Sh. Suresh Kumar vs Sh. Kamal Arora
2010 Latest Caselaw 5679 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                                      Date of decision: 14.12.2010


+                                             CS(OS) 1359/2008


       SH. SURESH KUMAR                                  ..... Plaintiff
                      Through : Sh. G.S. Raghav and Sh. Pankaj Kumar, Advocates.


                       versus


       SH. KAMAL ARORA                                  ..... Defendant
                     Through : Sh. K.S. Arya, Advocate.

       CORAM:
       HON'BLE MR. JUSTICE S. RAVINDRA BHAT

1.

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

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

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



MR. JUSTICE S.RAVINDRA BHAT, J (OPEN COURT)

%

I.A. No. 7057/2010

1. Through this application, the defendant seeks rejection of the suit.

2. The plaintiff sues for a decree for specific performance. The brief facts necessary to decide the case are that the parties entered into an agreement to sell dated 06.11.2006 in respect of the first floor of property being A-39, East of Kailash, New Delhi. The total consideration indicated in the pleadings is Rs. 25 lakhs. The plaintiff claims to have paid sum of Rs. 3 crores in fulfillment of the agreement and alleges having approached the defendant for execution of the

I.A. No. 7057/2010 in CS (OS) 1359/2008 Page 1 sale deed but faced resistance. Alleging these facts, the plaintiff approached this Court.

3. Initially, the plaintiff had sought damages as an additional and alternative relief. By an amendment, that relief was given-up; the Court recorded the plaintiff's position that such reliefs were given-up with prejudice on 10.05.2010.

4. The defendant contends, on the basis of the decision of the Supreme Court in Dadarao and Anr. v. Ramrao and Ors. 1999 (8) SCC 416 that wherever such an agreement postulates a consequence in monetary terms, the suit seeking specific performance of the agreement is not maintainable. The defendant particularly relies upon the following observations in Dadarao and Anr.:

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6. The relationship between the parties has to be regulated by the terms of the agreement between them. Whereas the defendants in the suit had taken up the stand that the agreement dated 24th April, 1969 was really in the nature of a loan transaction, it is the plaintiff who contended that it was an agreement to sell. As we read the agreement, it contemplates that on or before 15th April, 1972 the sale deed would be executed. But what is important is that the agreement itself provides as to what is to happen if either the seller refuses to sell or the purchaser refuses to buy. In that event the agreement provides that in addition to the earnest money of Rs. 1,000 a sum of Rs. 500 was to be given back to Tukaram Devsarkar and that "no sale deed will be executed". The agreement is very categorical in envisaging that a sale deed is to be executed only if both the parties agree to do so and in the event of anyone of them resiling from the same there was to be no question of the other party being compelled to go ahead with the execution of the sale deed. In the event of the sale deed not being executed, Rs. 500, in addition to the return of Rs. 1,000, was the only sum payable. This sum of Rs. 500 perhaps represented the amount of quantified damages or, as the defendants would have it, interest payable on Rs. 1,000.

7. If the agreement had not stipulated as to what is to happen in the event of the sale not going though, then perhaps the plaintiff could have asked the court for a decree of specific performance but here the parties to the agreement had agreed that even if the seller did not want to execute the sale deed he would only be required to refund the amount of Rs. 1,000 plus pay Rs. 500 in addition thereto. There was thus no obligation on Balwantrao to complete the sale transaction.

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It is argued that the above ruling has been subsequently followed by this Court in Ashok Aggarwal v. Bhagwan Das Arora 2001 (57) DRJ 241.

I.A. No. 7057/2010 in CS (OS) 1359/2008 Page 2

5. The plaintiff resists the application and relies upon Section 23 of the Specific Relief Act. He relies upon three rulings of the Supreme Court. In M.L. Devender Singh and Others v. Syed Khaja 1973 (2) SCC 515, the Court, after discussing the said provision (which states that contract may be enforced despite the sum named by the parties as the amount to be paid in case of its prejudice), if it is satisfied why such an amount was named only for the purpose of securing performance of the contract, held that in every case of specific performance involving such agreement, the Court has to inquire and satisfy itself as to the true intention of the parties, having regard to that provision, i.e. Section 23. The relevant discussion in M.L. Devender Singh (supra) is as follows:

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14. It may be mentioned here that the principles contained in Section 20 of the old Act are re-enacted in Section 23 of the Act of 1963 in language which makes it clear that a case where an option is given by a contract to a party either to pay or to carry out the other terms of the contract falls outside the purview of Section 20 of the old Act, but, mere specification of a sum of money to be paid for a breach in order to compel the performance of the contract to transfer property will not do. Section 23 of the Act of 1963 may be advantageously cited here. It runs as follows :

23(1) A contract, otherwise, proper to be specifically enforced, may be so enforced, though a sum be named in it as the amount to be paid in case of its breach and the party in default is willing to pay the same, if the court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for, the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance.

(2) When enforcing specific performance under this section, the court shall not also decree payment of the sum so named in the contract.

15. We think that Section 23 of the Act of 1963 contains a comprehensive statement of the principles on which, even before the Act of 1963, the presence of a term in a contract specifying a sum of money to be paid for a breach of the contract has to be construed Where payment is an alternative to carrying out the other terms of the contract, it would exclude, by the terms of the contract itself, specific performance of the contract to convey a property.

