Delhi High Court
J.K. Industries Limited vs Mohan Investments & Properties Private ... on 22 April, 1991
Equivalent citations: AIR1992DELHI305, AIR 1992 DELHI 305, (1991) 3 CURCC 22 (1991) 2 BANKLJ 151, (1991) 2 BANKLJ 151
ORDER
1. This is a suit for recovery of Rs. 1,13,125/-. The case of the plaintiff, in brief, is that in April 1983, defendant represented to the plaintiff that the defendant was the owner of the premises known as Pawan House located at Plot No. 2. Zamrudpur Community Center, Kailash Colony Extension, New Delhi and made an offer to the plaintiff to demise and grant the said premises on lease to the plaintiff on certain terms and conditions and thereafter from time to time various negotiations took place between the parties in connection with the said premises. It was pleaded that in course of the said negotiations, on or about August 6, 1983, the plaintiff paid a sum of Rs. 1,00,000/- to the defendant as token money pending finalisation of the agreement and/or lease relating to the premises and the said loan was accepted by the defendant subject to the finalisation of the lease deed as per its terms and conditions. It was alleged that thereafter further negotiations took place between the parties in course of which the plaintiff discovered that the representation made by the defendant was untrue and in that there were serious and material defects in the title of the defendant to the premises inasmuch as it was found that the defendant was not the owner of the premises and had no right or authority whatsoever to grant or demise the premises on, lease as such and the defendant had not obtained and did not hold and could not furnish to the plaintiff Completion Certificate or Occupation Certificate and other certificates necessary and required under the law and the prevailing practices and usages of the Delhi Development Authority (for short DDA) for occupying, possessing and using the premises. So, it was averred that the plaintiff discovered that the defendant was wholly incompetent and incapable of granting or demising the premises on lease to the plaintiff and in the circumstances, no agreement of lease or lease deed in respect of the premises could be arrived at or executed between the parties.
2. It was next pleaded that on or about October 27, 1983, the plaintiff called off the negotiations between the parties in respect of the premises and demanded from the defendant the refund of the said amount of Rs. 1,00,000/- and by letter dated November 17/18, 1983, the plaintiff gave notice to the defendant under the Interest Act, 1978. So, pleading that the said amount of Rupees 1,00,000/- was paid by the plaintiff to the defendant on a consideration which had totally failed, the defendant is legally bound to refund the said amount claiming interest @ 21% per annum from August 1983. Plaintiff claims Rs. 1, 13,125 / - from the defendant.
3. Defendant has contested the suit pleading that the plaint has not been signed, verified and the suit instituted by a duly authorized person on behalf of , the plaintiff company. On merits, it was pleaded that the defendant had never represented to the plaintiff that the defendant was the owner of the property in question and that the plaintiff, in fact, all along knew that M/s. Pawan Builders Private Limited, a sister concern of the defendant company, has been and is the owner of the property in question and the defendant has been authorised by the said owner to lease out the property and that even M/s. Pawan Builders Private Limited had been communicating with the plaintiff with regard to the agreement of lease.
4. Then, it is pleaded that the defendant, in fact, was the promoter of the building and was authorised to let out the building and the plaintiff was all along aware of this authority and sometime in early August 1983 and after certain negotiations between the plaintiff and the defendant for taking the said property on lease for a period of three years, the plaintiff vide its letter dated August 5, 1983, agreed to take the premises in question on lease for a monthly rent of Rs. 78,000/- and the tenancy was to commence with effect from September 1, 1983, and the plaintiff paid a sum of Rs. 1,00,000/ - as advance towards rent for the premises in question and the said amount was tendered by way of cheque along with the fetter of the plaintiff dated August 5, 1983, and the plaintiff had required the defendant to sign the said letter and return the same to the plaintiff in token of its acceptance which was returned to the plaintiff after signing. It is then pleaded that the defendant vide its letter dated August 25, 1983, also informed the plaintiff that the premises were complete in all respects and ready for possession and the plaintiff should take possession of the said premises on September 1, 1983, after executing the lease agreement. It was controverter that various negotiations took place between the parties and it was asserted by the defendant that a firm agreement was entered into between the parties and the plaintiff was supposed to take possession of the premises but the plaintiff did not occupy the premises and the same remained vacant till December 15, 1983, subjecting the defendant to a loss of Rs. 78,000/- per month with effect from September 1, 1983 and the defendant claimed Rs. 1,93,760/- from the plaintiff as counterclaim after adjusting Rs. 1,00,000/- already received. Defendant denied that Rupees 1,00,000/- was received as token money and pleaded that in fact, the same was received as advance to be adjusted in rent. Defendants further pleaded that the premises were ready for occupation as all necessary sanitary and electrical works had been completed and necessary forms 'C' & 'D' issued by the concerned authorities were duly inspected by the plaintiff before the plaintiff issued the letter dated August 5, 1983 and paid Rs. 1,00,000/- to the defendant. It is pleaded that there was no requirement of DDA to obtain any Completion Certificate before occupying the premises and in fact, more than 75% of the commercial buildings in Delhi are awaiting issuance of completion certificates by the DDA and are being occupied by the people without any Occupancy Certificates. It is pleaded that the plaintiff as an afterthought was raising objections regarding the Completion Certificate and Occupancy Certificate in order to wriggle out of the contract already made between the parties. It is further pleaded that the defendant had already given to the plaintiff a copy of the resolution of M/s. Pawan Builders Private Limited which authorises the defendant to lease the property in question and the plaintiff has illegally declined to occupy the premises on the basis of the concluded contract and thus, the plaintiff is qot entitled to refund of Rs. 1,00,000/-- or any interest over it and 'in fact, the defendant is entitled to recover Rs. 1,93,760/- from the plaintiff.
