IN THE COURT OF DR. T. R. NAVAL, DISTRICT & SESSIONS JUDGE, DISTRICT SHAHDARA, KARKARDOOMA COURTS, DELHI CS No. 363/12 Unique Identification No. 02402C0168182012 1. Smt. [ENTITY] W/o Sh. Akshay Kumar Jain 2. Smt. [ENTITY] W/o Sh. Amit Jain Both R/o 1/4649/61A,Gali no.3, New Modern Shahdara, Mandoli Road, Shahdara, Delhi -110032 Plaintiffs Versus 1. Smt. [ENTITY] W/o Sh. [ENTITY] 2. [ENTITY] S/o Late Shri Lala Hari Chand Both R/o 1/4511A, Ram Nagar Extn. Mandoli Road, Shahdara Delhi-110032 Defendants Date of Institution : 02.07.2012 Date of Arguments : 09.09.2015 Date of Judgment : 26.09.2015 Suit for Declaration and recovery of Rs. 10,43,000/- (Rupees Ten Lacs Forty Three Thousands only) JUDGMENT
This judgment will dispose off a suit for declaration and recovery of Rs.10,43,000/- (Rupees Ten Lacs Forty Three Thousands only) filed by the plaintiff against the defendants.
2. The facts in brief of the plaintiffs' case are that on 26.3.2012 the plaintiffs and the defendant No. 1 executed an agreement to sell (bayana) in respect of the property bearing no.1/4498, Ram Nagar Extn., Mandoli Road, Shahdara, Delhi-110032 measuring about 120 sq. yds., herein after referred to as the 'suit property' for a total consideration of Rs. 1,13,51,000/- (Rs. One Crore Thirteen Lacs Fifty One Thousand only). Both the plaintiffs jointly paid a sum of Rs. 10,00,000- (Rs. Ten lacs only) as earnest money towards the consideration amount to the defendant No. 1 through the defendant no.2. It was agreed that the defendant No. 1 would execute sale deed in respect of suit property in favour of the plaintiffs on or before 16.6.2012. As the defendant No. 1 or the defendant No. 2 did not supply copies of title documents at the time of execution of agreement to sell, therefore, the plaintiffs insisted for suppling copies of the title deeds and ultimately, the defendants supplied copies to the plaintiffs on 5.5.2012. On perusal of title documents it was revealed that the title documents were totally defective. The agreement to sell was only executed by the defendant No. 1. However, the same was signed by both the defendants as seller. The execution of agreement to sell was itself illegal. At another place both the plaintiffs and both the defendants signed the agreement to sell. Therefore, the execution of agreement to sell was itself illegal and it was null and void. The sale deed dated 30.6.2010 was executed by Smt. [ENTITY] W/o Sh. [ENTITY] and Sh. [ENTITY] S/o Sh. [ENTITY] in favour of [ENTITY] and [ENTITY] both while the agreement to sell was executed only by [ENTITY]. Sale deed dated 29.5.2006 was executed by Smt. [ENTITY] W/o Sh. [ENTITY] in favour of the Smt. [ENTITY] on 29.5.2006. Therefore, only Smt. [ENTITY] could execute the sale deed dated 30.6.2010 but the sale deed dated 30.6.2010 was executed by Smt. [ENTITY] and [ENTITY] both. Therefore, sale deed dated 30.6.2010 was itself illegal. On the basis of sale deed dated 30.6.2010 the defendant no.1 alone could not sell suit property to the plaintiffs. Prior to purchasing of the suit property by Smt. [ENTITY] it was revealed that suit property was purchased by Smt. [ENTITY] from Sh. [ENTITY] vide unregistered agreement to sell, deed of will and GPA. Therefore, the title of the defendants was defective and no title could be transferred by any person who has no right over the property. None of the title documents were clearly showing clear title of the defendants over the suit property in any manner. Therefore, the agreement to sell was itself an illegal document. Consequently, the defendant no.2 did not have any power to execute the agreement to sell. The defendants obtained Rs.10,00,000/- from the plaintiffs illegally and unauthorisedly by playing fraud and concealing material facts. The defendants are liable to refund the said amount alongwith interest thereon. As both the defendants violated the terms and conditions of the agreement, therefore they are also liable to severally and jointly to pay to the plaintiffs double the amount of the earnest money to the plaintiffs. However, the plaintiffs have claimed only principal amount against the earnest money alongwith 15% interest w.e.f. 16.3.2012 from the date of filing of the suit. The plaintiffs sent a legal notice dated 23.5.2012 to the defendants and called upon them to pay Rs. 10,00,000/- alongwith interest and Rs. 5,500/- towards cost of legal notice but they failed to make the payment inspite of service of legal notice on the defendant No. 1, therefore the defendants are also liable to pay interest @ 15% w.e.f. 16.3.2012 to 5.6.2012 which comes to Rs. 37,500/-. Thus, the defendants are liable to pay to the plaintiffs a sum of Rs.10,43,000/- (Rs. Ten Lacs Forty Three Thousand only). As the defendants failed to make the payment so the plaintiffs filed a suit with a prayer that a decree of declaration may be passed in their favour and against the defendants declaring the above mentioned agreement to sell dated 16.3.2012 as null and void and that the defendants did not have any locus standi to execute the title documents in respect fo the suit property and a decree of recovery of Rs. 10,43,000/- (Rs. Ten Lacs Forty Three Thousand only) in favour of the plaintiffs and against the defendants with future and pendentelite interest @ 15% per annum with cost.
