Delhi High Court
Satish Verma vs Garment Craft (India) Pvt. Ltd. on 11 December, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 11th December, 2017.
+ CS(OS) 401/2010
SATISH VERMA ..... Plaintiff
Through: Ms. Sonia Malhotra & Mr.
Shubendu Kaushik, Advs.
Versus
GARMENT CRAFT (INDIA) PVT. LTD. ..... Defendant
Through: Mr. Sudesh Ranjan Singh, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The plaintiff instituted this suit, for a) specific performance of the
Agreement of Sale of July, 2008 of property No. 259, Okhla Industrial
Estate, Phase-III, New Delhi; b) in the alternative, i) for recovery of
damages in the sum of Rs.3 crores for breach of contract; ii) for refund of
Rs.2 crores paid by the plaintiff to the defendant as advance/part sale
consideration out of the total agreed price of Rs.11,31,00,000/- together
with interest; and, c) for permanent injunction restraining the defendant
from alienating, encumbering or parting with possession of the said
property.
2. The suit was entertained and vide ex-parte ad-interim order dated
8th March, 2010, the defendant restrained from dealing with the property.
The said order was made absolute on 19th November, 2010.
3. The defendant contested the suit by filing a written statement and
on 13th August, 2014, the following issues were framed in the suit:
CS(OS) 401/2010 Page 1 of 16
"1. Whether the plaintiff is entitled for a decree of specific
performance of the Agreement to Sell dated July,
2008? OPP
2. Whether the plaintiff was ready and willing to
perform his part of the obligations in terms of the
Agreement to Sell dated July, 2008? OPP
3. Whether the plaintiff has committed any default in
performing his part of the obligation in terms of the
Agreement to Sell dated July, 2008? OPD
4. Whether the plaintiff is entitled for a decree of
permanent injunction restraining the defendant from
in any way transferring, selling, mortgaging,
alienating or creating third party interest or parting
with possession of the suit property No.259, Okhla
Industrial Estate, Phase-III, New Delhi-110020, built
on 606 Sq. Yards? OPP
5. Relief."
and the suit set down for trial.
4. The suit, on 22nd April, 2016 was dismissed under Order XVII Rule
3 of the Code of Civil Procedure, 1908 (CPC), for the failure of the
plaintiff to file any affidavit by way of evidence or to lead any evidence.
5. The plaintiff filed IA No.11234/2016 for recall of the order dated
22nd April, 2016 along with IA No.11235/2016 for condonation of 102
days delay in applying therefor. The said applications came up first
before this Court on 14th September, 2016 and were thereafter adjourned
from time to time.
6. Hearing of the aforesaid applications was commenced on 23 rd
November, 2017, and
(A) the following order was passed on 23rd November, 2017:
CS(OS) 401/2010 Page 2 of 16
"1. This Suit, inter alia, for specific performance of
an agreement of sale of immovable property, was on
22nd April, 2016 dismissed for non-prosecution owing
to the plaintiff, till then, inspite of issues having been
framed on 13th August, 2014 and inspite of repeated
opportunities, having not taken any steps to lead
evidence.
2. These applications for recall of order dated
nd
22 April, 2016 and for condonation of delay in
applying thereof also came up first before the Court
thereafter only on 14th September, 2016, i.e. after five
months, again showing that the plaintiff inspite of the
Suit having been dismissed for non-prosecution, did
not show any urgency. Since then, these applications
are pending adjudication.
3. The counsel for the plaintiff, during the
hearing, has contended that the plaintiff has paid a
sum of Rs.2 Crores to the defendant for purchase of
the property and has cited primarily the said reason
for restoration of the Suit and also explaining the
delay on the part of the plaintiff.
4. I have enquired from the counsel for the
plaintiff, whether the plaintiff is willing to give up the
relief of specific performance of agreement to sell and
confine the relief in the Suit to recovery of amounts
paid. Similar query has been made from the counsel
for the defendant.