5. In replication to the written statement-cum-counter claim, the plaintiff controverter the pleas of the defendant and reiterated its pleas and categorically stated that at no point of time prior to September 16, 1983, the plaintiff was made aware that defendant had any authority to let out the premises and that, in fact, the defendant had no authority to let out the premises as the defendant was found to be not the owner of the property and the Premises could not have been let out without obtaining the Occupancy Certificate from the DDA. It is denied that the defendant had suffered any damages on account of premises remaining vacant. It is controverter that any concluded contract had been made between the parties or the sum of Rs. 1,00,000/- was paid as advance and not as token money. Defendant also filed replication reiterating its pleas made in the counter claim-cum-written statement. Following issues were framed:
1. Whether the suit has been instituted and the plaint has been signed and verified by a duly authorised person?
2. Whether the letter dated August 5, 1983, did not form a concluded contract between the parties?
3. Whether the amount of Rs. 1 lakh was received by the defendant as advance rent?
4. Whether there was any misrepresentation by the defendant to the plaintiff? If so, to what effect?
5. Whether there were serious and material defects in the title of the defendant to the premises. If so, to, what effect?
6. Whether the plaintiff is entitled to interest? If so, at what rate?
7. Whether the defendant is entitled to damages from the plaintiff? If so, at what rate?
8. Whether the appropriation of Rs. I lakh by the defendant is valid and legal?
9. Whether the defendant on the counter-claim has paid proper court fee?
10. Whether the defendant is entitled to claim any interest? If so, at what rate?
11. Relief.
6. Plaintiff examined PW I Shri. J. R. C. Bhandari, who has signed and verified the plaint and instituted the suit and PW 2 Shri N . Ahuja, who is stated to have negotiated the deal with the defendant and the defendant, examined DWI A. K. Puri, one of the directors of the defendant. No evidence in rebuttal was led by the plaintiff.
Issue No.1
7. PW I has brought the original power of attorney and also the original minutes book of the plaintiff and proved on the record the resolution dated December 30, 1981, passed by the Board of Directors of the plaintiff-company, copy of which is Ex. P- 161 which authorises the Managing Director of the plaintiff-company to execute the power of attorney which he executed in favor of PW 1, copy of which is Ex. P 15 ' This particular power of attorney authorises PW I to sign, and verify the plaint and institute the suit on behalf of the plaintiff. So, I hold that the plaint has been signed and verified and a duly authorised person on behalf of the plaintiff-company has instituted the suit. Issue is decided in favor of the plaintiff.
Issue No. 28. The court has to construe the documents exchanged between the parties in or er to decide whether any concluded contract of lease had come into existence between t e parties. Ex. I is the letter dated April I , 1983, issued by defendant to the plaintiff in which it was mentioned that defendant had come to know from Yatinder Kumar of M/s. Shanti Swarup & Co. that the , plaintiff requires office accommodation and the defendant offered to rent out the premises in question of which details were 'furnished mentioning that the rent of the entire building will be Rs. 90,000 per month and 12 months rent would be payable as deposit of security which would be refundable at the time of vacating the premises and in addition 12 months rent was payable as advance which would be adjustable against the monthly rent spread over a period of three years in equal installments and the duration of the lease would be for a period of three years initially and would be renewable on mutual consent and after expiry of first three years. There would be increase of 25% in the rental amount and the physical possession would be handed over only on executing the lease agreement. On August 5, 1983, Ex.P 2 letter was issued by the plaintiff to the, defendant after reciting that with reference to final discussion held between N. Ahuja and P. R. Surana of the plaintiff and, Mr. Puri and Mr. Sood of the defendant, the plaintiff confirmed having agreed to take the said premises on rent on the terms and conditions as follows -
"1. We will take on rent complete building at No. 2 Kailash Colony, Community Centre, consisting of basement, ground to 4th floor, being 8760 sq. ft. as covered area as mentioned in your letter No.FPL/D/83 dated '12th April, 1983. the rent of the above said building will be Rs. 78,000/'- (Rupees Seventy-eight Thousand Only) per month. We will advance you nine months rent, which will be adjusted in the monthly rent in 30 months.
