Delhi High Court
Sanjay Passi vs Iqbal Chand Khurana And Anr on 3 May, 2010
Author: S.Ravindra Bhat
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 22.04.2010
Pronounced on: 03.05.2010
+ IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009
SANJAY PASSI ..... Plaintiff
Through: Mr. Vikas Dhawan, Advocate.
versus
IQBAL CHAND KHURANA AND ANR ..... Defendants
Through: Mr. Sanjeev Puri, Sr. Advocate with Mr. Sahir
Hussain, Advocate for D-1&2.
Ms. Neelima Tripathi, Advocate with Mr. Md.
Niyazuddin, Advocate for D-3.
CORAM:
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?
S.RAVINDRA BHAT, J.
I.A. Nos. 7865/2009 (Under Order 39 Rule 1 & 2), 9346/2009 (Under Section 151- reg.
tendering of balance sale consideration) and 15611/2009 (Under Section 151 - for directing
Defendant Nos. 1 and 2 to deposit money in the Court)
1. This order will dispose of three applications by the parties - I.A. Nos. 9346/2009,
7865/2009 and 15611/2009.
2. The suit seeks a decree, for specific performance of an Agreement to sell in respect of 56,
Golf Links (hereafter called "the suit property"). The Agreement to sell was entered into with the
Defendant Nos. 1 and 2 (hereafter referred to as "vendors"). The salient terms of the agreement
were that the total consideration agreed upon was Rs. 100 crores; the entire amount was to be
paid by the plaintiff on or before 06.06.2008; concededly, the period could be extended by three
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 1
months - a facility indicated in clause 2(a). The plaintiff submits having paid Rs.10 crores, to the
vendors on 06.12.2007 itself, and paid a further amount of Rs. 5 crores, on 17.04.2008.
3. The plaintiff contends about having enclosed a draft letter to the defendant, to be sent to
the Punjab National Bank (hereafter referred to as "PNB"), to enable him (the plaintiff) to
secure/obtain a loan of Rs.35 crores; it is further stated that on 11.08.2008, the said bank was
asked to process the loan at the earliest point of time. The suit further states that a part-payment
of Rs. 5 crores was made on 04.09.2008 to the vendors,which implied that the total consideration
paid by then was Rs.20 crores. The plaintiff also contends about the PNB having written to him
on 09.05.2008, requiring him to submit further documents, for processing the loan application.
4. It is argued that on 23.09.2008, a Supplementary Agreement was entered into, in terms of
which the parties acknowledged their mutual rights and obligations for the sale of the suit
property and also receipt of Rs. 20 crores by the Vendors. The Supplementary agreement dated
23.09.2008 altered the conditions to the effect that the entire balance amount was payable on or
before 07.04.2009 (in terms of clause (c) of the said Supplementary Agreement). The
Supplementary agreement further visualized payment of interest in the following terms:
"XXXXXX XXXXXX XXXXXX
d) For this delay the Purchaser will pay an interest to the Vendors as
follows:
i) Interest @ 18% per annum basis will be payable to Shri Iqbal
Chand Khurana on the entire amount remaining unpaid as on 1st sept &
onwards out of the total consideration of Rs.50,00,00,000/- in the
following manners:
01-09 to 03-09-2008 on Rs. 40 crores
04-09 to 17-09-2008 on Rs. 35 crores
18-09 to onwards Rs. 30 crores
The interest will be paid for every month on the 1st of every subsequent
month or will be compounded on a monthly basis.
ii) Interest @ 21% per annum basis will be payable to Shri Ashwani
Khurana on the amount of Rs.45 Cr remaining unpaid as on 1st sept. till
the 15th sept & on Rs. 50 Cr thereafter till the date of Registration &
transfer of property. The interest will be paid for every month on the 1st of
every subsequent month or will be compounded on a monthly basis.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 2
iii) If for any reason the purchaser cannot comply with the conditions
of the agreement wherein he has to pay an amount of Rs.80,00,00,000/-
(Rupees Eighty Crores only) alongwith interest as agreed upon by the
parties by the 7th April 2009 the purchaser will have to pay a penal
interest @ 36% Per Annum payable monthly for a maximum period upto
30th June, 2009. In case the buyer still fails to pay the total consideration
alongwith interest by 1st July 2009 an amount of Rs. 10 Crores from the
principle transaction amount alongwith interest as provided for &
elaborated above in favour of the vendors will stand forfeited and the
transaction will stand cancelled. The Vendors will share the forfeited
amount of Rs.10,00,00,000/- (Rupees Ten Crores only) in this unlikely
event equally along with the interest amounts as provided above and
accrued to them individually.
