Rajesh Sabharwal vs Rajasavi Estate & Developers Pvt. ...
2019 Latest Caselaw 2178 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                       Date of decision: 25th April, 2019
+          CS(OS) 445/2018, IA No.398/2019 (u/O I R-10 CPC), IA
           No.810/2019 (u/O VIII R-1A CPC) & IA No.1346/2019 (u/O
           XII R-6 CPC)

           RAJESH SABHARWAL                      ..... Plaintiff
                       Through:
                             Mr. Fanish Kumar Jain & Mr.
                             Paritosh Budhiraja, Advs.
                       Versus
    RAJASAVI ESTATE & DEVELOPERS
    PVT. LTD. & ORS.                        ..... Defendants
                  Through: Mr. K.R. Chawla, Mr. Sunil
                             Verma & Mr. Mohinder Singh
                             Sachdeva, Advs.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

 1.

The plaintiff has instituted this suit for recovery of Rs.4,17,19,650/- with interest at 18% per annum jointly and severally from three defendants viz. (i) Rajasavi Estate & Developers Pvt. Ltd.,

(ii) Smt. Savita Bhatia, and, (iii) Abhishek Bhatia.

2. The pleadings have been completed and the plaintiff has filed IA No.1346/2019 under Order XII Rule 6 of the CPC.

3. Applications of the defendants for deletion of defendants no.2 and 3 and for impleadment of Jasjit Singh and Satwant Kaur as defendants no.2 and 3 in place of existing defendants no.2 and 3 and for filing of additional documents are also for consideration.

4. The counsel for the plaintiff and the counsel for the defendants have been heard.

5. The plaintiff instituted this suit, pleading that (i) Jasjit Singh and Satwant Kaur aforesaid are the owners of property No.29/56 ad- mearuing 555.55 sq. yds., West Punjabi Bagh, New Delhi; (ii) the said Jasjit Singh and Satwant Kaur entered into a Collaboration Agreement dated 28th January, 2014 with the defendant no.1 for re-development of the said property of Jasjit Singh and Satwant Kaur and under which Collaboration Agreement, the second floor of the re-developed / re- constructed property with proportionate share in the stilt parking and land underneath was to fall to the share of the defendant no.1 and the defendant no.1 was also authorized to sell the same; (iii) the defendant no.1, acting through defendants no.2 and 3, vide Agreement dated 3rd December, 2014 agreed to sell the aforesaid second floor etc. to the plaintiff for a total consideration of Rs.7,21,00,000/- and out of which received a sum of Rs.72,00,000/- at the time of entering into Agreement to Sell on 3rd December, 2014 and a sum of Rs.1,88,00,000/- between 17th January, 2015 and 29th November, 2015; (iv) the plaintiff has thus paid a total amount of Rs.2,60,00,000/- under the Agreement dated 3rd December, 2014; (v) the plaintiff, in February, 2016 when visited the property found that the defendants were not doing the work of finishing and furnishing of the second floor agreed to be sold to the plaintiff; (vi) the plaintiff got issued a notice dated 10th February, 2016 to the defendants as well as Jasjit Singh and Satwant Kaur calling upon them to complete the construction and deliver possession of the aforesaid 2nd floor to the plaintiff against receipt of the balance sale consideration; (vii) Jasjit Singh and Satwant Kaur, vide their reply to the aforesaid legal notice

informed the plaintiff that they had already cancelled the Collaboration Agreement dated 28th January, 2014 with the defendants and that the plaintiff could have no claim against the said Jasjit Singh and Satwant Kaur because the plaintiff had no privity of contract with them; (viii) the defendants however did not reply to the said legal notice sent by the plaintiff; (ix) thereafter, the plaintiff made complaints to the SHO, Punjabi Bagh, New Delhi and the DCP, West District, Delhi on 1st March, 2016 and 7th March, 2016 respectively;

(x) pursuant to the complaints, the defendants sent a reply-cum-notice dated 30th March, 2016 denying receipt of Rs.2,60,00,000/- and claiming to have received Rs.2,50,00,000/- from the plaintiff and claiming to have forfeited the said amount due to plaintiff not making timely payments and claiming further amount of Rs.1,08,15,000/- from the plaintiff; (xi) the plaintiff got issued another notice dated 3 rd April, 2016 to the defendants enquiring as to how the defendants were entitled to recover any further amounts when Jasjit Singh and Satwant Kaur had already cancelled the Collaboration Agreement and enquiring as to what was the right of the defendants to recover further amounts from the plaintiff; (xii) once the Collaboration Agreement already stood cancelled, the defendants were/are incapable of performing their part of the Agreement to Sell dated 3 rd December, 2014 with the plaintiff and are liable to return Rs.2,60,00,000/- received from the plaintiff with interest. Hence, the present suit for recovery of Rs.2,60,00,000/- along with pre-suit interest at the rate of 18% per annum amounting to Rs.1,57,19,650/- i.e. for a total sum of Rs.4,17,19,650/-.

