M/S Madhan And Company & Ors. vs Punjab & Sind Bank & Ors.
2018 Latest Caselaw 581 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA No. 73/2018

%                                                   24th January, 2018

M/s MADHAN AND COMPANY & ORS.            ..... Appellants
                 Through: Mr. Anil Sapra, Sr. Advocate
                          with Mr. Rama Shanker, Mr.
                          S.Katyal, Ms. Seema Sharma
                          and Mr. Saurabh, Advocates.

                          versus


PUNJAB & SIND BANK & ORS.                              ..... Respondents

                  Through:               Mr. Harish Katyal and Ms.
                                         Pratyasha Kunj, Advocates.

CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

C.M. Appl. No. 2823/2018 (Exemption)

      Exemption allowed subject to just exceptions.

      CM stands disposed of.

C.M. Appl. No. 2824/2018 (delay in re-filing of 9 days)

For the reasons stated in the application, delay in re-filing the

appeal is condoned subject to just exceptions.

CM stands disposed of.

RFA No. 73/2018 and C.M. Appl. No. 2822/2018 (for stay)

1. This Regular First Appeal under Section 96 of the Code

of Civil Procedure, 1908 (CPC) is filed by defendant nos. 1 to 3 in the

suit impugning the judgment of the trial court dated 20.9.2017 by

which the trial court has decreed the suit for specific performance filed

by the respondent no. 1/plaintiff/Punjab & Sind Bank with respect to

the suit property being plot no. B, Safdarjung Community Centre,

New Delhi, admeasuring 344.65 sq. meters. I may straightway note

that the trial court has decreed the suit for specific performance noting

that the appellants/defendant nos. 1 to 3 way back in the year 1977 had

already received Rs.12,25,000/- out of the total sale consideration of

Rs.12,50,000/- (balance of Rs. 25,000/- was payable at the time of

execution of the sale deed after getting permission to sell from the

Delhi Development Authority (DDA) which was applied for and

awaited) and that the basic defence of the appellants/defendant nos. 1

to 3 to deny specific performance was alleged frustration of the

agreement to sell on the ground that the suit property could be

transferred to the respondent no. 1/plaintiff only after permission was

obtained from the DDA to transfer the suit property to the respondent

no. 1/plaintiff, and that inspite of applying for the permission DDA

had not granted the requisite permission.

2. The facts of the case are that parties entered into an

agreement to sell in terms of offer and acceptance letters exchanged

between them. The offer letters of the appellants/defendant nos. 1 to 3

to the respondent no. 1/plaintiff are dated 8.1.1977 and 15.3.1977.

These offer letters of the appellants/defendant nos. 1 to 3 were

accepted by the respondent no. 1/plaintiff in terms of letter dated

30.3.1977. The total price payable to the appellants/defendant nos. 1

to 3 under the agreement was a sum of Rs.12,50,000/-.

Appellants/defendant nos. 1 to 3 had to give a constructed building to

the respondent no. 1/plaintiff in terms of the agreement entered into

between the parties. Appellants/defendant nos. 1 to 3 constructed the

building and handed over possession of the same to the respondent no.

1/plaintiff, and which suit property is in possession of respondent no.

1/plaintiff since the last now over thirty years. In the year 1977 itself

appellants/defendant nos. 1 to 3 received Rs.12,25,000/- out of the

total sale consideration of Rs.12,50,000/- and the balance amount of

Rs.25,000/- was payable only at the time of execution and registration

of the sale deed and which could be done after the permission was

granted by the DDA, and which was required in terms of Clause 4(a)

of the lease deed dated 2.6.1977 entered into between DDA and the

appellant no. 1/defendant no.1. Appellant no. 1, I may note is a

partnership firm of which appellant nos. 2 and 3 are the partners i.e

defendant no. 1 was a partnership firm of which defendant nos. 2 and

3 were the partners.

