R.S.A. No.2203 of 2010 (O&M) - 1 - ***** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH R.S.A. No.2203 of 2010 (O&M) Date of decision:07.10.2010. M/s Kundan Steel Pvt. Limited ...Appellant Versus M/s Rachitech Engineering Pvt. Limited and another ...Respondents CORAM: HON’BLE MR. JUSTICE RAKESH KUMAR JAIN Present: Mr. Sanjiv Bansal, Advocate, for the appellant. Mr. Arun Palli, Senior Advocate, with Mr. Sunil Garg, Advocate, for the respondents. ***** RAKESH KUMAR JAIN, J. The defendant is in second appeal against the judgment and decree of the Courts below by which suit filed by the plaintiff for specific performance of an agreement to sell, has been decreed. In brief, the case set up by the plaintiff is that defendant No.1 represented to the plaintiff in early December 1989 that it is in financial crisis as it has to pay debts of the bank (defendant No.2) to the tune of `12,00,000/- which is likely to be settled in an out-of-court settlement for a sum of `10,00,000/-, if paid in one go, therefore, it proposed to the plaintiff to purchase its premises built on Industrial Plot No.172, Sector-25, Faridabad including the plot measuring 9680 Sq. Yards [hereinafter referred to as the “property in dispute”] on “as is where is” basis. It was further represented that the sale deed would be executed after the property is redeemed from mortgage from the bank (defendant No.2). The plaintiff agreed to the proposal on the basis of which an agreement- R.S.A. No.2203 of 2010 (O&M) - 2 - ***** cum-receipt came into being on 19.12.1989 for the sale of property in dispute for a sum of `20,80,000/-. The plaintiff allegedly paid a sum of `80,000/- to defendant No.1 vide cheque No.2948903 dated 19.12.1989 drawn on Canara Bank, Main Branch, Faridabad towards imprest. The deed of conveyance was agreed to be executed within 30 days from the date of redemption of mortgage. The plaintiff also alleged that it had an urgent need of an industrial premises for its business. Defendant No.1, in part performance of the agreement to sell dated 19.12.1989, delivered actual physical possession of the property in dispute to the plaintiff on or about 15.01.1990. It was also deliberated and mutually agreed between the parties that till the time the contract of sale dated 19.12.1989 is fully concluded between the parties, the plaintiff would remain in occupation of the property in dispute as a tenant on rent @ `6,000/- per month, besides payment of all other charges. It is alleged that ever since 01.02.1990, the plaintiff has been paying to defendant No.1 the said rent and had paid it till 31.08.1995. The rent was also increased w.e.f. 01.06.1993 from `6,000/- to `7,000/- per month. Since February, 1995 the rent could not be paid to defendant No.1 because it had no regular office where the payment of rent could have been made and the address of the Managing Director of defendant No.1 underwent an undisclosed change. The plaintiff alleged that it was always ready and willing to perform its obligations under the agreement to sell dated 19.12.1989, but defendant No.1 was trying to wriggle out of his commitments and was refusing to perform its obligations as it was trying to dispose of the property in dispute, in collusion with defendant No.2, by way of auction because the value of the property in dispute was assessed by defendant No.2 to the tune of `80,00,000/- which was sought to be sold by defendant No.2 for a sum of `36,00,000/- and in this manner, defendant No.1 was going to have the profit of `44,00,000/- which was otherwise not possible as it had already entered into an agreement to sell with the plaintiff. In reply, defendant No.1 specifically denied the agreement to sell dated 19.12.1989 and had admitted the tenancy of the plaintiff. It was R.S.A. No.2203 of 2010 (O&M) - 3 - ***** alleged that stamp paper was purchased on 19.12.1989 for the purpose of execution of rent deed which was actually executed and it was alleged that the agreement to sell dated 19.12.1989 is an outcome of fraud. It was further averred that amount of `80,000/- received by defendant No.1 from the plaintiff was on account of rent and not towards the earnest money, as alleged. The emphasis was more on the status of the plaintiff as a tenant, than as a prospective vendee. Defendant No.1 had, thus, alleged that the plaintiff had suppressed notice of demand raised by Haryana Urban Development Authority [for short “HUDA”] from defendant No.1 for the month of April, 1995 up to July, 1995 and on its own deposited `2,00,000/- with HUDA without any expressed authority of defendant No.1, which was not accepted by the HUDA and when defendant No.1 gave a letter in writing requesting the HUDA to accept the amount on 13.05.1996, the payment was accepted by the HUDA from the plaintiff. It was further