Kailash Nath And Associates vs Delhi Development Authority And ...
2007 Latest Caselaw 1681 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 2548

1. The plaintiff, a registered partnership firm having its office at 1006 Kanchenjunga, 18 Barakhamba Road, New Delhi-110001, acting by and through its registered partner, has instituted the present suit for specific performance of an agreement to sell of a plot of land bearing no. 2A, measuring 897.84 sq. meters, Bikaji Cama Place, District Centre, New Delhi (hereinafter referred to as the said plot) against defendants no. 1 and 2 being Delhi Development Authority, Vikas Sadan, INA, New Delhi and Union of India, Ministry of Urban Development, Government of India, Nirman Bhawan, Maulana Azad Road, New Delhi- 110011 respectively. In the alternative, the plaintiff claims for a sum of Rs. 3.12 crores as damages and/or for the recovery of Rs. 78 lakhs along with interest from the date of the deposit of the said amount till payment thereof.

2. The plaintiff being the highest bidder in the auction held on 19-01-1982 of the said plot by defendant no. 1 deposited a sum of Rs. 78 lakhs with defendant no. 1 being 25% of the bid on the date of the auction i.e. 19-01-1982 as per the terms and conditions of the said auction. The said amount is still lying with defendant no. 1.

3. Defendant no. 1 vide its letter dated 18-02-1982 (Ex.P-3) communicated to the plaintiff its acceptance of the bid of Rs. 3.12 crores and there upon an agreement to transfer the said plot was entered into between the plaintiff and defendant no. 1.

4. As per the terms and conditions of the auction as stated in the printed brochure (Ex.P-1) brought out by defendant no. 1 in relation to the perpetual leasehold rights of the said plot, the highest bid was subject to the acceptance of the Vice-Chairman of defendant no. 1 or such officer as may be authorized by him in that behalf and upon such acceptance being communicated to the intending purchaser, the said intending purchaser had to pay the remaining balance 75% amount of the bid to defendant no. 1 within three months thereof and in the case of the plaintiff the said time period was to expire on 17-05-1982.

5. It is the case of the plaintiff that at the time when the said auction was held, the highest bidders/allottees of several commercial plots auctioned by DDA were facing difficulties in the matter of payment of the entire bid amount within the time frame of three months from the date of acceptance of the bid, similarly prescribed in all auctions held by defendant no. 1. For the said purpose, representations were made to defendant no. 1 by the auction-purchasers including one Rajdhani Estate Promoters and Builder Associates and the partner of the plaintiff for granting extension of time for Page 2549 making payment of the entire bid amount on 05-05-1982 wherein defendant no. 1's chairman informed the members of the Association including the plaintiff's partner that a Committee had to be set up for the same and it was required from the members of the association and the plaintiff to meet the said committee.

6. The plaintiff's partner and the members of the Association held several meetings with the said Committee and the recommendations of the said committee were submitted to defendant no. 1 on 21-07-1982 inter alia recommending a time schedule along with interest to be prescribed beyond the period of three months for payment of the balance bid amount and further granting extension of time in all auctions held on or after 01-01-1982 where amounts were outstanding beyond the due date of payment. Such recommendations were accepted by defendant no. 1 and vide letter dated 11-08-1982 (Ex.P-8) granted the plaintiff extension of time till 28-10-1982.

7. The matter did not end at that since the association including the plaintiff made further representations to defendant no. 1 for grant of more time and concessions in the matter of interest to be paid for the period of delay in making the payment on account of the fact that there was a general recessionary trend in the real estate market. Defendant no. 1 being satisfied with the representations made, constituted yet another high powered committee vide its resolution no. 24-A dated 13-01-1983 (Ex.DW2/P-3) for the said purpose and made recommendations to defendant no. 1 to grant permission to the said auction purchasers to commence development/construction work on their respective sites subject to safeguards that defendant no. 1's title remained intact till the total financial liability is discharged by the auction purchasers and that the said auction purchasers be asked to deposit such sum equivalent to 50% of the bid amount within a period of 90 days from the date of the notice. Further that the said auction purchasers be granted permission to pay the balance bid amount in installments. The report of such recommendations made by the committee to defendant no. 1 were referred to defendant no. 2 and there upon defendant no. 2 advised defendant no. 1 to dispose of the cases in the light of the recommendations made by the said committee. Accordingly, defendant no. 1 vide its resolution no. 121 dated 14-05-1984 (Ex.DW2/P-4) resolved to decide each case on the basis of such recommendations. However, defendant no. 1 failed to take any decision in terms of the resolution no. 121 dated 14-05-1984 qua the plot of the plaintiff in spite of the repeated letters sent to defendant no. 1 dated 9-12- 1985 (Ex.P-11) , 20-10-1986 (Ex.P-12), 10-12-1986(Ex.P-13), 10-02-1987(Ex.P-14), 11-04-1987(Ex.P-16), 10-08-1987(Ex.P-17) and 10-10-1987(Ex.P-18) calling upon defendant no. 1 to give an offer of deposit of balance 25% of the premium so as to bring the total payment equivalent to 50% of the total premium and to release the possession of the plot to the plaintiff for construction purposes as per the said resolution.

