suit is barred by time? OPD. The onus to prove this issue was on the defendants. The first objection of the defendants is that the suit is barred by time as the plaintiff Jagdev Sharma (since deceased) did not take the appropriate steps during the stipulated period of time as per agreement to sell and is, therefore, not entitled for the relief as prayed for in the present suit.
In fact the objection raised by the defendants is that as per para no.18 of the plaint, the cause of action to file the present suit arose on 18.07.2007 i.e., when the defendants received the earnest money and the plaintiff was required to file the suit within three years from the alleged cause of action which arose on 18.07.2007. However, as per contention of the defendants, the suit has been filed on 19.07.2010 which is Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 15 of 49 beyond the period of three years limitation.
At the outset it be mentioned that no evidence on this issue has been led by the defendants. Further, the objection of the limitation point does not hold any water as the present suit has been filed on 16.07.2010 before the Hon'ble Delhi High Court i.e., within 3 years from the date of the cause of action which is evident from noting of the dealing clerk of the Hon'ble Delhi High Court on the left hand side stamp and handwriting on the index filed alongwith the memo of parties, plaint, affidavit, list of reliance, list of documents etc. As per Limitation Act 1963, the limitation prescribed is 3 years from the date when the cause of action arises. Now, if we calculate the time from the date of Agreement to sell i.e., 18.07.2007, the present suit filed by the plaintiff on 16.07.2010 is well within the period of limitation. Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 16 of 49 Thus, this issue is accordingly decided in favour of the plaintiffs and against the defendants.
15. Issue No. (3) Whether the suit is without any cause of action? (OPD) The onus to prove this issue was also conferred upon the defendants.
Here the contention of the defendants is that since in the agreement to sell dated 18.07.2007, vide para/clause 8, the parties to the suit have agreed that, if the defendants fail to perform the terms and conditions of the said agreement, the plaintiff shall be entitled to file a suit for specific performance. However, in the present case, the plaintiff has not done so and has claimed only recovery of earnest money alongwith interest. Hence, the suit of the plaintiff is without any cause of action.
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 17 of 49 Here, it be noted that the plaintiff being dominus litis has in exercise of discretion vested in him by law has opted to sue for earnest money and not for specific performance. The plaintiff is not bound in law or equity to sue for other relief. Under the law of this land, the plaintiff cannot be held dis entitled for filing a suit for recovery of earnest money with interest.
Further, the assertion of the defendants that agreement to sell dated 18.07.2007 only allows the plaintiff to file a suit for specific performance also does not hold water as without fulfilling the legal hindrances, the plaintiff cannot file a suit for specific performance. Such hindrances have already been mentioned by the plaintiff vide para 9, 10 and 11 of his plaint which reflects that there was bar of section 33 of the Delhi Land Reforms Act.
Even if the plaintiff would have filed a suit for specific Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 18 of 49 performance, no relief could have been granted to him under the law of the land because he has to face the consequences of Section 33 of the DLR Act.
From the aforesaid discussion, it is clear that law does not stops plaintiff from claiming refund of his earnest money by filing a civil suit moreso after issuance of notice of forfeiture dated 06.06.2008 exhibited as Ex.P2 which is almost around one year later after the execution of agreement to sell dated 18.07.2007.
Accordingly this issue is also decided against the defendants and in favour of the plaintiff.
16. For the sake of convenience, issue no.(4) is taken up prior to other issues.
Issue no. (4) Whether the plaintiff has settled the matter with M/s Raisina Villas Pvt. Ltd.? If so, its effect? OPP Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 19 of 49 The onus to prove this issue was upon the plaintiffs. Here the contention of the defendant is that in para17 of the plaint, the plaintiff has stated that he has settled the matter with M/s Raisina Villas Pvt. Ltd. Vide agreement dated 07.11.2007 and this agreement could be termed as partnership for a particular transaction. Now, since there was a partnership between the plaintiff and M/s Raisina Villas Pvt. Ltd., hence, the suit is barred u/s 69 of Indian Partnership Act, 1932.
Here it is apposite to mention that the defendants have tried to confuse the court by taking the objection of Section 69 of Indian Partnership Act as the agreement Ex.P1 did not mention that Late Jagdev Sharma and M/s Raisina Villas Pvt. Ltd. are partners. Even in the receipt Ex.PW3/2 also it did not mention that it is a partnership firm.
