Delhi High Court

Tanu Goel & Anr vs Girish Chopra & Ors on 16 May, 2014

Author: Rajiv Sahai Endlaw

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                        Date of decision: 16th May, 2014.

+                               CS(OS) 669/2011

       TANU GOEL & ANR                                      ..... Plaintiffs
                    Through:          Mr. Sudhir Nandrajog, Sr. Adv. with
                                      Mr. Sudhir Talwar & Ms. Jagriti
                                      Ahuja, Advs.

                                  Versus

    GIRISH CHOPRA & ORS                       ..... Defendants
                  Through: Mr. Sanjay Goswami, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.

The two plaintiffs have sued for specific performance of an

Agreement of Sale of third floor along with terrace rights of property No.9,

Sukhdev Vihar, New Delhi constructed over land admeasuring 450 sq. yds,

together with one servant quarter having common WC on the terrace floor

and one car parking space in the drive way, and in the alternative, for

recovery, of Rs.1 crore already paid as advance to the three defendants and

Rs.3,25,00,000/- as damages, pleading:

(i) that the defendants No.1 & 2 i.e. Sh. Girish Chopra and Smt.

Ashima Chopra vide Agreement to Sell dated 15th June, 2010 agreed

to sell the aforesaid property to the two plaintiffs for a total sale

consideration of Rs.4,25,00,000/-;

(ii) that in terms of the said Agreement to Sell, the plaintiffs paid a

sum of Rs.50 lakhs in the name of the defendant No.1 as earnest

money at the time of signing of the Agreement to Sell and a further

sum of Rs.25 lakhs on 9th July, 2010;

(iii) that the balance sale consideration of Rs.350 lakhs was payable

at the time of execution of the Sale Deed on or before 15 th August,

2010, after the defendants No.1 & 2 had cleared the dues in respect of

the home loan taken by them from the Bank of Baroda in respect of

the entire property No.9, Sukhdev Vihar, New Delhi;

(iv) that though the plaintiffs were ready to perform their part of the

agreement and had applied for a home loan to Standard Chartered

Bank which had been sanctioned in the sum of Rs.2,91,50,000/- vide

sanction letter dated 31st July, 2010 but the defendants No.1 & 2 did

not produce the No Dues Certificate from the Bank of Baroda and on

the contrary in the last week of August, 2010 requested the plaintiffs

for a further sum of Rs.25 lakhs out of the sale consideration;

(v) that a cheque in the said sum of Rs.25 lakhs was initially given

in the name of the defendant No.1 as sought by the defendants No.1

& 2 but on the asking of the defendants No.1 & 2 the payment under

the said cheque was subsequently stopped and a cheque for Rs.25

lakhs in the name of the defendant No.3 M/s. Divij Infraprojects Pvt.

Ltd. of which defendants No.1&2 were Directors, as per the request

of the defendants No.1 & 2, was given and which was encashed;

(vi) the defendants No.1 & 2 however did not come forward to

execute the Sale Deed, not even inspite of legal notice dated 21 st

January, 2011;

Hence this suit.

2. Summons of the suit and notice of the application for interim relief

were issued. After hearing the counsel for the defendants, the defendants

were vide order dated 31st March, 2011 restrained from creating any third

party interest and/or parting with possession of the property agreed to be

sold. The said ad interim order was vide subsequent order dated 6 th April,

2011 confirmed subject to the plaintiffs depositing an FDR of Rs.34 lakhs in

favour of the Registrar General of this Court. FAO(OS) No.342/2011

preferred by the defendants against the said order was dismissed vide order

dated 19th July, 2011. The plaintiffs have complied with the said condition.

3. The defendants have contested the suit by filing a common written

statement pleading:

(a) that the Agreement to Sell dated 15th June, 2010 by its very

terms, is a contingent contract within the meaning of Sections 31 &

32 of the Indian Contract Act 1872, performance of which was

contingent upon the defendants obtaining the necessary permission

from the Bank of Baroda with whom the entire property was

mortgaged and as per the Agreement, in case the defendants failed to

obtain the permission and transfer the property agreed to be sold on or

before 15th August, 2010, the defendants had a right to return the

advance amount to the plaintiffs along with interest @ 12.5% per

annum on or before 15th September, 2010; the defendants having

failed to obtain the necessary permission from the Bank of Baroda,

offered refund of the advance received with interest and which was

not accepted by the plaintiffs; the contingent contract had become

void as per Sections 32 & 35 of the Indian Contract Act, 1872 and is

unenforceable;

(b) that the defendants, to honour their obligations under the

Agreement to Sell, endeavoured for permission of the Bank of Baroda

but which permission was not granted as the defendants were not in a

position to discharge the entire outstanding with the said Bank which

as on 30th June, 2010 was Rs.8,63,66,783/- and as on 30th August,

2010 was Rs.4,22,30,393/- and as on 29th October, 2010 was

Rs.4,29,26,584/-;

(c) that the Bank of Baroda was not agreeable to release the

property agreed to be sold to the plaintiffs as the plaintiffs were not

coming forward to make the payment to the Bank or the defendants;

(d) that the plaintiffs were not ready and willing to perform their

part of the agreement by the stipulated date of 15 th August, 2010 and

according to the plaintiffs themselves, the approval for their home

loan was received only 29th September, 2010; that the earlier approval

of 31st July, 2010 was only an in principal approval;

(e) that the plaintiffs have not shown their readiness and

willingness for payment of the balance sum of Rs.35 to Rs.40 lakhs

even if it were to be believed that the home loan for Rs.2.91 crores

had been got sanctioned.

