CS (OS) No. 990 of 2003 Page 1 of 24 IN THE HIGH COURT OF DELHI AT NEW DELHI CS (OS) No. 990 of 2003 Reserved on: July 20, 2009 Decision on : August 13, 2009 NARESH GAUR & ORS. ..... Plaintiffs Through: Mr. Maninder Singh, Senior Advocate with Ms. Pratibha M. Singh, Advocate. versus UMA GUPTA ..... Defendant Through: Ms. Maninder Acharya, Advocate. CORAM: HON'BLE DR. JUSTICE S. MURALIDHAR 1.Whether reporters of the local news papers be allowed to see the judgment? No 2.To be referred to the Reporter or not ? Yes 3. Whether the judgment should be reported in the Yes Digest ? JUDGMENT 13.08.2009 S. Muralidhar, J. 1. Seven Plaintiffs have joined together to file the present suit seeking specific performance of an agreement to sell dated 18th October 1994 in respect of an industrial Plot No.34 measuring 360 sq.m. in the Functional Industrial Estate, Patparganj, Delhi-110092 (hereafter „suit property‟). The parties to this agreement were Plaintiff No.1, the predecessor-in-interest of Plaintiffs 2 to 7 late Shri Suresh Gaur who was the elder brother of Plaintiff No.1 and the Defendant. CS (OS) No. 990 of 2003 Page 2 of 24 2. The background to the filing of the present suit is that on 20th March 1990 an allotment was made by the Industries Department of the aforementioned industrial plot in favour of Shri Bhagwan Das Gupta. A Will was executed on 27th June 1990 by Shri Bhagwan Das Gupta. Under the Will one half of the undivided share of the plot was bequeathed to Smt. Laxmi Devi Gupta, the wife of Shri Bhagwan Das Gupta and the other half of the share was bequeathed to the Defendant. It was provided in the Will that after the death of Smt. Laxmi Devi Gupta her share in the undivided plot would devolve on the Defendant who would become the sole owner of the property. Shri Bhagwan Das Gupta expired on 13th November 1990. A Probate Case No.40 of 1991 was filed in this Court in respect of the said Will dated 27th June 1990. 3. The Defendant and Smt.Laxmi Devi Gupta entered into the aforementioned agreement dated 18th October 1994 with Plaintiff No.1 Shri Naresh Gaur and his elder brother Shri Suresh Gaur agreeing to sell the suit property to them for a consideration of Rs.14 lakhs. A sum of Rs.7 lakhs was paid to the Defendant and Smt. Laxmi Devi Gupta at the time of the execution of the agreement to sell towards part payment of the sale consideration. Of the said sum of Rs.7 lakhs, the Defendant received Rs.4,50,000/- in cash and a sum of Rs.2,50,000/- by way of two demand drafts dated 21st September 1994for Rs.1,25,000/- each. A receipt dated 18th October 1994 was executed by the Defendant and Smt. Laxmi Devi Gupta in acknowledgment of the receipt of Rs.7 lakhs. 4. Under the agreement to sell, the clauses of which will be discussed CS (OS) No. 990 of 2003 Page 3 of 24 hereafter, it was agreed that the balance sum of Rs.7 lakhs would be received by the sellers at the time of delivering the vacant physical possession of the suit property and execution or registration of the concerned documents such as the general power of attorney („GPA‟), agreement to sell, affidavit, Will, receipt or sale deed in favour of the purchasers or their nominees “within three months”. The agreement further stipulated that the balance amount would be payable “after 15 days from execution of the sale deed in the name of the first party and informing to the second party by the first party.” It was further agreed that the price was settled and would neither be reduced nor enhanced by either party. The second party i.e. the purchasers were entitled to get the sale deed registered in their names “after 15 days from getting the information of transfer of the lease deed in the name of the first party.” The agreement acknowledged the pendency of the probate case. It was agreed that “if the seller failed to get the case cleared from the High Court within three months then the purchasers shall have the full right to take back the said amount…with back interest within a period of one week.” The balance payment was to be made within 15 days from the date of execution of the lease deed in respect of the said plot “as well as taking over of the possession of the abovesaid plot by the second party by the Commissioner of Industries.” 5. According to the Plaintiffs they paid the Defendant a further sum of Rs.1 lakh on 29th July 1995. 