IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. R.S.A. No. 282 of 1985 Date of Decision: 13.9.2010 Shri Chuni Lal. ....... Appellant through Shri Arun Palli, Senior Advocate with Shri Kanwal Goyal and Shri Sunil Garg, Advocates. Versus Shri Vishwa Nath Satija (since deceased) through L.Rs. ....... Respondents through Shri Sumeet Mahajan, Senior Advocate with Shri Amit Kohar and Shri Vaibhav Sehgal, Advocates. CORAM: HON'BLE MR.JUSTICE MAHESH GROVER .... 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? .... Mahesh Grover,J. This Regular Second Appeal is directed against judgment and decree dated 10.11.1984 passed by the District Judge, Ludhiana (hereinafter described as `the first appellate Court') whereby the appeal of defendant- Shri Vishwa Nath Satija (since deceased and now represented by his legal representatives) preferred against judgment and decree dated 10.6.1983 of the Sub Judge Ist Class, Ludhiana (referred to hereinafter as `the trial Court') was accepted to the extent that the suit of Shri Chuni Lal, plaintiff- appellant, for specific performance of the contract to sell was held not executable through court, but he was made entitled to the refund of earnest R.S.A.No.282 of 1985 -2- .... money only, besides the stipulated damages in the endorsement dated April 13,1979. On 19.8.1978, the plaintiff and the defendant had entered into an agreement to sell half portion of the house in dispute for a total sale consideration of Rs.92,500/- and Rs.25,000/- were paid as earnest money (Rs.1000/- in cash, a sum of Rs.9000/- through cheque no.141780 dated 23.7.1978 and another sum of Rs.15000/- vide cheque no.141791 dated 19.8.1978). The defendant further agreed to sell the remaining half share of the house in question vide agreement to sell dated 3.3.1979 for the same price, i.e., Rs.92500/- and again received a sum of Rs.25,000/- by way of cheque no.276780 of that very day. Thus, the total sale consideration of the whole house was fixed at Rs.1,85,000/- and the defendant received a sum of Rs.50,000/- as earnest money. On 13.3.1979, the defendant further received Rs.90000/- vide two bank drafts dated 13.3.1979 of Rs.45000/- each and delivered the possession of the whole of the building except the motor garage, a store and a bathroom on the ground floor and the first floor where there is a chaubara only and made endorsements on the agreements to that effect. The parties further agreed that in case, the defendant fails to execute the sale deed, the plaintiff will be entitled to get it done through court. The agreements also contained a stipulation that the defendant shall obtain permission in terms of the provisions of the Urban Land (Ceiling and Regulation) Act,1976 (for short, `the Act') to sell the suit property and if such permission was not granted, the plaintiff shall be entitled to get the amount equivalent to the amount of earnest money as penalty. According R.S.A.No.282 of 1985 -3- .... to the plaintiff, when the defendant did not come forward to execute the sale deed, a legal notice dated 4.5.1981 was served upon him to do the needful and in reply thereto, it was informed on his behalf that the permission has been declined by the competent authority. A further legal notice was sent by the plaintiff to the defendant on 3.6.1981 informing him that the condition of taking permission pursuant to the provisions of Section 27(1) of the Act has been struck down by the Supreme Court in Bhim Singh Versus Union of India, 1981(1) S.C.C.166 and he, thus, demanded that the sale deed be executed in his favour. However, the defendant did not respond. The plaintiff, in his suit, pleaded that he was always willing and ready to perform his part of contract. The defendant contested the suit to say that the plaintiff was not entitled to specific performance of the agreements to sell as there was no subsisting agreement capable of being enforced and the only alternative left with him was to get the damages for the same. It was pleaded that the competent authority under the Act had declined the permission for the sale of the suit property and in which situation, the agreements were rendered incapable of being enforced. He denied that the possession of the suit property had been given to the plaintiff and pleaded that he continued to be in possession of three rooms, one store, verandah, latrine on the first floor and his goods are lying there. He, however, admitted receipt of a sum of Rs.1,40,000/- as earnest money from the plaintiff, but pleaded that in view of the fact that proceedings under Section 6 of the Act were still pending, it could not be construed that the house in question was also in the ceiling R.S.A.No.282 