3. In terms of Clause 4(a) of the lease deed dated 2.6.1977,

and which provided that appellant no. 1/defendant no.1 will not sell or,

transfer or, assign or otherwise part with possession of the suit

property except with the previous consent in writing of DDA, an

application was submitted by the appellant no. 1/defendant no.1 to

DDA for seeking permission to transfer the suit property to the

respondent no. 1/plaintiff. DDA did not process the application for

grant of permission to transfer the suit property on account of DDA

raising two objections, and which as will be stated hereinafter had no

co-relation to the intent and purpose of Clause 4(a) of the lease deed

dated 2.6.1977 entered into between the appellant no.1/defendant no.1

and the DDA. The first objection which was raised was that in the suit

property there was an excess construction of approximately 105 sq.

feet i.e a negligible covered area out of the total plot of 344.65 sq.

meters (or approx 412 sq. yards) and the second objection was that the

building constructed on the suit plot did not have a completion

certificate. The case of the appellants/defendant nos. 1 to 3 is that

since DDA did not grant the necessary permission therefore the sale

deed in favour of the respondent no.1/plaintiff could not be executed

and in fact the contract of the appellants/defendant nos. 1 to 3 with

the respondent no. 1/plaintiff thus stood frustrated on account of DDA

not granting permission to sell the property as required by Clause 4(a)

of the lease deed dated 2.6.1977. At this stage, it is required to be

noted, and which is an admitted position, that no formal order was

ever issued by the DDA rejecting the application filed by the

appellants/defendant nos. 1 to 3 to transfer the suit property to the

respondent no. 1/plaintiff and that the DDA had never cancelled the

lease deed executed by it in favour of the appellants/defendant nos. 1

to 3 allegedly because the suit property was transferred to the

respondent no. 1/plaintiff without permission being taken/granted as

required under Clause 4(a) of the lease deed dated 2.6.1977.

4. DDA was arrayed as the defendant no. 4 in the suit. It

filed its written statement pleading that since no prior sale permission

had been obtained, consequently any sale made by the

appellants/defendant nos. 1 to 3 in favour of the respondent

no.1/plaintiff is illegal.

5. After pleadings were complete, the following issues were

framed:-

"1. Whether plaintiff is entitled for a relief of specific performance of the agreement to sell as prayed for? OPP

2. Whether the plaintiff is entitled for damages in the alternate? OPP

3. Relief."

6. Issue nos. 1 and 2 have been dealt with together by the

trial court from para 87 of the impugned judgment with paras 27 to 86

discussing the evidence and the cross-examinations of the witnesses

who deposed on behalf of the parties.

7. Dealing with issue nos. 1 and 2 trial court has held that

the letter dated 30.3.1977/Ex.PW1/4 sent by respondent no.1/plaintiff

in response to the letters dated 8.1.1977 and 15.3.1977 (Ex.PW1/3) of

the appellants/defendant nos. 1 to 3 will result in a binding contract as

all the contractual terms are with clarity stated and therefore the

ingredients of Section 10 of the Indian Contract Act, 1872 stood

satisfied. Trial court has also noted that undisputedly

appellants/defendant nos. 1 to 3 have already received a sum of

Rs.12,25,000/- out of the total sale consideration of Rs.12,50,000/-

and appellants/defendant nos. 1 to 3 have after construction handed

over the building with the suit plot to the respondent no.1/plaintiff way

back from thirty years earlier. Trial court then notes that though

application for permission was filed by the appellants/defendant nos. 1

to 3 with the DDA for seeking transfer in terms of Clause 4(a) of the

lease deed, but admittedly though DDA raised objections, however the

application for transfer was never specifically rejected nor was the

lease deed executed by DDA in favour of the appellants/defendant

nos. 1 to 3 cancelled at any point of time. Trial court also notes that

admittedly in terms of the auction sale proceedings conducted by

DDA pursuant to which appellants/defendant nos. 1 to 3 purchased

the suit property, the terms of the auction sale showed that the suit plot

was to be used for banking purposes. Trial court then holds that in

view of the admitted facts which emerged on record the

appellants/defendant nos. 1 to 3 had failed to prove any ingredient of

Section 56 of the Indian Contract Act dealing with frustration of the

contract and therefore it has to be held that there is no frustration of

the contract entered into between the parties as per which the

appellants/defendant nos. 1 to 3 had to sell the suit property to the

respondent no. 1/plaintiff.

