M/S Fashion Flare vs Yogesh Vaidya & Ors
2012 Latest Caselaw 976 Del

16
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*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+       CS(OS) 1127/2010 & I.A. 7638/2010 & I.A. 1399/2011

%                                Judgment Delivered on: 13.02.2012

        M/S FASHION FLARE                      ..... Plaintiff
                 Through: Mr.B.S. Maan, Ms.Smita Maan and
                          Mr.Jitin Singh, Advocates

                     versus

        YOGESH VAIDYA & ORS                ..... Defendant
                Through: Mr.Ravinder Sethi, Sr. Advocate with
                         Mr.Mohit Chaudhary, Mr.A. Das and
                         Mr.Rashi Bansal, Advs for
                         the proposed defendant no.3
                         Mr.Manish Sharma, Adv. for defendts 1 & 2

        CORAM:
        HON'BLE MR. JUSTICE G.S.SISTANI

G.S.SISTANI, J. (ORAL)

I.A. No.292/2011

1. This is an application under Order 1 Rule 10 CPC read with Order 6 Rule 17 CPC filed by the plaintiff seeking to implead Mr.Samarjit Singh Chattha, as defendant no.3 to the present suit. Necessary facts to be noticed for disposal of this application are that plaintiff entered into a receipt-cum-agreement with defendants no.1 and 2 on 24.12.2009 for a total consideration of Rs.12,51,00,000/- with respect to sale of property bearing Flat No.84-D, Entire 1st Floor, Malcha Marg, Chankya Puri, New Delhi. As per the plaint, plaintiff has paid a sum of Rs.1,21,00,000/- to the defendants No.1 and 2, however, as per the defendants No.1 and 2 only a sum of Rs.1,08,50,000/- was received by them. As per the receipt-

cum-agreement, balance payment was to be made on or before 27.07.2010.

2. Mr.Maan, counsel for the plaintiff submits that prior to 27.07.2010 i.e. the date fixed to make the balance payment the defendants no.1 and 2 in a clandestine manner and with a view to defeat the legitimate claim of the plaintiff, entered into an agreement to sell with Mr.Samarjit Singh Chattha, defendant no.3 on 07.01.2010 and thereafter the parties executed Sale Deed 28.04.2010 prior to a date before which the plaintiff was to make the balance payment. Counsel for the plaintiff submits that in view of Section 19(b) of the Specific Relief Act, the proposed defendant No.3 is a necessary and proper party, as the decree which may be passed in his favour would be unexecutable against the said defendant no.3, in case he is not impleaded as a party to the present proceedings. In support of his submission, counsel for the plaintiff has relied upon Durga Prasad & Anr. vs. Deep Chand & Ors. AIR 1954 SC 75 and also a decision rendered by the Bombay High Court in the case Dilip Bastimal Jain vs. Baban Bhanudas Kamble & Ors. AIR 2002 Bombay 279 and more particularly paragraphs 12, 13 and 14 thereof, which are reproduced below:

"12. Having heard the parties at length, it is necessary to note that in order to decide the question relating to the pecuniary jurisdiction of the court, what is required to be seen is the allegations made, and relief claimed in the plaint. The allegations made in the plaint, if perused, it will be clear that the suit in question is nothing but a suit seeking substantive relief of specific performance of contract. The declaration of the invalidity of the sale deed in favour of the subsequent transferees. i.e., the relief against defendant Nos. 6, 13 and 14 is nothing but an ancillary relief. If the plaintiff is able to establish his case of the specific performance against the defendant No. 1 (respondent No. 1) then it would be enough,

if the defendant Nos. 6, 13 and 14 are joined as parties, to the suit because the only decree to be passed in the suit for specific performance against the subsequent transferees would be to ask them to join in conveyance with the defendant No. 1 owner. In that sense, it was not necessary at all for the plaintiff to ask for any such declaration as he did. It would have been enough for the plaintiff to have joined them as co-defendants so as to contend that the subsequent sale deeds were not binding on him. The argument of the learned Counsel appearing for the petitioner that the relief of declaration prayed for against the defendant Nos. 6, 13 and 14 was required to be valued in terms of money has, therefore, to be rejected.