4. The plaintiffs in their replication have inter alia denied that the

defendants had at any time offered refund with interest and have further

pleaded that the defendants No.1 & 2, after the institution of the present suit,

had sold the second floor of the property.

5. On the pleadings of the parties, the following issues were framed on

20th September, 2011:

"(i) Whether the plaintiffs have always been ready and willing to perform their part of the contract? OPP

(ii) Whether the plaintiffs are not entitled to specific performance of the Agreement dated 15.06.2010 as alleged in the preliminary objection-3 of the written statement? OPD

(iii) Whether the plaintiffs are entitled to specific performance of the Agreement dated 15.06.2010 or in the alternative to recover Rs.4.25 Crores as alleged in the plaint? OPP

(iv) Relief."

6. Evidence has been recorded before the Court Commissioner, with the

plaintiffs examining four witnesses including both the plaintiffs and the

defendants examining only the defendant No.1 as a witness. The counsels

have been heard.

7. My findings on the issues are as under. I will first take up Issue

No.(ii) inasmuch as the same is in the nature of a preliminary issue striking

at the very root of the claim of the plaintiff insofar as for specific

performance.

8. Issue No.(ii) Whether the plaintiffs are not entitled to specific performance of the Agreement dated 15.06.2010 as alleged in the preliminary objection-3 of the written statement? OPD

8.1. The plea of the defendants in para 3 of the preliminary objections in

the written statement is that the Agreement to Sell does not even contain any

clause providing for enforcement of the same by the plaintiffs by resorting

to specific performance through the Courts of Law but only provides for

refund of the advance paid by the plaintiffs along with interest. However

during hearing, under this issue, arguments were also addressed on the

Agreement being a contingent one. The said plea of the defendants is based

on the following clause in the Agreement to Sell proved as Ex.P1 and in

which the defendants No.1 & 2 are described as First Party and the plaintiffs

as the Second Party:

"That (if) the Second Party fails to get the registry done in favour of Second Party on or before 15th August, 2010, the First Party have the right to return the advance amount paid to the First Party, with an interest of 12.5% per annum to the Second Party on or before 15th September, 2010."

and on the basis of there being no clause in the said Agreement

providing for the right of the plaintiffs of specific performance of the

Agreement. The defendants in the written statement have further pleaded

that the reference in the aforesaid clause to "Second Party" is "supposedly

incorrect" and the reference in the said clause to „the failure to get the

registry done‟ is in fact to the First Party i.e. the defendants. The defendants

have pleaded that the aforesaid clause was inserted envisaging a possibility

of the defendants‟ failure to get the permission from the Bank of Baroda and

opting for return of the advance amount to the plaintiffs.

8.2. I may at the outset state that there is no „obvious‟ mistake in the

clause aforesaid. The defendants in their written statement also have not

pleaded any circumstances for this Court to return a finding of there being

such a mistake in the clause. I have perused the affidavit by way of

examination-in-chief of the defendant No.1 appearing as the sole witness of

the defendants. In that also there is no evidence of any such mistake. The

clause thus has to be read as it is.

8.3 Not only so, the said plea is also found to be an afterthought. The

defendants, at no time prior to the filing of the written statement, are proved

to have applied to the Bank of Baroda for release of the property agreed to

be sold to the plaintiffs from mortgage or the Bank of Baroda having

refused the same or of there being any other reason for the „failure‟ of the

defendants to register the Sale Deed in favour of plaintiffs. The defendants

have also not proved having communicated to the plaintiffs at any time that

they were „unable‟ to get the registry done in favour of plaintiffs. The

defendants have yet further not proved that interpreting the clause aforesaid,

as pleaded in the written statement, the defendants at any time exercised the

„right‟ to refund the monies received from the plaintiffs with interest at

12.5% per annum. The only inference is that the defendants also never

understood the clause aforesaid in the manner pleaded in the written

statement and the said plea is taken to only put obstacles to the relief

claimed in the suit of specific performance.

8.4. A reading of the aforesaid clause shows the Agreement of the parties

to be that even if the plaintiffs as purchasers were to fail to get the registry

done in their favour by paying the balance sale consideration on or before

15th August, 2010, the defendants as sellers were still not entitled to forfeit

or retain the advance received but remain liable to return the advance

received with interest @ 12.5% per annum. There is no clause in the

Agreement permitting the defendants to, in the event of failure of the

plaintiffs to perform their part of the Agreement, forfeit the advance paid by

the plaintiffs. The only meaning which can be ascribed to the said clause

thus is that in the event of the plaintiffs being in breach, the defendants had

agreed to refund the advance received with interest @ 12.5% per annum.

