M/S. Chetanya Properties & ... vs Nainital Bank Ltd.
2011 Latest Caselaw 2170 Del

*                HIGH COURT OF DELHI : NEW DELHI

                Judgment reserved on: March 31, 2011
               Judgment pronounced on: April 25, 2011
+
                          C.S. (OS) No. 2176/1999

%     M/s. Chetanya Properties & Investment Ltd. ...     Plaintiffs
                       Through:     Mr. K.N. Kataria, Senior Advocate
                                    with Mr. K.P. Mavi, Advocate

                                  versus

      Nainital Bank Ltd.                          ...    Defendant
                           Through:    Mr. Janendra Lal and Ms. Yasmin
                                       Tarapore, Advocates

CORAM:
HON'BLE MR. JUSTICE SUNIL GAUR

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

2.       To be referred to Reporter or not?               No.

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

SUNIL GAUR, J.

1. Breach of commitment by the Defendant to take Plaintiff's office

premises at 18/17, Western Extension Area, Dhaka House, Pusa Road,

Karol Bagh, New Delhi, (hereinafter referred to as the suit property)

having carpet area of 2950 sq.ft., on agreed rent of Rs.58/- per sq.ft. per

month, for a period of at least five years, has propelled the Plaintiff to

slap this suit for damages of Rs.20,53,200/- upon the Defendant.

C.S. (OS) No. 2176/1999 Page 1

2. It is Plaintiff's assertion that its Offer to lease out the suit property

to the Defendant was made vide letter of 28th October 1997 (Ex.P-1),

which was duly accepted by the Defendant vide letter of 29th December

1997 (Ex.PW-2/3) and it was clarified by the Plaintiff vide letter of 8th

April 1998 (Ex.P-5), to the Defendant that the lease of the suit property

was valid up to the year 2016 and was extendable upto another thirty

years on deposit of nominal lease money. As per the Plaintiff, it was

also clarified to the Defendant that the suit property stood mutated in

the name of the Plaintiff and there was no need of obtaining a probate

of the Will in respect of the suit property and the „No Objection

Certificates‟ (Ex.PW-1/5 and Ex.PW-1/6) of the Competent Authorities

had been already obtained and communicated to the Defendant vide

letter of 20th August, 1998 (Ex.P-8).

3. It is asserted on behalf of the Plaintiff that there was a concluded

Agreement between the parties regarding lease of the suit property and

what was required to be done by the Defendant was to formally execute

the Lease Deed in respect of the suit property on the aforesaid terms.

Plaintiff claims that vide letter of 23rd March, 1998 (Ex.P-3), Defendant

was informed that the suit property was ready for occupation but the

Defendant had not responded. On Plaintiff's behalf, it is projected that

vide letter of 18th December, 1998, certain facilities were extended to

the Defendant to make the aforesaid offer more lucrative, but the

C.S. (OS) No. 2176/1999 Page 2 Defendant raised certain extraneous query, which were clarified by the

Plaintiff vide letter of 8th April, 1998 (Ex.PW-1/13).

4. Vide letter of 26th September, 1998 (Ex.DW-2/2), it was conveyed

by the Defendant to the Plaintiff that despite various reminders, during

the past eight months, the requisite documents have not been furnished

by the Plaintiff, thereby indicating that the Plaintiff was not interested in

letting out the suit property to the Defendant and since the Plaintiff had

failed to keep the commitment, therefore, the Defendant had reserved

its right to claim damages/compensation. Again, vide letter of 23rd

March, 1999 (Ex.PW-1/14) Defendant had conveyed to the Plaintiff that

it will not be able to take the possession of the suit property till the

Plaintiff had submitted the requisite documents/approved plans.

