CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 1 of 38 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment reserved on :29.4.2015 Judgment delivered on : 06.5.2015 + I.A.Nos.2286/2010, 1460/2014, 5310/2014 in CS(OS) 353/2006 R.S.CHHABRA ..... Plaintiff Through Mr.Sandeep Sethi, Sr. Advocate with Mr.Chaman Lal Sachdeva, Mr.Preet Pal Singh and Ms.Priyam Mehta, Advocates. versus GOPAL KRISHAN KAPOOR ..... Defendant Through Mr.Pritesh Kapoor, Miss. Radhika Sharma and Ms.Bina Gupta, Advocates. + EX.P. 232/2007 & EX.APPL. (OS) 35/2010 SHRI R.S. CHHABRA ..... Decree Holder Through Mr.Sandeep Sethi, Sr. Advocate with Mr.Chaman Lal Sachdeva, Mr.Preet Pal Singh and Ms.Priyam Mehta, Advocates. versus SHRI GOPAL KRISHAN KAPOOR AND OTHERS ..... Judgement Debtors Through Ms.Bina Gupta, Mr.Pritesh Kapoor and Miss. Radhika Sharma and, Advocates. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 2 of 38 CORAM: HON'BLE MS. JUSTICE INDERMEET KAUR INDERMEET KAUR, J. 1. These are three applications filed by the judgment debtor. I.A. No. 2286/2010 (under Order XXIII Rule 3 of the Code) 2 This is an application filed by the judgment debtor under Order XXIII Rule 3 of the Civil Procedure Code, 1908 (hereinafter referred to as the „Code‟); reliance has been placed upon the proviso; submission being that the consent decree passed by the Court on 20.03.2006 in CS (OS) No. 353/2006 was obtained under a mis-representation and fraud; submission of the plaintiff (R.S. Chhabra) in those pleadings that he was a valid assignee of Rajesh Kumar (defendant No. 6 in that suit) was a false and fraudulent averment; there was no valid assignment by defendant No. 6 in favour of the plaintiff. In the instant case, the deed of assignment dated 20.04.2005 was only an agreement which was yet to be followed up by another document and not being a complete deed of assignment and the whole case of the plaintiff being premised on this document and this being fully known to the plaintiff, he is guilty of mis- representation within the meaning of Section 18 of the Indian Contract CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 3 of 38 Act. The consent decree passed on 20.03.2006 premised on this assignment deed suffering from a mis-representation is a voidable contract and the defendant accordingly seeks setting aside of this decree. His second submission on the agreement dated 20.04.2005 is based on the averments that a person holding a back to back agreement to sell with the original proposed buyer would not be entitled to sue on the first agreement in the absence of a valid and a complete assignment in his favour. There being no complete assignment in favour of the plaintiff, the present suit was not maintainable. On this ground also, the decree dated 20.03.2006 is liable to be set aside. This fact was learnt by the judgment debtors only when defendant No. 6 filed an application before the Division Bench seeking setting aside of the consent decree dated 20.03.2006. Submission being that the dispute between the parties had in fact travelled right up to the Supreme Court and the Apex Court vide its order dated 20.11.2009 had granted liberty to the present applicant/judgment debtor to move an appropriate application under Order XXIII Rule 3 of the Code pursuant to which this present application has been filed. Learned counsel for the applicant has placed reliance upon an extract from the text of “Chitty on Contracts” as also CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 4 of 38 “Halsbury‟s Laws of England” to argue as to what is a „mis- representation‟. Submission being that a statement of fact, past or present, which is unfounded and which is known to the plaintiff to be a wrong is a „mis-representation‟. Reliance has also been placed upon the judgment of the Apex Court in (1968) 2 SCR 797 Ningawwa Vs. Byrappa Shiddappa Hireknrabar and Others to support this submission. Submission being that where a contract is based on fraud or mis- representation, it is voidable. 3 Reply has been filed opposing the application. It is pointed out that the decree dated 20.03.2006 has attained a finality and as per the version of the applicant/judgment debtor while dismissing the SLP on 20.11.2009, the Supreme Court had refrained from interfering with the orders of the Court below which included the consent decree dated 20.03.2006. Submission being that the application is even otherwise barred by law of limitation; under Article 137 of Schedule I of the Limitation Act, an application seeking setting aside of the decree which is based either on fraud or mis-representation has to be filed within a period of three years which period has to be counted from the date of CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 5 of 38 knowledge of this fraud or mis-representation. Even as per the case of the applicant, he learnt about this fraud or mis-representation when defendant No. 6 filed an application before the Division Bench on 18.05.2006. The present application filed in December, 2010 is barred by limitation. Attention has been drawn to the memorandum of understanding dated 28.02.2005 executed between the plaintiff and defendant No. 6 wherein Clause 7 gave a specific right of assignment to defendant No. 6. Averment being that on 20.04.2005, there was a valid assignment made by defendant No. 6 in favour of the plaintiff and this fact was also well within the knowledge of the plaintiff as this document dated 20.04.2005had been filed by the plaintiff along with his suit. Even otherwise, in view of the judgment of the Apex Court reported as AIR 2004 SC 348 Shyam Singh Vs. Daryao Singh (dead) by Lrs and Ors. even in the absence of any words or expressions in a document where there is prohibition of an assignment or transfer, the implied prohibition cannot be read into such a document. The document dated 20.04.2005 was a valid assignment. This application on all counts is liable to be dismissed. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 6 of 38 I.A. No. 1460/2014 (under Section 28 of the Specific Relief Act) 4 This is an application filed by defendants No. 1 to 4 under Section 28 of the Specific Relief Act (hereinafter referred to as the „said Act‟). Submission being that the Court even after passing a decree in a suit for specific performance is not functus officio; the decree being only a preliminary decree; the Court is still in seizen of the matter. Where the timeline laid down by the Court had not been adhered to by the decree holder as is so in the present case and the decree holder having failed to deposit the balance amount in terms of the direction contained in the order of the executing Court dated 31.08.2009 and it being clear that the decree holder in fact did not have the money to deposit the balance sum of Rs.4.20 crores, it is a clear case where equitable consideration should not lie in favour of such a decree holder and the decree dated 20.03.2006 is liable to be set aside. For this proposition he has placed reliance upon 69 (1997) DLT 996 Parvesh Kumar Gulati Vs. Darshan Singh Gulati. Reliance has also been placed upon (1999) 4 SCC 702 V.S. Palanichamy Chettiar Firm Vs. C. Alagappan and Another and (2009) 8 SCC 766 Bhupinder Kumar Vs. Angrej Singh. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 7 of 38 5 Reply has been filed opposing the application. It is pointed out that there was no timeline laid down by the Court which was contained in the order dated 20.03.2006. The executing Court in its order dated 31.08.2009 had laid down certain directions about the terms of payment and the obligation on the part of the decree holder to make payment would have arisen only 15 days after the date of execution of the conveyance deed which was to be executed in favour of the judgment debtor. The conveyance deed has not yet been executed in favour of the judgment debtor. This is all because of the fault of the judgment debtor and this is clear from the report of the Local Commissioner (J.K. Aggarwal) who had been appointed by the executing Court vide its order dated 31.08.2009. Attention has been drawn to the three interim reports filed by the Local Commissioner. Submission being that it does not now lie in the mouth of the judgment debtor to press his prayer in terms of Section 28 as the whole fault lies with the judgment debtor. Reliance has been placed upon AIR 1970 SC 546 Nathulal Vs.Phoolchand and 2005 (5) ALLMR (SC) 15 P. D’Souza Vs. Shondrilo Naidu to support an argument that where it is clear from the documents on record that there were obligations on the part of the defendant to CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 8 of 38 perform his part of the agreement and when he had not done so, the question of plaintiff‟s readiness and willing to perform his part of the contract would not arise. Reliance has also been placed upon (1972) 3 SCC 684 Hungerford Investment Trust Limited (In Voluntary Liquidation) Vs.Haridas Mundhra and Others to put forward an argument that this Court has a limited power to grant relief under the provisions of Section 28 of the said Act. It is not an unlimited power; it is only where the vendor alleges that the vendee has failed to perform his part of the obligation, is the vendor entitled to get relief which prayer is clearly not available to the applicant in the instant case. I.A. No. 5310/2014 (under Order 11 Rule 12 of the Code) 6 This third application has been filed by the judgment debtor under Order 11 Rule 12 of the Code. Submission being that the bank statement for the period w.e.f. June, 2009 till date along with income tax returns (for the year 2006-2007) of the decree holder/plaintiff should be called upon by the Court to establish the submission made by the judgment debtor/applicant that the decree holder in fact had no money to comply with the directions contained in the order dated 20.03.2006; the decree CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 9 of 38 holder not having any funds was the reason why he did not pay the balance sum of Rs.4.20 crore; he is not entitled to any equitable consideation; the decree dated 20.03.2006 is accordingly liable to be set aside. 7 Reply has been filed opposing the aforestated application. Submission is that the application has been filed with a malafide intention and only to delay the proceedings in the Court; the obligation was upon the judgment debtor/applicant who had to comply with the directions contained in the order dated 31.08.2009 (passed by the executing Court) and the obligation on the part of the decree holder to pay the balance amount would have arisen only after the execution of the conveyance deed in favour of the defendant which was not executed in their favour all because of the fault of the judgment debtor. The application even otherwise could only have been filed in a pending suit and admittedly in the instant case, the suit proceedings already stand disposed of in terms of a consent decree dated 20.03.2006. 