8.5. The next question which arises is whether owing to the aforesaid

clause and owing to the fact that the Agreement does not provide for the

right of the plaintiffs to specific performance, the said relief is not available

to the plaintiffs.

8.6. The aforesaid clause is attracted only in the event of the plaintiffs i.e.

the purchasers being in breach. The question as to whether the plaintiffs are

in breach of the Agreement or not shall be considered under Issue No.(i)

hereunder. If the plaintiffs are held to be in breach, the question of their

being entitled for specific performance will not arise and they, in

accordance with the said clause shall be entitled to refund of advance paid

with interest @ 12.5% per annum.

8.7. The plea of the defendants, that the purport of the aforesaid clause

was to make the defendants, even if themselves in breach, liable only to

refund the advance received with interest, instead of for specific

performance, is based on the judgment of the Apex Court in Dadarao Vs.

Ramrao (1999) 8 SCC 416, but which has vide subsequent judgment in P.

D'Souza Vs. Shondrilo Naidu (2004) 6 SCC 649 been held to have been

rendered per incuriam. The Supreme Court has held that a clause in an

Agreement of Sale providing for payment of liquidated damages by the

seller in the event of being in breach does not negate the right of the

purchaser to claim the relief of specific performance. The Supreme Court in

this regard had referred to Section 23 of The Specific Relief Act, 1963

which provides that a contract otherwise specifically enforceable may be so

enforced though a sum may be named in it as the amount to be paid in case

of its breach and the party in default is willing to pay the same, if the Court,

having regard to the terms of the contract and other attending circumstances

is satisfied that the sum was named only for the purpose of securing

performance of the contract and not for the purpose of giving to the party in

default an option of paying money in lieu of specific performance.

8.8. The counsel for the defendants also, when confronted with the said

position could only urge that the provision in the subject Agreement is not

by way of damages/penalty. The counsel for the defendants has contended

that the clause aforesaid cannot be said to be to ensure specific performance

of the contract and was only for the purpose of giving to the defendants an

option of paying money in lieu of specific performance. However, the

language of Section 23 provides for giving option to the party in default, of

paying in lieu of specific performance. In the present case, the clause is not

of giving the defendants, if in default, an option but as aforesaid of making

the defendants liable to refund the advance received with interest even if the

plaintiffs be in default. Moreover, there are no express pleas in this regard

in the written statement.

8.9. I accordingly decide Issue No.(ii) in favour of the plaintiffs and

against the defendants and hold the clause aforesaid to be not in negation of

the right if otherwise found of the plaintiffs, of specific performance of the

Agreement to Sell.

9. Issue No.(i) Whether the plaintiffs have always been ready and willing to perform their part of the contract? OPP & Issue No.(iii) Whether the plaintiffs are entitled to specific performance of the Agreement dated 15.06.2010 or in the alternative to recover Rs.4.25 Crores as alleged in the plaint? OPP

9.1. The said issues are taken up together for adjudication as the

discussion and findings thereunder are intertwined.

9.2. The plaintiff No.1 Mrs. Tanu Goel appearing as PW1, in her affidavit

Ex.PW1/A by way of examination-in-chief, besides reiterating the contents

of the plaint has deposed that the plaintiffs, after the Agreement to Sell, kept

on verbally requesting the defendants No.1 & 2 to provide the „No Dues

Certificate‟ from the Bank of Baroda and the defendants No.1 & 2 kept on

requesting for some time and the plaintiffs had no option but to wait; that

the Standard Chartered Bank had vide letter dated 31 st July, 2010 Ex.PW1/2

sanctioned home loan of Rs.2,91,50,000/- for purchase aforesaid by the

plaintiffs; that the said sanction was thereafter extended from time to time

vide letter dated 11th August, 2010 Ex.PW1/3 and letter dated 29th

September, 2010 Ex.PW1/4 and insurance cover for the said loan was also

obtained from Royal Sundaram Alliance Insurance Company Ltd. vide

Ex.PW1/5; that the defendants at the time of receiving Rs.25 lakhs on 1 st

September, 2010 in the name of defendant No.3 had also assured that they

will execute Sale Deed on or before 31st October, 2010; that the defendants

on 10th November, 2010 had verbally agreed to sign an addendum extending

the date of execution of the Sale Deed but did not sign the same also; that

legal notice dated 21st January, 2011 Ex.PW1/6 was sent to the defendants

No.1 & 2 vide postal receipt Ex.PW1/7 and vide postal certificate Ex.PW1/8

and acknowledgement cards Ex.PW1/9 and Ex.PW1/10 were returned.