5. The plaintiff as well as the Managing Director
of the defendant to remain personally present in the
Court on the next date of hearing.
6. List on 29th November, 2017.";
(B) the following order was passed on 29th November, 2017:
"1. This order is in continuation of the earlier
order dated 23rd November, 2017.
CS(OS) 401/2010 Page 3 of 16
2. Mr.Sudesh Ranjan Singh, Advocate who had on
rd
23 November, 2017 appeared as the main counsel,
today states that he is not the main counsel and Mr.
Ashish D.Verma is the main counsel and seeks
adjournment.
3. The Managing Director of the defendant is also
not present.
4. Last opportunity is granted to the defendant to
appear tomorrow failing which appropriate order
shall follow.
5. The plaintiff stated to be present today to
remain present tomorrow also.
6. List on 30th November, 2017.";
(C) the following order was passed on 30th November,
2017:
"1. This order is in continuation of the orders dated
23rd November, 2017 as well as 29th November, 2017.
Today, Mr. Ashish Deep Verma, Advocate for the
defendant appears but the position remains the same
as before.
2. Though Mr. Ashish Deep Verma, Advocate on
enquiry states that no part of the amount of Rs.2
crores admittedly received is shown as earnest money
but is unable to show as to in exercise of what right
the defendant has forfeited the said amount of Rs.2
crores. Mr. Ashish Deep Verma, Advocate contends
that it is the plaintiff who is in breach of the
agreement and the defendant has suffered loss owing
to the said breach. However on enquiry, whether the
defendant has sued for damages or compensation for
such breach, the answer is in the negative.
3. Though Mr. Ashish Deep Verma contends that
the defendant can still sue for such damages but on
asking as to when the cause of action arose, states
that the cause of action arose in the year 2008 and is
CS(OS) 401/2010 Page 4 of 16
unable to tell as to how the claim for damages today,
would be within limitation.
4. Today, again adjournment is sought.
5. So as to ensure that Mr. Ashish Deep Verma,
Advocate on the next date of hearing does not seek
adjournment to study anything else, his attention is
drawn to the dicta of the Supreme Court in Kailash
Nath Associates Vs. Delhi Development Authority
(2015) 4 SCC 136 as well as of this Court in Palm Art
Apparels Pvt. Ltd. Vs. Enkay Builders Pvt. Ltd.
MANU/DE/3533/2017 as per which even qua earnest
money, in the absence of proof of actual loss or
damage, a decree of recovery thereof has to be
passed.
6. Subject to the defendant paying costs of
Rs.20,000/-, list on 6th December, 2017.";
and, (D) the following order was passed on 6th December, 2017:
"1. The defendant has not paid the costs till now.
2. Without the same, the defendant cannot be
heard. Another opportunity is given to the defendant
to pay the costs, failing which appropriate orders
shall follow.
3. List on 11th December, 2017."
7. The counsel for the defendant has today paid the costs to the
counsel for the plaintiff and the counsel for the defendant has been heard
further.
8. The counsel for the defendant has at the outset drawn attention to
para 44 of Kailash Nath Associates supra and has contended that the
Supreme Court therein had found the plaintiff therein to be not in breach
and for this reason had directed refund of the earnest money paid by the
plaintiff.
CS(OS) 401/2010 Page 5 of 16
9. Undoubtedly so, but at the same time, it was held that compensation
can only be given for damage or loss suffered and if damage or loss is not
suffered, the law does not provide for a windfall. The said paragraph thus,
rather than helping the defendant, is against the defendant.
10. The defendant in the present case, though has admittedly received
advance sale consideration of Rs.2 crores but has not made any claim for
the loss or damage suffered and the counsel for the defendant has already
agreed that the limitation for claiming damages/compensation has expired.
The present is thus a case of no loss/damage having been suffered by the
defendant.
11. The counsel for the defendant has then referred to the judgment of a
Single Judge of this Court in Airports Authority of India Vs. R.K.
