FAO(OS)252/2008 Page 1 of 47 * IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO(OS) 252/08 & CM 7625/08 MOHAN OVERSEAS P.LTD. ..... Appellant Through: Mr. D.S.Narula & Mr. A.S.Narula, Advs. -versus- GOYAL TIN & GENERAL INDUSTRIES …Respondent Through: Mr. Harish Malhotra, Sr. Adv. with Mr. R.K.Modi and Mr. Rajender Aggarwal, Advs. WITH FAO(OS) No.350/09 & CM No.11704/09 C.P. SHARMA ….. Appellant Through: Mr. Madan Gera, Adv. -versus- VIRENDER KUMAR GUPTA ….. Respondent Through: Mr. Rajesh Katyal, Adv. WITH FAO(OS) 313/09 & CM No.10289/09 RAVINDER SINGH & ANR. …. Appellant Through : Mr. Maninder Singh, Sr. Adv. with Mr. Saurabh Tiwari, Adv. -versus- MANOJ KUMAR PRUTHI & ANR. …Respondent Through : Mr. Sandeep Sethi, Sr. Adv. with Mr. Sanjay FAO(OS)252/2008 Page 2 of 47 S.Chhabra & Mr. Alok K. Aggarwal, Advs. for Respondent No.1 Mr. Amit S. Chadha, Sr. Adv. with Mr. Kunal Sinha, Adv. for Respondent No.2 WITH FAO(OS) No.64/09 & CM Nos.2693/09 & 3283/09 JAGDISH CHANDER KAPOOR & ORS. …. Appellant Through : Mr. P.K. Kapoor and Mr.V.K.Kapoor, Appellants No.2 and 3 in person -versus- RUPABH DEVELOPERS PVT. LTD.. …Respondent Through : Mr. J.P. Sengh, Sr. adv. with Mr. Vineet Malhotra, Adv. % Date of Decision : November 27, 2009 CORAM: * HON'BLE MR. JUSTICE VIKRAMAJIT SEN HON'BLE MR. JUSTICE V.K.JAIN 1. Whether reporters of local papers may be allowed to see the Judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the Judgment should be reported in the Digest? Yes VIKRAMAJIT SEN, J. 1. Courts are intended to be temples of justice, roads for redressal, and not houses for harassment. A judge will never be able to palate litigation being vulgarized as a vehicle of FAO(OS)252/2008 Page 3 of 47 victimization. He will scarcely stand idle when he perceives the jural system being employed as an instrument of oppression of an innocent citizen. Given the disturbing reality of decades of pendency of litigation, resulting largely from an exponential explosion of litigation in response to which the imperative of an increase in the strength of judges is startlingly absent, the judge must innovate; he must discover avenues which will minimize the malaise of delay in decision even if it entails routing away for practices which were hitherto fore commonplace. One genre of cases which the judge increasingly countenances are suits for specific performance of ostensible contracts for conveyance of immovable property and this class of lis is severely clogging the courts. Dismissing interlocutory injunction pleas in this category of cases is not adequate amelioration, principally because of the doctrine of lis pendens, which finds statutory expression in Section 52 of the Transfer of Property Act, 1882 („TP Act‟ for brevity). 2. This Appeal assails the Order of the learned Single Judge dated 5.5.2008 passed in CS(OS) No.1528/2007. The Appellant/Plaintiff has filed a suit for Specific Performance, permanent and temporary Injunction in respect of immovable property bearing No.243, Okhla Industrial Estate-III, New Delhi. By the impugned Order the learned Single Judge has rejected IA FAO(OS)252/2008 Page 4 of 47 No.9469/2007 filed by the Plaintiff seeking an ad interim injunction restraining the Defendant from alienating the suit property during the pendency of the suit. IA No.13550/2007 filed by the Defendant under Order XXXIX Rule 4 for vacation of the status quo order has been allowed. However, IA No.13551/2007 filed by the Defendant, praying for the rejection of the Plaint on the ground that it does not disclose a cause of action has also been dismissed; against which no appeal has been filed. 3. The Plaintiff‟s suit is predicated on the following document, which is admitted:- R E C E I P T Received from Mohan Overseas(P) Ltd., Okhla Industrial Area, Phase-I, New Delhi through its Managing Director Sh. Sunder Kukreja a sum of Rs.21,00,000- (Rupees Twenty One Lacs Only) in the following manner towards part payment of sale of property No.243, measuring 1211 sq. yards, Okhla Industrial Estate-III, New Delhi. The total sale consideration of the subject property is Rupees 11,90,00,000/- (Rupees Eleven Crore Ninety Lacs Only). Cash 5,00,000/- (Rupees Five Lacs Only) Cheque No.615714 of Rupees 16,00,000/- (Rupees Sixteen Lacs Only) of Standard Chartered Bank. The brief terms of this sale are as under: 1. The total sale consideration is Rupees 11,90,00,000/- (Rupees Eleven Crore Ninety Lacs Only). FAO(OS)252/2008 Page 5 of 47 2. The seller Goyal Tin & General Industries is partnership firm, having its office at 39 Okhla Industrial Estate-III, New Delhi, consisting of currently three partners, namely 1)Sh. Ramesh Kumar Miglani s/o Sh. Uttam Chand Miglani 2)Sh. Rajat Miglani s/o Sh. Ramesh Kumar Miglani and 3) Sh. Rishi Miglani s/o Sh. Ramesh Miglani, all residents of W-55, Greater Kailash-I, New Delhi. Sh. Ramesh Miglani has represented that he is fully authorized to finalise this sale agreement and that his acts and deeds are binding on Goyal Tin & General Industries and all its partners. Sh.Rakesh Miglani has further represented that the subject property no.243 Okhla Industrial Estate-III is free from all mortgages, lien, prior sale, gift, attachment etc. 3. The buyer or his nominee(s) shall pay the entire sale consideration within (five) months from this date whichever is later. The seller shall deliver all the relevant documents to the buyer from time to time. 4. A proper agreement to sell between the parties will be executed shortly. 