8. It is the case of the plaintiff that while the other builders including M/s. Ansal Properties and M/s. Skipper Construction Co. Pvt. Ltd. who were similarly situated as the plaintiff, were allowed to avail the said offer in Page 2550 terms of the recommendations of resolution no. 121 dated 14-05-1984 (Ex.DW2/P-4), the plaintiff for some reason was not permitted to avail the said offer. Further the plaintiff states that due to the silence being maintained by defendant no. 1 in the matter, the plaintiff was suffering irreparable loss in as much as had the plaintiff been allowed to deposit the balance 25% bid amount in 1984 itself and given possession of the plot for construction purposes, the plaintiff would have in the mean time also commenced and even completed the work of the construction of the multi-storeyed building.

9. The plaintiff states that it was only on 01-12-1987 that defendant no. 1 vide its letter (Ex.P-19) communicated to the plaintiff that before the case of the plaintiff was examined, the plaintiff was required to give its consent for making payment of the balance amount of 25% premium within the period to be fixed together with interest on the belated payment. The plaintiff on the very same day i.e. 01-12-1987 vide its letter (Ex.P-20) communicated its consent to defendant no. 1 requesting defendant no. 1 to convey its formal approval to enable the plaintiff to make the said payment as requested for. However, defendant no. 1 again maintained its silence forcing the plaintiff to make recurring representations again to the defendants dated 06.09-1988 (Ex.P-21) and 14-02-1989 (Ex.P-23).

10. In such circumstances the plaintiff filed a writ petition before this Court for directions to be issued to defendant no. 1 to treat the case of the plaintiff in terms of the resolution no. 121 dated 14-05-1984 and to follow the scheme with regard to payment of the balance bid amount as followed by defendant no. 1 in the case of other similarly situated auction purchasers. It was however held to be a case arising out of a contract between the parties and hence not amenable to jurisdiction under Article 226 of the Constitution. This was so held by an order dated 02.09.1993 (Ex.P-24) mainly on the submission of defendant no. 1 that there was no case of violation of Article 14 of the Constitution of India since the land of the builders who had been given extension of time for making the said balance payment of the bid amount were Nazul Land and defendant no. 1 was bound by the instructions issued by defendant no. 2 and the land of the plaintiff was non-Nazul land and the question of defendant no. 2 issuing any directions did not arise. The plaintiff filed an SLP before the Apex Court aginst the order of dismissal of the writ petition, but the said SLP was also dismissed in liming on 16-12-1993 (Ex.P-25).

11. In the meantime, defendant no. 1 vide its letter dated 06-10-1993 (Ex.P-26) informed the plaintiff that the bid/allotment of the said plot in question had been cancelled and the earnest money amounting to Rs. 78 lakhs deposited by the plaintiff at the time of auction had been forfeited.

12. Hence, the plaintiff has moved a Review Petition before the Apex Court to reconsider its decision rejecting the SLP (stated to be still pending when the suit was filed) and has filed the present suit for specific performance and/or recovery of the earnest money amounting to Rs 78 lakhs being deposited by the plaintiff at the time of auction.

Page 2551

13. It is the case of the plaintiff that the action of defendant no. 1 in purporting to cancel the bid/allotment of the said plot in favor of the plaintiff and in forfeiting the amount of Rs. 78 lakhs is bad in law and not binding on the plaintiff and that the plaintiff is entitled to specific performance of the agreement to sell against defendant no. 1.

14. It is averred by the plaintiff that prior to the action taken by defendant no. 1 of purporting to cancel the bid and forfeiting the deposit of Rs. 78 lakhs, defendant no. 1 did not inform the plaintiff of its intention to do so and/or call upon the plaintiff to perform the agreement.

15. The plaintiff states that defendant no. 1 has misled this Court and the plaintiff by an act of deliberate deception by not bringing the complete facts and circumstances into light. The plaintiff states that the main ground taken by the plaintiff in the writ proceedings was that defendant no. 1 had not granted extension of time for balance/bid money to the plaintiff as was granted to other similarly situated builders and to elucidate the said plea the example of a plot at Jhandewalan allotted to M/s Skipper Construction Co. Pvt. Ltd. was given. Further the plaintiff states that defendant no. 1 made a false affidavit in the writ proceedings by stating that Jhandewalan land was Nazul land in view of the fact that the said land is not a Nazul land which is stated to be in a noting dated 16-08-1984 of defendant no. 2 and that the second high powered committed was primarily set up to consider the said case and others similar to it.

16. Keeping the above said in mind, the plaintiff further states that since the permission in respect of the payment of balance bid amount was granted to non- Nazul land also by defendant no. 1, the plaintiff being equally placed must also be treated in a similar manner.

17. The position put forth by the plaintiff is that the said Committees were set up to look into the question of grant of extension of time for balance of the bid amount irrespective of the category of land and that the decision of the said committees were not limited to a particular class of land. Hence, defendant no. 1 having advocated the case of the plaintiff cannot deny the same now on the ground that the plaintiff's plot is a non-Nazul land.

18. The plaintiff further states that the amount of Rs. 78 lakhs has throughout been lying deposited with defendant no. 1 and the plaintiff at no time has withdrawn the said amount or expressed an intention to do so thereby affirming its readiness and willingness to perform its part of the agreement.

19. The plaintiff also submits that prior to the filing of the counter affidavit by defendant no. 1, the plaintiff was never informed by defendant no. 1 that its case was not covered by the recommendations of the said committees. In fact the case of defendant no. 1 was that defendant no. 1 itself for the first time through a letter dated 01-03-1990 of defendant no. 2 came to know that it did not require any instructions from defendant no. 2 in the matter of the plot of the plaintiff.

