Delhi High Court
Raj Rani vs Prafulla Kumar on 22 November, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No. 1056/2017 and C.M. No.46210/2017(stay)
% 22nd November, 2018
RAJ RANI
..... Appellant
Through: Mr. Anil Sharma, Advocate
with Mr. Arun Baali, Advocate
(M. No.9999315171).
versus
PRAFULLA KUMAR
..... Respondent
Through: Mr. Sucharita Ghosh, Advocate
with Mr. Naveen Sinha,
Advocate and Ms. Swati
Verma, Advocate (M.
No.9899090109).
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. This Regular First Appeal under Section 96 of the Code
of Civil Procedure, 1908 (CPC) is filed by the defendant in the suit
impugning the Judgment of the trial court dated 30.08.2017 by which
the trial court has decreed the suit for specific performance filed by the
respondent/plaintiff with respect to property bearing no. BH-269,
Shalimar Bagh (East), Delhi. Specific performance has been decreed
by simultaneously directing payment of the balance sale consideration
of Rs. 27,00,000/- to the appellant/defendant.
2. The facts of the case are that the respondent/plaintiff filed
the subject suit for specific performance of the Agreement to Sell
dated 07.09.2007 entered into between the appellant/defendant and the
respondent/plaintiff with respect to the suit property. The total sale
consideration was fixed at Rs. 33,01,000/-, of which Rs. 6,01,000/-
was admittedly paid by the respondent/plaintiff at the time of entering
into of the agreement to sell. The respondent/plaintiff claimed that the
appellant/defendant could not get the property converted into freehold
by 30.11.2007, and therefore time was extended first till 15.02.2008
and then till 29.03.2008 and finally till 30.04.2008. The
respondent/plaintiff pleaded that the appellant/defendant then asked
for a further sum of Rs. 2,00,000/- over the agreed sale consideration.
Accordingly, the respondent/plaintiff sent a Legal Notice dated
08.04.2008 to the appellant/defendant to perform the contract, and on
failure of the appellant/defendant to do the needful, the subject suit
was filed.
3. Appellant/Defendant contested the suit by filing the
written statement. Execution of the agreement to sell is admitted. The
extension of time upto 15.02.2008 is admitted but thereafter the
extensions are denied pleading that extensions till 29.03.2018 are
forged endorsements. It was pleaded that the respondent/plaintiff was
guilty of breach of contract. The suit was therefore prayed to be
dismissed.
4. After the pleadings were complete, the trial court framed
the following issues:-
"1) Whether the defendant no.1 had extended the time for making of
balance payment by the plaintiff firstly upto 29.03.2008 and then to
30.04.2008, as alleged in the plaint? OPP
2) Whether the plaintiff has always been ready and willing to perform
his part of the contract? OPP.
3) Whether the plaintiff is entitled to specific performance of the
agreement to sell dated 07.09.2007? OPP
4) Relief?"
5. Evidence which has been led in the trial court has been
referred to in para 7 of the impugned judgment and this para 7 reads as
under:-
"7. During trial, the plaintiff has examined Sh. Preetam Kumar Sinha,
his brother as PW-1 who tendered his affidavit as Ex.PW-1/A and
additional affidavit as Ex.PW-1/B. He also relied upon documents i.e.
plaint as Ex.PW-1/1, site plan as Ex.PW-1/2 (also Ex.P1), original sale
agreement Ex.PW-1/3(also Ex.P6), coloured photocopy of the sale
agreement as Ex.PW-1/4, perpetual lease deed Ex.PW-1/5 (also Ex.P2),
receipt dated 18.11.2007 as Mark A, notice dated 08.04.2008 Ex.PW-
1/7 (also Ex.P3), Notice dated 16.04.2008 Ex.PW-1/8(also Ex.P4),
reply dated 01.05.2008 as Ex.PW-1/9(also as Ex.P5). Plaintiff
examined himself as PW-2 and tendered his affidavit as Ex.PW-2/A
and he relied upon the documents which were relied by PW-1 in his
examination. After conclusion of PE, defendant led DE and examined
Sh. Shyam Sunder as DW-1 who tendered his affidavit as Ex.DW-1/1."
6. The trial court has decreed the suit by holding that the
respondent/plaintiff was ready and willing to perform his part of the
contract and that there was a breach of contract on behalf of the
appellant/defendant.
7(i) Ld. counsel for the appellant/defendant has strenuously
argued two aspects before this Court. Firstly, it is argued that in a suit
for specific performance, the plaintiff/proposed buyer has to prove
readiness as required by Section 16(c) of the Specific Relief Act, 1963
i.e. financial capacity must exist to go through with the transaction,
right from the date of entering into the agreement to sell till the decree
of the suit and that in this regard the respondent/plaintiff has miserably
failed. It is argued that financial capacity is not proved on self-serving
statements and the onus of financial capacity is only discharged by
proving on record sufficient documentary evidence in the form of
bank accounts, tax returns or documents as to ownership of movable
and other properties which the respondent/plaintiff has clearly failed
to do. Reliance is placed in this regard upon the judgment of the
Supreme Court in the case of N.P. Thirugnanam (Dead) by LRs. v.