XXXXXX XXXXXX XXXXXX"
5. It is submitted that after the Supplementary agreement was entered into, and in view of
conversations and negotiations (between the plaintiff and the vendors) - said to be evidenced by
e-mail communications, meetings were held between the parties when it was realized that the
transaction could not be proceeded with for the agreed consideration of Rs. 100 crores because
the market price of the property was much lower than that. The plaintiff submits that the parties
then decided that a third-party would be approached for sale of the property and that out of the
consideration realized, he (the plaintiff) would be entitled to reimbursement of Rs.20 crores. The
plaintiff alludes to meetings held between the parties on 22.11.2008 and 15.12.2008 to explore
such a possibility. He also refers to a transaction in respect of another property which was sold
for Rs.75 crores in respect of a larger area; it is submitted by the plaintiff, that the suit property
proportionately would have fetched Rs.59.68 crores. The plaintiff contends that in these
circumstances, a fresh agreement was arrived at on 13.01.2009 with the vendors in which the
total sale consideration agreed upon was Rs.60 crores; the said agreement also adjusted the
previously paid Rs.20 crores. The plaintiff alleges that the balance amount of Rs. 40 crores was
payable according to the schedule indicated in the supplementary agreement, i.e. by 07.04.2009.
The plaintiff states that this agreement was not separately recorded but incorporated by way of
change, or substitution of two relevant pages of the supplementary agreement dated 23.09.2009.
6. The suit alleges that on 20.01.2009, the plaintiff wrote to the second defendant, referring
to a property index according to which the real value of the suit property would have worked out
to Rs.89.5 crores and consequently, its valuation for Rs. 100 crores was perfectly reasonable.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 3
The plaintiff also mentions about his approaching the Punjab and Sind Bank for a short-term
loan, on 23.01.2009 and relies upon the said letter; it is contended that the said bank, in its reply
dated 04.02.2009, indicated that formalities had to be completed for the purpose. The plaintiff
further relies upon a letter dated 25.03.2009 by his brother, Sh. Sharuk Passi, offering to lend a
sum of Rs.40,00,00,000/- (Rupees forty crores) for acquiring the suit property. It is stated, in
these circumstances, that the vendors were informed on 23.03.2009 about the plaintiff having
arranged to pay the balance sale consideration and requesting them to execute the Sale Deed. The
plaintiff states that the vendors, when approached on 04.05.2009 for finalization of the
documents and execution of the Sale Deed, did not move further.
7. It is contended that on 06.05.2009, the vendors entered into an Agreement to sell with the
third defendant in respect of the suit property itself, alleging that the agreement with the plaintiff
had been rendered null and void. The total consideration was Rs.43 crores, of which the said
vendee (third defendant) is alleged to have paid Rs. 5 crores on the date of the agreement and the
balance was payable at the time of execution of the Sale Deed, i.e. on or before 31.05.2009. It is
alleged that the plaintiffs became aware of the agreement and sought specific performance of
their previously existing agreement to sell with the vendors by filing the present suit, on
25.05.2009. The claim includes one for permanent injunction.
8. This suit was listed on 26.05.2009; the Court issued notice returnable to the original
vendors, (i.e. the first two Defendants) on 29.05.2009. The plaintiff contends that on 26.05.2009,
he became aware that the vendors had communicated through an e-mail dated 25.05.2009,
enclosing a cancellation agreement. It is alleged that this cancellation agreement did not contain
any mention about the letter dated 29.09.2008.
