Delhi High Court
Versatile Commotrade Pvt Ltd. vs Adharshila Country Homes Pvt Ltd. on 26 October, 2018
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 1st October, 2018
Date of decision :26th October, 2018
+ CS (OS) 381/2014, I.As. 7320/2015 & 13279/2018
+ CS (OS) 402/2014, I.As. 7318/2015 & 13278/2018
VERSATILE COMMOTRADE PVT LTD. ..... Plaintiff
Through: Mr. Nikhlesh Krishnan & Mr. Aman
Prasad, Advocates. (M:9810683803
& 9718684930)
versus
ADHARSHILA COUNTRY HOMES PVT LTD. ..... Defendant
Through: Mr. Sanjay Poddar, Senior Advocate
with Mr. Jagdeep Dharma, Mr.
Gyanendra Kumar and Mr. Sharaf
Habibullah, Advs. (M:88000099887)
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
1. The present judgment disposes of two suits for recovery filed by the
Plaintiff.
Suit no.1 - CS (OS) 402/2014
2. The Plaintiff has filed the present suit under Order XXXVII CPC
seeking recovery of a sum of Rs.1,50,00,000/- along with interest @
16.25%. The brief facts are that the Plaintiff entered into an agreement to
sell dated 7th April, 2013 ("ATS-1") with the Defendant, for the sale of 9
bighas 6 biswas out of Khasra No. 31//9/2 (2-3), 12 (3-19), & 13/1 (3-4)
situated in the revenue estate of Village Jhuljhuli, Tehsil-Najafgarh,
NewDelhi-110043. The total sale consideration was Rs.6,20,00,000/- out of
which Rs.1,50,00,000/- was paid by means of cheque no.403785 dated 7th
April, 2013, drawn on Oriental Bank of Commerce, New Mandi,
Muzaffarnagar.
3. The Defendant had executed a receipt for the said amount, which was
witnessed by two witnesses.
4. The Defendant claimed to be the absolute owner/Bhumidaar of the
said land on the basis of an agreement to sell entered into between the
Defendant and one Mr. Kapoor Singh Dagar - the Bhumidaar, dated 29th
March, 2013.
5. The Plaintiff's case is that as per clause 5 of the agreement, the
Defendant was to obtain NOC from the concerned ADM for execution of
the sale deed, 15 days prior to the date of final payment. The date of final
payment was to be 22nd June, 2013. Since the Defendant did not obtain the
NOC in time, the Plaintiff is entitled to a refund of the sum paid. The
Plaintiff also got issued a legal notice dated 30th December, 2013, since the
Defendant failed to obtain the NOC. The Plaintiff has placed on record the
bank statement to prove that the sum of Rs.1,50,00,000/- was credited to the
Defendant's account.
6. The Defendant filed its leave to defend on the ground that the Plaintiff
did not make the payment of the balance sale consideration. It was further
stated by the Defendant that it had entered into an agreement to sell dated
29th March, 2013 with one Mr. Kapoor Singh Dagar. The Defendant took the
plea that it had never assured the Plaintiff that the Defendant would get the
sale deed executed in its favour on or before 18th June, 2013. Since the
Plaintiff did not approach the Defendant with the payment of the remaining
sale consideration, the Plaintiff failed to prove readiness and willingness.
The Defendant relied upon clause 5 of the agreement and contended that the
time period for obtaining the NOC is open ended, and thus the agreement is
still alive. The Defendant has taken the plea that since the Plaintiff did not
make the remaining payment, its transaction with Mr. Kapoor Singh Dagar
also stood cancelled, and hence the transaction with the Plaintiff could not
be fructified. In view of this, the Defendant submits that the Plaintiff itself
being in breach, is not entitled to a decree.