2. We will also give you security deposit equivalent to four months rent which will be adjusted in the rent for last four months of the lease period.
3. The lease period will be initially for three years with an option to renew the lease two times for a period of three years each subject to an increase of 15% of rent after every three years. The rent will start with effect from 1st September 1983.
We are enclosing herewith a cheque for Rs. I lakh (Rupees* One Lakh Only) as a token money of our having agreed to take your premises 011 hire which will be adjusted against the total advance to be given to you as mentioned above after the lease agreement has been executed.
Please sign the duplicate copy of this letter and return the same to LIS in token of your acceptance."
9. It appears that a duplicate copy after signatures was given back to the plaintiff. A cheque in the sum of Rs. I lakh was also given and on August 6, 1983, the receipt in that respect was given by the defendant which recited that this amount has been received as token money and the money will be adjusted against the total advance to be given by the plaintiff after the lease agreement has been executed and it was written on behalf of the defendant irr hand as follows:
"Received subject to finalisation of lease deed as per our terms and conditions."
10. The contention raised before rile is that these documents constitute a concluded contract. Counsel for the defendant has vehemently argued that all the important terms of the lease as contemplated u/ S. 105 of the Transfer of Property Act stood agreed upon and the execution of a lease deed was only a formality and was not a condition precedent for coming into force the contract of lease between the parties.
11. On the other hand, the learned counsel for the plaintiff has argued that the perusal of the contents of the above documents clearly show that lease deed was to be executed and only then the contract was to come into existence between the parties. He has emphasised that even on the receipt Ex. P. 19 dated August 6, 1983, the defendant had mentioned that the said Rs. I lakh has been received subject to finalisation of lease deed as per our terms and conditions. He has pointed out that what is indicated in this endorsement is that lease deed to be executed in the terms and conditions of the defendant and it does not show that any mutual terms and conditions have been agreed upon on the basis of which lease deed was to be executed. So, he has urged that in fact, only negotiations were taking place between the parties and the contract of lease was to come into existence between the parties only on execution of a lease deed, which in law was required to be registered as the lease was of a period of more than eleven months.
12. Counsel for the defendant has cited Currimbhoy & Co. Ltd. v. L.A. Creet, , wherein it was laid down that:
"Where the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will, in fact, go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is binding contract and the reference to the more formal document may be ignored."
13. There is no dispute about the principles enunciated in the aforesaid judgment. It will depend on the peculiar facts of particular case whether parties have entered into a contract and the execution of a document was only a formality and was not a condition precedent for coming into existence the contract between the parties. He has then referred to Jaifiarain Ram Lundia v. Surajmull Sagarmull, , which lays down that if after a contract is concluded and its terms settled, further negotiations are started with regard to the new matters, that would not prevent full effect being given to the contract already existing, unless it is established as a fact that the contract was rescinded or varied with the consent of both the parties or that both parties treated it as incomplete and inconclusive. There is no dispute that if court is to come to the conclusion in the present case on perusing the aforesaid documents that a concluded contract has come into existence then any subsequent correspondence between the parties, would not change the natur6 of the contract till there was mutual agreement to change the nature of the conclud7ed contract. It was also contended by the learned counsel for the defendant that entire negotiations and the correspondence need to be perused in deciding whether a concluded contract has come into existence between the parties and he referred to Dhulipudi Namayya v. Union of India, AIR 1958 Andh Pra 533, in which it was laid down that it is also well settled that in order to decide these matters the entire negotiations and the correspondence on which the contract depends must be considered. Reference was then made to Kollipara Sriramulu v. T. Aswatha Narayana, , wherein the Supreme has laid down that a mere reference to a future formal contract in an oral agreement will not prevent a binding bargain between the parties. Again, as far as the principle of law is concerned, there cannot be, indeed, any dispute that if the parties had settled all the vital terms of the contract and had mutually agreed to those terms then the contract comes into existence between the parties and if reference has been made by the parties for executing any formal contract in writing then mere fact that such formal contract in writing has not been executed would not result in already concluded contract being not binding on the parties. If the facts of a particular case show that execution of a written contract were a condition precedent for coming into force of the contract between the parties, then it cannot be said that any concluded contract in absence of any written contract being executed has come into force between the parties.