9. It is argued that the overall conspectus of facts disclose that out of the agreed total
consideration of Rs.60 crores, Rs. 20 crores had also been paid and the balance was payable,
simultaneously with the execution of the sale deed. The plaintiff had approached the
defendant/vendors in this regard with a request for completion of the transaction, in the end of
March, i.e. 28.03.2009 and early April 2009, despite which the latter did not take any steps. It
was after the plaintiff approached this Court on 25.05.2009 that the vendors forwarded a so-
called cancellation agreement which was in fact received on 26.05.2009. The agreement
significantly, submits the counsel, refers to the transaction with the plaintiff as a subsisting one
and calls upon the plaintiff to cancel it. This, argues the plaintiff, is testament to the fact that the
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 4
vendors themselves did not treat the agreement with the plaintiff as having been cancelled or
having come to an end on 07.04.2009.
10. The plaintiff relies upon the documents filed along with the suit, and additional
documents filed later, during the course of proceedings, to submit that the vendors for the first
time, contend about the existence of a forfeiture clause in the Supplementary Agreement of 23 rd
September, 2008; it is contended that the original of that agreement was secured from the Punjab
and Sind Bank, after filing of the present suit, and that there is no such condition.
11. After summons were issued, the vendors appeared, and contended that the suit property
had been sold to the third defendant, and that a Conveyance deed had been executed and
registered on 27th May, 2009. The plaintiff, in the circumstances, sought leave to implead the
said third defendant, and also amended the pleadings in the suit, contending that the sale does not
constitute a bona fide purchase by such defendant, without notice of the pre-existing agreement
to sell (with the plaintiff). It is submitted that the Agreement to Sell with the third defendant
(dated 6th May, 2009) clearly mentioned about the said pre-existing agreement to sell, and also
stated that the vendors (of the suit property) would obtain a cancellation of the Agreement to
Sell, which never happened. Therefore, when the third defendant completed the transaction, there
was full awareness and knowledge of the said party, that the plaintiff had a pre-existing right in
respect of the suit property, by way of an Agreement to Sell.
12. Dr. A.M. Singhvi, learned senior counsel, contends that the plaintiff has established a
strong prima facie case for the grant of a temporary injunction against the defendants, to restrain
them from transferring the property. The terms of the original agreement were changed, once in
September, 2008 and later, on 13th January, 2009, when the material alteration was in respect of
the consideration, which was reduced to Rs. 60 crores. The parties' original bargain had
envisioned that the transaction would be completed for Rs. 100 crores; however, there was a later
realization that the valuation of the property was exaggerated. The plaintiff, says counsel,
concededly paid Rs. 20 crores; he also has established that at the relevant time, he was in
possession of, (or could access) the requisite balance amount, which was duly intimated to the
vendor defendants. Yet, the latter, instead of completing the transaction, hastily, sought to sell
the property to the third defendant, for a much lower consideration of Rs. 43 crores, which shows
that the said sale was not bona fide. It is urged, besides that the Agreement to Sell with the third
defendant by the vendors granted the former time to complete the transaction, and scheduled the
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 5
registration of the conveyance deed on 31st May, 2009; yet the document was registered on 27th
May, 2009, with the obvious objective of defeating the plaintiffs' pre-existing rights.
13. It is argued that the vendors' contentions about the plaintiffs' alleged default in not
making payments, or completing the transaction with the time, are irrelevant, as the materials on
record belie the argument. Further, argues the plaintiff, time is never deemed of the essence of
the contract for sale of immovable property; reliance is placed on the decision reported as
Swarnam Ramachandram v Aravacode Chakungal Jayapalan, 2004 (8) SCC 689. It is
contended that as far as readiness and willingness is concerned, the plaintiff is not expected to
keep the entire amount of consideration to prove his ability or capacity; here reliance is placed on
the judgments reported as Azhar Sultana v B. Rajamani AIR 2009 SC 2157 and Nanik Lal
Karmakar v Shankar Lal Shah AIR 1962 Cal 103.
14. It is argued, by the plaintiff, that the sale transaction said to have been completed by the
vendors with the third defendant is clearly hit by lis pendens. Here, it is contended that the
sequence of events and other material circumstances, not only betrays the said third party
purchaser's knowledge of the plaintiff's right to purchase the property, by reason of a previous
agreement to sell with the vendors, but also their willingness to take a risk in this regard. It is
pointed out that the consideration amount of Rs. 43 crores, is grossly inadequate, even according
to the vendors' valuation of the property, and, consequently, the court should infer that the third
defendant had clear notice of the present dispute and suit. Here, the plaintiff relies on Section 52
of the Transfer of Property Act, 1882 and the judgment reported as Guruswamy Nadar v P.