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I.A. No. 7057/2010 in CS (OS) 1359/2008                                                        Page 3

6. The plaintiff also relies upon the subsequent judgment of the Supreme Court in Prakash Chandra v. Angadlal & Ors. 1979 (4) SCC 393 where the ratio in M.L. Devender Singh (supra) case was applied and a later ruling in Manzoor Ahmed Magray v. Ghulam Hassan Aram and Others 1999 (7) SCC 703. The relevant discussion in the later judgment Manzoor Ahmed Magray (supra) is as follows:

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8. The Court also held that the fact that the parties themselves have provided a sum to be paid by the party breaking the contract docs not, by itself, remove the strong presumption contemplated by the use of the words 'unless and until the contrary is proved" in Section 10 of the Specific Relief Act of 1963. The sufficiency or insufficiency of any evidence to remove such a presumption is a matter of evidence. Similar clause was interpreted by this Court in the case of Prakash Chand v. Angad Lal MANU/SC/0022/1979 : AIR1979SC1241 and it was observed that a perusal of the terms of the contract indicated that stipulation for damages was made only for the purpose of securing performance of the contract and not for the purpose of giving an option of paying money in lieu of specific performance. Court observed:

Even if a sum has been named in the contract for the sale as the amount to be paid in case of a breach, the appellant is entitled in law to the enforcement of the agreement.

9. Further, for the purpose of present matter, Section 20 and illustration therein of Specific Relief Act, 1977(1920 A.D.) of Jammu & Kashmir which is applicable to the parties makes it explicitly clear thus:

A contract, otherwise proper to be specifically enforced, may be thus enforced, though a sum be named in it as the amount to be paid in case of its breach, and the party in default is willing to pay the same.

Illustration

A contracts to grant B an under-lease of property held by A under C, and that he will apply to C for a licence necessary to the validity of the under-lease, and that, if the licence is not procured, A will pay B Rs. 10,000. A refuses to apply for the licence and offers to pay B Rs. 10,000. B is nevertheless entitled to have the contract specifically enforced if C consents to give the licence.

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7. This Court has considered the submissions. In the present case, the condition or stipulation relied upon by the defendant is to the following effect:

I.A. No. 7057/2010 in CS (OS) 1359/2008                                                          Page 4
        "XXXXXX                        XXXXXX                       XXXXXX

10. That in case the SECOND PARTY fails to pay the balance sale consideration to the FIRST PARTY within the said stipulated period i.e. on or before Four Months in respect of the said property then the advance/earnest money paid by the SECOND PARTY shall be forfeited by the FIRST PARTY and in case the FIRST PARTY shall not execute and registered all the relevant documents and papers such as General Power of Attorney/Will/Agreement To Sell and Purchase/Sale Deed etc., with the competent registering authority in Delhi/New Delhi, in favor of the SECOND PARTY or his/her/their nominees or backs out of the deal then the FIRST PARTY shall refund the double of the advance/earnest money to the SECOND PARTY, in all respects.

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8. It is apparent that the parties did stipulate for a possible consequence in the event the agreement could not be performed as per the terms and conditions visualized by them. A reading of Dadarao and Anr (supra) would seemingly conclude the discussion in the defendant's favor. However, the Court cannot be oblivious that the circumstance that in Dadarao and Anr. (supra), the Supreme Court, on a consideration of the terms and conditions proceeded as it did to hold that the agreement had stipulated a condition or consequence of damages which was a quantified one as a result of which the plaintiff was disentitled to the relief of specific performance. Pertinently, the Court did not notice the purport and effect of Section 23, which obliges - (at least - in this Court's opinion) - a consideration as to whether such a condition or clause is included by the parties concerned in order to secure the performance of the contract or liquidated damages.

9. At this stage, the Court is unable to discern any clear-cut intention since there is no evidence, either way, to conclude that the condition stipulated in Clause-10 was a mere consequence and not one to secure performance of the contract. To hold in the applicant defendant's favor would be choose one of the alternatives which is a mere assumption at this stage, without proof - a course, which is impermissible without going into the merits. This Court is also constrained to notice that Dadarao and Anr. (supra) besides, not taking into account Section 23 also did not notice the previous rulings in Prakash Chandra (supra) and M.L. Devender Singh (supra) which was also on almost identical aspects. All these decisions were noticed in an earlier ruling in Manzoor Ahmed Magray (supra) which was rendered on 05.10.1999. In Dadarao and Anr. (supra) (which was decided on 02.11.1999), the Court did not have the benefit of consideration of the previous rulings.

I.A. No. 7057/2010 in CS (OS) 1359/2008 Page 5

10. Having regard to the above discussion, this Court is satisfied that the suit cannot be rejected on the ground urged by the defendant. I.A. No. 7057/2010 is accordingly dismissed. CS (OS) 1359/2008 List before the Joint Registrar on 08.02.2011.

                                                                        S. RAVINDRA BHAT
                                                                                  (JUDGE)
       DECEMBER 14, 2010
       'ajk'




I.A. No. 7057/2010 in CS (OS) 1359/2008                                                  Page 6