6. The defendants have contested the suit by filing a written statement pleading that, (a) the suit has been filed in collusion with Jasjit Singh and Satwant Kaur; (b) the plaintiff, a property dealer, after verifying the title of Jasjit Singh and Satwant Kaur and after satisfying himself with respect to the Collaboration Agreement, had entered into the Agreement dated 3rd December, 2014 with the defendant no.1; (c) the plaintiff, prior to entering into the agreement with the defendant no.1, had also discussed with Jasjit Singh and Satwant Kaur as also admitted by the plaintiff before the police and in the legal notice dated 10th Febraury, 2016; (d) the defendant no.1 completed the construction of the property at its own cost, by the end of December, 2015, when Jasjit Singh and Satwant Kaur illegally and arbitrarily vide legal notice dated 14th January, 2016 cancelled the Collaboration Agreement dated 28th January, 2014 and on 25th January, 2016 executed Sale Deed of the second floor of the property in favour of M/s Manikaran International Pvt. Ltd.; (e) the sale deed executed by Jasjit Singh and Satwant Kaur in favour of M/s Manikaran International Pvt. Ltd. is a sham document inasmuch as it was without any consideration and under the Collaboration Agreement, the defendant no.1 had time till 30th May, 2016 to complete the construction; (f) the defendant no.1 also initiated proceedings against Jasjit Singh and Satwant Kaur in accordance with the arbitration clause in the Collaboration Agreement and also applied for interim relief; (g) the collusion of the plaintiff with Jasjit Singh and Satwant Kaur is evident from the plaintiff going slow in pursuing the criminal complaint earlier filed against them; (h) in fact, the plaintiff as property broker of Jasjit Singh and Satwant

Kaur arranged sale of the third floor of the said property; (i) the present suit for recovery of money is not maintainable and the entitlement if any of the plaintiff was to sue for specific performance;

(j) as per the Collaboration Agreement, the sale deed in respect of second floor of the property was to be executed by Jasjit Singh and Satwant Kaur in favour of the plaintiff; (k) the plaintiff had intentionally not impleaded the Jasjit Singh, Satwant Kaur and M/s Manikaran International Pvt. Ltd. in this suit; (l) the suit is barred by limitation; the Agreement to Sell is dated 3rd December, 2014 and the suit has been filed on 20th August, 2018; (m) the defendant no.1 has suffered huge losses on account of illegal acts of Jasjit Singh and Satwant Kaur and has made a counter claim against them in arbitration proceedings; (n) only Jasjit Singh and Satwant Kaur are liable to refund the amounts claimed by the plaintiff in this suit; (o) the present suit qualifies as a commercial suit and has been wrongly filed as an ordinary suit; (p) the defendant no.1 has forfeited Rs.72,00,000/- paid by plaintiff as earnest money as well as other amounts paid by the plaintiff; (q) the plaintiff even otherwise was in breach of the terms and conditions of the Agreement to Sell (details in this regard are pleaded but it is not deemed expedient to burden this judgment therewith); (r) the plaintiff had entered into the Agreement to Sell dated 3rd December, 2014 with the defendant no.1, only to re-sell the property; (s) the plaintiff, prior to legal notice dated 10th February, 2016, had no grievance against the defendant no.1 of breach of Agreement to Sell; (t) the plaintiff in fact had avoided to take possession of the second floor etc. of the property; and, (u) the

defendants no.2 and 3 are not necessary or proper parties and are distinct from the defendant no.1 company.

