IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Civil Suit No. 12 of 1999 Judgment reserved on 11.10.2006 Date of decision 3.11.2006 Jatender Nath Sharma & another …Plaintiffs. Versus Highseas Holding Pvt. Ltd. & others …Defendants. Coram The Hon’ble Mr. Justice : Surjit Singh, Judge. Whether approved for reporting? For the plaintiffs: Mr. B.K. Sood, Advocate. For defendants : Mr. R.L. Sood, Sr. Advocate, with Ms. Sanjivani & Mr. Vikas Rajput, Advocates. Surjit Singh, Judge Plaintiffs have filed this suit for specific performance of agreement dated 28.8.1995, whereby defendant No. 1, through its Director, agreed to allot flat No. C-12, Block-C, first floor, Dilshant Estate, Bharari Shimla and also for a direction to defendants No. 1 & 2 to hand over vacant physical possession of the said flat to the plaintiffs and also to execute and get registered a sale deed in respect of the said flat. Whether reporters of Local Papers may be allowed to see the Judgment? …2… 2. Cause of action, as disclosed in the plaint, may be summed up thus. Defendant No. 1 offered for allotment some flats, which it planned to construct in Dilshant Estate, Bharari Shimla. The plaintiffs made enquiries with defendant No. 1, who vide letter dated 25.8.1995, addressed to plaintiff No. 1, sent plan of Block-C, along-with the list of flats, which were available for allotment / sale. One of the flats, included in the list, was flat No. C-12, having 990 square feet area. The plaintiffs applied for the said flat No. C-12 on 28.8.1995 and also paid to defendant No. 1 a sum of Rs.50,000/- in cash. Another sum of Rs.10,000/- was paid through bank draft dated 30.8.1995. Defendant No. 1 acknowledged the receipt of both the amounts through receipt No. 227, dated 30.8.1995. Vide letter dated 6.11.1995, defendant No. 1 demanded an additional amount of Rs.50,000/-, by means of a draft, to make up the deficiency in the earnest money and assured to issue allotment letter on the receipt of the draft for the said amount. The plaintiffs, vide bank draft dated 7.12.1995, paid Rs.50,000/- to defendant No. 1 against receipt dated 11.12.1995, issued by the said defendant. On 9.9.1996 the plaintiffs were sought to be delivered a cheque for Rs.60,000/- by defendant No. 1, on account of refund of the booking money, through a letter and along-with that letter there was a draft letter purporting to have been addressed by plaintiff No. 1 to defendant No. 1, thereby expressing his desire for the cancellation of the booking due to delay in construction. The plaintiffs did not sign that draft letter and sent reply to the aforesaid letter of defendant No. 1 on 17.9.1996 through an Advocate, conveying thereby that they had never asked for the cancellation of the booking nor were they agreeable to any such proposal of cancellation of booking and also required defendant No. 1 to issue allotment letter in …3… respect of the booked flat. That letter was duly received by defendant No. 1. Thereafter the plaintiffs received two letters dated 14.9.1996 and 26.9.1996 from defendant No. 1, reply to which was sent by the plaintiffs on 14.10.1996 through an Advocate and in that letter the contents of the aforesaid two letters, received from defendant No. 1, were denied. 3. On 2.12.1996 the plaintiffs received from defendant No. 1 another letter in which it was stated that in case the plaintiffs were ready to retain the booking, they should return the cheque for Rs.60,000/- and acknowledge the refund of Rs.50,000/-. The plaintiffs had not been refunded any amount of Rs.50,000/- and thus the demand for acknowledgement of the refund of the said amount, made by defendant No. 1, was unwarranted, illegal and hence unacceptable to the plaintiffs. The plaintiffs responded to that letter, vide letter dated 6.12.1996, through an Advocate. It was denied in the said reply letter that a sum of Rs.50,000/-, out of the booking amount, had been refunded. 