Smt. Sudershan Kumari Jain vs Sh.Pran Nath Jain & Ors.
2009 Latest Caselaw 494 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI



                                               Reserved on : 04.02.2009
%                                          Date of decision : 11.02.2009



+                          RFA (OS) No.8 of 1986

SMT. SUDERSHAN KUMARI JAIN                 ...     ... APPELLANT


                          Through : Mr.Arvind K.Nigam, Mr.S.K.Sharma,
                                    Mr. Raghu and Mr. Dhruv, Advocates.

                                 -VERSUS-

SH.PRAN NATH JAIN & ORS.                       ...    RESPONDENTS


                          Through : Mr.Arun Kumar, Adv. for R-1.
                                    None for R-2 and R-3.


CORAM :

HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON‟BLE MR. JUSTICE SUDERSHAN KUMAR MISRA


1.       Whether the Reporters of local papers
         may be allowed to see the judgment?              Yes

2.       To be referred to Reporter or not?               Yes

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


SANJAY KISHAN KAUL, J.

1. The appellant filed a suit for specific performance of the

Agreement to Sell and for possession in respect of property

bearing No.135 Block H, Vir Nagar Colony, G.T.Road, Gur

Mandi, Delhi measuring 250 square yards for a total

consideration of Rs.1,50,000/-.

2. It is the case of the appellant that a written Agreement of

Sale was executed on 03.08.1977, a copy of which was filed

along with the plaint, but the original was alleged to be in

the custody of respondent no.1.

3. The respondent no.1 is stated to be a perpetual sub lessee

of the property in question having acquired the said rights

in pursuance to a deed dated 30.09.1967 by the Land and

Housing Department, Delhi of the Delhi Administration in

favour of respondent no.1 duly registered on 16.01.1968.

In view of the Agreement to Sell, the respondent no.1

(original defendant) is stated to have applied for sale

permission of the suit property to the Delhi Development

Authority as in terms of the sub lease deed fifty per cent of

the unearned increase was payable to the said authority on

transfer of the property. In pursuance to the request of

respondent no.1, the permission was accorded by the DDA

vide letter dated 05.10.1977. The defendant is also stated

to have applied to the Income Tax Department on

18.01.1979 for grant of a certificate under Section 230A(1)

of the Income Tax Act, 1961 („the said Act‟ for short) which

was also issued and filed along with the plaint.

4. The appellant claims to have deposited a sum of

Rs.30,000/- with the DDA towards fifty per cent of the

unearned increase in the value of the plot. A further sum of

Rs.13,304.48 was paid by the appellant to the Loan

Department of the Delhi Administration on account of the

fact that a loan had been raised by the respondent no.1 for

a sum of Rs.12,500/- for construction on the plot. The

original documents were stated to be in the custody of the

appellant. The appellant thus claims to have paid a sum of

Rs.43,304.48 to the respondent no.1 out of a total sale price

of Rs.1,50,000/- since the burden of unearned increase was

to fall on the respondent no.1.

5. The grievance of the appellant is that the intention of the

respondent no.1 became dishonest and he did not come

forth to execute the sale deed despite a legal notice dated

29.11.1979. The suit was consequently filed.

6. Respondent no.1 was originally the sole defendant in the

suit. In the written statement, an objection was taken by

the respondent no.1 that he was not the sole owner of the

entire property and did not have the authority to sell the

entire house. The factum of the perpetual sub lease deed

being in favour of the respondent no.1 was, however, not

denied. The respondent no.1 claimed that he was the

owner of only 1/3rd share and his two brothers owned the

remaining 1/3rd share each. These two brothers were

subsequently impleaded as the defendants in the suit being

respondent nos. 2 and 3 herein.

7. The story set up by the respondent no.1 is that his father

was a member of the Jain Cooperative House Building

Society Limited though the share was obtained in the name

of the said respondent no.1 being the eldest son. The plot

was also consequently registered in his name. A loan was

taken by respondent no.1 from the DDA and amounts were

contributed by the other two brothers as well. The property

is stated to be assessed in the name of the three brothers in

1/3rd share each in the income tax returns. Respondent

no.1 claims that the appellant was in the full know of the

facts as her husband and son had approached the

respondent no.1 for negotiating the sale of the property.