of 1985 -4- .... area so as to put it beyond the ambit of Section 27 which stood struck down by the Supreme Court. He, thus, denied the existence of any right in favour of the plaintiff. The parties went to trial on the following issues:- 1. Whether the agreements to sell dated 19.8.78 and 3.3.79 are not executable?OPD 2. Whether the plaintiff is ever ready and willing to perform his part of the contract?OPP 3. Whether the plaintiff is entitled to possession by way of specific performance of agreement to sell dated 19.8.78 and 3.3.79?OPP 4. Whether the defendant received a sum of Rs.1,40,000/- from the plaintiff under agreement and not Rs.1,85,000/-? OPD 5. If issue no.4 is not proved, whether the plaintiff is not entitled to recover any amount from the defendant if so to what extent?OPP 6. Relief. After appraisal of the evidence before it, the trial Court decreed the suit and directed the execution of the sale deed on payment of the balance sale consideration. In appeal, the first appellate Court concluded that it could not be conclusively said that the house in dispute was beyond the permissible limits as the return under Section 6 of the Act filed by the defendant had R.S.A.No.282 of 1985 -5- .... not been finalised. It further concluded that as per the provisions of Section 32 of the Indian Contract Act, the agreement in question was contingent upon the permission being granted by the competent authority and in the event of refusal of such permission, the contract had become impossible to be enforced. It, thus, directed the refund of the earnest money to the plaintiff in terms of Section 20 of the Specific Relief Act, 1963 (for brevity, `the 1963 Act') along with the payment of damages which were agreed upon between the parties. Aggrieved by the judgment of the first appellate Court, the plaintiff has filed the instant appeal. Learned counsel for the plaintiff-appellant has contended that Section 27(1) of the Act having been struck down by the Supreme Court in Bhim Singh's case (supra), the order passed under the said provision by the competent authority was a nullity in the eyes of law and that being so, the agreements entered into between the parties were capable of being enforced as the condition of their enforcement after such permission being granted, stood whittled down and, thus, the first appellate Court ought not to have interfered with the judgment and decree of the trial Court. He further contended that once the aforesaid provision was held to be ultra vires, the condition requiring such permission would also be rendered redundant and likewise, the endorsements on the agreements by which the plaintiff- appellant had bound himself to the grant of damages from the defendant in the event of permission being declined, had also necessarily been rendered redundant. It was submitted that in fact, such permission was not, at all, R.S.A.No.282 of 1985 -6- .... required as the suit property measured 638-3/8 sq. Yards and was very well within the permissible limit of 1500 square meters. The next contention of the learned counsel for the plaintiff-appellant is that the defendant was promptly apprised of the judgment of the Supreme Court by which the provisions of Section 27(1) of the Act were struck down which intimation went unanswered and from the fact that the agreements in question were executed in the years 1978 & 1979, the judgment of the Supreme Court was rendered in the year 1980 and the legal notices were served in the year 1981, it was abundantly clear that the plaintiff was willing and ready to get the agreements converted into a sale deed as per the intent of the parties. To support his contentions, learned counsel for the plaintiff- appellant placed reliance on the following judgments:- 1. Bhim Singh Versus Union of India (supra); 2. State of Maharashtra Versus Pravin Jethalal Kamdar (dead) by Lrs., (2000) 3 S.C.C. 460; and 3. Ravinder Kumar Versus Harcharan Singh, 2009(1) R.C.R. (Civil) 570 (P&H). On the other hand, learned counsel for the legal representatives of the defendant laid much emphasis on the endorsements dated 13.4.1979 made by the parties to the agreements which is to the following effect:- “The seller Vishwanath Satija undertakes the responsibility to get the permission for sale of property. Both the parties further agree that in case the permission to sell is not granted to sell the aforesaid property then the purchaser shall be entitled to get R.S.A.No.282 of 1985 -7- .... the amount as penalty equivalent to the earnest money paid i.e. Rs.Fifty thousand only ( i.e. earnest money rupees twenty five thousand and penalty rupees twenty five thousand). The condition of getting the sale deed