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 20 of 49 As per agreement Ex.P1, M/s Raisina Villas Private Ltd. is joint purchaser of the suit property. It is the case of the plaintiffs that before filing the suit, the plaintiffs had settled with M/S Raisina Villas Pvt. Ltd. and refunded Rs. 45,00,000/ to them for obtaining rights to purchase the entire suit property. In this regard, plaintiffs have relied on (1) copy of abstracts of minutes of meeting of the Board of Directors of M/s Raisina dated 06.11.2017, Ex.PW2/1 whereby Sh.Rajeev Aggarwal Director of the said company was authorized to sign, deal, negotiate and settle with Jagdev Sharma (since deceased) in respect of suit property; and (2) Original agreement dated 07.11.2017 executed between Sh. Rajiv Aggarwal and Sh.Jagdev Sharma (since deceased), Ex.PW2/2 whereby Sh. Jagdev Sharma (since deceased) was authorized to deal/dispose of/utilize or enter into contract alone in respect of the suit property. PW2/2 also mentions the receipt of Rs.45 lacs by M/s Raisina Villas Pvt. Ltd. from Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 21 of 49 Jagdev Sharma (since deceased) which is mentioned at encircled portion Y. Further, the plaintiff has nowhere stated that any partnership deed was executed or any partnership firm came into existence. Thus, section 69 of the Partnership Act will not come into play.
In view of the aforesaid, this issue is also decided in favour of the plaintiff and against the defendant.
17. Both issues no. (2) and (5) are taken up together for the sake of convenience.
Issue no. (2) Whether the plaintiff had committed breach of his obligation as contained in Agreement to Sell dated 18.07.2007?(OPD) & ISSUE NO. (5) Whether the plaintiff is entitled to suit amount? OPP.
There is no dispute regarding the fact that earnest money in this case, could have been forfeited if all the Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 22 of 49 conditions of Section 73 r/w Section 74 of the Indian Contract Act have been fulfilled in terms of the law laid down by Hon'ble superior courts. The legal position with respect to forfeiture of amounts, even if paid as earnest money is not resintegra and has been dealt with exhaustively by the Hon'ble Supreme Court in Kailash Nath Associates Vs. DDA 2015 I AD (S.C.)
409. Reference to Klintoz Pharmaceuticals Pvt. Ltd. Vs. Ravinder Shankar Mathur (2015)4 SCC 136, Satish Verma Vs. Garment Gaft (India) Pvt. Ltd.2018 SCC Online Del 6829, Mera Baba Pvt. Ltd. Vs. Ram Lubhaya Puri 2018 SCC Online Del 9502, Kamla Rameshchandra Sharma Vs. Maharashtra Rajya Wakhar Mahamandal, Pune 2008 SCC Online Bom 1433 and Palm Art Apparels Pvt. Ltd. Vs. Enkay Builder Pvt. Ltd. MANU/DE/353/2017 would suffice".
The legal position as laid down in the above said judgment is:
Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 23 of 49 "(i) Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine preestimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated.
Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation."
(ii) Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
(iii) Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
(iv) The Section applies whether a person is a plaintiff or a defendant in a suit.
(v) The sum spoken of may already be paid or be payable in future.
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 24 of 49
(vi) The expression " whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine preestimate of damage or loss, can be awarded.
(vii) Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
Now, applying the abovesaid principles of law to the factual matrix of the present case, it be noted that it was incumbent upon the defendants to plead and prove that they are entitled to forfeit the earnest money of the plaintiffs.
18. It is the case of the plaintiffs that Late Jagdev Sharma had agreed to purchase the suit property from the defendants for a sum of Rs.8,07,50,000/ (Rupees Eight crores Seven lacs and fifty thousand). Sh. Rajeev Aggarwal, Director of M/s Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 25 of 49 Raisina Villas Pvt. Ltd., joined Late Jagdev Sharma for purchasing the suit property. Accordingly, agreement to sell dated 18.07.2007 Ex.P1 (already admitted by the defendants) was executed between the parties. Para 1 in page 2 of Ex.P1 reads as under: "1. That in pursuance of the said agreement and in consideration of Rs.8,07,50,000/ (Rupees Eight Crore Seven Lac Fifty Thousand only), out of which Rs.80,75,000/ (Rupees Eighty lac seventy five thousand only) has been received by the first party from the second party in the following manner: Amt. dated P.O.No. Bank Rs.9,00,000 14/08/07 007767 HDFC FROM Rs.9,00,000 14/08/07 007768 HDFC RAISINA VILLAS Rs.9,00,000 14/08/07 007766 HDFC PVT.