4. Defendant No. 1 at one point of time took the stand that construction of the flat had been delayed due to stay granted by the Hon’ble High Court in CWP No. 62/94 and that cancellation of the flat was contemplated by defendant No. 1 in good faith and in the interest of the plaintiffs. Defendant No. 1 kept silent for about two years after the plaintiffs sent to it through an Advocate letter dated 6.12.1996 denying therein the refund of Rs.50,000/-. The plaintiffs then sent a notice dated 7.7.1998 to defendant No. 1 calling upon it to issue the allotment letter in respect of the booked flat. When there was no response, the plaintiffs issued another notice dated 1.12.1998, wherein inter alia it was stated that in case no positive action was taken on the demand for issuance of allotment letter, …4… the plaintiffs would seek their legal remedy. Defendant No. 1 responded to this letter, vide reply dated 7.12.1998 / 22.12.1998 through an Advocate and also sent a draft for Rs.76,125/-, which included Rs.60,000/- on account of part of earnest money and Rs.16,125/- on account of interest accrued thereon. In the said reply it was denied that there was a concluded contract between the plaintiffs and defendant No. 1, the plaintiffs had no right to have the flat as no allotment letter had been issued and no agreement had been signed between the parties and that due to recommendations of the Environment Commission, the construction of block-C and block-D had been initially stayed and then cancelled. It is alleged that the plaintiffs had always been ready and willing to perform their part of the agreement. 5. Initially the suit was filed only against defendant No. 1. Defendant No. 1 in its written statement took the plea that defendant No. 2 Air Marshal G.B. Singh (retired) was the owner of the entire Dilshant Estate, including flat No. C-12 and that on account of his non-impleadment as defendant, the suit was bad. It was also disclosed in the written statement that the flat, in question, stood allotted to defendant No. 3 Raman Wasan. The plaintiffs then made an application, under Order 1 Rule 10 of the Code of Civil Procedure, seeking leave of the Court to add the said persons as defendants and suitably amend the plaint. The prayer was granted and amended plaint was filed. 6. In the amended plaint it was stated that defendant No. 1 never indicated that defendant No. 2 had anything to do with flat No. C-12 or other flats constructed / planned to be constructed in Dilshant Estate, leave alone informing that he was the owner of the flat being constructed / planned to …5… be constructed and it was only in the written statement to the initial plaint that defendant No. 1 for the first time claimed that defendant No. 2 was the owner of the property. It was alleged that there had not been any agreement between the plaintiffs and defendant No. 2 nor did the plaintiffs have any dealing or negotiations or interaction with defendant No. 2 and that defendant No. 1 had been holding out right up to the time of filing the written statement that it alone had the authority to negotiate and make agreements and also to issue allotment letters. 7. The addition that has been made in the amended plaint, on account of impleadment of defendant No. 3, is that defendant No. 1 never disclosed to the plaintiffs that the flat, in question, had been sold to defendant No. 3 and that it was for the first time in the written statement to the original plaint that such indication was given. It is alleged that as a matter of fact right up to the date of the filing of the suit defendant No. 1 had been claiming that the construction of the flat had been initially stayed and then cancelled by the Hon’ble Court. 8. Separate written statements have been filed by the defendants. Defendant No. 1 has raised a number of preliminary objections, besides contesting the claim on merits. It is alleged that there being no written agreement between the plaintiffs and defendant No. 1, the suit for specific performance is not maintainable. The suit is alleged to be barred by time as it seeks to enforce an agreement dated 28.8.1995 while the date of its institution is 1.3.1999. The plaintiffs are alleged to be not entitled to the discretionary relief of specific performance as they have not approached the Court with clean hands. The suit for specific performance is also alleged to be not maintainable, because one of the conditions of …6… allotment, i.e. condition No. 11, provides for refund of the booking money with interest at the rate of 9%. The frame of the suit is also alleged to be bad. Further it is alleged that decree for specific performance, if passed, would be inexecutable, because the defendant being not the owner of the property, cannot execute any deed of conveyance in favour of the plaintiffs. The plaintiffs are alleged to be estopped to file the suit because of their acts, deeds and conduct and delay and latches. 