Sanjay Passi vs Iqbal Chand Khurana
2010 Latest Caselaw 3670 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO(OS) No.392/10 & CM Nos.10632-33/10

SANJAY PASSI                       .....Appellant through
                                   Mr. Vikas Dhawan &
                                   Mr.Ahimanyu Mahajan,Advs.

                  versus

IQBAL CHAND KHURANA                .....Respondent through
                                   Mr.Sanjeev Puri, Sr. Adv.
                                   with Mr.Gyaltsen G.
                                   Barfungpa, Adv. for
                                   Respondent Nos.1 & 2
                                   Mr. P.V. Kapur, Sr. Adv. with
                                   Mrs. Neelima Tripathi,
                                   Mr.Vimal Nagrath,
                                   Mr.Sanjay Kumar Jha
                                   & Ms.Ikasha Bhalla, Advs.
                                   for Respondent No.3
                       WITH

      FAO(OS) No.490-92/10 & CM No.13529/10

IQBAL CHAND KHURANA                .....Appellant through
                                   Mr.Sanjeev Puri, Sr. Adv.
                                   with Mr.Gyaltsen G.
                                   Barfungpa, Adv.

                  versus

SANJAY PASSI                       .....Respondent through
                                   Mr. Vikas Dhawan with
                                   Mr.Abhimanyu        Mahajan,
                                   Advs. for Respondent No.1
                                   Mr. P.V. Kapur, Sr. Adv. with
                                   Mrs. Neelima Tripathi,
                                   Mr.Vimal Nagrath,
                                   Mr.Sanjay Kumar Jha
                                   & Ms.Ikasha Bhalla, Advs.
                                   for Respondent No.2

%                             Date of Hearing : August 05, 2010

                              Date of Decision : August 09, 2010


FAO(OS)392/2010                                        Page 1 of 10
       CORAM:
*     HON'BLE MR. JUSTICE VIKRAMAJIT SEN
      HON'BLE MS. JUSTICE MUKTA GUPTA
      1. Whether reporters of local papers may be
         allowed to see the Judgment?                 No
      2. To be referred to the Reporter or not?       Yes
      3. Whether the Judgment should be reported
         in the Digest?                               Yes

VIKRAMAJIT SEN, J.

1. The Plaintiff has filed this Appeal containing the following

Prayers:-

In the facts and circumstances as narrated above, it is most respectfully prayed that this Hon'ble Court may be pleased to -

(a) pass an order setting aside the impugned order and judgment dated 3.5.2010, except to the extent it directs Respondent Nos.1 and 2 to deposit a sum of Rs.14.5 crores, in view of the prayer of the Appellant for deposit of further amounts; and

(b) pass any other/further order(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.

2. Defendant Nos. 1 and 2 [Appellant in FAO(OS) No.490-

92/2010], who were the owners of the suit property, have also

assailed the said impugned Order dated 3.5.2010. The following

Prayers have been made in this Appeal:-

a) set aside the impugned Order dated May 3, 2010 passed by the Learned Single Judge in IA No.9346 of 2009, IA No.7865 of 2009 and IA No.15611 of 2009 in

CS(OS) No.1001 of 2009 to the extent of direction to the Appellants to deposit of Rs.14.5 crores in this Hon'ble Court;

b) pass such other order(s) as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.

These Prayers came into focus when Shri P.V. Kapur, learned

Senior Counsel commenced arguments on behalf of Respondent

No.3 who is the party in whose favour a Sale Deed has been

executed after the filing of the subject Suit for Specific

Performance. Keeping the extracted Prayers in perspective, we

considered it unnecessary to hear arguments on behalf of the

transferee pendent lite since no adverse orders have been

passed against it. Even if any such directions had been passed,

the Prayers in the Appeal would supplicate and require to nullify

them. The Order to deposit ` 14,50,00,000/- has been directed

against Defendant No.1.

3. By a detailed discussion, the learned Single Judge has

considered threadbare the various Agreements executed

between Shri Sanjay Passi on the one hand [Appellant in

FAO(OS) No.392/2010] and S/Shri Iqbal Chand Khurana and

Ashwani Khurana [Appellants in FAO(OS) No.490--92/2010] on

the other. The learned Single Judge has also perused and

discussed the correspondence exchanged between the parties.