Suit No.2 - CS (OS) 381/2014
7. The facts of this case are similar to the facts in the abovementioned
case. The Plaintiff entered into an agreement to sell dated 11th April, 2013
("ATS-2") with the Defendant for the sale of 1/2 share In 11 bigha 15 biswa
out of Khasra Nos. 74/21/2 (1-2), 85/1 (4-09), 10(3-10), 88/14(2-12), 15(0-
2) and ½ share in 4 bigha out of Khasra No.28/23/2(4-0) & 1/6 share in land
measuring 4 biswas out of Khasra No.31/26 (0-4) and ½ share in land
measuring 13 bigha 16 biswa out of Khasra No.62/15 (4-16), 6(4-16), 15(4-
04) situated in the revenue estate of Village Ujjwa, Tehsil Najafgarh, New
Delhi. The total sale consideration was Rs.3,20,00,000/- per acre, out of
which Rs.1,33,00,000/- was paid by the Plaintiff to the Defendant. The
receipt dated 11th April, 2013 is also on record.
8. The counsel for the Plaintiff has submitted that the Defendant, having
failed to obtain the NOC, was in breach of the agreement to sell. The
Plaintiff had therefore no obligation to pay the remaining consideration
amount. The advance amount is liable to be refunded as the power of
forfeiture could not have been exercised by the Defendant. It is further
submitted by Ld. Counsel for the Plaintiff that the Defendant was guilty of
breach on more than one count. The NOC from the concerned ADM was to
be obtained 15 days prior to the final payment. The back-to-back agreements
entered into by the Defendant with Mr. Rambir Singh and Mr. Ranbir Singh
were themselves cancelled and hence the Defendant had no surviving rights
in the property to even obtain a NOC.
9. On the other hand, it is submitted by Mr. Sanjay Poddar, Ld. Senior
Counsel appearing on behalf of the Defendant that the above two cases
relate to two agreements for three parcels of land. One parcel of land
belonged to Mr. Ranbir Singh, the second parcel of land belonged to Mr.
Rambir Singh and the third belonged to Mr. Kapoor Singh Dagar. These are
back-to -back agreements, and time was not of the essence of the contract. In
fact, the Plaintiff did not have requisite funds to make the payment as
required under the agreement to sell and it told the Defendant not to get the
NOC. The NOC was in fact obtained and given to the Plaintiff on 13th
September, 2013, which is Annexure C to the leave to defend. After this
NOC was submitted, the Plaintiff, in fact, issued a cheque dated 27th
September 2013, of Rs.20,00,000/- in favour of Mr. Ranbir Singh. The
original cheque, which has been placed on record, was returned due to
insufficient funds. He submits that due to the fault of the Plaintiff, the
Defendant incurred a huge loss and had to forfeit Rs.12,87,500/- paid to Mr.
Ranbir Singh, Rs.40,18,750/- paid to Mr. Rambir Singh and Rs.75,00,000/-
paid to Mr. Kapoor Singh Dagar. In fact, all the three agreements between
the Defendant and the respective parties were cancelled because the Plaintiff
did not make the payment. He further submits that the payment made by the
Plaintiff constituted the earnest money deposit, which was liable to be
forfeited.
10. In rejoinder submissions, Ld. counsel for the Plaintiff submits that the
amount paid is not the earnest money, but is in fact advance payment which
cannot be forfeited. Mr. Ranbir Singh himself terminated the agreement with
the Defendant on 26th September, 2013, and any payment made by the
Plaintiff to Mr. Ranbir Singh after the said date is not related to the
transaction with the Defendant. The NOC obtained on 13th September, 2013
was only in respect to one portion of the land. For the major portion of the
land, no NOC was obtained. Since, the Defendant did not adhere to the
terms of the agreement, the suit is liable to be decreed.
Analysis and findings
11. The agreements to sell dated 7th April, 2013 and 11th April, 2013 have
identical clauses except in respect of the description of the property and the
consideration amount. The relevant clauses of the said two agreements to
sell, which are necessary for the purpose of deciding the application for
leave to defend are set out herein below:
"2. That the first party shall hand over the physical
vacant possession of the said land to the second party
at the time of registration of the Sale Deed.
