RFA (OS) No.19 of 2000 Page 1 of 27 * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on : 02.02.2009 % Date of decision : 06.03.2009 + RFA (OS) No.19 of 2000 MR. DEVENDER SINGH MEHTA thr. LRs & ANR. …APPELLANTS Through: Mr. Rakesh Tiku & Mr. Aditya Bhardwaj, Advocates. Versus SHRI RAKESH KUMAR JAIN & ORS. ...RESPONDENTS Through: Mr. A.P. Agarwal, Mr. A.S. Mathur & Ms. Shruti Verma, Advocates for R-1, 2(a), 3 & 4. Mr. Rajesh Benati & Mr. Hari Mohan, Advocates for R-2 (b), (c) & (d). CORAM: HON'BLE MR. JUSTICE SANJAY KISHAN KAUL HON‟BLE MR. JUSTICE SUDERSHAN KUMAR MISRA 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be Yes reported in the Digest? SANJAY KISHAN KAUL, J. 1. A suit for specific performance and in the alternate for damages was filed by the plaintiffs (respondents herein) in respect of the property bearing No. 35, Babar Road, Bengali Market, New Delhi (hereinafter referred to as, „the suit property‟). The suit was decreed for the claim for specific performance vide judgment and decree dated 01.12.1999. Hence, this appeal. RFA (OS) No.19 of 2000 Page 2 of 27 2. The plaintiffs in the suit are four brothers. The plaintiffs entered into an Agreement for Sale dated 08.09.1978 (Ex. P-1) (hereinafter referred to as, „the said Agreement‟) with the defendants in respect of the suit property for a total consideration of Rs.4,90,000/-. The said Agreement was executed by the plaintiffs on the one side and defendant No. 1 on the other side (for himself and for and on behalf of defendant No. 2 as his duly constituted attorney). Defendant Nos. 1 & 2 are also brothers. 3. In terms of the said Agreement, the defendants had received a sum of Rs.30,000/- and the balance had to be paid in two installments, i.e., Rs.2,60,000/- to be paid at the time of possession of the property and execution of the Sale Deed and Rs.2,00,000/- to be paid within 2 years from the date of possession together with interest @ 10% p.a. on completion of the transaction in all respects. It was further covenanted and agreed between the parties that actual physical possession would be handed over within 3 months from the date of the said Agreement. It was also mentioned in the said Agreement that the defendants would, before registration, obtain permission in favour of the plaintiffs from the Competent Authority under Urban Land (Ceiling & Regulation) Act, 1976 (for short, „the ULCR Act‟) apart from obtaining permission from L&DO to sell the suit property as also the income-tax clearance certificate. It is the case of the plaintiff, as averred in the plaint, that these obligations were not fulfilled by the defendants as envisaged in the said Agreement and the excuse given by RFA (OS) No.19 of 2000 Page 3 of 27 them was the ill-health of the sister of the defendants. The plaintiffs after waiting for sometime wrote the letter dated 05.04.1979 (Ex. PW-2/1) to the defendants thereby requesting them to inform when possession shall be handed over as also to complete the transaction. The letter was sent to two addresses – one being at 3-C/31, Rohtak Road and the second at 35 Babar Road. The letter further stated that the plaintiffs were ready and willing to fulfill their part of the contract subject to handing over of physical possession of the building complete in all respects as per the said Agreement. This letter was received back with endorsement that the defendants were out of India / out of station. The plaintiffs again wrote a letter dated 02.05.1979 (Ex. PW-2/2), which was also unserved but this time the postal endorsement in respect of Rohtak Road address was “avoiding to take delivery” and in respect of the address of 35, Babar Road was “that in spite of going several times, addressee has not met and the kothi is lying vacant”. 4. It is further stated that on learning of the defendant‟s return, the plaintiffs approached him to complete the transaction. A notice by telegram dated 21.12.1979 (Ex. PW-2/3) was sent as also a registered notice dated 23.12.1979 (Ex. PW-2/4) was sent. Both these notice‟s remained undelivered. 5. The plaintiffs thereafter received a letter dated 08.01.1980 (Ex. P-3) from defendant No. 1 stating that it was not possible to register the sale as the required permissions RFA (OS) No.19 of 2000 Page 4 of 27 could not be obtained. The letter further stated that the money paid was being refunded, i.e., Rs. 30,000/-. The plaintiffs sent the letter dated 21.1.1980 (Ex. PW-2/5) to the effect that they did not accept that sale permission could not be obtained or that the transaction could not be completed and further stated that they were not encashing the draft and the same could be taken back. The said letter was stated to have been sent under postal certificate (UPC). It is averred in the plaint that since the letter was not returned, it must have been delivered. The plaintiffs further submitted that reminders dated 15.2.1980 (Ex. PW- 2/6) and 12.5.1980 (Ex. PW-2/7) were sent under postal certificate and no reply to the same was received. Finally, a legal notice dated 05.07.1980 (Ex. PW-2/9) was sent by the plaintiffs to the defendants. This letter was returned back with the endorsement “not available”. 