Shri Virender Aran vs Shri Devinder Singh
2013 Latest Caselaw 5705 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                              Reserved on: 28.11.2013
                                               Decided on: 10.12.2013

+      RFA(OS) 113/2013, CM APPL.13749/2013

       SHRI VIRENDER ARAN                         ..... Appellant
                Through: Mr. Sunil Fernandez with
                         Mr. Deepak Pathak & Mr. Virender, Advs.

                          versus

       SHRI DEVINDER SINGH                      ..... Respondent

Through: Mr. Vijay K.Gupta with Mr. Mehul Gupta, Advs.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI

% MR. JUSTICE NAJMI WAZIRI

1. The question which arises in the present appeal is whether for

rescission of a contract the mere communication to rescind would be

sufficient or would the said communication need to be accompanied with the

liquidated amount/damages mentioned in the contract where no time has been

specified for such payment. The facts of the case are that the appellant (seller)

agreed to sell a flat bearing No. C-8/54A, Keshav Puram, Delhi-35 to the

respondent (purchaser) for a sale consideration of Rs.29,50,000/-, through an

agreement dated 4th March, 2011. The entire monies were to be paid on or

before 5th June, 2011. Earnest money/bayana of Rs.3,00,000/- was received in

cash by the appellant/seller at the time of the agreement. Both parties had the

freedom to rescind the contract. However if the purchaser/respondent was to

walk away from it, he would have to forfeit the earnest money paid, whereas

if the seller was to rescind the contract he would be required to pay twice the

amount of earnest money received by him. By a letter dated 24 th May, 2011,

the seller conveyed to the purchaser that he would not like to sell his property

and offered to repay the earnest money. In reply, the purchaser through his

lawyer's notice of 31st May, 2011 stated that he was ready and willing to

honour his part of agreement, however should the seller persist with his stand

to rescind or not honour the agreement, he would be liable to pay the seller

double the amount of bayana, i.e. (Rs.3,00,000/- x 2) Rs.6,00,000/-. The said

legal notice called upon the seller/appellant:

"...to withdraw your letter dated 24.5.2011 and further to get the documentation done to transfer the property bearing No. C-8/54-A, Ist floor, Lawrence Road, Keshav Pura, Delhi- 110035 in favour of my client or you are liable to pay double the amount of Bayana of Rs.3,00,000/- which comes to Rs.6,00,000/- to my client as per Bayana Agreement dated 4.3.2011 on or before 5.6.2011 failing which my client reserve his rights to initiate legal proceedings under the provisions of law, against you with the competent courts of law, entirely at your costs and consequences, which please note.

The purchaser/respondent eventually filed a suit for specific performance

which was decreed by the learned Single Judge vide his order dated 29 th July,

2013; the said order is impugned in this appeal.

2. Counsel for the seller/appellant contends that for rescission of

the agreement all that the seller was required to do was to intimate the

purchaser/respondent that he was not willing to proceed with the agreement to

sell and that the earnest money would be repaid. He relies on Clause 5 of the

said agreement which reads as under:-

"5. That if the first party refuses to sell the said property within stipulated period as mentioned above then the first party shall be liable to pay the earnest money as double to the second party, in case if the second party refuses to purchase the said property within same time then her/his earnest money shall be forfeited by the first party and after it the first party shall have full right to resell the said property to any person at any rate."

He had also sought to demonstrate the seller's readiness and willingness to

repay the amount by having a demand draft for Rs.3,00,000/- i.e. earnest

money amount received, prepared in the name of the purchaser on 3 rd June,

2011 i.e. before the expiry of the time by when the purchaser/respondent was

enjoined to pay the entire sale consideration. However, the said draft could

not be delivered to the respondent due to confusion with respect to delivery of

the same to and through his lawyer. He stated that the reason for cancellation

of the agreement to sell and his inability to transfer the flat to the purchaser

was a personal one i.e. (i) the emotional attachment of his mother - who was

ailing from cancer - with the flat, (ii) she did not want their only home to be

sold out, and (iii) in deference to her wishes and in such a delicate phase in

her life, he decided to resile from the contract. He further submitted that the

reason for cancellation/resiling is not relevant in law when all that was

required to for the seller walk away from the contract was to intimate the

purchaser/respondent of his decision as per Clause 5.

