Delhi High Court
Ms Shoes East Ltd vs Delhi Development Authority on 17 May, 2018
Equivalent citations: AIRONLINE 2018 DEL 63
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% DATE OF DECISION: 17TH MAY, 2018
+ CS(OS) No.86/2011
MS SHOES EAST LTD. ..... Plaintiff
Through: Mr. Ravi Gupta, Sr. Adv. with Mr.
Ankit Jain, Mr. S. Rai & Mr. Sachin
Jain, Advs.
Versus
DELHI DEVELOPMENT AUTHORITY ..... Defendant
Through: Mr. Pawan Mathur, Adv.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
IA No.13157/2016 (of the plaintiff under Order XV Rule 3(1) read with
Order XII Rule 6 CPC)
1. The plaintiff, in this suit for recovery of Rs.11,62,45,657/- with
interest from the defendant Delhi Development Authority (DDA), after the
framing of the issues and during the course of recording of evidence, has
applied for judgment forthwith.
2. The application came up before this Court first on 24th November,
2016 when notice thereof was ordered to be issued. The plaintiff filed
another application being IA No.15697/2016 seeking deferment of the
recording of evidence in the suit till the decision of this application. IA
No.15697/2016 came up before this Court on 19th December, 2016, when it
was the contention of the counsel for the defendant DDA that the plaintiff,
inspite of repeated opportunities had failed to lead evidence and the plaintiff,
being unable to lead evidence, had filed IA No.15697/2016. In the face of
CS(OS) No.86/2011 Page 1 of 35
such contention, the recording of evidence as scheduled was not deferred as
sought by the plaintiff. No reply to the application has been filed by the
defendant DDA despite opportunity. The senior counsel for the plaintiff and
the counsel for the defendant DDA were heard on 2nd May, 2017 and
judgment reserved.
3. The plaintiff, on 21st December, 2010, instituted this suit pleading:
(i) That the defendant DDA floated tenders for sale of a plot ad-
measuring 18070 sq. mtrs. for construction of a five star hotel at
Netaji Subhash Place, opposite Wazirpur Depot near Pitampura,
Delhi.
(ii) That the bid of the plaintiff of Rs.15.62 crores was accepted and
allotment letter dated 14th December, 1994 issued by the
defendant DDA in favour of the plaintiff.
(iii) That the plaintiff paid a sum of Rs.3.91 crores at the time of the
bid, which was treated as the first installment; the second
installment of Rs.3,90,50,500/- was deposited on 13th March,
1995 and representations were made for extension of time to
pay the balance amount of Rs.781 lacs.
(iv) That the defendant DDA refused to grant extension and vide
letter dated 8th June, 1995 threatened that if the balance
payment is not made by 12th June, 1995, the amount already
paid would stand forfeited.
CS(OS) No.86/2011 Page 2 of 35
(v) W.P.(C) No.2253/1995 was filed by the plaintiff and during the
pendency whereof the plaintiff deposited Rs.100 lacs on 22nd
June, 1995 and another Rs.100 lacs on 3rd August, 1995,
leaving the balance amount payable at Rs.581 lacs.
(vi) W.P.(C) No.2253/1995 was disposed of vide order dated 14 th
February, 1996 giving liberty to the plaintiff to represent to the
Central Government and directing the Central Government to
decide the said representation within four weeks of receipt
thereof.
(vii) That the representations so made by the plaintiff were rejected
vide letter dated 17th July, 1996.
(viii) That the defendant DDA vide letter dated 13th August, 1996
conveyed to the plaintiff that the allotment was cancelled and
the earnest money of Rs.3.91 crores forfeited.
(ix) Aggrieved therefrom, the plaintiff filed W.P.(C) No.3185/1996
which was dismissed on 9th September, 1996, observing that so
far as forfeiture of earnest money is concerned, the plaintiff
would be at liberty to challenge the same before a competent
forum.
(x) That the defendant DDA, under cover of its letter dated 4th
October, 1996, refunded a sum of Rs.4,90,50,050/- and under
cover of another letter dated 25th October, 1996 refunded the
sum of Rs.100 lacs.
CS(OS) No.86/2011 Page 3 of 35
(xi) That another representation dated 19th June, 1998 was made by
the plaintiff to the Union Minister of Urban Affairs &
Employment and the Union Minister of Urban Affairs &
Employment passed an order of restoration of allotment and
directing the plaintiff to deposit the balance amount along with
12% interest per annum.
(xii) That the plaintiff, vide its letter dated 13th April, 1999 wrote for
issuance of the necessary letter for making payment of the
balance amount along with interest.
(xiii) That in the meantime, the Hon'ble Minister for Urban
Development relinquished his charge and another Minister took
over at his place; the plaintiff received a letter dated 18th
August, 1999 stating that the representation of the plaintiff was
examined and the request of the plaintiff declined.
(xiv) That aggrieved therefrom, the plaintiff preferred W.P.(C)
No.7251/1999 which was dismissed on 15th January, 2003;
LPA No.282/2003 was filed by the plaintiff and vide interim
order in the said appeal, it was directed that re-auction of the
plot would be subject to final outcome of the appeal.
(xv) That the defendant DDA trifurcated the plot and two of the
plots were auctioned on 30th June, 2006 for Rs.69.58 crores and
Rs.65.09 crores respectively.
CS(OS) No.86/2011 Page 4 of 35
(xvi) LPA No.282/2003 was dismissed on 20th October, 2009.
(xvii) That aggrieved therefrom, Special Leave Petition (C)
No.6049/2010 was filed by the plaintiff which was dismissed
on 6th August, 2010.
(xviii) That the plaintiff is entitled to refund of Rs.3.91 crores forfeited
by the defendant DDA together with interest at the rate 12% per
annum amounting to Rs.7,38,99,000/- as well as interest at the
rate of 12% per annum on other amounts deposited by the
plaintiff with the defendant DDA, for the period for which they
remained deposited with the defendant DDA i.e. for a total
amount of Rs.11,62,42,657/-.
4. The suit, filed without appropriate court fees and with other defects,
was refiled on 24th December, 2010, 4th January, 2011, 7th January, 2011 and
came up first before this Court on 14th January, 2011 when time of eight
weeks sought was granted for payment of court fees. Finally, vide order
dated 24th August, 2011, on court fees being deposited, summons of the suit
were issued.