3. The defendants in their written statement admitted execution of the agreement to sell. It was contested that agreement to sell was executed on 16.3.2012 and not on 26.3.2012. Before execution of agreement to sell, all the title documents including the previous chain of documents were shown to the plaintiff and copies thereof were supplied to them and on their complete satisfaction, they executed agreement to sell dated 16.3.2012 and they paid Rs.10,00,000/- as earnest money towards the part consideration. Agreement to sell was in consonance with the provisions of contract Act and other laws of the land and it was neither illegal nor void. The parties after understanding the contents of the agreement to sell put their signatures thereon. As the plaintiffs have failed to perform their part of the contract, therefore in terms of the agreement to sell, the earnest money stood forfeited and the agreement stood discharged by non performance by the plaintiffs. There was no cause of action in favour of the plaintiffs and against the defendants to file the present suit. The plaintiffs showed their inability to arrange the balance amount even after the stipulated period. Even the defendants agreed to extend the period for the purpose of contract but the plaintiffs were not interested and therefore, with mutual understanding and also as per terms and conditions of the agreement to sell, the earnest money stood forfeited. The plaintiffs did not come to this court with clean hands. They are not entitled to get any relief either in accordance with law or in accordance with equity. The suit of the plaintiffs is false and frivolous. The defendants denied the material averments and prayed for dismissal of the suit.
4. On the pleadings of parties, following issues were framed:
1. Whether the plaintiff is entitled to a decree of recovery of Rs.10,43,000/- with interest @ 15% per annum, as claimed? OPP
2. Whether the plaintiff has no cause of action to file the present suit, as alleged? OPD
3. Relief.
5. In support of their case, the plaintiff No. 2 examined herself as PW1. In order to prove their case, the defendant No. 2 examined himself as DW1. Besides, Sh. [ENTITY] was examined as DW-2 including written arguments.
6. After closing of evidence by parties, I have heard final arguments addressed by Ld. Counsels for the parties and perused file.
7. On perusal of file, I find that PW1 tendered in evidence her affidavit as Ex. PW1/A and also proved agreement to sell as Ex. PW1/1, legal notice dated 23.5.2012 as Ex. PW1/2, Original postal receipt as Ex.PW1/3, returned postal envelope as Ex.PW1/4 and also placed reliance on copies of title documents as Mark A to Mark H. Contents of her affidavit are almost reproduction of contents of the plaint. In cross-examination she stated that she did not go through the contents of the agreement Ex.PW1/1 before signing. At the time of execution of agreement Ex.PW1/1, her husband, elder brother of her husband and property dealer were also present, besides both the defendants. Defendant [ENTITY] signed on the last page of the agreement whereas defendant [ENTITY] signed all the pages of the agreement. The first page of the agreement Ex.PW1/1 was not signed by either party. They were instructed by their counsel to file present suit against the defendants and on their instructions, their counsel drafted the plaint. They found defects in the title of the documents regarding the suit property. Although, they had entered into an agreement to purchase the suit property from [ENTITY] but later on it was signed by [ENTITY] as well. They stated to have purchased it from [ENTITY] who purchased it from [ENTITY] but the document of purchase were executed by [ENTITY] and [ENTITY] in favour of [ENTITY] and [ENTITY] and [ENTITY] could not have sold the property to [ENTITY] and [ENTITY]. She denied the suggestion that they were shown copies of sale deed by the defendants before entering into the agreement to sell Ex.PW1/1. They did not visit the office of the Sub-Registrar to verify if the defendants were owners of the suit property before entering into the agreement to sell Ex.PW1/1. Even thereafter they did not visit the office of the Sub-Registrar to verify the title of the documents of the defendants. She explained that at the time of agreement whey were not given copies of the documents by the defendants and on their insistence they had given crossed copies in the month of May, 2012 and they had shown these copies to their counsel who told them about the defect in the title documents. She did not go through the written statement of the defendants. Their counsel might have gone through the reply. She admitted that defendants filed one copy of the sale deed in favour of [ENTITY]. Her counsel explained to her the contents of the written statement in Hindi language. She denied the suggestion that the title of the defendants was clear by virtue of two sale deeds dated 29.5.2006 in their favour. She denied that they became owners of the property in question to the extent of 60 sq. yds each or that at the time of signing of agreement Ex.PW1/1 they were supplied copies of all the documents or that it was a false suit. She explained that before filing the suit they had informed the defendants that their documents were not clear and their title was defective and they should refund their earnest money. But they failed to refund the same. She denied the suggestion that they were not ready and willing to perform their part of the contract or to pay the balance sale consideration to the defendants or they refused to perform their part of the contract. Her husband talked to the defendants informing them about the defect in their title on phone. She did not meet the defendants personally after execution of the agreement. She denied the suggestion that as per terms and conditions of the agreement, the defendants forfeited the money paid to them or that they did not have any right to claim any earnest money from the defendants. She explained that defendants were having defective titles and they could not forfeit the earnest money. She denied the suggestion that defendants were holding title of the suit property as per the sale deed dated 30.6.2010 duly registered in their favour measuring 60 sq. yds each. When she was asked whether she was willing to purchase the suit property, she replied in the negative and explained that they had already purchased two flats and further that title of the defendants was not clear.