13. The above legal position is no more res integra and is laid down in Vimala Ammal v. C. Suseela, reported in AIR 1991 Madras 209. Dwarka Prasad Singh v. Harikant Prasad Singh, reported in AIR 1973 SC 655 and Durga Prasad v. Deep Chand, reported in AIR 1954 SC 75. In all these cases, it has been held that when an action is brought for specific performance, the subsequent transferee would be a necessary party to the suit as the only decree that is required to be passed in such a suit (for specific performance) is against the original vendor. The subsequent transferees are required to be directed to join in the sale which is directed by a decree for specific performance of contract. It has been held that the proper form of decree is to direct specific performance of the contract between the vendor and the prior transferee and direct the subsequent transferee to join in the conveyance so as to pass on the title which resides in him, to the prior transferee. He does not join in any special convenants made between the prior transferee and his vendor, all that he does is to pass on his title to the prior transferee. This law was laid down by the Supreme Court firstly, in Durga Prasad's case (cited supra), would dispense with the necessity of obtaining any specific declaration against the subsequent transferee. It would not, therefore, be necessary at all to claim a declaration as such. This law was again reiterated in Dwarka

Prasad Singh's case and AIR 1973 SC 655 and subsequently followed in Vimala Ammal's case AIR 1981 Madras 209. Thus it was not at all necessary for plaintiff to claim declaration of invalidity of transfer of property made in favour of the subsequent transferees.

14. The learned counsel appearing for the petitioner tried to urge that it was essential for the plaintiff to claim a declaration of invalidity in favour of the subsequent transferees. Said argument has no substance. At this juncture, it is necessary to notice Clause (b) of Sub-section (1) of Section 19 of the Specific Relief Act which starts with the following words :

"19(1). Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-

(b) any other person claiming under him by a title....."

The Section speaks of the enforcement only. It does not speak in terms of a decree being claimed against such persons. As I have already pointed out hereinabove, that it is an established law that for enforcing the decree, all that is necessary is to implead such person as a party and the decree is required to direct such person to be a party to conveyance to be executed by the original vendor in favour of the vendee. It will have, therefore, to be held that there was no necessity of claiming any declaratory relief as against the defendant No. 6 (present petitioner) and defendant Nos. 13 and 14. Consequently, there was no question of payment of court- fees in respect of said relief. The said relief claimed was superficial and unnecessary in the facts and circumstances of the present case.

3. Mr.Ravinder Sethi, learned senior counsel for Mr.Samarjit Singh Chattha, the proposed defendant no.3, has opposed this application on the ground that defendant no.3 is a bona fide purchaser and he cannot be roped into

the present proceedings, which would amount to sheer harassment to him. Counsel further submits that defendants nos.1 and 2 had informed the plaintiff prior to filing of the suit by means of a communication dated 22.05.2010 that the subject matter of the suit stands sold to another party and particulars of bank account of the planitiff were sought to enable the defendants no.1 and 2 to return the money. It is further contended by Mr.Sethi that present suit has been filed in collusion with defendant no.1 and 2 to harass defendant no.3, the bona fide purchaser and he has already lodged an FIR against the plaintiff and defendants no.1 and 2. It is further submitted that since the defendant no.3 is not a party to the sale transaction, defendant no.3 will not be a necessary and proper party. Counsel has relied in the case Bharat Karsondas Thakkar Vs. Kiran Construction Company & Others (2008) 13 SCC 658 and more particularly 28, which is reproduced below:

"28. Along with that is the other question, which very often raises its head in suits for specific performance, that is, whether a stranger to an agreement for sale can be added as a party in a suit for specific performance of an agreement for sale in view of Section 15 of the Specific Relief Act, 1963. The relevant provision of Section 15 with which we are concerned is contained in clause (a) thereof and entitles any party to the contract to seek specific performance of such contract. Admittedly, the appellant herein is a third party to the agreement and does not, therefore, fall within the category of "parties to the agreement". The appellant also does not come within the ambit of Section 19 of the said Act, which provides for relief against parties and persons claiming under them by subsequent title. This aspect of the matter has been dealt with in detail in Kasturi's case (supra). While holding that the scope of a suit for specific performance could not be enlarged to convert the same into a suit for title and possession, Their Lordships observed that a third party or a stranger to the contract could not be added so as to convert a suit of one character into a suit of a different

character.