6. In the Written Statement, the following preliminary objections were raised : a. that the said Agreement is “voidable, not executable and inoperative” on the ground that the Plaintiffs were debarred by Section 5 of the Foreign Exchange Regulation Act, 1973 from making payment to the defendants since they were British Nationals. b. that since the plaintiffs owned another immovable property, they could not and did not sign and supply the necessary application and affidavits for the L&DO permission as well as the clearance under the Urban Land (Ceiling & Regulation) Act, 1976. c. that the Agreement stood exhausted, no longer operative and in force and binding upon the parties for the reason that Rs.30,000/- was returned. RFA (OS) No.19 of 2000 Page 5 of 27 d. that the plaintiffs were not financially in a position to pay the sale consideration. e. that the relief claimed by the plaintiff, i.e., decree directing the defendants to execute the sale deed in favour of the plaintiffs‟ nominee is wrong, unsustainable, beyond the terms and conditions of the Agreement dated 08.09.1978. f. that the claim for damages of Rs.4,50,000/- was wrong, voidable and misconceived. g. that only Rs.10,000/- at most, could be claimed as damages. h. that the agreement between the plaintiffs and defendants is invalid and cannot be acted upon since the same is hit by Section 47 read with Section 31 of Foreign Exchange Regulation Act, 1973. i. that it is otherwise not equitable to grant specific performance. j. that the specific performance of the Agreement to Sell could not be granted having regard to the fact that the defendant had been restrained by the High Court in WP(C) No. 2659/1984 titled as “Devinder Singh Mehta Vs. L&DO” from alienating, encumbering or disposing of the property in question in any manner. 7. It was also pleaded by the defendants that the defendants could not apply for the requisite clearance(s) / permission(s) due to the failure of the plaintiffs and that the letters/notices were never received. 8. The learned Single Judge on the basis of the pleadings framed the following issues :- 1. Whether defendant Nos. 1 and 2 are British National and are debarred from making any payment and/or receiving any payment in consideration of the sale of the suit property and the agreement is voidable/ inoperative for that reason? RFA (OS) No.19 of 2000 Page 6 of 27 1A. Whether the agreement dated 8th September, 1978 is invalid and hit by Sections 31 and 47 of the Foreign Exchange Regulation Act, 1973? 2. Whether the parties had agreed to cancel the sale agreement dated September 8, 1978 as alleged in para 8 (on merits) of the written statement? 2A. Whether it is not equitable to grant specific performance of the Agreement to Sell dated 8th September, 1978? 3. What is the effect of defendants returning Rs. 30,000/- by means of bank draft to the plaintiffs? 3A. Whether specific performance of the agreement cannot be granted for the pleas raised in para 11 of the preliminary objections? 4. Whether the plaintiffs were called upon to sign the necessary application and affidavits for obtaining permission for sale from the Government Authorities concerned and they failed to do so? If so, its effect? 5. Whether the plaintiffs were ready and willing to perform their part of the contract? 6. Whether the plaintiffs are not entitled to specific performance of the contract even if breach on the part of the defendant is proved? 7. To what amount, if any, the plaintiffs are entitled to damages? 8. Reliefs. 9. The plaintiffs in support of their case examined plaintiff No. 2 as PW-2. Seven other witnesses were also examined by the plaintiffs, namely, (i) Mr. Harish Chander Bajaj, Clerk, Punjab National Bank as PW-1; (ii) Mr. Hari Singh, Jr. Engineer (Meters), NDMC as PW-3: and (iii) Mr. Kadag Singh, Record Keeper, NDMC as PW-4. The three remaining witnesses were Mr. Mehar Chand as PW-5; Mr. Satinder Jain as PW-6 and Mr. Padam Chand Jain as PW-7. These three witnesses are relatives of the plaintiffs. The last witness RFA (OS) No.19 of 2000 Page 7 of 27 examined by the plaintiffs was Mr. Ghansham Vashist, Advocate as PW-8. PW-8 was appointed as a Local Commissioner. The defendants in support of their case only examined two witnesses, namely, Shri Bir Sen Singh, UDC, L&DO as DW-1 and Mr. Lok Nath Grover, power of attorney of the defendants as DW-2. 