8. DW1 tendered in evidence his affidavit as Ex. DW1/A and relied upon sale deed dated 02/07/2010 Ex. DW1/1; sale deed dated 29/05/2006 in favour of Smt. [ENTITY] as Ex. DW1/2; sale deed dated 29/05/2006 in favour of Sh. [ENTITY] as Ex. DW1/3; complaint dated 01/11/2012 as Ex. DW1/4; postal receipt as Ex. DW1/5; RTI application as Ex. DW1/6; postal receipt as Ex. DW1/7 and reply of RTI application dated 22/07/2013 as Ex. DW1/8. In cross-examination, he denied the suggestion that on 26/03/2012 a bayana agreement was executed between the plaintiff and defendant in respect of sale of property bearing No. 1/4498, Ram Nagar Extension, Mandoli Road, Delhi. He admitted that agreement to sale (bayana) Ex. PW1/1 was executed between the parties. He explained that it was executed on 16/03/2012. He denied the suggestion that the defendants were to execute sale deed on or before 16/06/2012 and the plaintiffs were to make the payment of balance amount to the defendant No. 1. He explained that sale deed was to be executed on 26/05/2012. He denied the suggestion that no title document of the suit property was handed over to the plaintiffs at the time of execution of agreement to sale or that copies of title documents were only given to the plaintiff on 05/05/2012 or that the agreement to sale was signed and executed only by [ENTITY] or that the documents copies of which were supplied by defendant No. 1 to the plaintiffs, were defective or that these were not consisting of the complete chain of documents or that he was not the owner of the suit property. He explained that agreement to sale was executed by both of them and they both were owner of the property in dispute and they had received a sum of Rs. 10 lacs from the plaintiffs. He denied the suggestion that he alongwith his wife were not the owners of the suit property. He never received any legal notice dated 23/05/2012 from the plaintiffs. He admitted that Smt. [ENTITY] purchased the property in question from [ENTITY] vide agreement to sale, deed of Will and GPA and that all those documents were un-registered and that it was written on documents Ex. PW1/1 that these were for the purpose of perusal (dekhne ke liye) and that document as Ex. DW1/P1 was supplied by him to the plaintiff and that documents mark C to H were supplied by him after making the cross over the documents to the plaintiffs. He denied the suggestion that the defendant No. 1 did not reach in the office of Sub-registrar to execute the sale deed or that un-registered documents were illegal and no transfer could be made on the basis of un-registered documents or that documents mark C to G were forged documents or that he filed a false affidavit in the court just to grab money of the plaintiffs or that he deposed falsely. He expressed his ignorance, if documents mark C to H relate to the suit property or not?