20. The stand of the defendant in the written statement is that the plaintiff has instituted the said suit for the same relief as claimed under the writ petition and then the SLP which stand dismissed earlier therefore Page 2552 the present suit is barred under law by the principle of res judicata / constructive res judicata.

21. The defendant also claims that the plaintiff has sought the decree of specific performance of the agreement to sell dated 18-02-1982 by the suit filed in February, 1994 which is thus barred by time.

22. The defendant has admitted to the fact that a sum of Rs. 78 lakhs stand deposited with it by the plaintiff on account of the auction held on 19-01-1982 as earnest money as per the terms and conditions of the auction and that there was an acceptance of the bid in favor of the plaintiff vide its letter dated 18-02-1982 demanding the balance required to be deposited within three months from the date of such issue of the demand letter.

23. The defendant also admits to the correspondence between the parties in relation to grant of extension of time in respect of balance bid amount to be paid to defendant no. 1 by the plaintiff stating that vide its letter dated 11- 08-1982 (Ex.P-8), defendant no. 1 had clearly specified the schedule of the payment to be made till 28-10-1982 and that the plaintiff would not be granted any extension of time beyond the specified period and in case it failed to make the said payment the bid would stand automatically cancelled and the earnest money would stand forfeited. Since the plaintiff did not make the payment as per schedule, the bid stood cancelled and the earnest money stood forfeited.

24. It is the case of the defendant that merely because the plaintiff made representations thereafter for further extension of time and that its representations were considered, does not give the plaintiff a fresh cause of action and also that defendant no. 1 through it letter dated 06-10-1993 (Ex.P-26) did convey the same to it.

25. Defendant No. 1 further states that the said plot in question has already been re-auctioned on 23-02-1994 in favor of one M/s. Great Eastern Shipping Co. Ltd. for Rs.11,78,00,000/- out of which Rs.3 crores has already been deposited with defendant no. 1, subsequent to the dismissal of the writ petition and the SLP filed by the plaintiff. Thus, the defendant's case is that the plaintiff is not entitled to any specific performance and/or damages as the bid has rightly been cancelled and the earnest money forfeited making the present suit not maintainable under law.

26. On the basis of the pleadings of the parties, the following issues were framed on 10-03-1997 and 03-11-1999:

Whether the plaintiff is entitled to the relief of specific performance?

Whether the plaintiff is entitled to the relief of damages paid for alternative recovery of Rs. 3.12 crores?

Whether the suit is in time?

Whether the plaintiff is entitled to the refund of Rs. 78 lakhs with interest and if so at what rate and from what period? OPP

Whether the suit is barred by principles of res judicata/constructive res judicata? OPP

Page 2553

Relief

27. In support of its case, the plaintiff examined two witnesses, Shri Sandeep Khanna (PW1), working as a partner in the registered partnership firm of the plaintiff and Shri Manmohan Sharma (PW2), working as a chartered accountant in the plaintiff's partnership firm. The defendant has also examined two witnesses namely Shri A.K. Dev (DW1) and Shri Raj Pal Yadav (DW2).

28. The PW1 in its affidavit has reaffirmed the facts as stated in the plaint. He has also identified the signatures of Shri Kailash Nath and has proved the documents Ex. Nos. PW1/1 to PW1/11 and Ex. PW1/20. In the examination in chief of PW-2, it is stated that defendant no. 1 was only to receive the balance sum of Rs.2.34 crores from the plaintiff and if interest @ 18% p.a. is added to the said amount till the date of the re-auction, defendant no. 1 would have been entitled to a sum of Rs.7.39 crores only. On the contrary, it has received Rs.11.78 crores on re-auction. Thus, defendant no. 1 has benefited by nearly Rs.4.5 crores while the plaintiff is claiming compensation only of Rs.3.12 crores.

29. Defendant no. 1 in its reply to the interrogatories has admitted that the plaintiff was referred to the First and the Second High Powered Committee. In the cross examination of DW-2, it has been admitted that the plaintiff was permitted to pay the balance sale consideration even after the stipulated time. It was also stated that defendant no. 1 has not produced any record that the bid was treated as automatically cancelled and that the plaintiff was not told that its land was non-Nazul and therefore the said recommendations were not applicable to the plaintiff.

30. On perusal of the pleadings, documents and the oral evidence, the findings on the issues are as under:

Issue No. 1 : Whether the plaintiff is entitled to the relief of specific performance?

31. At the time of filing the present suit, the plaintiff had applied for an interim relief to restrain defendant no. 1 from re-auctioning the said plot but the said relief was not granted and the plot was re-auctioned by defendant no. 1 on 23-02-1994. Thereafter the successful bidder has constructed a multi-storeyed building on the said plot and sold the flats therein to third parties.

32. The auction of the said plot by defendant no. 1 to the plaintiff was held on 19-01-1982. Subsequently, there were correspondence between the plaintiff and the defendants in relation to extension of time for payment of the balance bid amount. It is only in September, 1993 that the plaintiff filed a writ petition in respect of the same, which is almost ten years thereafter. This means that defendant no. 1 has already suffered as it was refrained from re-auctioning the said plot and also it cannot be lost sight of the fact that such re-auction of the said plot was undertaken by defendant no. 1 only after dismissal of the said SLP filed by the plaintiff on 23-02-1994.

33. Specific performance is an equitable relief where balance of equities has to be struck taking into account all relevant aspects of the matter. Before decreeing specific performance, it is obligatory for courts to consider Page 2554 whether by doing so any unfair advantage would result for the plaintiff over the defendant, the extent of hardship that may be caused to the defendant and if it would render such enforcement inequitable, besides taking into consideration the totality of the circumstances in each case.