Lakshmi Ammal AIR 2008 SC 2560.
15. The vendors do not dispute- in their written statement, about some material particulars,
such as the original agreement of December, 2007, the total consideration mentioned there, (Rs.
100 crores) and the date by which the transaction was to be completed. Similarly, they do not
dispute about the Supplementary Agreement and its terms, i.e extension of the time granted to
the plaintiff to complete the transaction, by 7th April, 2009, the receipt of Rs. 20 crores, and the
total consideration being agreed to be reduced to Rs. 60 crores. However, all other factual
allegations about the plaintiff's readiness and willingness, and his contention about having
approached them (the vendors) for paying the balance amounts, in March- April, 2009, are
denied.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 6
16. The vendor-defendants submit that the plaintiff has not disclosed the true facts pertaining
to the Supplementary Agreement, which is that in the event of failure to fulfill the obligations on
or before 07.04.2009, the vendors could forfeit Rs.12.5 crores. The agreement further recorded
that the plaintiff's failure to execute the Cancellation Deed required of by the new buyer would
result in the defendants being liable to refund of Rs.7.5 crores. It is submitted that as the plaintiff
did not execute a Cancellation Deed and has sought specific performance, there is no question of
refunding such amount of Rs.7.5 crores. The vendors also allege that the plaintiff has
manipulated the Supplementary Agreement. They contest the plaintiff's argument about being
ready and willing to perform his part of the contract and state that he never possessed the
requisite funds to pay the balance amount. The plaintiff's reliance upon certain bank certificates
in respect of his relative's accounts are questioned as forged and fabricated after-thoughts. It is
submitted that had the reality been such, the plaintiff would have approached the vendors within
the agreed time, i.e. 07.04.2009.
17. The vendors rely upon the circumstance that no interim order was made on 25.05.2009
when the suit was initially heard, having regard to the overall circumstances and the plaintiff's
inability at that stage to disclose that he was in possession of the necessary funds. It is argued
that the plaintiff's submissions about having approached them for execution of the sale or
conveyance deed and registration of the same are false, and rely upon the terms of the letter by
the plaintiff on 01.05.2009, pointing-out that it does not mention about any delay. The said letter
relied upon by the plaintiff, a handwritten document, reads as follows:
"XXXXXX XXXXXX XXXXXX
Sanjay Passi
MAY 1ST, 2009
My Dearest Ashwani Bhai Sahib,
I was quite disturbed today morning after talking to you. It really shocked
me on hearing about your High Com. Case. Bhai sahib have faith in Mata Rani.
Please don‟t let this disturb you. I am very sure with passage of time things will
work out well for you. I shall now duly pray for my elder brothe peace of mind. I
really love you a lot and your really very very precious to me. Please don‟t ever
hesitate to call me, always there for you and Bhabhi till my last breath.
With lots of love, your younger brother.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 7
Sd/-
Jai Mata Di
XXXXXX XXXXXX XXXXXX"
18. The vendors further submit that there is nothing on record to substantiate a mere
contention about the plaintiff having approached them on 28.03.2009 with a view to have the
documents executed. They contend further, that having regard to the previous circumstance
where the agreement was repeatedly changed, and the substantial amount (Rs.40 crores) that had
to be paid by the plaintiff, such casual dealings are not only incomprehensible but unbelievable.
19. The vendors/defendants seriously contest that the plaintiff's arguments about his
subsisting readiness and willingness to perform his part of the bargain at all times, stating that
the existing material on record, i.e. the letters dated 29.09.2008 and 20.01.2008, besides an -
email sent by M/s. Reliance Capital on 21.11.2008 shows that the plaintiff had availed a loan
facility and that he was in default to the said financial institution. It is contended that in these
circumstances, the mere averment about readiness and willingness is insufficient to entitle the
plaintiff to decree for specific performance as such condition has to exist till the hearing of the
suit. Reliance is placed upon the decisions reported as N.P. Thirugnanam v. R. Jaganmohan Rao,
AIR 1996 SC 116; Nitin Jain v. Murari Lal Behl 2008 (106) DRJ 672 and S.K. Mittal v. Kalinga
Estate Pvt. Ltd. 162 (2009) DLT 341.
