Gur Parsad Chadha & Anr. vs Narender Pal Malik
2009 Latest Caselaw 5096 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

                        + RFA No. 453/2001

                                        Reserved on : 13.11.2009
                                        Pronounced on: 09.12.2009

IN THE MATTER OF :
GUR PARSAD CHADHA & ANR.                   ..... Appellants
                      Through: Mr. T.A.Francis and
                      Ms.Shivangi Sharma, Advocates

                  versus

NARENDER PAL MALIK                               ..... Respondent
                  Through: Nemo


CORAM

* HON'BLE MS.JUSTICE HIMA KOHLI

     1. Whether Reporters of Local papers may
        be allowed to see the Judgment?          Yes

     2. To be referred to the Reporter or not?   Yes

     3. Whether the judgment should be
        reported in the Digest?                  Yes

HIMA KOHLI, J.

1. The present appeal is directed against a judgment dated

13.8.2001 passed in a suit for specific performance and permanent

injunction instituted by the appellants (plaintiffs in the court below),

against the respondent (defendant in the court below) praying inter

alia for directions to the respondent/defendant to perform his

obligations under the Agreement dated 24.1.1989 and execute a sale

deed in respect of a shop situated on the ground floor of a premises

bearing No.I-C/125, Lajpat Nagar, New Delhi (hereinafter referred to

as „the shop‟), after getting the same converted into freehold. The

appellants/plaintiffs also sought a decree of permanent injunction

against the respondent/defendant restraining him from disturbing the

peaceful possession and enjoyment of the appellants/plaintiffs in

respect of the shop and from selling, transferring or alienating the said

shops.

2. A brief backdrop of the case, as set out by the

appellants/plaintiffs in the plaint is that in January 1989, they were on

look out for a commercial shop to run their business activity of

providing Crane Services and sale of car accessories. The

appellants/plaintiffs came to know that the respondent/defendant was

offering to sell commercial shops on the ground floor of the suit

premises. A site plan of the said shop marked in red was enclosed

with the plaint. The appellants/plaintiffs averred that the sale price of

the shop was finalized at Rs.1,25,000/-. It is the case of the

appellants that as the property in question was a leasehold property,

the respondent/defendant could not execute an outright sale deed,

and therefore the parties decided to execute an Agreement to Sell-

cum-Lease Deed. The said document entitled a "Lease Deed", was

executed on 24.1.1989. The appellants/plaintiffs stated that they had

paid a major portion of the sale consideration to the

respondent/defendant, amounting to Rs.1,00,000/- and that he agreed

to get the property converted into freehold as and when it was

permissible and to execute a sale deed in favour of the

appellants/plaintiffs upon receipt of the balance sum of Rs.25,000/-.

In the meantime, it was agreed that the appellants/plaintiffs would pay

a sum of Rs.600/- per month to the respondent/defendant as notional

lease rent for occupying the premises.

3. The appellants/plaintiffs claimed that they remained in

peaceful and continuous possession of the shop since 21.1.1989 and

conducted their business from the said shop. They also tendered a

sum of Rs.600/- per month to the respondent/defendant on a monthly

basis, in terms of the agreement, till July, 1993. In the meantime, the

Municipal Corporation of Delhi passed an attachment order dated

30.6.1993 in view of outstanding property tax pertaining to the

premises and attached the lease rent being paid by the

appellants/plaintiffs to the respondent/defendant. As a result, from

August 1993 onwards, the appellants/plaintiffs started depositing the

said amount on a monthly basis with the MCD.