However, Plaintiff asserts that no details of the required documents

were given by the Defendant and approved plans were not required

because no new construction was carried out and alteration/

modifications in the suit property was made for which no sanction from

the Competent Authority was required and it was conveyed to the

Defendant that it cannot wriggle out from the firm commitment of taking

the suit property on lease as the Plaintiff had already spent huge

amount of money in making the suit property suitable for Defendant's

requirements, but the cryptic response of the Defendant vide letter of

20th April, 1999 (Ex.P-10) was that proposal to take the suit property on

C.S. (OS) No. 2176/1999 Page 3 lease was not found to be suitable. However, to the Legal Notice of 19th

May, 1999 (Ex.PW-1/16), there is a detailed response of 1st June, 1999

(Ex.P-11) of the Defendant, detailing the reasons for not accepting

Plaintiff's proposal of leasing out the suit property to the Defendant. Not

satisfied with the Defendant's response of 1st June, 1999 (Ex.P-11),

Plaintiff has come up with this suit to claim damages alleging breach of

commitment by the Defendant to take the suit property on lease.

5. Defendant resisted this suit by asserting that the suit property was

not got ready for occupation within stipulation time nor its plans were

approved and infact, the lease of the suit property in favour of Plaintiff

has already expired, and the application made by the Plaintiff to the

Authorities concerned, i.e., DDA for renewal of the lease was pending

consideration and this was not disclosed by the Plaintiff to the

Defendant and apart from aforesaid concealment of fact, there was risk

of sealing etc., in occupying the suit property. Apart from this, as per the

Defendant, there was no concluded contract between the parties and

so, there is no question of Plaintiff seeking damages from the

Defendant and breach, if any, of the alleged Agreement in question,

was by the Plaintiff and not by the Defendant. In the replication,

averments in the plaint have been reiterated.

6. The Issues claimed by the parties to this suit, are as under:-

C.S. (OS) No. 2176/1999                                                 Page 4
              (i)     Whether the suit of the Plaintiff is not
                     maintainable? OPD

             (ii)    Whether the plaint has been signed and the
                     suit filed and instituted by a duly authorized
                     person? OPP

             (iii)   Whether     the    Plaintiff    is   guilty   of
                     misrepresentation of facts? OPD

             (iv)    Whether at the pertinent time, the lease in
                     favour of the Plaintiff was in subsistence and
                     the Plaintiff was competent to lease the
                     premises? OPP

             (v)     Whether the plans for the premises were duly
                     approved and the Defendant entitled to occupy
                     the same? OPP

             (vi)    Whether it was not permissible for the
                     Defendant to carry on commercial business
                     out of the said premises? OPP

(vii) Whether the Plaintiff fulfilled the terms and conditions pursuant whereto the lease was to be executed? OPP

(viii) Whether any concluded and binding contract never came into existence between the parties? If so whether the same is not void or voidable at the option of the Defendant? OPD

(ix) Whether no cause of action has accrued to the Plaintiff against the Defendant? OPD C.S. (OS) No. 2176/1999 Page 5 Additional Issues, framed on 02.09.2003:

(x) Whether the Plaintiff is entitled to any amount from the Defendant? If so, how much? OPP

(xi) To what amount the Plaintiff is entitled as interest? OPP

(xii) Relief.

7. Apart from the deposition of Shri Ishar Singh (PW-1), Director of

the Plaintiff - Company and of Shri K.C. Tewari, (DW-1), Senior Branch

Manager of Defendant bank, there is deposition of Mr. Jai Singh (PW-

2), from DDA, regarding letter of 22nd June, 1998 (Ex.PW-2/1) giving

conditional „No Objection Certificate‟ to the Plaintiff for opening a

branch of the bank in the Karol Bagh area and of Shri S.S. Tokas, (PW-

3), from MCD regarding giving of „No Objection Certificate‟ for running

the bank in the premises in Karol Bagh area. There is also deposition of

Shri U.D. Oli, (DW-2), Manager (Premises) Head Office of Defendant

Bank, in support of the stand taken by the Defendant in this suit. The

deposition of Shri S.K. Sharma, (DW-3), UDC from DDA is of no

assistance as the summoned record was found to be not traceable.