8. The stand of the DDA before the trial court was that the

appellants/defendant nos. 1 to 3 and respondent no. 1/plaintiff have

violated the terms of lease deed dated 2.6.1977 because they entered

into the agreement to sell in violation of the terms of Clause 4(a) of

the lease deed because no prior permission was taken for transfer of

the suit property by the appellants/defendants nos. 1 to 3 to the

respondent no.1/plaintiff. This stand of the DDA was clearly wholly

misconceived and baseless inasmuch as Clause 4(a) bars the execution

of the sale deed or a transfer document or any document of

transferring ownership rights in the suit property and that this Clause

4(a) obviously does not prevent an agreement to sell being entered

into. It is trite that in case a seller refuses to perform a

contract/agreement to sell for an immovable property, and a suit for

specific performance is filed by the proposed buyer, then a decree is

passed that the proposed seller will execute the sale deed after taking

the necessary permissions as required from the competent authority,

and which permissions are required as a prior event for transferring of

the immovable property. Merely because there is required a prior

permission to sell the immovable property, and which is not taken

prior to the filing of the suit for specific performance, does not mean

that the suit will not be maintainable because contract of such a nature

is a contingent contract and that at the time of the passing of the

decree in the suit for specific performance the courts will direct taking

of permission from the competent authority as held by the Supreme

Court in the case of Mrs. Chandnee Widya Vati Madden Vs. Dr. C.L.

Katial and Others, AIR 1964 SC 978. Therefore, DDA was

completely unjustified in contending that there took place any sale or

that any sale deed was entered into between the appellants/defendant

nos. 1 to 3 and respondent no. 1/plaintiff because there is only an

agreement to sell and there is no sale/conveyance/transfer document.

9.(i) It is also required to be noted at this stage that during the

pendency of the suit the appellants/defendant nos. 1 to 3 were

successful in getting the suit property converted from leasehold to

freehold by paying the conversion charges and today no permission

will be required from the DDA for transfer of the suit property by the

appellants/defendant nos. 1 to 3 to the respondent no. 1/plaintiff. This

is noted by the trial court in the operative relief para of the judgment.

Trial court has while decreeing the suit for specific performance

rightly directed that the respondent no.1/plaintiff will be liable to pay

the conversion charges and all other charges which have been paid by

the appellants/defendant nos. 1 to 3 to DDA for converting the

property from leasehold to freehold.

(ii) Learned senior counsel for the appellants/defendant nos. 1 to 3

on instructions has stated that DDA has recently issued a notice to the

appellants/defendant nos. 1 to 3 for cancellation of the conveyance

deed making the property freehold from leasehold, and with respect to

which appellants/defendant nos. 1 to 3 have initiated litigation and the

impugned order of the DDA of cancellation of conveyance deed has

been stayed. In my opinion, however such facts would not make any

difference so far as the present suit for specific performance is

concerned because the respondent no. 1/plaintiff will take the title as it

is with any encumbrances or handicaps which may exist, and it will be

for the respondent no. 1/plaintiff to deal with such aspects qua the

DDA.

10. I would like to refer now to the relief paras 103 to 106 of

the impugned judgment, and which will show that the trial court has

been very careful in ensuring that the decree can be a decree for

specific performance by directly execution of the sale deed by the

appellants/defendant nos. 1 to 3 in favour of the respondent no.

1/plaintiff or in any case if any permission is required to be taken then

permission will be taken from DDA is in terms of Clause 4(a) of the

lease deed. Paras 103 to 106 of the impugned judgment read as under:-

"ISSUE NO.3 (RELIEF)

103. On the basis of findings of issue nos. 1 and 2, the plaintiff is entitled to a decree of specific performance as understanding/oral agreement/Ex. PW1/3 letter dated 15.03.1977 of defendant nos. 1 to 3 in regard to the suit land and property bearing Plot No. B, Safdurjang Community Centre, New Delhi, ad-measuring 412 sq. yds. (344.05 sq. meter) including the constructed building. In the peculiar circumstances, the DDA has granted permission for conversion of suit property from lease hold to freehold to defendant nos. 1 to 3 and already documents to this effect have been executed by defendant no.4/DDA in favour of defendant no.2 Sh. Lalit Mohan Madan, therefore, now the bar of clause 4 (a) of the lease deed is no impediment. The plaintiff bank is directed to pay the remaining part sale consideration of Rs.25,000/- within 15 days from the date of judgment to defendant nos. 1 to 3. Thereafter, within three months, the defendant nos. 1 to 3 are directed to execute sale deed in favour of plaintiff bank as property stands converted into freehold. Further, the plaintiff bank is directed to pay all the conversion charges or any other due or charges which were paid by defendant nos. 1 to 3 to the defendant no.4/DDA for conversion from leasehold to freehold or to be paid to DDA.