Rs.9,00,000 14/08/07 007765 HDFC LTD.
Rs.9,00,000 14/08/07 538808 PNB FROM
RAISINA
VILLAS
PVT.
Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 26 of 49
LTD.
Rs.35,00,000 cash From
plaintiff
Rs.75,000 Cash From
plaintiff
As advance/earnest money and the receipt of the same is hereby admitted and acknowledged in respect of sale of the said land and the balance sum of Rs.7,26,75,000/ (Rupees Seven Crore Twenty Six lacs Seventy Five thousand only) shall be received by the first party form the second party at the time of registration of the sale deed and the first party do hereby agree to sell, convey, transfer and assign all the rights, title and interest in the said land, unto the second party absolutely and forever."
19. The receipt Ex.PW3/2 in respect of bayana amount was also executed which shows that the cash amount of Rs.35 lacs and Rs.75,000/ was received from Jagdev Sharma. The receipt Ex.PW3/2 bears signatures and thumb impressions of defendants at point A3 to E3.
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 27 of 49 In their WS in para4 also the defendants have admitted that: ".....But the defendants are not denying this fact that they have agreed to transfer their land in question to the plaintiff on the price as mentioned in para3 of the suit and also does not deny the receipt of the amount vide pay order. However, the replying defendants did not receive Rs.75,000/ in cash as alleged in the para under reply and mentioned in the agreement to sell. The replying defendants have received Rs.80 lac only by cash and cheque. Even though, the cash has been received by the defendants in parts after this agreement to sell dated 18.07.2007".
20. Para 6, 7 of the agreement to sell Ex.P1 reads as under: "6. That the said land hereby agreed to be sold is not notified u/s 4 and 6 of the Land Acquisition Act.
7. That the first party and second party shall apply, obtain the No Objection Certificate from the Tehsildar Notification, Delhi, or any other concerned authority to sell the said land in favour of the second party or the nominee/s at the cost of the second party. ....."
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 28 of 49 The defendants breached the agreement by not obtaining the NOC. As per Section 5 of the Delhi Lands (Restriction on Transfer) Act, 1972, the seller is required to obtain permission before sale of land. Therefore, it was responsibility of defendants to obtain NOC for which cost was to be born by plaintiff. The Section 5 reads as under:
"5. Application for grant of permission for transfer under section 4.--(1) Any person desiring to transfer any land referred to in section 4 by sale, mortgage, gift, lease or otherwise may make an application in writing to the competent authority containing such particulars as may be prescribed. ......."
The anticipated violation of Section 33 of DLR Act was neither denied in pleadings nor controverted when PW1 stated so in his evidence. Therefore, it is proved that the defendants have breached the contract by not obtaining the NOC due to violation of Section 33 of DLR Act. They never Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 29 of 49 ever applied for NOC.
21. As regards the breach of obligation, plaintiffs have relied upon the legal notice dated 06.06.2008 Mark C as well as the reply Mark E sent to defendants and their counsel, whereby they had requested the defendants to obtain NOC from the concerned Tehsildar at the earliest so that the sale deed could be executed.
22. Here it be seen that this court finds substance in the plea of the plaintiffs that since the defendants could not arrange NOC, the later could not make the payment of remaining balance amount to the defendants. No document whatsoever has been filed by the defendants to show that they ever applied for NOC before the concerned authorities but same could not be issued due to noncooperation or nonavailability of the plaintiffs. The only plea taken is that the defendants visited the Subregistrar office on 30.07.2007 for execution of Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 30 of 49 sale deed but the plaintiffs failed to appear therein. Here it be noted that Ex.P1 agreement to sell is dated 18.07.2007. Even if it is presumed that defendants visited the office of Sub registrar on 30.07.2007 for execution of sale deed, then also it was just after 12 days of execution of Ex.P1, but the agreed time was of 90 days.