The sale of the property was to be concluded only if the

other two brothers agreed to sell their shares and thus no

written agreement was ever executed. Respondent no.1

did admit to applying for permission to sell the property to

the DDA but since leasehold rights were in the name of

respondent no.1, the application was so made. The amount

deposited by the appellant for clearance of the loan was

also not disputed though the original documents are stated

to have been acquired fraudulently. Since the respondents

did not agree to sell the property, there is stated to be no

concluded agreement between the parties.

8. On the pleadings of the parties, following issues were

framed on 11.5.1981:

"1. Was there no concluded agreement to sell the entire house in dispute? OPD

2. Did the defendant not agree to sell to the plaintiff the entire house for Rs.1,50,000/- and did he not receive Rs.43,304.48 in part performance of the contract of sale? OPD

3.. Did the defendant obtain sale permission from DDA and Income Tax clearance from Income Tax Department in part performance of the agreement to sell? OPP

4.Whether the plaintiff is entitled to specific performance of the contract of sale? OPP

5. Relief.

9. Two additional issues were framed on 24.09.1984:

1. Whether the judgment and decree dated 16.05.1983 in suit Nos.740/1980 and 287-A/83 is collusive between the defendant and his two brothers and is binding on the plaintiff? If so, what is its effect regarding relief qua defendants 2 and 3.

2. Whether the suit is barred by limitation?

10. The appellant entered into the witness box as PW1 to

support her case. An Assistant from the DDA appeared as

PW3 and proved the factum of the property standing in the

name of the respondent no.1 as well as the sale permission

granted on 05.10.1977 (ExPW3/1). The letter dated

22.01.1977 asking for documents prior to sale permission

was proved as ExPW3/2. The witness affirmed that the

registration remained in the name of respondent no.1. An

Inspector from the Income Tax Office appeared as PW4 and

proved the issuance of the no objection in Form 34A under

Section 230A(1) of the said Act. The permission, as had

been sought, was granted for 1/3rd share of respondent no.1

in the suit property. The witness also stated that there was

no document on record which showed the title of the

respondent no.1 in the property either in whole or in part.

The witness further deposed that respondent no.3 had not

shown himself as the owner of 1/3rd share in the suit

property in 1972-73, but in the assessment year 1973-74

had declared himself to be the owner of 1/3rd share in the

suit property. The position was the same for respondent

no.2 and that all the three respondents had shown 1/3rd

income from the property up to the assessment year 1981-

82. He affirmed that there was no document on record to

show the title of respondent no.2 and respondent no.3 in

the property. Respondent no.1 appeared in the witness box

as DW1, respondent no.3 as DW2 and respondent no.2 as

DW3. Two other witnesses also appeared and supported

the case of the respondents.

11. On completion of trial and hearing of arguments, the

learned Single Judge passed a judgment and decree dated

04.10.1985. Issue nos. 1 to 3, as also issue no.5, were

found in favour of the appellant. Additional issue no.2 was

given up by the respondents. However, issue no.4 was

found against the appellant. As a consequence thereof, the

appellant was held to be not entitled to a decree of specific

performance on account of interest of respondent nos.2 and

3 in the suit property as reflected in the income tax returns

and thus the decree was passed in favour of the appellant

and against respondent no.1 for a sum of Rs.43,304.48

along with interest at the rate of 12 per cent per annum

from the date when deposits were made till the date of

payment. It is this judgment which is assailed by the

appellant.

12. The learned Single Judge (as he then was) took note

of the fact that the appellant having alleged that the original

agreement to sell was in possession of respondent no.1 took

no steps to prove the document on record. The document

was denied in toto by the respondent no.1 and consequently

also denied possession of any original document in that

behalf. Thus no written agreement to sell could be proved.

13. The learned Single Judge, however, took into

consideration the plea of the appellant that in any case

there was ample evidence on record to prove the existence

of an oral agreement to sell. The plea was found to be

taken in the plaint as the averment in the plaint was to the

effect that "the defendant also entered into a written

agreement of sale dated 03.08.1977" which was wide

enough to permit a plea of an antecedent oral agreement.