104. In alternative, I direct the defendant no.4 to levy all the charges and recover all the dues for issuance of completion certificate and any other charges due in respect of suit property bearing Plot No. B, Safdurjang Community Centre, New Delhi, ad-measuring 412 sq. yds. including the constructed building and grant the permission if required under clause 4

(a) of the lease deed on payment of 50% unearned increased charges by the plaintif. Plaintif bank shall pay the remaining sale consideration of Rs.25,000/- to the defendant nos. 1 to 3. Thereafter, DDA officials are directed to execute lease deed in favour of the plaintiff bank within three months or DDA shall executed conveyance deed in favour of plaintiff bank and the conversion charges already paid by defendant no.2 shall be paid by plaintiff bank to defendant no.2 because properties stand freehold as per stand of DDA. The above all directions shall be completed within three months from the date of judgment. In alternative since the plaintiff bank is in well settled possession and operating branch for the last 30 years is entitled for damages to the tune of present market value of the suit property along with pendente lite and future interest till realization @ 8% per annum from the defendant nos. 1 to 3.

105. The plaintiff is entitled for a decree of perpetual injunction restraining the defendant nos. 1 to 3 from negotiating, selling, transferring, assigning or parting with the suit property to anybody else other than the plaintiff bank or applying for permission to sell to anybody other than the plaintiff with the defendant no.4. The plaintiff is also entitled for decree of mandatory injunction directing the DDA not to grant permission for sale of suit property to anybody other than the plaintiff bank.

106. The plaintiff is also entitled for cost of Rs.10,000/- from the defendant nos. 1 to 3 and cost of Rs.10,000/- from the defendant no.4/ DDA."

11. This Court is forced to notice the fact that the DDA has

taken a defence in the suit which not of substance but only of

imaginary handicap/technicality i.e DDA had contended that sale

permission could not be given on account of the alleged extra

coverage of 105 sq. ft. and that completion certificate was not

obtained with respect to the building constructed on the suit plot.

Surely DDA in view Clause 4(a) can only in terms of the intent of

Clause 4(a) be interested in taking the necessary unearned increase or

the conversion charges in terms of scheme for making the property

from leasehold to freehold, and that any issue of extra coverage has

nothing to do with DDA as that would be the subject matter to be

taken note of by the local municipal authority being the MCD in this

case. Also, there not being a completion certificate to a building can

legally be no ground for DDA to refuse to give permission for transfer

of the suit property because a buyer will take the suit property on 'as is

where is' basis with the fact that there is no completion certificate,

with the further fact that this issue will again pertain to the jurisdiction

of the local municipal authority, but I fail to understand as to how

DDA can use these completely misconceived defences for contending

that the suit filed by the respondent no.1/plaintiff/Punjab & Sind Bank

had to be dismissed.

12. As a result of the aforesaid discussion, the following

conclusions can safely be drawn:-

(i) There was a contract being an agreement to sell entered into

between the appellants/defendant nos. 1 to 3 and the respondent no.

1/plaintiff when the respondent no. 1/plaintiff gave its acceptance

letter Ex. PW1/4 dated 30.3.1977 accepting the offer terms of the

appellants/defendant nos. 1 to 3 as contained in Ex.PW1/3 dated

8.1.1977 and 15.3.1977 for selling the suit property.

(ii) Appellants/defendant nos. 1 to 3 have already received Rs.

12,25,000/- out of the total sale consideration of Rs. 12,50,000/- way

back in around the year 1977-78 and appellants/defendant nos. 1 to 3

had acted pursuant to the agreement to sell by constructing a building

on the suit plot and handing over the suit plot and the building there on

to the respondent no. 1/plaintiff. The respondent no.1/plaintiff had

done all that was required to be done on its part under the contract

showing that it was ready and willing to go through with the

agreement to sell.

(iii) Permission was applied for by the appellants/defendant nos. 1 to

3 in terms of Clause 4(a) of the lease deed dated 2.6.1977 of DDA

with the appellants/defendant nos. 1 to 3, and that DDA though

objected in giving permission yet at no point of time an order was ever

passed refusing to grant permission.