Here it is also apposite to mention the evidence of defendant no.1/DW1 Sarjeet Sharma Ex.DW1/A. During crossexamination he deposed that: "The date of visit to the office of SubRegistrar as 30.07.2007 mentioned in Ex.P2 is false. He had got the notice Ex.P2 drafted from his counsel. On 06.06.2008 I was in Sri Nagar, J&K. It is correct that I was not present in Delhi on 06.06.2008. .......... I had taken the copy of agreement to the counsel for getting the notice Ex.P2 drafted. I have not applied for obtaining NOC from the Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 31 of 49 revenue authority for sale of the land. (vol. The plaintiffs had obtained signed form of NOC from the defendants and assured to get the NOC himself) ...........The NOC form is required to be signed by the seller."
23. The defendants have been unable to prove this issue as the only assertion of the defendants is that the agreement Ex.P1 envisages only specific performance of the agreement. Since, it is already proved by the plaintiff that there were legal hindrances and the agreement could not have been performed, therefore, the plaintiffs became entitled to refund/recovery of the amounts paid. In such facts, even if the claim for specific performance would have been made, then also the same could not have been decreed.
24. As far as the case of Ritu Mercantiles Pvt. Ltd. & Anr. Vs. Leelawati, 2013(3) CLJ 93 Del., as relied upon by the defendants is concerned, the same is distinguishable as it Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 32 of 49 relates to only injunction application in a suit for specific performance and secondly, it relates to an undivided urban immovable property and is only an interim order which is not an issue in the present case.
25. As far as the case law relied upon by the Ld. Counsel for the defendant i.e. Satish Batra vs. Sudhir Rawal, 2012 Lawsuit(SC) 715 dated 18.10.2012, it will be apposite to mention that the Hon'ble Delhi High Court has categorically distinguished the aforesaid case in Vandana Jain Vs. Rita Mathur & Ors 2018(4) CLJ 315 Del. Dated 20.04.2018 wherein the Hon'ble Delhi High Court has held as under:
"I have recently in the judgment in the case of M.C. Luthra Vs. Ashok Kumar Khanna in RFA No.780/2017 decided on27.2.2018 distinguished the judgment of the Supreme Court in the case of Satish Batra (supra) and have relied upon the Constitution Bench judgment of the Supreme Court in the case of Fateh Chand Vs.Balkishan Dass AIR 1963 SC 1405 and a recent judgment of the Supreme Court in the case of Kailash Nath Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 33 of 49 Associates Vs. Delhi Development Authority and Another (2015) 4 SCC 136. The Supreme Court judgment in the case of Kailash Nath Associates (supra) clarified the legal position that the earnest money paid under an agreement to sell cannot be forfeited in the absence of proving that any loss was caused to the proposed seller(s). The relevant paras of the judgment of this Court in the case of M.C. Luthra (supra) are paras 7 to 17 and paras 7 to 12 read as under:
7. Before this Court on behalf of the respondent/plaintiff it is argued that even if respondent/plaintiff is held to be guilty of breach of contract, but since no loss is pleaded and proved by the appellant/defendant to have been suffered by him on account of the breach of contract by the respondent/plaintiff, therefore, the appellant/defendant cannot forfeit the entire amount of Rs.9 lacs and that the appellant/defendant can forfeit only a nominal amount or a reasonable amount out of the total amount received by the appellant/defendant of Rs.9 lacs. Reliance is placed by the counsel for the respondent/plaintiff upon the Constitution Bench judgment of the Supreme Court in the case of Fateh Chand Vs. Balkishan Dass AIR 1963 SC 1405. Reliance is also placed by the counsel for the respondent/plaintiff upon a recent judgment of the Supreme Court in the Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 34 of 49 case of Kailash Nath Associates Vs. Delhi Development Authority and Another (2015) 4 SCC 136 to argue that Supreme Court in this judgment of Kailash Nath Associates (supra) has clarified with reference to the ratio of Fateh Chand's case (supra) that when what is forfeited pursuant to a clause in a contract being an agreement to sell then that act of forfeiture is one falling under Section 74 of the Indian Contract Act, 1872 and that Section 74 of the Contract Act would only apply if the contract is of such a nature that loss cannot be proved on account of breach of contract but if the loss can be proved then it/loss must be proved failing which earnest money cannot be forfeited. Putting it in other words it is argued that it is held by the Supreme Court in the case of Kailash Nath Associates (supra) that on forfeiture being effected of earnest moneys paid under the contract, the said act of forfeiture is an act which falls under Section 74 of the Contract Act because forfeiture is taking place of a liquidated amount fixed as per the contract between the parties, but eventuality of such a clause of forfeiture coming into application would only be where contract is such by its nature that the loss cannot be proved; unlike those contracts where it is possible to prove the loss caused; and that breach of an agreement to sell/purchase of immovable property is a type of contract where loss can be proved, Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 35 of 49 and that once loss is not pleaded and proved to be caused to the appellant/defendant, then earnest money amount cannot be forfeited. It is also argued on behalf of the respondent/plaintiff that amount of forfeiture if results in forfeiture taking place then if the forfeited amount is in the nature of a penalty amount, then the Courts will not allow forfeiture of the liquidated amount/earnest money which is in the nature of penalty and that Courts will only grant reasonable compensation lesser than the total amount of earnest money which is a penalty amount.
