RFA No.152/2006 Page 1 of 31 IN THE HIGH COURT OF DELHI AT NEW DELHI RFA NO.152/2006 Judgment reserved on: 25.11.2010 Judgment delivered on: 09.03.2011 REHMANIA ACADEMY OF SCIENCES, MATHURA ……Appellant Through: Mr.Yunus Malik and Mr.Ravi Kishore, Advocates. Vs. SHRI B.B.D.BHARGAVA & OTHERS ……Respondents Through: Ms.Ritu Singh Mann and Mr.Dheeraj Garg, Advocates for the respondent No.1.CORAM: HON'BLE MR. JUSTICE KAILASH GAMBHIR 1. Whether the Reporters of local papers may yes be allowed to see the judgment? 2. To be referred to Reporter or not? yes 3. Whether the judgment should be reported yes in the Digest? KAILASH GAMBHIR, J. * RFA No.152/2006 Page 2 of 31 1. By this appeal filed under Section 96 of the Code of Civil Procedure, 1908 the appellant seeks to set aside the judgment and decree dated 16.11.2005 whereby the suit filed by the respondents for declaration was decreed in favour of the respondents and against the appellant. 2. Brief facts of the case relevant for deciding the present appeal are that the appellant and respondents entered into an agreement to sell 4/7th share of the property belonging to the respondents bearing Nazul Plot No.38, Company Bagh, Civil Lines, Mathura dated 2.6.02 and it was stipulated between the parties that the complete payment of the said property would be made by the appellant by 31.8.02. That due to the failure of the appellant to pay the requisite amount by the said date, the respondents No.1 to 3 rescinded the contract vide notice dated 26.10.02 and filed a suit for declaration of the same which vide judgment and decree dated 16.11.05 was decreed in favour of the respondents holding that the agreement was rightly terminated by the respondent no.1 to 3. Feeling aggrieved with the same, the RFA No.152/2006 Page 3 of 31 appellant has preferred the present appeal. Respondent no.4, however, being a performa respondent had sold her 1/7th share to the appellant vide a separate sale deed dated 9.4.2003 and during the pendency of the suit, respondent nos. 2 and 3 vide sale deed dated 8.6.04 and 24.11.04 also sold their respective shares to the appellant. 3. Assailing the impugned judgment and decree on the point of jurisdiction, counsel appearing for the appellant submitted that the suit filed by the respondents no. 1 to 3 was clearly hit by Section 16 (Clauses a to f) of CPC, as the Courts at Delhi lacked the territorial jurisdiction to entertain the said suit filed by the respondents. Elaborating this argument, counsel further submitted that by seeking the declaration in their favour, the respondents no. 1 to 3 sought to enforce the right flowing from the immovable property and not independent of the immovable property. Counsel further contended that the said issue being legal, the same can even be considered by this Court in exercise of its appellate jurisdiction. In support of his arguments, counsel for the RFA No.152/2006 Page 4 of 31 appellant placed reliance on the decision of the Hon'ble Apex Court in Harshad Chiman Lal Modi Vs. DLF Universal Ltd & Anr. (2005) 7 SCC page 79 with special emphasis on paras 16, 31 and 33. 4. On the merits of the case, counsel for the appellant submitted that no notice to rescind the agreement, as envisaged in Clause 3 of the agreement to sell dated 2.6.2002, was given by the respondents to the appellant. Inviting attention of this Court to the legal notice dated 26.10.2002, counsel submitted that the respondents have not given any notice of termination, but in fact rescinded the agreement straightway through the said notice itself and such termination notice was clearly in contravention of clause 3 of the said agreement. Counsel for the appellant further submitted that the respondents had suppressed a very vital fact from the learned trial court by not disclosing that the respondents No.2, 3 and 4, who were plaintiffs nos.2 and 3 and defendant no.2 before the learned trial court respectively, had sold their respective shares in favour of the RFA No.152/2006 Page 5 of 31 appellant during the pendency of the said suit. Counsel further stated that the photocopies of the sale deeds executed by these respondents in favour of the appellant have been placed on record. He further stated that it was only the respondent No.1, who was plaintiff No.1 before the learned trial court, who did not come forward to sell his share to the appellant. Counsel thus contended that due to the said willful suppression on the part of the respondents, the learned trial court did not come to know about the respondent nos. 2 and 3 having honoured the said agreement and, therefore, there would not have