4. It has not been denied that thereafter an Agreement to Sell on a non-judicial stamp paper of Rupees 100/- had been got prepared by the Plaintiff, the photocopy whereof bears notations in the handwriting of the Defendant. Follow-up correspondence has also been placed on record by learned counsel for the Appellant along with an Agreement to Sell, also on Rupees 100/- non-judicial stamp paper bearing the date 3.8.2007 which appears to have incorporated changes made to the earlier draft FAO(OS)252/2008 Page 6 of 47 in the handwriting of the Defendant. It has not been denied that the Defendant had received a sum of Rupees 5,00,000/- in cash, along with a cheque for Rupees 16,00,000/-. Rupees 5,00,000/- has till date not been returned by the Defendant. Although the cheque for Rupees 16,00,000/- has not been encashed, it remains in the possession of the Defendant. The Plaintiff has further averred that two cheques dated 3.8.2007, drawn on Standard Chartered Bank, New Delhi for a total sum of Rupees 1,14,00,000/-, have been tendered to the Defendant, who has not encashed them. Balance-Sheets of the Plaintiff have been filed with the purpose of establishing that it has always remained in sound financial health, and that liquidity was not a problem. 5. According to Mr.D.S. Narula, learned counsel for the Plaintiff, the Receipt reproduced above, sufficiently evidences the formation of a contract for the purchase of the suit property inasmuch as (a) it mentions the total sale consideration as Rupees 11,90,00,000/-; (b) the description of the property leaves no room for doubt as to what was the subject matter of the contract; and (c)there was complete certainty about identity of the contracting parties. Considerable argument has been generated on the fourth concomitant necessary for the formation or emergence of an oral contract, viz. certainty as to FAO(OS)252/2008 Page 7 of 47 other terms relating to cost of conveyance, time etc. It is trite that every document must be read holistically; the title or heading given to the subject document does not conclusively indicate or establish that it was not an agreement for the sale of immovable property. 6. The learned Single Judge has applied the decision of Single Benches of this Court in Amarjit Singh Johar & Co. –vs- Shri Prakash Chand Brahmin, 79(1999) DLT 289 and High Way Farms –vs- Chinta Ram, 85 (2000) DLT 355, all of which fall in line with the decision of the Supreme Court in Mool Chand Bhakru –vs- Rohan, (2002) 2 SCC 612 in which it was opined that an oral Agreement to Sell must spell out and cover all the essential terms of the Sale including the time-frame within which the Sale Deed has to be executed and as to who would be liable to pay the registration charges etc. In this regard, it seems to us to be of importance to highlight Section 29 of the Stamp Act, 1899 which prescribes that in the absence of an agreement to the contrary, liability for payment of duty rests on the lessee in respect of a lease deed, and on the grantee in the context of a Conveyance. Kollipara Sriramulu –vs- T. Aswathanarayana, AIR 1968 SC 1028 must be kept in mind. The law has been explained by their Lordships in the FAO(OS)252/2008 Page 8 of 47 following paragraph:- We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and so such agreement was executed. We do not accept this argument as correct. It is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton 6 H.L.C. 238 the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous FAO(OS)252/2008 Page 9 of 47 agreement In Von Hatzfeldt-Wildenburg v. Alexander [1921] 1 Ch. 284 it was stated by Parker, J. as follows : "It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored." In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rassier v. Miller 3 A.C. 1124 Lord Cairns said : "If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract." In Currimbhoy and Company Ltd. v. Creet 60 I.A. 297 the Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. in Van Hatzfeldt-Wildenburg v. FAO(OS)252/2008 Page 10 of 47 Alexander [1912] 1 Ch. 284 was be applicable in India. The question in the present appeals is whether the execution if a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of respondent No. 1 does not show that the drawing up of a written agreement was a pre- requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and time for completion of the sale were all fixed. 