3. That the first party assure/s the second party that
he/she/they is/are the absolute owner(s)/vide
agreements to sell dated 25.03.13 of the said land and
that he/she/they has/have not encumbered in any
manner i.e. such as sale, gift, mortgage, court-
litigation, dispute, charge, lien, notices, agreement,
etc. etc.
4. That the first party further assures the second party
that he/she/they is/are exclusive owner(s)/bhumidar(s)
of the said land and as such he/she/they is/are fully
competent to enter into an agreement and if someone-
else claims any right, title and interest as owner or
otherwise or raises any objection for the sale then the
first party shall be liable and responsible for the losses
if any suffered by the second party.
5. That the first party shall apply and obtain the No
Objection Certificate in favour of the second party or
the nominee/s at his/her/their own costs and
responsibility at least 15 (fifteen) days before the date
of final payment. In case the first party fails to obtain
the NOC then this agreement shall stands
automatically extended till the NOC is obtained.
6. That the first party shall execute and register the
sale deed and give the physical vacant possession
within the said stipulated period to the second party or
his/her/their nominee/s failing which the second party
shall have a right to get this transaction executed
through the court of law under specific performance of
the contract at the cost of the first party.
7. That in case if the second party fails to pay the
balance amount within the said stipulated period, then
the advance/earnest money paid shall be forfeited by
the first party. And this agreement to sell will
automatically come to an end."
12. A perusal of the above clauses in the context of the agreement to sell
shows that there was no doubt that these two agreements were back-to-back
agreements. The clauses which show that the agreements were back to back
agreements are set out herein below:
Agreement to Sell dated 7th April, 2013
"Whereas the first party is/are the absolute owner/s
and bhumidar/s of 9 Bighas 6 Biswas out of Khasrna
No.31/19/2 (2-3), 12(3-19) & 13/1 (3-4) through
agreement to sell dated 29-03-13 , situated in the
revenue estate of Village Jhuljhuli, Tehsil Najafgarh,
New Delhi.
Agreement to Sell dated 11th April, 2013
Whereas the first party is/are the owner/s vide
agreements to sell with bhumidars dated 25.3.2013 of
1/2 share In 11 Bigha 15 Biswa out of K No's 74/21/2
(1-2), 85/1 (4-09), 10(3-10), 88/14(2-12), 15(0-2) and
½ share in 4 Bigha out of K.No.28/23/2(4-0) & 1/6
share in 4 Biswas out of K No.31/26 (0-4) and ½ share
in 13 Bigha 16 Biswa out of Khasra No.62/15 (4-16),
6(4-16), 15(4-04). Total land, situated in the revenue
estate of Village Ujjwa, Tehsil Najafgarh, New Delhi"
13. While in CS(OS) 402/2014, the back to back agreement was with Mr.
Kapoor Singh Dagar, dated 29th March, 2013, in CS(OS) 381/2014, the
back-to-back-agreements were with Mr. Rambir Singh and Mr. Ranbir
Singh, both dated 25th March, 2013.
14. The Court is however not dealing with disputes under the said two
agreements. What is relevant to decide the present dispute are the two
agreements to sell dated 7th April, 2013 and 11th April, 2013. The
consideration stipulated in the said agreements is not in dispute. The
amounts paid by the Plaintiff i.e. to the tune of Rs.1,33,00,000/- and
Rs1,50,00,000/- at the time of execution of the agreements to sell, are also
not in dispute. The only question is whether the Defendant can forfeit the
said amounts.
15. A perusal of the clauses in the agreements to sell shows that no
physical possession was handed over at the time of execution of the
agreements. Execution of the sale deeds had been contemplated. The
Defendant was required, under clause 5, to obtain a NOC from the
concerned ADM, 15 days prior to the date of final payment. The date of
final payment in ATS-1 is 22nd June, 2013 and in ATS-2 is 90 days from
11th April, 2013 i.e., 11th July, 2013.
16. The NOC was to be obtained 15 days prior to the final payment,
which admittedly was not obtained. The Defendant argues that for a portion
of the land, he obtained a NOC from the concerned ADM on 13th
September, 2013. Such a NOC for only part of the land would still not come
to the Defendant's aid.