14. Counsel for the defendant has also referred to Eastham (Inspector of Taxes) v. Leigh London and Provincial Properties Ltd. 1971 Tax LR 1576. In the said case a company had entered into a contract with the owner of the site to construct a building on it within two years. If the building was to be completed, there was then a condition that the owner was to lease out the building to another person for a period of 125 years from the date of agreement i.e. June 22, 1962. The building was duly constructed and in May 1964, lease was granted. The owner was assessed to capital gains tax on the basis that the lease was required by a in 1964. The question, which arose for decision, was whether lease could not come into existence on June 22, 1962, when the agreement was made or came into existence in May 1964? The question posed before the court was: If the agreement dated June 22, 1962, were to be held to be a conditional contract within the meaning of Para (3) of schedule 9 of the Finance Act, 1962, then date of acquisition would be the said date of the contract and in case the contract was not a conditional (one) then the date of acquisition by A would be the date when the lease was granted. It was held that though the grant of lease depended on the fulfilllment of certain obligations on the part of the lessee, the contract was not a conditional contract. The construction of the building within two years was not a condition precedent to the grant of the lease. The case is based on totally different facts. Here, what we have to see is whether there came about a concluded contract between the parties or not with regard to the agreement to take on lease the premises in question.
15. The learned counsel for the plaintiff, on the other hand, has cited H. G. Krishna Reddy & Co. v. M. M. Thimmiah, , wherein it was held that if a document which is entered into between the two parties and which is relied upon as constituting a contract contemplates the execution of a further regular agreement between the parties, it is a matter of construction whether execution of a further contract is a condition of the terms of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the original agreement should be performed. In the former case, there cannot be any unenforceable contract unless the condition is fulfillled or on the ground that law does not recognize a contract to enter into a contract. The fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to an agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound a previous agreement. It is further laid down that when there is a written document which is followed by further negotiations in the form of correspondence, the entirety of the correspondence has to be looked into to find out whether there has been a completed contract or not. In the cited case a receipt was executed by the proposed vendor in favor of the proposed vendee for certain amount towards the agreed price of the sale of suit property and under that receipt a regular agreement of sale on a stamp paper had to be executed within 15 days from the date of the receipt. It was held that the said recital being a condition of the bargain between the parties under the receipt the said receipt was not intended to be a concluded contract.
16. The facts of the present case are analogous to the facts in the said case. Here also while we peruse the correspondence reproduced above, the plaintiff has issued the letter dated August 5, 1983, giving counter proposal to the defendant because t,he conditions mentioned in letter Ex., P2 were not in consonance with the conditions given in letter Ex. P I of the defendant offering the premises in question on rent to the plaintiff. On the document Ex. P 19 dated August 6, 1983, which was executed by the defendant while receiving a cheque in the sum of Rupees 1,00,000,,'- as token money, the defendant clearly mentioned that the same is received subject to finalisation of the lease deed as per our terms and conditions). It is evident that the sum of Rs. I lakh has not been received according to the terms mentioned in Ex. P2. The words indicate that the lease deed was to be executed as per terms and conditions of the defendant. There is no agreement made by the plaintiff that lease deed is to be executed on the terms of the defendant. It would mean that negotiations were still continuing between the parties and no concluded contract has come into existence by issuance of letter Ex. P 2 and by acceptance of the token money by the defendant. It is evident that the defendant was insisting of execution of a lease deed in order to bring about a concluded contract between the parties. The terms and conditions as indicated in Ex. P19 were not mentioned as the terms and conditions contained in Ex. P2.
17. The learned counsel for the defendant, on the other hand, has contended while referring to the provisions of Ss. 105 and 108 of the Transfer of Property Act that in order to bring about the contract between the parties to take the premises on lease what was required was settlement of the premises and the rate of rent to be p4id and, capacity of the landlord to hand over vacant possession of the premises to the lessee. He has argued that execution of a lease deed was only a formality, which was to be gone into before delivering possession of the premises to the plaintiff. He has vehemently argued that agreement to take the premises on lease between the parties was clinched by virtue of issuance of letter Ex.P2 and acceptance of Rs. I lakh as token money from the plaintiff by the defendant. The learned counsel for the plaintiff has argued that unless a lease agreement was to be executed and registered no concluded contract between the parties came into existence. It must be made clear that as yet'no lease agreement has come into existence between the parties. The question to be decided is whether the plaintiff had agreed to take the premises on rent in future meaning thereby that whether there has come into existence a contract to take the premises on lease between the parties or not?
18. There would be much merit in the case of the defendant if the defendant had not used the aforesaid words "while accepting the cheque for Rs. I lakh as token money". The words written on Ex. P 19 by the defendant rather indicate that terms of the lease were yet to be finalised between the parties before any concluded contract could come into existence between the parties. Hence, I hold that no concluded contract has come into existence between the parties. Issue is held in favor of the plaintiff.