34. Taking the aforesaid into consideration, I am of the view that since the said plot has already been re-auctioned and thereafter construction on the said plot has already taken place with the flats being sold to the third parties, in such circumstances it would not be reasonable and equitable to grant a relief of specific performance to the plaintiff. In fact, learned Counsel for the plaintiff could not seriously press this issue though he did not concede the same.

35. The issue is answered against the plaintiff.

Issue No. 2 : Whether the plaintiff is entitled to the relief of damages paid for alternative recovery of Rs.3.12 crores?

Additional Issue No. 1: Whether the plaintiff is entitled to the refund of Rs.78 lakhs with interest and if so at what rate and from what period? OPP

36. Issue No. 2 and additional issue no. 1 being interrelated are taken up together. The parties to the present suit have admitted to the fact that by way of an auction held on 19-10-1982, the plaintiff had made a bid of Rs.3.12 crores and deposited 25% thereof i.e. Rs.78 lakhs with the DDA on 19-01-1982 itself. As per the terms of the auction (Ex P-1), in case of default, breach or non- compliance of any of the terms and conditions of the auction by the bidder or by the intending purchaser, the earnest money would stand forfeited.

37. The balance bid amount of Rs. 2.34 crores which was to be initially deposited within a period of 90 days from the date of the issuance of the letter of acceptance was subsequently changed to three months vide letter dated 12-03-1982 (Ex. P-4) by defendant no. 1. The plaintiff was thus required to pay the balance consideration by 17-05-1982 which was not acceptable to the plaintiff.

38. In relation to the same, representations were made by the plaintiff and other successful bidders to the DDA for extension of time for deposit of the balance bid amounts. Thereafter, a High powered committee was constituted by DDA wherein recommendations were made (Ex. DW-2/P-1) to DDA which were accepted vide its letter (Ex. P-6) granting 15 days extension to the plaintiff and others to deposit the balance bid amount by 28-10-1982.

39. The plaintiff and the other bidders were still not satisfied and further representations were made. Consequently, defendant no. 1 on 13-01-1983 vide Ex. P-31 constituted a second high powered committee which vide Ex. DW-2/P-3 recommended that the auction purchasers be asked to deposit within a period of 90 days of the notice such sum to make the total payment equal to 50% of the bid amount and be permitted to pay the balance amount with interest @ the rate of 18% per annum. The committee also recommended that the bidders in the mean time be permitted to commence development/construction on Page 2555 the site. Such recommendations were accepted by defendant no. 1 vide its resolution dated 14-05-1984 (Ex. DW- 2/P-4).

40. Defendant no. 1 in its reply to the interrogatories has admitted that the plaintiff was referred to the First and the Second High Powered Committee.

41. In view of the Nazul Land Rules, defendant no. 1 referred the cases to the Central Government. Defendant no. 1 vide its letter (Ex. P-19) sought the consent of the plaintiff to abide by the recommendations of the High Powered Committee. The plaintiff on the same day gave its consent vide its reply (Ex. P- 20) to pay the balance 75% premium within the period fixed along with 18% interest.

42. Since then the plaintiff had continued to make representations to defendant no. 1 to treat the plaintiff's case similar to the other bidders vide (Ex. P-10 to P-18) but defendant no. 1 in spite of obtaining consent from the plaintiff did not offer the said terms to the plaintiff. It is pertinent to note that the plaintiff was the only bidder who had consented to pay interest @ 18% per annum on the balance bid amount (Ex. P-32) as also the internal nothings of the file of defendant no. 1( Ex. DW-2/P-2), photocopies of which were proved in the cross of DW-2.

43. The plaintiff ultimately filed a CWP in this Court which was dismissed (Ex. P-24) for the reason of matter being contractual and being not entertainable in a proceeding under Article 226 of the Constitution.

44. Defendant no. 1 thereafter vide its letter dated 06-10-1993 (Ex. P-26) informed the plaintiff that the bid/allotment of the plot in its favor had been cancelled and the earnest money of Rs. 78 lakhs paid by the plaintiff had been forfeited. To this the plaintiff filed a SLP against the order of dismissal of its writ petition, which again got dismissed in liming (EX. P-25) with a liberty to take steps to challenge the order of forfeiture of the earnest money.

45. It is averred by the plaintiff that the nothings of the file of the defendant before this Court disclose that when defendant no. 1 had sent the cases to the Central Government for reference in accordance with the Nazul Rules, the Central Government had returned the file of the plaintiff for the reason that the land of the plaintiff was not Nazul Land. However, in spite of the file being sent back, defendant no. 1 did not take any decision in respect of the plot of the plaintiff.

46. The plaintiff further submits that defendant no. 1 referred all the cases to the two High Powered Committees irrespective of whether the land was Nazul or non-Nazul. The recommendations of the Second High Powered Committee were accepted by defendant no. 1 itself. The cases were referred to the Central Government only because of the Nazul rules. The plaintiff contends that if the said Nazul Rules were not applicable to the plaintiff, defendant no. 1 having accepted the said recommendations ought to have itself applied such recommendations.

47. The plaintiff further submits that the defendant in its written statement stated that the Central Government vide its letter dated 04-08-1988 informed defendant no. 1 that the plot of the plaintiff being non-Nazul did Page 2556 not require the permission from the Central government. Further the defendant in its written statement stated that the plaintiff was informed of the land being a non-Nazul land only vide letter dated 01-03-1990.