17. The Defendant argues that clause 5 is open ended, and the NOC could
have been obtained at any point of time. This is a self-defeating argument of
the Defendant. On the one hand, the Defendant has pleaded that the Plaintiff
failed to make payment within the prescribed period. Thus, the Defendant,
while arguing that time was of the essence of the contract for making of
payment, in the same breath, argues that time was not the essence of the
contract for obtaining the NOC. The NOC was a pre-condition for making of
the payment. No payment could have been made till the NOC was obtained.
No sale deed could have been executed without first, the NOC and secondly
the payment. The NOC and payment were interlinked and the NOC
preceded the payment.
18. The plea of the Defendant that the Plaintiff told the Defendant not to
obtain the NOC is not borne out from the record. In fact, the Plaintiff has
claimed that after realizing that the Defendant may not be able to get the sale
deed executed, it entered into an independent transaction with the owners.
19. The fact that the agreement, which the Defendant had with Mr. Ranbir
was itself terminated as per Annexure F to the leave to defend application
goes to show that after 26th September, 2013, the Defendant could not have,
in any event, obtained a NOC. Thus, for the Defendant to obtain the NOC,
was an impossibility.
20. The Defendant's reliance on a cheque of Rs.20 lakhs in favour of Mr.
Ranbir Singh, does not improve its case in any manner as there appears to be
some relationship between the Defendant and Mr. Ranbir Singh, and must
have come in possession of the said cheque. The Defendant has attempted to
weave a story around the said cheque, which is not borne out from the
record. This fact is extraneous to the case between the Plaintiff and the
Defendant. Thus, the Plaintiff had rightly issued the notice seeking refund of
the amount.
21. In a leave to defend application, the Court has to only see whether the
Defendant has a triable defence. The argument of the Defendant, that time
was not the essence of the contract for obtaining NOC is liable to be rejected
on two counts:
The Defendant itself pleaded that the Plaintiff failed to make payment
of the balance consideration with the stipulated time, hence for
payment being made, time was the essence of the contract;
Even if there is an open-ended clause, as per Section 46 of the Indian
Contract Act, 1872, in case no specific time period is prescribed for
the performance of an obligation, the obligation must be performed
within a reasonable time.
22. In the present case, reasonable time would include that amount of
time during which the Defendant could have obtained NOC. After
termination of the contract by Mr. Ranbir Singh on 26th September, 2013,
the Defendant could not have even obtained the NOC since the very basis of
the agreement to sell had collapsed.
23. Thus, clause 5 cannot be interpreted in the manner in which the
Defendant seeks to interpret the same.
24. The agreement does not permit forfeiture in any situation except if the
Plaintiff fails to pay the balance amount. Clause 7 is clear to this effect. The
clear position on record is that prior to the final date for making payment i.e.
22nd June, 2013 in case of ATS-1 and 11th July, 2013 in case of ATS-2, it
did not obtain the NOC. The NOC had to be obtained 15 days prior to the
final date of payment.
25. Thus, no occasion arose for the Plaintiff to pay the balance sale
consideration. Thus, the Plaintiff is not in breach, and the advance/earnest
money cannot be forfeited by the Defendant.
26. The Defendant has raised a further issue as to the nature of the
amount received by it. The agreement to sell itself describes the amount as
advance/earnest money.
27. The Defendant's counsel has submitted that it has already filed a suit
against the Plaintiff in respect of Rs.40 lakhs, which it had to forego in view
of the transaction with Mr. Rambir Singh. The said suit is pending before the
District Courts in Dwarka, Delhi and the Defendant can pursue the same
against the Plaintiff.