6. On 15th January 1996 this Court granted probate of the Will. Thereafter in 1998 the Defendant appears to have applied to the Industries Department for CS (OS) No. 990 of 2003 Page 4 of 24 the grant of lease in her name. It may be mentioned here that on 25th May 1998 Smt. Laxmi Devi Gupta died and therefore in terms of the Will of late Shri Bhagwan Dass Gupta, which was probated by that date, the Defendant became the absolute owner of the plot. The elder brother of Plaintiff No.1, Shri Suresh Garg expired on 14th November 2000 leaving behind Plaintiffs 2 to 7 as his legal heirs. 7. The Plaintiffs did not hear from the Defendant thereafter. In the plaint it is stated that when enquiries were made from Shri R.D. Gupta, husband of the Defendant, working as Joint Director, Department of Industries, Govt. of National Capital Territory of Delhi, the Plaintiffs were informed that the process for the execution of the lease was underway. 8. In the month of November 2002 the husband of the Defendant, Shri R.D. Gupta informed the Plaintiffs that a perpetual lease deed had already been executed by the Department in favour of the Defendant on 3rd July 2002. Although in terms of the agreement the Defendant was to inform the Plaintiffs of the execution of the lease deed, they did not do so and the Plaintiffs learnt of it only upon making enquiries with Shri R.D. Gupta. On 12th, 18th, 27th November and 9th December 2002 meetings were held by the Plaintiffs with the Defendant. According to the Plaintiffs when called upon to execute the sale deed the Defendant demanded an additional sum of Rs.12 lakhs which the Plaintiffs were unwilling to pay. On their part the Plaintiffs informed the Defendants of their readiness and willingness to perform their obligations under the agreement to sell dated 18th October 1994. They were in other words willing to make the balance payment of Rs.6 lakhs. However CS (OS) No. 990 of 2003 Page 5 of 24 the Defendant was demanding an additional sum of Rs.6 lakhs. 9. Thereafter a lawyer‟s notice dated 23rd December 2002 was sent to the Defendant by the Plaintiffs calling upon her to execute the sale deed in favour of the Plaintiffs within seven days. The willingness of the Plaintiffs to pay the balance amount of Rs.6 lakhs was reiterated. This notice was not replied to. Thereafter the present suit was filed praying inter alia for a decree of specific performance and in the alternative for a decree for damages in the sum of Rs.30 lakhs being the present market value of the property minus the amount of Rs.14 lakhs and refund of Rs. 8 lakhs along with pendente lite interest and future interest @ 18% per annum. It may be mentioned that the court fee has been paid on the said amount of Rs.30 lakhs. 10. The stand of the Defendant in the written statement was that time was the essence of the contract. Since the probate of the Will was not granted within three months of the execution of the agreement to sell, the said agreement stood dissolved. Consequently the Plaintiffs could only claim refund of the money deposited by them with the Defendant. It was contended by the Defendant that it was not the intention of the parties that the agreement to sell should remain valid and enforceable for an indefinite period. Neither the Defendant nor late Smt. Laxmi Devi Gupta would have agreed to be bound down to a fixed price particularly if had been known that the transaction would not be completed within three months of the execution of the agreement to sell. In the written statement it was pointed out that possession of the suit property was delivered to the Defendant on 8th October CS (OS) No. 990 of 2003 Page 6 of 24 2002. The market price had by then risen considerably. Even according to the Plaintiffs the current price (as on the date of the written statement i.e. 29th July 2003) was Rs.35 lakhs. 11. As regards the events that transpired after the expiry of the three-month period in January 1995, the Defendant stated that she had “repeatedly impressed” upon the Plaintiff No.1 and Shri Suresh Gaur to take back the amount of Rs.7 lakhs paid by them along with interest as per the agreement of the parties. However, Plaintiff No.1 and Shri Suresh Gaur did not do so and rather impressed upon the Defendant and late Smt. Laxmi Devi Gupta to accept another instalment of Rs.One lakh only and wait for a further three months thereafter. According to the Defendant, on 29th July 1995 she reluctantly accepted the amount of Rs. One lakh. However, once again despite the passage of three months thereafter, neither the probate petition was