5. The defendant DDA has contested the suit, filing written statement
pleading:
(a) That the suit claim is barred by time; the cause of action to seek
recovery of Rs.3.91 crores accrued to the plaintiff on 13th
August, 1996 when the plaintiff was intimated about the
cancellation and forfeiture; the cause of action for interest on
CS(OS) No.86/2011 Page 5 of 35
the other amounts deposited by the plaintiff accrued on 4 th
October, 1996 and 25th October, 1996 when the defendant DDA
refunded Rs.4,90,50,050/- and Rs.100 lacs to the plaintiff; the
suit had been filed after 14 years from the date when the cause
of action first accrued.
(b) That the plaintiff, vide letter dated 29th May, 1998 had called
upon the defendant DDA to refund the earnest money of
Rs.3.91 crores and the suit filed in the year 2011 is patently
barred by time.
(c) That the earnest money of Rs.3.91 crores has been forfeited by
the defendant DDA on account of inability of the plaintiff to
make the payment of the balance price of the plot as per the
terms and conditions of the tender.
(d) That no challenge was made by the plaintiff to the letter dated
13th August, 1996 of cancellation and forfeiture.
(e) That the cancellation of allotment has however been upheld in
several rounds of litigation instituted by the plaintiff.
(f) That the plaintiff having not challenged the cancellation of
allotment, the forfeiture of earnest money is as per the terms
and conditions of the tender and the present suit is hit by the
provisions of Section 11 of the CPC and the principles of
estoppel, in view of the decisions in the earlier rounds of
litigation.
CS(OS) No.86/2011 Page 6 of 35
(g) That no notice under Section 53B of the Delhi Development
Act, 1957 has been issued preceding the suit.
(h) That the suit had not been filed by a duly authorised person; the
plaintiff is a sick company within the meaning of Sick
Industrial Companies (Special Provisions) Act, 1985 (SICA)
and an Operating Agency has been appointed by the Board for
Industrial and Financial Reconstruction (BIFR) with respect to
the plaintiff.
(i) That Rs.3.91 crores deposited by the plaintiff, being 25% of the
tendered premium, was the earnest money which has been
forfeited by the defendant DDA as per the terms and conditions
of the tender.
(j) That the plaintiff, in W.P.(C) No.2253/1995 had also sought a
writ, order or direction in the nature of certiorari striking down
the tender conditions No.8 and 14 relating to cancellation and
forfeiture of earnest money and the plaintiff withdrew the
petition with liberty to approach the Government of India for
extension of time.
(k) That the deposit by the plaintiff of Rs.200 lacs in two tranches
was a unilateral act of the plaintiff.
(l) That the defendant DDA is not liable for payment of any
interest.
CS(OS) No.86/2011 Page 7 of 35
6. On the pleadings of the parties, the following issues were framed on
9th January, 2013:
―1. Whether the plaintiff is entitled to the amounts as claimed in the
suit? OPP.
2. If the answer to the first is in affirmative, then, whether the
plaintiff is entitled to any interest? If so, at what rate and for
which period and on which amount? OPP.
3. Whether the suit is barred by the limitation? OPD.
4. Whether the suit is not maintainable in the present form? OPD.
5. Whether the suit is liable to the dismissed on the principles of
estoppel? OPD.
6. Whether the suit is liable to be dismissed for want of notice under
Section 53-B of the Delhi Development Act? OPD.
7. Whether the plaintiff company is a sick company and under the
Operating Agency, and if so, whether the suit filed by the plaintiff
through the Managing Director is maintainable, and if not, to
what effect? OPD.‖
and the suit set down for evidence.
7. No witness was examined by the plaintiff till 21 st March, 2016 when
the first witness of the plaintiff tendered his affidavit by way of
examination-in-chief. However the witness did not appear subsequently for
completion of his cross-examination and the Joint Registrar, vide order
dated 29th November, 2016, gave last opportunity for the witness to appear
on 20th December, 2016. At that stage this application and IA
No.15697/2016 supra were filed.
CS(OS) No.86/2011 Page 8 of 35
8. The dicta of the Supreme Court in Kailash Nath Associates Vs. Delhi
Development Authority (2015) 4 SCC 136 forms the pivot of the argument
of the senior counsel for the plaintiff. It was argued that the suit is for
refund of earnest money and the defendant DDA in its written statement has
nowhere pleaded having suffered any loss owing to non compliance by the
plaintiff of the agreement to purchase the plot and the plaintiff is thus
entitled to a decree for refund of Rs.3.91 crores immediately, in accordance
with the said judgment and the Court can award interest at such rate as may
be deemed appropriate in the facts and circumstances of the case.
9. The defendant DDA in its written statement having taken a plea of
limitation and an issue having been framed thereon, it was enquired from the
senior counsel for the plaintiff as to how the suit claim is within time. In the
light of the history of litigation, it was also enquired, whether the plaintiff
has taken the plea of Section 14 of the Limitation Act, 1963.
10. The senior counsel for the plaintiff stated that the plaintiff is not
relying on Section 14 of the Limitation Act. On going through the pleadings
also as aforesaid, it is not found so.
11. The senior counsel for the plaintiff argued that the suit is not barred
by time. It was urged that the cause of action for the relief of refund of
earnest money would accrue to the plaintiff only when the claim of the
plaintiff made in the earlier litigation, for specific performance of the
Agreement to Sell, is finally decided and which was finally decided on
dismissal on 6th August, 2010 of SLP(C) No.6049/2010 as aforesaid.
CS(OS) No.86/2011 Page 9 of 35
12. It was enquired from the senior counsel for the plaintiff, whether not
the cause of action for the relief of refund of earnest money as claimed in
this suit is the same as the cause of action for the relief of specific
performance of the Agreement to Sell and whether not a plaintiff is required
to simultaneously and not successively claim all the reliefs to which the
plaintiff may be entitled to from the same cause of action. It was further put
to the senior counsel for the plaintiff that if it was to be held that a plaintiff
is entitled to successively sue for different reliefs to which he may be
entitled to from the same cause of action, whether not the litigation would
become endless and a source of harassment.
