Tarun Sawhney vs Uma Lal & Ors.
2011 Latest Caselaw 4324 Del

         THE HIGH COURT OF DELHI AT NEW DELHI

%                    Judgment Pronounced on: 05.09.2011

+ CS(OS) 2051/2010


TARUN SAWHNEY                        ..... Plaintiff
             Through: Mr. Sandeep Sethi, Sr. Adv.
            with Mr. Harpreet Singh, Mr. Rajesh
            Gupta and Mr. Sumit R. Sharma, Advs.

                     versus

UMA LAL & ORS.                                  ..... Defendant
                     Through: D-5 Mr. Vinoo Bhagat, Adv. for
                     self and on behalf of D-3.

CORAM:-
HON'BLE MR JUSTICE V.K. JAIN

1. Whether Reporters of local papers may
   be allowed to see the judgment?                         No.

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

3. Whether the judgment should be reported                 No.
   in Digest?

V.K. JAIN, J. (ORAL)

IA 10719/2011 (u/O7 R 11 CPC)

1. This is an application filed by defendants 3 and 5

for rejection of the plaint on the ground that it does not

disclose any cause of action to file the present suit. Relying

on Clause 20 of the first agreement and Clause 17 of the

second agreement dated 16th September 2009, defendant

No.5, who also represents defendant No.3 in this case

contends that since the agreements were not implemented

within twelve calendar months, they stood automatically

terminated and consequently the plaintiff has no cause of

action to seek their enforcement. The second contention of

the applicants is that there is no averment in the plaint that

the defendants committed breach of agreement and in the

absence of such an averment, the plaint does not disclose a

cause of action to file a suit for specific performance of the

agreement dated 16th September 2009. The third

contention is that though Clause 18 of the first agreement,

which is identical to Clause 15 of the second agreement

provided for the parties agreeing on a mutually convenient

time and date for execution and registration of the sale deed

and delivery of possession to the vendee in case the L&DO

were to covey the property directly in the name of the

vendee and this was to be done within 30 days of the vendee

informing the vendor that the sale deed was ready for the

execution and in the other case it was to be done within 30

days of the vendee informing the vendor that he was ready

to receive execution and make payment for execution of the

conveyance deed in his name by L&DO, no notice envisaged

in the above referred clause of the agreements was given

and, therefore, the plaintiff has not proved that he was

ready to perform his obligation in terms of the contract.

2. The application has been opposed by the plaintiff,

who has taken a preliminary objection that such an

application is not maintainable in view of the consent order

of the Division Bench dated 3rd May 2011 in FA(OS)

104/2011.

3. Vide a detailed order dated February 4, 2011, this

Court allowed IA 13424/2010 filed by the plaintiff under

Order 39 Rules 1 and 2 of CPC and dismissed IA

5048/2011 filed by defendants 3 and 5 under Order 39

Rule 4 of CPC. FA(OS) 104/2011 was preferred against that

order. A perusal of the order passed by the Division Bench

would show that the learned counsel for the parties agreed

to an interim arrangement being put in place pending trial

and to expedite the trial so that the parties knew the final

fate of the suit. The agreed arrangement envisaged,

furnishing of a bank guarantee of Rs.30.68 Crores by the

plaintiff to the satisfaction of the Registrar of this Court and

appointment of a Court Commissioner for recording

evidence in the matter. It is difficult to dispute that the

consent order passed by the Division Bench on 3 rd May

2011 does envisage a fast track trial of the suit, so that the

final decision in the suit may be rendered at an early date.

Hence, filing of an application under Order 7 Rule 11 of the

Code of Civil Procedure, therefore, does not appear to be in

consonance with the spirit of the consent order passed by

the Division Bench of this Court.

4. Coming to merits of the application, while allowing

the application of the plaintiff for grant of interim injunction

and rejecting the application of defendants No.3 and 5 for

vacation of the interim injunction, which this Court had

earlier granted to the plaintiff, the Court inter alia observed

as under:-

One possible interpretation of the terms of the agreement, particularly if the above referred first Clause is read in isolation and without adverting to the surrounding facts and circumstances, can be that since the conveyance deed converting the leasehold rights into freehold rights was not executed by 15th September 2010 when the term stipulated for implementation of the term expired, time being essence of the contract, the defendants are not bound to fulfil their obligation under the agreements by executing sale deeds in favour of the plaintiff and their obligation is confined only to the return of the earnest money

received from the plaintiff and the charges deposited by him with L&DO on their behalf. The expression used in above referred Clause of the agreements and the preemptory consequences acknowledged therein do tend to support the case setup by defendants 3 and 5 in this regard and indicates that though the agreement does say it in so many words, that the parties intended the time to be essence of the contract and that is why they agreed that on expiry of 12 months from the date of agreement, the rights of the parties under the agreement shall stand extinguished, the agreement shall stand terminated and the defendants would be at liberty to sell the property to any person of their choice.