(iv) Contracts which require grant of previous permission by an

authority before sale of an immovable property, such contracts are

contingent contracts, and while decreeing suits for specific

performance for such contracts, in addition to the direction of

execution of sale deed directions are issued that the proposed seller

will take the necessary permission of the competent authority for

selling of the property vide Mrs. Chandnee Widya Vati Madden

(supra). Additionally, I note that in case a proposed seller refuses to

apply for permission, then after passing of a decree, in execution

proceedings there is a procedure provided in terms of Order XXI Rule

32 CPC whereby Courts appoint Court Commissioners to take

necessary permissions or do all other acts which are required for

execution of the sale deed.

(v) Defence/objections raised by DDA have no co-relation to the

intent and purpose of Clause 4(a) of the lease deed, for DDA to refuse

to grant permission to sell the suit property.

(vi) There cannot be frustration of the contract being the agreement

to sell entered into by the appellants/defendant nos. 1 to 3 with the

respondent no. 1/plaintiff, inasmuch as frustration would have been if

there was an order passed by the DDA refusing to grant permission

which legally had become final, and admittedly there is no order

passed by DDA refusing to grant permission.

(vii) Trial court by the impugned judgment has ensured that different

situations and scenarios are taken care of whether it is required with

respect to decree for specific performance or for execution of the sale

deed since now the property is freehold, and trial court has as required

by law and equity directed the respondent no.1/plaintiff payment of

conversion charges and all other charges which have been paid by the

appellants/defendant nos. 1 to 3 to DDA for converting the property

from leasehold to freehold.

13. After the appeal was argued for some time, the matter

was passed over for counsels for the appellants/defendant nos. 1 to 3

to take instructions if the appellants/defendant nos. 1 to 3 were still

pursuing the appeal in the facts of the present case inasmuch as it was

clear that the appellants/defendant nos. 1 to 3 were only arm-twisting

the respondent no. 1/plaintiff on account of phenomenal rise in the

price of the suit property from the year 1977 to date. There was also

an issue with respect to the aspect that if the appellants/defendant nos.

1 to 3 did not press the appeal then directions which have been issued

vide para 107 of the impugned judgment for an inquiry to be

conducted because of missing of original record of DDA can be

deleted inasmuch as there was an innuendo as if the

appellants/defendant nos. 1 to 3 were responsible for getting missing

the original records of the suit property from DDA. After a pass-over

counsel for the appellants/defendant nos. 1 to 3, on instructions state

that the appellants/defendant nos. 1 to 3 insist that appeal be disposed

of by passing a judgment.

14. In view of the aforesaid discussion the present appeal is

an abuse of process of law. Appellants/defendant nos. 1 to 3 are

endeavoring to blackmail and arm-twist the respondent no.

1/plaintiff/Punjab & Sind Bank although agreement in almost its

entirety has been acted upon on account of the appellants/defendant

nos. 1 to 3 having already received almost the entire sale consideration

i.e having received Rs.12,25,000/- out of the total sale consideration of

Rs.12,50,000/-.

15. In view of the aforesaid discussion and noting that the

trial court has decreed the suit in favour of respondent no. 1/plaintiff

with only awarding a sum of Rs.10,000/- as costs, accordingly while

dismissing the appeal costs of Rs.5,00,000/- are imposed upon the

appellants/defendant nos. 1 to 3 for the false and dishonest litigation

which the appellants/defendant nos. 1 to 3 have forced the respondent

no. 1/plaintiff to engage in. Out of the total sum of Rs.5,00,000/- a

sum of Rs.2,50,000/- will be paid to the respondent no. 1/plaintiff

being costs for the contest of the suit as also this appeal, and the

balance amount of Rs.2,50,000/- will be deposited by the

appellants/defendant nos. 1 to 3 within six weeks with the website

www.bharatkeveer.gov.in. and an affidavit along with the receipt will

be filed in this Court within two weeks thereafter. I may note that the

power to impose costs in terms of Section 35 CPC is on account of

costs incurred by a party, but there is no provision in CPC for

imposition of costs for abusing the process of law and causing gross

wastage of judicial time and the same would therefore be covered by

Section 151 CPC under the inherent powers of this Court. Costs

payable to the website are thus imposed in exercise of powers by this

Court under Section 151 CPC.

16. The appeal is dismissed and disposed of accordingly.

JANUARY 24, 2018                          VALMIKI J. MEHTA, J
AK