The factum of respondent no.1 seeking permission for sale

of the property from the DDA was proved on record as also

the factum of the appellant having deposited an amount of

Rs.30,000/- towards unearned increase in pursuance to the

permission granted by the DDA. The sale permission sought

by respondent no.1 was specifically in favour of the

appellant and the permission from the competent authority

under the Urban Land (Ceiling and Regulation) Act had

already been obtained. These documents were found to be

sufficient to show the intent to sell the property to the

appellant as also the agreed consideration which was set

out in the application which formed the basis of the

calculation of the unearned increase. The manner of

applying for the sale permission also negated the stand of

the respondent no.1 that he had applied only to sell 1/3rd

share in the property or that the consideration of

Rs.1,50,000/- was only for his share as it was contrary to the

application made by respondent no.1 to the concerned

authority of DDA. The finding recorded is also that the

appellant got the loan, which was taken against the

property, cleared and paid for the same which was in

furtherance of the agreement to sell.

14. The only document establishing the claim of 1/3rd

share each of the three respondents is the application made

by respondent no.1 to the income tax authorities resulting

in issuance of a certificate under Section 230A(1) of the said

Act. However, the said document also established that the

agreed price for the whole property was Rs.1,50,000/-. This

document, however, was after the

agreement/understanding entered into between the parties.

15. Respondent no.1 failed to prove any receipt of title in

favour of his father in the Society and the finding was of

respondent no.1 alone being a member of the cooperative

society who had paid for the same and had the registered

document in his favour. Nothing was brought on record

other than the oral testimony that respondent nos. 2 and 3

contributed towards the construction. The learned Single

Judge, however, found that the assessment orders prior to

the date of the agreement itself showed that the income

was shared and the respondent nos.2 and 3 had claimed

share in the property in their income tax returns though

there was no document of title in their favour filed with the

income tax authorities. It is thus the returns of the income

tax which are the sole basis of the finding of the learned

Single Judge in favour of the respondents that the same

being prior to the agreement to sell, specific performance

could not be granted as respondent nos.2 and 3 were not

agreeable to sale of the property in question.

16. It may also be noticed that respondent nos.2 and 3

had filed a suit against respondent no.1 in pursuance to an

award and obtained a decree. The suit was practically

uncontested and was found to be a collusive one. In fact,

the stand of respondent nos.2 and 3 that the suit was filed

by them after the filing of the suit for specific performance

and it is the suit of specific performance which had caused

the respondent nos.2 and 3 to file a suit to get declaration

of their shares in the property in question.

17. It would be appropriate at this stage to discuss the

testimony of the appellant and the three respondents. The

appellant more or less affirmed the stand as set out in the

plaint. It was categorically denied that there was any prior

information available with the appellant about there being

three owners of the property. There is, in fact, not much of

meaningful cross examination from which anything further

can be deciphered. Respondent no.1 affirmed on oath that

he was the owner of only 1/3rd share and his understanding

with the husband and son of the appellant was for sale of

only 1/3rd share for Rs.1,50,000/- while the appellant had to

have independent discussions for purchase of the remaining

2/3rd share. The understanding for sale 1/3rd share was

stated to be conditional on the other two respondents

agreeing to the sale. In cross examination, it was admitted

that the respondent nos. 2 and 3 were not members of the

cooperative society nor was any permission sought in their

name. Respondent no.1 has admitted to have never

informed the DDA or any other civic authority that he was

the owner of only 1/3rd share. Respondent no.1 also

affirmed that the property was constructed by him in 1969

and the completion certificate stood in his name.

18. The stand of the respondent nos.2 and 3 (DW3 and

DW2 respectively) respectively was that the property

belonged to all the three brothers though the title

documents were in favour of one brother alone. There was

stated to be no tenant in the property in the year 1977. The

tenant was inducted thereafter, but the claim of the

respondents was that they were unaware of any transaction

between the appellant and the respondent no.1. There is

contradiction in the stand of the said respondents inasmuch

they claimed to have equally contributed to the property

while respondent no.1 in his deposition stated that he alone

had spent for the same. DW3 had clearly stated that the

claim for partition was made in view of the suit for specific

performance having being filed.