arisen any question of termination or rescission of the said agreement so far the respondents No.2 and 3 are concerned. Counsel for the appellant also placed reliance on Clause (d) of Sub Section 2 of Section 27 of the Specific Relief Act to support his argument that a part of the contract could not have been rescinded by the respondent No.1 alone, as it was an indivisible contract which could not have been severed by the respondent No.1 alone more particularly when all other RFA No.152/2006 Page 6 of 31 respondents had come forward and agreed to honour the said agreement and in fact had executed sale deeds in favour of the appellant during the pendency of the suit. Counsel also stated that in fact the respondent No.1 was to refund the money as per his share and this fact by itself would show that the contract could not have been severed, the same being an indivisible contract. 5. Refuting the submissions of counsel for the appellant, Ms.Ritu Singh Mann, learned counsel for the respondent No.1 argued that the judgment cited by the counsel for the appellant would not be applicable to the facts of the present case. Distinguishing the facts of the said case the counsel pointed out that the suit filed by the appellant therein was to claim specific performance of the agreement and for possession of the property, besides seeking declaration and permanent injunction, while in the present case, the respondents had sought the relief of declaration to the effect that the agreement dated 2.6.2002 was rightly rescinded by the respondents herein. Counsel further stated RFA No.152/2006 Page 7 of 31 that as per Section 16 CPC, the jurisdiction is barred only where the case of the parties is covered in one of the Clauses (a) to (f) of the Section and not otherwise. The contention of the counsel for the respondents was that the respondents never claimed any right or interest in the immovable property and, therefore, the case of the respondents would not be covered even under Clause (d) of Section 16 CPC, rather the same would fall under Section 20 CPC. Counsel for the respondent placed reliance on Section 54 of the Transfer of Property Act to contend that since there was only an agreement between the parties, therefore, no right by the said agreement could have been created by the respondents in favour of the appellant and, therefore, there was no question of determination of any right or interest in respect of the immovable property, which right was still vested with the respondents and was never transferred to the appellant. 6. Counsel for the respondents however did not dispute the fact that the sale deeds were executed by the RFA No.152/2006 Page 8 of 31 respondents No.2 and 3 in favour of the appellant during the pendency of the suit and that the respondent No.4 who was defendant No.2 before the learned trial court had sold her share prior to the filing of the said suit. Counsel thus did not dispute the photocopies of the sale deeds filed by counsel for the appellant but stated that even the appellant, who was duly represented by his Advocate, never disclosed the fact of the execution of the sale deeds before the learned trial court. The counsel invited the attention of this court to the fact that the Advocate of the appellant herein was present at the stage of final arguments and the presence of Mr.B.A.Hasim, Advocate for defendant No.1 has been shown on the decree sheet also. Counsel for the respondents also submitted that valid notice of termination to rescind the agreement was given to the appellant in terms of Clause 3 of the agreement. Counsel also submitted that after the termination of the said contract, if any, fresh contracts were entered into between the appellant and the other RFA No.152/2006 Page 9 of 31 respondents then the same will not defeat the rights of the respondent No.1 claimed by him in the said suit. 7. Counsel for the respondent also submitted that the said sale was made by the respondents No.2 and 3 at a lesser rate than the rate earlier agreed upon by them in the agreement to sell dated 2.6.2002. Drawing attention of the Court to one of the photocopies of the sale deeds placed on record by the appellant, counsel submitted that the respondent No.4, who was defendant No.2 before the learned trial court, had sold her share of 2167.63 sq. yds. for a total consideration of Rs.31,59,405/-, which comes to (Approx.) Rs.1457/- sq. yd. Counsel further submitted that the sale amount even in the sale deeds executed by the respondents No.2 and 3 during the pendency of the case were at somewhat lesser rate and no reference has been made to the