13. The senior counsel for the plaintiff contended that the claim for refund
of earnest money being diametrically opposite and repugnant to the claim
for specific performance of the Agreement to Sell, the plaintiff could not
have possibly claimed the relief of refund of earnest money till it was
pursuing the relief of specific performance. It was further argued that the
cause of action for the relief of refund of earnest money could not have
accrued till it was finally decided whether the plaintiff is entitled to the relief
of specific performance or not.
14. On it being put, that the plaintiff had not sought the relief of specific
performance also, it was contended that the reliefs claimed in the writ
petitions earlier filed were in the nature of specific performance.
15. To justify that the cause of action for the relief of earnest money is
different from the cause of action for the relief of specific performance,
reference was made to Section 22 of the Specific Relief Act, 1963 as under:
CS(OS) No.86/2011 Page 10 of 35
―22. Power to grant relief for possession, partition, refund of earnest
money, etc.--(1) Notwithstanding anything to the contrary contained in the
Code of Civil Procedure, 1908, any person suing for the specific
performance of a contract for the transfer of immovable property may, in an
appropriate case, ask for--
(a) possession, or partition and separate possession, of the
property, in addition to such performance; or
(b) any other relief to which he may be entitled, including the
refund of any earnest money or deposit paid or made by him,
in case his claim for specific performance is refused.
(2) No relief under clause (a) or clause (b) of sub-section (1) shall be
granted by the court unless it has been specifically claimed:
Provided that where the plaintiff has not claimed any such relief in the
plaint, the court shall, at any stage of the proceeding, allow him to amend
the plaint on such terms as may be just for including a claim for such relief.
(3) The power of the court to grant relief under clause (b) of sub-section (1)
shall be without prejudice to its powers to award compensation under
section 21.‖
and it was argued that it is for this reason only that the proviso to Sub-
Section (2) of Section 22 of the Act permits amendment of the plaint in a
suit for specific performance, at any stage of the proceeding, to include a
relief of refund of earnest money. Reliance in this regard was placed on
Mahender Nath Gupta Vs. Moti Ram Rattan Chand AIR 1975 Delhi 155,
para 31 whereof is as under:
―31. Section 22 enacts a rule of pleading. The legislature thought it will
be useful to introduce a rule that in order to avoid multiplicity of
proceedings the plaintiff may claim a decree for possession in a suit for
specific Performance even though, strictly speaking, the right to
possession accrues only when specific performance is decreed. The
legislature has now made a statutory provision enabling the plaintiff to ask
for Possession in the suit for specific performance and empowering the
court to provide in the decree itself that upon payment by the Plaintiff of
CS(OS) No.86/2011 Page 11 of 35
the consideration money within the given time, the defendant should
execute the deed and put the plaintiff in possession.‖
and it was argued that just like the right to possession was held to accrue
only when specific performance was decreed, similarly, the right to refund
of earnest money accrues only when specific performance is denied.
Reliance in this regard was placed on Babu Lal Vs. Hazari Lal Kishori Lal
(1982) 1 SCC 525 laying down that under the proviso to Section 22(2), relief
of recovery of possession can be claimed even in execution of a decree for
specific performance and it was argued that the same is indicative of the
cause of action for the relief of possession or for the relief of refund of
earnest money not accruing till the relief claimed of specific performance is
under adjudication.
16. With respect to the other queries raised, it was contended that though
the plaintiff in the writ petitions aforesaid could have in the alternative
claimed the relief of refund of earnest money but the relevant question is,
whether the plaintiff, if has not raised the said claim, is barred by time from
raising it after relief in the nature of specific performance is finally declined.
17. It was enquired from the senior counsel for the plaintiff, which Article
of the Schedule to the Limitation Act governs the limitation for a suit for
refund of earnest money as the present suit is. Upon the senior counsel for
the plaintiff not drawing attention to any Article, his attention was drawn to
Article 47, providing the period of three years for filing a suit for money
paid upon an existing consideration which afterwards fails, commencing
from the date of failure. It was enquired, whether not the date of such
failure of consideration would be the date of forfeiture.
CS(OS) No.86/2011 Page 12 of 35
18. It was yet further enquired from the senior counsel for the plaintiff,
whether a judgment of a Court of law, of refusal of specific performance,
can be a cause of action and for that matter, whether any judgment or order
of the Court can at all be a cause of action for another original claim and not
for an appeal thereagainst. In my opinion, it cannot be.
19. The senior counsel for the plaintiff reiterated that since Section 22 of
the Specific Relief Act, notwithstanding the reliefs permitted to be added
being barred by time by then, permits the same to be added at any time, on
the same principle that a suit for refund of earnest money can be instituted
after the relief of specific performance is declined till the highest Court.
20. Though the senior counsel for the plaintiff also referred to Rohit
Kochhar Vs. Vipul Infrastructure Developers Ltd. 122 (2005) DLT 480 and
Adcon Electronics Pvt. Ltd. Vs. Daulat (2001) 7 SCC 698 relied therein but
on attention of the senior counsel for the plaintiff being drawn to Vipul
Infrastructure Developers Ltd. Vs. Rohit Kochhar (2008) 102 DRJ 178
(DB) setting aside the judgment of the Single Judge, the same were not
pressed further.
21. Reliance was also placed on Harbans Lal Vs. Daulat Ram 2006 SCC
OnLine Del 1520 (DB) observing in para no.8 thereof, ―On a plain reading
of Section 22 of the Specific Relief Act, there can be no quarrel with the
proposition that a person suing for specific performance of a contract can in
appropriate cases ask for further / additional reliefs by way of possession or
partition and separate possession of the property or by way of refund of the
CS(OS) No.86/2011 Page 13 of 35
earnest money or deposit paid in case his claim for specific performance is
refused.‖
22. Qua the plea in the written statement of the defendant DDA, of non
issuance of notice under Section 53B of the Delhi Development Act,
reliance was placed on para no.27 of my judgment in I.P. Power Generation
Company Ltd. Vs. Siddhartha Extension Resident Welfare Association
2013 SCC OnLine Del 4956 holding that the suit cannot be dismissed on
such technical ground after it has been contested and that notice under
Section 53B is not required where there is earlier litigation between the
parties.
23. With respect to the plea in the written statement of the defendant
DDA, of the suit having been not instituted by a duly authorised person, it
was contended that the bar of Section 22 of SICA is with respect to suing a
sick company and not with respect to the sick company instituting the suit.