Dr. R. Jagan Mohan Rao and Others, (1995) 5 SCC 115. The
relevant para of this judgment which is relied upon is para 5 which
reads as under:-
"5. It is settled law that remedy for specific performance is an equitable
remedy and is in the discretion of the court, which discretion requires to
be exercised according to settled principles of law and not arbitrarily as
adumbrated under Section 20 of the Specific Relief Act 1963 (for short,
'the Act'). Under Section 20, the court is not bound to grant the relief
just because there was valid agreement of sale. Section 16(c) of the Act
envisages that plaintiff must plead and prove that he had performed or
has always been ready and willing to perform the essential terms of the
contract which are to be performed by him, other than those terms the
performance of which has been prevented or waived by the defendant.
The continuous readiness and willingness on the part of the plaintiff is a
condition precedent to grant the relief of specific performance. This
circumstance is material and relevant and is required to be considered
by the court while granting or refusing to grant the relief. If the plaintiff
fails to either aver or prove the same, he must fail. To adjudge whether
the plaintiff is ready and willing to perform his part of the contract, the
court must take into consideration the conduct of the plaintiff prior and
subsequent to the filing of the suit alongwith other attending
circumstances. The amount of consideration which he has to pay to the
defendant must of necessity be proved to be available. Right from the
date of the execution till date of the decree he must prove that he is
ready and has always been willing to perform his part of the contract.
As stated, the factum of his readiness and willingness to perform his
part of the contract is to be adjudged with reference to the conduct of
the party and the attending circumstances. The court may infer from the
facts and circumstances whether the plaintiff was always ready and
willing to perform his part of the contract." (underlining added)
7(ii). It is further argued on behalf of the appellant/defendant
that the relief of specific performance is a discretionary relief in terms
of Section 20 of the Specific Relief Act, and that courts including the
Supreme Court, have consistently held that where only a minor/small
percentage of the sale consideration is paid in advance as
consideration, then in such cases, specific performance cannot be
decreed. One such judgment of the Supreme Court in this regard is the
judgment in the case of Saradamani Kandappan v. Mrs. S.
Rajalakshmi, (2011) 12 SCC 18. The counsel for the
appellant/defendant also places reliance upon the judgment passed by
this Court in the case of M/s Hotz Industries Pvt. Ltd. v. Dr. Ravi
Singh (Since Deceased Through LRs) & Ors., 2018 SCC Online Del
7618 to argue that in this judgment this Court has extensively
considered both the aspects of financial capacity and the discretionary
nature of the relief of specific performance, and therefore it is argued
that the trial court was unjustified in decreeing the suit merely on self-
serving statements of existence of financial capacity which in law is
not sufficient to discharge the onus of proof.
8. The ld. counsel for the respondent/plaintiff has very
vehemently argued that the appellant/defendant is guilty of breach of
contract, and therefore the trial court was justified in decreeing the suit
for specific performance. It is also argued that respondent/plaintiff
had deposited in the trial court in January, 2012 the entire sale
consideration and therefore the trial court has rightly held that
respondent was ready and willing to perform his part of the contract as
required by Section 16(c) of the Specific Relief Act.
9. Since both the issues which are required for decision by
this Court, being of readiness/financial capacity, and whether the
discretionary relief of grant of specific performance should or should
not be granted where only about 17% of the sale consideration is paid,
have been the subject matter of exhaustive discussion by this Court in
the judgment in the case of M/s Hotz Industries Pvt. Ltd. (supra), the
relevant paras of this judgment are reproduced as under:-
"14. The next issue which arises is that even if the defendants have to
be held guilty of the breach of contract being the agreement to sell dated
10.2.1995, whether the plaintiff is entitled to specific performance of the
subject agreement to sell. In order to decide the issue of entitlement of the
plaintiff to get specific performance of the agreement to sell, two issues
have to be decided in favour of the plaintiff. One issue is that the plaintiff
has to prove that it always has been and continued to be ready and willing
to perform its part of the agreement to sell, and as is so required by
Section 16(c) of the Specific Relief Act, 1963, the subject matter of the
issue no.6. I note that the issue no.6 framed is not happily worded as it
does not contain the requirement of continuous readiness and willingness
as the requirement of Section 16(c) of the Specific Relief Act is that a
plaintiff in a suit for specific performance must always be and continues to
be ready and willing to perform his part under the agreement to sell, and
therefore issue no.6 is read as modified in terms of the requirement of the
language of Section 16(c) of the Specific Relief Act. One other issue
would be whether plaintiff is entitled to discretionary relief for specific
performance.
15. Let us now examine as to whether plaintiff has led evidence and
proved in this suit that the plaintiff has always been and continues to be
ready and willing to perform its part of the contract.
16. In my opinion the expression "has always been and continues to be
ready and willing to perform the contract" includes that plaintiff must
show that he always has had the financial capacity to perform its part of
the contract for making payment of balance sale consideration of Rs.2.10
crores/Rs.2.18 crores. No doubt financial capacity which is to be proved
under the term readiness and willingness is not that plaintiff has to show
that it had with it liquid moneys, but however it is equally necessary for
the plaintiff to show its financial capacity, and having much assets, for
being able to pay the balance sale consideration.
