On 14th December 2022, the Supreme Court in a Division Bench comprising of Justice Surya Kant and Justice Bela M. Trivedi observed that the high Court ought not to have made any fact-based observations especially when the records of the concerned courts were not requisitioned to reach an independent conclusion to hold that the finding of fact by the two courts was contrary to the record. (Desh Raj & Ors. Vs. Rohtash Singh)
Facts of the Case:
The subject matter of the original suit was a property situated in the revenue estate of village Tigra, Tehsil, and District Gurgaon which the Appellants jointly owned to the extent of their respective shares. Two separate agreements to sell were entered between the present parties for the Concerned Property on 17.02.2004. In the first agreement appellant, 1-4 sold their share to the concerned party, and in the second one appellant, 5 sold the share which accrued to her and her minor son. Appellant 5 was contractually bound to secure permission under The Hindu Minority and Guardianship Act, 1956 to sell the share of the minor.
The permission was obtained before the date of execution and was communicated to the respondent on 10.07.2004. the appellants appeared before the Sub-Registrar to execute the sale deed but the respondent failed. The last opportunity was given to the respondent but o his failure the Appellants forfeited the earnest money and treated the Sale Agreements as canceled.
In January 2006, the respondent filed suit seeking relief of specific performance of Sale Agreements and other consequential reliefs. But during its pendency, the land was acquired by the State of Haryana u/s 4 of the Land Acquisition Act, 1894. The trial court held that the Sale Agreements were either way rendered impossible to perform in view of the land acquisition proceedings and proceeded to grant a decree of recovery of earnest money on the principle of unjust enrichment.
The First Appellate Court upheld the decree granted by Trial Court on entirely identical reasons. The HC also upheld the decree passed by the concerned courts. Hence, giving rise to the Present appeal.
Contentions of the Appellants:
The counsel for the appellants submitted:
“The contractual performance of Sale Agreements needed to be mandatorily effectuated by the Respondent on or before the Date of Execution. He stated that the Appellants reiterated the same stance in their legal notices. The HC t has completely overlooked the fact that at the relevant period of time, there was no necessity to procure NOC under Section 7A of HUDA Act. Under Clause 8 of the Sale Agreements, it was the Respondent and not the Appellants, responsible to procure relevant NOCs. Hence, the onus to prove that steps were taken to obtain NOCs under Section 7A of the HUDA Act was on the Respondent which he miserably failed to discharge.”
The case of Satish Batra v Sudhir Rawal was referred.
Contentions of the Respondents:
The counsel for the respondents submitted that “the Appellants were unwilling and they failed to perform their contractual obligations, especially regarding securing NOC under Section 7A of the HUDA Act. Clause 8 of the Sale Agreements ought to be interpreted to mean that only such sanction or NOCs which the Respondent could obtain unilaterally, was his contractual obligation. The Sale Agreements had been rendered impossible as the State of Haryana lawfully acquired the suit land.
Hence, all the courts below have rightly directed the refund of the earnest money with interest. During the acquisition proceedings, the Appellants were successful in obtaining the release of land measuring 8 Marlas out of the acquired land as noted in the award dated 23.11.2011. the said property was still in possession of the Appellants who are guilty of suppression of material facts.”
Observations and Judgment of the Court:
The hon’ble court observed:
“On the dual factual premise that it was the clear intention of the parties to treat time as the essence of the contract and that there was an undue delay on behalf of the Respondent to institute the suit, the relief of specific performance cannot be granted. The bare reading of clause 8, spells out the intention of the parties in respect of the Respondent’s liability for obtaining the required NOC. We are bound to interpret the contractual terms in their literal sense and the respondent has led no evidence to indicate that he took any proactive steps to obtain the purported NOC necessary to execute the sale deed. Section 22 of the Specific Relief Act 1963 sub-Section (2) puts a caveat that the reliefs shall not be granted by the court unless “it has been specifically claimed”.
The proviso to sub-Section (2) further says that even if such relief was not specifically claimed in the plaint, it is the discretion of the Court to permit the plaintiff to amend the plaint “at any stage of the proceedings” and allow him to include the claim for refund of the earnest money or deposit paid. In a scenario where the contractual terms clearly provide the factum of the pre-estimate amount being in the nature of ‘earnest money’, the onus to prove that the same was ‘penal’ in nature squarely lies on the party seeking a refund of the same.
Failure to discharge such burden would treat any pre-estimated amount stipulated in the contract as a ‘genuine pre-estimate of loss’. We deem it appropriate to hold that the forfeiture was justified and within the confines of reasonable compensation as per Section 74 of the Contract Act in light of the fact that during the entirety of proceedings - firstly the nature of forfeiture was never contested by the Respondent and secondly the Respondent never prayed for the refund of earnest money.”
The appeal was allowed.
The judgments rendered by the concerned courts were rested aside and it was held that the suit is liable to dismiss.
Case: Desh Raj & Ors. Vs. Rohtash Singh
Citation: Civil Appeal No. 921 Of 2022
Bench: Justice Surya Kant and Justice Bela M. Trivedi
Date: December 14, 2022.
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