9. As regards the merits, it has been admitted that defendant No. 1 had planned to construct some flats in Dilshant Estate and had offered the same to prospective buyers. However, it is alleged that defendant No. 2 is the owner of the property and he alone has the authority to execute the deed of conveyance. It is alleged that there had not been any concluded agreement between the parties and that the plaintiffs only applied for tentative allotment of flat No. C-12. It has been admitted that a letter was written to the plaintiffs on 6.11.1995 demanding another sum of Rs.50,000/- with assurance that letter of allotment would be issued, but it is alleged that that letter does not have the effect of bringing into existence a concluded agreement capable of specific performance. It has been alleged that on 9.9.1996 the entire amount paid by the plaintiffs was refunded to them and they were called upon to execute a letter for cancellation of booking, but the plaintiffs retained the money refunded to them and at the same time refused to sign the letter for cancellation of the booking. It is alleged that when the money was refunded and the plaintiffs were called upon to execute the letter of cancellation of booking, some writ petition was pending in the Hon’ble High Court in which the construction of flats in Block-C had been stayed and that is why the plaintiffs were refunded the booking amount and …7… called upon to execute the letter of cancellation and that this was done after having received a telephonic request from the plaintiffs for cancellation. At the same time it is alleged that the defendants wanted to offer an alternative flat to the plaintiffs on revised rates, but the plaintiffs were not interested. It is also alleged that Block-C was later on constructed and flat No. C-12 was allotted to defendant No. 3 and its possession was also delivered to him in October, 1998. It has been alleged that the plaintiffs had been aware from the very beginning that defendant No. 2 was the owner of the property and that he alone could execute a binding agreement with regard to the flat and no agreement having been executed between the plaintiffs and defendant No. 2, the plaintiffs were not entitled to any relief, except the refund of the booking amount, which stood refunded to them. It is alleged that even according to the plaintiffs’ own assertion, formal agreement had not been executed between them and defendant No. 1 and that in fact even the stage for execution of such an agreement had not reached, as before the execution of an agreement, issuance of letter of allotment was required and no such letter had been issued. 10. Defendant No. 2 has also raised some preliminary objections in addition to contesting the claim of the plaintiffs on merits. It is alleged that defendant No. 2, being the owner of the property and there being no agreement between the plaintiffs and defendant No. 2, the suit for specific performance is not maintainable. It is also alleged that the claim is barred by limitation especially against defendant No. 2, who has been impleaded after the institution of the suit. The plaint is alleged to lack material particulars. Plea of estoppel has also been raised. The suit is alleged to be bad for misjoinder of defendants No. 2 and 3. …8… 11. On merits it is stated that defendant No. 2 is the exclusive owner of the property, in question, and there being no agreement between him and the plaintiffs, the latter have no enforceable cause of action. Further it is stated that the plaintiffs themselves have pleaded that there was no concluded agreement between them and defendant No. 1 and for this reason also the suit is liable to be dismissed. 12. Defendant No. 3 has alleged that he is a bona fide purchaser for consideration and hence the suit is liable to be dismissed. He has also raised pleas of limitation, estoppel, maintainability of the suit, misjoinder of defendants No. 2 and 3 and the plaintiffs having no enforceable cause of action because of there being no agreement between them and defendant No. 2, who is alleged to be the real owner of the property. On merits, it is alleged that defendant No. 3 has spent huge amount of money to make the flat habitable. 13. Plaintiffs have filed replications to all the three written statements in which they have reiterated the averments made in the plaint and denied those made in the written statements. 