17.(i) When we examine the facts of the present case it is found that
plaintiff in order to prove readiness and willingness has relied upon two
aspects. The first aspect is the availability of the balance sale
consideration as on 22.5.1995 in terms of the certificate filed and proved
by the plaintiff as Ex.PW1/8, and which is a certificate issued by the
A.B.N. Amro Bank, Sansad Marg Branch, New Delhi that it was the
plaintiff who had got prepared as on 22.5.1995 bank drafts in favour of the
defendant no.1 in this suit for amounts of Rs.18 lacs, Rs.1.45 crores, Rs.30
lacs, Rs.15 lacs and Rs.10 lacs, and which amounts total to the balance
sale consideration. The second aspect of the plaintiff being ready and
willing has been argued on behalf of the plaintiff on the basis that when
the plaintiff entered into the compromise with the defendant no.4 in the
suit in February, 2005, the plaintiff had paid a consideration of Rs.42.50
lacs to the defendant no.4 and which is so recorded in the order of this
Court dated 9.2.2005. It is argued that therefore as on 9.2.2005 and even
thereafter the plaintiff has proved his financial capacity and therefore
readiness and willingness.
(ii) I cannot agree with the argument urged on behalf of the plaintiff
that plaintiff had proved its readiness and willingness as required by
Section 16(c) of the Specific Relief Act. As already observed above,
readiness and willingness has to be a continuous act from the date of
entering into the agreement to sell till at least the leading of evidence by
the plaintiff in the suit, if not even as on date at the stage of final
arguments, and in this regard it is seen that the plaintiff has at best proved
that it had the balance consideration with it only in May, 1995. Having
financial capacity in May, 1995 in the opinion of this Court will not enable
the plaintiff to show financial capacity of the plaintiff for the period from
after May, 1995 till the evidence has been concluded by the plaintiff in the
present suit in August, 2010. In fact the plaintiff has to be held to be
guilty of the concealing documents from this Court, and which documents
are in the special knowledge of the plaintiff and therefore required to be
proved by the plaintiff in terms of Section 106 of the Indian Evidence Act.
These documents in possession of the plaintiff with respect to its financial
capacity would be the documents of the bank accounts of the plaintiff, any
fixed deposit receipts of the plaintiff of amounts in its bank, audited
Balance Sheets and Profit and Loss accounts of the plaintiff from the year
1995 till plaintiff's evidence was closed in August, 2010 in terms of the
statement made on behalf of the plaintiff. Section 16(c) of the Specific
Relief Act deliberately requires continuous rediness and willingness i.e
continuous financial ability to complete the transactions. The stage of
complying with obligations under the agreement to sell by a proposed
buyer even if does not arise, yet Section 16(c) of the Specific Relief Act
requires the plaintiff to show continuous financial capacity to prove the
balance sale consideration. In my opinion, it has to be held that the
plaintiff in this regard has miserably failed because merely by showing
financial capacity as on date on 22.5.1995 cannot mean that the plaintiff
had financial capacity from 23.5.1995 till the plaintiff concluded its
evidence in August, 2010. As already stated above the plaintiff has not
filed any document with respect to its financial capacity like Balance
Sheets, Profit and Loss accounts and therefore against the plaintiff adverse
inference has to be drawn under Section 114 of the Indian Evidence Act
on account of the plaintiff having deliberately not filed such documents. It
is therefore held that the plaintiff cannot be held to have complied with
Section 16 (c) of the Specific Relief Act merely because plaintiff has
proved the certificate of bank Ex.PW1/8 dated 5.1.2004 showing that
plaintiff had prepared pay orders with respect to balance sale consideration
on one day and date of 22.5.1995. Also and simply because the plaintiff
has paid a sum of Rs.42.50 lacs to defendant no. 4 in February, 2005
would also not mean that plaintiff is to be held that it had always the
capacity to pay the entire balance sale consideration to defendant nos. 1 to
3 with the fact that payment by plaintiff to defendant no. 4 of a sum of
Rs.42.50 lacs will only show financial capacity of the plaintiff of Rs.42.50
lacs and not with respect to total balance sale consideration payable by the
plaintiff to the defendant nos. 1 to 3 of Rs.2.18 crores.
(iii) It was argued on behalf of the plaintiff that plaintiff's Managing
Director has deposed in plaintiff's favour that plaintiff had the financial
capacity, and this is sufficient evidence to prove readiness and willingness.
This argument is however misconceived not only because PW-1 Sh. Arun
Kumar Jain had been cross-examined appropriately by suggesting that
plaintiff did not have financial capacity and plaintiff was not ready and
willing but also because self-serving deposition cannot be held to be
discharge of onus of proof and so observed by this Court in the case of
Baldev Behl & Ors. Vs. Bhule & Ors. (2012) 132 DRJ 247, paras 26 (i)
and (ii) of which reads as under:-
"26(i). This issue pertains to plaintiff No.1 being ready and willing
to perform his part of the agreement to sell. As per Section 16(c) of the
Act, every plaintiff in a suit for specific performance must aver and
prove that the plaintiff has always been and continues to be ready and
willing to perform his part of the contract/agreement to sell. Readiness
is financial capacity to go ahead with the agreement to sell and
willingness is the intention. I may, at this stage, specifically invite
attention to the observations of the Supreme Court in the case of Balraj
Taneja and Anr. (supra), and relevant paras have been reproduced
above, and which show that in a suit for specific performance even if
there is no defence of the defendant, yet, the aspect of readiness and
willingness has to be specifically proved by the plaintiff. This is stated
by the Supreme Court in para 30 of the said judgment. The question is
whether the plaintiff No.1 has proved his readiness and willingness at
the relevant time and also continues to be ready and willing to perform
his part of the contract/agreement to sell.