4. As averred by the appellants/plaintiffs in November 1993,

the policy for conversion of leasehold rights in immovable properties

situated in Delhi, into freehold rights was formulated by the Land &

Development Officer. The appellants/plaintiffs stated that they

approached the respondent/defendant on 13.4.1994 and requested

him to complete the formalities for getting the suit property converted

into freehold, as promised by him. They tendered the balance sale

consideration of Rs.25,000/- to the respondent/ defendant, but he

refused to accept the same. He also refused to take any steps to

convert the property into freehold. A legal notice dated 18.4.1994 was

served by the appellants/plaintiffs on the respondent/defendant calling

upon him to specifically perform his obligations under the Agreement

dated 24.1.1989. The appellants/plaintiffs expressed their readiness

and willingness to perform the obligations on their part, but the

respondent/defendant did not reply to the said notice and nor did he

perform his part of the obligations under the Agreement. Instead, he

started creating hurdles in the peaceful enjoyment of the facilities of

toilet and water connection situated on the ground floor of the

premises and threatened the appellants/plaintiffs that he would

disconnect their electricity supply. As a result, the appellants/plaintiffs

along with other shop owners, instituted a suit for injunction against

the respondent/defendant on 15.4.1994. The respondent/defendant

filed a written statement in the aforesaid suit, but the

appellants/plaintiffs submitted that they were permitted to withdraw

the suit on account of some formal defects, with liberty to institute a

fresh suit on the same cause of action. Subsequently, in May 1994, the

appellants/plaintiffs instituted the present suit in the trial court.

5. Summons in the suit were issued by the trial court to the

respondent/defendant. He entered appearance and filed his written

statement. After the pleadings were completed, the

respondent/defendant stopped appearing in the matter. Vide order

dated 29.10.1996, he was proceeded against ex-parte. Thereafter,

the appellant No.1 examined himself as PW-1. After hearing the

counsel for the appellants/plaintiffs and considering the evidence

produced on record, the trial court dismissed the suit of the

appellants/plaintiffs by holding that the lease deed dated 24.1.1989

could not be enforced as an Agreement to Sell and that the

contingency to exercise the option of converting the premises from

leasehold to freehold not having arisen, the appellants/plaintiffs could

not claim a decree for specific performance to execute a conveyance

deed in their favour. Aggrieved by the aforesaid judgment dated

13.08.2001, the appellants/plaintiffs preferred the present appeal,

which was admitted vide order dated 11.10.2001. The respondent

was served by publication and affixation. But he did not enter

appearance and was proceeded against ex-parte vide order dated

08.05.2009.

6. Counsel for the appellants/plaintiffs submitted that a bare

reading of the document in question shows that the said document is

an Agreement to Sell and not a simple lease deed. In support of the

aforesaid submission, he relied on a judgment of this Court in the case

of M/s Nanak Builders and Investors Pvt.Ltd. Vs. Vinod Kumar Alag

reported as AIR 1991 DELHI 315. He further stated that the

contract in question was not a contingent contract or a contract of

such a nature where the rights of the parties were inchoate and hence

specific performance of the same could have been sought by the

appellants/plaintiffs and granted by the trial court. In support of the

aforesaid submission, he relied on the following judgments:

(i) Mrs. Chandnee Widya Vati Madden Vs. Dr.C.L.Katial and others AIR 1964 SC 978

(ii) Ramesh Chandra Chandiok and another Vs. Chuni Lal Sabharwal(dead) by his legal representatives and others AIR 1971 SC 1238.

(iii) Nirmala Anand Vs. Advent Corporation Pvt.Ltd. and others AIR 2002 SC 2290.

7. Lastly, it was urged that the objection taken by the

respondent/defendant in the written statement to the effect that the

suit of the appellants/plaintiffs was barred by limitation, is without any

basis as Article 54 of the Limitation Act entitles the appellants/plaintiffs

to institute a suit within a period of three years from the date of first

refusal by the respondent/defendant to specifically perform the

contract. In support of the aforesaid submission, he relied on a

judgment of the Supreme Court in the case of Rojasara Ramjibhai

Dahyabhai Vs. Jani Narottamdas Lallubhai (dead by LRs.) and another

reported as AIR 1986 SC 1912.

8. None appeared on behalf of the respondent despite service

effected on him by way of publication. I have heard the counsel for

the appellants/plaintiffs. Counsel for the appellants/plaintiffs has

taken this court through the trial court record and the relevant

documents.