48. It is the case of the plaintiff that the defendant had treated the contract as subsisting till issuance of the letter of cancellation dated 06-10-1993 (Ex- 26) and had by its conduct led the plaintiff to believe that it could pay the balance bid amount. It is further stated that no decision of cancellation of the bid was communicated to the plaintiff till 06-10-1993.

49. Defendant no. 1 after treating the contract as subsisting could not unilaterally cancel the same. The defendant having once extended the time for payment was required to give a notice to the plaintiff to perform the agreement prior to terminating the agreement and could not straightaway terminate the agreement. Defendant no. 1 having done so is in breach of the agreement, is liable to compensate the plaintiff for the said breach. Reliance in this regard is placed on Webb v. Hughes (1870) LR 10 EQ 281 wherein it was held that if time had been the essence of the contract, the purchaser might have given notice on the day appointed for completion that he would abandon the contract; but after going on negotiating, he should have given a reasonable notice. In Hind Construction Contractors by its sole proprietor Bhikamchand Mulchand Jain (Dead) by L.R's Appellants v. State of Maharashtra , the Apex court held that where time has not been made the essence of the contract or, by reason of waiver, the time fixed has ceased to be applicable, the employer may by notice fix a reasonable time for the completion of the work and dismiss the contractor on a failure to complete by the date so fixed. A similar position has been brought forth in Halsbury laws of England, Vol 9: Contracts,para 485 which reads as follows:

where a stipulation making time of the essence has been waived, time may be made of the essence, where there is unreasonable delay, by a notice from the party who is not in default fixing a reasonable time for performance and stating that, in the event of non-performance within the time so fixed, he intends to treat the contract as broken.

50. In the examination in chief of PW-2, it is stated that defendant no. 1 was only to receive the balance sum of Rs. 2.34 crores from the plaintiff and if interest @ 18% p.a. is added to the said amount till the date of the re-auction, defendant no. 1 would have been entitled to a sum of Rs. 7.39 crores only. On the contrary, it has received Rs. 11.78 crores on re-auction. Thus, defendant no. 1 has benefited by nearly Rs. 4.5 crores while the plaintiff is claiming compensation only of Rs. 3.12 crores.

51. Further, the plaintiff states that in the cross examination of DW-2, it has been admitted that the plaintiff was permitted to pay the balance sale consideration even after the stipulated time, that defendant no. 1 has not produced any record that the bid was treated as automatically cancelled and that the plaintiff was not told that its land was non-Nazul and therefore the said recommendations were not applicable to the plaintiff.

Page 2557

52. The plaintiff averred that the time for payment was not the essence of the contract. In support of its claim, the plaintiff has relied on the case of Smt. Raj Rani Bhasin and Ors. v. S. Kartar Singh Mehta wherein it was held that in an agreement of sale of immovable property time for the payment of the sale consideration is not of the essence and mere stipulation that the earnest money would be forfeited if the date is not adhered to, would not necessarily make time the essence of the contract. Mere incorporation in the written agreement of a clause imposing penalty in case of default, does not by itself evidence an intention to make time of the essence. A similar view was taken in Dipnarain Sinha and Anr. v. Dinanath Singh and Ors. and Hind Construction Contractors by its sole proprietor Bhikamchand Mulchand Jain (Dead) by L.R's Appellants v. State of Maharashtra (supra).

53. It has been contended that Section 74 of the Contract Act does not permit any such forfeiture without loss being proved and the onus to prove such loss is on the forfeiting party. In the constitutional Bench judgment of Fateh Chand v. Balkishan Dass , it was held that where breach of contract causes no loss and where no attempt is made to establish that party had suffered any loss or damage on account of breach so committed, the amount deposited by way of earnest money or security deposit cannot be forfeited. The same position was laid down in Union of India v. Rampur Distillery and Chemicals Co. and Atul Gupta v. DDA 1994 (31) DRJ 502. In Smt. Kamal Rani v. Smt. Chand Rani the court held that the earnest money should not be allowed to be forfeited where vendor has not suffered loss but gained on account of frustration of contract.

54. The learned Counsel for the plaintiff also referred to the cases of Bombay Builders (I) Pvt. Ltd. and Anr. v. DDA 41(1990) DLT (SN) 23 (DB) and Ashok Kumar Kanojia and Anr. v. DDA and Anr.2005 VII AD (Delhi) 36 having similar facts where the court had granted relief to the plaintiff.

55. Thus the plaintiff submits that it is entitled to interest on the damages for breach of the contract from the date of the institution of the suit. However if the plaintiff is not granted damages but is held entitled to the refund of Rs. 78 lakhs, then the plaintiff is entitled to interest @ 18% p.a. from the date of such deposit. It is further averred that defendant no. 1 had no justification to keep the said amount after the date of re-auction and hence with effect from the said date, it is liable to pay interest @ 24% p.a.

56. Learned Counsel for the defendant on the other hand states that as per the letter dated 11-08-1982 (Ex.P-8), the last date of making the payment expired on 28-10-1982. After the receipt of the said letter from defendant no. 1, no request was made by the plaintiff for further extension of time which shows that the plaintiff treated the bid as cancelled and earnest money forfeited.

Page 2558

57. It is further contented that the plaintiff having failed to fulfilll the conditions of bid as mentioned in the letter dated 11-08-1982, has no right to file the present suit for specific performance or for damages as per the provisions of the terms and conditions in such letter.