Issue No. 3 -
19. It is evident from the bare perusal of Ex. P 19 receipt that the sum of Rs. I lakh was paid only as token money and was not given as advance rent. It was to take the shape of part of the advance rent if the lease deed was to be executed as per terms and conditions indicated by the defendant while accepting the said cheque. So by no stretch of reasoning it can be held that the defendant as advance rent received the said amount. If there has been a concluded contract between the parties regarding an agreement to take on lease the premises in question then the said amount of Rs. I lakh received as token money could be treated as consideration for the said concluded contract. As I have held that no concluded contract to take the premises on lease had come into existence between the parties the said amount of Rs. I lakh could not be treated as consideration for any concluded contract. At any rate, the same could not be treated as part of any advance rent till the lease deed was to be executed between the parties. Issue is decided accordingly against the defendant.
20. On August 27, 1983, Ex.P 3 letter was issued by the defendant to the plaintiff requiring the plaintiff to take possession of the premises on September 1, 1983, after execution of the lease deed. It was also indicated in this letter that the rent of the building will start from September 1, 1983. The plaintiff admits receipt of this letter but no reply was sent to this letter. Letter Ex. P4 dated September 8,1983, was issued by M/s. Pawan Builders Private Limited, the owner of the building to the plaintiff wherein it was mentioned that the owner has submitted the original lease papers to the DDA and has also applied for completion certificate. It appears that as yet no lease deed had been executed by the DDA in favor of M/s. Pawan Builders Pvt. Ltd. and no occupancy certificate/ completion certificate had been obtained. M/s. Pawan Builders Pvt. Ltd. also wrote letter Ex.P5 to the plaintiff mentioning that all relevant papers as required by the plaintiff have been submitted and it was mentioned as to why delay was taking place in executing the lease deed and it was mentioned that all arrangement for delivering the possession of the premises had been completed even prior to September 1, 1983.
21. The plaintiff had sent a registered notice, copy of which is Ex. P6 dated September 16/17 1983, in which it was mentioned that a meeting took place between the representatives of the parties on September 1, 1983, when certain copies of the papers relating to the plot were given to the plaintiff from where it was found that the plot was delivered by the DDA to M/s. Pawan Builders Pvt. Ltd. and the building was not completed within the stipulated period and the building could not be occupied till occupancy certificate was issued. So, the plaintiff required the defendant to send the copy of the occupancy certificate from the DDA and query was made from the defendant as to whether the defendant was proposing to give the lease of the premises, as plaintiff had not bargained for any sub-lease. Defendant had sent the reply dated September 22, 1983, Ex. P8, to this notice in which it was mentioned that the occupancy certificate had been issued by the Architects and a copy of the resolution had been handed over passed by M/s. Pawan Builders Pvt. Ltd. authorising the defendant to let out the premises to the plaintiff. Even in this reply it was not made clear whether the plaintiff was to be inducted in the premises under sub-lease or defendant was to execute the lease deed in favor of the plaintiff as an agent of the owner. Ex. P 9, copy of the letter dated September 27, 1983, issued by the plaintiff to the defendant again reiterates that as no occupancy certificate had been issued by the DDA the defendant could not have given possession of the property to the plaintiff. It also asserted that copy of the resolution passed by M / s. Pawan Builders Pvt. Ltd. is vague and it does not specify in what capacity the premises were to be leased by the defend-' ant to the plaintiff. It was mentioned that no concluded contract has come into existence between the parties and thus, the plaintiff has not become liable to pay any rent of of premises from September 1, 1983 1 may refer to Baij Nath v. Kshetrahari Sarkar, , where it was observed that u/ S. 25 of the Specific Relief Act, 1877, a Lesser is bound to give the lessee a title free from reasonable doubt and where a prospective lessee demands title deeds from the prospective Lesser for his investigation and approval, it cannot be said that there has been a final and concluded agreement between them, although most other material terms may have been agreed upon by them. In such a case the lessee is free to back out of the contract if he is not satisfied about the Lesser's title, and so long as one party is left free to back out of a contract at his choice, it cannot be said that any binding contract has been arrived at between the parties. These observations squarely apply to the facts of, the present case.
22. Ex.P I I is dated September 29, 1983, issued by the defendant to the plaintiff. It was mentioned therein that 'C'&'D'forms have been already submitted and the building was fit for occupation and it was clarified that the lease would be executed by the defendant as M/s. Pawan Builders Pvt. Ltd. had given complete authority to execute the, lease deed. Again, it was not clarified whether the defendant was to give a sub-lease or execute the lease deed as an agent of the owner. Vide letter Ex. P12 dated October 27, 1983, the plaintiff required the defendant to return the token money given as no concluded contract had come into existence between the parties. Ex.P 14 dated November 8, 1983, is the letter sent by the defendant to the plaintiff claiming the rent from the plaintiff with effect from September 1, 1983, indicating that the liability of the plaintiff continues till the new tenant was to be found and it was mentioned that Rs. I lakh had been adjusted in the rent which became due. Ex. P17 is the copy of the letter dated November 17, 1983, issued to the plaintiff controverts the claim of the defendant and reiterating that the defendant is bound to refund the sum of Rs. I lakh received by the defendant as token money and interest @ 21% per annum was also claimed.