Singhal (2011) 185 DLT 648 and has read out para 6 thereof.
12. On a reading of the same, I do not find the same to be holding any
different from what has been held by the Supreme Court in Kailash Nath
Associates supra.
13. The counsel for the defendant has then referred to the order dated
22nd April, 2016 whereby this suit was dismissed and for restoration of
which IAs No.11234-11235/2016 have been filed and to Mohan Madan
Vs. Sheel Gulati (2015) 223 DLT 57, in para 18 whereof certain
observations have been made as to speculative litigation.
14. I have already enquired from the counsel for the plaintiff, whether
the plaintiff is willing to give up the relief of specific performance.
CS(OS) 401/2010 Page 6 of 16
15. Upon the same query being made from the counsel for the plaintiff
today, she, under instructions from the plaintiff, stated to be present in
Court, states that the plaintiff confines the relief in this suit to recovery of
Rs.2 crores paid and for recovery of damages and gives up the relief of
specific performance.
16. Finding it to be highly inequitable that the suit of the plaintiff for
the relief, even of recovery of Rs.2 crores paid as advance sale
consideration for a transaction which has not fructified, be also dismissed
for non-prosecution, though ought to have been allowed in the absence of
any claim for damages, binding the plaintiff to the statement made today
that the plaintiff gives up the relief of specific performance, for the
reasons pleaded, the delay in applying for restoration of the suit is
condoned and the suit is restored to its original position.
17. IAs No.11234-11235/2016 are disposed of.
18. The suit thus survives for the relief of recovery of Rs.2 crores
admittedly paid by the plaintiff to the defendant under the Agreement and
for recovery of damages for breach of contract.
19. As far as the relief claimed of refund of Rs.2 crores paid is
concerned, the relevant clauses of the Agreement to Sell-cum-Receipt of
July, 2008 and in which the defendant is described as 'First Party/Seller'
and the plaintiff as 'Second Party/Purchaser', are as under:
"The First Party/seller has agreed to sell its entire
Property No.259, Okhla Industrial Estate, Ph-III, New
Delhi-110020, with physical vacant possession, free from all
encumbrances, after clearing all the dues, demands, taxes (if
any) and the second party/purchaser has agreed to purchase
CS(OS) 401/2010 Page 7 of 16
as referred above the Property No.259, Okhla Industrial
Estate, Ph-III, New Delhi-110020, for a total sale
consideration Rs.11,31,00,000/- (Rupees Eleven Crore and
Thirty One Lacs Only).
.......
The seller and the purchaser are aware of it that at
present that the Property No.259, Okhla Industrial Estate,
Ph-III, New Delhi-110020, is being occupied by the tenants
and to get the Property vacated from the existing tenants, its
maximum expenses upto the extend upto Rs.50,00,000/-
(Rupees Fifty Lacs only) shall be paid extra by the
purchaser.
And if the said amount exceed/increased
Rs.50,00,000/- (Rupees Fifty Lacs only) then the entire
difference shall be paid by the Owner/Seller.
NOW THIS AGREEMENT WITNESSES AS
FOLLOWS:-
1. The seller has already received from the
Purchaser a sum of Rs.50,00,000/- (Rupees
Fifty Lacs only) out of which Rs.10,00,000/-
(Rupees Ten Lacs only) receive in cash &
Rs.40,00,000/- (Rupees Forty Lacs only) by Ch.
No.490794 dated 20.07.2008, drawn on State
Bank of India, Okhla Industrial Estate, New
Delhi-110020.
2. At the time of executing of this agreement to
sell the seller hereby admit to have received
from the purchaser another sum of
Rs.1,50,00,000/- (Rupees One Crore and Fifty
Lacs only) out of which Rs.90,00,000/- (Rupees
Ninety Lacs only) receive in cash &
Rs.60,00,000/- (Rupees Sixty Lacs only) by Ch.