9. DW2 also tendered his affidavit Ex. DW2/A in evidence. He, inter alia, stated in his affidavit Ex. DW2/A that suit property is situated adjacent to his residence. In the first week of March 2012, Sh. [ENTITY] called him to attend a meeting with prospective buyers, i.e the plaintiffs at the shop of the defendant No. 2 to negotiate the sale of suit property. Accordingly, he reached at the shop of the defendant No. 2 where both plaintiffs alongwith their husband and two property dealers of the locality were present. After some negotiation, consideration of suit property was settled as Rs. 1,13,51,000/- (Rupees One Crore Thirteen Lac and Fifty One Thousand Only). Copies of entire chain of documents/previous title deeds were shown to them in his presence by the defendant No. 2. It was agreed that after examination and satisfaction of documents of title, the plaintiffs shall execute an agreement to sale with the defendants. Thereafter, on 16/03/2012, he was again called upon by the defendant No. 2 at the office of property dealer M/s Ritu Properties at Ram Nagar, Ashok Marg, Shahdara, Delhi. Both the plaintiffs with their husbands, the defendants and both property dealers, namely [ENTITY] and [ENTITY] were present. The property dealers produced stamped agreement and filled up particulars therein. As agreed between the parties a sum of Rs. 10 Lacs, as earnest money, was handed over to the defendant No. 2. The agreement was signed by both parties and the property agents and copy thereof was handed over to the defendant No. 2. Subsequently, the sale agreement became frustrated as the plaintiff failed to get the sale deed registered even after the expiry of period fixed by the parties as they did not have the requisite funds. In cross-examination, he stated that he did not bring any document with regard to firm M/s [ENTITY]. He denied the suggestion that there were no such firm in the said locality or that he did not reside near the house of Sh. [ENTITY], the defendant or that a transaction did not take place between the parties in his presence. He told that the transaction took place between the parties on 16/03/2012, though the documents were given to the plaintiffs in the first week of March 2012. He explained that amount of Rs. 10 Lacs was paid in his presence to the defendant by the plaintiffs on 16/03/2012. He was aware that the property in dispute was owned by the defendant but he could not say whether it was recorded in the name of both the defendants or it was recorded in the name of the defendant No. 1 or the defendant No. 2. He denied the suggestion that he deposed falsely at the instance of the defendants.
10. It has been argued by Ld. Counsel for the plaintiffs that the the sale of joint property in the absence of co-sharer was not valid. Even vendee of a specific khasra number of his joint undivided share of property will have to get his share determined.
11. In support of his arguments he relied on a case [PRECEDENT] by Lrs and Anr, http: indiankanoon.org/doc/40009, wherein it was held that :
"Another point put forward by the respondents is also that the property does not belong to the respondents only but also to two of their sisters and the heirs of the other deceased sister. They claim that they (respondents) are entitled only to 2/5 share in the properties, while, the remaining 3/5 share belongs to their two sisters and the heirs of the other deceased sister. But, the contention of the petitioner on the death of their (respondents) father [ENTITY] the respondents got it by survivorship. But the death Register extract in respect of [ENTITY] shows that he died in the year 1971. Therefore, the respondents only could not have become entitled to the property by survivorship. Each of the respondents would be entitled to a 1/3 share as co-parceners and the remaining 1/3 belonging to his father would have devolved upon his heirs including his daughters. Therefore, it is evident that the respondents 1 and 2 only are not the owners of the entirety of the property in question. Therefore, how far the award can be enforced as against the other owners is also open to question. The other owners are also not before the court. They are not parties to the agreement Ex. A4 or the arbitration proceedings. Therefore, in these circumstances, I find that the award has to be set aside and that it cannot be made the rule of the court."
(Emphasis is supplied)
12. It has been further argued by Ld. Counsel for the plaintiffs that the defendants did not serve any notice on the plaintiffs regarding forfeiture of earnest money. Therefore, they were not entitled to forfeit the amount of earnest money and the vendee i.e plaintiffs are entitled to get return of the amount paid by them as earnest money.
13. In support of his arguments, Ld. Counsel for plaintiffs relied on a case [ENTITY] (died) per LR v. B.S. Neelkanta and another, 2006 (1) RCR (Civil) 575 wherein Andhra Pradesh High Court held that :
"29. Having regard to the facts and circumstances of the case and keeping in view the decisions of the Apex Court, as referred to hereinabove, we are of the opinion that the plaintiffs cannot be said to have even complied with the requirements of law and also the conditions in the agreement, they are not entitled to get any relief, particularly a discretionary relief of specific performance of agreement of sale. Hence, the appeal has to be allowed and the decree and judgment of the Court below is liable to be set aside. Further, since the plaintiffs could not succeed in getting the relief of specific performance of agreement of sale, they are entitled for refund of the amount paid towards the advance. Here, it is not out of place to mention that in view of the fact that the vendor did not give any notice, except the reply, forfeiting the advance or earnest money paid under the suit agreement, and also as not entitled to forfeit the amount and is liable to replay the same to the vendee. So, as there is not dispute with regard to the payment of Rs. 18 lakhs between the parties, it is proper to give a direction to the appellant herein to return the said amount of Rs. 18 lakhs to the respondents herein. With regard to award of interest, since there is no covenant in the agreement to the effect that, we are inclined to grant interest at 12% p.a from 22-7-1994, the date of issuance of legal notice by plaintiffs, till the date of payment. Hence, we are inclined to direct the appellant herein that the above said payment shall be made within a period of three months from the date of this judgment."