finalised nor the lease in respect of the suit property executed in favour the Defendant and Smt. Lakshmi Devi Gupta nor its possession delivered. It is claimed by the Defendant that on the expiry of three months from 29th July 1995, i.e. some time in. in November, 1995, the Defendant and Smt. Laxmi Devi Gupta verbally communicated to the Plaintiff No.1 and Shri Suresh Gaur, their intention to cancel the transaction in exercise of the rights under the Agreement since they could wait any longer to receive the balance consideration and to complete the transaction.” Notwithstanding these contentions, the Defendant submits that it would be unjust to specifically enforce the agreement dated 18th October 1994. It is submitted that in that event the agreement is liable to be declared null and void under Section 23 of the Contract Act. CS (OS) No. 990 of 2003 Page 7 of 24 12. It is further contended in the written statement that under Clause (5)(a) of the lease deed dated 23rd July 2002 the lessor i.e. Delhi Administration was entitled to charge 15% unearned increase which in the present case works out to Rs.6,10,000. The agreement in question did not deal with the aspect of the obligation of payment of unearned increase to the lessor i.e. Delhi Administration in the event of the transfer of the suit property by the Defendant to the Plaintiffs. Since this was a substantial liability, not anticipated at the time of entering into the agreement, there was no consensus between the parties on this aspect and therefore the agreement was not enforceable. It is also pointed out that under Clause 5(a) of the perpetual lease deed no alteration or transfer of the suit property could take place without the previous consent of the lessor i.e. Delhi Administration. The proviso to the said clause states that consent should not be given for a period of ten years from the commencement of the lease deed unless exceptional circumstances exist for the grant of such consent. It is pointed out that on the date of the agreement i.e. 18th October 1994 neither the Defendant nor late Smt. Laxmi Devi Gupta were co-owners of the suit property since the Probate of the Will of late Sri Bhagwan Das Gupta had not been granted in their favour. It is accordingly submitted that the agreement cannot be enforced. 13. In the replication it is pointed out that the acceptance of Rs.1 lakh by the Defendant on 29th July 2005 i.e. beyond the expiry of the three months from 18th October 1994 indicated that time was not the essence of the contract. The contention of the Defendant that she had communicated to the Plaintiffs about her intention to cancel the agreement was denied as being factually CS (OS) No. 990 of 2003 Page 8 of 24 incorrect. On the other hand she demanded Rs.12 lakhs additionally for executing the sale deed. 14. On the basis of the pleadings and the documents, this Court by an order dated 18th January 2005 framed the following issues: “1. Whether agreement dated 18.10.1994 was conditional and whether parties stood discharged from their respective liabilities thereunder? OPD 2. Whether the agreement dated 18.10.1994 is void for the reasons stated in the preliminary objection No.9 by the defendants? OPD 3. Whether the suit is barred by limitation? OPD 4. Whether the agreement dated 18.10.1994 is not enforceable under law? OPD 5. Whether the plaintiffs were ready and willing to perform their obligations under the agreement dated 18.10.1994? OPP 6. If the relief of specific performance is denied, whether plaintiffs are entitled to decree or damages, if so in what amount? OPP 7. Relief.” 15. The submissions of Mr. Maninder Singh, learned Senior counsel appearing for the Plaintiffs and Ms. Maninder Acharya, learned counsel appearing for the Defendant have been heard. CS (OS) No. 990 of 2003 Page 9 of 24 16. Issue No.3: Whether the suit is barred by limitation? A perusal of the agreement dated 18th October 1994 shows that the entitlement of the Plaintiffs to seek execution of the sale deed in their favour would arise only on the expiry of 15 days after receiving intimation that the lease stood mutated in the name of the Defendant. The transfer of the lease in favour of the Defendant admittedly took place only on 3rd July 2002. Thereafter four meetings were held in November and December 2002 between the parties. However, no sale deed came to be executed. The suit was filed on 3rd May 2003. Since the cause of action to seek specific performance arose only after the mutation of the lease in favour of the Defendant, it cannot be said that the suit is barred by limitation. This issue is accordingly decided against the Defendant and in favour of the Plaintiffs. 