58. Defendant no. 1 has averred that more that from the date of the auction i.e. 19-01-1982 till the date of cancellation of the bid i.e. 06-10-1993 almost 11 years have passed and the plaintiff has not made any payment or 75% remaining premium amount or taken any steps in this regard till date. Hence the earnest money was rightly forfeited. On the same reasoning, the learned Counsel for the defendant states that the claim of the plaintiff for damages is also misconceived and unsustainable. There is no proof of suffering on the part of the plaintiff. In the judgment of J.L. Kelikar v. State of Kerela , the Apex court held that where the plaintiff's breach of obligation under the contract leads to the termination of the contract by the defendant, the plaintiff's claim for damages must be dismissed as the termination is not wrongful.

59. In relation to the letter dated 01-12-1987 (Ex.P-19) seeking consent of the plaintiff to abide by the recommendations of the second high powered committee, the consent having subsequently been given by the plaintiff (Ex.P-20), defendant no. 1 states that the content of the said letter clearly stated that it did not carry any commitment.

60. Defendant no. 1 submits that as per the terms of the auction the plaintiff had deposited a sum of Rs. 78 lakhs as earnest money and the balance amount of Rs. 2.34 crores was to be deposited within the three months from the date of issue of demand letter. The time thus was by an express condition made an essence of the contract. The time which was subsequently extended cannot be construed as waiver of the condition that the time was of the essence and the plaintiff was obliged to deposit the balance sale consideration within the extended period. Defendant no. 1 states that assuming that time was not the essence of contract even then the contract had to be performed within reasonable time as was held in the case of Chand Rani (Smt.) (Dead) by LRs v. Kamal Rani (Smt.) (Dead) . Since the plaintiff failed to do so it must suffer the consequences. In these circumstances, the cancellation of the bid of the plaintiff was absolutely fair, just and legal and the consequent forfeiture of earnest money is not vitiated by any illegality.

61. Defendant no. 1 in support of its contention has relied upon the judgment of DDA v. Grihsthapana Co-operative Group Housing Society Ltd. where it was held that the forfeiture of the earnest money by the defendant was legal since, in the absence of anything to the contrary in the contract, the defendant is entitled to forfeit the earnest Page 2559 money when there is a default or failure of the purchaser. In Firm Styled G.L. Kilikar v. State of Kerala the Apex Court in para 8 held that there can be no dispute that in order to succeed in its claim the plaintiff must establish that the cancellation of the agreement before the expiry of the period fixed was wrongful.

62. In relation to the same, defendant no. 1 had also brought the attention of this Court to Sub-clause 2 of Rule 24 of the DDA (Disposal of the Developed Nazul Land) Rules 1981 (inserted by way of an amendment on 11.11.91) which reads as follows:

If the premium or the price of land as provided in Sub rule 1 is not deposited, the earnest money deposited shall be forfeited and it shall be competent for the authority to allot the land to another person including a Co-operative Society in accordance with the prescribed procedure.

The learned Counsel thereby submitted the rules are statutory in nature and therefore after the amendment of the rules, the forfeiture of the earnest money did not remain exclusively within the domain of contract but the power to forfeit the earnest money came to have a statutory flavour as also that the cancellation of the bid of the petitioner was after the said amendment and that the exercise of statutory power can be challenged only if the same is not bonafide or is a colorable exercise of power.

63. On examination of the aforesaid submissions, I am of the considered view that the said rule is not applicable to the present case mainly on three grounds. Firstly, that the said rule was not in existence at the time of commencement of the said agreement to sell and therefore cannot be applied to the present case. Secondly, defendant no. 1 itself in its written statement had taken up this plea that the bid stood automatically cancelled vide its letter dated 11-08-1982, thus the defendant cannot take advantage of its own position by changing the date of cancellation of the bid to 06-10-1993 as per its own convenience. And lastly, that defendant no. 1 itself had stated that the land of the plaintiff was a non-Nazul Land and thus the said rules being applicable to Nazul lands cannot be applied to the said land being a non-Nazul land.

64. In view of the aforesaid, the question to be examined is as to whether on a consideration of the evidence referred to aforesaid, the plaintiff can be held entitled either to the refund of the earnest money of Rs.78.00 lacs or damages to the tune of Rs.3.12 crores or any other amount. There can be little doubt that in such matters of contract, the stipulation of time period is of significance. A party must make the payment within the time stipulated failing which the defendant would have the authority to cancel the bid and forfeit the amount. In fact, it is in this direction that learned Counsel for the defendants have relied upon the various judgments referred to afore said. Simultaneously it cannot be lost sight of that the defendants are not precluded from extending the time period for making the payment. The conduct of defendant no. 1 shows that the time period was extended on Page 2560 more than one occasions and, thus, defendant no. 1 by its own conduct made time not of the essence of the contract. Defendant no. 1 would have been well within its rights to have forfeited the amount on the failure of the plaintiff to deposit the balance amount.

65. Defendant no. 1 instead of following the aforesaid course, found merit in the representations received not only from the plaintiff but such similar situated parties. It is in view thereof that the matter went as far as setting up of two committees to repeatedly examine the matter and to come to a conclusion. The case of defendant no. 1 was that the material produced by the plaintiff and such similar persons gave rise to a cause to extend the time for making the payment subject to certain terms and conditions. However, in view of the perception of defendant no. 1 that the consent of UOI, defendant no. 2, would be required, the land being Nazul land, the file was forwarded to defendant no. 2. The matter did not rest at this since thereafter UOI did grant such consent but sent back the file of the plaintiff only on account of the fact that the land in question was not Nazul land. The net effect of this is that there was no permission required from the UOI and the decision taken by defendant no. 1 to extend the time period for making the payment, thus, stood as it is.