There is no other evidence on record.

8. At the conclusion of trial, learned counsel for both the parties had

made their respective submissions and had extensively referred the

evidence on record and reliance has been also placed upon the

C.S. (OS) No. 2176/1999 Page 6 decisions in Baron International Airways vs. Haj Committee & Anr., AIR

1997 Delhi 247; M.V. Shankar Bhat and another vs. Claude Pinto (D.)

by LRs. And Ors., AIR 2004 SC 636; Dresser Rand S.A. vs. M/s. Bindal

Agro Chem Ltd. & Anr., AIR 2006 SC 871; Union of India vs. Hardeep

Engineers P. Ltd., 148 (2008) DLT 562; Baijnath vs. Kshetrahari Sarkar,

AIR 1955 Calcutta 210; H.G. Krishna Reddy and Co. vs. M.M.

Thimmaiah and another, AIR 1983 Madras 169; Binani Metals Ltd. vs.

Union of India, 114 (2004) DLT 637 (DB); Deepak Ansal vs. Ansal

Properties and Industries Ltd., 138 (2007) DLT 560.

9. After having considered the submissions advanced, the decisions

cited and upon analysis of evidence on record, findings returned on the

Issues framed are as follows:-

Issue No.: (ii)

10. Plaintiff is a Limited Company and this suit has been instituted by

it on the strength of the certified copy of the certificate of incorporation

issued by the Registrar of Companies, which is duly proved on record,

as Ex.PW-1/1 and on the basis of the Resolution of 17th September,

1999, in favour of Shri Ishwar Singh, Director of the Plaintiff - Company,

which is duly incorporated in the Minutes Book of the Plaintiff -

Company, which is proved on record as Ex.PW-1/2. There is no cross-

examination of Shri Ishwar Singh (PW-1), Director of the Company, who

C.S. (OS) No. 2176/1999 Page 7 has deposed on the basis of the aforesaid document, regarding the

valid institution of this suit and even at the hearing, it was not shown as

to whether there was any defect in the aforesaid documents on the

basis of which this suit has been validly instituted. Accordingly, it is held

that the suit has been validly instituted.

Issue No.(iv) to (vii)

11. These four Issues are inter-linked and are being taken up

together as they relate to the fundamental Issue of there being any

concluded Agreement/contract between the parties and of there being

breach thereof and by whom.

12. The Offer vide letter of 28th October 1997 (Ex.P-1) to lease out

the suit property to the Defendant was principally accepted by the

Defendant vide Communication (Ex.P-2) on certain terms and

conditions and the basic Term and Condition No.9 about which there is

a serious dispute, needs to be adverted to. It reads as under:-

"9. Landlord to provide a copy of title of said property of landlord on the said property, to enable the bank to verify that it stands in their name in the land Records Office. They are also required to provide documents of their correlated to this property including resolution etc."

C.S. (OS) No. 2176/1999 Page 8

13. In response to Defendant's query, what was conveyed by the

Plaintiff to the Defendant on 8th April, 1998 vide Communication (Ex.P-

5), was as under:-

"The lease of the plot is valid up to the year 2016 and after that its renewal shall be made by depositing the nominal lease money and same will be extended for other thirty years."

14. Pertinently, it is the Plaintiff, who has placed on record

Communication of 15th May 1998, by the concerned Authority, i.e., DDA

to the Plaintiff on the subject of renewal of the Lease Deed in respect of

the suit property and what was conveyed, deserves attention. It reads

as under:-

"Subject: Renewal of lease deed in respect of Plot No.2, Block NN (Khasra No.1271/1144) Naiwala Karol Bagh, New Delhi.

Sir,

With reference to your letter dated 20.4.98 on the above subject I am to inform you that the lease in respect of the above plot in question is due for IIIrd renewal. The matter of enhancement of Ground rent is under consideration of Government of India and as soon as the same is decided the action for IIIrd renewal of the Lease Deed would be taken.

