Mrs. Jaya Bhandari & Ors. vs M/S Malhan Builders & Ors. on 25 August, 2010

[Cites 21, Cited by 2]

Delhi High Court

Mrs. Jaya Bhandari & Ors. vs M/S Malhan Builders & Ors. on 25 August, 2010

1. By this appeal filed under Section 96 of the Code of Civil Procedure, 1908 the appellants seek setting aside of the judgment and decree dated 29.3.2005 passed by the learned ADJ whereby the suit for specific performance filed by the appellants for seeking execution of agreement dated 12.5.85 was dismissed.

2. Brief facts of the case relevant for deciding the present appeal are that the appellants purchased the third floor of the property bearing Plot No.15, Siri Fort Road, New Delhi from the respondents nos. 1 to 5 i.e the builders of the said property vide agreement to sell dated 12.5.85 for a consideration amount of Rs. 4, 80,000. The respondents nos. 6 to 15 are the owners of the said property and entered into a collaboration agreement vide agreement dated 1.6.1983 by virtue of which the respondent no. 6 to 15 had undertaken to execute sale deed in favour of the purchasers of the building constructed by respondents no. 1 to 5. Thereafter the respondents failed to execute the sale deed as per the RFA No.486-88/2005 Page 2 of 35 collaboration agreement in favour of the appellants and consequently the appellants filed a suit for specific performance which vide judgment and decree dated 29.3.2005 was decreed against the appellants. Feeling aggrieved with the same, the appellants have preferred the present appeal before this court.

3. Assailing the impugned judgment and decree Mr. V.P.Singh, learned Senior Advocate appearing for the appellants submitted that the learned trial court has committed grave illegality in dismissing the suit of the appellants seeking specific performance of the contract merely on the ground that the third floor/barsati floor of the suit property forming part of the sale transaction between the appellant and the builder i.e. respondent Nos. 1 to 5, was not constructed as per the building by-laws. The contention of the counsel was that there was no breach or violation of any of the covenants agreed upon by the appellants and the RFA No.486-88/2005 Page 3 of 35 respondents, therefore nothing could come in the way of the appellants to seek specific performance of the contract.

4. Counsel for the appellants further submitted that non-fulfillment of any condition either on the part of the owner or the builder cannot deprive the purchaser i.e. the appellants herein, to bind the builder to perform his part of obligation arising under the legally and validly executed agreement and such a right of the purchaser is indefeasible right which cannot be defeated merely on account of an unauthorized construction or some permission not taken from the competent authority or for some other violation either on the part of the builder or the owner.

5. Counsel for the appellants further submitted that the construction of excess area in the property in any case will not violate the provisions of Section 23 of the Indian Contract Act as at the most the construction of excess area can result in the demolition of the said excess area anticipating the worst scenario possible but construction of such excess area cannot RFA No.486-88/2005 Page 4 of 35 defeat the right of the purchaser to seek specific performance of the contract under the agreement to sell lawfully executed in his favour by the seller. Counsel for the appellant further submitted that in any event of the matter, the construction on the third floor already stands regularized by the MCD and the MCD has already issued a regularization plan after deposit of a compounding amount of Rs.1,14,716/- by the appellants. Counsel thus submitted that the plea of the construction on the third floor of the property being unauthorized or in violation of the MCD by-laws is no more available to the respondents once the said construction on the third floor having been regularized by the MCD. Counsel for the appellants also submitted that the owners i.e. respondent Nos. 6 to 15 have already registered a sale deed in respect of the second floor in favour of one Miss Surinder Sodhi who had also purchased the ground floor of the said property from the builders i.e. respondent Nos. 1 to 5. Counsel for the appellants also invited attention of this court to clause 11 of the Collaboration Agreement whereunder the owner has RFA No.486-88/2005 Page 5 of 35 undertaken to execute all the documents and agreements for the portions as allocable to the share of the builders under the collaboration agreement. Counsel thus submitted that the owners cannot escape from their liability to execute the sale deed in terms of clause 11 which gives right to the builders to transfer the portions of the said property as were allocated to their share which included even the unbuilt areas. Counsel thus submitted that the appellant is entitled to the execution of the sale deed in terms of clause 11 of the collaboration agreement. Counsel for the appellant also submitted that the non-fulfilment of any of the conditions in the collaboration agreement either on the part of the owner or the builder, which is not a part of the agreement to sell between the seller and the purchaser, cannot defeat the right of the purchaser to seek a specific performance. The contention of the counsel for the appellants was that it was obligatory on the part of the owners to execute the sale deed in favour of the appellants in terms of the collaboration agreement even in respect of the unauthorized construction and the relief of specific RFA No.486-88/2005 Page 6 of 35 performance of the contract based on agreement to sell between the seller and purchaser could not have been denied to the purchaser once he was found to be ready and willing to fulfill his part of the contract and when there was no complaint of any breach of contract on the part of the purchaser. Counsel thus submitted that the unsanctioning of the third floor in the property in question could not have created any bar in granting the decree for specific performance in favour of the appellants. Counsel thus submitted that the ld. Trial court has committed grave illegality by dismissing the suit of the appellants thereby denying the relief of specific performance. In support of his arguments counsel for the appellant placed reliance on the following judgments:-