10. The learned Single Judge after considering the pleadings and perusing the evidence led by the parties has given categorical findings and the consequent decree of specific performance. The learned Single Judge has dealt with Issue Nos. 1 & 1A together. The learned Single Judge held that the defendants have failed to prove that they were British Nationals. The learned Single Judge has taken note of the fact that the address given of defendant No. 1 in the said Agreement was of Rohtak Road, Delhi and moreover, photocopy of the passport of the defendants had not been filed. It has been further held that even if the defendants were British Nationals, there would not have been an infraction of Section 31 nor Section 47 of the Foreign Exchange Regulation Act, 1973. The fact that the defendants admittedly maintained bank accounts in Delhi and had encashed the sum of Rs. 30,000/- in New Delhi was taken note of and, thus, it was held that there was no impediment in the defendants receiving sale consideration in India. Issue Nos. 1 & 1A were, thus, held against the defendants. 11. In so far as Issue No. 2, the learned Single Judge has taken note of the fact that the onus of proving this issue was upon RFA (OS) No.19 of 2000 Page 8 of 27 the defendant and he failed to produce any evidence to prove his assertion. Accordingly, Issue No. 2 has also been held against the defendants by the learned Single Judge. 12. Issue No. 2A has also been held against the defendant by the learned Single Judge while observing that the plaintiffs are not guilty of laches and hence, no case has been made out that it is not equitable to grant specific performance. The learned Single Judge has noted that it was the defendants who had sought adjournments from time to time and had delayed the final adjudication of the suit by amending their pleadings twice. It was also noted that defendant No. 1 had died in the United Kingdom on 24.05.1991 leaving behind his widow Smt. Surjit Kaur Mehta and two sons, namely, S/Shri Mehrban Singh and Harsharan Singh. The legal heirs had filed affidavits to this effect as well as vakalatnamas in favour of Mr. Vivekanand, but since these documents had not been authenticated by the Indian High Commission, the same were consequently inadmissible. None of the heirs had entered the witness box to affirm the averments in the Written Statement. The counsel for the defendants had been engaged by Shri Lok Nath Grover, Power of Attorney (Ex. DW-2/1) holder of the Defendants. It has been taken note of by the learned Single Judge that the said Power of Attorney did not empower Shri Lok Nath Grover to appoint an Advocate on behalf of the defendants nor authorized him to give evidence on their behalf. RFA (OS) No.19 of 2000 Page 9 of 27 13. As regards Issue No. 3, the learned Single Judge has returned a categorical finding that the defendants had attempted to unilaterally resile from their obligations under the contract by returning the part payment of Rs.30,000/-. It has been held that by returning Rs.30,000/- by way of bank draft to the plaintiffs, the defendants could not terminate the said Agreement dated 08.09.1978. The learned Single Judge has taken note of the fact that the plaintiffs had tried to contact the defendants repeatedly, but to no avail as the defendants were not available in India at least during the period from March, 1980 to December, 1980. 14. With respect to Issue No. 3A, the learned Single Judge has observed that the issue has arisen on account of the second amendment sought to be carried out in the written statement by including preliminary objection No. 11. The learned Single Judge has noted that the Written Statement on record does not conform to the requirements of Rules 14 and 15 of Order VI of the Code of Civil Procedure, 1908 (hereinafter referred to as, „the Code‟) as it has not been signed by the defendants‟ Advocate and the verification does not state the place and the date of signing. The learned Single Judge has even considered this plea on merits and rejected the same. The defendants did not lead any evidence to prove this issue and it was consequently decided against the defendants. 