(ii) Readiness to perform the obligations by a proposed
purchaser is a very important aspect and it has to be proved by
categorical evidence. Mere oral evidence and self-serving depositions
cannot be a substitute for categorical evidence on the specific statutory
requirement of Section 16(c). It is not disputed on behalf of the
plaintiff No.1 that plaintiff No.1 has not filed any income tax returns or
any bank account or proof of any other assets/properties or any other
evidence to show the financial capacity of the plaintiff No.1 to pay the
balance sale consideration. As per the case of the plaintiff No.1, the
balance sale consideration would be approximately ` 19.5 lacs and there
is no evidence worth the name in the record to show the plaintiff No.1's
financial capacity for this amount. Of course, while on this argument, I
am assuming that there is a certainty as to consideration because in
reality there is no certainty as to balance sale consideration inasmuch as
the plaintiff No.1 has failed to exercise the option in terms of the
agreement to sell as to which area of the balance land less the
hutment/portion the plaintiff No.1 seeks specific performance of. Also,
as already stated above, this area claimed by the plaintiff No.1 has to be
further conditioned by an area of 12 bighas which has already been sold
to be defendant No.3 under the sale deed dated 8.4.1988. In any case, I
need not state anything further inasmuch as there is not a single piece of
paper on record or any credible evidence which proves the financial
capacity of the plaintiff No.1. I accordingly hold that plaintiff No.1 has
miserably failed to prove his readiness to perform his obligations under
the agreement to sell dated 27.8.1988. In fact, even willingness on the
part of the plaintiff No.1 is absent inasmuch as there is no certainty of
any option exercised by the plaintiff No.1 as to specific area which the
plaintiff No.1 seeks to purchase, and which specific area had
necessarily to be clear inasmuch as there is the issue of lessening the
area whether on account of hutments or on account of 12 bighas of land
already purchased by the defendant No.3 vide sale deed dated 8.4.1988
and hence of clarity as to for what area and for what price the agreement
to sell has to go ahead."
18. It is, therefore, held that plaintiff has failed to show that it had
always been and continued to be always ready and willing to perform its
part of agreement to sell by having the necessary financial capacity to pay
the balance sale consideration of Rs.2.18 crores till February, 2005 and
thereafter till August, 2010 for the sum of Rs.2.18 crores less the sum of
Rs.42.50 lacs paid to the defendant no.4.
19. Issue no. 6 is therefore decided against the plaintiff and in favor of
defendant nos. 1 to 3.
20.(i) The next aspect to be considered is as to whether plaintiff is
entitled to the discretionary relief of specific performace. In law, merely
because there is an agreement to sell, and that the proposed seller is found
to be guilty of breach of agreement to sell, yet it does not automatically
follow that a proposed buyer is only for that reason entitled to the specific
performance of the agreement to sell. In fact, besides the
defendants/proposed sellers being guilty of breach of contract, and that
even if the proposed buyer/plaintiff proves that there was financial
capacity in the plaintiff to pay the balance sale consideration, yet the
plaintiff is not necessarily and automatically entitled to specific
performance, and this is because the grant of relief of specific performance
is a discretion vested in the Court as per Section 20 of the Specific Relief
Act.
(ii) An agreement to sell is a contract between the parties and
contracts between the parties are subject matter of the Indian
Contract Act, 1872. The effect of breach of contract is provided
under Section 73 of the Indian Contract Act. If there is a breach of
contract then an aggrieved party is entitled to monetary damages as
per Section 73 of the Indian Contract Act and which monetary
damages is the amount of loss which is caused to the aggrieved party
under the contract. An aggrieved party who was the proposed buyer
under the agreement to sell will suffer loss if in case on the date and in
around the date of breach, the value of a similar property as the
contracted property under the agreement to sell, which could be
purchased by the plaintiff as a proposed buyer, had increased. To the
extent of increase of price of the property a plaintiff who is a proposed
buyer suffers loss when a proposed seller/defendant does not sell the
property under an agreement to sell, because a buyer has to pay a
higher price for purchase of a similar property, and thus ordinarily
whenever there is a breach of contract of an agreement to sell on
account of the breach by the defendant/proposed seller, then the
plaintiff/proposed buyer becomes entitled ordinarily to damages/loss
under Section 73 of the Indian Contract Act being the difference of
the contract price and the higher price of a similar property in around
the date of breach. The Specific Relief Act contains provisions that in
spite of a plaintiff who is the proposed buyer, and against whom
breach of contract is caused by a defendant in the suit being the
proposed seller, the plaintiff/proposed buyer need not ask for and be
granted damages in such a case where the plaintiff/proposed buyer
pleads and seeks that there should be specific performance of the
contract and not the breach of the contract. In a way therefore the
provisions of Specific Relief Act directing specific performance of a