19. On hearing learned counsel for the parties, we find

that learned counsel for respondent no.1 has not been able

to displace the findings arrived at in favour of the appellant

on various issues. Learned counsel for respondent no.1

sought to challenge those findings though no cross

objections were filed in view of the fact that if the appeal of

the appellant was to succeed, the relief would go against

the respondent no.1 and thus he was entitled to once again

argue those aspects without there being any cross

objections. Learned counsel for respondent no.1 has

referred to the judgment in Ravinder Kumar Sharma v. State

of Assam and Ors; (1999) 7 SCC 435 where it was held that

for purposes of sustaining the impugned part of the decree,

the respondent, without filing of appeal/cross objections,

can attack the findings on which the part of decree passed

against him was based.

20. Pleadings and the evidence on record make it

abundantly clear that there was some understanding

arrived at between the appellant and respondent no.1 in

respect of the suit property. The written agreement in

pursuance to the understanding sought to be put forth by

the appellant could not be proved by him. However, the

plea of oral understanding preceding such written document

was established by way of contemporaneous documents. It

is not in dispute that the registered sub lease stands in

favour of respondent no.1 and he alone was the member of

the Society and all payments were made by him. The sub

lease deed itself provided for payment of unearned increase

to DDA in case of transfer of the property and the

respondent no.1 did file an application seeking permission

to transfer the property in favour of the appellant for a total

consideration of Rs.1,50,000/-. The total consideration is

clearly mentioned and thus it is not permissible for the

respondent no.1 to plead that the sum of Rs. 1,50,000/- was

not the total consideration of the property but was only in

respect of his 1/3rd share in the property.

21. It is not in dispute that in the records of the DDA,

respondent no.1 is the only recorded owner. There could

thus be no question of respondent no.1 moving an

application in respect of his 1/3rd share in the suit property.

In any case, the same is contrary to the letters sent by

respondent no.1. Thus, there is certainty both about the

property and about the total consideration. The aforesaid

understanding has been acted upon as it has been

established on record that the appellant paid the unearned

increase of Rs.30,000/- to the DDA. Not only that, the loan

availed of by the respondent no.1 for construction on the

property was cleared by the appellant by payment of the

amount so that the property became unencumbered and

ready for transfer. In such a situation, the only thing to be

done by the appellant was to pay the balance amount for

which the appellant was ready and willing, but respondent

no.1 backed out of the transaction. The learned Single

Judge also rightly analyzed the effect of the legal

proceedings initiated inter se the respondents post the

specific performance suit being filed. Respondent no.2 as

DW3 has categorically stated that the suit was filed only

because the suit for specific performance was filed by the

appellant. This was clearly an endeavour by the

respondents inter se to give a legal cloak of sanctity to what

they had pleaded in the written statement of there being

1/3rd share each of the three respondents. Such a collusive

suit could not establish the title of respondent nos.2 and 3

much less stand as an obstruction to the claim of the

appellant.

22. In view of the aforesaid, the only aspect to be

considered in the present appeal is the challenge by the

appellant to the findings of the learned Single Judge based

on the income tax assessment orders of the respondents.

23. It is not in dispute that there is no registered

document or any other writing evidencing the intent of the

respondent nos. 2 and 3 to share the property equally. No

such application was made either to the Society or to the

perpetual lessor being the DDA showing such an intent.

Thus, for all practical purposes, respondent nos. 2 and 3

permitted respondent no.1 to proclaim his title to the

outside world as the sole owner in pursuance to a registered

document and the appellant dealt with respondent no.1 in

that capacity. Learned counsel for respondent no.1 sought

to strenuously argue that the appellant was aware of the

nature of ownership by solely relying upon the certificate

issued under Section 230A(1) of the said Act. No doubt, the

share of the respondent no.1 is stated to be 1/3rd in the

same, but that document is not a contemporaneous

document with the understanding between the appellant

and respondent no.1 and is post the

agreement/understanding. The application is not a joint

one for this certificate, but by respondent no.1 alone as per

law. Nothing has been brought in evidence as to at what

stage was this document handed over to the appellant. In

any case, it was handed over much subsequent to the

agreement/understanding. The witness from the income

tax authorities has stated that there is no document filed

with the authorities to establish the title of respondent nos.2

and 3. Respondent no.1 has not even filed anything to

show that he restricted his claim to 1/3rd share in the suit

property. Such a claim was made by respondent nos.2 and

3 prior to the agreement to sell and for sharing the rent

and/or earnings but it will have to be considered as to what

is the effect of such an understanding on the claim of the

appellant. The learned Single Judge has taken a view that

the first respondent would not have risked showing the

other two respondents as the co-owners in the suit property

just to avoid any tax liability. The presumption of the

property being owned by respondent no.1 is stated to be

displaced on account of the claims of all the three

respondents before the income tax authorities. There is

stated to be absence of evidence on the part of the

appellant to rebut this position.