15. The learned Single Judge has decided Issue No. 4 against the defendants and held that the plaintiffs were not called RFA (OS) No.19 of 2000 Page 10 of 27 upon by the defendants to sign any application or affidavit for obtaining necessary permission for sale from the concerned authorities. The learned Single Judge has also taken note of the fact that a controversy arose in Crl. M. No. 3/86 on the question of cancellation, under the initials of defendant No. 1, of the words “their nominees” in Ex. P-1. Ex. P-1/B as also the certified copy (photocopy) did not contain this cutting. Ex. PW-2/10 has been taken note of, which is an Agreement between the plaintiffs nominating plaintiff No. 1 to be owner of the suit property. The learned Single Judge has also concluded that the scoring out of the words “their nominees” under the signature of Defendant No. 1 in Ex. P-1 was carried out in a surreptitious and illegal manner to subvert the understanding between the parties whereby the vendees were authorized to appoint their nominees. 16. The learned Single Judge has dealt with Issue Nos. 5 & 6 together. Issue No. 5 has been held in favour of the plaintiffs and Issue No. 6 has been decided against the defendants. The learned Single Judge has appreciated the evidence and dealt with the statutory provisions as well as the case-law on the subject to come to the aforementioned findings. The learned Single Judge observed that in a suit for specific performance, each case has to be decided on its own facts. It has also been observed that, “It is often argued, especially since damages are invariably claimed in the alternative in suits for specific performance of an agreement, that the discretionary relief of specific RFA (OS) No.19 of 2000 Page 11 of 27 performance ought not to be granted and the alternative relief of damages should instead be considered. This is clearly a misnomer and is contrary to various decisions of the Apex Court including the case of Prakash Chandra v. Angadlal & Ors., AIR 1979 SC 1241… ”. It has been observed by the learned Single Judge that the plaintiffs possessed the capacity to pay the sale consideration. The plaintiffs have produced evidence in the said regard. The learned Single Judge has also noted that as per the said Agreement, the plaintiffs were granted the liberty to pay the sale consideration even after execution of the sale deed. 17. So far as Issue No. 7 is concerned, the learned Single has not given a finding in respect thereof as the question of damages would only arise if the decree of specific performance was not being granted. 18. In respect of Issue No. 8, the learned Single Judge has granted the relief of specific performance of the said Agreement in favour of the plaintiffs and against the defendants. 19. There is another aspect to the matter as contempt of court proceedings were initiated against Mr. Lok Nath Grover during the pendency of this appeal. The Order dated 25.09.2001 records the fact that Mr. Lok Nath Grover had written a letter to Devinder Gupta, J. It was recorded that an attempt had been made to influence the course of judicial proceedings. It was also recorded that Mr. Lok Nath Grover had been proceeded against for having committed RFA (OS) No.19 of 2000 Page 12 of 27 contempt of court in Criminal Contempt Petition No. 25/98 titled „Sports Authority of India vs. Lok Nath Grover‟. Pursuant to the aforesaid Order dated 25.09.2001, Cont. Cas. (Crl.) No. 16/2001 was registered, which has been heard along with the present appeal. The suit as well as the appeal has been prosecuted by Mr. Lok Nath Grover being the holder of power of attorney of the defendants. 20. The learned counsel of the appellants has sought to assail the findings of the learned Single Judge on the following grounds :- Appellants are Foreign Nationals 21. Learned counsel for the appellants pleaded that the appellants herein are British Nationals, and though their British passports were not formally proved, a copy of the same has now been filed and the same being a public document can be taken into consideration. Learned counsel also sought to rely upon the cross-examination of PW-2 where the said witness only expressed an unawareness of the nationality of the appellants but did not dispute the same. Learned counsel also submitted that the reliance placed on Ajit Prasad Jain v. N.K. Widhani & Ors., AIR 1990 Del 42 by the learned Single Judge is misplaced, and hence the suit ought to have been dismissed at the initial stage itself. Effect of undertaking given to Court in WP (C) No.2659/1984 22. In regard to Issue No. 3A, it is submitted by learned counsel for the appellants that the respondents never disputed the factual position except for saying that it was in the form of RFA (OS) No.19 of 2000 Page 13 of 27 an undertaking