7. The counsel for the plaintiff has argued that since on cancellation by Jasjit Singh and Satwant Kaur of the Collaboration Agreement dated 28th January, 2014 with the defendant no.1, the defendant no.1 was/is left with no right, title or interest in the property agreed to be sold to the plaintiff, the pleas in the written statement of the defendants of breach of Agreement to Sell dated 3rd December, 2014 by the plaintiff are of no relevance. It is further contended that the privity of contract of the plaintiff was with the defendants only and not with Jasjit Singh and Satwant Kaur and the pleas in the written statement of the defendants, that under the Agreement to Sell, the sale deed was to be executed in favour of the plaintiff by Jasjit Singh and Satwant Kaur, are contrary to the terms and conditions of the Agreement to Sell.

8. I have by way of abundant caution enquired from the counsel for the plaintiff, whether there was any Power of Attorney by Jasjit Singh and Satwant Kaur in favour of the defendant no.1 or any of the defendants to enter into the Agreement to Sell with respect to the second floor etc. of the property.

9. The counsel for the plaintiff denies and on further prodding states that no such plea has been taken by the defendants even.

10. A perusal of the Agreement to Sell dated 3rd December, 2014 also shows the same to have been entered into by the defendant no.1 acting through defendant no.2, in its own right, in favour of the

plaintiff and not as the attorney or agent of the Jasjit Singh and Satwant Kaur.

11. A perusal of the Agreement to Sell further shows the defendants

(i) therein to have claimed their entitlement to enter into the same in pursuance of the Collaboration Agreement dated 24th January, 2014 and claiming themselves to be owners of the property agreed to be sold therein; (ii) to have received the monies mentioned therein in their own names and not in the name of Jasjit Singh and Satwant Kaur; (iii) having reserved to themselves the right of forfeiture of the monies paid in case of non-payment of balance amount within stipulated time and not having reserved the right of forfeiture in favour of Jasjit Singh and Satwant Kaur; (iv) in their personal individual capacity to have meted out assurances and made representations to the plaintiff, again not in their capacity as agents of Jasjit Singh and Satwant Kaur or on their behalf; and, (v) not having any clause for execution of sale deed in favour of the plaintiff or his nominee by Jasjit Singh and Satwant Kaur.

12. A perusal of the Collaboration Agreement dated 28th January, 2014 shows, (a) the defendant no.1 to have agreed to bear the costs of re-development / re-construction of the property and to have further agreed to pay certain monies to Jasjit Singh and Satwant Kaur and to have agreed to complete the construction within 20 months from the date of sanction of the plan; (b) it having been agreed between Jasjit Singh and Satwant Kaur on the one hand and the defendant no.1 on the other hand that the second floor with proportionate share in stilt parking will be taken by the defendant no.1 and the defendant no.1

being entitled to sell the said floor and to receive earnest money, part payment and sale consideration thereof from an intending buyer and to handover vacant possession thereof to the intending buyer; and, (c) Jasjit Singh and Satwant Kaur to have agreed to execute and get registered a sale deed of the second floor etc. in favour of defendant no.1 at the time of completion of structural work i.e. at the time of casting of lintel of the third floor.

13. The defendants are also found to have filed a copy of the arbitral award dated 29th January, 2019 in the arbitration between defendant no.1 on the one hand and Jasjit Singh and Satwant Kaur on the other hand. A perusal of the said award shows (i) the Collaboration Agreement dated 28th January, 2014 to have been held to bind the parties thereto and their contractual relationship; (ii) the claim of Jasjit Singh and Satwant Kaur for balance amount due under the Collaboration Agreement from the defendant no.1 having been rejected; (iii) the claim of the defendant no.1 for specific performance to have been rejected on account of sale deed dated 25th January, 2016 of the second floor etc. in favour of the M/s Manikaran International Pvt. Ltd. having already been registered; (iv) the claim of the defendant no.1 for ground floor in lieu of second floor to have been rejected; (v) the defendant no.1 having been held to be not entitled to specific performance also for the reason of having alternatively claimed compensation; (vi) the claim of the defendant no.1 for recovery of Rs.1,75,25,000/- and Rs.20,25,000/- towards monies paid to Jasjit Singh and Satwant Kaur with interest having been allowed;

(vii) the claim of Jasjit Singh and Satwant Kaur for recovery of

Rs.2,10,00,000/- advanced as loan to the defendant no.1 having been allowed; (viii) the claim of Jasjit Singh and Satwant Kaur for recovery of Rs.80,50,000/- from the defendant no.1 towards defaults made by the defendant no.1 being allowed; (ix) the claim of defendant no.1 for recovery of costs of construction carried out in the property having been rejected; (x) the claim of defendant no.1 for loss of profits having been rejected; (xi) the claim of Jasjit Singh and Satwant Kaur for damages for mental harassment having been rejected; and, (xii) the claim of defendant no.1 of value of building material lying at the site having been rejected.