4. Mr.Sethi, learned senior counsel for Mr.Samarjit Singh Chattha, the proposed defendant no.3, has also opposed this application on the ground that the plaintiff has intentionally concealed in the plaint the factum of the suit property having been sold by defendants no.1 and 2 to a third party. Similar arguments with regard to the concealment have also been raised by counsel for the defendants No.1 and 2 and according to the counsel on this ground alone the plaintiff would be disentitled to the relief sought for.

5. I have heard counsel for the parties and perused the record. Basic facts are not in dispute that the plaintiff had entered into a receipt-cum- agreement with defendants Nos.1 and 2 for a total sum of total sum of Rs.12,51,00,000/-. As per the plaintiff, plaintiff has paid a sum of Rs.1,21,00,000/- to the defendants no.1 and 2, whereas as per the defendants No.1 and 2 only a sum of Rs.1,08,50,000/- has been paid to them by plaintiff. It is not in dispute that defendants Nos.1 and 2 have prior to the last date of making the payment sold the suit property to defendant No.3 vide sale deed dated 28.04.2010 at a sale consideration of Rs.6.0 crores, which is far less to the agreed sale consideration with the plaintiff, as aforementioned.

6. The submissions made by counsel for the defendants that the plaintiff has willfully suppressed the material facts from this court, which would disentitle him to the relief claimed for is not acceptable to the court, as it has been repeatedly held that all concealments cannot be a ground for not granting relief to the party, and what would be considered by the court is whether the concealment is material and by virtue of which concealment a party has been able to steal an order. The short question which comes up for consideration before this court is as to whether Mr.Samarjit Singh

Chattha, who has purchased the suit property by means of a sale deed prior to the last date for completion of transaction between the plaintiff and defendants no.1 and 2 on the basis of a receipt-cum-agreement is a proper and necessary party to the present suit. Section 15 of the Specific Relief Act deals with persons for or against whom a contract may be specifically enforced. As per section 15 of the Specific Relief Act, the parties to an agreement are the proper and necessary parties to a suit for specific performance. A three Judge Bench of the Supreme Court in the case of Kasturi Vs. Iyyamperumal & Others (2005) 6 SCC 733 has dealt in detail the provisions of Order 1 Rule 10 Sub-Rule 2 of the Code of Civil Procedure and laid down the test for impleading parties to a suit. In the case of Kasturi (Supra), the Supreme Court has set aside the order of the Trial court and the High Court by which stranges to the agreement to sell were impleaded as parties, who claimed independent title and possession adversely to the title of the vendor. In the said decision while the Apex Court held that the strange or a third party to contract is not entitled to be impleaded as a party, however, a person who has purchased the contracted property from the vendor would be necessary party in equity as well as in law. It would be useful to reproduce paragraphs 7 to 13 of the same:

7. In our view, a bare reading of this provision namely, second part of Order 1 Rule 10 sub-rule (2) of the CPC would clearly show that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with notice of the contract, but a

person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who is a necessary party. Tests are - (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings (2) no effective decree can be passed in the absence of such party.

8. We may look to this problem from another angle. Section 19 of the Specific Relief Act provides relief against parties and persons claiming under them by subsequent title. Except as otherwise provided by Chapter II, specific performance of a contract may be enforced against :-

"19(a) either party thereto;

(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;

(c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant;

(d) when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;

(e) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation, the company;

Provided that the company has accepted the contract and communicated such acceptance to the other party to the contract."

9. We have carefully considered sub-sections (a) to (e) of Section 19 of the Act. From a careful examination of the aforesaid provisions of sub-sections (a) to (e) of the Specific Relief Act we are of the view that the persons seeking addition in the suit for specific performance of the contract for sale who were not claiming under the vendor but they were claiming adverse to the title of the vendor do not fall in

any of the categories enumerated in sub-sections (a) to (e) of section 19 of the Specific Relief Act.

10. That apart, from a plain reading of section 19 of the Act we are also of the view that this section is exhaustive on the question as to who are the parties against whom a contract for specific performance may be enforced.