20. It is urged that the suit is not maintainable since the subject matter, i.e. the suit property
has been transferred to the third defendant and the plaintiff, despite knowledge of this fact has
not taken any steps. It is also argued that the letter dated 20.01.2009 and the Cancellation Deed,
all furnished to the plaintiff were clearly within his knowledge but have been deliberately
withheld from this Court, thus disentitling him to any equitable relief, much less the temporary
injunction sought for. The letter written by the plaintiff to one of the vendors, Sh. Ashwani
Khurana, on 20.01.2009 is as follows:
"XXXXXX XXXXXX XXXXXX
January 20, 2009
My Dearest Ashwani Bhai Sahib,
On going through Times Property dated January 17th 2009, copy enclosed, I
found that in the Property Index, Prime Residential Capital Values by C.B.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 8
Richard Ellis, the world wide renowned Property Agent dealing in Real Estate
have mentioned that in the Golf Links the value of independent houses in Rs./Sq.
Yd. is ranging 6.5 to 7.0 lacs.
Keeping the above figures in mind, your property 56, Golf Links which is 1250
Sq. Yds. @ Rs.7.0 lacs work out to Rs.87.50 crores. So you to quote Rs. 100
crores, non-negotiable is very legitimate considering its excellent location.
Whenever you do happen to meet anyone, you could show this Property Index
also.
Looking forward meeting you soon.
With Warm Personal Regards,
Sd/-
Jai Mata Di
XXXXXX XXXXXX XXXXXX"
21. The vendors point-out that the documents relied upon by the plaintiff to suggest that he is
in possession of the necessary funds to pay the balance of Rs.40 crores largely hinge on the so-
called commitment of M/s. PASCOS, a proprietary concern of the plaintiff's brother. It is argued
that the documents only reflect that such a concern has been permitted a working-capital loan
sanction against hypothecation of its current assets. This, says the vendors, clearly belie the
plaintiff's insistence that he has possession of the funds and could have completed the
transactions within time. It is also pointed-out that the plaintiff relies upon a subsequent letter
dated 18.11.2009 written by his brother - after the filing of the suit and after the vendors had
filed written statement.
22. The third defendant contends being a bona fide purchaser for valuable consideration
without offering any subsequent argument or agreement in respect of the suit property. The third
defendant states that the vendors had provided a copy of the plaintiff's letter dated 01.05.2009
written much after 07.04.2009 which nowhere disclosed his readiness and willingness to perform
the contract that had been extended. The third defendant talks of the improbability of someone
writing a letter after the last date agreed for performance, particularly, when the vendor was
allegedly refusing to execute the documents. The third defendants states that the terms of the
Supplementary Agreement dated 23.09.2008 spelt-out that time was intended to be of essence to
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 9
the contract failing which the entire transaction was deemed to have been cancelled. Being
property in a prime location, the vendors were constrained to sell it for various personal reasons,
including acute financial requirements and the ongoing disturbances on account of the Delhi
Metro work. It is contended that these considerations were indicated to the third defendant with a
view to obtain the best prevailing price.
23. The third defendant refutes the suggestion that the consideration agreed to be paid by it,
i.e. Rs. 43 crores was not fair value and relies upon a contemporaneous sale deed in respect of
similar property which records Rs.39 crores as the agreed consideration. It is submitted that the
plaintiff had offered 16 months w.e.f. 06.12.2007 and 07.04.2009 to perform the agreement
which he failed to do miserably. It is further argued that the plaintiff and the vendors have
referred to no less than five different agreements - two dated 06.12.2007 and three agreements
dated 23.09.2007. It is submitted that the third defendant was aware of only two agreements, i.e.
the original agreement dated 06.12.2007 and the Supplementary Agreement dated 23.09.2008.
The third defendant, therefore, argues that the doctrine of lis pendens does not apply to this case
since the Agreement to Sell entered into by it was after 07.04.2009 (i.e. after cancellation of
plaintiff's Agreement to Sell) and the sale transaction was completed before the suit or its notice
was received by the vendors. It is emphasized that the Court issued summons in the suit on
25.05.2009, returnable for 25.05.2009, whereas the sale deed in favor of the third defendant was
in fact registered on 27.05.2009. In the circumstances, the Court cannot infer that the said third
defendant had prior notice of the suit.