17. Issue No.1: Whether agreement dated 18th October 1994 was conditional and whether parties stood discharged from their respective liabilities thereunder? The stand of the Defendant has been that time is the essence of the contract. It is contended that under the agreement dated 18th October 1994 the sale deed was to be executed and possession to be handed over to the Plaintiffs within three months of the Agreement. It is submitted that the said period of three months could be reckoned either from 18th October 1994 itself or at the highest the expiry of three months after 29th July 1995 when the further sum of Rs. 1 lakh was received by the Defendant. It is submitted that on either of these parameters, the agreement came to an end latest on 28th October 1995. It is accordingly submitted that beyond that date the Plaintiff cannot seek CS (OS) No. 990 of 2003 Page 10 of 24 specific performance. Inasmuch as the Defendant has filed the suit only in 2003, long after the Defendant stood discharged from her obligation, the suit is not maintainable as such. Reliance is placed by the Defendant on the judgment of this Court in Subhash Chander Kathuria v. Umed Singh 127 (2006) DLT 292. Reliance is also placed on the judgment in K.S.Vidyanadam v. Vairavan (1997) 3 SCC page 1. 18. On behalf of the Plaintiffs it is pointed out that they have throughout been willing to perform their part of the contract. Reference is made to the evidence and to the decisions in Indira Kaur v. Sheo Lal Kapoor (1998) 2 SCC 488 and P. D’souza v. Shondrilo Naidu (2004) 6 SCC 649 to plead that it is the obligation of the Court to lend its hand for enforcement of the contract. Reference is also made to the judgment in Gurdial Kaur v. Piara Singh (2008) 4 SCALE 695. On the aspect of limitation reference is made to the judgment in Panchanan Dhara v. Monmatha Nath Maity (2006) 5 SCC 340, Kuldip Gandotra v. Shailendra Nath Endlay AIR 2007 Delhi page1 and Nisha Raj v. Pratap K. Kaula 151 (2008) DLT 402. Reference is also made to Section 54 of the Transfer of Property Act, 1882 to contend that time is not the essence of the contract in transactions of sale of immovable property. 19. The submissions have been considered. In the present case the paras and clauses of the agreement when read together show that the parties did not intend time to be essence of the contract. The agreement consists of paras by way of a preamble followed by paras 1 and 2 (hereafter for convenience referred to as „paras‟) followed by the actual Clauses of the agreement which CS (OS) No. 990 of 2003 Page 11 of 24 are again numbered from 1 to 10 (hereafter referred to as „Clauses‟). Para 1 makes a reference to the time limit of three months for completion of several tasks including delivering of vacant physical possession, execution and registration of concerned documents such as GPA, agreement to sell, affidavits, Will and simultaneous payment of the balance sum of Rs.7 lakhs. However Para 2 contemplates that the said balance sum of Rs.7 lakhs would be payable “after 15 days from execution of the lease deed in the name of the firs t party and informing to the second party by the first party.” When Para 2 is read together with Clauses 2,8, 9 and 10 the position that emerges is that time does not begin to run for the buyers till they have been informed by the seller about the leased having been mutated in her name and 15 days have elapsed thereafter. Clauses 2, 8, 9 and 10 read as under: “2. That the second party shall be entitled to get the Sale Deed /proper documents executed and registered either in their own name or in the names of their nominee(s) after fifteen days from getting the information of transfer of the lease deed in the name of the first party. 8. After getting the Lease Deed in their own name, the first party will be responsible to inform the second party in written as soon as possible. 9. That if the first party fails to get the case cleared from the High Court within three months, then the second party shall have full right to take back the said amount, which is paid to the first party by the second party, with Bank Interest within a period of one week. 10. That the balance consideration amount shall be payable by the second party to the first party within a CS (OS) No. 990 of 2003 Page 12 of 24 period of 15 days from the date of execution and registration of lease deed of the above mentioned plot as well as taking over the possession of the above said plot by the first party from the Commissioner of Industries/ Authority concerned.” 