14. The counsel for the defendants has argued, that (i) the defendants no.2 and 3 who are merely Directors of the defendant no.1, are not liable for dues of defendant no.1 and have been wrongly impleaded and are liable to be deleted; (ii) on the contrary, Jasjit Singh and Satwant Kaur are necessary parties to the suit; the amounts received by defendant no.1 from the plaintiff were used in construction of the property, as claimed by the plaintiff also and the benefit of which construction has gone to Jasjit Singh and Satwant Kaur and under Section 70 of the Indian Contract Act, 1872, the claim of the plaintiff for the said amount has to be against Jasjit Singh and Satwant Kaur; (iii) the plaintiff did not make payments under the Agreement to Sell dated 3rd December, 2014 on the dates prescribed therein and was in breach, entitling the defendants to forfeit the monies paid; and, (iv) the suit claim is barred by time; attention is invited to Articles 23 and 24 of the Schedule to the Limitation Act, 1963.

15. I will first take up the aspect of limitation.

16. Article 23 of the Limitation Act provides limitation of three years from the date when the money is received, for a suit for money payable by the defendant to the plaintiff for the money received by the defendant for the plaintiff's use.

17. I have enquired from the counsel for the defendants, the date for completion of the sale under the Agreement to Sell dated 3rd December, 2014.

18. The counsel for the defendants states that the same was to be completed in December, 2016.

19. The present suit is found to have been instituted on 21 st August, 2018.

20. I have further enquired from the counsel for the defendants, when Jasjit Singh and Satwant Kaur cancelled the Collaboration Agreement with the defendant no.1.

21. The counsel for the defendants states that though the Collaboration Agreement was cancelled on 14th January, 2016 but the defendants learnt of the same only in August, 2016.

22. In the aforesaid scenario, I am unable to understand as to how the suit claim can be said to be barred by time.

23. Articles 23 and 24 to which attention is drawn are clearly not applicable. The monies paid by the plaintiff to the defendants and for recovery of which this present suit has been filed were paid by way of earnest money / part consideration for purchase of an immovable property by the plaintiff from the defendant no.1 and the monies so paid would not qualify as money payable to the plaintiff for money

received by the defendant for plaintiff's use. On the contrary, the limitation for the present suit would be governed by Article 113 of the Limitation Act. Reference in this regard can be made to Ram Lal Puri Vs. Gokalnagar Sugar Mills Co. Ltd. AIR 1967 Del 91 (DB), India Trade Promotion Organization Vs. India International Textile Machinery Exhibitions Society (2013) 199 DLT 40 (DB) and MS Shoes East Ltd. Vs. Delhi Development Authority (2018) 249 DLT

199.

24. Thus, the plea of limitation, in view of undisputed factual position neither has any merit nor requires any trial.

25. As far as the argument of the counsel for the defendants, of the entitlement of the plaintiff for recovery of monies paid being only against Jasjit Singh and Satwant Kaur is concerned, again neither did the plaintiff has any privity of contract with Jasjit Singh and Satwant Kaur nor did the defendant no.1 enter into the agreement dated 3rd December, 2014 with the plaintiff, as attorney or agent of Jasjit Singh and Satwant Kaur. The position in law was that the said Jasjit Singh and Satwant Kaur, in consideration of the Collaboration Agreement agreed to sell the second floor etc. of the property to the defendant no.1 and the defendant no.1 acting through defendant no.2 entered into Agreement to Sell the second floor etc. to the plaintiff. The contract of the defendant no.1 through defendant no.2 contained in the Agreement dated 3rd December, 2014 is, as aforesaid, on principal-to- principal basis and in which the defendants stood to earn for themselves and not for and on behalf of the said Jasjit Singh and Satwant Kaur.

26. Thus, even if the monies paid by the plaintiff may have gone towards construction raised and benefit of which has gone to the Jasjit Singh and Satwant Kaur, there is nothing in law to compel the plaintiff to recover the said monies from the said Jasjit Singh and Satwant Kaur, allowing the defendants to go scot-free. In fact, the said contention of the counsel for the defendants is falsified from the claim made by the defendants in arbitration proceedings against Jasjit Singh and Satwant Kaur. Though the said claim was rejected but it proves the falsity of the defendants being taken in this suit.