24. The above discussion would record that:
(1) The parties agreed to on 06.12.2007, that the suit property was to be sold to the plaintiff,
for a total consideration of Rs.100 corres;
(2) Concededly, the plaintiff paid Rs.20 crores to the vendors;
(3) The parties agreed in change of terms, through another - Supplementary Agreement
dated 23.09.2008.
(4) The parties further agreed - on 13.01.2009, that the total consideration payable (for the
suit property) was Rs. 60 crores.
(5) The balance payable by the plaintiff to the vendor, was Rs. 40 crores; this was to be made
by 07.04.2009, with some stipulation about interest payment.
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 10
25. As between the plaintiff and the vendors, there is no dispute about the material terms
concerning payment of consideration. The amounts were to be paid by the plaintiff on or before
07.04.2009 - in terms of the supplementary agreement as well as later agreement dated
13.01.2009. Even according to the terms of later agreement dated 13.01.2009, the balance
payment of Rs. 40 crores had to be paid by the plaintiff on or before 07.04.2009. The agreement
also stipulated that interest @ 18% per annum was payable to the vendors for the period of
extension till date of completion of transaction on paid account. Additionally, it was agreed that
in the event of the plaintiff's inability to complete the transaction, forfeiture of certain amounts
paid as advance, could be resorted to. The last date for performance (of the Agreement), was 7th
April, 2009. The question is whether the plaintiff has established prima facie, that he approached
the vendors within that time (since the previous deadlines are not as relevant, at the present
stage). The second question is, whether the plaintiff is correct in saying that the transfer of the
suit property is hit by lis pendens.
26. The plaintiff submits that efforts to get the sale deed executed and registered were made,
and that vendor- defendants were approached several times, in March - April 2009. Specifically,
the suit mentions 28th March, 2009 as one such instance. The plaintiff however, does not support
this allegation with any material - either in the form of e-mails, or any letters. The plaintiff has
filed, on the record, three sets of documents - one filed along with the list of documents at the
time of institution of the suit, and the other documents, which were filed later. They include a
bunch of letters and e-mails. Interestingly, these e-mails are mostly by the defendants; those by
the plaintiff, or his replies, deal with other aspects, and the e-mails of March or April 2009
nowhere mention anything about his readiness and willingness, or his request to the vendors to
execute the documents. In this context, if the court examines the letter dated 1st May, 2009,
which is the nearest in point of time, it is clear that nowhere did the plaintiff mention about the
suit property. These communications address all kinds of issues, and some of them discuss
concerns personal to the plaintiff, or the vendors. It is highly improbable - even if the parties to
an agreement to sell have a close personal friendship - that where the property is valued at such
substantial rates, as in this case, the purchaser would not mention about the forthcoming
transaction, or show some anxiety, if the vendor has delayed in the performance of his
obligations. The vendor defendants here clearly deny having been approached by the plaintiff, as
is alleged in the suit. These matters have to therefore, be established in the course of trial. The
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 11
plaintiff's letter of 29th September, 2009 suggests his inability to purchase the suit property, and
instead proposes that the vendors collaborate with him, to approach another buyer. This letter has
been explained as having been obtained under coercion. Now, that explanation, in the court's
view, is unconvincing. The plaintiff's subsequent correspondence does not suggest that. On the
other hand, in the letter of 20th January, 2009 (after the third change to the Agreement to Sell, on
13th January, 2009) indicates that he suggested to the vendors to quote Rs. 100 crores for the
property. On an overall conspectus of these circumstances, prima facie, there is nothing which
suggests that the plaintiff approached the vendors, at the relevant time, or prior to the filing of
this suit.
27. The plaintiff is correct in saying that time should not be considered as of the essence of
the contract, in respect of sale of immovable property. However, the rule does not mean that
when called upon to issue an equitable relief - even a temporary injunction, the court has to
disregard express stipulations for time, contained in the contract. A party's conduct, in the
performance of its express obligations, is an important aspect which has to be considered when
deciding whether ad-interim injunction should be granted. Here, the record would disclose that
the original agreement stipulated the payment of the entire amount in September, 2008. The
parties extended this time, by agreement, to 7th April, 2009, with a grace period of two months.