9.3. The affidavit Ex.PW2/A by way of examination-in-chief of the

plaintiff No.2 Sh. Sunil Goel appearing as PW2 is on the same lines save

that he has proved as Ex.PW2/2 the addendum which was prepared for

extension of time and as Ex.PW2/3 the Sale Deed executed by the

defendants No.1 & 2 of the second floor and has also deposed that the

defendants had also cleared the lien before sale of the basement, ground and

first floors also.

9.4. PW1 in her cross-examination was asked about the amount in her

bank account and was not able to disclose the same; suggestion was given to

her that she had not filed the statement of her bank as she was not possessed

of the funds for purchase of the property; she admitted having not told the

defendants of having to take loan from the bank for purchase of the

property; she could not say whether the officials of the Standard Chartered

Bank had gone to the Bank of Baroda to verify the title of the property and

denied the suggestion that the officials of the Standard Chartered Bank had

never inspected the subject property; she could not say whether Ex.PW1/2,

Ex.PW1/3 and Ex.PW1/5 were photocopies or the originals; she denied the

suggestion that Ex.PW1/2 was only an in-principal approval and that

technical and legal approval was still required; she denied that the loan

amount was never transferred and disbursed to the account of the plaintiffs

and admitted that no bank draft of Rs.3.25 crores for the balance sale

consideration was got prepared before 15th August, 2010; she denied the

suggestion of the understanding between the parties being, of the plaintiffs

making payment of balance sale consideration to Bank of Baroda directly

and getting „No Objection Certificate‟ (NOC) and thereafter getting the Sale

Deed executed in their favour; she denied the suggestion that the defendants

after 15th September, 2010 had offered to refund the entire amount with

interest; upon being asked to produce the statement of her bank account in

which the loan amount from Standard Chartered Bank had been disbursed,

she produced Ex.PW1/D1.

9.5. PW2 in his cross-examination deposed having disclosed to the

Standard Chartered Bank that the property was mortgaged; of the officials

of the Standard Chartered Bank visiting and inspecting the property though

having not verified the original title deeds; admitted Ex.PW1/2 being in-

principal sanction subject to legal and technical clearance but deposed that

the same were Bank‟s internal process and the plaintiffs got the

disbursement of the loan amount in the home loan account on 10 th August,

2010; he further deposed that since the date of the execution of the Sale

Deed was extended, the amount so credited was debited from the account;

he denied any understanding of the plaintiffs paying the balance sale

consideration to Bank of Baroda directly; he denied that after August, 2010

the market value of the property had come down and the plaintiffs had lost

interest in purchasing the same.

9.6. The plaintiffs have examined their Financial Consultant Sh. Upendra

Tiwari as PW3 and who has in his affidavit Ex.PW3/A by way of

examination-in-chief proved, the e-mails by which the Addendum dated 10th

November, 2010 for extension of time was forwarded to the defendant No.1

as Ex.PW3/1 and Ex.PW3/2; another e-mail requesting the defendant No.1

to provide his bank account details for the purpose of execution of the Sale

Deed as PW3/3 and e-mail sent on 4th January, 2011 asking the defendants

to accept the balance sale consideration as Ex.PW3/4 and PW3/5. In his

cross-examination, he deposed that the e-mail address of the defendant No.1

was provided by the plaintiffs and denied the suggestion that the said e-

mails were never received by the defendant No.1. Significantly, no

suggestion was given to him that the address at which the e-mails were sent

was not of the defendant No.1.

9.7. The plaintiffs have also examined Sh. Prabhas Kumar, Operation

Officer with Standard Chartered Bank as PW4 who has proved his authority

letter from the Bank as PW4/A and the Bank‟s office copies of Ex.PW1/2 to

Ex.PW1/4 as Ex.PW4/1 to Ex.PW4/3 as well as the statements of account

dated 8th October, 2010, 25th October, 2010 and 25th November, 2010 in the

names of the plaintiffs as Ex.PW4/4, Ex.PW4/5 and Ex.PW4/6 respectively;

he has further deposed that the statement of a Home Saver Account is

generated after disbursal of loan to the customer and the home loan amount

was disbursed to the plaintiffs. In his cross-examination he denied any

personal knowledge with respect to the home loan application of the

plaintiffs or sanction and approval thereof and also could not tell whether

the plaintiffs had disclosed in their loan application that the property

intended to be purchased was mortgaged. He also could not answer any

other queries regarding loan but denied the suggestion that the loan amount

was never credited or disbursed to the plaintiffs.