1. S.K. Kochar Vs. Smt. Nimmi Singh & Ors 68 (1997) DLT 914

2. Ajit Prasad Jain Vs. N.K. Widhani & Ors. 38 (1989) DLT 456

3. R. Velammal Vs. R. Daivasigamani & Ors. AIR 1993 Madras 100 RFA No.486-88/2005 Page 7 of 35

4. Vegi Venkateswara Rao Vs. Vegi Venkatarama Rao AIR 1998 Andhra Pradesh 6

6. Opposing the present appeal, Mr. Ashok Gurnani, learned counsel appearing for the respondents submitted that there is no privity of contract between the appellants and respondent Nos. 6 to 15 and therefore the appellants cannot seek any relief or remedy against these respondents to enforce specific performance of the contract entered into between the appellants on one hand and the respondent Nos.

6 to 15 on the other hand. Counsel for the respondent further submitted that in terms of the collaboration agreement executed between the respondent Nos. 1 to 5 on one hand and the respondent Nos. 6 to 15 on the other hand, it was obligatory on the part of the builder to raise only lawful and authorized construction on the property in question after obtaining due sanctions from the MCD and the DDA in accordance with the by-laws of the MCD and in conformity with the Master Plan. Counsel thus submitted that since the respondent Nos. 6 to 15 raised an objection against the RFA No.486-88/2005 Page 8 of 35 unauthorized construction on the third floor of the property in question which also led to the revocation of the sanctioned plans, therefore the owners were not bound to execute the sale deed in favour of the purchasers through the builder. The contention of the counsel for the respondent was that due to the said breach and contravention of the terms of the collaboration agreement, the builder lost every right to get enforced the terms of the collaboration agreement against the owner and if the right which the builders could not have enforced against the owner, then how can the present appellants enforce their alleged right against the owners. Counsel thus urged that the appellants cannot be placed on a higher footing than the builders. Counsel for the respondents further submitted that the respondents are not a party to the agreement to sell dated 12.05.1985 executed between the appellants and the builders and therefore none of the covenants of the agreement to sell can be enforced by the appellants against the owners. Inviting attention of this court to clause 7 of the agreement to sell, counsel submitted that RFA No.486-88/2005 Page 9 of 35 the right to file a suit for specific performance has been given to the purchaser only against the builder and not against the owner. Counsel for the respondents further submitted that the owners and builders are bound by the terms of the collaboration agreement and once the builder commits any default or breach of the terms of the collaboration agreement then due to such breach on the part of the builder, even the builder cannot seek enforcement of the collaboration agreement and hence there arises no question of appellants who derived their alleged right from the builders to seek such enforcement. The contention of the counsel for the respondents was that the owners cannot be left high and dry or merely mute spectators in the event of violation committed by the builder in breach of the terms and conditions of the collaboration agreement. Counsel for the respondents further submitted that even in the suit filed by the appellants, no relief has been claimed by the appellants against the owner i.e. respondent Nos. 6 to 15 and the averments made in the plaint are mainly confined against the builder alone. RFA No.486-88/2005 Page 10 of 35

7. Counsel also submitted that even no demand notice was served by the appellants against the owners and in the absence of such a demand notice, the suit for specific performance against the owners is not maintainable. In support of this argument, counsel placed reliance on a short note of the Andhra Pradesh High court in the case of Baddam Prathapa Reddy vs. Chennadi Jalapathi Reddy 2008 (5) ALD 200 . Counsel for the respondents also placed reliance on Section 51 and 52 of the Indian Contract Act to support his argument that the promisor can be called upon to perform his promise only when the promisee is ready and willing to perform his reciprocal promises. In support of his arguments, counsel for the respondents placed reliance on the following judgments:-

1. Bal Krishna & Anr. Vs. Bhagwan Das (Dead) by L.Rs. & Ors. AIR 2008 SC 1786

2. Sita Ram & Ors. Vs. Radhey Shyam AIR 2008 SC 143 RFA No.486-88/2005 Page 11 of 35

8. I have heard learned counsel for the parties at considerable length and given my thoughtful consideration to the pleas advanced by them.