earlier agreement dated 2.6.2002 in the said sale deeds. Counsel also stated that in the subsequent sale deeds the appellant has purchased the 3/7th share of the land admeasuring 15173.4 sq yards, although in the notice sent by RFA No.152/2006 Page 10 of 31 the appellant, the appellant took a position that the area at site falls short by 1350 sq. yds. Counsel also submitted that the respondents had agreed to sell the plot on ‘as is where is’ basis and this was specifically stated in the agreement. Counsel further submitted that the appellant never took or resorted to the remedy of seeking specific performance of the contract based on the agreement to sell even till date. 8. In rejoinder arguments, counsel for the appellant submitted that the right or interest claimed by the respondents has flown only because of the agreement to sell which concerns the sale of the immovable property which is situated in Mathura (U.P.) and not in Delhi and, therefore, only the Mathura Courts could have entertained the said suit and not the Delhi Courts. Counsel further submitted that in the subsequent sale deeds, there is a clear reference to the earlier agreement dated 2.6.2002 and the said sale was made by the respondents No.2 and 3 at a rate of Rs.1600 /- sq. yds RFA No.152/2006 Page 11 of 31 only which was also the rate as per the agreement to sell dated 2.6.02. 9. I have heard learned counsel for the parties at considerable length and gone through the records of the case. 10. A suit for declaration was filed by respondents No. 1 to 3 (plaintiffs in the suit) against the appellant (defendant No. 1 in the suit) and respondent No. 4 (defendant no.2 in the suit) seeking declaration to the effect that the respondents No. 1 to 3 had rightly terminated and rescinded the agreement dated 2nd June, 2002. In the said suit a declaration was also sought that out of the total sum of Rs. 28 lakhs refundable by respondents No. 1 to 3 and respondent No. 4, respondents No. 1 to 3 were liable to refund only an aggregate amount of Rs. 2,25,000/- to the appellant. It is not in dispute between the parties that the subject property i.e. Nazul plot No. 38, Company Bagh, Civil Lines is situated in Mathura and respondents No. 1 to 3 were the co-owners of 3/7th undivided share of the property while respondent No. 4 RFA No.152/2006 Page 12 of 31 was co-owner of 1/7th share . It is also not in dispute that earlier there was an oral agreement and then the agreement in writing was executed on 2nd June, 2002 between the parties and the total consideration between the parties was settled at Rs. 1,38,72,822.80 and out of the said sale consideration an advance of Rs. 1 lakh was paid by the appellant on 31.10.2001. On 9.1.2002, a further payment of Rs. 22 lakhs was made by the appellant to respondent No. 1, who accepted the said payment on behalf of the said sellers and out of the said payment of Rs. 22 lakhs, cash payment of Rs. 2 lakhs was meant for paying stamp duty etc. In terms of the oral agreement between the parties, the appellant had agreed to pay the entire balance sale consideration amount within 7 days after the said property was converted from lease hold to free hold. Since the appellant failed to make the payment of the balance amount of Rs. 1,15,72,822.80 within the period of one week from the date of the registration of the conveyance deed of the said property, both the parties came forward to reduce the terms of the agreement in RFA No.152/2006 Page 13 of 31 writing through the said agreement to sell dated 2nd June, 2002. At the time of the execution of the said agreement to sell, further payment of Rs. 25 lakhs was made by the appellant to the seller on 2nd June, 2002 through a demand draft in the name of respondent no.4 and the appellant had agreed to pay the balance amount with the agreed rate of interest in terms of clause 2 of the agreement to sell on or before 31st August, 2002. In terms of Clause 3 of the agreement to sell, it was also agreed between the parties that if the appellant failed to make the said payment by 31.8.2002, then the seller shall have the option to rescind the agreement after giving a written notice to the appellant. In clause 3 of the said agreement it was also agreed between the parties that the time is the essence of the agreement and the balance sale consideration has to be paid on or before 31st August, 2002, failing which the agreement shall stand terminated at the option of the seller. It was also agreed that in case the seller chooses to rescind the agreement then the buyer shall forfeit Rs. 20 lakhs from the amount of advance already paid