14. Ld. Counsel for the plaintiffs further argued that the plaintiffs did not file a suit for specific performance of the contract because the titles were defective. In such situation, the plaintiffs are entitled to get refund of their earnest money with interest.
15. In support of his arguments, Ld. Counsel for the plaintiffs relied on a case Lavinder Kumar Sharma v. Parmod Kumar, 2011(1) RCR (Civil) [SECTION]8 (P&H), wherein it was held by Punjab and Haryana High Court that :
"10. Now the question is as to "whether, in the present case, the plaintiff should have filed a suit for recovery as suggested by learned counsel for the appellant or he was entitled to alternative relief which has been granted by the Courts below". No doubt that the Court dealing with the suit for specific performance has the jurisdiction under [SECTION] of the Act to grant any of the relief provided in [SECTION] of the Act if it is specifically claimed by the plaintiff in his plaint. In the present case, as it has been mentioned earlier, the plaintiff had filed a suit for specific performance of agreements to sell (Ex.P1) and Ex. P5) and had also sought alternative relief of refund of the sale consideration alongwith interest in case of refusal by the Court of the performance of the agreement to sell. Since there is a specific relief claimed in terms of [SECTION] of the Act by the plaintiff in the plaint, there was no hindrance in the part of the Court in order to grant alternative relief. Therefore, I do not agree with the contention of learned counsel for the appellant that in the case of refusal of specific performance, where the plaintiff has also made an alternative prayer for refund of the sale consideration, the plaintiff should have filed a suit for recovery and the suit for specific with alternative prayer was not maintainable".
16. Ld. Counsel for plaintiff further argued that in the circumstances like in the present case if the plaintiffs are not ready and willing to purchase the property, even then they have right for refund of money with interest @ 10%.
17. In support of his arguments, he relied on a case [PRECEDENT], wherein it was held that :
"11. The defendant No. 1 denied and disputed the contention of the plaintiff that he had received any sum as earnest money for executing a deed of sale, but admitted that he had taken Rs. 30,000/- (Rupees thirty thousand) only with interest at the rate of 10% (ten) per centum per annum by the defendant No. 1 to the plaintiff.
12. It is pertinent to note that there was a prayer for a decree for refund of the purported consideration money and in view of the stand taken by the defendant No. 1, the learned Judge, in our view, rightly moulded the prayer by directing refund of the said sum with interest for ends of justice. We are not inclined to upset such a decree when the defendant No. 1, admittedly took Rs. 30,000/- (Rupees thirty thousand) only by executing a promissory note and categorically stated in the written statement, particularly in paragraph 29 thereof, that he was ready to pay back the said sum with interest.
13. In such circumstances, we hold that the learned Judge has not exceeded his jurisdiction, either in fact or in law, in passing a decree for refund of Rs. 30,000/- (Rupees thirty thousand) only with interest at the rate of 10% (ten) per centum per annum by the defendant No. 1 to the plaintiff."
18. Ld. Counsel for plaintiffs further argued that in the peculiar facts and circumstances of the case, the court has power to compensate the purchaser.
19. He relied on a case Shanker Singh v. Narinder Singh & Ors, http: indiankanoon.org/doc/96387003, wherein the Apex Court held that :
"24. We have however to note that the respondents had paid the earnest money of Rs. 28,000/- at the time of entering into the agreement way back on 12.1.1997 i.e nearly 35 years ago. The respondents will therefore have to be compensated adequately. On the question of the appropriate compensation, it was submitted by Mr. [ENTITY], the learned senior counsel for the appellant that the agreement was made at a difficult time in the social life of Punjab for a throw away price. However, no evidence is placed on record to that effect. He then pointed out that the appellant had contended in the lower courts that respondents were influential people. Even so, it cannot be ignored that inspite of the agreement, the land has remained with the appellant all through out in view of the orders passed by the courts from time to time, due to which he has benefited. The specific performance of the agreement is being denied basically because of the finding that the agreement was incapable of being performed inspite of the offer of relinquishment. It is an adage that money doubles itself in ten years, and on that basis the amount of Rs. 28,000/- with an appropriate interest will come to at least Rs. 3,50,000/-. If the land was with the respondents, they would have earned much more. Having seen this position, Mr. [ENTITY] has fairly left it to the Court to decide an adequate amount to be paid to the respondents by way of compensation and in lieu of specific performance of the concerned agreement. Accordingly, having considered all the relevant aspects, we are of the view that to meet the ends of justice, the appellant should be directed to pay the respondents an amount of Rs. 5,00,000/- which will be inclusive of the earnest money with due return thereon, and compensation."