7. We are fully mindful of the comparatively constricted confines of the jurisdiction of appellate courts before whom a challenge to an interlocutory order has been brought. The parameters have been penciled out by the Supreme Court in Wander Ltd. –vs- Antox India P. Ltd., 1990(Supp) SCC 727 and Ramdev Food Products (P) Ltd. –vs- Arvindbhai Rambhai Patel, (2006) 8 SCC 726. In Wander Ltd. their Lordships had analysed the powers of the Appellate Court in suchlike matters as follows FAO(OS)252/2008 Page 11 of 47 - “The appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion”. This decision has been followed very recently in Seema Arshad Zaheer -vs- Municipal Corpn. of Greater Mumbai, (2006) 5 SCC 282. The City Civil Court had granted a temporary injunction against the Corporation which was challenged before the Bombay High Court. Speaking for the Bench His Lordship R.V. Raveendran FAO(OS)252/2008 Page 12 of 47 made the following pithy observations:- 32. Where the lower court acts arbitrarily, capriciously or perversely in the exercise of its discretion, the appellate court will interfere. Exercise of discretion by granting a temporary injunction when there is “no material”, or refusing to grant a temporary injunction by ignoring the relevant documents produced, are instances of action which are termed as arbitrary, capricious or perverse. When we refer to acting on “no material” (similar to “no evidence”), we refer not only to cases where there is total dearth of material, but also to cases where there is no relevant material or where the material, taken as a whole, it is not reasonably capable of supporting the exercise of discretion. In this case, there was “no material” to make out a prima facie case and therefore, the High Court in its appellate jurisdiction, was justified in interfering in the matter and vacating the temporary injunction granted by the trial court. 8. In Ramdev the Supreme Court has taken into consideration both Wander Ltd. and Seema Arshad Zaheer. His Lordship, S.B. Sinha, J., has perspicuously propounded the law in these words: The grant of an interlocutory injunction is in exercise of discretionary power and hence, the appellate courts will usually not interfere with it. However, the appellate courts will substitute their discretion if they find that discretion has been exercised arbitrarily, FAO(OS)252/2008 Page 13 of 47 capriciously, perversely, or where the court has ignored the settled principles of law regulating the grant or refusal of interlocutory injunctions. This principle has been stated by this Court time and time again. [See for example Wander Ltd. v. Antox India P. Ltd., 1990 (Supp) Supreme Court Cases 727, Laxmikant V. Patel v. Chetanbhai Shah, (2002) 3 SCC 65 and Seema Arshad Zaheer -vs- Municipal Corpn. of Greater Mumbai, (2006) 5 SCC 282]. The appellate court may not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. However, in this case the courts below proceeded on a prima facie misconstruction of documents. They adopted and applied wrong standards. We, therefore, are of the opinion that a case for interference has been made out. 9. We would be loathe to reverse or alter the impugned Order had we not arrived at the conviction that the learned Single Judge has misapplied the law. We are unable to overlook the fact that a sum of Rupees 21,00,000/- had been tendered by the Appellant to the Defendant, as evidenced in the Receipt dated 12.5.2006. Out of these monies, the sum of FAO(OS)252/2008 Page 14 of 47 Rupees 5,00,000/- received in cash has not been returned to the Plaintiff; even the formality of returning the cheque for Rupees 16,00,000/- has also not been ventured upon by the Defendant. This, prima facie, is indicative of the Defendant‟s resolve and mental make-up, viz., that the Agreement arrived at in terms of the said Receipt had not been cancelled by him. 10. When a court is called upon to grant an ad interim injunction, ex parte or otherwise, it is trite that it must be satisfied of the existence of a prima facie case in favour of the Plaintiff, namely, that the suit is more than likely to be decreed. The balance of convenience must also lie in favour of the Plaintiff; and it should be manifestly clear that unless the protection of the Court is granted the Plaintiff will suffer irreparable loss and injury. A new dimension or consideration has now come to be recognized, as is evident from a reading of the following paragraphs in Mahadeo Savlaram Shelke –vs- Pune Municipal Corporation, (1995) 3 SCC 33:- 12. In "Modern Law Review", Vol 44, 1981 Edition, at page 214, R.A. Buckley stated that "a plaintiff may still be deprived of an