After doing so, a prima facie finding has been articulated to the

effect that the Plaintiff was unable to arrange for the requisite

funds and had, therefore, requested the Vendors (Khuranas) to

refund the amount already paid. The readiness and willingness

of the Appellant to perform his part of the contract has, in the

opinion of the learned Single Judge, not been established. So far

as the next question raised before the Trial Court, viz.

application of the principle of lis pendens is concerned, his

prima facie conclusion is that ―a firm view about the third

defendant's knowledge regarding any pre-existing agreement

concerning the suit property‖ cannot be arrived at. It has been

noted in the impugned Order that the Suit had been filed on

25.5.2009 with notice returnable for 29.5.2009; an Agreement

to Sell was allegedly entered into between Khuranas and the

third Respondent/Defendant, namely, Hap Apparel Pvt. Ltd. on

6.5.2009 but the Sale Deed pursuant to this Agreement was

executed on 27.5.2009. Thirdly, the learned Single Judge has

made mention of the fact that the Agreement between

Sanjay Passi and Khuranas was for ` 60,00,00,000/-, out

of which ` 20,00,00,000/- had been paid.

4. There is no dispute as to the Clause that ` 7,50,00,000/-

was to be returned in the event of the cancellation of the

Agreement, although there is serious challenge to the inclusion

of the term requiring the Plaintiff to execute a Cancellation

Deed. The Plaintiff's assertion is that the words ―provided, the

purchaser executes a cancellation deed if required by the

vendors and does not legally challenge the forfeiture‖ have been

interpolated by the Khuranas in the Agreement. The impugned

Order records that there is no defence as to why ` 7,50,00,000/-

was neither offered nor refunded. Eventually, it has been held

that since the Khuranas are treating the Agreement of the

Plaintiff as cancelled, there was no justification for their

retaining the entire sum of ` 20,00,00,000/-. The learned Single

Judge has, as per the Agreement between the parties, ordered

the deposit of the sum of ` 7,50,00,000/-, which was

refundable/returnable as per the terms of the Agreement to Sell

between the Plaintiff and Defendant Nos.1 and 2. So far as the

remaining ` 12,50,00,000/- is concerned, the learned Single

Judge has prima facie found it plausible only to forfeit

` 7,00,00,000/- as and by way of a pre-estimate of damages. It is

for this reason that Defendants Nos.1 and 2 [Khuranas] have

been directed to deposit ` 14,50,00,000/- in Court.

5. The Plaintiff prays for the setting aside of the

impugned Order but maintaining the direction for the deposit

of ` 14,50,00,000/-. Defendant Nos.1 and 2 (Appellants in

FAO(OS) No.490-92/2010) pray for setting aside of this very

direction; they, however, agree before us to deposit the sum of

` 7,50,00,000/- along with interest that has accrued thereon.

6. Since there are two Agreements to Sell which are in the

limelight, it will be relevant and topically instructive to

reproduce the following extract from Narandas Karsondas -vs-

S.A. Kamtam, (1977) 3 SCC 247:-

32. A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. See Rambaran Prasad v. Ram Mohit Hazra, (1967)1 SCR 293. The fiduciary character of the personal obligation created by a contract for sale is recognized in Section 3 of the Specific Relief Act, 1963, and in Section 91 of the Trusts Act. The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein.

7. We find it relevant that the sale consideration

was ` 60,00,00,000/- between the Plaintiff and Defendant Nos.1

and 2 and the price at which the suit property was sold to

Defendant No.3/Respondent No.3 is ` 43,00,00,000/-. We think

that at this stage it is not necessary to give any weightage to the

fact that earlier the sale consideration was ` 1,00,00,00,000/-.