20. Ld. Counsel for the plaintiffs further argued that if the agreement to sell is defective, then sale is illegal.
21. In support of his arguments he relied on a case Shri B.B. Sabharwal & Anr v. M/s Sonia Associates, http: indiankanoon.org/doc/164683227, wherein High Court of Delhi held that :
"36. In view of my finding on issues No. 2 and 3, the plaintiffs are not entitled to specific performance of the agreement dated 20th June, 1997. As noted earlier, in the event her failure to complete the sale transaction in time, the defendant was required to refund the earnest money of Rs. 5 lacs to the plaintiffs alongwith penalty, amounting to Rs. 5 lacs, thereby making a total sum of Rs. 10 lacs. Since the defendant did not even apply for grant of Income Tax Clearance within 15 days from the date of the agreement or even thereafter, she failed to complete the sale transaction and, therefore, is liable to pay a sum of Rs. 10 lacs to the plaintiffs. This obligation on the part of the defendant arises, irrespective of the false plea of payment of Rs. 15 lacs set up by the plaintiffs, based since this is on the contractual obligation between the parties. "
22. Ld. Counsel for the plaintiffs further submitted that as per provisions of [SECTION] and [SECTION] of the [ACT], the defendants are liable to refund the earnest money in the case no performance of contract on their part.
23. In support of his arguments, he relied on a case Mrs. Saradamani Kandappan v. Mrs. S. Rajalakshmi & Ors, http: indiankanoon.org/doc/834739, wherein Apex Court held that :-
"54. Further, defendants 1 to 3 in their written statement filed in the specific performance suit had agreed to refund all amounts received by them from the plaintiff. It is true that the offer was conditional upon the plaintiff not creating any hindrance in the way of the defendants by filing false, frivolous and mischievous suits. Though we have affirmed the decision of the learned Single Judge and the Division Bench that the plaintiff is not entitled to the relief of specific performance, it cannot be said that the plaintiff had filed false, frivolous and mischievous suits. In view of the above, in terms of the agreement and in terms of its offer, the plaintiff was entitled to recover the amounts paid by her. A sum of Rs. 2,25,000 was paid under the agreement of sale to defendants 1 to 3.".
24. It has been further argued by Ld. Counsel for the plaintiffs that if the agreement to sell is vague without any description of property, then it is not capable of being enforced specifically. The court can grant alternate relief of refund of earnest money.
25. In support of his arguments, he relied on a case [PRECEDENT], http: indiankanoon.org/doc/ 632303, wherein it was held that:-
"14. In view of the settled law, the Courts below have granted the relief alternative prayed for by the plaintiff-appellant i.e the decree for payment of Rs. 10,000/- stated to have been paid as earnest money, has become payable. In view of the fact that the agreement is not enforceable by way of execution of sale deed, the alternative relief has been correctly granted."
26. On the other hand, Ld. Counsel for the defendants referred to the provisions of [SECTION], [SECTION], [SECTION] and [SECTION] of [ACT] and argued that none of the arguments submitted by Ld. Counsel for the plaintiffs is tenable. The defendants were having right, title and interest over the suit property. They were having chains of previous documents and were willing to perform part of their contract. These were the plaintiffs who could not arrange sale consideration and falsely took the plea that the title deeds of the defendants were defective. They did not serve any notice on the defendants regarding their defective title deeds. The defendants were legally entitled to forfeit the amount of earnest money. The plaintiffs are not entitled to recover any amount of the earnest money. They are not entitled to get any alternative relief. He prayed for dismissal of their suit.
27. In support of his arguments, Ld. Counsel for the defendants relied on a case [PRECEDENT], wherein it was held by Calcutta High Court that :-
"22. As a result of the above discussion, I have come to the conclusion that the earnest money, in the real sense of the term, as explained above, is, in the absence of a contract to the contrary, either express of implied, liable to be forfeited by the vendor when the contract goes off for default on the part of the purchaser and such liability exists, notwithstanding [SECTION], [SECTION] and [SECTION] of the [ACT], and is not affected by any of the said provisions, although, when the vendor sues the purchaser for compensation for breach of the contract, in the matter of assessment of such compensation, the forfeited earnest money has to be taken into account and, there, the purchaser would get credit for the same.".
28. Ld. Counsel for the defendants further relied on a case [PRECEDENT], wherein the Apex Court held that :-
"When we examine the clauses in the instant case, it is amply clear that the clause extracted hereinabove was included in the contract at the moment at which the contract was entered into. It represents the guarantee that the contract would be fulfilled. In other words, 'earnest' is given to bind the contract, which is a part of the purchase price when the transaction is carried out and it will be forfeited when the transaction falls through by reason of the default or failure of the purchaser."