However, it is difficult to dispute that Clause 20 of the first agreement, which is identical to Clause 17 of the second agreement, cannot be read divorced from other terms of the agreements and the facts and circumstances in which the agreements were executed cannot be excluded from consideration, while deciding whether the parties intended to treat the time as essence of the contract or not. Admittedly, there is no express stipulation that time would be essence of the contract in all circumstances and irrespective of what the cause for the delay in implementation of the agreement was and whosoever was responsible for the delay. It is important to note here that though the plaintiff had agreed to deposit requisite charges for mutation and conversion with L&DO for and on behalf of the defendants and he was also pursuing the matter of mutation and conversion with L&DO, primarily it was

the responsibility of the defendants, they being the vendors to obtain mutation of the suit property in their names as also to get its leasehold rights converted into freehold rights though nothing in law prevented the plaintiff to agree to undertake this obligation on their behalf. It cannot be disputed that the mutation and conversion could not have been allowed unless all the requisite documents were submitted to L&DO and the formalities prescribed by it for the purpose duly complied. This was acknowledged by the defendants when they agreed, vide Clause 12 of the first agreement, which is identical to Clause 10 of the second agreement, to do all acts and execute all documents including application, affidavits, power of attorney, etc. to enable the plaintiff to get mutation and conversion to freehold of the suit property effected. They further agreed to furnish the documents to the plaintiff within seven working days of his making a request in this regard. They also agreed to carry out further correspondence with L&DO with the concurrence of the plaintiff. The case of the plaintiff, as set-out not only in the plaint but also in the letter which he had written to the defendants before filing this suit, is that the applications which the defendants had earlier submitted to L&DO were defective, Form C and Form D and/or sanctioned building plan and/or house tax receipts which could confirm that the property was constructed within the time stipulated in the lease deed were not provided, the plaintiff had to make efforts to obtain old record from the office of MCD so that payment of composition fee of about Rs.15 Lacs by the defendants could be

avoided and there was delay in furnishing documents such as Deed of Disclaimer to be executed by defendant No.3 Smt. Upma Khanna. At this stage, the Court cannot go into the truthfulness or otherwise of the allegations made by the plaintiff in this regard. If, however, the allegations are correct and processing of the matter with L&DO office was delayed on account of any default/lapse on the part of one or more of the defendants, it would be difficult to dispute that for the purpose of calculating the time of 12 months envisaged in the agreements for their implementation, the period of delay attributable to the defendants will not be excluded. No person can be allowed to take advantage of his own fault or inaction, whether deliberate or otherwise. Hence, a person who causes delay in implementation of the agreement or is guilty of contributing to the delay, cannot be allowed to bereft from his own act or omission, by avoiding the implementation of the agreement on the ground of delay. This also was the view taken by Supreme Court in Nirmala Anand vs. Advent Corporn (P). Ltd. (2002) 5 SCC 481.

It is, thus, quite clear that by 15th September, 2010, which, according to the contesting defendants, was the last date for implementation of the agreements dated 16th September, 2009, the Land and Development Office had accepted the request made by defendant Nos. 1, 2 and 5 for conversion of free hold rights in respect of the suit property into free hold rights. Once the application of defendant Nos. 1, 2 and 5 for conversion of lease hold rights into free hold rights was accepted, what remained to be done was completion of formalities in connection

with execution of conveyance deed and execution of sale deed in favour of the plaintiff, which were the acts to be done by the defendants, without the plaintiff having to play any further role in the matter. It is difficult to accept that the deadline stipulated in the agreements dated 16th September, 2009 cannot be said to have been met despite the Land and Development Office having accepted the application for conversion of lease hold rights into free hold rights and having communicated its decision to defendant No.5 vide its letter dated 15th September, 2010. The defendants could have requested L&DO to prepone the date for extension of conveyance deed, but, they chose not to adopt such a course of action. The time leg of a few days between issue of communication dated 15th September, 2010 by the Land and Development Office and execution of the sale deed by the defendants would in any case be of no significance and would not frustrate the agreement between the parties, particularly when the plaintiff had made an unequivocal offer to the defendants on 10th September, 2010, well before expiry of the time stipulated in the agreements dated 16th September, 2009, to deposit the balance sale consideration into an escrow account. Once the defendants had received intimation from the Land and Development Office about acceptance of their application for conversion of lease hold rights into free hold rights, they could easily have written to the plaintiff requiring him to deposit the balance consideration in an escrow account in terms of his letter dated 10th September, 2010. The conduct of the main contesting defendants in not honouring their contractual obligations