8. The issue before this Court is that whether it is the ratio of the judgment of the Supreme Court in the case of Satish Batra (supra) which has to be applied or it is the ratio of the judgments of the Supreme Court in the cases of Fateh Chand (supra) and Kailash Nath Associates (supra) which have to be applied. Also, if the ratio in the case of Satish Batra (supra) applies, then it is to be decided to what extent can the appellant/defendant be held entitled to forfeit the amount i.e whether appellant/defendant can forfeit the entire amount of Rs.9 lacs or only a lesser amount can be allowed to be forfeited by the appellant/defendant, and what is that lesser amount.
The facts of the judgment of the Supreme Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 36 of 49 Court in the case of Satish Batra (supra) are quite similar to the facts of the present case because in the said case the Hon'ble Supreme Court was dealing with a fact situation as to whether when a contract being an agreement to sell contains a clause of forfeiture then in such cases the seller on breach by the buyer under an agreement to sell is entitled to forfeit the amount of earnest money simply because a clause of forfeiture is so provided under the agreement to sell. Supreme Court in the case of Satish Batra (supra) on account of a clause of forfeiture existing in the agreement to sell in that case allowed forfeiture of an amount of Rs.7 lacs out of the total sale consideration of Rs.70 lacs i.e 10% of the amount received under the agreement to sell was held to be in the nature of earnest money being capable of forfeiture by the seller because the clause in the agreement to sell so provided for.
Supreme Court in the case of Satish Batra (supra) distinguished the judgment of the Constitution Bench of the Supreme Court in the case of Fateh Chand (supra) and relied upon the subsequent judgments of the Supreme Court in the cases of Shree Hanuman Cotton Mills and Others Vs. Tata Air Craft Limited (1969) 3 SCC 522 and Videocon Properties Ltd. Vs. Dr. Bhalchandra Laboratories and Others (2004) 3 SCC 711 for holding that the earnest money in an agreement to sell can always be forfeited Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 37 of 49 without pleading and proving any requirement of the seller having suffered any loss. The relevant paras of the judgment of the Supreme Court in the case of Satish Batra (supra) are paras 5 and 8 to 17 and these paras read as under:
5. We have heard the learned Counsel on either side at length. Facts are undisputed. The only question is whether the seller is entitled to retain the entire amount of Rs. 7,00,000/ received towards earnest money or not. The fact that the purchaser was at fault in not paying the balance consideration of Rs. 63,00,000/ is also not disputed. The question whether the seller can retain the entire amount of earnest money depends upon the terms of the agreement. Relevant clause of the Agreement for Sale dated 29.11.2005 is extracted hereunder for easy reference:
"e) If the prospective purchaser fail to fulfill the above condition. The transaction shall stand cancelled and earnest money will be forfeited. In case I fail to complete the transaction as stipulated above. The purchaser will get the DOUBLE amount of the earnest money. In the both condition, DEALER will get 4% Commission from the faulting party."Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 38 of 49 The clause, therefore, stipulates that if the purchaser fails to fulfill the conditions mentioned in the agreement, the transaction shall stand cancelled and earnest money will be forfeited. On the other hand, if the seller fails to complete the transaction, the purchaser would get double the amount of earnest money. Undisputedly the purchaser failed to perform his part of the contract, then the question is whether the seller can forfeit the entire earnest money.
