CS(OS)No.864/1999, 865/1999, 985/1999 Page 1 of 37 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: 03.10.2011 Judgment Pronounced on: 17.10.2011 + CS(OS) 864/1999 INDIAN BANK ..... Plaintiff Through Ms. Seema Gupta, Adv. versus GAWRI CONSTRUCTION UDYOG LTD & ORS ..... Defendants Through Mr. M.L. Mahajan and Mr. Gaurav Mahajan, Advs. + CS(OS) 865/1999 INDIAN BANK ..... Plaintiff Through Ms. Seema Gupta, Adv. versus GAWRI CONSTRUCTION UDYOG LTD & ORS ..... Defendants Through Mr. M.L. Mahajan and Mr. Gaurav Mahajan, Advs. AND + CS(OS) 985/1999 INDIAN BANK ..... Plaintiff Through Ms. Seema Gupta, Adv. versus GAWRI CONSTRUCTION UDYOG LTD & ORS ..... Defendants Through Mr. M.L. Mahajan and Mr. Gaurav Mahajan, Advs. CS(OS)No.864/1999, 865/1999, 985/1999 Page 2 of 37 CORAM:- HON’BLE MR JUSTICE V.K. JAIN 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported Yes in Digest? V.K. JAIN, J 1. By this common judgment, I will dispose of all the three suits and counter-claim referred above. Defendant No. 1 entered into construction-cum-agreements dated 23rd April, 1990 with the plaintiff-bank for construction on various properties. The sale deed was to be executed within 30 days from the date of giving possession to the plaintiff. Under the agreement, defendant No. 1 was to pay all taxes on the properties subject matter of the agreements till possession was delivered to the plaintiff-bank. The agreement provided for payment of penalty to the plaintiff- bank at the rate of 0.5% of the total sale consideration subject to ceiling of 7.5% of the total consideration if possession of the flats, to be constructed by defendant No. 1, is delayed beyond 18 months from the date of the signing of the agreement. The bank was entitled to rescind the CS(OS)No.864/1999, 865/1999, 985/1999 Page 3 of 37 agreement in case of delay beyond 15 weeks and in that case the amount disbursed by it was recoverable with interest from the date of disbursement. 2. Suit No. 864/1999 pertains to construction of 10 flats on Property No. C-17, Inder Puri. Suit No. 865/1999 pertains to construction of 12 flats of Property No. C-12, Inder Puri. Suit No. 985/1999 pertains to construction of 12 flats of Property No. C-10, Inder Puri. Since defendant No. 1 has not executed the sale deeds in respect of the flats constructed by it, despite delivering their possession to the plaintiff, a decree for specific performance of the agreement by directing defendant No. 1 to execute sale deed in respect of the building constructed by it on the aforesaid plots has been sought in all the three suits. In Suit No. 864/1999, the plaintiff has also claimed a sum of Rs 5.20 lakh which it claims to have paid as arrears of property tax for the period prior to handing over of possession to the plaintiff which it has paid to Municipal Corporation of Delhi. It is also alleged that the plaintiff-bank has adjusted a sum of Rs 2,76,765/- towards price variation and liquidated damages and a sum of Rs 50,000/- is payable by it to the defendant which it is ready and willing to pay after settlement of the CS(OS)No.864/1999, 865/1999, 985/1999 Page 4 of 37 accounts. .In Suit No. 865/1999, the plaintiff has, besides execution of the sale deed in his favour, also sought a direction to defendant No. 1 install meters in every flat, constructed by it. It is alleged that since possession of the flats was delayed by defendant No. 1, it was liable to pay a penalty of Rs 39,000/- which the plaintiff-bank has already adjusted. According to the bank, it was required to pay a sum of 19,033/- to the defendant which it is ready and willing to pay. In Suit No. 985/1999, the plaintiff has, in addition to execution of the sale deed in his favour, has also sought recovery of Rs 1108.76/-, being the excess amount paid to defendant No. 1. It is alleged that defendant No. 1 is liable to pay a sum of Rs 36,400/- for delay in handing over the possession which the plaintiff-bank has already adjusted. 