despite receipt of communication dated 15th September, 2010 from the Land and Development Office indicates that they had decided not to perform their part of the contract by executing the sale deed in favour of the plaintiff, much before the deadline stipulated in the agreement dated 16th September 2009 expired. This inference finds ample support from the conduct of the defendants in not accepting the offer made by the plaintiff vide his communication dated 10th September, 2010. The first document, which the plaintiff wanted the defendants to execute in his favour as a condition for depositing the balance sale consideration in an escrow account, was a special power of attorney in favour of his nominee, who would be authorized to execute, register the conveyance deed as also the sale deed in his favour after conversion of the property was intimated by the Land and Development Office. Since the defendants had agreed to sell whole of the property to the plaintiff, they could have no valid reason for refusing to execute such a power of attorney in favour of his nominee when the plaintiff was offering to deposit the balance sale consideration in an escrow account and that amount could have been withdrawn by the defendants immediately on the execution of the documents mentioned in the letter and handing over possession of the suit property to him. The second document sought by the plaintiff was a general power of attorney in his favour along with an agreement to sell for which he was ready and willing to pay the requisite stamp duty. I find no valid objection to the defendants executing such a document when the plaintiff was willing not only to pay the requisite

stamp duty but also to deposit the balance sale consideration in an escrow account. The third requirement of the plaintiff was a confirm date for handing over possession of the suit property and the fourth requirement was to hand over the original letter of mutation and original lease deed against the proper acknowledgement along with other original documents. Since the plaintiff was offering to deposit the balance sale consideration in an escrow account and defendants could have withdrawn that amount on executing the above referred documents in respect of the suit property, their refusal to accept this very fair offer made by the plaintiff is a clear indicator that by that time they had already decided not to honour their contractual obligation and that is why this offer was not accepted by them.

Applying the above-referred decision to this case, time will not be essence of the contract, despite stipulations contained in Clause 20 of the first agreement and Clause 17 of the Second agreement, particularly when there was no default on the part of the plaintiff is pursuing the matter with L&DO.

Applying the proposition of law laid down in this case, the Court needs to see not only the terms contained in Clause 20 of the first agreement and clause 17 of the second agreement was also needs to consider the matter in the backdrop of the facts and circumstances in which the agreements were executed, as also the subsequent conduct of the parties, to determine whether they actually intended to make the time essence of the contract or not. In the facts and circumstances of

a given case, despite a specific date fixed in the agreement for conclusion of transaction, the Court may, on considering the other terms contained in the agreement as also the other facts and circumstances of the case come to the conclusion that parties did not intend to treat the time as essence of the contract and the expression stipulation made in this regard was, in fact, intended to impress upon the parties to conclude the transaction, to the extent it is possible, within the time frame stipulated in the agreement between them. Admittedly, defendants 1 and 2 had agreed to extend the time for completion of the transaction by three months. This is yet another indicator that either the parties did not intend to treat the time as essence of the contract or they felt that the delay in completion of the transaction was not attributable to the plaintiff and that is why two of the five vendors, extended the time stipulated for completion of the transactions.

As noted earlier, in the case before this Court, there is no material on record which would attribute any part of the delay which occurred in obtaining mutation/conversion from L&DO to the plaintiff. The last date for completion of the contract was 15th September, 2010. Application for conversion of leasehold rights into freehold rights had been accepted by L&DO by that time and, therefore, the sale deed in favour of the plaintiff could have been executed by the defendants within a few days thereafter. This suit itself has been filed on 1st October, 2010, i.e., within 16 days of the last date stipulated for completion of the transaction. If the Court, after trial,

comes to the conclusion, that the delay in completion of the transaction was attributable wholly or partly to the plaintiff, and there has been steep escalation in the value of the suit property in the meanwhile, it may in the event of granting specific performance of the agreements dated 16th September 2009 direct the plaintiff to pay an appropriate amount to the defendants as a pre-condition for execution of the sale deed by them in his favour. The defendants in that case would have no grievance that they have suffered monetary loss on account of escalation in the value of the property, without any default in their part in meeting their contractual obligations.