alleged that the rent deed was executed on 01.02.1990 and the plaintiff had applied for electricity connection with Haryana State Electricity Board [for short “HSEB”] only on 13.03.1990. The rate of rent was not disputed by defendant No.1, but it was alleged that the payments allegedly mentioned in the plaint were accounted for towards rent up to 31.01.1995. The defendant No.1 also denied its collusion with defendant No.2 (bank) in order to frustrate the agreement to sell, allegedly executed in favour of the plaintiff. In the written statement filed by defendant No.2, it was alleged that the plaintiff had filed the suit in collusion with defendant No.1, therefore, the plaintiff is estopped from filing the suit by its own act and conduct. Apart from that, it was alleged that the agreement to sell executed between the plaintiff and defendant No.1 had no binding effect on the rights of defendant No.2. It was further alleged that the property in dispute was mortgaged by defendant No.1 in favour of defendant No.2 as collateral security granted to defendant No.1 on 04.02.1974, therefore, defendant No.1 was not competent to alienate the suit property as defendant No.2 had a valid and subsisting charge over it. It was further alleged that defendant No.1 was defaulter of the bank as a R.S.A. No.2203 of 2010 (O&M) - 4 - ***** result of which a suit for recovery filed against defendant No.1 was decreed by the Delhi High Court for which defendnat No.2 had filed an execution. The Debt Recovery Tribunal through its Recovery Officer had ordered for auction of the property in dispute for recovery of `34,05,034.80/- plus costs of the auction, which was fixed on 16.07.1988 after due publication in the newspaper. It was also asserted that in these circumstances, the plaintiff could not have sought performance of the agreement to sell because it was well within their knowledge that the bank (defendant No.2) had first charge over the property in dispute as it was mortgaged with it. On the pleadings of the parties, the learned Trial Court framed the following issues on 17.01.2000: - “1. Whether the defendant No.1 vide agreement to sell dated 19.12.1989 agreed to sell the suit property for a sale consideration of `20,80,000/- in favour of the plaintiff and received a sum of `80,000/- from the defendant No.1 as earnest money?OPP. 2. Whether the plaintiff has always been ready and still willing to perform his part of contract?OPP. 3. Whether the suit is time barred?OPD. 4. Whether the plaintiff is a tenant under the defendant No.1 with effect from 01.02.1990, as alleged?OPD No.1. 5. Whether the plaintiff has no cause of action and no locus standi to file the present suit?OPD. 6. Whether the suit of the plaintiff is not maintainable against defendant No.2?OPD2. 7. Whether the suit is bad for mis-joinder and non-joinder of necessary parties?OPD. R.S.A. No.2203 of 2010 (O&M) - 5 - ***** 8. Whether the plaintiff is estopped from filing the suit due to his own act and conduct, as alleged?OPD. 9. Whether the suit has been filed in collusion with the defendant No.1, as alleged, if so its effect?OPD. 10. Whether the agreement and receipt dated 19.12.1989 is a procured documents and not binding on the rights of the defendant No.2 as alleged?OPD2. 11. Relief.” Both the parties led their respective evidence. The plaintiff examined Rajender Lavasa as PW1, Suresh Chand Aggarwal as PW2, Purshotam Lal as PW3 and had tendered documents; copy of resolution dated 14.01.1990 as Ex.PA, agreement to sell dated 19.12.1989 as Ex.PB, rent agreement dated 01.02.1990 as Ex.PC, receipt dated 14.01.1990 as Ex.PD, receipt dated 19.12.1989 as Ex.PE, receipts showing deposit of `100/- with HUDA authorities as Ex.PG & Ex.PH, letter dated 03.08.1998 issued by Estate Officer, HUDA in the name of the plaintiff as Ex.PI, receipt for deposit of `1,68,233/- with HUDA authorities as Ex.PJ, demand notices of house tax as Ex.PK, receipts showing deposits of house tax as Ex.PK/1 to Ex.PK/21, postal receipt as Ex.PL, letter dated 24.04.1990 written by the plaintiff, to the SDO Sub Urban Sub Division Haryana State Electricity Board, Ballabgarh as Ex.PL/1, letter dated 07.05.1990 written by the plaintiff in the name of Executive Engineer, HSEB, Sector-7, Faridabad as Ex.PL/2, memorandum Articles of Association of plaintiff company as Ex.PX, receipt showing deposit of `34,05,034.80/- with Bank of India as Ex.PY, receipt showing deposit of `949.66/- as Ex.PY/1, letter dated 14.07.1998 written by the plaintiff to the General Manager of Bank of India, New Delhi as Ex.PY/2 and appeal preferred before the Administrator, HUDA, Faridabad by the plaintiff as Ex.PZ. On the other hand, defendant No.1 examined S.P. Singh as DW1 and Madhur Gupta as DW2. Defendant No.1 also led documentary R.S.A. No.2203 of 2010 (O&M) - 6 - ***** evidence by producing copy of the Minute Book of defendant No.1 as Ex.D1, death certificate of Sushil Kumar Gupta as Ex.D2, minutes of the Board of Directors Meeting as Ex.D3, report of Handwriting & Finger Print Expert as Ex.DW1/A, negatives as Ex.DW1/2 to Ex.DW1/11, enlarged photographs as Ex.DW1/12 to Ex.DW1/21, rent agreement as Ex.DW3/A, letter issued by the plaintiff to the Estate Officer, HUDA as Ex.DW3/B, letter written to the HUDA for enhanced dues by the plaintiff as Ex.DW3/C, letter of the plaintiff to the HUDA as Ex.DW3/D, order of the Administrator, HUDA as Ex.DW3/E and Form No.32, containing the particulars of Directors, Managing Agents, Secretaries and Treasurers and Manager & Changes among them as Ex.D4. It may be pertinent to mention that out of the aforesaid documentary evidence, the agreement to sell dated 19.12.1989 is Ex.PB, whereas the rent agreement dated 01.02.1990 is Ex.PC. After considering the evidence on record, the learned Trial Court vide its judgment and decree dated 25.01.2007 decreed the suit of the plaintiff and directed defendant No.1 to execute and register the sale deed in respect of the property in dispute in favour of the plaintiff on receipt of the balance sale consideration after obtaining necessary transfer permission from HUDA within a period of 3 months, failing which the plaintiff would be at liberty to get the sale deed executed and registered through the agency of the Court. Aggrieved against the judgment and decree of the learned Trial Court, defendant No.1 filed appeal before the First Appelalte Court and at the same time the plaintiff had filed cross-objections in which it was alleged that before filing the suit, the plaintiff had made various payments to different authorities to discharge various dues recoverable from defendant No.1 which are liable to be adjusted against the balance sale consideration. However, the learned First Appellate Court vide its judgment and decree dated 09.03.2010 dismissed the appeal filed by defendant No.1 as well as the cross-objections filed by the plaintiff. It appears that the plaintiff remained satisfied with the judgment and decree R.S.A. No.2203 of 2010 (O&M) - 7 - ***** of the First Appellate Court by which his cross-objections have been dismissed, but defendant No.1 had the grievance, therefore, only one appeal has been preferred before this Court i.e. RSA No.2203 of 2010, at the instance of defendant No.1. In this appeal, learned counsel for the appellant has raised the following questions: - i) Whether the First Appellate Court has committed an error of law in not giving its own opinion while discarding the Expert's opinion in respect of the signatures of Sushil Kumar Gupta (since deceased) on the agreement to sell dated 19.12.1989 (Ex.PB)? ii) Whether the plaintiff had no jurisdiction to redeem the property from mortgage from bank (defendant No.2) in violation of the provisions of the agreement to sell in which the prerogative was of the seller? While opening his arguments, learned counsel for the appellant has drawn the attention of this Court to para No.74 of the judgment of the First Appellate Court to contend that in order to prove imitation forgery, in the agreement to sell, of the signatures of Sushil Kumar Gupta (since deceased), who was an authorized signatory of defendant No.1, the appellant/defendant No.1 had examined Handwriting and Fingerprint Expert as DW1 who had proved his report Ex.DW1/1. It is submitted that DW1 had categorically reported that the signatures on the agreement to sell Ex.PB is a result of imitation forgery. Learned counsel for the appellant has further submitted that while discarding report of the Handwriting and Fingerprint Expert DW1, learned First Appellate Court has not given its own opinion, therefore, it is a patent error of law which vitiates the finding of the Courts below in so far as the authenticity and validity of the agreement to sell (Ex.PB) is concerned. In respect of his second submission that the plaintiff had no jurisdiction to redeem the property in dispute from mortgage as it was the prerogative of the seller as per the agreement, learned counsel for the appellant has drawn the R.S.A. No.2203 of 2010 (O&M) - 8 - ***** attention of this Court to condition No.6 of the agreement to sell to contend that the final deed of conveyance in respect of the property in dispute was agreed to be executed within 30 days from the date on which the mortgage is redeemed by the seller and that too after obtaining the necessary transfer permission from the authorities concerned. It is submitted that since the amount has been paid to the bank by the plaintiff for the purpose of redemption of mortgage, it is a violation of condition No.6 of the agreement to sell Ex.PB, therefore, the plaintiff had