9.8. The defendant No.1 appearing as DW1, in his affidavit Ex.DW1/A by

way of examination-in-chief besides reiterating the contents of the written

statement has deposed, (i) that as on 31st May, 2010 a sum of Rs.8 crores

was due to the Bank of Baroda and the defendants were not possessed with

sufficient means to pay the same and for this reason only had decided to sell

the portions of the property falling to their share under the collaboration

agreement for development thereof; that the urgent need of the defendants

for the funds was disclosed to the plaintiffs; (ii) that for this reason only

time was made the essence of the contract; (iii) of having told the plaintiffs

that if the defendants were not able to pay the entire amount of the Bank of

Baroda, they would refund the advance amount received from the plaintiffs

with interest @ 12.5% per annum and it was for this reason only that the

written contract was kept silent about the rights of the plaintiffs to specific

performance; (iv) that the plaintiffs had not disclosed that they were

required to take loan for the purchase of the property; (v) that the sale

consideration was fixed on a lower side as compared to the prevalent market

price for the reason of the plaintiffs representing ready, availability of funds

with them; (vi) of the plaintiffs having remained silent after completing

payment of Rs.75 lakhs on 9th July, 2010; (vii) of the plaintiffs having

offered a further sum of Rs.25 lakhs only around 31 st August, 2010; (viii) of

the said amount having been received in the name of the defendant No.3 for

the reason of the same being not refundable under the terms of the

Agreement and the balance payment being paid by 15th September, 2010;

(ix) of the plaintiffs having again defaulted and having started avoiding the

defendants; (x) of the plaintiffs being never ready with the funds; (xi) of the

e-mails Ex.PW3/1 and Ex.PW3/2 having been not noticed by the defendants

as the sender thereof was not known to the defendants; (xii) of the said e-

mails having either never reached the inbox of the defendants or having

been ignored or deleted by the defendants as spam; (xiii) of the defendants

being not regularly using their e-mail address; (xiv) of the legal notice

having not been received by the defendants; (xv) of the defendants having

incurred interest levied by Bank of Baroda owing to the default by the

plaintiffs.

9.9. DW1 in his cross-examination, (a) admitted that he is engaged in the

business of property development and construction and of selling residential

flats after development thereof; (b) that the entire loan taken on security of

the property No.9, Sukhdev Vihar, New Delhi had not been repaid till then;

did not remember whether the entire portion of the property falling to his

share under the collaboration agreement was unsold on the date of entering

into the Agreement with the plaintiffs; (e) admitted that the ground floor of

the property was sold by him by Sale Deed dated 28 th June, 2010

Ex.DW1/P1; (f) admitted that he did not apply for any permission from

Bank of Baroda for selling of the property agreed to be sold to the plaintiffs;

(g) admitted that he had not written to the plaintiffs that he was not able to

so apply owing to the plaintiffs having not made the full payment; (h) could

not explain the inconsistency in para 7 of the written statement that

permission had been refused and in his deposition of permission having not

been applied for; (i) admitted that at the time of sale of the ground and

second floors permission of the Bank of Baroda had been obtained; (j)

admitted that no notice demanding the balance sale consideration was sent

to the plaintiffs; (k) admitted that no notice of termination of Agreement

owing to the failure of the plaintiffs to make the balance sale consideration

had been sent; (l) could not tell the dates when offer for refund of money

with interest was made and admitted that no written letter in this regard was

sent; (m) could not tell that as to how much amount had been offered; (n)

admitted receipt of legal notice dated 21st January, 2011 and stated that after

receipt thereof again a refund with interest was offered.

9.10. The senior counsel for the plaintiffs has argued, that sale of

mortgaged property is not barred; that there is no plea in the written

statement of time of payment being of essence; that the date fixed of 15 th

August, 2010 in the Agreement to Sell lost relevance upon payment on 1 st

September, 2010 of Rs.25 lakhs; that the readiness and willingness of the

plaintiffs is established from the e-mails of November, 2010, legal notice of

31st January, 2011 and the filing of the suit in March, 2011; that a plaintiff

in a suit for specific performance is not required to have actual money in his

pocket and is only required to prove ability to pay the same and which in the

present case is proved by deposit of Rs.34 lakhs in this Court and by the

sanction of a home loan for Rs.2.91 crores; that the loan was sanctioned by

the Standard Chartered Bank on the basis of Agreement to Sell which

mentions the factum of the property being mortgaged with the Bank of

Baroda; that the defendants have not led any evidence of refusal of Bank of

Baroda to issue NOC for sale; that home loan is always disbursed by issuing

a cheque for the loan amount directly in the name of the seller and taking

custody of the Sale Deed executed in favour of the loanee; that home loans

are a norm today and specific performance cannot be denied for the reason

of the purchaser intending to pay through the medium of a home loan.

Reliance is placed on Raj Kumar Sharma Vs. Pushpa Jaggi 128 (2006)

DLT 96, S.K. Gupta Vs. Avtar Singh Bedi 122 (2005) DLT 437, Sukhbir

Singh Vs. Brij Pal Singh AIR 1996 SC 2510, Vishwa Nath Sharma Vs.

Shyam Shanker Goela 2007 (3) SCALE 569, Aniglase Yohannan Vs.

Ramlatha (2005) 7 SCC 534 and Nirmala Anand Vs. Advent Corporation

(P) Ltd. (2002) 5 SCC 481.