Nos.490798 & 490800, dated 25.07.08, drawn
on State Bank of India, Okhla Industrial Estate,
New Delhi-110020.
3. The Balance payment Consideration schedule
has been agreed & settled between the Seller
and the Purchaser as follows:-
i. If the owner shall be able to handover
the 50% of the vacant possession of
entire Property No.259, Okhla Industrial
Estate, New Delhi-20, on or before 31st
January, 2009, then the purchaser shall
pay 50% of the total sale consideration.
ii. If the seller shall be able to handover the
entire property (except One tenant in
possession) on or before 31st March,
2009, then the purchaser shall pay the
entire balance consideration of the said
Property.
As and when the seller shall receive the entire
balance consideration the seller shall sign
execute/registered the required documents in
the office of Sub-Registrar, Agreement to sell,
GPA and other required documents as required
by the purchaser."
20. The defendant also executed Receipt-cum-MOU dated 20th July,
2008 as under:
"RECEIPT-CUM-MOU
M/s Garment Craft (India) Pvt. Ltd. owner of
Property No.259, Okhla Industrial Estate, New Delhi-20,
built on about 606 sq.yds., as per registered conveyance
deed dated 27th May, 2008, hereby admit to have receive
from the purchaser Mr. Satish Verma son of Shri K.L.
Verma, resident Farm No.11, South Drive, DLF
Chhattarpur, New Delhi, a sum of Rs.1,50,00,000/- (Rupees
One fifty Lacs only) out of which Rs.90,00,000/- (Rupees
Ninety Lacs only) received in cash & Rs.40,00,000/- (Rupees
Sixty Lacs only) by Ch. No.490798 and 490800 dated
25/07/08 drawn on State Bank of India, Okhla Ph. III, New
Delhi-110020 on account of Part sale consideration,
regarding sale of entire Property No.259, Okhla Industrial
Estate, New Delhi-110020, with actual physical vacant
possession and free from all encumbrances.
Uptill now the seller (M/s Garment Craft (India) Pvt.
Ltd.) hereby admit to have receive from the purchaser (Mr.
Satish Verma) total sum of Rs.2,00,00,000/- (Rupees two
crores only), at the time of receiving the above said
consideration the seller has handed over the actual physical
vacant possession of ground floor portion of Property
No.259, Okhla Industrial Estate, New Delhi-110020 to the
purchaser.
Dated: July, 2008."
21. The aforesaid documents are not in dispute.
22. It is the plea of the plaintiff in the plaint (i) that the plaintiff, vide
his letter dated 18th February, 2009, called upon the defendant to complete
its part of the agreement; (ii) that the defendant vide its letter dated 6 th
March, 2009 called for a meeting on 8th March, 2009; (iii) letters dated
23rd March, 2009, 24th March, 2009 and 27th March, 2009 were sent by the
plaintiff to the defendant and a reply dated 28 th March, 2009 was received
from the defendant; (iv) that the balance sale consideration of Rs.9.31
crores was payable by the plaintiff to the defendant at the time of
registration of Sale Deed and handing over actual, vacant, physical
possession of the remaining suit property by the defendant to the plaintiff;
(v) that the defendant refused to perform the sale transaction after
receiving Rs.2 crores from the plaintiff, inspite of plaintiff being ready
and willing to pay the balance sale consideration and to fulfil his part of
the Agreement to Sell.
23. The defendant contested the suit by filing a written statement
pleading (a) that the defendant was desirous of selling the property to
meet the expenses of the medical treatment of one of the Directors of the
defendant; (b) that the plaintiff initially paid Rs.50 lacs on 20 th July, 2008
and thereafter on 25th July, 2008, paid Rs.1.5 crores; (c) that though in the
Agreement, it was mentioned that the possession of the ground floor was
handed over but it was in fact not so handed over; (d) that the time frame
for payment of the balance sale consideration was mandatory; (e) that the
Director of the defendant who was ailing, expired on 4th October, 2008
and the defendant managed to get the premises vacated from all tenants
except M/s OSR Shipping and being in urgent need of money, vide letter
dated 17th February, 2009, called upon the plaintiff to take possession of
the property except the portion in possession of said M/s OSR Shipping
and after making payment of the entire balance sale consideration; and, (f)
that the plaintiff being in breach cannot take advantage of his own
defaults.