24. The counsel for the defendant DDA contended i) that the plaintiff is
misconstruing Section 22 of the Specific Relief Act; ii) that the plaintiff
never sued for specific performance; iii) that the cause of action for the relief
claimed of refund of earnest money accrued to the plaintiff on 13 th August,
1996 when the defendant DDA cancelled the allotment in favour of the
plaintiff and forfeited the earnest money; iv) that the plaintiff, after
accepting the amount of Rs.4,90,50,050/- refunded by the defendant DDA
on 4th October, 1996 and Rs.100 lacs refunded by the defendant DDA on
25th October, 1996, is not entitled to challenge the cancellation; v) that the
contention of the plaintiff that the cause of action for the relief of refund of
CS(OS) No.86/2011 Page 14 of 35
earnest money did not accrue till the decision on 6th August, 2010 of the
Supreme Court is also falsified from the letters dated 30th April, 1998 and
29th May, 1998 of the plaintiff asking for refund of the earnest money with
interest; vi) that in fact the repeated rounds of litigation by the plaintiff in the
past were also in abuse of the process of the Court; the plaintiff, after relief
had been denied to it, made representations and thereafter filed fresh
litigation on rejection of the said representations; repeated representations /
review sought cannot keep the cause of action alive.
25. The senior counsel for the plaintiff, in rejoinder contended that the
letter dated 13th August, 1996 of the defendant DDA was during the
pendency of W.P.(C) No.3185/1996 and thus subject to outcome thereof and
if that writ petition had succeeded, the said letter would have also gone;
much emphasis was placed on the interim order in LPA No.282/2003
preferred against the dismissal of the W.P.(C) No.7251/1999.
26. Attention during the hearing having been bestowed on Section 53B of
the Delhi Development Act, it was enquired from the senior counsel,
whether not Sub-Section (2) thereof prohibiting the institution of a suit
against the defendant DDA, save a suit for recovery of immovable property
or for declaration of a title thereto, after the expiry of six months from the
date on which the cause of action arises, prescribes a lesser period than that
prescribed in the Limitation Act for suits against the DDA of the nature
described in Section 53B(1).
CS(OS) No.86/2011 Page 15 of 35
27. It was further enquired from the senior counsel for the plaintiff,
whether a cause of action for the relief of refund of earnest money can in
law remain eclipsed till the decision on the relief claimed of specific
performance.
28. I have considered the matter. The arguments having proceeded
primarily on the aspect of limitation and it being the case of the plaintiff
itself that no evidence is required thereon and the suit can be decreed
forthwith, I proceed to consider the same first.
29. The first question which has to be decided qua the aspect of limitation
is, the Article of the Limitation Act applicable to a claim for refund of
earnest money. During the hearing, attention of the counsel, as aforesaid,
was invited to Article 47 of the Limitation Act.
30. I find Govindasami Pillai Vs. The Municipal Council, Kumbakonam
A.I.R. 1918 Mad. 728, Nathulal Vs. Sulal AIR 1962 Raj 83, Modern
Builders by its partner P. Ganesan Vs. B.G. Narayanan 1990 SCC OnLine
Mad 482 and Punita Bharti Vs. Kirpal Singh AIR 2010 HP 29 to have held
that the suit for recovery of earnest money would be governed by the said
Article 47 or its equivalent Article 97 in the Schedule to the Limitation Act,
1908 and the consideration to have failed on the date of cancellation of the
Agreement to Sell. I however find the Division Bench of this Court in Ram
Lal Puri Vs. Gokalnagar Sugar Mills Co. Ltd. AIR 1967 Del 91 to have
held that a suit for refund of earnest money is not covered by Article 47 or
by any other specific Article of the Schedule to the Limitation Act and is to
be thus governed by the residuary Article 113. It was reasoned that earnest
CS(OS) No.86/2011 Page 16 of 35
money is intended to serve as a proof of bona fide of the purchaser so that if
the transaction falls through for the reason of the purchaser, the amount is
liable to forfeiture; on the other hand if transaction goes forward, earnest
money becomes part of the purchase price - earnest money thus cannot be
said to have been paid upon an existing consideration which afterwards
failed. Another Division bench of this Court, comparatively recently, in
India Trade Promotion Organisation Vs. India International Textile
Machinery Exhibitions Society (2013) 199 DLT 40, also held Article 113 to
govern a suit for refund of earnest money.
31. That brings us back to the question, when the right to sue for refund of
earnest money can be said to accrue i.e. on the date when the contract under
which earnest money is paid is cancelled and notice of forfeiture of earnest
money given or the date when the challenge if any made to the cancellation
of contract finally fails.
32. To hold that the cause of action for refund of earnest money would
remain suspended and accrue only when the challenge to cancellation finally
fails, would amount to holding that a decision of a Court which finally
declines the challenge to cancellation of contract, is capable of giving rise to
a cause of action for a new relief. In my opinion, the decision of a Court can
only furnish a cause of action for preferring the remedy provided in law, of
appeal or otherwise thereagainst and cannot be the cause of action for any
relief different from that claimed in the suit by the plaintiff.
CS(OS) No.86/2011 Page 17 of 35
33. Law generally provides for a period of three years, to make a
challenge to forfeiture of earnest money or cancellation of a contract [see
Vinod Sharma Vs. Delhi Development Authority 2012 SCC OnLine Del
5745 (DB)]. The purchaser, who has paid the earnest money and contract to
sell in whose favour has been cancelled, may not institute the challenge
immediately. If it were to be held that the right to sue for refund of earnest
money accrues only when the challenge if any made to cancellation finally
ends, I have wondered what will be the date of commencement of period of
limitation - whether expiry of three years from the date of cancellation,
within which challenge to cancellation could have been made or the date of
cancellation and whether such period will stop running or stand suspended
on the date when challenge is made and again start running when the
challenge finally fails. I have further wondered that if it were to be latter,
would it not be against the well settled law that the time under the Limitation
Act, once begins to run, runs continuously.
34. In my opinion, the plaintiff, by claiming one relief, cannot be said to
have suspended or eclipsed the limitation from running for the other relief,
which had also begun to run. Thus the cause of action for refund of earnest
money which undoubtedly would accrue on cancellation of the contract and
notice of forfeiture being issued, would accrue on the same day and continue
to run and the suit for refund of earnest money can be made within three
years only from the date of cancellation of contract and / or notice of
forfeiture of earnest money, irrespective of the challenge if any made to
cancellation of contract having been made.