9.11. Per contra, the counsel for the defendants has argued that the

plaintiffs were insisting upon release from mortgage of the entire property

instead of only the portion thereof agreed to be sold to the plaintiffs and

which stand of the plaintiffs was in contravention of the Agreement to Sell

(it may however be mentioned that neither there is plea to the said effect in

the written statement nor any evidence led to the said effect and the said

argument thus has to be ignored); that the plaintiffs have not been able to

prove their readiness and willingness; that the letter dated 31 st July, 2010

Ex.PW1/2 of the Standard Chartered Bank is only of in-principal approval

and not of sanction of the loan; that the letter of sanction of the loan

Ex.PW1/3 dated 11th August, 2010 has not been proved as no record with

respect thereto was requisitioned from the Standard Chartered Bank; that the

letter dated 29th September, 2010 Ex.PW1/4 is again of in-principal

approval and shows that the processing fees was still outstanding which

means that the loan had not been sanctioned; that the insurance cover

Ex.PW1/5 is of the month of October, 2010 i.e. of after the stipulated date

for completion of sale; that the plaintiffs have not proved offer of balance

sale consideration; that the mortgaged property could not have been

mortgaged again; that the witness from Standard Chartered Bank had no

personal knowledge; that in any case, the loan was not for the entire balance

sale consideration and the plaintiffs have not led any evidence of availability

of the balance Rs.3.25 crores with them; that there is no evidence of the loan

being still alive; that no car parking space or servant quarter with common

toilet can now be conveyed since the portions of the building stand occupied

(it may again be said that there is no such plea or evidence and the said

argument also thus has to be ignored).

9.12. The senior counsel for the plaintiffs in rejoinder has contended that

there can be no presumption of inability of the plaintiffs to pay or of the

plaintiffs being not able to revive the home loan.

9.13. The first question to be adjudicated is of the availability of funds with

the plaintiffs for payment of balance sale consideration.

9.14. Though undoubtedly the Agreement to Sell does not record any

representation of the plaintiffs as purchasers to the defendants No.1&2 as

sellers that the plaintiffs would be paying the balance sale consideration by

availing finance from the Bank but the same to my mind is irrelevant. In

today‟s dates and time, when availing of such financial facilities is not

uncommon and when such finance is taken, not necessarily owing to lack of

funds with borrowers but as financial/tax planning, merely because the

plaintiff/purchaser in a suit for specific performance does not show

availability of liquid funds with him, though shows availability of financial

facility, cannot be a ground for denial of the relief of specific performance.

I am not able to fathom any principle where a purchaser is required to

inform the seller at the time of entering into the Agreement to Sell that the

balance sale consideration will be paid after availing such financial facility.

The seller ought not to be concerned with the source from which balance

sale consideration is arranged by the purchaser.

9.15. Under the Agreement to Sell, the balance sale consideration was

payable on or before 15th August, 2010. The plaintiffs have proved that they

had made an application for a home loan to the Standard Chartered Bank;

that the Standard Chartered Bank vide their letter dated 31 st July, 2010 to the

plaintiffs had given in-principle sanction for a loan of Rs.2,91,50,000/- to

the plaintiffs, being 90% of the purchase price of the subject property and

the said sanction was valid for a period of 30 days from the issuance thereof.

Though the said sanction as per its face is "in-principle" and provides that

disbursal of the loan thereunder was subject to all internal checks being

positive and the property purchased therewith being offered as collateral and

on the various terms and conditions contained therein and the counsel for

the defendants laid much emphasis on Clauses 2, 3 &4 thereof, to contend

that the same did not indicate readiness and willingness of the Bank to lend

the sum of Rs.2,91,50,000/- to the plaintiffs but the subsequent letter dated

11th August, 2010 of the Bank proved as Ex.PW1/3 opening the loan

account in the name of the plaintiffs is indicative of the Standard Chartered

Bank, after 31st July, 2010, being satisfied, of the plaintiffs and the property

being purchased by the plaintiffs being compliant of all the conditions

contained in the letter dated 31st July, 2010. The argument of the counsel

for the defendants, of the letter dated 31st July, 2010 being not proof of the

sum of Rs.2,91,50,000/- being available for payment towards sale

consideration to the defendants No.1&2, cannot be accepted.

9.16. Though the plaintiffs have also proved the subsequent letter dated 29th

September, 2010 of the Standard Chartered Bank to the plaintiffs and which

is on identical terms as the letter dated 31st July, 2010 but therefrom I am

unable to hold that there was no sanction or availability of loan before 15th

August, 2010. It cannot be lost sight of that though the parties had agreed

for the Sale Deed to be executed by 15th August, 2010 but the Sale Deed

was not so executed. However, the demand by the defendants and receipt

by the defendants of further sale consideration in the last week of August,

2010 i.e. after 15th August, 2010 shows that the Agreement to Sell had not

lapsed on 15th August, 2010 and was rather kept alive by the parties. The

plaintiffs, could not have availed of the loan so arranged from Standard

Chartered Bank, without the Sale Deed being executed. Rather, the letter

dated 29th September, 2010 of the Bank shows that the Bank, inspite of loan

having earlier sanctioned having not been availed, was willing to even then

lend Rs.2,91,50,000/- for payment of the balance sale consideration under

the subject Agreement to Sell. I thus conclude that the plaintiffs had

available to them, out of the balance sale consideration payable of Rs.3.25

crores, the sum of Rs.2,91,50,000/-.