9. Before dealing with the arguments, it would be necessary to refer to certain admitted positions between the parties:-

i) There is an agreement to sell dated 12.05.1985 duly executed between the appellants as a purchaser and the respondent Nos. 1 to 5 being the builders/developers;

ii) There is a collaboration agreement dated 1.06.1983 duly executed between the owners i.e. the respondent Nos. 6 to 15 and the respondent Nos. 1 to 5 as builders;

iii) The owners i.e. respondent Nos. 6 to 15 are not party to the agreement to sell dated 12.05.1985;

iv) At the time of execution of the agreement to sell under the building by-laws of the MCD the builder could have raised construction of a Barsati on the third floor and accordingly construction of third floor was impermissible under the law;

v) Under the MPD-2021 the third floor has been allowed and the appellants have already paid the compounding RFA No.486-88/2005 Page 12 of 35 fee for getting the construction of the third floor regularized and sanctioned/regularization plan has already been issued by the MCD regularizing construction of the third floor;

vi) The appellants are in possession of the third floor of the property bearing Plot No. 15, Siri Fort Road, New Delhi since the inception;

vii) The respondent Nos. 1 to 5 did not contest the suit filed by the appellants before the ld. Trial court and the stand taken by them in the written statement supports the case of the appellants;

viii) The respondents no. 1 to 5 have not appeared before this court to contest the present appeal.

ix) Based on the collaboration agreement dated 01.06.1983, the builders had executed an agreement to sell in favour of the second floor purchaser and the respondent Nos. 6 to 15, the owners, have already executed sale deed in their favour but did not come forward to execute the sale deed in favour of the appellants due to the unauthorized construction on the third floor.

10 . In the background of the aforesaid undisputed facts, two short questions that arise in the present appeal are that :-

RFA No.486-88/2005 Page 13 of 35

1. Whether the relief of specific performance of contract can be denied to the appellants who are purchasers of the third floor of the property in question due to the existence of unauthorized construction on the third floor?

2. Whether in the absence of any privity of contract between the appellants and the owners any direction can be given to the owners to execute the sale deed in favour of the appellants in a suit for specific performance filed by the appellants based on agreement to sell executed between the appellants and the builders?

11 . So far as the answer to the first question is concerned, it has become more of an academic exercise as the MCD under the MPD-2021 has allowed raising of the third floor and that the appellants have already got the construction on the third floor regularized after paying the necessary compounding fee of Rs.1,14,716/-. Therefore, the plea of unauthorized construction coming in the way of the owners to execute the sale deed in favour of the appellants in terms of the collaboration agreement would not be available to them in the present circumstances. It is a settled law that an appeal is a continuation of the suit and therefore, this Court cannot shut RFA No.486-88/2005 Page 14 of 35 its eyes to this subsequent development of sanction of construction of the third floor which was the sole ground taken by the owners to deny execution of the sale deed in favour of the appellants.

12 . So far as the second question is concerned, it is an admitted case between the parties that the respondent Nos. 6 to 15 are not party to the agreement to sell executed between the appellants on one hand and the builders i.e. respondent Nos. 1 to 5, on the other hand. Under the collaboration agreement, the construction which could be raised by the builder was to be an authorized construction and not an unauthorized construction and at the relevant time it was not permissible to raise the third floor and therefore indisputably raising of the third floor by the builder was unauthorized. With the said unauthorized construction in place it is to be seen whether due to raising of the unauthorized construction on the said property, the owners had revoked the said collaboration agreement or the owners did not execute the RFA No.486-88/2005 Page 15 of 35 sale deeds in favour of the other purchasers through the same builder. To a question put by the court to the counsel for the respondents, the counsel clearly answered that there is no dispute pending between the owners and builders so far the collaboration agreement is concerned and certain disputes arose earlier, but they already stand resolved. It was also not disputed by the counsel for the respondents that the respondent Nos. 6 to 15 i.e. owners had executed the sale deed in respect of the second floor whose purchaser also entered into an agreement to sell through the same builder. 13 . Mr. V.P. Singh, Senior Advocate appearing for appellants placed reliance on the judgment of this Court in the case of Ajit Prasad Jain (Supra) where the court took a view that the relief of specific performance could not have been denied to the purchaser for want of permission from L&DO once the purchaser was found to be ready and willing to perform his part of the contract. Relevant para of the said judgment is referred as under:-