3. The suit has been contested by defendants No. 1 and 2 who have taken a preliminary objection that the suit is bad for mis-joinder of defendants No. 2 and 3, who are neither a necessary nor a proper party to the suit. They have also denied the competence of Mr M.S. Parthasarthy to sign and verify the pleadings and institute the suit on behalf of the plaintiff-bank. They have also claimed that the suit is CS(OS)No.864/1999, 865/1999, 985/1999 Page 5 of 37 barred by limitation and is not properly valued for the purpose of Court fee and jurisdiction. On merits, it is alleged that defendant No.1 has also been ready and willing to execute the sale deed and it is the plaintiff which is guilty of breach of terms of the agreement, as they have failed to pay the amount due to the defendants. 4. As regards the claim of the plaintiff for the amount paid by it to MCD towards arrears of property tax, it is alleged that no house tax was payable when the building was under construction and, therefore, the claim of the Corporation for the years 1988-89, 1989-90, 1990-91 and 1991-92 was without any basis and the plaintiff had no right to deal with the demand of MCD without involving the defendants. In Suit No. 865/1999, the defendants have denied their liability to pay any penalty to the plaintiff and have claimed that it was the plaintiff which was responsible for the delay in construction. It is also alleged that the defendants are also entitled to interest on the amount of Rs19,033/- which the plaintiffs admit to be payable to defendant No. 1 and the amount of interest comes to Rs 33,878/-. In Suit No. 985/1999 defendants have denied their liability to pay the amount of Rs 36,400/- which the CS(OS)No.864/1999, 865/1999, 985/1999 Page 6 of 37 plaintiff claims to have adjusted. 5. A counter-claim of Rs 41,38,901/- had been filed by defendant No. 1 in Suit No. 864/1999. It is alleged that vide letters dated 13th August, 1988 and 1st January, 1990, the plaintiff-bank accorded sanction for purchasing 33 flats comprised in Property No. C-15, C-10 and C-12, Inder Puri and 20 flats comprised in Property No. C-17 and C-40, Inder Puri. However, on the suggestion of the plaintiff-bank, five different agreements were executed. It is alleged that the plaintiff made payment of Rs 22.35 lakh towards construction of flats on Property No. C-40, Inder Puri. It is alleged that the plaintiff-bank failed to approve the plan for further construction as a result of which, construction could not be started. The defendant raised a loan of Rs 1 crore from the bank. Since the sanction for the plans was not forthcoming from the plaintiff-bank, defendant No. 1 requested it either to return the balance duly sanctioned or cancel the agreement. While making payment towards construction of flats, the plaintiff-bank adjusted the sum of Rs 22.35 lakh which it had paid towards construction on Property No. C-40, Inder Puri along with interest amounting to Rs 11.77 lakh. It is alleged that defendant No. 1 was CS(OS)No.864/1999, 865/1999, 985/1999 Page 7 of 37 forced to agree to the adjustments since original documents were with the plaintiff bank and it was not ready to part with them unless the aforesaid amount was adjusted against the other amounts payable by the bank in respect of other properties. Defendant No. 1 claimed that amount of Rs 11.77 lakh along with interest on that amount which comes to Rs 19.94 lakh. The defendants have also claimed interest amounting to Rs 50,944/- on the liability of Rs 19,003/- admitted by the plaintiff-bank and Rs 1,23,500/- towards interest on the liability of Rs 50,000/-. The defendants have also claimed a sum of Rs 7,91,927/- towards interest on delayed payment. 