9. The fountainhead of the dispute is the document dated

24.01.1989, entitled "Lease Deed". The first submission of the counsel

for the appellants/plaintiffs that the aforesaid document was not

merely a lease deed, but an Agreement to Sell, has to be tested in the

light of the terms and conditions contained in the said document. It is

trite that a mere heading or a title of a document cannot deprive the

document of its real nature and that it is the substance which is to be

seen and not the form (Refer: C.I.T.Punjab, Haryana, J & K, H.P. and

Union Territory of Chandigarh Vs. M/s Panipat Woollen and General

Mills Co.Ltd., Chandigarh, AIR 1976 SC 640 and M/s Nanak

Builders and Investors Pvt.Ltd. Vs. Vinod Kumar Alag, AIR 1991

DELHI 315. The relevant clauses of the document in question are

reproduced hereinbelow for ready reference:

"NOW THIS DEED OF LEASE WITNESSETH AS UNDER:

1. That on consideration of the rent hereinafter reserved and all the covenants and conditions hereinafter contained and on the part of the lessees to be paid, observed and performed by the Lessor hereby demised into the lessees a part portion at Ground Floor, measuring 10‟X15‟ approx. of house No. I-C/125, Lajpat Nagar, New Delhi at the monthly rent of Rs.600/- (Rupees Six hundred only).

NOW THE LESSEES HEREBY CONVENANTS WITH THE LESSOR AS FOLLOWS:

1. XXXX

2. To pay the monthly rent of Rs.600/- (Rupees Six hundred only) per month hereby reserved on or before the 24th day of each English Calendar month failing which a penalty of Rs.10/- per day shall be charged.

3. XXXX

4. XXXX

5. That the Lessees had already deposited an amount of Rs.1,00,000/- (Rupees one lac only) with the Lessor as Security Deposit through Mr. Parvinder Sodhi vide Lease Agreement dated 24th January, 1989.

THE LESSOR HEREBY CONVENANTS WITH THE LESSEES AS UNDER:-

1. XXXX

2. That the demises premises mentioned above is a part of House No. I-C/125, Lajpat Nagar, New Delhi, which is a leasehold property under Land and Development Authority, Nirman Bhawan, New Delhi. In case of the above property becomes freehold at any time then the Lessees shall have the option to purchase the same and get it registered in their favour in the office of the Sub-Registrar, New Delhi and the Lessor shall not refuse to sign any document required for the smooth transfer of the abovesaid premises in favour of the Lessees, without demanding any monetary consideration/ remuneration.

3. That a sum of Rs.25,000/- (Rupees Twenty five thousand only) shall have to be paid by the Lessees to the Lessor before or at the time of registration of regular sale deed in the office of the Sub-Registrar New Delhi, in addition to the amount of Rs.1,00,000/- (Rupees one lac only) i.e. Rs.1,25,000/- (Rupees one lac twenty five

thousand only) shall be merged towards the cost and sale price of the aforesaid portion.

4. That the sum of Rs.1,25,000/- (Rupees one lac twenty five thousand only) shall remain the final sale price out of which the lessees had already paid a sum of Rs.1,00,000/- (Rupees one lac only) and the remaining balance of Rs.25,000/- (Rupees Twenty five thousand only) shall be paid by the lessees to the lessor before or at the time of registration of regular sale deed, before the Sub-Registrar, New Delhi, and the lessor shall be strictly bond to above price and shall not demand any remuneration from the lessees at the time of registration of regular sale deed.

5. XXXX

6. XXXX

7. That all the expenses towards the cost of registration of sale deed i.e. stamp duty, registration fee etc. shall be borne and paid by the lessees.

8. XXXX"

10. A perusal of the aforesaid terms and conditions contained

in the document (Ex.PW1/2), undoubtedly shows that though the

document is described as a lease deed, the same does mention in

clauses 2 to 4 that in case the premises becomes freehold at any time,

then the appellants/plaintiffs shall have the option to purchase the

same and get it registered in their favour and at that time, the

lessor/respondent would not refuse to sign any document and would

not demand any further monetary consideration beyond a sum of

Rs.25,000/-, Rs.1,00,000/- having already been deposited with the

respondent/defendant as security deposit, which amount would, at

that time, be treated as the sale price of the shop. Thus, what

emerges is that a sum of Rs.1,25,000/- was agreed as the final sale

consideration of the shop. A sum of Rs.1,00,000/- having already

been paid by the appellants/plaintiffs to the respondent/defendant,

the balance sum of Rs.25,000/- was agreed to be paid by the

appellants/plaintiffs at the time of registration of a regular sale deed in

their favour. In the meantime, it was agreed that the

appellants/plaintiffs would continue to pay rent at the rate of Rs.600/-

per month to the respondent/defendant, apart from charges for

consumption of electricity and water on actual basis.