14. This Court framed the following issues on the pleadings of the parties, vide order dated July 14, 2000:- “1. Whether there has been an agreement to sell between the parties, if so, what are the terms thereof? OPP. 2. Whether the plaintiffs are entitled to the relief of specific performance of the agreement to sell? OPP. 3. Whether the plaintiffs are entitled to the possession of the suit property? OPP 4. Whether the suit is within time? OPP …9… 5. Whether the plaintiffs are guilty of suppression of material facts, as alleged? If so, to what effect? OPD-1 6. Whether the suit is liable to be dismissed in view of condition No. 11 of the application dated 28.8.1995? OPD-1 7. Whether the suit in the present form is not maintainable, as alleged? OPD 8. Whether the plaintiffs are estopped from filing the suit, as alleged? OPD 9. Whether the suit is bad for mis-joinder of defendants 2 & 3, as alleged? OPD 10. Whether the suit lacks essential pleadings, as alleged? If so, to what effect? OPD 11. Whether the defendant No. 3 is a bonafide purchaser for value without notice, as alleged? If so, to what effect? OPD 12. Relief.” 15. Parties have gone to trial. I have heard the learned counsel for the parties and also gone through the record. My issue-wise findings are as follows. Issue No. 1 16. The plea taken by the defendants is that defendant No. 2, being the owner of the property, alone could have entered into an agreement for sale of the flats and since there was no agreement between the plaintiffs and defendant No. 2 for the sale of flat No. C-12 in Block-C of …10… Dilshant Estate, there is no legally enforceable agreement and hence the plaintiffs are not entitled to a decree for specific performance of the alleged agreement. 17. As a matter of fact, the plaintiffs have sought specific performance of the agreement dated 28.8.1995, which they entered into with defendant No. 1 and the said agreement, as would be seen from the evidence being referred to and discussed hereinafter, is for the allotment of the flat and not for direct sale. One of the Directors of defendant No. 1, namely Capt. P.S. Chimni, while in the witness box and under cross- examination by the plaintiffs, admitted that advertisement had appeared in various newspapers at different times inviting applications for allotment / sale of flats. He was called upon to produce the newspapers in which those advertisements appeared. He produced three of such newspapers, which are Ext. DW-3/A, DW-3/B and DW-3/C. These advertisements appeared in the newspapers dated May 13, 2000, May 7, 1999, March 24, 2001, respectively, whereas admitted facts are that the application for allotment of flats was made by the plaintiffs in the year 1995. In two of these advertisements, i.e. Exts. DW-3/B and DW-3/C, only the name of defendant No. 1 appears as the person, who is to be contacted for details. Defendants have also placed on record a cutting from the newspaper and claim that this appeared in the issue dated 20.5.1994 of the Times of India. They did not, however, prove this cutting. As per this cutting, those who could be contacted for the booking of flats are defendant No. 1, defendant No. 2 and some other persons. There is another cutting, which is claimed to be from the issue dated 21.5.1994 of the Economic Times. This also pertains to the flats in Dilshant Estate and the persons, who could be …11… contacted for booking, as named in this advertisement, are the same as in the aforesaid cutting from the Times of India. 18. From the aforesaid advertisements it is clear that defendant No. 1 was one of the persons who could be contacted for booking of flats. The fact that the names of defendant No. 1 and defendant No. 2 and some other persons appeared in the same advertisements is enough to hold that defendant No. 2 had authorized defendant No. 1 to accept applications for booking of flats. 19. There is some more evidence, which is very specific on the point. Ext. PW-1/A is a letter, which was written by DW-3 Shri P.S. Chimni, a Director of defendant No. 1, to plaintiff J.N. Sharma, whereby list of flats of Block-C was sent to him and he was informed that the booking would be open within a period of one month. Then there is an application on a printed format, which the plaintiffs submitted to the defendant. A copy of the application, proved by the plaintiffs, is Ext. PW-1/A-2. Defendants produced the original application, which was shown to DW-3 P.S. Chimni in the cross-examination and was exhibited as ‘PB’. This application is on printed formant. Name of defendant No. 1 is printed as the person to whom it is addressed. Plaintiffs submitted this application to defendant No. 1. DW-3 admits this fact. Along-with this application, a bank draft for Rs.10,000/- was also submitted. The application was for allotment of flat No. C-12 in Block C, first floor. The payment plan that had been opted by the plaintiffs was ‘B’ as per column No. 6 of this application. Approximate area was 990 square feet. The date of making of the application is though not mentioned, the date of its acceptance by defendant No. 1 is there. The same is ’28.8.1995’. This application was