RFA No.152/2006 Page 14 of 31 by him and the balance amount will be refunded within a period of four months from the date of exercising such option of rescinding the contract but without any interest. As per the averments made in the plaint, in September, 2002 the appellant through its Secretary Mr. A. R. Sani approached the respondent No. 1 with draft of Rs. 30 lakhs with a request of extension of time for payment, but the said request of the appellant was not entertained by the respondents. The appellant had also sent a notice dated 18th September, 2002 wherein the plea was taken by the appellant that the area of the suit property was found short by 1350 sq yards. Respondent No. 1 on the other hand sent a legal notice dated 26th October, 2002 to the appellant thereby terminating the said agreement. The appellant was also informed through the said notice that an amount of Rs. 20 lakhs stood forfeited by them in terms of clause No. 3 of the agreement to sell. Thereafter the respondent no.1 to 3 filed a suit for declaration for the rightful termination of the contract, wherein, the appellant was proceeded ex parte before the RFA No.152/2006 Page 15 of 31 learned Trial Court. The appellant had moved an application under Order IX Rule 7 CPC before the learned Trial Court to seek setting aside of the ex parte order but the said application of the appellant was dismissed by the learned Trial Court vide order dated 16th May, 2005 with costs of Rs. 5,000/-. The learned Trial Court in the said order observed that the application moved by the appellant was nothing but a pack of lies. The said order dated 16th May, 2005 dismissing the application of the appellant was never challenged by the appellant and, therefore, the said order became final between the parties. After the dismissal of the said application, the matter was taken up for final arguments by the learned Trial Court on 16.9.2005. On 16.9.2005, the Advocate representing the appellant sought to advance his arguments but the said request was opposed by the respondent on the ground that the appellant had failed to pay the costs as was imposed by the Trial Court vide order dated 16.5.2005. The matter was accordingly adjourned to 19.10.2005 giving an opportunity to the appellant to deposit the said costs. On 19.10.2005 RFA No.152/2006 Page 16 of 31 respondents No. 1 to 4 gave up prayer Nos. 2 and 3 of the plaint. The final arguments were heard by the Court in the pre-lunch session and after lunch session. It was observed in the said order that in the pre-lunch session the appellant was duly represented by his Advocate but after the lunch the Advocate did not appear. The matter was accordingly reserved for orders by the Court for 16.11.2005. The learned Trial Court, however, still granted an opportunity to the appellant to advance arguments before the next date after having paid the costs imposed by the Court vide order dated 16th May, 2005. The appellant did not choose to advance the final arguments and the learned Trial Court vide orders dated 16.11.2005 passed the final order thereby decreeing the suit filed by the respondents No. 1 to 3 in terms of prayer No. 1 of the plaint. 11. The narration of aforesaid sequence of facts became necessary as the main argument advanced by the counsel for the appellant before this court was that the Delhi Court had no territorial jurisdiction to entertain the suit in RFA No.152/2006 Page 17 of 31 terms of Section 16 of the Code of Civil Procedure. Counsel also contended that the objections concerning the territorial jurisdiction being legal can be agitated even at the stage of appeal. Counsel for the appellant also placed reliance on the decision of the Apex Court in the case of Harshad Chiman Lal Modi (Supra). Before I deal with the said legal objection raised by the counsel for the appellant, it would be appropriate to reproduce Section 16 of the Code of Civil Procedure as under:- “16. Suits to be instituted where subject-matter situate. Subject to the pecuniary or other limitations prescribed by any law, suits- (a) for the recovery of immovable property with or without rent or profits, (b) for the partition of immovable property, (c) for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property, (d) for the determination of any other right to or interest in immovable property, (e) for compensation for wrong to immovable property, (f) for the recovery of movable property actually under RFA No.152/2006 Page 18 of 31 distraint or attachment, shall be instituted in the Court within the local limits of whose jurisdiction the property is situate : Provided that