11. The trial court examined the aforesaid document and

arrived at the conclusion that the terms set out in the document

(Ex.PW1/2) were vague and that it could not be construed that the

said document was only an Agreement to Sell. Instead, it was

observed that the document was optional depending upon the

contingency as to whether the property became freehold and whether

the appellants/plaintiffs opted for getting a conveyance deed executed

in their favour. While relying on a judgment of the Bombay High

Court in the case of Sau. Shantabai Vs. Manakchand Ratanchand Raka

reported as AIR 1988 Bombay 82, it was observed that the

alternative option for specific performance of agreement to sell was

unenforceable as the contingency to enforce it had not arisen, as

contemplated in Ex.PW-1/2. Ultimately, the suit of the

appellants/plaintiffs was dismissed by the learned ADJ by holding that

till the date of institution of the suit, the property remained leasehold

and as the respondent/defendant was not under any obligation to get

the property converted to freehold, the appellants/plaintiffs could not

claim or be granted specific performance of the Agreement to Sell.

12. Having carefully perused the terms and conditions

contained in the aforesaid document, this Court does not find any

reason to differ with the reasoning of the trial court. The second

covenant of Ex.PW-1/2 is worded in such a manner that the obscurity

in specifying the time span for converting the property into freehold is

inherent. Only in case the property would become freehold at any

time in the future, would the appellants/plaintiffs have the option to

purchase the same. It is not disputed that till date, the property has

not been got converted from leasehold into freehold. Hence the

contingency not having arisen, the question of the appellants

exercising the option under the second covenant by approaching the

respondent does not arise. If the property would have been converted

into freehold, then the appellants could have exercised their option to

purchase the same and they could also have approached the

respondent for getting the sale deed registered in their favour. Upon

failure on the part of the respondent to do the needful, the appellants

were also entitled to seek specific performance of the Agreement by

instituting a suit in that regard. Such a contingency not having arisen,

the appellants had no cause of action to approach the court for seeking

specific performance of the Agreement. Only upon such a contingency

arising, could the appellants have instituted the suit in the first place.

13. Coming to the judgments relied on by the counsel for the

appellants/plaintiffs, they are clearly distinguishable on facts and do

not take the case of the appellants further. In the case of Chandnee

Widya Vati Madden (supra), the plaintiffs therein had entered into a

contract of sale of a house belonging to the defendant on the plot

granted by the Government. One of the terms of the contract was

that the vendor would obtain necessary permission of the Government

for the sale within two months of the agreement and if the permission

was not forthcoming within that time, it was open to the vendees to

extend the date or to treat the agreement as cancelled. Though the

vendor made an application for permission, but for reasons of her own,

withdrew the same. As a result, the plaintiffs filed a suit for specific

performance of the contract or in the alternative, for damages,

wherein the trial court found that the plaintiffs were always ready and

willing to perform their part of the contract and it was the defendant

who willfully refused to perform her part of contract. Despite the said

finding, the trial court dismissed the suit for specific performance of

the contract on the ground that the agreement was inchoate in view of

the fact that the previous sanction of the Chief Commissioner to the

proposed transfer had not been obtained. The High Court on appeal

came to the conclusion that the agreement was a completed contract

for sale of the house in question, subject to the sanction of the Chief

Commissioner before the sale transaction could be concluded.

Aggrieved by the said order, the vendor/defendant filed an appeal in

the Supreme Court wherein the main ground of attack was that the

contract was not enforceable being of a contingent nature and the

contingency had not been fulfilled. The said plea was turned down by

the Supreme Court by holding that under the document it was for the

defendant/vendor to make the necessary application for permission to

the Chief Commissioner. Unlike the facts of the present case in hand,

in the aforesaid case, there was a certainty of time frame for the

vendor to obtain permission from the Chief Commissioner within two

months of the agreement and only if the permission was not

forthcoming within that time, was it open to the vendees to extend the

date or treat the agreement as cancelled. In the present case, there is

complete obscurity in specifying the time span for converting the

property from leasehold to freehold. The agreement only provided

that in case the property becomes freehold at any time, then the

appellant would have the option to purchase the same. No specific

time frame was thus contemplated, much less stipulated in the

agreement for completing the process of converting the property into

freehold.