8 Arguments have been heard on all the aforenoted applications. The following factual matrix emerges: CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 10 of 38 (i) CS (OS) No. 353/2006 was filed by the plaintiff (R.S. Chhabra) against six defendants of whom defendants No. 1 to 5 were the persons with whom defendant No. 6 had entered into an agreement to sell dated 28.02.2005 qua a property bearing No. 14-B (also known as 14-C), Bazaar Marg, Old Rajender Nagar (hereinafter referred to as the „suit property). Total consideration was Rs.5.20 crores. In terms of Clause 7 of this agreement, there was a specific stipulation which was to the effect that defendant No. 6 for his bonafide need had the right to assign his rights in favour of a third party. (ii) Vide a subsequent MOU dated 20.04.2005, defendant No. 6 assigned his right in favour of the plaintiff. This was for consideration of Rs. 1 crore. The plaintiff on the strength of this deed of assignment executed by defendant No. 6 in favour of the plaintiff has filed the present suit. His contention was that he was ready and willing to perform his part of the agreement and was willing to pay the entire balance consideration to the defendants but the defendants were not ready to execute the sale deed in his favour. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 11 of 38 (iii) The suit was filed by the plaintiff on 24.02.2006. A decree of specific performance in terms of the agreement to sell dated 28.02.2005 was prayed for. (iv) Within less than one month of the filing of the suit on 20.03.2006, a compromise was arrived at between the parties. This was a compromise arrived at between the plaintiff and defendants No. 1 to 5; defendant No. 4 was present in person. In terms of this compromise, the decree was passed. The compromise application (I.A. No. 3182/2006) was a part of the decree dated 20.03.2006. The schedule of payments was drawn up. It was agreed that the property which was leasehold would be converted into freehold within a period of 15 days; joint statement of the parties was recorded. The suit was disposed of. Decree- sheet was drawn up. (v) I.A. No. 6399/2006 was thereafter filed on 18.05.2006 by defendant No. 6 in CS (OS) No. 353/2006 seeking setting aside of the decree dated 20.03.2006. (vi) I.A.No. 8638/2006 was filed by the plaintiff for direction to defendants No. 1 to 5 to implement the decree dated 20.03.2006. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 12 of 38 (vii) These applications were disposed of on 05.02.2008 by a Single Judge of this Court. The Court noted that a separate substantive suit has been filed by defendants No. 1 to 4 i.e. CS (OS) No. 691/2007 seeking setting aside of the decree dated 20.03.2006; these applications where all the respective persons were parties could be decided in that suit; these applications were accordingly disposed of. (viii) In CS(OS) No.691/2007 filed by defendants No. 1 to 4 (challenging the consent decree dated 20.03.2006) an interim application (I.A. No. 14573/2007) was filed by defendants No. 1 to 4. (ix) I.A. No.55198/2008 was filed by defendant No. 6 in the same suit i.e. in CS (OS) No. 691/2007. (x) Both these applications sought interim relief against the consent decree dated 20.03.2006; a stay of the decree had been sought. These applications were dismissed by a single Judge of this Court on 09.04.2009. The statement made by the respective parties that a fraud had been played upon them in obtaining the consent decree dated 20.03.2006 as there appeared to be no valid assignment by defendant No. 6 (Rajesh Kumar) in favour of the plaintiff was negatived. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 13 of 38 (xi) Appeals were filed separately by defendants No. 1 to 4 and defendant No. 6 respectively. The Division Bench on 27.07.2009 dismissed the appeal of defendant No. 6 (Rajesh Kumar) noting the submissions made by him that the decree dated 20.03.2006 is liable to be set aside as it is vitiated by fraud is incorrect. It was agreed that the balance sum of Rs. 20 lacs would be paid by the plaintiff to defendant No. 6 which was thereafter paid before the Single Judge on 23.08.2012. (xii) On 20.08.2009, the Division Bench dismissed the appeal filed by defendants No. 1 to 4 on the same premise. This order was passed against the order of the Single Judge dated 09.04.2009 (in CS (OS) No.691/2007). The Division Bench on 20.08.2009 reiterated that even if a proposition is pressed that a party whose consent to a compromise has been obtained by fraud yet in the factual matrix of the instant case, no fraud appears to have been played upon defendants No. 1 to 5; no prima- facie case had been made out in their favour. The Division Bench noted that defendant No. 6/Rajesh Kumar had already entered into an agreement dated 20.04.2005 with the plaintiff (R.S. Chhbra) who had paid a sum of Rs. 1 crore to Rajesh Kumar; the possession of the suit CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 14 of 38 property was continuously being enjoyed by defendants No. 1 to 4. Relief of injunction was not available to the parties. The Division Bench dismissed this appeal. (xiii) The matter did not rest here. Both defendants No. 1 to 5 and defendant No. 6 filed separate Special Leave Petitions before the Supreme Court. (xiv) The Supreme Court on 20.11.2009 passed separate orders in the two separate SLPs against the orders of the Division Bench (dated 27.07.2009 and 20.08.2009). 