23. From the initial correspondence exchanged between the parties it was not made clear by the defendant to the plaintiff as to whether 'defendant was the owner of the property in question and in case the defendant was not the owner how the defendant had authority to let out the premises to the plaintiff. It appears that later on a copy of the resolution passed by the Board of Directors of M/s. Pawan Builders Pvt. Ltd., a sister concern of the defendant, was given to the plaintiff which indicated that the defendant has been authorised to let out the premises to the plaintiff. Even in the said resolution it was not made clear as to in what capacity the defendant was to let out the premises to the plaintiff. Shri A. K. Puri coming as DW I in cross-examination for the first time stated that the defendant had taken the lease of the building in question from M/s. Pawan Builders Pvt. Ltd. and a sub-lease was to be granted to the plaintiff. This was not the plea taken either in the written statement or in the correspondence exchanged between the parties. This fact by itself leads to an inference that the parties were not consensus ad-idem with regard to the material fact as to what sort of lease was to be granted to the plaintiff. up to the time of giving of the offer by the plaintiff to the defendant vide Ex. P2 and receipt of the token money of Rs. I lakh by the defendant from the plaintiff, it was not made clear to the plaintiff as to in what capacity the plaintiff was to be inducted in the premises as a tenant; whether the defendant was to execute a lease deed or was to execute a sub-lease in favor of the plaintiff? It is true that a person who is to let out the premises need not be owner of the property but he should have only authority to hand over the vacant possession of the premises to the tenant in order to bring about a relationship of landlord and tenant between the parties. However, in the present case what has to be seen is whether there had taken place any misrepresentation to the plaintiff by the defendant so as to invalidate the agreement to take the premises on lease between the parties. It was, in my opinion, the duty of the defendant to have disclosed its authority to let out the, premises to the plaintiff when the defendant had sent the initial offer. At any rate, before accepting the token money from the plaintiff the defendant ought to have disclosed the facts as to the authority of the defendant to let out the premises in question to the plaintiff.
24. Counsel for the defendant has argued that as soon as the copy of the resolution of M/s. Pawan Builders Private Limited was furnished to the plaintiff, the defendant had made it clear as to in what capacity the defendant was letting out the premises to the plaintiff. Admittedly, the copy of such a resolution was given to the plaintiff after the defendant had received Ex. P2 and the defendant had also received the token money. At any rate, even the resolution, which was passed by the Board of Directors of M/s. Pawan Builders Pvt. Ltd. also did not indicate as to whether the defendant was to let out the premises to the plaintiff as an agent of the owner or the defendant was to create a sub-lease in favor of the plaintiff. It is evident that if it has been disclosed to the plaintiff during the negotiations that defendant was to create a sub-lease in favor of the plaintiff, the plaintiff may not have even issued letter Ex. P2 agreeing to take the premises in question on rent. So, it must be held that on account of misrepresentation by the defendant in concealing the material facts, the plaintiff was made to give the token money and also issue the letter Ex. P2 and in case it is to be held that any concluded contract came into existence between the parties by giving of token money and issuance of Ex.P2 letter, the same stood vitiated and .could be validly avoided by the plaintiff.
The next point to be seen is whether the defendant could give vacant possession of the premises to the plaintiff in absence of obtaining any occupancy certificate from the DDA From the bye laws 7.5.1, 7.5.2 & 7.6 of the Bye Laws in question applicable, it is evident that without obtaining any occupancy certificate the building could not be occupied. However, this Court in Municipal Corporation of Delhi v. Piyush Traders Ltd., 1988 Rajdhani LR 65 1, has held that the contract of letting does not become void even if no occupancy certificate had been obtained. The question, which came up for consideration before the court, was whether the rental being obtained by the landlord by letting out the premises in absence of occupancy certificate could be taken into consideration for fixing the ratable value for purposes of house tax. The contention was raised that as the landlord before letting out the premises had obtained no occupancy certificate the rental being g obtained could not be taken into consideration for purposes of fixing the rateable value. This contention was negatived by this court observing that neither the letting of such a building in respect of which occupancy certificate is not obtained had been made invalid by any provision of law nor there is any prohibition in the statute that no contract would be made for letting before obtaining the completion certificate and if such contract is made, the same would be void. Under S. 246 of the Delhi Municipal Corporation Act, there is a provision not to occupy the building till the permission is obtained. S. 351 read with Schedule 12 of the Delhi Municipal Corporation Act lays down certain fine to be imposed if their takes place any violation of provisions of S. 346(2) of the said Act. However, this Court held that mere fact that certain penalties are to be imposed for occupying the building in absence of occupancy certificate it vitiate the contract of lease.