66. In my considered view, it is not open for defendant no. 1 to state that while it recommended the case of other similarly situated parties in case of Nazul land to the Government and obtained permission for grant of extension of time, in case of non-Nazul land where such permission was not required, a different parameter was required to be followed. It may be mentioned at the cost of repetition that the plaintiff was a party which volunteered to pay interest @18% per annum unlike some of the other parties. There is merit in the contention of learned Counsel for the plaintiff that defendant no. 1 after treating the contract as subsistent having extended time for making the payment was at least required to give a notice to the plaintiff to perform the agreement prior to terminating the agreement and could not straightaway terminate the same. This conclusion can draw strength from the observations in Halsbury Laws of England (supra) referred to aforesaid as also in Webb v. Hughes (supra). It is clearly a case where there has been waiver of the time being essence of the contract by conduct of the parties and, thus, defendant no. 1 was required to give notice on the day appointed for completion of the contract failing which only termination could take place.

67. There were numerous communications exchanged between the parties. The recommendations of the two high-powered committees constituted by defendant no. 1 made its recommendations which were accepted by defendant no. 1 vide its resolution dated 14.5.1984 (Ex.DW2/P-4). Having accepted the recommendations, in the case of the plaintiff defendant no. 1 was required to do nothing further but mistakenly referred the case to UOI for its approval assuming the case to be one of Nazul land. Plaintiff sent repeated reminders vide letters dated 9-12-1985 (Ex.P-11) , 20-10-1986 (Ex.P-12), 10-12-1986(Ex.P-13), 10-02-1987(Ex.P-14), 11- 04-1987(Ex.P-16), 10-08-1987(Ex.P-17) and Page 2561 10-10-1987(Ex.P-18) calling upon defendant no. 1 to give an offer of deposit of balance 25% of the premium so as to bring the total payment equivalent to 50% of the total premium and for release of the possession of the land to the plaintiff for purpose of construction. Defendant no. 1 vide its letter received on 1.12.1987 by the plaintiff (Ex.P-19) sought the consent of the plaintiff to abide by the recommendations of the high-powered committee and the consent was duly given on the even date (Ex.P-20). Thereafter no offer was made to the plaintiff and without any notice of compliance for payment, the letter of cancellation dated 6.10.1993 (Ex.P-26) was issued. It appears that defendant no. 1 itself was not aware of the land being non-Nazul land as the first communication was addressed to the plaintiff only on 1.3.1990.

68. The present case is one where defendant no. 1 has not even suffered a loss. The plot was to be purchased by the plaintiff at Rs.3.12 crores and it was finally sold to a third party at Rs.11.78 crores, i.e. almost three and a half times the price. During this period defendant no. 1 continued to enjoy the earnest money of the plaintiff of Rs.78.00 lacs.

69. In view of the prolonged period, exchange of communications, the plaintiff making various offers but not complying with the initial terms, defendant no. 1 taking its own time in the decision making process, I am of the considered view that the plaintiff is entitled to the refund of the earnest money of Rs.78.00 lacs but no further amount is liable to be paid to the plaintiff.

70. The issue is accordingly answered in favor of the plaintiff. Issue No. 3: Whether the suit is in time?

71. The letter of cancellation was issued to the plaintiff by defendant no. 1 on 06-10-1993 (Ex.P-26) wherein it was stated that consequent upon the plaintiff's failure to deposit the balance 75% premium of the aforesaid plot and dismissal of the writ petition by this Court, the bid/allotment of the said plot stood cancelled and the earnest money amounting to Rs.78 lakhs deposited by the plaintiff at the time of the auction forfeited.

72. Learned Counsel for the plaintiff has submitted that consequent to such letter of cancellation dated 06-10-1993, the present suit was filed by the plaintiff immediately thereafter on 17-02-1994, which is well within time.

73. The learned Counsel for the defendants has admitted to the letter of cancellation dated 06-10-1993 contending that such letter was nothing but the result of what had already happened way back in 1982, hence claiming the present suit to be barred by time.

74. It is pertinent to note that the extension of time as requested by the plaintiff was granted by the defendant no. 1 till 28-10-1982 vide its letter dated 11.08-1982. (Ex.P-8) Subsequent to that, a further extension of time was asked for by the plaintiff. Accordingly, defendant no. 1 vide its resolution no. 121 dated 14.05.1984 (Ex.DW2/P-4) resolved to decide each case (including plaintiff's case) on the basis of such recommendations. However, defendant no. 1 failed to take any decision in terms of resolution no. 121 dated 14.05.1984 qua the plot of the plaintiff in spite of the Page 2562 repeated letters sent to defendant no. 1 dated 9-12-1985 (Ex.P-11) , 20-10-1986 (Ex.P-12), 10-12-1986(Ex.P-13), 10-02- 1987(Ex.P-14), 11-04-1987(Ex.P-16), 10-08-1987(Ex.P-17), and 10-10-1987(Ex.P-18) calling upon defendant no. 1 to give an offer of deposit of balance 25% of the premium so as to bring the total payment equivalent to 50% of the total premium and to release the possession of the plot to the plaintiff for construction purposes as per the said resolution. In response to the same, defendant no. 1 vide its letter dated 01-12-1987 asked for the plaintiff's consent for making payment of the balance amount of the bid. But later vide its letter dated 06- 10-1993 (Ex.P-26) informed the plaintiff that the bid/allotment of the said plot in question had been cancelled and the earnest money amounting to Rs. 78 lakhs deposited by the plaintiff at the time of auction had been forfeited.