breached agreement to sell are in the nature of Exceptions or Provisos
to Section 73 of the Indian Contract Act. What is being stated by this
Court is that if there is a breach of contract then an aggrieved party
on account of the breach of the contract gets under Section 73 of the
Indian Contract Act monetary damages but where instead of grant of
damages because of the contract being broken, a plaintiff/proposed
buyer instead seeks/prays that the contract should be specifically
performed, then such a scenario is in the nature of an Exception or a
Proviso to the ordinary situation comprised in Section 73 of the
Indian Contract Act that breach of contract entitles a person to
monetary damages on account of the loss caused. Therefore once the
provisions of Specific Relief Act with respect to specific performance
are not the normal consequence of a breach of contract being of grant
of damages as per Section 73 of the Indian Contract Act, therefore the
provisions of the Specific Relief Act; with the important provision
therein being Section 20 of the Specific Relief Act; provides that
Court has the discretion whether or not to grant specific performance
and that merely because it is lawful to do so, the Court will not grant
specific performance but instead may only grant damages with the
measure of damages being those as provided in Section 73 of the
Indian Contract Act. This aspect has been considered by this Court in
detail in the judgment in the case of Jinesh Kumar Jain Vs. Iris Paintal
and Ors. ILR (2012) 5 Delhi 678. The relevant paras of this judgment
are paras 13 to 18 and these paras read as under:-
"13. Now let us assume that the agreement to sell dated
26.9.1988 was not hit by the 1972 Act; the defendants were guilty of
breach of their obligation to perform their part of contract; and that the
plaintiff was ready and willing to perform his part; even then, can it be
said that the plaintiff is yet entitled to the discretionary relief of
specific performance. It will be appropriate at this stage to refer to
Section 20 of the Specific Relief Act, 1963, and more particularly sub-
Section 3 thereof. Section 20 reads as under:-
20. Discretion as to decreeing specific performance.-
(1) The jurisdiction to decree specific performance is discretionary,
and the court is not bound to grant such relief merely because it is
lawful to do so; but the discretion of the court is not arbitrary but
sound and reasonable, guided by judicial principles and capably of
correction by a court of appeal.
(2) The following are cases in which the court may properly
exercise discretion not to decree specific performance:-
(a) where the terms of the contract or the conduct of the parties
at the time of entering into the contract or the other circumstances
under which the contract was entered into are such that the
contract, though not voidable, gives the plaintiff an unfair
advantage over the defendant; or
(b) where the performance of the contract would involve some
hardship on the defendant which he did not foresee, whereas its
non-performance would involve no such hardship on the plaintiff;
or
(c) where the defendant entered into the contract under
circumstances which though not rendering the contract voidable,
makes it inequitable to enforce specific performance.
(3) The court may properly exercise discretion to decree
specific performance in any case where the plaintiff has done
substantial acts or suffered losses in consequence of a contract
capable of specific performance.
(4) The court shall not refuse to any party specific performance
of a contract merely on the ground that the contract is not
enforceable at the instance of the party."
14. Sub-Section 3 makes it clear that Courts decree specific
performance where the plaintiff has done substantial acts in consequence
of a contract/agreement to sell. Substantial acts obviously would mean
and include payment of substantial amounts of money. Plaintiff may have
paid 50% or more of the consideration or having paid a lesser
consideration he could be in possession pursuant to the agreement to sell
or otherwise is in the possession of the subject property or other
substantial acts have been performed by the plaintiff, and acts which can
be said to be substantial acts under Section 20(3). However, where the
acts are not substantial i.e. merely 5% or 10% etc of the consideration is
paid i.e. less than substantial consideration is paid, (and for which a rough
benchmark can be taken as 50% of the consideration), and/or plaintiff is
not in possession of the subject land, I do not think that the plaintiff is
entitled to the discretionary relief of specific performance.
15. The Supreme Court in the recent judgment of Saradamani
Kandappan vs. Mrs. S. Rajalakshmi, 2011 (12) SCC 18 has had an
occasion to consider the aspect of payment of a nominal advance price by
the plaintiff and its effect on the discretion of the Court in granting the
discretionary relief of specific performance. Though in the facts of the
case before the Supreme Court, it was the buyer who was found guilty of
breach of contract, however, in my opinion, the observations of the
Supreme Court in the said case are relevant not only because I have found
in this case the plaintiff/ buyer guilty of breach of contract, but also
because even assuming the plaintiff/buyer is not guilty of breach of
contract, yet, Section 20 sub-Section 3 of the Specific Relief Act, 1963 as
reproduced above clearly requires substantial acts on behalf of the
plaintiff/proposed purchaser i.e. payment of substantial consideration.