CS(OS) No.86/2011 Page 18 of 35
35. I will however be failing in my duty if do not mention that in Munni
Babu Vs. Kunwar Kamta Singh 1923 ILR (All) XLV 378 and in some other
judgments of that era, it was held that cause of action for a suit for recovery
of earnest money accrues on the dismissal of a suit for specific performance,
but on the premise of the governing Article of the Schedule to the Limitation
Act, 1908, being Article 97 which is equivalent to Article 47 of the 1963
Act. However the view of this Court as aforesaid, is otherwise and thus the
said judgments are of no avail.
36. Reliance, by the senior counsel for the plaintiff, on Section 22 of the
Specific Relief Act, in my opinion, is misconceived. The liberty granted
thereunder, to, at any stage of a suit for specific performance of a contract
for transfer of immoveable property, amend the plaint for including a claim
for possession of the property or any other relief to which the plaintiff may
be entitled to, including of refund of earnest money, in case relief of specific
performance is refused, cannot be utilised for bringing within limitation an
independent suit for recovery of money paid as earnest money and when the
plaintiff has never sued for specific performance. I am also unable to
deduce therefrom that the cause of action for refund of earnest money
remains eclipsed till the dismissal of a claim for specific performance.
Moreover, the plaintiff in the present case has in the past also never sued for
specific performance and the challenge by the plaintiff to the cancellation of
the agreement to sell on account of breach of contract by the plaintiff cannot
be equated to a claim for specific performance. Section 22 only vests a
special right in the plaintiff in a suit for specific performance and Section 22
cannot be read as prescribing the limitation for a suit for recovery of earnest
CS(OS) No.86/2011 Page 19 of 35
money or the date of commencement of limitation. An attempt to interpret
Section 22 as entitling a claim for earnest money, only if made alongwith a
claim for specific performance, was rejected in Harbans Lal Vs. Daulat
Ram supra. Rather, from Section 22 it appears that cause of action for a
claim for refund of earnest money accrues simultaneously with the cause of
action for the relief of specific performance and the only benefit which a
plaintiff has been given is to add the said relief to a suit for specific
performance, even if not originally made. If it were to be held that the cause
of action for a relief of earnest money accrues only upon dismissal of a suit
for specific performance, there would have been no occasion for the
Legislature to, in Section 22, permit for inclusion of the said relief in the
alternative.
37. Seen in this light, the cause of action to the plaintiff accrued on 13 th
August, 1996 when the defendant DDA cancelled the contract and notified
the plaintiff of forfeiture of earnest money. The suit could thus have been
filed within three years therefrom i.e. by 12th August, 1999 and has
admittedly been filed after eleven years therefrom, on 21st December, 2010.
38. Though the senior counsel for the plaintiff stopped at Section 22,
Section 24 of the Specific Relief Act as under:
―24. Bar of suit for compensation for breach after dismissal of
suit for specific performance.--The dismissal of a suit for specific
performance of a contract or part thereof shall bar the plaintiff's right
to sue for compensation for the breach of such contract or part, as the
case may be, but shall not bar his right to sue for any other relief to
which he may be entitled, by reason of such breach.‖
could have been better invoked.
CS(OS) No.86/2011 Page 20 of 35
39. The same undoubtedly suggests that the dismissal of a suit for specific
performance of a contract does not bar the plaintiff from suing for any other
relief to which the plaintiff may be entitled to by reason of such breach. I
have wondered, whether therefrom it can be said that a cause of action for
the relief of refund of earnest money accrues on or remains eclipsed till, the
dismissal of a suit for specific performance.
40. There was no equivalent of Section 24 of the Specific Relief Act in
the Specific Relief Act, 1877. A perusal of the 9th Report of the Law
Commission of India on the Specific Relief Act, 1877 shows the Law
Commission to have, with respect thereto opined/observed as under:
"As we have included in the Act specific provisions enabling a
plaintiff to ask for reliefs such as a refund of earnest money, in a
suit for specific performance, we recommend that, by way of
abundant caution, it should be made clear that a dismissal of a
suit for specific performance, will not bar a suit for any relief
other than damages."
41. It would thus appear that Section 24 is only clarificatory and would
have no impact qua the Limitation Act. I have further wondered about the
interplay between Section 24 of the Specific Relief Act and the Limitation
Act, both of the year 1963. Section 24 only clarifies that a suit for refund of
earnest money would not be barred after dismissal of a suit for specific
performance but does not say, it would be also within limitation, if limitation
provided for in the Limitation Act has lapsed. While Specific Relief Act is a
statute enacted to define and amend the law relating to certain kinds of
specific relief, the Limitation Act has been enacted to consolidate and amend
the law for limitation of suits. Limitation Act being a special law, would
CS(OS) No.86/2011 Page 21 of 35
prevail over the Specific Relief Act in the matter of limitation for instituting
suits.
42. There is another aspect. Section 24 of the Specific Relief Act only
clarifies that dismissal of a suit for specific performance shall not bar the
plaintiff's right to sue for any other relief to which he may be entitled by
reason of such breach. The said clarification is applicable only in the case of
dismissal of a suit for specific performance. The plaintiff in the present case
never instituted a suit for specific performance and which is inherently
dissimilar to the relief claimed by the plaintiff in the writ proceedings.
43. W.P.(C) No.2253/1996 was preferred impugning the letter dated 8th
June, 1995 of defendant DDA informing the plaintiff, in response to
representations of plaintiff for extension of time, that according to the terms
of tender, time for payment could not be extended and that if the payment
was not made, the defendant DDA would treat the auction as cancelled and
forfeit 25% amount paid. It was the contention of the plaintiff before the
Writ Court, as recorded in order dated 14th February, 1996, that though
defendant DDA had no power to extend time, the Central Government does
have power under Section 41(3) of the Delhi Development Act and Rule
45(2) of the Delhi Development Authority (Disposal of Developed Nazul
Land) Rules, 1981. On the said submission, W.P.(C) No.2253/1996 was
disposed of with liberty to plaintiff to represent to Central Government.