executed through court of law stands cancelled.” With reference to the above reproduced endorsement, learned counsel contended that the plaintiff by his conduct, had agreed to waive off his right of specific performance of agreements in preference of getting damages in the event of permission being declined by the competent authority and since the permission was actually declined, the only relief that could have been claimed by the plaintiff was the refund of the amount along with damages which was essentially allowed by the first appellate Court and, thus, the impugned judgment and decree deserved to be upheld. He further contended that the agreements had been rendered incapable of being enforced because of the impediment of law and also for the reason that the competent authority did not grant the permission and once an agreement to sell is rendered incapable of being enforced, the only option available to the Court is to resort to the provisions of Section 20 of the 1963 Act and which has rightly been done by the first appellate Court. Another contention raised by the learned counsel for the legal representatives of the defendant is that the order passed by the competent authority was a composite order under Sections 26 and 27 of the Act and in this view of the matter, merely because Section 27(1) had been struck down as being ultra vires to the Constitution of India, would not necessarily erase the effect of the entire order. R.S.A.No.282 of 1985 -8- .... To substantiate his contentions/ arguments, he placed reliance on the judgments of the Supreme Court in K.Narendra Versus Riviera Apartments (P) Ltd., (1999) 5 S.C.C. 77 and M.Meenakshi and others Versus Metadin Agarwal (Dead) by Lrs. and others, (2006) 7 S.C.C. 470. I have thoughtfully considered the rival submissions and have perused the impugned judgment, as also the record with the assistance of the learned counsel for the parties. The Government of India, in order to provide for the imposition of a ceiling on vacant land in urban agglomerations, for the acquisition of such land in excess of the ceiling limit, to regulate the construction of buildings on such land and for matters connected therewith and also with a view to preventing the concentration of urban land in the hands of few persons and speculation & profiteering therein and also for bringing about an equitable distribution of land in urban agglomerations to subserve the common good, promulgated the Act. Section 4 thereof prescribed the ceiling limit of the vacant land for different categories specified in Schedule-I, whereas Section 27 laid down prohibition on transfer of urban property except with previous permission in writing of the competent authority. State of Punjab is mentioned at serial no.11 in Schedule -I whereas Ludhiana Urban Agglomeration is included at item no.2 therein and its category is stated to be `C'. Relevant portion of Section 4(1) and sub-section (1) Section 27 of the Act are reproduced below for ready reference:- R.S.A.No.282 of 1985 -9- .... “4. Ceiling limit. (1) Subject to other provisions of this section, in the case of every person, the ceiling limit shall be, - (a) xx xx xx xx xx xx (b) xx xx xx xx xx xx ( c) where such land is situated in an urban agglomeration falling within category C specified in Schedule I, one thousand five hundred square metres; (d ) xx xx xx xx xx xx 27. Prohibition on transfer of urban property.- (1) Notwithstanding anything contained in any other law for the time being in force, but subject to the provisions of sub-section (3) of section 5 and sub-section (4) of section 10, no person shall transfer by way of sale, mortgage, gift, lease for a period exceeding ten years, or otherwise, any urban or urbanisable land with a building (whether constructed before or after the commencement of this Act) or a portion only of such building for a period of ten years of such commencement or from the date on which the building is constructed, whichever is later except with the previous permission in writing of the competent authority.” In the instant case, concededly, the property in dispute is a building and falls within the urban area of Ludhiana and it measures 632-3/8 sq.yards. The execution of the agreements which stipulated the sale R.S.A.No.282 of 1985 -10- .... consideration of Rs.1,85,000/- and passing of an amount of Rs.1,40,000/- to the defendant pursuant thereof, is not in question. Likewise, except for the extent, the handing over of possession of the house in dispute is also not in dispute. The Court is, therefore, has to proceed to analyse the condition of obtaining permission from the competent authority under the provisions of the Act. In my opinion, the following questions of law arise for consideration in the instant appeal:- 1. Whether in view of the facts and circumstances of the case, the power exercised by the first appellate Court in accepting the appeal, reversing the judgment & decree of the trial Court and decreeing the suit for specific performance in the alternative, can be termed to be illegal and arbitrary? 