28. No other claims have been raised in respect of any losses suffered by
the Defendant. The losses, if any, are not the subject matter of the present
suit as the Defendant has not raised any claims in this regard. The
advance/earnest money having been admittedly received by the Defendant,
the NOC having not been obtained as per the stipulation in the agreement to
sell, the obligation to pay the balance sale consideration did not arise. Thus,
there is no triable defence raised by the Defendant. The law on this subject is
well settled in IDBI Trusteeship Services Ltd. v Hubtown Ltd. Civil Appeal
No. 10860/2016, Decided on November 15th, 2016. The Supreme Court held
as under:
"18. Accordingly, the principles stated in paragraph
8 of Mechelec's case will now stand superseded, given
the amendment of O.XXXVII R.3, and the binding
decision of four judges in Milkhiram's case, as
follows:
a. If the defendant satisfies the Court that he has a
substantial defence, that is, a defence that is likely to
succeed, the plaintiff is not entitled to leave to sign
judgment, and the defendant is entitled to
unconditional leave to defend the suit;
b. if the defendant raises triable issues indicating that
he has a fair or reasonable defence, although not a
positively good defence, the plaintiff is not entitled to
sign judgment, and the defendant is ordinarily entitled
to unconditional leave to defend;
c. even if the defendant raises triable issues, if a doubt
is left with the trial judge about the defendant's good
faith, or the genuineness of the triable issues, the trial
judge may impose conditions both as to time or mode
of trial, as well as payment into court or furnishing
security. Care must be taken to see that the object of
the provisions to assist expeditious disposal of
commercial causes is not defeated. Care must also be
taken to see that such triable issues are not shut out
by unduly severe orders as to deposit or security;
d. if the Defendant raises a defence which is plausible
but improbable, the trial Judge may impose
conditions as to time or mode of trial, as well as
payment into court, or furnishing security. As such a
defence does not raise triable issues, conditions as to
deposit or security or both can extend to the entire
principal sum together with such interest as the court
feels the justice of the case requires.
e. if the Defendant has no substantial defence and/or
raises no genuine triable issues, and the court finds
such defence to be frivolous or vexatious, then leave
to defend the suit shall be refused, and the plaintiff is
entitled to judgment forthwith;
f. if any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to
defend the suit, (even if triable issues or a substantial
defence is raised), shall not be granted unless the
amount so admitted to be due is deposited by the
defendant in court."
29. If the Defendant has no triable defence, the leave to defend is not
liable to be granted.
30. The Plaintiff has relied upon Subhash Chand v. M/s Versatile
Commotrade Pvt. Ltd., RFA (OS) (COMM) 12/2017, Decided on 18th
August, 2017, which is a suit involving a similar agreement to sell entered
into by the Plaintiff with a third party. In the said suit, a Division Bench of
this court upheld the decree granted by the Ld. Single Judge and held that,
the Plaintiff was entitled to seek refund of money.
31. The Defendant has relied upon a judgment of this Court in M/s
Versatile Commotrade Pvt. Ltd. v M/s Angad Developers Pvt. Ltd CS (OS)
802/2014, Decided on 20th July, 2018 . In the said case, there were two
amounts of which recovery was sought. One amount was the earnest money
and the second amount was part of the balance sale consideration. In respect
of the second amount, the suit was decreed. In respect of the first amount,
the matter was sent to trial, as there was a forfeiture clause, which was relied
upon by the Defendant and the matter required evidence to be led to justify
the forfeiture and to establish as to who was in breach. This judgement is of
no application in the present case as the amount has been paid at one go and
has been described as Earnest money/advance payment. In the said
judgment, the amounts were paid in two different tranches and were
differently described and in the present case, the aspect as to who is in
breach does not require oral evidence as the facts are not in dispute.
32. The leave to defend applications are accordingly liable to be
dismissed and the suits are liable to be decreed. CS (OS) 381/2014 is
decreed for a sum of Rs.1,33,00,000/- along with simple interest @ 10% per
annum from the date of issuance of notice dated 13th December, 2013, till
the date of decree.
33. CS (OS) 402/2014 is decreed for a sum of Rs.1,50,00,000/- along
with simple interest @ 10% per annum from the date of issuance of notice
dated 30th December 2013, till date of decree.
34. Decree sheet be drawn. All pending I.As are disposed of.
PRATHIBA M. SINGH
JUDGE
OCTOBER 26, 2018
Rahul