24. Learned counsel for the appellant has referred to the

judgment of a Division Bench of this Court in S.Kartar Singh

v. Commissioner of Income Tax; (1969) 73 ITR 438 to

canvass the plea that the treatment of income for purposes

of tax does not affect title. Learned counsel also referred

to the observations of the Supreme Court in Commissioner

of Income Tax. V. Podar Cement Pvt. Ltd and Ors; (1997)

226 ITR 625 to emphasize the distinction between a

"registered owner" and "owner" for purposes of income tax

when the following observations were made:

" We are conscious of the settled position that under the common law, "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act, etc. But, in the context of Section22 of the Income Tax Act, having regard to the ground realities and further having regard to the object of the Income Tax, namely, "to tax the income", we are of the view, "owner" is a person who is entitled to receive income from the property in his own right."

25. At this stage a reference can also be made to Section

27 (iii) of the said Act which states as under:

"Section 27. "Owner of house property", "annual charge", etc. defined

(iii) a member of a cooperative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house-building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof;

This definition clearly states that for the purposes of

Section 22-26 an owner of house property will be deemed to

be the person in whose name the allotment has been made.

In the present case, the allotment has been made in favour

of respondent no.1. He would thus be the deemed to be

owner of the property.

26. Learned counsel also referred to the Halsbury‟s Laws

of England; Fourth Edition Volume 42. The relevant extract

is under the heading "Disclosure of Material Facts". This

part deals with the consequences of consent being given

and ignorance of material facts as also the consequences of

misrepresentation. In para 46, it has been observed as

under:

" However, any active concealment by the vendor of defects which would otherwise be patent is treated as fraudulent, and the contract is voidable by the purchaser if he has been deceived by it."

In para 50, while dealing with "Disclosure by the Vendor", it

is observed as under:

"Disclosure by the Vendor: In special circumstances it may be the duty of the vendor to disclosure matters which are known to himself, but which the purchaser has no means of discovering, such as a defect which will render the property useless to the purchaser for the purpose for which, to the vendor‟s knowledge, he wishes to acquire it; or a notice served in respect of the property, knowledge of which is essential to enable a purchaser to estimate the value. If the vendor fails to make disclosure, he cannot obtain specific performance and may be ordered to return the deposit."

27. Learned counsel for the appellant thus contended that

the vendor cannot obtain specific performance if he fails to

disclose relevant material but the converse of that is not

true if the vendee is to go ahead with the transaction since

it would imply that the vendee would be able to take

advantage of his own non disclosure. A duty is cast on the

vendor to disclose any defect of title. Learned counsel also

sought to draw strength from para 248 dealing with a

situation where specific performance would be refused. A

claimant is not entitled to the remedy of specific

performance if there has been conduct on his part, such as

misrepresentation, disentitling him to the relief in equity,

and the remedy may be refused if it would impose great

hardship on an innocent vendor like in a case of mistake.

28. Learned counsel for the appellant referred to the

Treatise on the Specific Performance of Contracts by The

Rt.Hon.Sir Edward Fry, Sixth Edition, where on page 328 the

following observations have been made:

" A man may with impunity," said North J., in Archer v.Stone, "tell a lie in gross in the course of negotiations for a contract. But he cannot, in my opinion, tell a lie appurtenant. That is to say, if he tells a lie relating to any part of the contract or its subject matter, which induces another person to contract to deal with his property in a way which he would not do if he knew the truth, the man who tells the lie cannot enforce the contract."

29. We have given our thought to the rival contentions

advanced by the parties. We find that the appellant cannot

be non suited merely on account of the respondents claim

to have filed returns with the income tax authorities stating

that they had equal share in the property.