9.17. However, that still leaves open the question of availability of the

balance sale consideration of Rs.33,50,000/- with the plaintiffs. Though

undoubtedly the plaintiffs have not proved that the said amount of

Rs.33,50,000/- was lying in their account but considering the proportion

which the said amount bears to the entire sale consideration and taking

judicial notice of the fact that the Banks do not sanction such house loans

without satisfying themselves that the borrower is in a position to pay the

10% of the sale consideration from the borrower‟s own resources, I am of

the view that the plaintiffs have proved availability of the said balance

amount of Rs.33,50,000/- also with them.

9.18. My this view is reinforced from the fact that the plaintiffs, even

otherwise as herein below discussed, have proved that they continued to

approach the defendants for completion of the transaction and it was the

defendants who maintained a sphinx like attitude in the matter. Only if the

defendants had in response to the said efforts of the plaintiffs, asked the

plaintiffs to complete the transaction and the plaintiffs had failed to do so,

could it have been said that the plaintiffs were not ready and willing. The

said amount of Rs.33,50,000/- is not only a mere 7.88% of the total sale

consideration but is also approximately only 1/3 rd of the advance paid by the

plaintiffs to the defendants and it defies logic that a purchaser of immovable

property would not have available to him such a small percentage of the

total sale consideration price.

9.19. The judgments cited by the senior counsel for the plaintiffs, of the

purchaser/plaintiff in a suit for specific performance of an Agreement of

Sale of immovable property being not required to show ready availability of

balance sale consideration with him, are apposite in this regard. Mention

can also be made of the fact that the plaintiffs were vide interim order

aforesaid directed to deposit Rs.34 lakhs in this Court for the reason only of

the contention of the defendants of the plaintiffs, though having loan of

Rs.2,91,50,000/-, not being capable of payment of the balance sale

consideration and the plaintiffs immediately complied with the said

condition and the said amount has been lying deposited in this Court since.

9.20. I thus conclude that the plaintiffs have proved availability of the

balance sale consideration on the stipulated dated for payment thereof with

them.

9.21. However, mere availability of the balance sale consideration does not

complete the element of readiness and willingness and is only one part

thereof. The other part of the said ingredient is of the communication by the

purchaser to the seller of readiness to pay the said balance sale consideration

on the stipulated date.

9.22. In my opinion, the plaintiffs have passed the said test as well.

9.23. The plaintiffs, admittedly out of the balance sale consideration of

Rs.3.50 crores which was payable at the time of registration of the Sale

Deed only, complied with the demand of the defendants and paid a sum of

Rs.25 lakhs out thereof to the defendants. The same is indicative of the

anxiety of the plaintiffs to complete the transaction. Had the plaintiffs not

been so anxious, they could have very well taken a stand that the entire

balance sale consideration of Rs.3.50 crores will be paid only against the

registration of the Sale Deed. Not only so, the plaintiffs have also proved

having informed the defendants vide emails dated 15th November, 2010, 24th

November, 2010, 4th January, 2011 and 10th January, 2011 of their

Chartered Accountant, of the readiness and willingness with the balance sale

consideration and having called upon the defendants to execute the Sale

Deed and sought details of the bank accounts of the defendants for

preparation by the plaintiffs of the demand drafts in favour of the said bank

accounts towards balance sale consideration. In fact, the said emails also

record that it is the defendants who had been postponing the date of

execution of the Sale Deed by 15 days each time. The defendants have not

denied the address at which the said emails are proved to have been

delivered being not theirs. Rather, the defendants in their evidence have

admitted the receipt of the said emails. The explanation of the defendants

for not responding thereto, that the same were not noticed or were discarded

as spam being not by the plaintiffs, is unbelievable. The said emails are

abundantly clear, of being on behalf of the plaintiffs and being with respect

to the transaction of sale admittedly entered into by the defendants. The

said explanation is unbelievable. Once, it is held that the defendants were in

receipt of such communications from the plaintiffs calling upon the

defendants to complete the transaction and informing the defendants of the

readiness and willingness of the plaintiffs to pay the balance sale

consideration and recording grievance of the delay being on the part of the

defendants, were received by the defendants, the only conclusion of non-

reply thereof by the defendants, is that the defendants had nothing to show

in response thereto and the plaintiffs‟ version was correct.

9.24. The same is the position of the legal notice dated 21 st January, 2011

got served by the plaintiffs on the defendants and the service whereof also

stands proved and admitted. No reply was sent thereto also. The defendants

continued to maintain a sphinx like silence.

