Mohan Exports (I) Pvt. Ltd. vs M.M. Sehgal
1997 Latest Caselaw 38 Del

JUDGMENT

Anil Dev Singh, J.

(1) This is a suit for specific performance of the agreement dated April 14, 1982 pertaining to two flats No. 204 and 205, Madhuban Building, Nehru Place, New Delhi. The facts as stated in the plaint are as follows :-

(2) The plaintiff is a deemed limited company. Defendants 1 and 2 are the Directors and shareholders of defendant No.3-M/s. Reliance International Corporation Pvt. Ltd. Defendant No.4 is a sister concern of defendant No.3. Defendant No.5 is the promoter and builder of the building Madhuban in which the above said two flats are situate. Defendant No.6 is the tenant of the above said two flats. Defendants 1 and 2 approached the plaintiff in the month of February 1982 for the sale of the above noted property. After some negotiations sale price of the property was settled at Rs.12 lacs. As a result of the negotiations the parties entered into the above said agreement whereby defendants 1 to 3 agreed to sell the flats for a total consideration of Rs.12 lacs to the plaintiff. The sale consideration was paid in the following manner :- Date of payment Amount Cheque/Draft No Bank 27.2.1982 2 Lacs 079164 Syndicate Bank New Delhi. 17.3.1982 4 Lacs 380201 Indian Bank New Delhi. 14.4.1982 6 Lacs Pay order No. State Bank of Patiala. 254468

(3) As per clause Iv of the agreement to sell, defendants 1 to 3 were to transfer the property in favour of the plaintiff in all respects on or before April 30, 1982. Since defendants 1 to 3 did not comply with the stipulation laid down in clause Iv of the agreement, the plaintiff on May 5, 1982 by means of separate letters to defendants 1 to 3 called upon them to take necessary steps to transfer the property in the name of the plaintiff. Earlier to that, on April 30, 1982 the plaintiff also wrote a letter to M/s. Ansal Properties and Industries Pvt. Ltd, defendant No.5, to intimate to it if there was any outstanding against the original buyer/owner of the flats and also to indicate the transfer charges for transferring the flats in its name. Pursuant to the letter of the plaintiff, defendant No.5 vide its communication dated May 5, 1982 intimated to the plaintiff that the owners had paid the full and final cost of the flats. Besides, the plaintiff was informed that the following documents had to be obtained and submitted along with the application in the prescribed form :- (A) A clearance certificate to the effect that all dues payable to the Estate Manager (Ansal Buildings) at Nehru Place have been paid as on the date of transfer, i.e., service charges, ground rent, etc. (b) A certificate from the Estate Manager to the effect that they have not encroached upon the common passage/corridor by putting up any unauthorised construction. (c) A photo copy of the Receipt issued by the M.C.D. towards 5 per cent transfer duty. This is payable to M.C.D. in the case of all transfers. (d) M.C.D. Receipts (photo copies) for payment of House-Tax."

(4) As defendants 1 to 3 did not respond to the letters of the plantiff dated May 5, 1982, the plaintiff by another letter dated June 8, 1982 reminded the defendants to fulfill their obligation under the agreement. This letter also failed to evoke any response from defendants 1 to 3. Ultimately, the plaintiff instituted the instant suit for specific performance against the defendants on June 11, 1982.

(5) Defendants 1 to 3 in their written statement, inter alia, pleaded that the suit was barred by the provisions of sections 14, 16 and 20 of the Specific Relief Act; that the suit was not maintainable and could not be specifically enforced; that the plaintiff had failed to complete the transfer by the stipulated date and violated the essential terms of the contract as contained in Clause Vi of the agreement; that the parties negotiated different transactions, the first transaction was negotiated in respect of sale of shares of defendant No.4 and a document to this effect was drafted by the plaintiff, which was sent to the answering defendants, and a sum of Rs.2 lacs was paid to defendant No.1 on behalf of defendant No.4 towards this transaction; that a further sum of Rs.4 lacs was paid in the name of defendant No.4 by the plaintiff towards the first transaction; that for the second transaction pertaining to flats No. 204 and 205, Madhuban Building, only a sum of Rs.6 lacs was paid and the remaining amount has not been paid till date; that the suit is malafide and has been filed to put pressure on the defendants to submit to plaintiff's demand of surrendering the suit property.

(6) Having regard to the pleadings of the parties the following issues were framed on February 15, 1993 :- "1. Whether the present suit is barred by the provisions of sections 14, 16 and 20 of the Specific Relief Act, OPD. 2. Whether the agreement in question cannot be specifically enforced as alleged in para 2 of the written statement (preliminary objections)? OPD. 3. Whether the plaintiff had not paid the entire sale consideration ? OPD. 4. Whether the plaintiff was ready and willing to perform its part of the contract ? OPP. 5. Whether defendants 1 to 4 had committed breach of the contract ? OPP. 6. Whether time was the essence of the contract? If so, to what effect ? OPD. 7. Whether the plaintiff negotiated two separate agreements - one for sale of the property in dispute and the other for the sale of the shares of defendant No.4? If so, to what effect ? OPD. 8. Whether there was no mutuality between the parties and,therefore,the suit is not maintainable? OPD. 9. Whether the plaintiff is entitled to mesne profits? If so, at what rate and for what period? OPP. 10. To what relief is the plaintiff entitled ?"