2. Whether by virtue of striking down of Section 27(1) of the Act, the agreements to sell were rendered capable of being executed or not? 3. Whether the endorsements made on the agreements to sell regarding waiver of the right of the plaintiff-appellant to seek specific performance of the contract in lieu of damages in the event of permission not being granted by the competent authority under Section 27 of the Act which provision ultimately stood struck down, would still bind the parties to the agreements or not? R.S.A.No.282 of 1985 -11- .... 4. Whether the impugned judgment and decree are the result of perversity or not? To answer the aforesaid questions which more or less hinge around the contingency contemplated by both the parties to obtain permission under Section 27 of the Act to render the agreements capable of being enforced,one necessarily has to travel to the judgment of the Supreme Court in Bhim Singh's case (supra) wherein, while declaring sub-section (1) of Section 27 as ultra vires, it was observed as under:- “Finally, we are of the opinion that sub-section (1) of Section 27 of the Act is invalid insofar as it imposes a restriction on transfer of any urban or urbanisable land with a building or a portion only of such building, which is within the ceiling area. Such property will therefore be transferable without the constraints mentioned in sub-section (1) of Section 27 of the Act.” The matter further came up for consideration in State of Maharashtra Versus Pravin Jethalal Kamdar (Dead) by Lrs. (supra) wherein there was an agreement dated 31.3.1976 executed by the respondent therein for some sale consideration which was mentioned therein. The permission to sell the property was required as per the provisions of Section 27(1) of the Act which permission was declined by the competent authority vide order dated 26.5.1976. The State had an option to pre-empt this sale and exercising that option, the State of Maharashtra offered the same consideration to the respondent in the said case to purchase the property R.S.A.No.282 of 1985 -12- .... and the sale deed was executed on 23.8.1976. A few years thereafter, the Supreme Court struck down the provisions of Section 27(1) of the Act in Bhim Singh's case (supra) as being ultra vires which prompted the respondent to file a suit for declaration and possession saying that the order of the competent authority declining permission under Section 27(1) of the Act vide its order dated 26.5.1976 and consequent sale deed executed in favour of the State on 23.8.1976 were null and void conferring no right of ownership on the State and all actions including taking of possession of the property were illegal. Damages of wrongful use and occupation of the property were also sought. In the backdrop of these facts, the Supreme Court observed in paragraphs 5 and 6 of the judgment as under:- “5. As already noticed, in Bhim Singhji case, Section 27(1) insofar as it imposes a restriction on transfer of any urban or urbanisable land with a building or a portion of such building, which is within the ceiling area, has been held to be invalid. Thus, it has not been and cannot be disputed that the order dated 26.5.1976, was without jurisdiction and a nullity. Consequently, the sale deed executed pursuant to the said order would also be a nullity. It was not necessary to seek a declaration about the invalidity of the said order and the sale deed. The fact of the plaintiff having sought such a declaration is of no consequence. When possession has been taken by the appellants pursuant to void documents, Article 65 of the Limitation Act will apply and the limitation to file the suit R.S.A.No.282 of 1985 -13- .... would be 12 years. When these documents are null and void, ignoring them a suit for possession simpliciter could be filed and in the course of the suit it could be contended that these documents are a nullity. In Ajudh Raj Versus Moti, (1991) 3 SCC 136, this Court said that if the order has been passed without jurisdiction, the same can be ignored as a nullity, that is, non-existent in the eye of the law and it is not necessary to set aside; and such a suit will be governed by Article 65 of the Limitation Act. The contention that the suit was time-barred has no merit. The suit has been rightly held to have