U.K. Paints (India) Pvt. Ltd. vs Mr. Jagdish Rai
2008 Latest Caselaw 717 Del

JUDGMENT

S. Ravindra Bhat, J.

IA No. 3139/2007 (under Order XXXIX Rule 1 and 2 CPC)

1. This Court had dealt with this application and recorded a detailed order at the ad interim stage, but before the written statement was filed, on 19.3.2007 restraining the defendant from creating any third party rights in, and encumbering or parting with possession of the suit property till further orders.

2. The Court had, however, indicated that the matter would be heard in detail on a later date.

3. The plaintiff seeks a decree for specific performance of an agreement dated 21.9.2006, for purchasing an industrial plot. The agreed consideration was Rs. 3.6 crores. It is not disputed that the defendant was paid Rs. 36,00,000/-, constituting 10% of the consideration amount at the stage of execution of the agreement.

4. The suit property is in the form of leasehold rights. In terms of the lease deed, its alienation or transfer is impermissible without the prior approval/consent of the Lesser i.e. Directorate of Industries. The stipulation in the agreement (to sell) therefore was that the defendant would obtain such permission within 75 days. The parties also recorded the minutes of the meeting on the same day i.e. 21.9.2006, whereby, they agreed that in case the said time period was not adhered to it would be further extended by 30 days.

5. It is contended that by the counsel for the defendant that period was to end on 6.12.2006 and in terms of the minutes of the meeting on 4.1.2007 at the latest.

6. This Court on 19.3.2007 considered the contentions of the parties and recorded as follows:

Having heard counsel for the parties, at this stage I am not inclined to permit the defendant to create any mortgagee or encumberence in respect of the suit property. It would be for the defendant to show that it is not the defendant who is responsible for the failure to obtain the conversion from leasehold to freehold. The defendant will have ample opportunity to put forward its case when he files his written statement and reply to the present application in this respect. As at the present, there is no material before the Court to come to the conclusion, even at the prima facie stage, that the conversion of the property from leasehold to freehold has not taken place without any failure or default on the part of the defendant and despite his efforts in this regard.

So far as the question of payment of Court Fees is concerned, counsel for the plaintiff submits that the claim of damages is only in the alternative, and he undertakes that in case the alternative relief is decreed by the court, the plaintiff would pay the deficient Court fees as and when directed by the Court. The objection with regard to Court Fees may also be raised by the defendant in his written statement and will be considered in detail after the pleadings are complete.

Having considered the merits of the case, prima facie, I am of the view, that the plaintiff is entitled to interim protection. Accordingly, I hereby restrain the defendant from creating any third party rights in, encumbering or parting with possession of the suit property till further orders.

7. Counsel for the defendant relied upon the written statement and also the documents filed along with it. According to her, the defendant had taken all reasonable steps towards discharging his obligation to apply for conversion. She relied upon letters dated 4.10.2006, 13.11.20006 and 30.11.2006 written to the Commissioner of Industries, seeking permission to convert the property from leasehold to freehold. It was also contended that the defendant continued to visit the Directorate with a view to pursue these applications and did all he could reasonably do for the conversion. It was submitted that, in spite of these and in spite of compliance of directions such as payment of deficient amounts, etc. (the proof of which has been placed on record) the Commissioner did not pass any orders, which would have enabled the parties to effectuate the agreement.

8. Learned Counsel contended that since the defendant was not at fault, there was no question of the plaintiff moving the court and seeking an order. It was also submitted that the plaintiff waited till the end of March to approach the Court and seek reliefs in the present suit. In these circumstances, the Court should not confirm interim order. In the alternative the counsel urged the court at least permit the defendant to create an encumbrance. Learned Counsel relied upon a letter written by In Tech Digital Technology on 28.3.2007 and submitted that the said concern was willing to set up a digital printing business in India, which would be carried for and on behalf of the defendant, by his son.

9. Learned Counsel further urged that the objective of the agreement between the parties was to help the defendant to over come his crisis at the stage when it was executed, as he was in need of money. However, the parties were conscious of the rising prices and therefore, had stipulated that the property would be converted within a time bound manner. In the event of such course of being rendered impossible the parties were to be relieved of their respective obligations.

10. Learned Senior counsel for the plaintiff/applicant reiterated the submissions made in the application. He also relied upon the previous order of the court dated 19.3.2007. Learned Counsel contended that none of the stipulations in the agreement, which admittedly bind the parties, placed a time limit for the execution of the sale deed. It was submitted that having regard to the principles underlying under Section 59,52 and 55 of the Contract Act the contract should be construed as one containing intervening obligations of the defendant. The obligations of the plaintiff could not be construed as preceding those of the defendant and the latters' conduct in the present case as well as the request made today to permit encumbrance of the property if allowed, would permit the defendant to benefit from his own wrong.

11. Learned Counsel submitted that the petitioner has made out a prima facie case for the grant of an injunction and its confirmation. He submitted that if the defendant were to be permitted to create third party rights, financial institutions who would have greater legal remedies independent of the present proceedings would be created, that would injure the interests of the plaintiff irrepairably.

12. The court has considered the pleadings of the parties and the documents placed on record. It is undoubtedly correct that the agreement does mention a 75 days' time limit. The parties also agreed to extend that period for another 30 days. What cannot be lost sight of however is that, the stipulation concerns the obligation of the defendant to obtain conversion of the property. In such circumstances, the court is unimpressed by the defendant's contention that the stipulation has the effect of placing a time limit upon the validity of the agreement itself. The construction placed by the defendant that it was the time limit of the agreement is prima facie untenable. Firstly, no part of the agreement says so; secondly, the time limit pertains to the obligation of the defendant and it does not concern the mutual obligations or duties of the parties and; thirdly, the time limit of 75 days described is aimed more at the convenience of the parties to have the sale deed executed, as is evident from the stipulation that such a limit of time is necessary to obtain stamp paper etc.

13. In view of the above circumstances, the court is of the opinion that the defendant has not been able to show any cogent or valid ground why the interim order made on 19.3.2007 should be varied.

14. So far as the contention of the defendant that he should be permitted to encumber the property to enable him to carry on business effectively is concerned, reliance has been placed upon a letter dated 28.3.2007. The court cannot be unmindful of the fact that creation of such third party rights, particularly in favor of financial institutions could potentially result in an irreparable injury to the plaintiff. Such financial institutions have now extended rights in law to deal with properties in the event of default in repayment schedules by their borrowers. Therefore, the plaintiff's likelihood of prejudice would be considerable and the matter would not be confined to one where the adjustment of consideration at the stage of final judgment, can be conveniently gone into by the Court. The amplitude of powers of public financial institutions to seize assets and put them to sale, without recourse to court, would result in incalculable prejudice and foreclose the plaintiff's rights.

15. In view of the above reasons, the interim order made on 13.9.2007 is confirmed. The defendant shall not encumber or part with possession of the suit property, or alienate it or any part of it, during the pendency of the suit. IA No. 3139/07 is disposed of in the above terms.

CS (OS) 505/2007

List for framing of issues on 25.8.2008.