Paras 37 and 43 of the judgment in the case of Saradamani Kandappan
(supra) are relevant and they read as under:
"37. The reality arising from this economic change cannot
continue to be ignored in deciding cases relating to specific
performance. The steep increase in prices is a circumstance which
makes it inequitable to grant the relief of specific performance where
the purchaser does not take steps to complete the sale within the
agreed period, and the vendor has not been responsible for any delay
or non-performance. A purchaser can no longer take shelter under the
principle that time is not of essence in performance of contracts
relating to immovable property, to cover his delays, laches, breaches
and "non-readiness". The precedents from an era, when high inflation
was unknown, holding that time is not of the essence of the contract in
regard to immovable properties, may no longer apply, not because the
principle laid down therein is unsound or erroneous, but the
circumstances that existed when the said principle was evolved, no
longer exist. In these days of galloping increases in prices of
immovable properties, to hold that a vendor who took an earnest
money of say about 10% of the sale price and agreed for three months
or four months as the period for performance, did not intend that time
should be the essence, will be a cruel joke on him, and will result in
injustice. Adding to the misery is the delay in disposal of cases
relating to specific performance, as suits and appeals therefrom
routinely take two to three decades to attain finality. As a result,
an owner agreeing to sell a property for rupees one lakh and
received rupees ten thousand as advance may be required to
execute a sale deed a quarter century later by receiving the
remaining rupees ninety thousand, when the property value has
risen to a crore of rupees.
xxxxx xxxxx xxxxx
43. Till the issue is considered in an appropriate case, we can only
reiterate what has been suggested in K.S. Vidyanandam.
(i) The courts, while exercising discretion in suits for specific
performance, should bear in mind that when the parties prescribe a
time/period, for taking certain steps or for completion of the
transaction, that must have some significance and therefore
time/period prescribed cannot be ignored.
(ii) The courts will apply greater scrutiny and strictness when
considering whether the purchaser was "ready and willing" to
perform his part of the contract.
(iii)Every suit for specific performance need not be decreed merely
because it is filed within the period of limitation by ignoring the time-
limits stipulated in the agreement. The courts will also "frown" upon
suits which are not filed immediately after the breach/refusal. The fact
that limitation is three years does not mean that a purchaser can wait
for 1 or 2 years to file a suit and obtain specific performance. The
three-year period is intended to assist the purchasers in special cases,
as for example, where the major part of the consideration has been
paid to the vendor and possession has been delivered in part-
performance, where equity shifts in favour of the purchaser."
(emphasis is mine)
16. A reading of the aforesaid paras shows that Courts have a bounden
duty to take notice of galloping prices. Surely it cannot be disputed that
the balance of convenience i.e. equity in the present case is more in favour
of the defendants who have only received 10% of the consideration. If the
hammer has to fall in the facts of the present case, in my opinion, it should
fall more on the plaintiff than on the defendants inasmuch as today the
defendants cannot on receiving of the balance consideration of
`44,00,000/-, and even if exorbitant rate of interest is received thereon,
purchase any equivalent property for this amount. Correspondingly, the
plaintiff has had benefit of 90% of sale consideration remaining with him
(assuming he has any) and which he could have utilized for purchase of
assets including an immovable property. In specific performance suits a
buyer need not have ready cash all the time and his financial capacity has
to be seen and thus plaintiff can be said to have taken benefit of the 90%
balance with him. It is well to be remembered at this stage that in a way
that part of Specific Relief Act dealing with specific performance is in the
nature of exception to Section 73 of the Contract Act, 1872 i.e. the normal
rule with respect to the breach of a contract under Section 73 of the
Contract Act, 1872 is of damages, and, the Specific Relief Act, 1963 only
provides the alternative discretionary remedy that instead of damages, the
contract in fact should be specifically enforced. Thus for breach of
contract the remedy of damages is always there and it is not that the buyer
is remediless. However, for getting specific relief, the Specific Relief Act,
1963 while providing for provisions of specific performance of the
agreement (i.e. performance instead of damages) for breach, requires
discretion to be exercised by the Court as to whether specific performance
should or should not be granted in the facts of each case or that the
plaintiff should be held entitled to the ordinary relief of damages or
compensation.
17. I have recently in the case titled as Laxmi Devi vs. Mahavir Singh
being RFA No. 556/2011 decided on 1.5.2012 declined specific
performance, one of the ground being payment of only nominal
consideration under the agreement to sell. Para 11 of the said judgment
reads as under:-
"11. Besides the fact that respondent/plaintiff was guilty of
breach of contract and was not ready and willing to perform his part of
the contract lacking in financial capacity to pay the balance
consideration, in my opinion, the facts of the present case also
disentitle the respondent/plaintiff to the discretionary relief of specific
performance. There are two reasons for declining the discretionary
relief of specific performance. The first reason is that the Supreme
Court has now on repeated occasions held that unless substantial
consideration is paid out of the total amount of consideration, the
Courts would lean against granting the specific performance inasmuch
as by the loss of time, the balance sale consideration which is granted
at a much later date, is not sufficient to enable the proposed seller to
buy an equivalent property which could have been bought from the
balance sale consideration if the same was paid on the due date. In the
present case, out of the total sale consideration of `5,60,000/-, only a
sum of `1 lakh has been paid i.e. the sale consideration which is paid is
only around 17% or so. In my opinion, by mere payment of 17% of
the sale consideration, it cannot be said that the respondent/plaintiff
has made out a case for grant of discretionary relief or specific
performance..............."