accepted by an authorized …12… signatory of defendant No. 1. That means the application, submitted by the plaintiffs for allotment of flat No. C-12 on the first floor of Block-C, had been accepted by an authorized signatory of defendant No. 1. The salient terms and conditions for allotment are also a part of this printed application, which is in the shape of a folder. Conditions No. 14 and 16, which are reproduced here-in-below, leave no doubt that the allotment was to be made by defendant No. 1, who is termed as ‘Builder’ and even the buyer’s agreement was to be executed by the plaintiffs in his favour after allotment of flat:- “14. The allotment of the flat / shop is entirely at the discretion of the Builder and the Builder has a right to reject any offer without assigning any reason thereof.” “16. The intending Allottee(s) agrees to sign and execute, as and when desired by the Builder, the Flat Buyers Agreement on the Builders standard format.” 20. It is true that in condition No. 8 it is mentioned that the owner of the property is Air Marshal G.B. Singh (retd.), defendant No. 2 herein, but this has been stated only for the purpose of making it clear to the plaintiffs that the land, on which the flat is built, shall remain the property of defendant No. 2 and green areas and other vacant areas shall also remain his property. 21. Learned counsel stated that according to this clause 8, the sale deed or in case of the allottee being not entitled to sale, on account of bar of Section 118 of the H.P. Tenancy & Land Reforms Act or for any other disability, lease deed for ninety-nine years was to be executed by the owner and thus it was known to the plaintiffs that for an agreement of sale or lease of ninety-nine years, they had to have an agreement with the owner, i.e. …13… defendant No. 2. It is apposite to notice condition No. 8, which is reproduced below:- “8. The land on which the Flat/Shop are built, will remain the property of the owner, Air Marshal G.B. Singh, PVSM (Retd.) (hereinafter referred to as the “Owner”). The green areas i.e. all areas within Dilshant Estate on which flats/shops and other structures have not been built shall remain the property of the owner and the allottee shall only have a right/license to use the green areas and shall have no right whatsoever to ownership of the said green areas and shall not have any right to occupy or make any construction whatsoever on the said green areas. The allottee(s) will be entitled to have the residential Flat/commercial shop transferred in his/her own name through a regular sale deed if the Allottee(s) is entitled to purchase the same under section 118 of the Himachal Pradesh Tenancy and Land reforms act, 1972 or after obtaining necessary permission in other cases. Where no permission is obtained or the allottee is not entitled to have the sale deed executed in his/her favour the “Owner” shall execute a 99 years lease and with a right to sub-lease etc. and all other incidental rights enjoyed by a flat/shop owner in favour of the allottee(s). All expenses or cost in this behalf shall be borne by the allottee(s).” 22. Even a casual reading of condition No. 8 shows that the allottees are not required to enter into any agreement with the owner, but they have the right, after completion of the formalities, to have executed sale deed or lease deed of 99 years, as the case may be, from the owner. 23. After the submission of the application and its acceptance by defendant No. 1, the plaintiffs paid Rs.50,000/- in cash on 28.8.1995 against receipt Ext. PW-1/B furnished by DW-3 Capt. P.S. Chimni in his capacity as Director of defendant No. 1. A sum of Rs.10,000/- had been …14… paid through a bank draft along-with the application Ext. PB and a receipt for that amount was issued on 30.8.1995. The same is Ext. PW-1/C. On 6.11.1995 a communication was addressed by defendant No. 1 to plaintiff J.N. Sharma, calling upon him to send a bank draft of Rs.50,000/- to complete the earnest money in order to enable defendant No. 1 to issue allotment letter. The plaintiffs sent the bank draft for the aforesaid amount of money promptly. Defendant No. 1 acknowledged the receipt of the said draft on 11.12.1995. The receipt is Ext. PW-1/E. Despite having received the bank draft for Rs.50,000/-, defendant No. 1 did not fulfil the assurance regarding allotment of flat as held out in the letter dated 6.11.1995 Ext. PW- 1/D. The plaintiffs by sending bank draft for Rs.50,000/- in response to letter dated 6.11.1995 received from defendant No. 1, became entitled to the allotment of the flat, in question. Further, the