RFA No.486-88/2005 Page 16 of 35

"The permission from Land and Development Office is not a condition precedent for grant of decree for specific performance. In Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial & Ors. : [1964]2SCR495 the Supreme Court confirmed the decision of the Punjab High Court holding that if the Chief Commissioner ultimately refused to grant the sanction to the sale the plaintiff may not be able to enforce the decree for specific performance of the contract but that was no bar to the court passing a decree for that relief. The same is the position in the present case. If after grant of the decree of specific performance of the contract the Land and Development Office refuses to grant permission for sale the decree-holder may not be in a position to enforce the decree but it cannot be held that such a permission is a condition precedent for passing a decree for specific performance of the contract. I may also notice that Section 27(1) of the Urban Land (Ceiling and Regulation) Act, in so far as it imposes a restriction on transfer of any urban or urbanisable land with a building or a portion of such building, which is within the ceiling area, was declared invalid by Supreme Court in Maharo Saheb Shri Bhim Singhji Anantalakhshmi Pathabi Ramasharma Yeturi and others v. Union of India :

AIR1981SC234 and as such it may not be necessary to obtain permission under the said Act but that is not a matter with which I am concerned at this stage. Assuming such a permission is required that would be a matter for consideration after passing of the decree and at the stage of execution. No fault can be found out with the plaintiffs' anxiousness to take possession in terms of the agreement on payment of the amounts stipulated therein."

14 . The counsel for the appellants also placed reliance on the judgment of the Madras High Court in the case of R. Velammal (Supra) where the purchasers had agreed to purchase a property along with the encumbrances and the court took a view that no legal impediment could arise to RFA No.486-88/2005 Page 17 of 35 grant the relief of specific performance of contract where the purchasers themselves were willing to purchase the property along with the encumbrances. Relevant para of the judgment is referred as under:-

"10. In fact, the plaintiffs are ready and willing to purchase the A-Schedule property along with the encumbrance. PW 1 in his deposition has stated that the defendant is willing to execute the sale deed along with the encumbrance. Therefore when the plaintiffs are willing to purchase the A-Schedule property even along with encumbrance, the defendant cannot say that she is not in a position to execute the sale deed, since the A- Schedule property is not free from encumbrance. In the written statement, there is no pleadings with regard to the contingent contract as argued by the learned counsel for the appellant before this court. In the suit filed by the said Mehaboob Bivi, the injunction was only for restraining the defendant from interfering with her possession and enjoyment of the suit property. In fact, there is no injunction restraining the defendant from executing the sale deed in respect of the A-Schedule property. There is no clause in the sale agreement Exhibit A-32 to the effect that if there is any encumbrance, A-Schedule property cannot be conveyed. Both the plaintiffs and the defendant knew that the suit filed by the said Mehaboob Bivi was pending during the time when the sale agreement was executed. When the plaintiffs are willing to purchase the A-Schcdule properly with encumbrance, it is not open to the defendant to say that she cannot sell the A-Schedule property with encumbrance. The B-Schedule property was agreed to be sold if the purchasers came to the conclusion that 'A' Schedule property could not be sold on account of some unforeseen result of the suit filed by the said Mehaboob Bivi. Now it is seen that the pendency of the suit filed by Mehaboob Bivi cannot be an impediment in selling the A- Schedule property. Further the plaintiffs are willing to purchase the A-Schedule property along with RFA No.486-88/2005 Page 18 of 35 encumbrance. Hence the defendant cannot refuse to sell the A-Schcdule property."