9 The orders passed by the Apex Court on the SLP of defendants No. 1 to 5 reads herein as under:- “We find no reason to interfere. Special leave petition is dismissed. However, this will not come in the way of the petitioner challenging the order dated 5.2.2008, whereby the petitioner’s application under Order 23 Rule 3 (proviso) CPC was dismissed, in accordance with law.” 10 The Supreme Court reiterated that it had no reason to interfere with the order passed by the Division Bench. The petitioner was however not precluded from challenging the order dated 05.02.2008 CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 15 of 38 wherein his application under Order XXIII Rule 3 of the Code was dismissed. I.A. No. 2286/2010 was thereafter filed. 11 The argument of the learned counsel for the applicant in all the aforenoted applications is that the compromise was largely on the ground of misrepresentation and fraud. Attention has been drawn to the assignment deed dated 20.04.2005. Submission being that this was not a valid assignment; being only an agreement to assign; the whole case of the plaintiff is based on this invalid document; had he not got a valid assignment in his favour, the suit would not be maintainable. The judgment debtor learnt about this fraudulent assignment deed only when defendant No. 6 chose to file an application seeking setting aside of the decree dated 20.03.2006 which was on 18.05.2006. The whole transaction being vitiated by a mis-representation and fraud, it is voidable and liable to be set aside. 12 His second argument is premised on Section 28 of the said Act. Submission being that this Court is not powerless to rescind the contract if the timeline laid down by the Court had not been adhered to, the Court is well within its powers to rescind the contract. Submission being that CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 16 of 38 the decree for specific performance is in the nature of preliminary decree and the suit is deemed to have been pending in the Court. Section 28 makes it clear that the Court does not lose its jurisdiction even after grant of decree for specific performance; it does not become functus officio where the timeline laid down by the Court had not been adhered to by the plaintiff/decree holder as in the instant case, equitable considerations are not to be considered in his favour; the decree is liable to be rescinded. 13 His third submission (in terms of his application under Order 11 Rule 12 of the CPC) is that the decree holder did not have sufficient funds to make the payment and that is why he did not pay the money to the judgment debtor. This can be deciphered by calling his income tax returns. 14 Needless to state that all these submissions have been refuted. 15 This Court has noted that submissions and counter submissions of the respective parties. 16 Section 28 of the Specific Relief Act reads herein as under:- CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 17 of 38 “28. Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed.— (1) Where in any suit a decree for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require. (2) Where a contract is rescinded under sub-section (1), the court— (a) shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor, and (b) may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and if the justice of the case so requires, the refund of any sum paid by the vendee or lessee as earnest money or deposit in connection with the contract. (3) If the purchaser or lessee pays the purchase money or other sum which he is ordered to pay under the decree within the period referred to in sub-section (1), the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:— (a) the execution of a proper conveyance or lease by the vendor or lessor; (b) the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease. (4) No separate suit in respect of any relief which may be claimed under this section shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be. CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 18 of 38 (5) The costs of any proceedings under this section shall be in the discretion of the court.” 17 There is no doubt to the settled legal proposition as submitted by the learned counsel for the plaintiff that even after passing of a decree under the Specific Relief Act, the Court does not become functus officio; it retains its powers and being in the nature of a preliminary decree and where the purchase money has not been paid as per the schedule; the contract may be rescinded on the application made by the vendor/lessor. 18 The factual matrix of each case however has to be examined in its individual context for the application of this legal proposition. In the instant case, the compromise decree was passed on 20.03.2006 . This was a consent decree between the plaintiff and defendants No. 1 to 5 where defendant No. 4 was present. This decree was passed within less than one month from the date of filing of the suit which suit had been filed by the plaintiff on 24.02.2005. This suit was premised on a deed of assignment dated 20.04.2005 executed by defendant No. 6 (Rajesh Kumar) in favour of the plaintiff. The rights of the plaintiff had emanated from this assignment deed. Not happy with this consent CS (OS) No. 353/2006 & Ex. P. No. 232/2007 Page 19 of 38 decree, defendant No. 6/Rajesh Kumar moved