injunction in such a case on general equitable principles under which factors such as the public interest may, in an appropriate case, be relevant. It is of interest to note, in this connection, that it has not always been regarded as altogether beyond doubt whether a plaintiff who does thus fail to FAO(OS)252/2008 Page 15 of 47 substantiate a claim for equitable relief could be awarded damages". In "The Law Quarterly Review" Vol 109, at page 432 (at p. 446), A.A.S. Zuckerman under Title "Mareva Injunctions and Security for Judgment in a Framework of Interlocutory Remedies" stated that "if the plaintiff is likely of suffer irreparable or uncompensable damage, no interlocutory injunction will be granted, then, provided that the plaintiff would be able to compensate the defendant for any unwarranted restraint on the defendant's right pending trial, the balance would tilt in favour of restraining the defendant pending trial. Where both sides are exposed to irreparable injury ending trial, the courts have to strike a just balance". At page 447, it is stated that the court considering an application for an interlocutory injunction has four factors to consider : first, whether the plaintiff would suffer irreparable harm if the injunction is denied; secondly, whether this harm outweighs any irreparable harm that the defendant would suffer from an injunction; thirdly, the parties' relative prospects of success on the merits; fourthly, any public interest involved in the decision. The central objective of interlocutory injunctions should therefore be seen as reducing the risk that rights will be irreparably harmed during the inevitable delay of litigation". 13. In "Injunctions" by David Bean, 1st Edn, at page 22, it is stated that "if the plaintiff obtains an interlocutory injunction, but subsequently the case goes to trial and he fails to obtain a perpetual order, the defendant will meanwhile have been restrained unjustly and will be FAO(OS)252/2008 Page 16 of 47 entitled to damages for any loss he has sustained. The practice has therefore grown up, in almost every case where interlocutory injunction is to be granted, of requiring the plaintiff to undertake to pay any damages subsequently found due to the defendant as compensation if the injunction cannot be justified at trial. The undertaking may be required of the plaintiff in appropriate cases in that behalf. In "Joyce on Injunctions" Vol. 1 in paragraph 177 at page 293, it is stated "Upon a final judgment dissolving an injunction, a right of action upon the injunction bond immediately follows, unless the judgment is superseded. A right to damages on dissolution of the injunction would arise at the determination of the suit at law". 11. What is so often glossed over is the fact that wherever immovable property is at the fulcrum of the fight, Order XXXIX prescribes the passing of a temporary injunction during the pendency of the suit. It is platitudinous that the issuance of injunctions is not circumscribed by the Code of Civil Procedure, 1908 („CPC‟ for short). It is equally vapid that where a statutory provision is available, the Judge should adhere to its dictates. Rule 1 of Order XXXIX of the CPC covers cases in which temporary injunctions may be granted. It states, inter alia, that where in any suit it is proved by affidavit or otherwise that the property in dispute in the suit is in danger of being alienated by any party to the suit, the Court may by an order grant a FAO(OS)252/2008 Page 17 of 47 temporary injunction to restrain such act or make such other order for the purpose of staying or preventing the alienation of the property as the Court thinks fit, until the disposal of the suit or until further orders. It may be argued that the Code employs the word „may‟ instead of „shall‟, but in our view, in cases of this genre, the word „may‟ would more often than not mandate the grant of an ex parte ad interim injunction. Furthermore, Section 10 of the Specific Relief Act, 1963 („SR Act‟ for short) lays down that when a Court is confronted with a prayer for the specific performance of a contract to transfer immoveable property, it shall presume that its breach cannot be adequately relieved by compensation in money; hence the prayer may, in its discretion, be allowed. In M.L. Devender Singh –vs- Syed Khaja, (1973) 2 SCC 515 the agreement to sell a commercial property contained a clause to the effect that if the Vendor failed to complete the sale transaction, the liquidated sum of Rupees 20,000/- would become payable as damages. The Vendor breached the contract but their Lordships declined to grant damages alone, in view of the provisions of Section 23 of the SR Act. In such a situation, there is added compulsion to grant interlocutory relief. 12. The doctrine of lis pendens fortifies and strengthens this interpretation of the law which is