Yours faithfully,

Sd/-

(K.R. Bagri) Assistant Director (OSB)."

C.S. (OS) No. 2176/1999 Page 9

15. Regarding obtaining of „No Objection Certificate‟, Plaintiff was

asked by the concerned Authority, i.e., DDA vide Communication of 13th

May 1998, to approach the concerned branch of the MCD for obtaining

the same. It is relevant to take notice of the fact that in none of the

Communications, i.e., Ex.P-6 to Ex.P-8, Plaintiff has uttered a word

about the third renewal of the Lease Deed of the suit property by the

Authorities concerned, i.e., DDA. It is only in the Communication of 27th

April, 1998, (Ex.D-1) placed on record by the Defendant, Plaintiff had

sought release of six months' rent as refundable security, while casually

disclosing about the renewal of the Lease Deed of the suit property, in

the following words:-

"That renewal of Lease Deed of Plot No.974-975- 976n. NN Block, Main Arya Samaj Road, Karol Bagh, New Delhi, have since been applied to DDA New Delhi and the copies of the Lease Deed and application is attached for perusal. Also Mutation from the DDA for the above said property is attached."

16. On 6th August, 1998, vide Communication (Ex.DW-2/1),

Defendant had sought production of the requisite documents/certificates

and in particular, site plan of the suit property, duly approved by the

Competent Authority and renewed Lease Deed of the suit property.

Again on 26th September, 1998, Defendant had regretfully reminded the

C.S. (OS) No. 2176/1999 Page 10 Plaintiff vide Communication (Ex.DW-2/2), that despite various

reminders, the requisite documents have not been furnished, thereby

indicating that the Plaintiff is no longer interested in letting out the suit

property to the Defendant who had reserved its right to claim damages

for breach of the commitment by the Plaintiff to let out the suit property

to the Defendant. Instead of furnishing the renewed Lease Deed of the

suit property from the Competent Authority, Plaintiff vide

Communication of 23rd November, 1998 (Ex.D-2), had informed the

Defendant that the suit property is ready for occupation as per the

requirement of the Defendant, while giving the following assurance:-

"We shall indemnify the bank for any loss suffered by the bank after shifting its branch to our building on account of its construction."

17. Even in the Communication of 12th March, 1999 (Ex.D-3), 1st

April, 1999 (Ex.D-4), 17th April, 1999 (Ex.D-5), and even in the Legal

Notice of 19th May, 1999 (Ex.PW-1/16), Plaintiff had been referring to

„No Objection Certificate‟ from the concerned Authorities, etc., but has

nowhere adverted to the crucial issue of renewal of the Lease Deed of

the suit property and its sanctioned building plan from the Competent

Authority, which was foremost in the mind of the Defendant in view of

the Warning issued by the Municipal Corporation of Delhi by Public

Notice (Ex. DW-2/4) in the newspaper of being beware before

C.S. (OS) No. 2176/1999 Page 11 purchasing or hiring a house/flat/shop, as some unscrupulous builders

had built properties across the City without sanctioned of building plans

or in violation of the sanctioned building plan and it was made clear by

the Municipal Corporation of Delhi (MCD) to the public that such

buildings were liable to face various actions under the provisions of

Delhi Municipal Corporation Act, (DMC Act) such as demolition, sealing

and prosecution. Even before the issuance of Legal Notice of 19th May,

1999 (Ex.PW-1/16), it was made clear by the Defendant to the Plaintiff

vide Communication of 23rd March, 1999 (Ex.P-9) that the required

documents/approved map (site plan), etc., of the suit property have not

been submitted by the Plaintiff and decision on fresh proposal from the

Plaintiff to the Defendant by the Board of the Defendant Bank has yet

not been taken.