As an alleged failure of the Plaintiff to perform his

contract, Defendant Nos.1 and 2 have facially sustained a loss of

` 17,00,00,000/-. The claim for damages would, therefore,

possibly arise only so far as the sellers, that is, Defendant Nos.

and 1 and 2/Appellants are concerned, and that too for a sum of

` 17,00,00,000/-. As against this amount, the impugned Order

directs deposit of ` 7,50,00,000/- on the ground that it was

specifically stated to be refundable. Since this amount has been

ordered to be deposited in this Court, as in view of the

statement of learned Senior Counsel for the Khuranas that they

do not oppose this deposit, we need not make any observations

on this score except to round off the amount at ` 10,00,00,000/-,

after including interest. There seems to us, however, no

justification for calling upon Defendant Nos.1 and 2 to make

any further deposit as, on a perusal of the documents

between the parties, these Defendants have sustained a loss of

` 17,00,00,000/-. It is quite another matter that as the Suit

progresses, the Plaintiff may succeed in proving that the price

of ` 43,00,00,000/- was in fact the market price at all relevant

times. We say this, on a prima facie appreciation of facts,

keeping in perspective that the Agreement between the Plaintiff

and Defendant Nos.1 to 3 was initially for ` 1,00,00,00,000/-

and for no appreciable reason was reduced by 40 per cent to

` 60,00,00,000/-. There is obviously more in this transaction

than meets the eye. At the conclusion of the Trial, no doubt, all

the complexion and hues of the transaction will become palpably

evident.

8. The Original Side of the High Court of Delhi has seen an

explosion of dockets pertaining to actions for specific

performance of contracts for sale of immovable property. In

Mohan Overseas (Private) Ltd. -vs- Goyal Tin & General

Industries, 169 (2010) DLT 487 : 2010 I AD (Delhi) 253, a

Division Bench has expressed the opinion that keeping in

perspective the application of the principle of lis pendens, it

would be in the interest of justice and equity that the purchaser

should be asked to deposit the entire sale consideration. A

reading of the impugned Order is indicative of the position that

the Plaintiff was actually praying for an injunction against

Defendant Nos.1 and 2, which has been declined. No further

prayer on these lines has been pressed in the Appeal. The

learned Single Judge, therefore, could not have called upon the

Plaintiff to deposit the entire sale consideration as a sine qua

non for considering the discretionary relief for specific

performance. Possibly, this course was not chartered since the

Suit Property has already been sold to a third party, viz.

Defendant No.3, who is in possession thereof.

9. In Mohan Overseas, the Division Bench had also

expressed its reservations on the aspect of whether the Court is

empowered to obtain an undertaking from the Plaintiff to pay

the Defendant a pre-estimated amount of damages fixed by the

Court in the event that the Plaintiff loses his suit for Specific

Performance of an alleged Agreement to Sell. Such a course was

chartered by a learned Single Judge to prevent frivolous suits of

specific performance of transfer of immovable properties and

had been approved by another Division Bench in FAO(OS) No.

19/2009 titled Vinod Seth -vs- Devinder Bajaj. It transpires

that the Hon'ble Supreme Court in an appeal from the said

Judgment of Division Bench, numbered as Civil Appeal No. 4891

of 2010, did not approve of this method and held that such a

direction was not sustainable in law. Their Lordships, however,

to balance the equities in the case, arrived at a figure, which

according to them, the Plaintiff/Vendee would have earned from

the agreement. It was thereafter directed that subject to deposit

of this stipulated amount by the Defendant/Owner with the Trial

Court, the bar of lis pendens would be lifted and he would be

free to deal with the property. Their Lordships thus, in effect,

converted the suit for specific performance into one for recovery

of damages.

10. The only prayer of the Plaintiff/Appellant is that the Order

directing the deposit of ` 14,50,00,000/- should be upheld. We,

therefore, find no useful purpose in discussing Hindustan

Construction Company, Muzaffarpur -vs- The State of Bihar, AIR

1963 Patna 254, Tandra Venkata Subrahamanayam -vs-

Vegesana Viswanadharaju, AIR 1968 Andhra Pradesh 190,

Swarnam Ramachandran -vs- Aravacode Chakungal Jayapalan,

(2004) 8 SCC 689 etc. etc.. We are unable to find any reason, at

this stage of the proceedings, to uphold this direction in view of

the apparent loss incurred by Defendant Nos.1 and 2.

11. The Appeals along with pending applications are disposed

of with the issuance of directions to Defendant Nos.1 and 2

to deposit a sum of ` 10,00,00,000/- with the Registrar-

General of this Court within fifteen days from today. The

Registrar-General shall invest the said money in a Fixed Deposit

Receipt for an initial period of 366 days, with automatic

renewals.

( VIKRAMAJIT SEN ) JUDGE

( MUKTA GUPTA ) JUDGE August 09, 2010 tp