5. For the reasons given by this Court in its order

dated February 4, 2011, I find it difficult to hold at this

stage that the agreements dated 16 th September 2009 stood

terminated and became incapable of enforcement on expiry

of 12 months from the date on which they were executed.

In the facts and circumstances of the case, this question, in

my view can be finally decided only after recording evidence

of the parties though I would not altogether rule out the

interpretation suggested by defendants 3 and 5 to the

aforesaid clause of the agreement being ultimately accepted

by the Court. As noted by this Court, while passing the

order dated 4th February 2011, the Court needs to keep in

mind that the mutation and/or conversion of leasehold

rights into freehold was not in the competence of the

plaintiff who could only have made sincere and honest

efforts to pursue the matter with L&DO, in terms of his

agreement with the vendor. If the plaintiff did all that he

could have done in this regard and the conversion still did

not happen within the stipulated time of one year for

completion of the transaction, it may be difficult to deny the

specific performance of the agreements to the plaintiff on

this ground. Also the Court needs to examine the effect of

the application of defendants 1, 2 and 5 for conversion of

leasehold rights into freehold being accepted by

15th September 2010 which according to them was the last

date for implementation of the agreements dated 16th

September 2009. While passing the order dated 4 th

February 2011, this Court has taken a prima facie view that

deadline stipulated in the agreements dated 16 th September

2010 had been met on L&DO having accepted the

application of leasehold rights into freehold rights and

having communicated its decision to defendant No.5 vide its

letter dated 15th September, 2010. I have also taken a

prima facie view that the time lag of few days between issue

of communication dated 15th September 2010 by L&DO and

execution of sale deed by the defendants would not frustrate

the agreements between the parties particularly when the

plaintiff had made unequivocal effort to defendants on 15 th

September 2010 to deposit the balance sale consideration

into an escrow account.

6. As regards the decision of Supreme Court in

Central Bank of India vs. Hartford Fire Insurance AIR 1965

SC 1288 and in H.H. Maharani Shantidevi P. Gaidwad vs.

Savjibhai Haribhai Patel (2001) 5 SCC 101, this Court while

rejecting the application of defendants No.3 and 5 under

Section 14(1)(c) of Specific Relief Act vide order dated 12th

July 2011 inter alia observed as under:-

In the case of Her Highness Maharani Shantidevi vs. Savjibhai Haribhai Patel and Others (2001) (5) SCC 101, an agreement dated 24.03.1977 was entered into between the owner and the licensee in respect of a property known as Laxmi Vilas Palace Estate, Vadodra. The plaintiff in that case had evolved a scheme for constructing dwelling units for the accommodation of the weaker sections of society and those units were to be constructed on the portion of the properties. Clause 17 of the agreement provided that it would not be unilaterally rescinded by either party, after the licensee had been put in the possession of the property. It was held by the Court

that the contract was of a determinable nature and it could be determined at any time before the licensee was put into possession. However, the agreements, subject matter of this suit are wholly of a different nature and clause 20 of the first agreement and clause 17 of the second agreement are wholly different from clause 17 of the agreement in the case of Her Highness Maharani Shantidevi (supra). It would be pertinent to note here that the agreement in that case provided for its termination by a party to the agreement upto a particular stage and did not provide for its automatic termination on account of its not being implemented in a particular time frame. In the case of Central Bank of India vs. Hartford Fire Insurance Co. Ltd. (supra), the relevant clause provided that the insurance could be terminated at any time at the request of the insurer and could also be terminated at the instance of the company. Again, the relevant clause provided for termination of the contract by a positive act on the part of the Insurance Company either at its own instance or on the request of the insured.

Since the agreements in the abovereferred cases were wholly different from the agreements subject matter of this suit, the reliance on these judgments appears to be misplaced.

7. In my view, the judgment relied upon by defendant

No.5 did not really help the applicants since they deal with

matters, which were of an altogether different nature and

with totally different fact situations. It is true that the

intention of the parties has to be gathered primarily from

the words used by them while entering into contractual

obligation, but, the other facts and circumstances of the

case cannot be altogether excluded from consideration while

taking a view as to what exactly the purpose intended when

they reduced their commitments into writing. Therefore, I

find it difficult to take a final view at this stage on the

question as to whether the agreements dated 16 th

September 2010 stood determined for all purposes, on

expiry of 12 months from the date on which they were

executed or not. This question needs to be answered only

after the evidence of the parties has been recorded in this

case.