9.25. The Supreme Court in Rakesh Kumar Vs. Hindustan Everest Tool

Ltd. (1988) 2 SCC 165 and in Hiralal Kapur Vs. Prabhu Choudhry (1988)

2 SCC 172 has held that non-reply to such a material assertion is to be

treated as acceptance thereof.

9.26. This suit was filed soon thereafter i.e. on 18th March, 2011.

9.27. I therefore conclude that the plaintiffs have been successful in

discharging the onus of Issue No.(i), of having always been ready and

willing to perform their part of the contract. The plaintiffs, after the

institution of the suit also are found to have been ready and willing. Issue

No.(i) is accordingly decided in favour of the plaintiffs and against the

defendants.

9.28. As far as Issue No.(iii) is concerned, once it is held that the

Agreement to Sell of which specific performance is claimed in this suit, was

not contingent as argued by the counsel for the defendants and that the

plaintiffs have been ready and willing to perform their part of the

Agreement to Sell and the Agreement to Sell by its very nature is

specifically enforceable, the ordinary rule is that an Agreement of Sale of

immovable property is specifically enforceable and damages in lieu thereof

are an exception. Reference in this regard can be made to Prakash

Chandra Vs. Angadlal (1979) 4 SCC 393. Though the relief of specific

performance is a discretionary relief but the defendants have neither pleaded

nor argued as to why the said discretion be not exercised in favour of the

plaintiffs and inspite of the plaintiffs being ready and willing, they should be

denied the relief of specific performance and be given the relief instead of

damages.

9.29. Though it is the admitted position that the property agreed to be sold

was mortgaged and though the Agreement is of Sale free of mortgage and

though the defendants have contended that the mortgagee Bank has refused

to so discharge the mortgage but the defendants have totally failed to prove

the same. The defendants have not proved any attempts made by them for

having the mortgage so discharged and the mortgagee Bank having refused

the same. On the contrary, it stands admitted that the mortgagee Bank has

been floor-wise discharging the mortgage. There is no reason as to why the

mortgagee Bank would not have so discharged the mortgage of the subject

floor also. There is also merit in the contention that the mortgage is not an

impediment to sell. At best the sale remains subject to the mortgage.

9.30. The question however still arises, as to whether this Court should

order specific performance when the property remains mortgaged and the

Agreement was for conveyance free from mortgage. In my opinion, a seller

of mortgaged property cannot be permitted to wriggle out from an otherwise

binding Agreement to Sell by refusing to take steps for making the property

free from mortgage. The plaintiffs/purchasers, if the property on the date

when specific performance ordered is still mortgaged, would have a choice

to either have the mortgage discharged by paying balance sale consideration

to mortgagee Bank, including by payment of additional amount, if any

claimed by the mortgagee Bank and have the Sale Deed executed and to

take proceedings for recovery of the additional amount paid from the

defendants.

9.31. Thus, Issue No.(iii) is answered by ordering that the plaintiffs are

entitled to specific performance of the Agreement to Sell dated 15 th June,

2010.

10. Resultantly, the suit of the plaintiffs is allowed by passing a decree in

favour of the plaintiffs and against the defendants No.1&2 of specific

performance of the Agreement dated 15th June, 2010, by directing:

(i) The defendants No.1&2 to within three months hereof, after

having the third floor along with terrace of property No.9, Sukhdev

Vihar, New Delhi constructed over land admeasuring 450 sq. yds,

freed from mortgage, execute a Sale Deed thereof in favour of the

plaintiffs on the terms and conditions contained in the Agreement to

Sell dated 15th June, 2010 against receipt of balance sale

consideration of Rs.3.25 crores from the plaintiffs; the amount of

Rs.34 lakhs deposited in this Court shall then form part of the sale

consideration and be paid to the defendants No.1&2; if the defendants

No.1&2 so voluntarily execute the Sale Deed, the interest accrued

there on shall also be released to the defendants No.1&2 besides the

sale consideration;

(ii) If the defendants No.1&2 do not get the property freed from

mortgage within the said three months and do not so execute the Sale

Deed, the plaintiffs shall be entitled to negotiate with the mortgagee

Bank for settling the dues of the said Bank; the mortgagee Bank i.e.

Bank of Baroda is directed in this context to so deal with the plaintiffs

insofar as the mortgage of the third floor and terrace is concerned;

and to after having the property freed from mortgage, have the

Conveyance Deed of the said property executed in their favour

through the process of the Court; in such eventuality, if the amount

paid by the plaintiffs to the mortgagee Bank is more than the balance

sale consideration, the plaintiffs shall be free to institute proceedings

for recovery of the excess amount so paid from the defendants and in

such an eventually, the plaintiffs shall also be entitled to withdraw the

amount of Rs.34 lakhs deposited in this Court together with interest

accrued thereon;

(iii) In the event of the defendants No.1&2 complying with the

decree in terms of one above, no costs; else, the defendants shall also

be liable for costs.