14. In the case of Ramesh Chandra Chandiok(supra), the

vendee agreed to purchase a leasehold plot from the vendor on a date

when the vendor was not in possession thereof and in respect of which

he had not obtained a lease deed from the Government. The receipt

for earnest money provided that the balance sale consideration was to

be paid within a month at the time of execution of the registered sale

deed. A lease deed was executed by the Government in favour of the

vendor, after the agreement to sell entered into by him with the

vendee wherein the vendor was required to obtain sanction of the

Government before transfer of the leasehold plot. Though the vendor

was aware of the aforesaid condition and intimated the vendee that

the sale deed would be executed by him only after obtaining required

sanction and further, undertook to inform the vendee as soon as

sanction was obtained by him, he never undertook any steps to apply

for sanction. Instead, he informed the vendee that he was not willing

to wait indefinitely for want of sanction and that if the rest of the

consideration was not paid to him within a period, the earnest money

would be forfeited and the agreement cancelled. Subsequently, the

vendor applied for and obtained required sanction, but did not inform

the vendee and cancelled the contract, thus compelling the vendee to

file a suit for specific performance of the contract against the vendor.

In the aforesaid case, while the trial court refused the relief of specific

performance to the vendee, a money decree was granted in his favour.

Aggrieved by the said judgment, the vendee filed an appeal before the

High Court. The High Court held that there was nothing to indicate

that the absence of such a sanction invalidated the transfer ab initio or

rendered it void. It held that even a defeasible interest could be the

subject matter of sale and that the sale could be effected without the

sanction having been previously obtained. It was further held that the

vendees had not satisfactorily shown that they had sufficient funds to

pay the balance amount and that once the appellant had obtained

satisfaction of the money decree passed by the trial court in execution

proceedings, they were disentitled to claim specific performance. The

Supreme Court however set aside the order of the High Court by

holding that as long as the title of the vendor was incomplete, there

was no question of the sale being completed and they have never

applied for sanction, the vendees were under no obligation to complete

the sale before any information was received by them about the

sanction having been obtained.

15. In the present case, it is not as if the respondent had ever

applied to the L&DO for converting the property from leasehold to

freehold, there being no timeframe contemplated in the agreement.

Hence the eventuality of the property becoming freehold had not

arisen. In such circumstances, the appellants could not have sought

to exercise their option to purchase the same and get the suit property

registered in their favour by execution of a regular sale deed. The

issue of readiness and willingness is therefore not relevant to the facts

of the present case. The wordings of the relevant covenants

contained in the agreement in question are such that till the property

gets actually converted into freehold, no cause of action could be

claimed to have arisen in favour of the appellants, so as to institute

the suit in question. Hence the facts of the aforesaid case are also

distinguishable from those of the present case.

16. In the case of Nirmala Anand (supra), counsel for the

appellant relied upon para 11 wherein reference has been made to the

aforesaid decisions of the Supreme Court in the case of Chandnee

Widya Vati Madden (supra) & Ramesh Chandra Chandiok(supra) which

have already been dealt with hereinabove and need not be repeated.

17. The argument urged by the counsel for the appellants with

regard to the objection of the respondent, taken in his written

statement to the effect that the suit of the appellants was barred by

limitation, need not detain this Court as the same was not considered

by the trial court while dismissing the suit.

18. While concurring with the reasons given in the impugned

judgment to disentitle the appellants to claim a decree for specific

performance of lease agreement and permanent injunction, this Court

is however, of the opinion that the suit of the appellants could not

have been dismissed by the trial court. The order of dismissal of the

suit of the appellants has resulted in complete deprivation of the

appellants‟ right to claim a decree for specific performance on a future

date as and when the contingency contemplated in the agreement

arises. The suit ought to have been rejected under the provisions of

Order VII Rule 11 of the Code of Civil Procedure, on the ground that

the same was without any cause of action, for the reason that the

occasion for the appellants to have instituted the suit had not arisen,

as the property had not been converted into freehold. It would

therefore be appropriate to modify the impugned judgment by holding

the suit filed by the appellants was liable to be rejected. The

impugned judgment and decree is therefore modified to the extent

that instead of dismissing the suit of the appellants, the same is

rejected as being devoid of any cause of action. Decree sheet be

drawn accordingly. The appeal is disposed of with no order as to

costs. Trial court record be released forthwith.

                                                        (HIMA KOHLI)
DECEMBER 09, 2009                                         JUDGE
mk