15 . Counsel for the appellants also placed reliance on another judgment of Delhi High Court in the case of S.K. Kochar (Supra) where also the defendant never applied to seek permission under the Foreign Exchange Regulation Act, 1973 and the court took a view that such a permission cannot put an absolute bar for entering into an agreement and therefore relief for specific performance of contract in such a case could not be denied. The relevant para of the said judgment is referred as under:-

"The statement of the law in Story of Specific Performance is instructive and it has to be extracted to appreciate the view of the author which is as follows: In truth, the exercise of this whole branch of equity jurisprudence, respecting the recission and specific performance of contracts, is a matter of discretion in the Court; nor indeed, of arbitrary and capricious discretion, dependent upon the mere pleasure of the fudge, but of that sound and reasonable discretion which governs itself, as far as it may be, by general rules and principles; but at the same time which withholds or grants relief according to the circumstances of each particular case, when these rules and principles will not furnish any exact measure of justice between the parties.

IT is not possible to lay down any rules and principles which are of absolute obligation and authority to all cases, and therefore, it would be a waste of time to RFA No.486-88/2005 Page 19 of 35 attempt to limit to principles, or the exceptions which the complicated transactions of the parties, and the ever-changing habits of society may at different times, require the Court to recognise and consider. But from decided cases the following circumstances, conditions and incidents may be deduced to the factors to be taken into consideration 'the contract must be certain, unambiguous, mutual and upon a valuable consideration; it must be perfectly fair in all its parts; free from any misrepresentation, imposition or surprise; not an unconscionable or hard bargain; and its performance not oppressive upon the defendant; finally it must be capable of specific execution through a decree of the Court".

About obtaining permission from the Reserve Bank under the Foreign Exchange Regulation Act, 1973 it is the duty of the first defendant to have applied for the permission. She did not apply. therefore, the first defendant cannot be heard to contend that inasmuch as the permission had not been obtained from the Reserve Bank of India, the relief of specific performance should be denied to the plaintiff. Much water has flown under the bridge. Now in the light of the policy of the Government of India, the non-resident Indian can get permission if relevant facts are stated. The general policy of the Government is, if the non- residents are allowed to buy and purchase the property in India there will be free flow of business and other activities. therefore, the defense that the first defendant did not obtain permission from the Reserve Bank for the sale of the property is no defense at all. The well-known principle is one cannot take advantage of one's own wrong. In this connection, the decision of this Court reported in Ajit Prashad Jain v. N.K. Widhani and Others, :

AIR1990Delhi42 has to be noticed while dealing with the plea by the defendant agreement/vendor that the prohibition under Section 31 of the Foreign Exchange Regulation Act, 1973 would operate in case the agreement/ vendor had not obtained permission from the concerned authority under that act, the Court held: In support of the objection under this issue defendants have relied upon Section 31 of the Foreign Exchange Regulation Act,-1973. The contention of defendants is that defendant No. 2 is not a- citizen of India and as such he could not transfer or dispose of by sale settlement or otherwise any immovable property situate in India without prior permission of the Reserve Bank of India and as such the agreement to sell is void. In support of the contention that defendant 2 has acquired RFA No.486-88/2005 Page 20 of 35 citizenship of German Democratic Republic, reliance is placed on citizenship certificate dated 17.7.1970 (Ex. D6/1). It does appear from the said certificate that defendant No. 2 had acquired citizenship of German Democratic Republic but in my view that has no effect on the validity of the agreement in question. Section 31 of the Foreign Exchange Regulation Act on which reliance has been placed by the defendants only places a restriction on a foreign citizen on transfer or sale, mortgage lease, gift, settlement or otherwise of any immovable property situate in India except with the previous general or special permission of the Reserve Bank of India. The said provisions do not place any restriction on entering into agreement like Ex. Public Witness 2/1. The said provisions also do not place an absolute bar to the transfer or sale of any property at as such it cannot be said that the agreement itself will become void. It is well-settled that a contract for sale by itself does not create any interest in or charge on such property (see Section 54 of the Transfer of Property Act). Thus it cannot be held that the agreement is void on the objection raised in preliminary objection No. 4 based on Section 31 of the Foreign Exchange Regulation Act. The said provisions do not bar grant of relief of specific performance to the plaintiff and the question of permission of the Reserve Bank of India will arise, if at all at the stage of execution of the sale deed. Consequently, issue No. 5A is also answered against the defendants. Section 31 of the Foreign Exchange Regulation Act, 1973 reads as under : Restriction on acquisition, holding etc. of immoveable property in India ........................

Therefore, in any event there is no impediment for the plaintiff in getting the relief to specific performance. The plaintiff can apply to the Reserve Bank of India staling all the facts for permission and the Reserve Bank of India shall grant the necessary permission."