24. The counsels for both parties are ad-idem that the plaintiff was
never in possession of any part of the property and the defendant remains
in possession thereof.
25. Neither the sum of Rs.50 lakhs nor the sum of Rs.1,50,00,000/-
admittedly paid by the plaintiff to the defendant were agreed by the
parties, neither in the Agreement to Sell-cum-Receipt nor in the Receipt-
cum-MOU, to be treated as earnest and in the Receipt-cum-MOU are
expressly described as 'part sale consideration'.
26. Though I have in the hearings aforesaid, heard the counsels at
length on the aspect of right of the plaintiff to damages and the right of the
defendant to forfeit the amount of Rs.2 crores but since the hearing till
now was under the head of the applications for restoration, I have today
again expressly asked the counsels, whether they want to address any
further arguments on the aforesaid aspects today or on any other day.
27. Both counsels fairly state that whatever they had to argue on the
said aspect has already been argued.
28. Supreme Court, in Kailash Nath Associates supra set aside the
judgment of the Division Bench of this Court allowing the appeal (by
relying on Section 74 of the Contract Act) against the judgment of the
Single Judge of this Court ordering refund of earnest money on the
ground that the seller had not suffered any loss. It was held that
compensation can only be given for damage or loss suffered and if
damage or loss is not suffered, law does not provide for a windfall. It was
laid down that (i) terms of the contract are required to be taken into
consideration before arriving at the conclusion whether the party claiming
damages is entitled to the same; (ii) if the terms are clear and
unambiguous stipulating the liquidated damages in case of the breach of
the contract, unless it is held that such estimate of damages/compensation
is unreasonable or is by way of penalty, the party who has committed the
breach is required to pay such compensation in terms of Section 73 of the
Contract Act; (iii) Section 74 of the Contract Act is to be read with
Section 73 thereof and in every case of breach of contract, the person
aggrieved by the breach is not required to prove actual loss or damage
suffered by him before he can claim a decree; the Court is competent to
award reasonable compensation in case of breach, even if no actual
damage is proved to have been suffered in case of consequence of breach
of a contract; (iv) in some contracts, it would be impossible for the Court
to assess the compensation arising from breach and if the compensation
contemplated is not by way of penalty or unreasonable, the Court can
award the same, if it is genuine pre-estimate by the parties as the measure
of reasonable compensation. I may however add that the Supreme Court
also did not find the plaintiff therein to be guilty of breach and the
defendant therein to be entitled to forfeit.
29. Neither the Agreement to Sell-cum-Receipt nor the Receipt-cum-
MoU in the present case stipulate liquidated damages to be paid by the
plaintiff or the amount paid to be forfeited in case of breach by the
plaintiff. It is also not the term that the parties had arrived at any genuine
pre-estimate in this regard nor is it pleaded so.
30. Thus, what has been held in Kailash Nath Associates and Palm Art
Apparels Pvt. Ltd. supra, squarely applies to the said amount of Rs.2
crores and the written statement of the defendant does not disclose any
defence entitling the defendant no.1 to retain/forfeit the said amount and a
decree for recovery thereof is liable to be passed forthwith.
31. As far as the claim of the plaintiff for damages is concerned, the
tenor of the proceedings with effect from 23rd November, 2017 alone does
not entitle the plaintiff to any damages from the defendant for breach of
contract. The conduct of the plaintiff is found to be highly negligent.