11. As noted hereinearlier, two tests are required to be satisfied to determine the question who is a necessary party, let us now consider who is a proper party in a suit for specific performance of a contract for sale. For deciding the question who is a proper party in a suit for specific performance the guiding principle is that the presence of such a party is necessary to adjudicate the controversies involved in the suit for specific performance of the contract for sale. Thus, the question is to be decided keeping in mind the scope of the suit. The question that is to be decided in a suit for specific performance of the contract for sale is to the enforceability of the contract entered into between the parties to the contract. If the person seeking addition is added in such a suit, the scope of the suit for specific performance would be enlarged and it would be practically converted into a suit for title. Therefore, for effective adjudication of the controversies involved in the suit, presence of such parties cannot be said to be necessary at all. Lord Chancellor Cottenham in Tasker Vs. Small 1834 (40) English Report 848 made the following observations: (ER pp.850-51)

"It is not disputed that, generally, to a bill for a specific performance of a contract for sale, the parties to the contract only are the proper parties; and, when the ground of the jurisdiction of Courts of Equity in suits of that kind is considered it could not properly be otherwise. The Court assumes jurisdiction in such cases, because a Court of law, giving damages only for the non-performance of the contract, in many cases does not afford an adequate remedy. But, in equity, as well as in law, the contract constitutes the right and regulates the liabilities of the parties; and the object of both proceedings is to place the party complaining as nearly as possible in the same situation as the

defendant had agreed that he should be placed in. It is obvious that persons, strangers to the contract, and, therefore, neither entitled to the right, nor subject to the liabilities which arise out of it, are as much strangers to a proceeding to enforce the execution of it as they are to a proceeding to recover damages for the breach of it."

[Emphasis supplied ]

12. The aforesaid decision in 40 E.R. 848 was noted with approval in De Hogton v. Money2. Turner, L.J. observed at Ch.P 170:

"Here again his case is met by (1834) 40 E.R. 848 in which case it was distinctly laid down that a purchaser cannot, before his contract is carried into effect, enforce against strangers to the contract equities attaching to the property, a rule which, as it seems to me, is well founded in principle, for if it were otherwise, this Court might be called upon to adjudicate upon questions which might never arise, as it might appear that the contract either ought not to be, or could not be performed."

13. From the aforesaid discussion, it is pellucid that necessary parties are those persons in whose absence no decree can be passed by the Court or that there must be a right to some relief against some party in respect of the controversy involved in the proceedings and proper parties are those whose presence before the Court would be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit although no relief in the suit was claimed against such person."

7. The judgment Bharat Karsondas Thakkar (Supra) sought to be relied upon by learned senior counsel for the defendant no.3, is not applicable to the facts of the present case, as in the present case the defendants no.1 and 2 has sold the suit property to defendant no.3, prior to the last date of

making the payment by the plaintiff and in case defendant no.3 is not impleaded as a party, the decree if passed, would become unenforceable. Section 19(b) of the Specific Relief Act, which is reproduced below, is applicable to the present case:

19 . Relief against parties and persons claiming under them by subsequent title.-- xxx

(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract."

8. It is also submitted by Mr.Sethi, learned senior counsel for the proposed defendant no.3 that in the amendment sought in the plaint the relief of declaration and cancellation of the sale agreement has not been sought. The submission of Mr.Sethi, is without any force as the arguments sought to be raised is unanswered in para 12 of Dilip Bastimal Jain (Supra) wherein the Bombay High Court, has held that the main prayer made in the suit would be for the specific relief and the relief for declaration and cancelation would be an ancillary prayer.

9. Having regard to the fact that the defendants no.1 and 2 sold the suit property even before the time expired for making the final payment, the case of the plaintiff would be fully covered under Section 19(b) of the Specific Relief Act and in the absence of the proposed defendant no.3 no effective decree can be passed. I am also of the view that the presence of the proposed defendant No.3 is necessary to adjudicate the controversy involved in the present suit for specific performance and for the enforcibility of the contract. For the reasons stated above, the present application is allowed. Mr.Samarjit Singh Chattha, is impleaded as defendant no.3 to the present suit.

CS(OS) 1127/2010 & I.A. 7638/2010 & I.A. 1399/2011

10. The amended plaint is taken on record. Let the written statement be filed within 30 days. Liberty is also granted to defendants no.1 and 2 to file written statement to the amended plaint within 30 days. Replication be filed within 30 days thereafter. Parties shall file documents within the same period.

11. List the matter before Joint Registrar on 26.03.2012 for admission/denial of documents, the date already fixed.

12. List the matter before court on 10.05.2012 for framing of issues and for hearing of application. Parties will bring suggested issues to court on the next date of hearing.

G.S.SISTANI, J FEBRUARY 13, 2012 Ssn [pdf]