20. It is not possible for this Court to agree with the learned counsel for the Defendant that notwithstanding the fact that the obligation on the part of the buyers to make the payment of the balance sum did not arise till they were informed of the lease being mutated in favour of the Defendant, the Agreement itself would come to an end on the expiry of three months after either 18th October 1994 or 29th July 1995. The conduct of the Defendant in accepting the payment of Rs.1 lakh on 29th July 1995 is indeed a pointer that the parties did not intend the Agreement to come to an end on the expiry of three months after 18th October 1994. 21. The evidence of the parties in this aspect may be looked at. In her evidence the Defendant who examined herself as DW-1 specifically stated that she applied for the mutation of the lease in her name in 1998. This belies the stand of the Defendant that she had not taken any step in pursuant to the Agreement after the expiry of three months from 29th July 1995. In her written statement the Defendant stated that she had repeatedly asked the Plaintiffs to take back the money together with the interest. However in answer to the questions posed to her during cross-examination she answered as under: “Q. Had you written any letter to the plaintiffs after three months had expired? CS (OS) No. 990 of 2003 Page 13 of 24 A. No we had not written any letter but had verbally informed them in the meetings we had with them. Q. Can you give the dates of these meetings? A. The meetings were held on 12.11.02, 18.11.02, 27.11.02 and 9.12.02. Q. These were the only meetings and no other meeting were held? A. Yes. Q. I put it to you that the agreement between you and the plaintiffs is subsisting and did not expire after three months, firstly as you had received the payment of Rs.1 lakh after the expiry of three months and, secondly all the meetings took place in 2002 after the execution of the lease deed in your favour? A. It is incorrect to say so. Q. I put it to you that you got the possession of the plot on 8.10.02? A. Yes. Q. Who all were present in the meetings which you have mentioned above? A. I was there, Sh. Ajay Gaur, Sh. Naresh Gaur and one or two more people from their side were present in these meetings. Q. I put it to you that your husband was also present in these meetings? A. No. Q. You have stated that in these meetings you were CS (OS) No. 990 of 2003 Page 14 of 24 willing to return the money to the plaintiffs. Had you got prepared any demand draft or pay order for that purpose prior to the meetings? A. No (Vol.) If they had been willing to take the money back I would have got the same prepared immediately. Q. Is this correct that you had not met the plaintiffs from 1995 to 2002 for returning the money? A. I had verbally told them to take the money back. Q. Whom had you conveyed that you were willing to refund the money and whom did you call? A. I had never called and it was the plaintiffs who used to call.” 22. The above answers of the Defendant create a serious doubt whether she seriously intended to return the moneys to the Plaintiffs. According to her, the communication with the Plaintiffs in this regard was verbal but no dates are forthcoming. She later admits that it was the Plaintiffs who got in touch with her. This conduct of the Defendant is not consistent with her plea that the Agreement had come to an end three months after either 18th October 1994 or 29th July 1995. Inasmuch as the Plaintiffs have in the instant case been able to prove by leading evidence and on the recitals of the Agreement, that time was not the essence of the contract, the decision of the Supreme Court in K.S.Vidyanadam v. Vairavan is of no assistance to the Defendant. 23. What is unusual about the agreement is that 50% of the sale consideration was paid by the Plaintiffs upfront even at the time of execution of the sale deed. Then a further sum of Rs.1 lakh was paid. Therefore out of CS (OS) No. 990 of 2003 Page 15 of 24 a total consideration of Rs.14 lakhs, 8 lakhs stood paid within a year of the execution of the agreement. This was even prior to the Probate in respect of the Will of late Sri Bhagwan