(7) As would be evident from the above said issues, the burden of proof of issues numbers 1, 2, 3, 6, 7 and 8 was on the defendants, while onus of proof in regard to the issues nos. 4, 5 and 9 was on the plaintiff. The plaintiff produced Mr. Ashwani Kumar Puri, Managing Director of the plaintiff company, as its witness. However, defendants 1 to 3, on the other hand, made a statement on April 15, 1985 that they would not like to lead evidence in the matter.

(8) First I will take up the following issues regarding which the onus was on defendants 1 to 4:- Issues No. 1, 2, 3, 6 , 7 and 8:

(9) The position with regard to issues numbers 1, 2, 3, 6, 7 and 8 is that defendants 1 to 4 have led no evidence in support thereof, and as such have not discharged the onus of proof placed on them. Learned counsel for defendants 1 to 3 have addressed no arguments in regard thereto. As such these issues are decided against defendants 1 to 4. Issues No. 4 and 5:

(10) In so far as issues nos. 4 and 5 are concerned, the same have to be appreciated in the light of the evidence adduced by the plaintiff. The plaintiff, as already stated above, produced Mr. Ashwani Kumar Puri, its Managing Director. As per the statement of Mr. Ashwani Kumar Puri (Public Witness -1) the parties entered into an agreement with regard to flats Nos. 204 and 205, Madhuban Building, on April 14, 1982. He stated that he came across defendant No.1 through a property broker; that defendant No.1 was interested in disposing of two flats bearing Nos. 204 and 205, Madhuban Building, Nehru Place, New Delhi, besides some other properties belonging to him as well as defendant NO.4; that on February 17, 1982 defendant No.1 visited his office and finalised the deal with respect to the two flats; that the total consideration for the two flats was Rs.12 lacs; that Rs.2 lacs were paid to him by means of a cheque drawn in his favour towards purchase of the two flats; that at that time no written agreement was executed, but defendant No.1 had delivered all the documents of title relating to the said properties; that he was interested in purchasing the property bearing No. 3, Friends Colony, but he found that there was some defect in the title of the defendant in respect of that property, therefore, he dropped the idea of purchasing the Friends Colony property; that on March 17, 1982 by means of a cheque a further sum of Rs.4 lacs was paid to defendant No.1 towards price of the flats in question; that the balance amount of Rs.6 lacs towards consideration of the flats was paid on April 14, 1982 and on that date the agreement was executed between the parties; that the agreement was signed by defendants 1 and 2 on behalf of Reliance International Corporation Pvt. Ltd.; and that the defendants were reminded for executing the sale deed but kept putting it off by postponing the date. The witness also testified to the fact that he had written letters Ext. P-1, Ext. P-3 and Ext. P-5 to the defendants for completing the transaction. In cross-examination the witness admitted that in the second week of February 1982 he had discussions about the properties in dispute, namely, 3 Friends Colony, the property at Safdarjung Enclave, and some other properties. The witness pointed out that property No. 3 Friends Colony was under acquisition of the income-tax department. He did not agree to the suggestion of the counsel for defendants 1 to 3 that he had paid money for the purchase of shares of defendant No.4.

(11) From the statement of Mr. Puri it is clear that the agreement was executed between the parties on February 14, 1982. The agreement records the payment of an amount of Rs.12 lacs by the plaintiff to defendants 1 to 3. Defendant No.1 executed three receipts, Ext. PW1/1 to Ext. PW1/3 acknowledging the receipt of Rs.12 lacs from the plaintiff. In the written statement filed by defendants 1 to 4 the agreement dated April 14, 1982 has been admitted. However, the said defendants have stated that the parties had negotiated two different transactions - the first transaction was in respect of sale of shares of defendant No.4 and the second transaction was with regard to the suit properties. It is further averred that the plaintiff did not pay the balance amount of Rs.6 lacs in respect of the second transaction relating to suit properties. It is note worthy that the defendants did not lead any evidence to prove their defense. There is no evidence on record to show that the parties had entered into two different transactions. In the agreement dated April 14, 1982 the payments of Rs.12 lacs by the plaintiff to defendants 1 to 3 in respect of flats Nos. 204 and 205, Madhuban Building, 55, Nehru Place, New Delhi, have been acknowledged. Learned counsel appearing for the defendants conceded that there was no evidence on record to show that the plaintiff and defendants 1 to 3 had entered into any other transaction besides the agreement dated April 14, 1982. He only submitted that at this distance of time it will be inequitable to grant a decree of specific performance in favour of the plaintiff. He submitted that instead of granting a decree for specific performance the plaintiff could be adequately compensated in monetary terms. In support of his submission learned counsel relied upon a decision of the Supreme Court in Kanshi Ram v. Om Prakash Jawal & others, . In that case the Supreme Court instead of granting decree for specific performance of the contract directed the vendor to pay a sum of Rs.10 lacs to the vendee. In this regard, the Supreme Court held as follows :- "....THEquestion that arises for consideration is: whether it would be just, fair and equitable to grant the decree for specific performance ? It is true that the rise in prices of the property during the pendency of the suit may not be the sole consideration for refusing to decree the suit for specific performance. But it is equally settled law that granting decree for specific performance of a contract of immovable property is not automatic. It is one of discretion to be exercised on sound principles. When the court gets into equity jurisdiction, it would be guided by justice, equity, good conscience and fairness to both the parties. Considered from this perspective, in view of the fact that the respondent himself had claimed alternative relief for damages, we think that the courts would have been well justified in granting alternative decree for damages, instead of ordering specific performance which would be unrealistic and unfair. Under these circumstances, we hold that the decree for specific performance is inequitable and unjust to the appellant. The appeal is accordingly allowed. The appellant shall not again sell the property for five years. The respondents will be paid a sum of Rs.10 lakhs within a period of three months from today. In case the respondents avoid receipt of the amount within the stipulated time, it would be open to the appellant to deposit the same to the credit of the plaintiff in the trial Court. In case of default, the decree would stand confirmed. No costs. "