8. We are of the view that the High Court has completely misunderstood the dictum laid down in the above mentioned judgment in Fateh Chand Case and came to a wrong conclusion of law for more than one reason, which will be more evident when we scan through the subsequent judgments of this Court.
9. In Shree Hanuman Cotton Mills v. Tata Air Craft Limited, this Court elaborately discussed the principles which emerged from the expression "earnest money". That was a case where the Appellant therein entered into a contract with the Respondent for purchase of aero scrap. According to the contract, the buyer had to deposit with the company 25% of the total amount and that deposit was to remain with the company as the earnest money to be adjusted in the final bills. Buyer Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 39 of 49 was bound to pay the full value less the deposit before taking delivery of the stores. In case of default by the buyer, the company was entitled to forfeit unconditionally the earnest money paid by the buyer and cancel the contract. The Appellant advanced a sum of Rs. 25,000/ (being 25% of the total amount) agreeing to pay the balance in two installments. On Appellant's failure to pay any further amount, Respondent forfeited the sum of Rs. 25,000/, which according to it, was earnest money and cancelled the contract. Appellant filed a suit for recovery of the said amount.
―The trial Court held that the sum was paid by way of deposit or earnest money which was primarily a security for the performance of the contract and that the Respondent was entitled to forfeit the deposit amount when the Appellant committed a breach of the contract and dismissed the suit." (Shree Hanuman Cotton Mills case) The High Court confirmed the decision taken by the trial Court. This Court, considering the scope of the term "earnest", laid down certain principles, which are as follows: (Shree Hanuman Cotton Mills case) ―21. From a review of the decisions cited above, the following principles emerge regarding "earnest"
Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 40 of 49 (1) It must be given at the moment at which the contract is concluded. (2) It represents a guarantee that the contract will be fulfilled 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.‖
10. In Delhi Development Authority v.
Grihstrapana Cooperative Group Housing Society Ltd., this Court following the judgment of the Privy Council in Har Swaroop and Shree Hanuman Cotton Mills, held that the forfeiture of the earnest money was legal. In V. Lakshmanan v. B.R. Mangalgiri, this Court held as follows:
―5.The question then is whether the Respondents are entitled to forfeit the entire amount. It is seen that a specific covenant under the contract was that Respondents are entitled to forfeit the money paid under the contract. So when the contract fell through by the default committed by the Appellant, as part of the contract, they are entitled to forfeit the entire amount.Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 41 of 49
11. In HUDA v. Kewal Krishan Goel, the question that came up for consideration before this Court was, where a land is allotted, the allottee deposited some installments but thereafter intimated the authority about his incapacity to pay up the balance installments and requested for refund of the money paid, was the allotting authority entitled to forfeit the earnest money deposited by the allottee or could be only entitled to forfeit 10% of the total amount deposited by the allottee till the request is made? Following the judgment in Shree Hanuman Cotton Mills, this Court held that‖ (Huda case)
12. ... the allottee having accepted the allotment and having made some payment on installments basis, then made a 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."
26. Also in case Nafe Singh Vs. Sanjay Gupta, RFA No.1036/2018 dated 21.12.2018, it is held that: "5. I may note that one judgment of the Hon'ble Supreme Court reported as Satish Batra v. Sudhir Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 42 of 49 Rawal, (2013) 1 SCC 345 took a view contrary to the one in the Constitution Bench judgment of the Hon'ble Supreme Court in the case of Fateh Chand (supra) and the Hon'ble Supreme Court in its subsequent judgment of Kailash Nath Associates (supra) cleared the legal position and these aspects have been extensively dealt with by this Court in the judgment in the case of M.C. Luthra (supra). The judgment in the case of M.C. Luthra (supra) was taken up in challenge before the Hon'ble Supreme Court, and the Hon'ble Supreme Court vide Order dated 15.05.2018 has dismissed the SLP(C) No. 11702/2018 challenging the judgment passed by this Court in the case of M.C. Luthra (supra)."
27. Further, by examining DW2 Sh. Raj Kumar from office of SubRegistrar, Dwarka, defendants have tried to prove the rates of the suit property in the village in order to show alleged losses to them.
Here it be noted that no averment in this regard has been made by the defendants in their written statement. Here it would be apposite to mention case titled as Bachhaj Nahar Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 43 of 49 vs. Nilima Manda & Anr., (2008) 17 SCC 491 whereby the Hon'ble Supreme Court held that:
8. (i) No amount of evidence can be looked into, upon a plea which was never put forward in the pleadings. A question which did not arise from the pleadings and which was not the subject matter of an issue, cannot be decided by the Court.