25. The learned counsel for the plaintiff, on the other hand, has cited Devinder K. Wadhwa v. Desu, 1987 Rajdhani LR 542 : (AIR 1988 Delhi 236). One of the requirements of the Rules of the Desu before grant of electric connection is that occupancy certificate has to be submitted. A single Judge of this Court held that Municipal Corporation Act clearly prohibits the occupation of a building, which is newly constructed unless permission for occupying the same has been obtained from the Corporation, either by the grant of such permission or by the grant of a completion certificate. , It is difficult to imagine that where no such permission to occupy is granted the Corporation is nevertheless under an obligation to provide electricity to an occupant of the said premises who in violation of the law is in occupation thereof. The learned Judge was not dealing with the question whether the contract of lease by itself would stand vitiated in absence of obtaining the occupancy certificate under the Rules as hit by S. 23 of the Contract Act. The agreement to take on lease the premises in respect of which as yet no occupancy certificate has been issued, is not void as there is no prohibition imposed in the provisions of the Delhi Development Act or bye laws that no agreement for lease is to come into force till the occupancy certificate has been obtained in respect of a particular building. Even a possession of the building can be given to the prospective tenant under an agreement for lease even though no occupancy certificate had been issued. The word 'occupancy' is different from the word 'possession'. A person may be in possession of the building and he may not be occupying the building so as to violate the prohibition contained in the bye laws. The contention raised by the learned counsel for the plaintiff is that as no occupancy certificate had been obtained the contract to take the premises on rent, if had come into existence, the same stands vitiated as the same is hit by S. 23 of the Contract Act. There is no merit in such a contention. It is one thing to say that the contract is void, it is another thing to say that the plaintiff might not have agreed to take the premises on rent if plaintiff was aware that the premises could not be occupied in absence of obtaining any occupancy certificate . In my opinion, the contract to take the premises on rent does not become void even though no occupancy certificate has been obtained.
26. If I have to hold that the concluded contract to take on lease the premises had come into existence between the parties, the same on the face of it could not be treated as void as no occupancy certificate had been obtained because there is no prohibition contained in any law that such a contract would be void. The question of occupying the premises comes into play only after a contract to take the premises on lease has been made. The plaintiff could have easily found out from the defendant before entering into the contract as to whether any occupancy certificate had been obtained by the defendant or not. As already mentioned by me above, possession of the premises could be delivered by the defendant to the plaintiff even in absence of occupancy certificate, may be the plaintiff could not have used the premises meaning thereby occupied the premises, in view of the fact that no occupancy certificate had been obtained in respect of the building in question. It is not possible to hold that any misrepresentation had been made by the defendant in respect of the obtaining or nonobtaining of occupancy certificate in respect of the building in question. Plaintiff is bound to know the bye-laws and could have easily confirmed before entering into contract for lease whether any occupancy certificate had been obtained or not by the defendant. So, on this score it cannot be held that the contract between the parties if had come into existence stands vitiated. However, in view of my finding that there has been misrepresentation by the defendant as to the capacity in which defendant was to let out the premises to the plaintiff the contract, if had come into existence between the parties, stood vitiated. I decide these issues accordingly in favor of the plaintiff.
Issue No. 6 -
27. Plaintiff under the Interest Act is entitled to have the interest from the date of service of notice dated November 17/18, 1983. There is no evidence to show as to what is the prevalent bank rate. Normally 12% per annum interest is proper to be granted from the date of service of the said notice on the defendant.
Issue No. 7 -
28. The property in question does not admittedly belong to the defendant. Defendant has not produced on record any lease deed executed by the owner in favor of the defendant. It is not understood how the defendant has suffered any damages on .account of failure of the plaintiff to take the premises on rent. In case it is to be held that there was a concluded contract between the parties by which the plaintiff had agreed to -take the building in question on rent with effect from September 1, 1983, and the plaintiff has committed the breach of the contract by not taking the building on rent with effect from September 1, 1983, the defendant has not suffered any damages because the building in question did not belong to the defendant. It is M/s. Pawan Builders Private Limited, owner of the building, which had suffered the damages and thus, the defendant is not entitled to recover damages from the plaintiff although it has come in evidence that the building could not be let out up to December 15, 1983, and ultimately, it was let out to N.T.P.C. from December 15, 1983, at the rent of Rs. 72,000/per month. It appears that M/s. Pawan Builders Private Limited had executed the lease deed in favor of N.T.P.C. as admitted by DW I in his cross-examination. So, it is clear that the defendant has not suffered any damages so that the defendant could claim any damages from the plaintiff. It is M/s. Pawan Builders Private Limited, the owner of the building, which has suffered the damages which could have recovered the damages, if any, from the plaintiff in case the plaintiff had committed breach of the contract. Defendant was acting as an agent of M/s. Pawan Builders Private Limited and the defendant as an agent has not suffered any damages. Hence, the defendant is not entitled to recover any damages from the plaintiff. Issue is decided against the defendant.