29. Ld. Counsel for the defendants further relied on a case [PRECEDENT] wherein Allahabad High Court held that :
"22. Now I would take firstly whether the time of payment was the essence of the contract and whether it was a condition precedent of passing of the title in property. After carefully going through [SECTION] of the Act of 1882 and the agreement the parties settled that the payment would be made as stipulated and there was no intention to the contrary. The defendant also disposed of the property and demolished it. From the plaintiff-appellant side, he did what was possible for the delivery of possession and even procuring of the certificate from the Income Tax authority, as mentioned in the earlier part of the judgment and requested the defendant to make a payment and get a certificate so that the registration of sale deed can be made. The defendant on one pretext or another dragged the plaintiff into the litigation. The question of [ENTITY]'s title in the suit property which ultimately was dismissed. The defendant in all fairness should have made payment and in case ultimately there was difficulty in title he could have sued the plaintiff for indemnification. The defendant has enjoyed the property after taking the possession and deliberately did not make payment on the plea that there is no income tax certificate and the sale deed registration cannot be effected. Generally, under [SECTION] of the [ACT] time in case of contract of immovable property is not essence of contract."
30. Ld. Counsel for defendants further relied on a case [PRECEDENT], wherein it was held that:-
"It is true that the limit of damages would depend upon the terms of the contract and facts in each case. In Anson's Law of Contract, 24th edition, at page 152, on exemption clause with regard to notice of a printed clause, it was stated that a person who signs a document containing contractual terms is normally bound by them even though he has not read them, and even though he is ignorant of their precise legal effect. But if the document is not signed, being merely delivered to him, then the question arises : whether the terms of the contract were adequately brought to his notice? The terms of the contract have elaborately been considered and decided. The details thereof are not necessary for us to pursue. It is seen that when a person signs a document which contains certain contractual terms, as rightly pointed out by Mr. [ENTITY], learned senior counsel, that normally parties are bound by such contract; it is for the parties to establish exception in a suit."
31. Ld. Counsel for the defendants further relied on a case [PRECEDENT], wherein Supreme Court observed that :
"9. This is also the manner in which this facet of the law has been enunciated in England, as is evident from the following passage from Halsbury's Laws of England (4th edn Reissue, 1998) Vol 12 (1), para 10[SECTION] which reads as follows :-
"10[SECTION]. Liquidated damages distinguished from penalties. - The parties to a contract may agree at the time of contracting that, in the even of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called 'liquidated damages', and it is recoverable without the necessity of proving the actual loss suffered. If, however, the stipulated sum is not a genuine pre-estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation".
32. Ld. Counsel for defendant lastly relied on a case Smt. Saradamani Kandappan & Others v. Mrs. S. Rajalakshmi & Others, http: indiankanoon.org/doc/834739, wherein Supreme Court held that:
"54. Further, defendants 1 to 3 in their written statement filed in the specific performance suit had agreed to refund all amounts received by them from the plaintiff. It is true that the offer was conditional upon the plaintiff not creating any hindrance in the way of the defendants by filing false, frivolous and mischievous suits. Though we have affirmed the decision of the learned Single Judge and the Division Bench that the plaintiff is not entitled to the relief of specific performance, it cannot be said that the plaintiff had filed false, frivolous and mischievous suits. In view of the above, in terms of the agreement and in terms of its offer, the plaintiff was entitled to recover the amounts paid by her. A sum of Rs. 2,25,000 was paid under the agreement of sale to defendants 1 to 3.".
33. On perusal of pleadings of the parties, analysing the evidence on record and considering the arguments of Ld. Counsels for the parties, I have formed my opinions on the issues and that are discussed herein-below issue-wise:
Findings on Issue No. 1.
34. The burden to prove this issue was on the plaintiff and she had to prove that she was entitled to get a decree of recovery of Rs.10,43,000/- with interest @ 15% p.a. The evidence on record has already been discussed and narrated herein above. On examination and analysis of the evidence on record, I am of the view that plaintiff has failed to prove that she is entitled to a decree as prayed for. The reasons which support my decision are firstly, that it is not convincing that title of the defendants over the suit property was defective. Ex.DW1/1 is Sale Deed of the suit property in respect of 120 sq. yards. According to the sale deed Smt. [ENTITY] and [ENTITY] sold the suit property to Smt. [ENTITY] and Sh. [ENTITY] defendants. The chain of documents in respect of previous owner was also filed and proved. On analysing the sale deed and chain of documents, it is not convincing that he defendants were not the registered owner of the suit property.