The plaintiff's inability to show that he approached the defendant vendors, at or just before the
stipulated time, therefore, is a material factor for the court to conclude that a prima facie case
does not exist.
28. The next aspect is the plaintiff's willingness and ability to pay the agreed balance amount
- of Rs. 40 crores. Here, reliance is placed on correspondence with the PNB and the Punjab and
Sind Bank. These letters at best show that the plaintiff had sought for sanction of loan for Rs. 35
crores. However, there is nothing to say that neither of these banks approved payment of such
amounts, or disbursed them. The plaintiff has relied on certificate issued by his brother's banker,
and other documents, such as fixed deposits to the extent of about Rs. 15 crores, held by him,
and his wife, as well as a company said to be controlled by him, to argue that he was always in
possession of the amount, or had ready access to it.
29. There are observations in the judgments cited by the applicant-plaintiff, to indicate that
the Court should not insist that the plaintiff should establish, that at all stages, he had the amount
necessary to complete the transaction. On the other hand, there are decisions relied on by the
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 12
vendors and the third defendant, that even to entitle an ad-interim order, there must be some
prima facie material in the plaintiff's favour. The material here suggests that the plaintiff had
borrowed Rs. 5 crores in 2008 (the copy of a communication filed by the defendant); his brother
had been sanctioned working capital limit for commercial purposes, and he (i.e the plaintiff's
brother) was in possession of substantial funds. There is a letter given by plaintiff's brother that
such funds and amounts could be given to him (the plaintiff). Yet, these, in the opinion of the
court, do not add up to prima facie readiness and willingness on the plaintiff's part, to entitle him
to an order of injunction for the duration of the proceeding. This court is mindful of the
circumstance, in this context that even though time is not deemed to be of the essence of the
contract, the prevailing circumstances, in the realty sector is such that property prices are
escalating almost on a daily basis. This aspect would of necessity, caution the courts in their
approach to grant injunctions on routine basis. An unjustified interim order, at the behest of a
casual purchaser, can lead to oppression of the owner or vendor, or even a third party purchaser
and cause economic hardship.
30. In this case, the plaintiff has placed on the record a letter dated 29.09.2009; the same
reads as follows:
"XXXXXX XXXXXX XXXXXX
Sanjay Passi
September 29, 2008
Dear Sh. I.C. Khurana and Sh. Ashwani Khurana,
This refers to our „Agreement of Sale for your property at 56-Golf Links, New
Delhi followed by a supplementary Agreement dated 23rd Sept. 2008.
Pursuant to the signing of the above agreements certain unexpected
circumstances have arisen as a result of which I am unable to go through with the
transaction negotiated with you.
I request you to kindly make alternate arrangements to sell this property at
whatever best market rates achievable. I sincerely hope that that it could fetch a
much better figure that the amount that was finalized between us.
You would agree with me that certain opportunity costs have been foregone by me
for the amounts already paid and obviously the intent was to see the transaction
through. I now request you to take a fair and reasonable decision depending upon
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 13
your future cash flows and decide an appropriate amount of refund to me and
whatever you will decide would be acceptable to me in good faith.
I do really cherish the relationship and trust that we have developed and am sure
that this will be everlasting.
With Warm Personal Regards,
Sd/-
Sanjay Passi
114, Sunder Nagar, New Delhi-110 003, India.
XXXXXX XXXXXX XXXXXX"
31. In the suit, it is contended that the plaintiff was unable to arrange for the funds at that
stage and, therefore, requested the vendors to refund the amount paid earlier. The plaintiff further
alleges that since the parties' relationship was cordial, and due to subsequent negotiations, the
consideration was agreed to be reduced and ultimately recorded in the supplementary or changed
agreement, on 13.01.2009. Having regard to this letter, the materials on record ought to be, in the
opinion of the Court, suggestive of the plaintiff's ability to reasonably show that he possessed or
had reasonable access to the funds and should have said so at the relevant time, by the first week
of April. There is, however, no such material on record. The e-mail communications/certificates,
details of funds etc. issued by various banks and other authorities have been produced by the
plaintiff in the list of documents filed on 20.11.2009, i.e. much after the suit was filed; besides all
of them pertain to a later period, i.e. July 2009. Neither the letters of the PNB dated 05.09.2008
nor does any other document indicate that the plaintiff could have obtained a loan for purchase of
the suit property. Taking into consideration all these aspects, it is held prima facie that the
plaintiff is unable to establish that he was ready and willing to perform his part of the contract on
the date of filing of the suit or by the time fixed by the parties (or within the extended time, i.e.
first week of June 2009).