75. In the light of the aforesaid, I am of the view that all this while the plaintiff was made to believe that its case was under consideration and that a final decision in relation to its case was yet to be taken. It is only through the letter dated 06-10-1993 that the said bid/allotment of the plaintiff was ultimately cancelled following which the plaintiff filed the present suit on 17- 02-1994. Thus the present suit filed by the plaintiff is within the period of limitation as prescribed by the statute and hence is not barred by time.

76. The issue is accordingly decided in favor of the plaintiff and against the defendants. Additional Issue No. 2: Whether the suit is barred by principles of res judicata/constructive res judicata? OPP

77. It is the submission of learned Counsel for the plaintiff that this issue has apparently been erroneously framed since the orders passed on 9.12.1997 had clearly rejected the plea of res judicata while deciding IA 6882/1997 under Order XIV Rule 5 of the CPC. It was held in terms of the said Order that the issue did not arise as (i) the writ petition was not decided on merits; and (ii) the order of the Supreme Court itself envisages remedy of recovery. Learned Counsel for the plaintiff further submitted that if this issue is examined, it will be found that there is no way whereby the suit of the plaintiff can be barred on the principles of res judicata or constructive res judicata in view of the rejection of the case being on the ground of not being the subject matter of adjudication under Article 226 of the Constitution of India as it was a contractual matter. Learned Counsel relied upon a judgment in Narinder Singh v. Khaliq-ur Rehman and Ors. where it was held that a writ petition is not dismissed on merits but on the other grounds like availability of alternative remedy, it would not operate as res judicata. A similar view has also been taken in Shanti Devi v. Punjab State and Anr. Vol CXIX (1998-2) Punjab LR 619.

78. In Bhagubhai Dhanabhai Khalasi and Anr. v. State of Gujarat and Ors. (2007) 4 SCC 241, the Apex court held that a party in grievance must have a remedy and access to justice is a human right. Thus the plaintiff cannot be deprived of remedy of claiming damages for breach of contract by Page 2563 this suit for the reason of having earlier filed a writ which was dismissed for the reason of matter being contractual.

79. The learned Counsel for the defendant on the other hand submits that vide order dated 16-12-1993 (Ex. P-25), the plaintiff was given opportunity to challenge the order of forfeiture of security deposit therefore the plaintiff could only challenge the order by which earnest money was forfeited whereas the plaintiff in the present suit has raised all those issues already raised in the SLP, which was dismissed. Therefore, the present suit filed by the plaintiff is barred by the principle of res-judicata/ constructive res-judicata.

80. The writ petition filed by the plaintiff was held not amenable to jurisdiction and hence dismissed. This was followed by an SLP filed in the Apex Court by the plaintiff wherein the Court dismissed the same in liming yet envisaged remedy for recovery of the earnest money. The present suit has been filed by the plaintiff for specific performance and in the alternative claimed damages/recovery of the earnest money. In my view, the present case was not decided on merits in the writ petition therefore res judicata would not operate in this case.

81. I am also in full agreement with the position as laid down by the Apex court holding that the plaintiff cannot be deprived of remedy of claiming damages/recovery of the earnest money by this suit for the reason of having earlier filed a writ which was dismissed for the reason of matter being contractual. Thus the right of the plaintiff to claim the recovery of the earnest money deposited at the time of the auction with defendant no. 1 cannot be absorbed only for the reason that a writ was filed by the plaintiff, which was dismissed without going into the merits of the case for the matter being contractual in nature. Hence, res judicata would not be operative in this case.

82. The findings on the earlier issues being held in favor of the plaintiff only to the extent of refund of the earnest money and, thus, even if the plea of defendant no. 1 was to hold good, that no other claims other than the claim for refund of earnest money, could be made in view of the orders of the Apex Court, it is only that relief which has been granted.

83. The issue is answered accordingly.

Relief

84. In view of the findings arrived at aforesaid, the plaintiff is held entitled to the recovery of Rs.78.00 lacs from defendant no. 1. The other question to be examined is of the rate of interest and the date from which the plaintiff can claim such interest.

85. It is not in dispute that the matter remained under examination for one reason or the other till the bid of the plaintiff was cancelled vide the letter dated 6.10.1993. The suit was filed soon thereafter. There is no doubt that defendant no. 1 is also responsible for this delay for a period of time when time being the essence of the contract lost its significance but simultaneously the plaintiff also did not comply with the original demands of the auction. I am, thus, of the considered view that the plaintiff should be held entitled only to pendente lite and future interest, the date of the filing of the suit being 17.2.1994. As far as the rate of interest is Page 2564 concerned, taking into consideration the prevailing rate of interest over this period of time, I deem it appropriate that the plaintiff should be held entitled to interest @ 9%, per annum simple interest.

86. A decree is passed in favor of the plaintiff and against defendant no. 1 for a sum of Rs.78.00 lacs along with pendente lite and future interest @ 9% per annum, simple interest, from 17.2.1994 till date of realization. The plaintiff shall be entitled to proportionate costs.

87. Decree sheet be drawn up accordingly.