18. Therefore, whether we look from the point of view of Section 20
sub-Section 3 of the Specific Relief Act, 1963 or the ratio of the judgment
of the Supreme Court in the case of Saradamani Kandappan (supra) or
even on first principle with respect to equity because 10% of the sale
consideration alongwith the interest will not result in the defendants even
remotely being able to purchase an equivalent property than the suit
property specific performance cannot be granted. In fact, on a rough
estimation, the property prices would have galloped to at least between 30
to 50 times from 1988 till date. I take judicial notice of this that in the
capital of our country, like in all other megapolis, on account of the
increase in population and rapid urbanization, there is a phenomenal
increase in the prices of urban immovable property.
I therefore hold and answer issue no. 5 against the plaintiff and in favour
of the defendants holding that the plaintiff is not entitled to discretionary
relief of specific performance. " (underlining added)
21. The ratio of the judgment passed by this Court in Jinesh
Kumar Jain (supra) has been thereafter followed by this Court in the
following cases:-
(i) Sushil Jain Vs. Meharban Singh and Others (2012) 131 DRJ
421.
(ii) Baldev Behl & Ors. Vs. Bhule & Ors. (2012) 132 DRJ 247
(In para 25 of this judgment it is noted that the appeal against the
judgment in the case of Jinesh Kumar Jain (supra) being RFA(OS)
No.75/2012 stands dismissed by a Division Bench of this Court on
31.8.2012).
(iii) A.K. Narula Vs. Iqbal Ahmed and Others ILR (2013) I Delhi
315.
22.(i) A reading of the ratio of the aforesaid judgment of this Court in the
case of Jinesh Kumar Jain (supra) shows that a proposed buyer as a
plaintiff when only has paid a very limited amount of consideration, then
such a plaintiff may not ordinarily be entitled to the discretionary relief of
specific performance when the grant of specific performance is being
decided after a long period of time having elapsed after entering into the
agreement to sell and the suit for specific performance coming up for final
disposal. The logic is very simple that from the balance sale consideration
which has to be paid by the plaintiff/proposed buyer under an agreement
to sell to the defendant/proposed seller, even by adding thereto interest,
surely the defendant/proposed seller from the balance sale consideration
plus interest cannot purchase a property of an equivalent type as would
have been purchased by receipt of the sale consideration at the time when
the agreement to sell was entered into many many years earlier.
(ii) As a result of rise in the prices of a property, that in the facts of the
present case this Court can take judicial notice that prices of properties in
Delhi, and that prices in the year 1995 would be far far lesser than the
prices of the property today in the year 2018, and that too more so with
the fact of the suit property being situated in one of the prime colonies of
the Delhi being Maharani Bagh, grant of specific performance will severly
and gravely prejudice the defendants. On a conservative estimate the
value of the suit property as on today would be at least around 20 times
more than what was the price of the suit property in the year 1995 and that
therefore with the balance sale consideration payable to the defendants as
on today even with interest, the defendants will not be able to purchase the
property as the defendants could have purchased with the value of the
balance sale consideration in the year 1995.
(iii) In my opinion in such cases as the present the plaintiff in fact
should be extremely careful in such a suit for specific performance; that
when evidence is led the plaintiff also leads requisite evidence as to the
loss which would be caused to the plaintiff on account of the breach of
contract by the defendants/proposed sellers, so that the Court can grant
monetary damages to the plaintiff/proposed buyer on account of the
breach of contract by the defendants/proposed sellers along with the
interest, but indubitably the position on record in the present case is that
the plaintiff has led no evidence whatsoever as to what was the difference
of the property price in around April/May, 1995 than what was the price of
the property on the date of entering into agreement to sell on 10.2.1995.
Once a plaintiff fails to lead any evidence whatsoever to prove loss, then
the plaintiff harms its own case because the Court in equity when it
exercises discretionary power to deny specific performance because of
Section 20 of the Specific Relief Act, and that the Court wants to grant
damages on the principles under Section 73 of the Indian Contract Act, the
Court cannot do so since it does not have any evidence before it in order to
grant monetary damages to the plaintiff/proposed buyer and which
loss/monetary damages the plaintiff would have been entitled to on
account of defendants/proposed sellers held guilty of breach of agreement
to sell. After all it is not that the plaintiff has pleaded and proved why it
wants to be the owner only and only of the suit property and that why any
other property in the same or similar area would not be sufficient for the
plaintiff's needs. Therefore since plaintiff with the balance sale
consideration with it plus an additional amount could well have purchased
a similar property in the same or similar area in around May, 1995 and
within some reasonable time thereafter, but yet plaintiff has chosen not to,
hence the plaintiff is held disentitled to the discretionary relief of specific
performance. It is therefore held that since the plaintiff has only paid
approximately 14.5% of the sale consideration as on the date of entering
into the agreement to sell being the amount of Rs.37 lacs, therefore
plaintiff is not entitled to the discretionary relief of specific performance.
(iv) It is also relevant that since plaintiff has over this period from the
year 1995 to 2018 had moneys in its pocket of the balance sale
consideration of Rs.2.18 crores, the plaintiff would/could have invested
wisely for obtaining returns on this amount of balance sale consideration.