16 . Counsel for the respondent, on the other hand, placed reliance on the judgment of the Apex Court in the case of Bal Krishan & Anr. (Supra) to support his argument that relief for specific performance is a discretionary relief and the RFA No.486-88/2005 Page 21 of 35 court is not bound to grant such a discretionary relief merely because it is lawful to do so. Counsel for the respondent laid special emphasis on para 8 of the said judgment which is reproduced as under:-

"8. Section 16 of the Specific Relief Act, 1963 (hereinafter referred to as 'the Act') corresponds with Section 24 of the old Act of 1877 which lays down that the person seeking specific performance of the contract, must file a suit wherein he must allege and prove that he has performed or has been ready and willing to perform the essential terms of the contract, which are to be performed by him. The specific performance of the contract cannot be enforced in favour of the person who fails to aver and prove his readiness and willingness to perform essential terms of the contract. Explanation (ii) to clause (c) of Section 16 further makes it clear that plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction. The compliance of the requirement of Section 16(c) is mandatory and in the absence of proof of the same that the plaintiff has been ready and willing to perform his part of the contract suit cannot succeed. The first requirement is that he must aver in plaint and thereafter prove those averments made in the plaint. The plaintiff's readiness and willingness must be in accordance with the terms of the agreement. The readiness and willingness of the plaintiff to perform the essential part of the contract would be required to be demonstrated by him from the institution of the suit till it is culminated into decree of the court. It is also settled by various decisions of this Court that by virtue of Section 20 of the Act, the relief for specific performance lies in the discretion of the court and the court is not bound to grant such relief merely because it is lawful to do so. The exercise of the discretion to order specific performance would require the court to satisfy itself that the circumstances are such that it is equitable to grant decree for specific performance of the contract. While exercising the discretion, the court would take into RFA No.486-88/2005 Page 22 of 35 consideration the circumstances of the case, the conduct of parties, and their respective interests under the contract. No specific performance of a contract, though it is not vitiated by fraud or misrepresentation, can be granted if it would give an unfair advantage to the plaintiff and where the performance of the contract would involve some hardship on the defendant, which he did not foresee. In other words, the court's discretion to grant specific performance is not exercised if the contract is not equal and fair, although the contract is not void."

17. So far the contention of the counsel for the respondent that no demand notice was served upon the owners by the appellants is concerned; it would be suffice to say that the purpose of sending demand notice is to convey to the seller that the purchaser is ready and willing to perform his part of the contract. There is no provision in the Specific Relief Act which mandates the service of the demand notice by the vendee before seeking specific performance of the contract. Even under Article 54 of the Limitation Act, in an agreement of sale where no specific date for performance is fixed, three years period of limitation is to be reckoned from the date when the plaintiff has the notice of the refusal of performance RFA No.486-88/2005 Page 23 of 35 by the defendant. Hence, the short note in case of Baddam Prathapa Reddy (supra) relied upon by the respondent would be of no help. Even otherwise in the said judgment the Hon'ble High Court was of the clear view that this matter has to be gone into a little deeper in an appropriate case and has thus left the question open ended.

18. It is true that the respondent Nos. 6 to 15 are not privy to the agreement to sell dated 12.05.1985 but it is equally true that the respondent Nos. 1 to 5 had executed the said agreement to sell, deriving their power and authority from the collaboration agreement dated 1.6.1983 executed between the builders and the owners. In terms of clause 11 of the collaboration agreement, the respondent Nos. 1 to 5 were given the authority by the owners to execute all documents and agreements in favour of the purchasers. Clause 11 of the collaboration agreement is reproduced as under:-

"11. THAT the "OWNER" has undertaken to execute all documents, agreements and assurances as may be necessary and requisite to be extended and vouchsafed to the "BUILDERS" in respect of the property or purchase of the property allocable to the share of the RFA No.486-88/2005 Page 24 of 35 "BUILDERS". Accordingly, the "BUILDEERS" shall always be fully competent to transfer any part or portion built or unbuilt areas in the aforesaid out of the area allocable to the buildings project to any person at any time either before the building is completed or after the building is completed and by entering into agreement and accept cash, cheques, pay order, draft etc. from all such transferees on his own name and can issue receipts or all such payments; The "BUILDERS" have full discretion to put their sign board on the premises;"