44. It will thus be seen that there was nothing in the nature of the specific
performance, for consideration before the Writ Court.
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45. W.P.(C) No.3185/1996 was filed by the plaintiff impugning the
decision dated 17th July, 1996 of the Central Government, rejecting the
application of plaintiff under Section 41(3) supra, on the ground of the same
having been passed in violation of principles of natural justice. The said
contention was not accepted and vide order dated 9 th March, 1996, W.P.(C)
No.3185/1996 was dismissed. However the order records that (a) during the
course of hearing, defendant DDA vide letter dated 13th August, 1996
cancelled the tender and forfeited the earnest money of Rs.3.91 crores; (b)
the counsel for plaintiff stated that the plaintiff, in the said petition, was
confining the challenge to the decision dated 17th July, 1996; (c) the plaintiff
thereafter sought to withdraw W.P.(C) No.3185/1996, to file a
comprehensive petition but which was declined; and, (d) that with the
dismissal of the petition, the controversy to the extent of petitioner's
challenge to the decision dated 17th July, 1996 and to the refusal of
defendant DDA to extend time, stood concluded; ―So far as the forfeiture of
the earnest money is concerned, the petitioner is at liberty to challenge the
same before the competent forum pursuing such remedy as may be advised‖.
46. The plaintiff did not challenge the order dated 9th March, 1996
aforesaid further and the same attained finality.
47. As would be evident from above, W.P.(C) No.3185/1996 also was not
in the nature of or akin to a claim for specific performance.
48. The plaintiff, after dismissal on 9th March, 1996 of W.P.(C)
No.3185/1996, did not approach any forum qua forfeiture of earnest money
or for refund/recovery thereof. The plaintiff however, after two years
CS(OS) No.86/2011 Page 23 of 35
therefrom, on 19th June, 1998 made another representation to the then Union
Minister of Urban Affairs and Employment and on which representation, the
plaintiff claims that the Union Minister of Urban Affairs and Employment,
notwithstanding the matter of cancellation of allotment having attained
judicial finality, took a decision of restoration of allotment of the plot to the
plaintiff. However, the plaintiff itself admits that the Union Minister who
took this decision was changed shortly thereafter and the said decision was
not honoured by the next incumbent and on the contrary vide letter dated
18th August, 1999, the representation dated 19th June, 1998 of the plaintiff
rejected.
49. The plaintiff thereafter started another round of litigation, by filing
W.P.(C) No.7251/1999. As per the order dated 15 th January, 2003 of
dismissal of the said writ petition, the challenge in the said writ petition was
to the review by the next incumbent, of the decision taken by the earlier
Union Minister, of restoration of plot of land to the plaintiff. It was found in
the order dated 15th January, 2003 of dismissal of W.P.(C) No.7251/1999
that the decision taken by the earlier Union Minister in favour of the plaintiff
had not been communicated to the plaintiff. It was held, (a) that the order
dated 9th September, 1996 of dismissal of W.P.(C) No.3185/1996 left no
manner of doubt that save for the challenge to forfeiture of earnest money,
no other issue survived for consideration; (b) that the representation dated
19th June, 1998 had been filed after a lapse of considerable period of time of
almost two years and that too after encashing the cheques for refund of the
amount in excess of the earnest money sent by the defendant DDA to the
plaintiff; (c) that the representation dated 19th June, 1998 was clearly an
CS(OS) No.86/2011 Page 24 of 35
afterthought; repeated representations to the government do not require the
government to hear and decide each such representation; (d) that the
decision taken by the Union Minister and which had been reviewed, was not
final; and, (e) that the plaintiff had had numerous rounds of litigation and
there was no occasion for the plaintiff to make a representation dated 19 th
June, 1998 after the dismissal on 19th September, 1996 of W.P.(C)
No.3185/1996.
50. The plaintiff preferred LPA No.282/2003 against the order dated 15th
January, 2003 of dismissal of W.P.(C) No.7251/1999 supra. LPA
No.282/2003 was dismissed vide judgment dated 20 th October, 2009. It was
held, (a) that mere writing on the file in the Ministry of Union of India does
not amount to an order; (b) that no order restoring the allotment of the plot
of land aforesaid in favour of the plaintiff had been issued; and, (c) that the
order dated 9th September, 1996 disposing of W.P.(C) No.3185/1996
concluded the issue against the plaintiff and a belated administrative
redressal sought two years thereafter could not resurrect the dead claim.
51. SLP(C) No.6049/2010 preferred by the plaintiff against the order
dated 20th October, 2009 supra of dismissal of LPA No.282/2003 was
dismissed in limine on 6th August, 2010.
52. Thereafter, this suit, as aforesaid, was filed on 21st December, 2010.
53. The contention of the senior counsel for the plaintiff, that the writ
proceedings taken by the plaintiff prior to the institution of the present suit
were akin to or in the nature of a claim for specific performance is thus
CS(OS) No.86/2011 Page 25 of 35
contrary to record. The question of the plaintiff being entitled to the benefit
of Section 24 of the Specific Relief Act thus, even otherwise does not arise.
54. However, even if it were to be held that the plaintiff is entitled to the
benefit of Section 24, as aforesaid, the challenge by the plaintiff to the
cancellation of allotment came to an end upon dismissal on 9 th March, 1996
of W.P.(C) No.3185/1996 and which order / judgment attained finality. Even
if the limitation of three years were to commence therefrom, the said
limitation lapsed on 8th March, 1999, eleven years prior to the institution of
this suit on 21st December, 2010. The plaintiff as aforesaid, after dismissal
on 9th March, 1996 of W.P.(C) No.3185/1996, though had opportunity to
challenge the forfeiture of earnest money and / or to seek refund thereof, did
not do so and accepted the refund of the monies over and above the earnest
money paid / deposited by the plaintiff and allowed the matter to rest for
over two years. The representation dated 19th June, 1998 made by the
plaintiff after two years has already been held as aforesaid to be not capable
of reviving the claim of the plaintiff which was dead by then. Even
otherwise, it is settled law that repeated representations or notices or
reminders do not extend the period of limitation. The plaintiff thus is not
entitled to count the period of limitation with effect from dismissal on 6 th
August, 2010 of the SLP preferred by the plaintiff against the dismissal of
LPA No.282/2003.