27. As far as the only other contention of the counsel for the defendants, of the plaintiff being in breach of the Agreement to Sell and the defendants being entitled to forfeit the monies is concerned, once the claim of the defendants for specific performance of their Collaboration Agreement dated 28th January, 2014 against Jasjit Singh and Satwant Kaur has been dismissed, the breach if any by the plaintiff of the terms and conditions of the Agreement to Sell dated 3 rd December, 2014 is of no avail since the defendants admittedly, prior to the date by which they agreed to complete the sale in pursuance to the Agreement to Sell dated 3rd December, 2014, were divested of the property agreed to be sold, rendering the defendants incapable of performing their part of the Agreement to Sell. Once it is so, the defendants cannot claim the right of forfeiture. Reference in this regard can be made to Gian Chand Vs. Gopala (1995) 2 SCC 528 and Thiriveedhi Channaiah Vs. Gudipudi Venkata Subba Rao (2009) 17 SCC 341.

28. The counsel for the defendants has handed over a compilation of fourteen judgments but none of which are found applicable to the aforesaid controversy.

29. The counsel for the defendants at this stage states that the termination by Jasjit Singh and Satwant Kaur of the Collaboration Agreement dated 28th January, 2014 has in the arbitral award been held to be illegal.

30. Even if that be so, the fact remains that the award did not grant the relief of specific performance of the Collaboration Agreement dated 28th January, 2014 to the defendants, thereby disentitling the defendants from completing their part of the obligations under the Agreement to Sell dated 3rd December, 2014.

31. No other argument has been urged.

32. The plaintiff is thus entitled to refund of the monies paid.

33. There is some controversy also as to the amount paid by the plaintiff, with the plaintiff claiming the amount paid to be Rs.2,60,00,000/- and the defendants stating the same to be Rs.2,55,00,000/-. The counsel for the plaintiff however states that since the suit is being allowed and for the sake of expediency, he does not want trial for the disputed amount of Rs.5,00,000/- and gives up the claim therefor.

34. The counsel for the plaintiff has already stated that he is not pressing the claim for recovery of double the amount paid. He however states that the plaintiff is entitled to interest.

35. It is also stated that the defendant no.1 Company has no assets from which the monies can be recovered and it is for this reason that

the decree is sought besides against the defendant no.1 Company, also against its directors defendants no.2&3 who have reaped the benefits of the said monies.

36. The counsel for the defendants of course contends that since agreement was admittedly between the defendant no.1, the defendants no.2&3 cannot be liable therefor.

37. Considering that a large part of the amount has been paid and received in cash by the defendants no.2&3, I am of the view that a case for piercing the corporate veil is made out. The cloak of a company cannot be permitted to be used to illegally withhold monies. Reference in this regard can be made to Subhra Mukherjee Vs. Bharat Coking Coal Ltd. (2000) 3 SCC 312, Singer India Ltd. Vs. Chandar Mohan Chadha (2004) 7 SCC 1, Saurabh Exports Vs. Blaze Finlease & Credits Pvt. Ltd. (2006) 129 DLT 429 and Dara Projects Pvt. Ltd. Vs. Business India Exhibitions Pvt. Ltd. (2017) SCC OnLine Del 8069.

38. As far as the aspect of interest is concerned, the counsel for the defendants has referred to Union of India Vs. Watkins Mayor and Co. AIR 1966 SC 275 to contend that interest not exceeding @ 6% per annum can be awarded.

39. I am unable to agree. The Nationalised Banks also are in today's date giving interest at the rate of 7 to 8% per annum on fixed deposits accepted by them. The interest earned on company deposits and on other investments is far more. Considering the said facts, I am of the view that award of interest at 10% per annum is appropriate.

40. A decree is accordingly passed, in favour of the plaintiff, and jointly and severally against the defendants,

(i) of recovery of Rs.2,55,00,000/- along with interest @10% per annum w.e.f. 1st December, 2015 (the last payment made by the plaintiff to the defendants being on 29th November, 2015) till the date of realisation and,

(ii) of recovery of costs, with professional fee assessed at Rs.1,50,000/-.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J APRIL 25, 2019 'gsr'/pp..

(Corrected and released on 17th May, 2019).