Thus, no purpose has been served by examination of DW2 by the defendants as the same is an afterthought.
28. From the aforesaid discussion, it is clear that in order to forfeit the earnest money, the defendants are not only required to plead substantial loss caused to them but they are also required to prove the same. DW1 in his crossexamination himself has admitted that he had not applied for obtaining NOC from the revenue authority for sale of the land. In the present case, the defendants have miserably failed to establish that they suffered loss or the plaintiffs have Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 44 of 49 committed breach of his obligation for issuance of NOC as per Ex.P1 as no documentary evidence has been filed by them in this regard.
29. The case laws relied upon by the defendants i.e., Narendra Kumar Jain Vs. SubregistrarIX, Delhi & Ors., Writ Petitioner (C) No.9541/2006 decided on 01.09.2006 is also not applicable in this case as the facts of the present case are entirely different from this case. Also, in the present case, the defendants have failed to perform their part of agreement in getting NOC.
Since it is proved that the defendants are in breach of the agreement Ex. P1, hence they are not entitled to retain any amount whatsoever. The legal notice Ex. P2 was not proved from statement of DW1 as he admitted that he had not issued any instructions to the counsel. The facts stated in the legal notice Ex. P2 were not proved as from statement of DW Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 45 of 49 1 and no other witness was examined by defendants. Hence, the assertion of the plaintiff that the notice was issued malafidely remained unrebutted. Moreover, the defendants have failed to plead and prove any loss caused to them on account of failure of the sale agreement. Some of the relevant excerpts of crossexamination of DW1 are as under:
"...It is wrong to suggest that the notice Ex. P2 was not drafted on my instructions. (vol. I had instructed my brothers to get the notice Ex. P2 drafted). .......... The NOC form is required to be signed by the seller. ....."
"....We are still recorded owners of the suit property. I am not ready to sell the suit property at the rates mentioned in the agreement Ex. P1. It is for the reason that now the rates have increased and today I have no need to sell the land ......I have not applied for NOC even after reply dated 30.06.2008 was sent by Sh. Devender Bhardwaj Advocate.....
..The rates mentioned in the agreement is correct, time for performance of agreement is also correct. The amount mentioned therein is also correct."Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 46 of 49 The aforementioned admission of DW1 during his cross examination shows that the defendants deliberately did not apply for NOC as the rates of the suit property had increased and they were not now in need of money to transfer the suit property.
30. In view of the aforesaid discussions, plaintiffs are held entitled for recovery of bayana amount (earnest money) of Rs.80,75,000/. Accordingly, both these issues are decided in favour of the plaintiffs and against the defendants.
31. ISSUE NO. (6) Whether the plaintiff is entitled to interest? If so, its effect? OPP In view of the aforesaid discussions, plaintiffs are also held entitled for the interest on the bayana amount. The plaintiffs have claimed interest @ 12% per annum from 18.07.2007 till the filing of the suit as damages i.e., Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 47 of 49 Rs.29,07,000/ alongwith court fees and further pendente lite and future interest @ 12% per annum on Rs.1,09,82,000/ (Rs.80,75,000+29,07,000) till recovery .
After taking into consideration today's economic scenario, this court grants interest @ 7% p.a. on the bayana amount from date of institution of the suit till actual realization of the amount.
32. ISSUE NO. (7): RELIEF The suit is decreed in favour of the plaintiffs and against the defendants.
33. A decree for recovery of Rs.80,75,000/ (Rupees Eighty Lacs Seventy Five Thousand) alongwith interest @ 7% per annum from the date of filing of the present suit till its actual realization is passed in favour of plaintiffs and against the defendants. The plaintiffs shall be also entitled for the cost of Suit no. 17179/16 Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 48 of 49 the present suit.
34. Decree sheet be prepared accordingly and thereafter, file be consigned to records after due compliance.
Announced in the Open Court
On 24.09.2022 (Mohinder Virat)
Addl. District Judge05
SouthWest District, Dwarka
New Delhi
Suit no. 17179/16
Jagdev Sharma vs Sarjeet Sharma & Ors. Pages 49 of 49