32. The order dated 13th August, 2014, after framing the issues, directed
the parties to file list of witnesses within four weeks and directed the
plaintiff to adduce evidence by way of affidavits within eight weeks
therefrom and posted the suit before the Joint Registrar for recording of
evidence on 15th December, 2014. The plaintiff, till 15th December, 2014
neither filed list of witnesses nor any affidavit by way of evidence and the
counsel for the plaintiff also failed to appear before the Joint Registrar on
15th December, 2014. Notwithstanding the same, the Joint Registrar gave
further time to the plaintiff to file list of witnesses and affidavits by way
of examination-in-chief of the witnesses of the plaintiff within further
eight weeks therefrom and adjourned the suit to 26th May, 2015 for
evidence of the plaintiff. By 26th May, 2015 also, the plaintiff neither
filed list of witnesses nor affidavits by way of evidence and again did not
appear. Though the suit should have been placed before the Court for
dismissal for defaults of the plaintiff including of appearance but the Joint
Registrar nevertheless gave further time of twelve weeks to the plaintiff
for filing list of witnesses and affidavits by way of evidence and posted
the suit for evidence of the plaintiff on 15th December, 2015. The default
of the plaintiff continued and the position was unchanged by 15 th
December, 2015 as well. However, since the Joint Registrar was on leave
on 15th December, 2015, the suit was adjourned for evidence of the
plaintiff to 5th February, 2016. The position still remained unchanged.
However, the Joint Registrar was not available on 5th February, 2016 as
well, resulting in adverse orders being not passed against the plaintiff and
the suit being posted to 30th March, 2016 for evidence of the plaintiff. On
30th March, 2016 also, the default of the plaintiff continued and the
counsel for the plaintiff even failed to appear before the Joint Registrar.
The Joint Registrar in the order dated 30th March, 2016 noted that the
plaintiff had neither filed list of witnesses nor affidavit by way of
evidence despite more than one and a half years since framing of issues
having elapsed and despite being given sufficient opportunities, and
posted the suit before the Bench on 22nd April, 2016. On 22nd April, 2016,
reasoning that the plaintiff, inspite of repeated opportunities, had failed to
lead any evidence and there was gross negligence on the part of the
plaintiff and the affidavits by way of evidence were not ready by that date
also, as aforesaid, the suit was dismissed as the plaintiff had failed to
discharge the onus of the issues framed.
33. The aforesaid would show that the plaintiff inspite of availing six
opportunities, did not lead any evidence. The plaintiff, without proving
breach of contract on the part of the defendant and which the plaintiff has
failed to do, cannot be entitled to any damages from the defendant. The
claim of the plaintiff for damages is thus dismissed.
34. As far as the claim of the plaintiff for interest is concerned, the
plaintiff in the plaint has claimed pre-suit interest at the rate of 18% per
annum on the amount of Rs.2 crores and the amount of interest due till the
date of institution of the suit is stated to be Rs.2.54 crores. The plaintiff
has of course also claimed pendente lite and future interest.
35. In the entirety of the facts aforesaid, I am of the view that the
plaintiff is not entitled to any pre-suit interest on the amount of Rs.2
crores and is entitled only to interest pendente lite on the said sum of Rs.2
crores at the rate of 7% per annum and till 31st March, 2018; however post
31st March, 2018, the plaintiff shall be entitled to interest at the rate of
11% per annum on the said sum of Rs.2 crores.
35. A decree is accordingly passed, in favour of the plaintiff and
against the defendant, for recovery of Rs.2 crores with interest at the rate
of 7% per annum from the date of institution of the suit till 31 st March,
2018 and if the amount of Rs.2 crores is not paid by 31st March, 2018,
then with effect from 1st April, 2018, the defendant shall be liable to
interest at the rate of 11% per annum till the date of payment / realization.
36. In the circumstances, no costs.
Decree sheet be drawn up.
RAJIV SAHAI ENDLAW, J.
DECEMBER 11, 2017
'bs/gsr'
(corrected & released on 25th January, 2018)