been filed within the period prescribed by the Limitation Act. 6. Next, it was contended that simply on account of Section 27 (1) to the extent stated above having been declared unconstitutional, it does not follow that the petitioner is entitled to equitable relief particularly when he accepted the sale consideration and executed the sale deed. Reliance has been placed on the decision of Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 holding that equitable considerations cannot be held to be irrelevant in case of claim for refund under Section 72 of the Contract Act or in a writ petition filed under Article 226 or 32 of the Constitution. That was a case where refund was not directed despite invalidity of the provisions under which duties had been paid or collected as the person claiming the refund had passed on the burden of duty to others R.S.A.No.282 of 1985 -14- .... and had not suffered any prejudice or loss and, therefore, no directions were issued for refund. It was held that under these circumstances there is no question of reimbursement to such a person. The principles laid down in Mafatlal Industries case have no applicability to the facts of the present case. It cannot be said that the plaintiff has not suffered any prejudice or loss. It is not a case of a voluntary sale. The plaintiff had to execute the sale deed on account of an illegal and without jurisdiction order made under Section 27(1) of the Act in respect of property within the ceiling limit. If the plaintiff has retained the sum of Rs.2,60,000 all these years, at the same time, the defendants have also retained the possession of the property. The plaintiff on his own did not want to sell the property to the appellant-defendants. The fact that the same amount of consideration as mentioned in the agreement of sale was paid to the plaintiff by the defendants, is of no relevant. On the facts of the case, it cannot be held that there are any equitable considerations against the plaintiff to warrant the denial of relief of possession granted to him by the High Court.” Having regard to the aforesaid, whether permission, at all, was required or not would itself be a moot question, but apparently both the parties laboured under a misconception and the same was sought and bound themselves to such an eventuality. However, the fact that sub-section (1) of Section 27 of the Act was struck down, has aided and enhanced the cause R.S.A.No.282 of 1985 -15- .... of the plaintiff. One would also like to look at the facts of the case by putting it in converse, that had this requirement not been there, then independent of such requirement, did the defendant have any moral authority to wriggle out of the agreements once he had bound himself to such a contract and had also accepted a substantial part of the sale consideration. He certainly had a right to deny the plaintiff the execution of the sale deed if the latter had failed to perform his part of agreements, but using the law as shield which provision was, in the first place, not required to be resorted to and which eventually was struck down, I am of the opinion that the defendant could not justifiably decline the enforcement of the agreements executed in favour of the plaintiff, more-so when he was served with a legal notice immediately after the passing of the judgment in Bhim Singh's case (supra). As noticed above, the impediment of the obstructive and restrictive clause in the agreements stood erased therefrom and once the principal contingent clause of the agreement was found to be a result of misconception, the subsequent endorsement also necessarily has to be held as uncalled for and could not have outweighed the main clauses contained therein. It is a settled principle of law that it is the intent of the parties which has to be inferred from the agreement to sell and incidental or ancillary clauses cannot hold the entire intent of the contracting parties to a result which can frustrate such intent. On the basis of the above discussion, it is held that the proceedings under Section 27(1) of the Act resulting in denial of permission R.S.A.No.282 of 1985 -16- .... to the defendant to enforce the agreements to sell were a nullity and were not binding upon the parties in view of the fact that the said provision had been struck down by the Supreme Court in Bhim Singh's case (supra) and, therefore, the agreements were capable of being enforced. No doubt, the jurisdiction to pass a decree of specific performance under Section 20 of the 1963 Act is discretionary, but the Court is required to evaluate such relief in the backdrop of the circumstances in which the parties place themselves by their conduct. Keeping in