35. Secondly, during cross examination the plaintiff as PW-1 admitted that before entering into the agreement to sell neither she nor any other person on her behalf visited the office of Sub Registrar if the defendants were the owners of the suit property? Even thereafter they did not visit the office of Sub Registrar to verify the title of the documents from the office of Registrar, then how the plaintiffs can say that the title of the defendants in respect of the suit property was defective?
36. Thirdly, as per the agreement to sell Ex.PW1/1, it was one of the clause in the agreement that if first party i.e. defendants do not fulfill the terms and conditions of agreement to sell or they rescind the contract then they would pay double of the amount to the second party i.e. the plaintiffs and if the second party refused to buy the suit property, then the amount of earnest money will be forfeited and the first party i.e. defendants will be having right to forfeit it. The agreement to sell is to be honoured and if that is honoured then plaintiffs does not have any right to claim the earnest money which she paid to the defendants.
37. Fourthly, the principles of law laid down in cases [PRECEDENT] (supra), [ENTITY] (died as per LR vs. B.S. Neelkanta & Anr. (supra), [PRECEDENT] (supra), [PRECEDENT] (supra), [PRECEDENT]. (supra), [PRECEDENT] (supra), [PRECEDENT]. (supra), and [PRECEDENT]. (supra) will not provide any benefit to the plaintiffs as the facts of present case and those cases are different.
38. Fifthly, the principles of law laid down in cases [PRECEDENT]. (supra), [PRECEDENT] (supra), [PRECEDENT] (supra), [PRECEDENT] (supra), and [PRECEDENT] (supra) provide benefit to the defendants as in the similar circumstances the earnest money by proposed buyer was forfeited when he was unable to purchase money.
39. Sixthly, the arguments of Ld. counsel for plaintiffs that previous owner of the suit property i.e. Smt. [ENTITY] purchased the suit property from Sh. [ENTITY] vide unregistered agreement to sell, deed of will and GPA and therefore, Smt. [ENTITY] was not competent to transfer the suit property to the previous owner of the suit property, is not convincing as the defendants were having registered sale deed of the suit property in their favour and the defects in title deed could not be established by the plaintiffs.
40. Seventhly, the arguments of Ld. counsel for the plaintiffs that the defendants played fraud on the plaintiffs is not convincing as there is no evidence on record to prove it.
41. Lastly, the principles of law laid in case of [PRECEDENT] further supports my decision. It was held therein that :
"Law is, therefore, clear that to justify the forfeiture of advance money being part of 'earnest money' the terms of the contract should be clear and explicit. Earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of non- performance, by the depositor. There can be converse situation also that if the seller fails to perform the contract the purchaser can also get the double the amount, if it is so stipulated. It is also the law that part payment of purchase price cannot be forfeited unless it is a guarantee for the due performance of the contract. In other words, if the payment is made only towards part payment of consideration and not intended as earnest money then the forfeiture clause will not apply"
42. Consequent upon the above reasons and discussion, it is held that plaintiffs have failed to prove issue no. 1 in their favour and accordingly it is held that plaintiffs are not entitled to a decree of recovery as prayed for. This issue is, therefore, decided in favour of the defendants and against the plaintiffs.
43. The burden to prove this issue was on the defendants and the defendants had to prove that plaintiffs does not have any cause of action to file the present suit. The evidence on record has already been discussed and narrated herein above. Same are not being repeated here for the sake of brevity and to avoid repetition. On the basis of evidence on record and in view of the reasons mentioned under issue no. 1, it is held that plaintiffs did not have any cause of action to file the present suit. Therefore, this issue is decided in favour of the defendants and against the plaintiffs.
44. I have also examined the evidence on record to find out whether the agreement to sell Ex.PW1/1 was illegal, null and void. In view of the evidence on record and particularly discussed herein above and for the reasons narrated under issue no. 1, it is held that plaintiffs have failed to prove that bayana agreement Ex.PW1/1 was either illegal or it was null and void or the defendants did not have locus standi to execute title documents.
Relief/Order
45. Consequent upon the decision of issue Nos. 1 and 2 in favour of the defendants and against the plaintiffs and other reasons and discussion made herein above, it is held that plaintiffs are neither entitled for decree of declaration nor they are entitled for the decree of recovery of Rs.10,43,000/- (Rupees Ten Lac Forty Three Thousand) in their favour and against the defendants. Resultantly, suit of the plaintiffs is dismissed. However, keeping in view the facts and circumstances of the present case, both the parties are left to bear their own cost.
Decree-sheet be prepared accordingly.
File be consigned to Record Room.
Announced in open court (Dr. [ENTITY]) on 26th September, 2015 District & Sessions Judge Shahdara, KKD Courts, Delhi