8. The applicants have also relied upon ITC Limited

vs. Debts Recovery Appellate Tribunal (1998) 2 SCC 70

wherein the Supreme Court was of the view that mere clever

drafting creating illusions of cause of action will not come in

the way of the Court unraveling the matter and finding out

whether the plaint does actually disclose a cause of action

or not. There can be no dispute with the aforesaid

proposition of law, I find it difficult to say that the plaint

before this Court, when examined in the light of the

abovereferred decision, does not disclose a real substantial

cause of action to file the present suit.

9. As regards the plea that the plaintiff has not

alleged breach of contract by the defendants, I find no

merits in the contention. Para 23 of the plaint is relevant in

this regard and inter alia reads as under:-

The plaintiff has accordingly fully complied with clause 20 of the first agreement to sell and clause 17 of the second agreement to sell. It is the defendants who have not performed their part of the obligations under the two agreements to sell by not executing conveyance deed and conveying the suit property to the plaintiff till date. Even otherwise, time is not the essence of contract between the parties. Parties did not intend that the sale deed should be executed within one year of execution of agreement to sell. The two agreements to sell envisage that the sale deed is to be executed only after execution and registration of the conveyance deed in respect of the suit property in favour of the defendants. In any event, word "one year" appearing in clauses 20 and 17 (supra) is directory and not mandatory.

Thus, the plaintiff has pleaded failure of the

defendants to perform their contractual obligation by not

executing the conveyance deed and suit property to him. In

any case, defendants 3 and 5 admittedly wrote a letter dated

22nd September 2010 to the plaintiff claiming therein that

the agreements had expired on 15th September 2010 and,

therefore, it become incapable of being performed. An

averment in this regard has also been made in para 28 of

the plaint. This is also alleged that the defendants sought

to refund the earnest money received by them by means of

two separate cheques enclosed to the reply/letter dated 22nd

September 2010. According to the plaintiff the stand of the

defendants in the letter/reply dated 22nd September 2010

was absolutely in violation of the terms of the agreement

and that conduct of the defendants had constrained him to

approach this Court to protect his legal rights and seek

their performance. Once defendants 3 and 5 took a stand

that the agreements had expired and had become incapable

of performance and they also sought to refund the money

which they had received from the plaintiff, it was quite

evident that they were not interested in performing the

agreement for sale of the suit property to the plaintiff,

though ostensibly on the ground that the time limit for

completion of the transaction had expired on 15 th

September 2010. I, therefore, find no merit in the second

plea taken in the application.

10. As regards failure of the plaintiff to send notice in

terms of Clause 18 of the first agreement and Clause 15 of

the Second agreement, in my view there was no occasion for

giving such a notice since the conveyance deed has not been

executed by L&DO either in the name of the vendor or in the

name of the vendee. Therefore, at this stage, it cannot be

said that the plaintiff was not ready and willing to perform

his part of the contract. I have dealt with this contention at

some length in my order dated 4th February 2011 and have

taken a prima facie view that the plaintiff was ready and

willing to perform his part of the contract. Therefore, I find

no merit even in the third contention raised by the

applicant.

11. For the reasons stated above, the application is

devoid of any merits the same is hereby dismissed. However,

the observations made in the order being tentative and

prima facie, made solely for the purpose of deciding this

application, shall not affect the decision of the case on

merits.

IA16947/2010 (u/O 12 R 6 CPC)

Dismissed as not pressed.

IA 10718/2011 (u/O 6 R 17 CPC)

The learned counsels agree that since the written

statement has already been amended and even replication

to the amended written statement has been filed, this

application has become infructuous.

The application stands disposed of as such.

CS(OS) 2051/2010

The Local Commissioner will, as far as possible

conclude recording of evidence, within three months of the

parties next appearing before him. Mr. Sethi requests that

a date may be fixed for appearance of parties before the

Local Commissioner. This, however, is opposed by Mr.

Bhagat, who states that it is for the Local Commissioner to

issue the notice to the parties to appear before him and that

he does not know the address of the Local Commissioner

and is also not sure as to whether he would be accepting

the assignment or not. Mr. Sethi states that the plaintiff is

ready to provide the phone number and address of the Local

Commissioner to Mr. Bhagat. I however leave it to the Local

Commissioner to communicate the date, time and place of

hearing before him to the parties.

In view of the order of Division Bench dated 3 rd

May 2011, list this matter for direction on 13th January

2012.

One copy each of this order be given dasti to both

the parties.

(V.K. JAIN) JUDGE SEPTEMBER 05, 2011 Ag