55. There is another aspect. Section 24 of the Specific Relief Act does
not bar the right of the plaintiff, whose suit for specific performance has
been dismissed, from claiming any other relief to which he may be entitled
by reason of breach of contract. Applicability of Section 24 thus pre-
CS(OS) No.86/2011 Page 26 of 35
supposes a finding in the judgment of dismissal of suit for specific
performance, of the plaintiff being not in breach. The relief of specific
performance is a discretionary relief and can be denied inspite of plaintiff
being not in breach. In the facts of the present case, from the judgment dated
14th February, 1996 of dismissal of W.P.(C) No.2253/1996 and from the
judgment dated 9th March, 1996 of dismissal of W.P.(C) No.3185/1996, it is
clear that it was the plaintiff who has been found to be in breach. Section 24
has no application to a plaintiff who is himself in breach of the agreement.
56. That brings me to Section 53B of the Delhi Development Act, 1957
which is as under:
―53B. Notice to be given of suits.- (1) No suit shall be instituted
against the Authority, or any member thereof, or any of its officers
or other employees, or any person acting under The directions of the
Authority or any member or any officer or other employee of the -
Authority in respect of any act done or purporting to have been done
in pursuance of this Act or any rule or regulation made thereunder
until the expiration of two months after notice in writing has been, in
the case of the office or place or abode of, the person to be sued and
unless such notice states explicitly the cause of action, the nature of
relief sought, the amount of compensation claimed and the name and
place of residence of the intending plaintiff and unless the plaint
contains a statement that such notice has been so left or delivered.
(2) No suit such as is described in sub-section (1) shall, unless it is a
suit for recovery of immovable property or for a declaration of title
there to, be instituted after the expiry of six months from the date on
which the cause of action arises.
(3) Nothing contained in sub-section (1) shall be deemed to apply to
a suit in which the only relief claimed is an injunction of which the
object would be defeated by the notice or the postponement of the
institution of the suit.‖
CS(OS) No.86/2011 Page 27 of 35
57. Per Section 53B(2), a suit, as described in sub-Section (1) and not
being a suit for recovery of immovable property and / or for declaration of
title thereto, is prohibited from being instituted after the expiry of six months
from the date on which the cause of action arises.
58. Section 29(2) of the Limitation Act provides that where any special
or local law prescribes for any suit, a period of limitation different from the
period prescribed by the Schedule, it is the provision in the special law that
will prevail and not the provisions of the Limitation Act. Thus the period of
limitation for a suit against DDA, prescribed in Section 53B, would not be
of three years even, but of six months only.
59. A Division Bench of this Court, in Durga Chand Kaushish Vs.
Union of India ILR (1971) II Delhi 350, held that the period of limitation
prescribed in Section 53B(2) is only for the category of suits falling under
sub-Section (1) and finding the suit in that case for refund of money
collected by DDA which DDA was not legally entitled to do and further
finding that the calculation of excess amount was not an act falling within
the scope of Delhi Development Act, it was held that there could be no
reduction of period of limitation therein.
60. It has thus to be determined, whether the receipt of earnest money and
forfeiture thereof by the defendant DDA is an act done or purporting to have
been done in pursuance to the Delhi Development Act or any Rule or
Regulation made thereunder.
CS(OS) No.86/2011 Page 28 of 35
61. The plaintiff, in its list of documents has filed as Annexure-4 thereto, a
copy of the bid and tender dated 30th November, 1994 issued by the
defendant DDA inviting the tenders in which the plaintiff had participated
and has in the list of documents itself mentioned the same to be under the
―Delhi Development Authority (Disposal of Developed Nazul Land) Rules,
1981‖. Similarly, as Annexure-5 to the said list, the plaintiff has filed
allotment letter dated 14th December, 1994 from the defendant DDA, again
under ―Delhi Development Authority (Disposal of Developed Nazul Land)
Rules, 1981‖. A perusal of the said documents also shows the allotment of
the land for which the plaintiff had bid, to be under the Delhi Development
Authority (Disposal of Developed Nazul Land) Rules, 1981 framed by the
Central Government in exercise of powers conferred by Section 56(2)(j)
read with Section 22(3) of the Delhi Development Act.
62. The said Rules provide for the manner of dealing by the defendant
DDA with the nazul land developed by or under the control and supervision
of the DDA. The said Rules, in Rules 29 and 32 thereof under Chapter III
titled ―Allotment by Auction‖ provides as under:
―29. Sale to the highest bidder - The officer conducting the
auction shall normally accept, subject to confirmation by the Vice-
Chairman, the highest bid offered at the fall the hammer at the auction
and the person whose bid had been accepted shall pay as earnest
money, a sum equivalent to 25 per cent of his bid and he shall pay the
balance amount to the Authority within fifteen day; of acceptance of the
bid or within such period as the Vice-Chairman may specify in the
public notice under rule 27 or in another public notice.
32. Forfeiture of earnest money - A person who fails to pay
the balance amount of the bid within the period provided in rule 29
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shall forfeit the earnest money and it shall be competent for the Vice-
Chairman to re-auction the plot.‖
63. The action of defendant DDA demanding and receiving the earnest
money of Rs.3.91 crores paid / deposited by the plaintiff, constituting 25%
of the total land premium and the receipt thereof by the defendant DDA and
the forfeiture thereof by the defendant DDA is thus governed by Rules
framed under the Delhi Development Act and this suit seeking refund of the
said earnest money is within the description contained in Section 53B(1) of
the Act and per Section 53B(2), the limitation for filing thereof was of six
months from the date the cause of action arose.
64. I would however be failing in my duty if do not notice some of the
other judgments of this Court qua Section 53B supra.
65. Delhi Development Authority Vs. H. Dohil Construction Co. AIR
1984 Delhi 124 was a suit for specific performance of contract to sell land
and was held to be a suit essentially for recovery of immovable property and
not within the scope of Section 53B(2).
66. Ram Dulari Vs. Delhi Development Authority 1995 (34) DRJ 129
was a suit for recovery of damages accruing from the action of the DDA of
demolishing the construction on the property of the plaintiff. It was held that
the act of demolition is integrally connected with the duties of the DDA and
covered by Section 53B(2) of the Act.