18. In the face of the aforesaid documentary evidence on record,

Plaintiff cannot be heard to say that its application for renewal of the

lease with the Competent Authority was pending and it was not

rejected. It is not the case of the plaintiff that during the subsistence of

the Plaintiff's Offer (Ex.P-1) of which there was conditional acceptance

by the Defendant, the third renewal of the Lease Deed of the suit

property by the Competent Authority was granted and was furnished to

the Defendant. It is nobody's case that the third renewal of the Lease

Deed of the suit property by the Competent Authority was a mere

C.S. (OS) No. 2176/1999 Page 12 formality and it cannot be so, because non renewal of the Lease Deed

of suit property puts the title of the Plaintiff in respect of the suit property

under a cloud. In view of the aforesaid Public Notice (Ex.DW-2/4), the

apprehension of the Defendant was legitimate and Defendant was very

well justified in issuing the impugned Communication of 19th May 1999

(Ex.PW-1/16) supplemented by Defendant's response/reply of 1st June,

1999 (Ex.P-11) as after waiting for about 8 months or so, the sanctioned

building plan of the suit property was not forthcoming from the Plaintiff,

therefore, the Defendant was well advised to reject the Plaintiff's

proposal for leasing out the suit property to the Defendant. The

impugned rejection of the Plaintiff's proposal is eminently justified, as

the Plaintiff has not disclosed even during the present proceedings as to

what was the follow-up communication from the DDA to the Plaintiff

after the Communication of 15th May 1998 vide which Plaintiff was

informed that the third renewal of the Lease Deed of the suit property

would be undertaken after the matter of enhancement of ground rent,

which is under consideration of Government of India, is finalized. It

would have been indeed hazardous for the Defendant to have gone

ahead with the Plaintiff's proposal of leasing out the suit property to the

Defendant without sanctioned building plan of the suit property coming

forth. In this view of the matter, mere issuance of „No Objection

Certificate‟ (Ex.PW-1/3) for opening branch of a Bank in the suit

C.S. (OS) No. 2176/1999 Page 13 premises would not and could not have saved the Defendant from

facing sealing of the suit property, prosecution etc., in absence of there

being a sanctioned building plan of the suit property and about its

adverse consequences, the Defendant had became aware from the

Public Notice (Ex.DW-2/4). It is so said because, „No Objection

Certificate‟ (Ex.PW-1/3) merely states that premises at Main Arya

Samaj Road, Karol Bagh, is declared as local commercial for issuing

the municipal trade license as per provisions of DMC Act and nothing

more.

19. On the crucial aspect of the third renewal of the Lease Deed in

respect of the suit property by the Competent Authority what the

Plaintiff's star witness Ishwar Singh (PW-1) had to say in cross-

examination is as under:-

"Proposed loan of Rs.10 lakhs was never carried forward as the Plaintiff did not require the money till the question of ground rent has not been decided, hence lease in respect of the suit premises had not been renewed."

20. In view of the aforesaid admission of non-renewal of the third

lease of the suit property by the Competent Authority, strong reliance

placed by the Plaintiff upon the „No Objection Certificate‟ of the

Municipal Authorities for opening a branch of a Bank in the suit

C.S. (OS) No. 2176/1999 Page 14 premises, because the area being commercial, is of no consequence.

More so, when Plaintiff fails to establish that the payment of betterment

charges or other charges, as referred to in the Communication of 22nd

June 1998 (Ex.PW-2/1), by the DDA was demanded, and if so, whether

they were paid or not. The Plaintiff may have carried out some alteration

in the suit premises but the same is of no avail in the absence of there

being a sanctioned building plan of the suit property and mainly

because of non-renewal of the third lease of the suit property by the

Competent Authority. Due to these two fundamental lacunas, sealing,

prosecution etc., as referred to in the Public Notice (Ex.DW-2/4) has

been well avoided by the Defendant by rejecting Plaintiff's

proposal/Offer (Ex.P-1).

21. In the face of the aforesaid findings, though the Plaintiff succeeds

in proving that it was permissible to let out the suit property to the

Defendant for commercial purpose, but the Plaintiff fails to prove that

the sanctioned building plan of the suit property was duly approved by

the Competent Authority and was forwarded to the Defendant.