no right to seek performance of the agreement to sell with the intervention of the Court. On the other hand, learned counsel for the respondent No.1/plaintiff has submitted that the report of the Handwriting and Fingerprint Expert, who is not a summoned witness, is a procured report and even otherwise is a mere opinion which could not be made the sole basis for concluding that the signatures of Sushil Kumar Gupta (since deceased) on (Ex.PB) was an act of imitation forgery. In this regard, he has relied upon two decisions of the Supreme Court in the case of Shashi Kumar Banerjee and others Vs. Subodh Kumar Benerjee since deceased and others, AIR 1964 SC 529 and Ishwari Parsad Vs. Mohd. Isa, AIR 1963 SC 1728. It is submitted that there are numerous factors which have been proved by leading cogent evidence on record to prove the due execution of the agreement to sell as it is submitted that the man would lie but the facts and circumstances would not. In this regard, learned counsel for the respondent No.1/plaintiff has submitted that, admittedly, the plaintiff was in possession of the property in dispute as a tenant. Now, the matter with regard to his tenancy is subjudice before the Apex Court. It is submitted that on the date of agreement to sell, earnest money was paid through cheque which is also recorded in the agreement to sell Ex.PB which cannot be considered to be payment made towards rent as it is not made part of the rent deed which came into being much later. It is also submitted that the amount of the earnest money do not coincide with the amount of rent. It is further submitted that defendant No.1 had to pay R.S.A. No.2203 of 2010 (O&M) - 9 - ***** enhanced charges of the property in dispute to HUDA and in the event of non-payment thereof, the HUDA was proceeding to resume the plot. It was felt by the plaintiff that defendant No.1 is not going to save the property in dispute from resumption, he filed appeal before the Administrator, HUDA on 13.11.1995 (Ex.PZ) and it was allowed to deposit the dues recoverable from defendant No.1. It is also submitted that at the time when the plaintiff had been pursuing his remedy before HUDA, it had only projected its tenancy rights and not its rights as a prospective vendee for the reason that a prospective vendee had no enforceable right, but a tenant in possession of the property, which is going to be resumed has definitely got the right to safeguard his tenancy. It is also argued that the plaintiff had to pay house tax from 1991 onwards till the year 2001 by virtue of receipts Ex.PK/1 to Ex.PK/21. The electricity charges of the property in dispute were also paid by the appellant in regard to earlier non- payment by defendant No.1. In this context, receipt Ex.PL/1 was also placed on record. Since the property in dispute was mortgaged with the bank (defendant No.2) and was being sold off by way of auction for a sum of `34,05,034.80/-, the said amount was paid by the plaintiff under the orders of the Court dated 14.07.1998 vide receipt Ex.PY. The defendant No.1 was interested in auction of the property in dispute because the reserve price was fixed by the bank to the tune of `80,00,000/- for the recovery of `34,05,034.80/- and in that manner, without performing its obligation as the vendor, the defendant No.1 would have earned profit of `44,00,000/- even after making the payment of the bank dues. The learned First Appellate Court has also taken into consideration the agreement to sell. One of the arguments raised by learned counsel for the appellant is that the stamp papers for agreement to sell and the agreement of rent were purchased on the same day and, in fact, there was no intention on the part of defendant No.1 to execute agreement to sell in favour of the plaintiff as the property was only meant to be let out on rent, however, the Court had found that there was a stamp paper in the name of defendant No.1 whereupon the agreement to sell Ex.PB was executed and there was not R.S.A. No.2203 of 2010 (O&M) - 10 - ***** even an allegation by defendant No.1 that the said stamp paper of defendant No.1 was forged. As a matter of fact, the learned First Appellate Court has dealt with each and every aspect of the matter in detail and has recorded a firm finding of fact in favour of the plaintiff and against defendant No.1. Thus, after piecing together the pieces of jigsaw, it could be very easily understood that the document Ex.PB was not a forged document, even if the Court had not given much weightage to the report of the Handwriting and Fingerprint Expert. Thus, in view of the finding of fact recorded by the Courts below, I do not find any merit in this appeal and as such, the same is hereby dismissed, however, without any order as to costs. October 07, 2010 (RAKESH KUMAR JAIN) vinod* JUDGE