a suit to obtain relief respecting, or compensation for wrong to, immovable property held by or on behalf of the defendant, may where the relief sought can be entirely obtained through his personal obedience be instituted either in the Court within the local limits of whose jurisdiction the property is situate, or in the Court within the local limits of whose jurisdiction the defendant actually and voluntarily resides, or carries on business, or personally works for gain.” 12. Section 16 of the Code of Civil Procedure deals with the territorial jurisdiction. As the title of the section suggests suits are to be instituted where the subject matter situates. It is not in dispute between the parties that the immoveable property under sale is situated within the jurisdiction of Mathura and territorial jurisdiction for the determination of any right concerning the said immoveable property in terms of Section 16(d) would clearly vest with the Courts at Mathura and not with Delhi Courts. The relief, which was sought by respondents No. 1 to 3 in the said plaint flows from the agreement to sell dated 2.6.2002 which is clearly covered within the ambit of section 16(d) and it is RFA No.152/2006 Page 19 of 31 easily discernable from the language of the said section that the suit for declaration arising out of non-performance of the terms of the agreement concerning sale of immovable property cannot be filed at a place other than the place of location of the immoveable property. The learned Apex Court in the said judgment of Harshad Chiman Lal Modi (Supra) has clearly held that a Court within whose territorial jurisdiction the property is not situated has no power to deal and decide the rights or interest in respect of such property. So far the contention of counsel for the respondents that the suit filed by the respondents before the Delhi Courts is maintainable in terms of proviso of Section 16 CPC, this Court is constrained to observe that the argument of counsel for the respondents is totally misplaced. The proviso of Section 16 CPC cannot be interpreted in a manner to enlarge the scope of the Section. For the applicability of the proviso the relief sought must be one which can be obtained entirely through personal obedience of the defendant which means that the obedience must be such which the defendant can RFA No.152/2006 Page 20 of 31 render without going beyond the jurisdiction of that Court. In any case the proviso of Section 16 would be applicable only in a case where the personal obedience of the defendant can be secured only if the defendant resides within the local limits of the jurisdiction of the court, or carries on business within those limits which is not the situation in the present case as the defendant No.1 (the appellant herein) does not reside or works within the jurisdiction of the courts at Delhi. It would be of advantage to reproduce the following paras of the said judgment as under:- “Section 16 thus recognizes a well established principle that actions against res or property should be brought in the forum where such res is situate. A court within whose territorial jurisdiction the property is not situate has no power to deal with and decide the rights or interests in such property. In other words, a court has no jurisdiction over a dispute in which it cannot give an effective judgment. Proviso to Section 16, no doubt, states that though the court cannot, in case of immovable property situate beyond jurisdiction, grant a relief in rem still it can entertain a suit where relief sought can be obtained through the personal obedience of the defendant. The proviso is based on well known maxim "equity acts in personam”, recognized by Chancery Courts in England. Equity Courts had jurisdiction to entertain certain suits respecting immovable properties situated abroad through personal obedience of the defendant. The principle on which the maxim was based was that courts could grant relief in suits respecting immovable property situate abroad by enforcing their judgments by process in personam, i.e. by arrest of defendant or by attachment of his property. RFA No.152/2006 Page 21 of 31 In Ewing v. Ewing, (1883) 9 AC 34 : 53 LJ Ch 435, Lord Selborne observed : "The Courts of Equity in England are, and always have been, courts of conscience operating in personam and not in rem; and in the exercise of this personal jurisdiction they have always been accustomed to compel the performance of contracts in trusts as to subjects which were not either locally or ratione domicilli within their jurisdiction. They have done so, as to land, in Scotland, in