(12) It may be mentioned that in that case the admitted position was that the agreement to sell relating to property measuring 100 square yards situated in Lajpat Nagar was executed on April 7, 1969. Out of the total sale consideration of Rs. 16,000.00 only a sum of Rs.2,500.00 was paid by the proposed vendee to the proposed seller as earnest money. The proposed vendee filed the suit on July 13, 1970 for specific performance of the agreement and also claimed in the alternative damages to the tune of Rs.12,000.00 with interest payable thereon. The trial court granted a decree of specific performance which was upheld by the High Court in appeal. As already pointed out, the proposed vendee had merely paid a sum of Rs.2,500.00 as earnest money which means he paid only about 8% of the sale consideration of the property whose market value was in lacs. By merely investing Rs.2,500.00 the prospective vendee was seeking to acquire a property worth lacs. Upholding a decree for specific performance in these circumstances would have been inequitable. However, in the instant case the position is different. The plaintiff had paid the full sale consideration of Rs.12 lacs at the time of the execution of the agreement itself. If the argument of the learned counsel for defendants 1 to 3 is accepted it will amount to putting premium on their deliberate failure to carry out the terms and conditions of the agreement. As per clause Iv of the agreement, defendants 1 to 3 were required to complete the sale transaction on or before April 30, 1982. The plaintiff had discharged its obligation by paying the sum of Rs.12 lacs to defendants 1 to 3 and nothing more had to be done by it. It was the duty and obligation of defendants 1 to 3 to complete the transaction in accordance with the stipulations made in the agreement. Since defendants 1 to 3 failed in discharging their obligation they cannot, at this stage, complain about the delay which has taken place during the proceedings of the suit. It may be pointed out that while the agreement was to be completed by defendants 1 to 3 on or before April 30, 1982, the plaintiff filed the present suit on June 11, 1982. Therefore, there was no delay on the part of the plaintiff in filing the suit. Besides, the plaintiff vide Exhibits P-1, P-3 and P-5, all dated May 5, 1982 and Exhibit PW1/7 dated June 8, 1982 reminded defendants 1 to 3 to complete the transaction as per the agreement. The plaintiff also by its letter dated April 30, 1982 (Ext. PW1/4) requested the promoter of the building to indicate the transfer charges for transferring the flats in its name. Therefore, it is clear that the plaintiff was always ready and willing to perform its part of the agreement and it was defendants 1 to 3 who had been delaying and procrastinating the execution of the conveyance and had committed breach of the same. Accordingly, issues 4 and 5 are decided in favour of the plaintiff. Issue No. 9:

(13) At the outset it may be pointed out that by order dated November 4, 1982, defendant No. 6 was directed to deposit arrears of rent due from November 1, 1982 with the Registrar of this Court. Besides, it was directed that defendant No. 6 will deposit the rent with the Registrar of this Court and the same would be subject to the result of the suit.

(14) As already noticed, the plaintiff had paid the entire consideration of Rs.12 lacs to defendants 1 to 3 on April 14, 1982 when the agreement was executed between the parties. Therefore, since the plaintiff had performed its obligation and had paid the entire sale consideration, the rent of the property in all fairness, equity and law should go to the plaintiff. The mere fact that defendants 1 to 3 did not complete the transaction by the stipulated date is no justification for them to claim the rent of the property in question. The plaintiff is, therefore, held entitled to the amount of rent which had been deposited by defendant No.6 till date along with interest. Issue No. 10:

(15) In view of the finding on the issues, a decree for specific performance in respect of Flats No. 204 and 205, Madhuban Building, Nehru Place, New Delhi, is passed in favour of the plaintiff and against defendants 1 to 3. Defendants 1 to 3 are also directed to execute the necessary documents within six weeks. Defendant No. 5 will receive the requisite charges from the plaintiff and record the transfer of the ownership of the flats in favour of the plaintiff.

(16) Defendant No. 6 will hereafter pay the rent directly to the plaintiff. The deposits made by defendant No. 6 of the arrears of rent as also the rent will be released in favour of the plaintiff forthwith.