Issue No. 829. As there was no concluded contract between the parties, the plaintiff is entitled to recover Rs. I lakh and the defendant Is not entitled to retain the same and was bound to refund the same as soon as the plaintiff required the defendant to refund the same by serving a legal notice. Issue is decided against the defendant.
Issue No. 9 -
30. It appears that in the counter-claim the defendant has paid the court fee on the balance amount of the damages after adjusting Rs. 1 lakh in the damages. The total counter-claim is said to be Rs. 2,73,000 - and after adjusting Rs. I lakh the counter-claim is to the tune of Rs. 1,73,000/ - and the court fee has been paid on the counter claim plus interest. The case of the plaintiff is that the court fee ought to have been paid on Rs. 2,73,000/- and not on Rs. 1,93,760/-.
31. In Munshi Ram v. Radha Kishan (deceased), , it was observed that pleas which are open to the defendant to defeat the relief sought by a plaintiff may be of adjustment, set off and counter-claim, the pleas of adjustment and set off being primarily of defense and while no court fee is required on a plea of adjustment court fee is payable on -pleas of set off and -counter claim. It was held that whereas set off is a statutory defense which would afford an answer to the plaintiff's claim wholly or property, a counter-claim which is substantially a cross-action affords no defense to the plaintiff's claim but is a weapon of offence which enables a defendant to enforce a claim against the plaintiff effectually as an independent action and when the defendant claims an amount from the plaintiff below or up to the plaint claim it is a claim for set off stricto sensu but when the claim is for a larger amount the claim for the excess over the plaint claim has to be considered, as counterclaim.
32. The learned counsel for the plaintiff has vehemently argued that the pleas taken by the defendant do not amount to any adjustment and at the most with regard to Rs. I lakh, the defendant is claiming set off and for the other amount claimed from the plaintiff the defendant is setting up a counter-claim and on both these pleas the defendant has to pay the court fee. The learned counsel for the defendant, on the other hand, has cited Jyanti Lal v. Abdul Aziz, . In the said case A brought a suit against B for house rent for a total sum of Rs. 1445/-. B filed the written statement wherein he pleaded adjust ment and satisfaction of Rs. 1,295/- towards the house rent. The trial Court took the view that as B made certain improvements and advanced certain money, he could maintain a cross suit in respect thereof, and, therefore, he was to pay the court fee on the amount he claimed as adjusted and satisfied towards the rent as it was in the nature of a set off within the meaning of Schedule 1, Art. I of the Court Fee Act. In the revision the High Court held that in such circumstances the claim of adjustment and satisfaction pleaded by B was really in the nature of a plea of payment, that is, a plea of satisfaction by adjustment, and not in the nature of either legal or equitable set off and, therefore, no court fee was leviable on the value of that claim under the provisions of Schedule I Article 1, of the Court Fees Act. In case it was to be held by this Court that Rs. I lakh had been given as advance rent, and the defendant was entitled to claim damages on failure of the plaintiff to take the premises on rent then the said amount of Rs. I lakh could be treated as adjusted in the rent due but in the present case, only a concluded contract taking the premises on r ent had been-pleaded by the defendant and Rs. I lakh had been given as token money. No lease agre6nent itself had come into existence between the parties. So, it cannot be said I that Rs. I lakh had been paid as advance rent. The defendant claims damages occurring to the defendant with effect from September 1, 1983, when the plaintiff did not take the premises on rent. So, Rs. I lakh which was given to the defendant was being set off qua the claim of damages arisen in favor of the defendant from September 1, 1985. Hence, it cannot be said that Rs. I lakh could be adjusted in any claim towards any rent. The defendant was, in my opinion, bound to pay the court fee on the said amount of Rs. 1 lakh also. I hold accordingly. Let the court fee be furnished by the defendant within two weeks.
Issue No. 10-
33. As I have already held that the defendant is not entitled to recover any damages, so the defendant is not entitled'to claim any interest also. Issue is decided against the defendant.
Relief:-
34. Plaintiff is entitled to recover Rs.1 lakh with interest @ 12% per annum from September 20, 1983, when the notice Ex.P6, was served on the defendant till realisation.
35. 1 decree the suit for recovery of Rs. I lakh with interest @ 12% per annum from September 20, 1983, till realisation. The plaintiff shall have the costs of the suit from the defendant. The counter-claim is dismissed.
36. Suit decreed.