30. The first aspect to be noticed is that there is no

documents filed with the income tax authorities evidencing

such an arrangement. The subject matter is an immovable

property and rights & interests can only be created by a

registered document. Leave aside a registered document,

there is no document evidencing such an arrangement.

31. Income tax returns are intrinsically confidential in

nature and only the respondents are privy to them. The

appellant is not expected to carry out a search and cannot a

carry out a search of the income tax returns of the

respondents. It is in these circumstances that the

significance of a distinction between an owner of a property

in respect of the title as against the purpose of income tax

becomes significant as per the observations made in

Commissioner of Income Tax. V. Podar Cement Pvt. Ltd and

Ors‟s case (supra) and S.Kartar Singh v. Commissioner of

Income Tax‟s case (supra). The mere reflection of such an

ownership by the respondents with the Income Tax

Department, albeit prior to the agreement to sell, thus itself

cannot come to the aid of the respondents. It cannot be

lost sight of that insofar as respondent no.1 is concerned

there can be really no defence. Respondent nos.2 and 3

appear to have colluded with respondent no.1 to defeat the

rights of the appellant. These two respondents had taken

no steps from the inception of title of the property in favour

of respondent no.1 till the agreement and filing of the suit

for specific performance to establish any right in the

property. That being the position, respondent nos.2 and 3

cannot claim a right in the property to avoid the transfer of

the property in favour of the appellant. The transfer of the

property in favour of the appellant really does not require

any consent of respondent nos.2 and 3 for the reason that

the registered owner remains respondent no.1. The

permissions have been granted in favour of respondent no.1

and he alone is to be called upon to execute the sale deed

in favour of the appellant. Thus there is no impediment in

the execution of the sale deed in favour of the appellant.

32. If the appellant was apprehensive of the title or of any

defect, which was not disclosed by respondent no.1, it is the

appellant who could have avoided the transaction. The

appellant is seeking enforcement of his rights through

specific performance and the defaulting party being

respondent no.1 cannot be permitted to plead that the

transaction should be avoided. Respondent no.1 failed to

disclose to the appellant any interest of respondent nos.2

and 3 and the appellant could not have deciphered such an

interest despite due diligence. The acts carried out by the

appellant and respondent no.1 in furtherance to the

agreement/understanding also support such a conclusion. It

is the appellant who has deposited the unearned increase

and has also cleared the loan. The only thing which now

remains to be done is for the appellant to pay the balance

price and the sale deed to be executed in her favour.

Respondent nos.2 and 3 really cannot raise any objection as

they have failed to make out a claim of title in the property

other than for purposes of income tax. If the respondent

nos.2 and 3 have been negligent in establishing their title,

they cannot defeat the claim of decree for specific

performance by the appellant, and, if at all, their claims

would be against the respondent no.1, if any.

33. We are thus of the considered view that the appellant

is entitled to a decree of specific performance of the

agreement/understanding and the suit property is liable to

be transferred and registered in the name of the appellant

on payment of the balance consideration. The balance

consideration i.e. Rs.1,50,000/- less the amount paid of Rs.

43,304.48 amounting to Rs.1,06,695.52 is directed to be

deposited in the court within a period of one month from

today whereafter the respondent no.1 will execute the sale

deed in favour of the appellant within one month thereafter

and on such execution collect the amount from the Court.

In case of failure of respondent no.1 to execute the sale

deed within one month of such deposit, the sale deed would

be executed through an officer appointed by this Court to

carry out the necessary task.

34. We did consider the aspect of passage of time and the

consequent increase in real estate prices. This was with the

object of examining whether an enhanced amount is liable

to be paid to respondent no.1. We are, however, not

inclined to favourably consider this aspect for the

respondents as since 1980 the respondents have put the

property on rent and enjoyed the rental income from the

same. Thus, the respondents have been enjoying the

rentals from the property for quite a long period of time

though the appellant has been deprived of its enjoyment.

35. The appeal is accordingly allowed leaving the parties

to bear their own costs in the peculiar facts of the case.

SANJAY KISHAN KAUL, J.

FEBRUARY 11, 2009 SUDERSHAN KUMAR MISRA, J. dm