Inconsequentially, Issue No.(vi) is answered in favour of the Plaintiff but

the main Issues No.(iv), (v) & (vii) are decided against the Plaintiff, as

the third renewal of the lease in respect of the suit property was still

pending before the Competent Authority and thus there was a clear cut

default of aforesaid term and condition No.9 of the conditional

C.S. (OS) No. 2176/1999 Page 15 acceptance (Ex.P-2) requiring supply of the valid title document of the

suit property. Needless to say the third renewal of the lease of the suit

property was an essential component of the clear title of the suit

property, as in the absence of the said renewal the title of the Plaintiff in

the suit property would be in jeopardy. These four Issues are

accordingly answered.

Issue No.: (i), (iii), (viii) & (ix)

22. A scrutiny of the evidence on record reveals that it was never

disclosed in the first instance by the Plaintiff to the Defendant that the

third renewal of the lease of the suit property, which was due, is

awaited. Rather, after the conditional acceptance (Ex.P-2) by the

Defendant, Plaintiff vide Communication of 8th April, 1998 (Ex.P-5) had

disclosed to the Defendant that the lease of the suit property is valid up

to the year 2016 and after that, renewal shall be made by depositing the

nominal lease money. Much later, vide Communication of 27th April,

1998 (Ex.D-1), Plaintiff was constrained to disclose that the renewal of

the Lease Deed of the suit property by the Competent Authority was

pending and this was the impediment in there being a concluded

contract between the parties and rightly so. Had the fact of pending third

renewal of the lease deed of the suit property by the Competent

Authority been disclosed by the Plaintiff in the first instance, then,

obviously there would not have been any conditional acceptance of the

C.S. (OS) No. 2176/1999 Page 16 Plaintiff's Offer by the Defendant. Therefore, the Plaintiff is definitely

guilty of suppression the aforesaid vital fact which goes to the root of

the matter and so, Issue No.(iii) is answered in affirmative.

23. Though no reference to the decisions cited is required for the

settled legal proposition, i.e., where an Offer is not unconditionally

accepted, no concluded contract can be said to have been arrived at,

but I find that the decisions reported in Dresser Rand S.A. vs. M/s.

Bindal Agro Chem Ltd. & Anr., AIR 2006 SC 871; M.V. Shankar Bhat

and another vs. Claude Pinto (D.) by LRs. And Ors., AIR 2004 SC 636;

Union of India vs. Hardeep Engineers P. Ltd., 148 (2008) DLT 562;

Deepak Ansal vs. Ansal Properties and Industries Ltd., 138 (2007) DLT

560; Binani Metals Ltd. vs. Union of India, 114 (2004) DLT 637 (DB);

can be referred to with advantage in the support of the aforesaid

proposition. In the instant case, it is quite obvious that the various

correspondence, as referred to above, exchanged between the parties

were nothing but a preclude to a contract, which was yet to be entered

into by executing a registered Lease Deed and since a vital defect was

found, i.e., of third renewal of the lease of the suit property by the

Competent Authority being pending and of non furnishing of the

sanctioned building plan of the suit property, therefore it can be safely

held that there was no concluded contract between the parties. Issue

No. (viii) stands answered accordingly.

C.S. (OS) No. 2176/1999 Page 17

24. In view of the findings returned as aforesaid, Issue No.(i) and (ix)

have to be necessarily decided against the Plaintiff. These two Issues

are accordingly answered. Consequentially, findings on Issue No.(x) &

(xi) are also answered against the Plaintiff.

Issue No.: (xii)

25. In the face of the findings returned as aforesaid, it is held that the

Plaintiff is not entitled to recover any amount whatsoever from the

Defendant. Resultantly, this suit is dismissed while leaving the parties to

bear their own costs.

26. This suit stands disposed of accordingly.

Sunil Gaur, J.

April 25, 2011
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C.S. (OS) No. 2176/1999                                                Page 18