19 . It is a matter of fact that in the suit for specific performance filed by the appellants, they have duly impleaded the owners as well as the builders. It is not in dispute that the appellants have already paid a substantial amount of the sale consideration to the respondent Nos. 1 to 5 i.e. a sum of Rs.3,86,000/- out of the total sale consideration amount of Rs.4,80,000/- and for the balance sale consideration amount of Rs.94,000/- the appellants have always shown their willingness to pay. The appellants in para 11 of the plaint have clearly averred that the respondent Nos. 6 to 15 are bound and liable to execute all necessary and requisite documents, agreements, etc. in terms of the collaboration agreement dated 1.6.1983 and in the prayer para also the appellants have sought a RFA No.486-88/2005 Page 25 of 35 decree for specific performance based on the agreement to sell dated 12.05.1985 against all the respondents. Therefore, this court does not find any merit in the argument of the counsel for the respondent Nos. 6 to 15 that no specific relief was claimed by the appellants/plaintiffs in their suit against respondent Nos. 6 to 15 to claim decree for specific performance against them. The agreement to sell dated 12.05.1985 cannot be taken into consideration independent of the collaboration agreement as the collaboration agreement is the soul of the agreement to sell. In the absence of the collaboration agreement neither the builders could have executed the agreement to sell in favour of the appellant nor the appellants could have come forward to purchase the third floor in question. As already stated above, in para 11 of the plaint there is a categorical averment made by the appellants holding these respondents liable to execute all necessary and requisite documents, agreements, etc in favour of the appellants. Even otherwise, the parties have entered the trial fully conscious of the controversy involved and the relief RFA No.486-88/2005 Page 26 of 35 being claimed by the appellants and therefore respondent Nos. 6 to 15 cannot be heard to say that no relief for specific performance was claimed by the appellants against the respondent Nos. 6 to 15. It is also a matter of record that in the written statement filed by the respondent Nos. 1 to 5, they have clearly supported the case of the appellants being fully entitled to get the sale deed executed in their favour in terms of the collaboration agreement read with the agreement to sell. The respondent Nos. 1 to 5 have squarely blamed the respondent Nos. 6 to 15 for not fulfilling their obligation arising under the said collaboration agreement. So far the respondent Nos. 6 to 15 are concerned, the main defence taken by them is that since respondent Nos. 1 to 5 did not raise the construction in accordance with the building by-laws of the MCD and as per the Zonal & Master Plan of DDA therefore they were not obliged to honour the terms of the collaboration agreement to execute the sale deed in favour of the appellants. The objection of privity of contract was also taken by these respondents in their written statement. The RFA No.486-88/2005 Page 27 of 35 Ld. Trial Court also declined the relief of specific performance to the appellants primarily on the ground that the alleged third floor of the suit property under sale was not constructed in accordance with the building by-laws and the defendant Nos. 6 to 15 being the lessees could not have executed the registered sale deed in favour of the appellants. The court also observed that by granting relief as prayed for by the plaintiffs, the court cannot perpetuate the wrong doings of the builders by granting a legal warrant in the form of relief to the plaintiffs.

20 . Indisputably, the court is not bound to grant decree for the specific performance of the contract simply because it would be lawful to do so, and thus a party approaching the court cannot claim specific performance as a matter of right. It is within the discretion of the court to decree a suit for specific performance after taking into consideration the totality of the facts of the case and when the question of discretion comes then necessarily it is not to be exercised RFA No.486-88/2005 Page 28 of 35 arbitrarily but should be based on sound judicial principles. The appellants in the present case have been denied the relief of specific performance only on the ground that the builders had raised unauthorized construction on the third floor of the suit property. It is no more in dispute between the parties that the construction of third floor has been allowed under the MPD 2021 and the appellants have already paid the necessary compounding fee of Rs.1,14,726/- and on the payment of the same, the MCD has issued the regularization plan. As a result of this subsequent development, the said plea of the third floor being an unauthorized construction is no more available to the respondent Nos. 6 to 15. The respondents have also not disputed the fact that based on the same collaboration agreement they have already executed sale deed in favour of the purchasers of the second floor of the property. The respondents No.6 to 15 have further not disputed the fact that there are no inter se disputes pending between them and respondents Nos. 1 to 5 arising out of the collaboration agreement. In the background of this scenario, the question RFA No.486-88/2005 Page 29 of 35 would arise that as to why the appellants should be denied the relief of specific performance of the contract when they have already paid the substantial amount of the total sale consideration amount in terms of the agreement to sell and as a part performance of the contract the possession of the suit premises was delivered to them. The respondent Nos. 1 to 5 who have supported the case of the appellants before the Ld. Trial Court have not come forward to contest the present appeal and it is the respondent Nos. 6 to 15 alone who have contested the present appeal but without giving any justifiable reasons as to why they are not prepared to execute the sale deed in favour of the present appellants in terms of the collaboration agreement. It is true that there is no privity of contract between the appellants and respondent Nos. 6 to 15 and the appellants cannot directly enforce terms of the agreement to sell against these respondents. However, in the facts of the present case, the appellants have duly impleaded these owners as defendants in the main suit and have also placed reliance on the collaboration agreement dated 1.6.1983 RFA No.486-88/2005 Page 30 of 35 and therefore the respondent Nos. 6 to 15 cannot be heard to say that the appellants are seeking a specific performance merely based on the agreement to sell dated 12.05.1985. The appellants are well within their rights to seek relief of specific performance of the contract based on the agreement to sell dated 12.05.1985 read with the said collaboration agreement dated 1.6.1983. Nowhere in the written statement these respondents have denied the execution of the said collaboration agreement and the dispute which was referred to in the written statement does not subsist any more and therefore there is no escape for these respondents but to execute the sale deed in favour of the appellants.