(v) Therefore on the one hand defendants cannot purchase a similar
property in similar area as in the year 1995 when the agreement to sell was
entered into with respect to the sale consideration of 1995 in the year
2018, on the other hand the plaintiff has had benefit of having enjoyed and
put to use and derived benefits of the balance sale consideration of Rs.2.18
crores, assuming the plaintiff had such a balance sale consideration
amount with it (and in reality though it does not have as held while
deciding issue no.6) therefore if the plaintiff is granted specific
performance in the facts of the present case there would result not only in
grave jeopardy to the defendants but that situation would be accompanied
by the benefit which the plaintiff has had by having with it and having
used or could have used the balance sale consideration of Rs.2.18 crores.
23. I therefore hold that plaintiff in the facts of this case is not entitled
to the benefit of being granted the discretionary relief of specific
performance. Issue no. 7 is therefore decided in favor of the defendant
nos. 1 to 3 and against the plaintiff." (emphasis is mine)
10(i). It is noted that in terms of the judgment of the Supreme
Court in the case of N.P. Thirugnanam (Dead) by LRs. (supra) the
requirement of proving financial capacity/readiness is right from the
date of agreement to sell till the disposal of the suit, and since the
respondent/plaintiff has deposited the balance sale consideration of
Rs. 27,00,000/- in the suit in January, 2012 it is to be seen that
whether the respondent/plaintiff had the financial capacity right from
the date when the Agreement to Sell was entered into on 07.09.2007
till 2012 i.e. for approximately a period of five years.
10(ii). In this regard, it is noted that except the self-serving
averments/deposition of the respondent/plaintiff being ready and
willing, there is no documentary evidence which is filed or proved on
record by the respondent/plaintiff for the period from September, 2007
till 2012 that the respondent/plaintiff had the necessary financial
capacity. No doubt financial capacity does not mean availability of
liquid funds and that financial capacity has to be interpreted in a
reasonable manner to show that a proposed buyer had the necessary
financial capacity to pay the balance sale consideration, however,
equally it is noted that financial capacity has to be proved to the
judicial conscience of the court by sufficient documentary evidence.
This has been held in the case of Baldev Behl & Ors. v. Bhule & Ors.
(2012) 132 DRJ 247, and the relevant paras of this judgment have
already been reproduced by this Court in para 17(iii) of M/s Hotz
Industries Pvt. Ltd. (supra), which are not reproduced again herein to
avoid repetition. Therefore, once the respondent/plaintiff did not file
any income tax return or any bank account statement or any wealth tax
return or any other document, whether liquid or reasonably liquid, to
show the availability of financial capacity of the respondent/plaintiff
that he could pay the balance sale consideration of Rs. 27,00,000/-
from September, 2007 to 2012, it must therefore be held that the
respondent/plaintiff did not have the financial capacity for this five
year period and therefore the respondent/plaintiff has failed to prove
the sine qua non requirement of Section 16(c) of the Specific Relief
Act. The respondent/plaintiff therefore was not entitled to the relief of
specific performance and the trial court has thus erred in decreeing the
suit for specific performance despite the clear ratio of the Supreme
Court in the case of N.P. Thirugnanam (Dead) by LRs. (supra).
11. On the second aspect with respect to the discretionary
nature of specific performance, it is noted that approximately about 17
odd percent out of the sale consideration has been paid by the
respondent/plaintiff. The rationale for declining the relief of specific
performance has been dealt with in detail by this Court sub-paras (i) to
(v) of para 22 of the judgment in the case of M/s Hotz Industries Pvt.
Ltd. (supra) which have been reproduced above, and one such
rationale/reason is that suits which are decreed many years later from
the date of entering into agreement to sell causes a lot of prejudice to
the seller who has only received a small percentage of the total sale
consideration inasmuch as from the amount of sale consideration fixed
under an agreement to sell entered into many years earlier, the seller
cannot purchase a property of equivalent value of money many years
later when the suit for specific performance is decreed. In fact it is for
this reason that a buyer has been mandated to lead sufficient evidence
for grant of decree of damages because whenever there is a breach of
contract, including a contract being an agreement to sell, two
alternative reliefs are available, one being of specific performance and
the second of grant of damages under Section 73 of the Indian
Contract Act, 1872. In the present case, no claim has been laid out by
the respondent/plaintiff for the grant of relief of damages under
Section 73 of the Contract Act and no such evidence has been led as to
the rise of the value of the suit property from the date of entering into
the agreement to sell than as compared to the price of the property
from the alleged date of breach in March, 2008. A decree for damages,
which can be of a specific amount, cannot be granted to the
respondent/plaintiff in the facts of the present case.
12. In view of the aforesaid discussion, this appeal is
allowed. The impugned judgment of the trial court is set aside. The
suit for specific performance filed by the respondent/plaintiff will
stand dismissed. Parties are left to bear their own costs.
13. It is noted that this Court had put it to the counsel for the
respondent/plaintiff that although there is no relief prayed for return of
the amount of Rs. 6,01,000/-, this amount of Rs. 6,01,000/- along
with reasonable rate of interest can be granted to the
respondent/plaintiff on making such an oral prayer to this Court, by
passing a money decree in favour of the respondent/plaintiff and
against the defendant, however the counsel for the respondent/plaintiff
after taking a pass over stated that she has instructions to argue the
appeal on merits for dismissing the same.
14. The appeal is accordingly allowed and disposed of in
terms of the aforesaid judgment.
NOVEMBER 22, 2018/Ne VALMIKI J. MEHTA, J