3. Learned counsel further contended that the way the agreement

was structured casts an obligation only upon the purchaser to pay the entire

consideration amount within the stipulated period i.e. on or before 5 th June,

2011. However, no such time limit was fastened upon the seller in case he

was to resile from the agreement. In any case, the seller had offered, within

one week of the agreement i.e. on 10th March, 2011 and yet again on 24th

May, 2011, to refund to the purchaser the earnest money, but allegedly the

purchaser refused to accept the monies. His bona fides was further established

by the fact that the demand draft of Rs.3,00,000/-, equivalent to the earnest

money received had already been prepared in favour of the purchaser by

HDFC bank on 3rd June, 2011, however it could not be delivered through his

lawyer to the purchaser due to some confusion. Therefore, contended counsel

the learned Single Judge had erred in holding that the defendant could not

lawfully cancel the agreement to sell any further proceedings in decreeing the

suit for specific performance of the agreement to sell.

4. Learned counsel for the respondent contends that there was no

error in the impugned judgment and the seller could not have resiled from the

contract as the intention of the seller was doubtful. The reasons such as the

seller's mother having an emotional attachment with the property is a ploy to

evoke sympathy; the allegation that the purchaser was a property dealer is an

irrelevant issue. Both ought to be rejected. He contended that the purchaser

was always ready and willing to perform his part of the agreement. According

to him, the sellers greed to procure a higher sale price for the property from

another purchaser had gotten the better of him. He contends that the

respondent/purchaser had got a bank draft of Rs.6,50,000/- prepared in the

name of the seller (and monies for the said drafts were arranged by one Sh.

Rajneesh Sharma from his joint account). That on 5th June, 2011, which was a

Sunday, the purchaser requested the appellant/seller to accept the said amount

towards balance consideration in the office of the Sub-Registrar on the very

next day. The purchaser claims to have gone on 6th June, 2011 and marked his

presence there and to have informed the appellant/seller of his presence in the

office of Sub-Registrar on 6th June, 2011. In his evidence (through affidavit),

the purchaser/respondent states that:

"I say that I have always been ready and willing till the filing of the suit to perform my part of the contract/agreement (Ext.PW1/1). In furtherance of such intention, I got 7 bank drafts for a total value of Rs.26,50,000/- i.e. the total balance sale consideration, prepared from various banks payable to defendant on 4th June 2011 from Karur Vysya Bank Ltd. and from State Bank of India and HDFC Bank, on 6th June 2011. Copies of said bank drafts are Mark A to Mark G. The amount

of said bank drafts was arranged by Mr. Rajneesh Sharma s/o. Shri Shiv Shakti Dutt Sharma R/o. Flat No.C-8/52A, Lawrence Road, Keshav Puram, Delhi-110035. In these circumstances, the entire balance sale consideration was ready in terms of Ext.PW1/1 as on 6th June 2011 for completing the sale transaction".

5. The appellant had relied upon the principles in Manzoor Ahmed

Magray vs. Ghulam Hassan Aram & Ors., AIR 2000 SC 191 to contend that

simply because an agreement provides for liquidated damages it cannot

operate as a bar for the grant of specific performance.

6. The learned Single Judge considered the arguments of the parties

including the precedent of the seller's/appellant's counsel i.e. Man Kaur. vs.

Hartar Singh Sangha, (2010) 10 SCC 512. He then concluded that the

provision of damages would not preclude the decree for specific performance.