21. The reasoning given by the Ld. Trial Court for not granting relief to the appellants is that since the third floor of the property was not constructed in accordance with the building plans and the construction on the third floor has been raised beyond permissible limits in violation of the building by- laws and in such a scenario to grant relief to the appellant RFA No.486-88/2005 Page 31 of 35 would amount to perpetuating the wrong doing of the builder. This reasoning of the ld. Trial Court does not totally sound illogical as it was expected of the builder not to have raised the construction on the third floor in violation of the building plans and the floor area ratio but the more relevant question is that if such a construction has been raised by the builder in violation of the building plans then should such unauthorized construction come in the way of the owners not to execute the sale deed in respect of the third floor which floor has been lawfully sold by the builders to the appellants. It is not in dispute that the entire construction raised by the builders on the third floor was not illegal even at the time of execution of the said agreement to sell. It also cannot be in dispute that any portion constructed by the builder in excess of the floor area ratio and in violation of the building by-laws would have resulted in demolition of only that portion which was unauthorized. Further in terms of clause 9 of the collaboration agreement, for any violation committed by the builder they were to keep the owners harmless and RFA No.486-88/2005 Page 32 of 35 indemnified for any loss claims or demands resulted to the owners due to such non-performance or non-observance of rules and regulations. In the backdrop of these facts, it cannot be said that any illegality was committed by the builders in executing the agreement to sell in favour of the appellants for the sale of the third floor of the said property. As there was nothing illegal in the transfer of the third floor of the said property by the builders in favour of the appellants, therefore so far the said agreement to sell is concerned, the same can neither be treated as unlawful or void on account of unauthorized construction on the part of the builder on the said floor. This court is therefore of the considered view that the existence of unauthorized construction on the third floor of the said property could not have created any bar in the grant of decree for specific performance by the Ld. Trial Court in favour of the appellants and against the respondents. The existence of any unauthorized construction on the third floor would have certainly caused suffering to the purchasers i.e. the appellants herein or the same could have been at the RFA No.486-88/2005 Page 33 of 35 sufferance of the builders in terms of Clause 9 of the Collaboration Agreement had there been any loss occasioned to the owners as a result of raising of the illegal construction by the builder. Nevertheless, as already discussed above, this question in any case has now become academic since now the third floor construction already stands regularized by the MCD.

22 . In the light of the above discussion, this court is of the considered view that the appellants are entitled to the grant of decree of specific performance of the contract and accordingly the suit is decreed against all the respondents and in favour of the appellants. The impugned judgment and decree dated 29.03.2005 is accordingly set aside. The respondents are directed to execute the sale deed in favour of the appellants in terms of Clause 11 of the collaboration agreement dated 01.06.1983 within a period of one month from the date of this order and at the time of execution of sale deed the appellants shall pay the balance sale RFA No.486-88/2005 Page 34 of 35 consideration amount to the builders i.e. respondent Nos. 1 to 5.

23. Hence, the appeal is allowed.

KAILASH GAMBHIR, J August __, 2010 pkv RFA No.486-88/2005 Page 35 of 35

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Delhi High Court