32. So far as the submission regarding lis pendens concerned, the Court is of the view that
the materials on record cannot, at this stage, enable it to take a firm view about the third
defendant's knowledge regarding any pre-existing agreement concerning the suit property. This
Court is conscious of the circumstance that though the suit was filed on 25.05.2009, the
returnable date fixed was 29.05.2009 and the Sale Deed in favor of the third defendant was
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 14
executed on 27.05.2009. Of course, the Agreement to Sell, dated 06.05.2009 by the vendors with
the third defendant fixed the date by which the sale deed was executed and registered as
31.05.2009. The third defendant asserts that it was only aware of two agreements and was
assured that the agreement with the plaintiff stood cancelled with effect from 07.04.2009. The
third defendant further asserts that the clause, for cancellation agreement, was rather provided for
only by way of caution and did not constitute a condition for the bargain with the vendors.
These, in the opinion of the Court, is to whether the third defendant was indeed a bonafide
purchaser without notice, having regard to the materials and the peculiar circumstances, are
matters of trial that cannot be commented upon.
33. The above observations are no-doubt determinative of the plaintiff's disentitlement to
interim injunction. This Court is mindful of the fact that in terms of the agreement with the
plaintiff, the consideration agreed was Rs. 60 crores, of which the defendant was paid Rs.20
crores. The vendors are asserting the right to retain Rs.12.5 crores by way of forfeiture. There is,
however, no defense as to why Rs. 7.5 crores was neither offer nor refunded to the plaintiff.
Even the defendants do not suggest that the forfeiture clause is by way of pre-estimate of
liquidated damages realistically assessed by the parties. If one sees the overall conspectus of
facts, the vendor had agreed to sell the property for Rs.100 crores, there was no forfeiture clause.
The same appears to have been included at a later stage in the supplementary agreement, by
which time the consideration agreed had been reduced to Rs.60 crores. Even if the vendor's
contention about a genuine pre-estimation of damage were to be prima facie upheld, the Court
would still have to consider whether roughly 21% of the agreed consideration in such a short
span of time - when the property was sold for Rs.43 crores can reasonably be said to constitute a
genuine pre-estimate of damages. There is no material or pleading suggestive of this aspect.
34. Having regard to the above peculiar facts, the Court is of the opinion that since the
vendors are treating the agreement with the plaintiff as cancelled, there is no justification for
their retaining the entire Rs. 20 crores, particularly, when the agreed consideration paid by the
third defendant was Rs. 43 crores. The retention of Rs. 7.5 crores has not been justified at all. So
far as the balance Rs. 12.5 crores is concerned, even if the Court were to consider that some part
of it could constitute a reasonable preestimate of liquidated damages, retaining the entire amount
does not appear to be so. For these reasons, ends of justice would be sub-served if the vendors
deposit the said Rs. 7.5 crores and also the sum of Rs. 7 crores (out of Rs. 12.5 crores) which
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 15
they claim was forfeited, in this Court. The vendors, i.e. Defendant Nos. 1 and 2 are, therefore,
directed to deposit the sum of Rs. 14.5 crores in this Court within six weeks from today. They
shall furnish an undertaking to comply with this direction, in the form of an affidavit, within two
weeks. The Registry is directed to keep the said Rs. 14.5 crores in an interest bearing Fixed
Deposit initially for a period of one year, to be renewed thereafter from time to time and subject
to final orders of the Court.
35. I.A. Nos. 7865/2009, 9346/2009 and 15611/2009 are disposed of in the above terms.
Order dasti.
CS(OS) 1001/2009
List for further proceedings on 17th September, 2010.
S. RAVINDRA BHAT
(JUDGE)
MAY 3, 2010
IA Nos. 7865/2009, 9346/2009 and 15611/2009 in CS(OS) 1001/2009 Page 16