He further reasoned that the contention of hardship being caused to a party if

the contract was to be enforced would also not be available for the purpose of

resiling from a contract and a decree for specific performance would be

granted in such circumstances. He relied upon Yohannan and Anr. vs.

Harikrishnan Nair and Ors., AIR 1992 Ker 49 and Baijnath vs. Kshetrahari

Sarkar & Ors., AIR 1955 Cal 210. Finally, the learned Single Judge,

conscious of the principle contained in the judgment of the Supreme Court in

Rajeshwari vs. Puran Indoria, (2005) 7 SCC 60 held as under:-

"5. Normally, a suit for specific performance of an agreement for sale of immovable property involves the question whether the plaintiff was ready and willing to perform his part of the contract in terms of Section 16 of the Specific Relief Act, whether it was a case for exercise of discretion by the court to decree specific performance in terms of Section 20 of the Specific Relief Act and whether there were laches on the part of the plaintiff in approaching the court to enforce specific performance of the contract. In some cases, a question of limitation may also arise in the context of Article 54 of the Limitation Act on the terms of the agreement for sale. Other questions like the genuineness of the agreement, abandoning of the right to specific performance, a novation and so on, may also arise in some cases. No doubt, a finding on the three primary aspect indicated earlier would depend upon the appreciation of the pleadings and the evidence in the case in the light of the surrounding circumstances......"

7. The learned Single Judge held that the contention of hardship

being caused to the appellant/defendant/seller was untenable in view of the

fact that the purchaser/respondent was ready and willing to perform his part of

the contract and mere provision for refund of the earnest money could not

preclude the grant of decree of specific performance. This Court has

considered the contentions of the parties. The stipulation in Clause 5 of the

agreement is clear. The option to resile from the agreement was not premised

upon or qualified by any condition; it was a clear and unhindered prerogative

available to the seller. He exercised the option and conveyed his decision

within the period of the agreement i.e., 5th June, 2011. This Court cannot also

lose sight of the fact that the demand draft got prepared towards refund of the

earnest money on 3rd June, 2011; keeping in view that the refund of the

earnest money was not specified to be made on a fixed date or within a

particular period, it would nonetheless be expected of the seller to repay the

same within a reasonable period and in default pay interest on double the

amount of the earnest money. The purchaser had issued a legal notice wherein

he had accepted that the invocation of the Clause 5 for rescinding the contract

would make the seller liable to pay Rs. 6,00,000/- on or before 5th June, 2011

failing which the purchaser could take recourse to law. In other words, the

purchaser was willing to accept the damages amounting to double the earnest

money paid i.e. Rs.6,00,000/- and in the event of same having not been paid,

it would logically be inferred that the interest would be payable thereon.

During the course of hearing on 28th November, 2013 counsel for the

appellant offered to pay a sum of Rs.6,00,000/- along with 18% interest

effective from 24.5.2011 and any other incidental amount and expenses of

costs as may be appropriate.

8. This Court is of the opinion that for rescinding the contract, only

invocation of Clause 5 and due communication of the same was required;

which was duly done, hence the agreement stood rescinded on 24.05.2011.

Consequently, twice the amount of the earnest money i.e. Rs.6,00,000/- was

payable to the purchaser. The seller had got the demand draft of Rs.3,00,000/-

prepared on 3rd June, 2011. Although the time frame for refund was not

mentioned in the agreement, he has nevertheless shown his readiness and

willingness to repay the money. The offer to repay Rs.6,00,000/- along with

18% interest thereon is, in the opinion of this Court, fair and adequate. In

view of the preceding discussion, the impugned order is set aside, the

appellant is directed to pay Rs.6,00,000/- with interest thereon at the rate of

18% per annum from 24.5.2011 and costs of Rs.1,00,000/- to the respondent

within 4 weeks from today.

9. The appeal and the application for stay are disposed off in the

above terms.

NAJMI WAZIRI (JUDGE)

S. RAVINDRA BHAT (JUDGE)

DECEMBER 10, 2013 ak