67. Lucky Star Estates (India) Pvt. Ltd. Vs. The Delhi Development
Authority AIR 2004 Delhi 428 was a suit for refund of earnest money with
interest. The Single Judge held the suit to be barred by limitation under
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Section 53B(2). However, the Division Bench in appeal found that the
cancellation of the bid was after one year and without disclosing any reason,
earnest money had been illegally retained. In these facts, Section 53B(2)
was held to be not applicable. I may however notice that the Delhi
Development Authority (Disposal of Developed Nazul Land) Rules, 1981
were not noticed and it was generally observed that auctioning of nazul land
was an act done under a contract but not required by the DDA Act.
68. For the reason of the finding in Lucky Star Estates (India) Pvt. Ltd.
supra, of the DDA having acted illegally and for the reason of the said
judgment not noticing the Rules aforesaid, I am humbly of the opinion that
the same does not bind me.
69. Mayurdwaj Cooperative Group Housing Society Ltd. Vs. Delhi
Development Authority 2011 (121) DRJ 317 (RFA (OS) No.0549/2011
preferred whereagainst was dismissed on 19th December, 2012) was a suit
for refund of composition fee collected by the DDA and finding that DDA
was not entitled to collect the composition fee, the suit was held to be not
within the ambit of Section 53B(2).
70. Fresh Assets Ltd. Vs. DDA MANU/DE/2632/2015 was a suit for
recovery of interest on the earnest money deposited with the DDA and
which was returned by DDA on its own, on sale being stayed by an order of
another Court. The plaintiff claimed interest for the period for which the said
money had been retained. With respect to the defence of Section 53B(2), it
was held relying on Lucky Star Estates (India) Pvt. Ltd. supra that the facts
of the subject case did not warrant the restriction of the larger period of
CS(OS) No.86/2011 Page 31 of 35
limitation prescribed under the Limitation Act to be whittled down to the
period prescribed under Section 53B(2) of the Act.
71. As would be obvious, in Fresh Assets Ltd. supra there was an
admission of the DDA of the DDA being not entitled to retain the earnest
money and DDA on its own had refunded the same but after some delay. It
was in this light held that the action of the DDA of retaining the monies was
not an act done or purported to have been done in pursuance of the Delhi
Development Act or any rule or regulation made thereunder and the said
judgment has no application to the facts of the present case.
72. I thus hold Section 53B(2) to be applicable and the limitation
available to the plaintiff being of six months only.
73. The suit having been filed beyond the said six months, whether
counted from 12th June, 1995 or from 9th March, 1996, is palpably barred by
time.
74. Though as aforesaid, the suit is liable to be dismissed but I may add
that as far as the invocation by the counsel for the plaintiff of Kailash Nath
Associates supra is concerned, though the defendant DDA undoubtedly in its
written statement has not pleaded any loss but at the same time, it cannot be
forgotten that the defendant DDA has been constituted for the purposes of
providing for the development of Delhi according to plan and for matters
ancillary thereto. The defendant DDA is not a body which carries out sale
of land for profit and sales and agreement to sell effected by it of land are for
public purposes. Though it cannot be said that the defendant DDA suffers
loss on account of breach of contract by the plaintiff which stands
CS(OS) No.86/2011 Page 32 of 35
established, as any other seller of land would suffer but breach of contract by
a purchaser of land from the defendant DDA results in public damage/loss.
It has been held in Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.
(2003) 5 SCC 705 that in such contracts, it is the public which suffers
damage and which damage is very difficult / impossible to
assess/compute/prove. The sale by the defendant DDA to the plaintiff in the
present case also was for the purpose of construction of a hotel and the
construction of the hotel has certainly been delayed on account of breach by
the plaintiff. Though it cannot be said that the defendant DDA had suffered
any loss on account of delay in construction of hotel but the loss has been
caused to the public at large which has been deprived of timely availability
of a facility of a hotel in the locality. In such circumstances, a pre-estimated
assessment of damage in the form of providing for forfeiture of earnest
money, in terms of Saw Pipes Ltd. supra, is in accordance with law. It was
held in Saw Pipes Ltd. supra that where in respect of situations, where it
would be difficult to prove exact loss or damage which the parties suffer
because of the breach, the parties having pre-estimated such loss after clear
understanding, it would be unjustified to arrive at the conclusion that the
party who has committed breach of the contract is not liable to pay
compensation and it would also be against the specific provisions of
Sections 73 and 74 of the Contract Act, 1872.
75. In the present case also, as aforesaid, breach on the part of the plaintiff
stands concluded by the judgments in the writ proceedings and it would be
unjustified to deny the pre-estimated damages to the defendant DDA.
CS(OS) No.86/2011 Page 33 of 35
76. I may further state that Kailash Nath Associates supra struck a note
slightly different from the position of law prevailing for sometime past
thereto, holding forfeiture of earnest money to be permissible. Need
however is not felt to elaborate the said aspect as the said aspect has recently
been discussed in detail in M.C. Luthra Vs. Ashok Kumar Khanna 2018
SCC OnLine Del 7462, and reference thereto alone is deemed to be
sufficient.
77. The plaintiff in this suit, besides claiming the relief of refund of
earnest money with interest, has also claimed interest on payments over and
above earnest money made by the plaintiff to the defendant DDA and which
have already been refunded by the defendant DDA to the plaintiff. Not only
would the claim for such interest be also barred by time for the reasons
aforesaid but I may also state that the said payments were made / deposited
by the plaintiff during the pendency of the writ proceedings and the plaintiff,
after the order dated 9th March, 1996 of W.P.(C) No.3185/1996 accepted
refund thereof. The claim if any of the plaintiff for interest on the said
payments, ought to have been made in the writ proceedings during the
pendency whereof the same were made and cannot be by way of this
independent suit.
78. Resultantly, IA No.13157/2016 of the plaintiff under Order XV Rule
3(1) read with Order XII Rule 6 of the CPC, though is allowed but instead of
the plaintiff being found entitled to a decree forthwith for money in its
favour, it is found that the suit claim is blatantly barred by time and not
maintainable.
CS(OS) No.86/2011 Page 34 of 35
79. Resultantly, the suit is dismissed.
80. The plaintiff is also burdened with costs of this suit of Rs.5 lacs,
payable to the defendant DDA.
Decree sheet be drawn up.
RAJIV SAHAI ENDLAW, J.
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