given in the year 1987. Learned counsel for the appellants further submitted that no further evidence was required to be given and, thus, the issue ought to have been decided in favour of the appellants. Respondents were not ready and willing to perform their obligations under the said Agreement 23. Learned counsel for the appellants further submitted that the respondents were not ready and willing to discharge their obligations, which as per the appellants also included their facilitating the obtaining of requisite permissions from the government authorities. In this regard, reliance is placed upon Clause 2(a) of the said Agreement which stipulated a payment of Rs.2,60,000/- by the vendee, i.e., the respondents herein to the vendor, i.e., the appellants herein at the time of possession of the property and execution of the sale deed. Learned counsel further submitted that since as per Clause 4 of the said Agreement, actual physical possession was also to be given in three (3) months, therefore, it would follow that the payment of Rs.2,60,000/- also had to be made within the same period of time. It was also urged by learned counsel for the appellants that the permissions in favour of the vendee (respondents herein) or their nominee(s) were to be taken by the appellants before execution of the sale deed and upon failure of the vendee (respondents herein) to get the requisite permission, which was the condition precedent for execution of the sale deed, the bargain was to be treated as cancelled. RFA (OS) No.19 of 2000 Page 14 of 27 24. Learned counsel for the appellants further submitted that the respondents could not furnish the requisite certificates / affidavits as plaintiff Nos. 2 and 3 along with their mother in August, 1979 had bought a house bearing No. 41, Bengali Market, New Delhi and also assigned their rights in favour of plaintiff No. 1 by virtue of an internal arrangement / agreement. It was submitted that the said Agreement was correctly cancelled on 08.01.1980. Learned counsel for the appellants also placed reliance upon Sections 51 to 53 of the Indian Contract Act, 1872 (for short, „the Contract Act‟) and Ex. PW-2/5, PW-2/6, PW-2/7 & PW-2/9 wherein the respondents had only demanded possession of the property without offering any money to contend that if the promisee is not ready and willing to perform his reciprocal promise, the promisor need not perform his promises. It was further submitted that once a disability had been incurred by plaintiff Nos. 2 and 3 on account of having bought property No. 41, Bengali Market as a result of which affidavits were not given, therefore, their unilateral assignment in favour of plaintiff No. 1 had no meaning as affidavits had to be filed by all the plaintiffs. Learned counsel for the appellants has relied upon the judgment of Full Bench of this Court in Daulat Ram v. Lt. Governor, AIR 1982 Del 470 to put forth the proposition that a nominee cannot acquire a status better than the principal. 25. Learned counsel for the appellants also sought to urge that the respondents were not in a financial capacity to pay the sale consideration as they had acquired property bearing RFA (OS) No.19 of 2000 Page 15 of 27 No. 41, Bengali Market. Learned counsel further sought to disregard the evidence of the relations of the plaintiffs as it was stated to be too remote and full of contradictions. 26. Learned counsel for the appellants relied upon the judgment of the Apex Court in N.P. Thirugnanam (Dead) by LRs. v. Dr. R. Jagan Mohan Rao and Ors., (1995) 5 SCC 115, which was followed in the case of Umabai & Anr. v. Nilkanth Dhondiba Chavan (Dead) by Lrs. & Anr., 2005 IV AD (S.C.) 587 to support the proposition that mere capacity to raise funds is not adequate to meet the parameters set in Section 16 of the Specific Relief Act, 1963. Relief 27. Learned counsel for the appellants further submitted that the relief of specific performance was a discretionary one and the increase in prices of the property would result in inequities between the parties. In this behalf, learned counsel relied upon the judgment of the Apex Court in Kanshi Ram v. Om Prakash Jawal & Ors., JT 1996 (4) S.C. 733 to urge that the alternative relief of damages may be granted when there has been a manifold increase in the price of the property in question. Learned counsel also relied upon the judgment of the Apex Court in K. Narendra v. Riviera Apartments (P) Ltd., (1999) 5 SCC 77 to submit that the specific performance can be declined when the agreement has become incapable of performance. Reliance was also placed upon the judgment of a learned Single Judge