6. The following issues were framed on the pleadings of the parties:- i. Is shri M.S. Parthasathi, Assistant General Manager is competent to sign verify and institute these suits on behalf of the plaintiff bank? ii. Are the suits of the plaintiff bad for misjoinder of the defendants, as alleged in para 1 of the preliminary objections? iii. Are the suits being properly valued for the purposes of court fee and jurisdiction? If not, with what effect? CS(OS)No.864/1999, 865/1999, 985/1999 Page 8 of 37 iv. Are the suits of the plaintiff within time? v. Did the plaintiff entered into only one transaction in respect of 33 flats comprised in plot Nos. C-15, C-10 and C-12, Inder Puri, New Delhi and 20 flats comprised in plot Nos. C-17 and C-40, Inder Puri, New Delhi. vi. Whether the defendants have failed to complete all legal formalities including obtaining completion certificate in respect of the premises? OPP vii. Whether there are some illegal and unauthorized constructions made by the defendant and whether the defendants are liable either to get the buildings regularized or to pay damages for the loss to be suffered by the plaintiff? OPP viii. In view of the agreement to sell whether the defendants can refuse execution of sale deed in favour of the plaintiff? OPD ix. Whether the defendants are entitled to receive any amount from the plaintiff? If so, what amount? OPD x. Whether the counter claim, arising out of a separate contract, can be claimed in this suit by the defendants? OPD CS(OS)No.864/1999, 865/1999, 985/1999 Page 9 of 37 xi. Relief. Issue No. 1 7. Mr M.S. Parthasarthy, who has signed and verified the pleadings and instituted this suit on behalf of the plaintiff-bank, filed his affidavit by way of evidence and was partly examined on 23rd October, 2007. He was not produced thereafter and the plaintiff-bank examined PW-3 Shri P.R. Pujari, Chief Manger with the plaintiff-bank. Mr Pujari has identified the signature of Mr M.S. Parthasarthy on the plaint and has also proved the copy of Power of Attorney in favour of Mr M.S. Parthasarthy which is Ex.PW- 1/2 and which has been executed by Mr M. Gopalakrishnan, Chairman and Managing Director of the plaintiff-bank at the relevant time. A perusal of the Power of Attorney Ex.PW-3/2 would show that vide this document, Mr M.S. Parthasarthy was authorized to take all legal proceedings whether civil or criminal for recovering and receiving the debts of the bank and to institute, file and prosecute all actions, including civil suits on behalf of the plaintiff-bank. He was also authorized to sign, verify and file vakalatnama, written statement, etc. on behalf of the plaintiff-bank. The power of attorney purports to be CS(OS)No.864/1999, 865/1999, 985/1999 Page 10 of 37 executed by the Chairman and Managing Director as well as the Director and General Manager of the plaintiff-bank and authenticated by public notary. Since, the power of attorney in favour of Mr M.S. Parthasarthy has been attested by Public Notary, there is a statutory presumption under Section 85 of Evidence Act that the Power of Attorney was executed by the person by whom it purports to have been executed and the person who executed the power of attorney was fully competent in this regard. 8. In Jugraj Singh and Anr. Vs. Jaswant Singh and Ors., AIR 1971 SC 761, the Power of Attorney attested by a Public Notary was disputed on the ground that it did not show on its face that the Notary had satisfied himself about the identity of the executant. Supreme Court held that there was a presumption of regularity of official acts and that the Notary must have satisfied himself in the discharge of his duties that the person who was executing it was the proper person. In Rajesh Wadhwa vs. Sushma Govil, AIR 1989, Delhi 144, it was contended before this Court that till it is proved that the person who signed the said power of attorney was duly appointed attorney, the court cannot draw a presumption under Section 57 and 85 of the CS(OS)No.864/1999, 865/1999, 985/1999 Page 11 of 37 Evidence Act. Repelling the contention, it was held by this Court that the very purpose of drawing presumption under Sections 57 and 85 of the Evidence Act would be nullified if proof is to be had from the foreign country whether a particular person who had attested the document as a Notary Public of that country is in fact a duly appointed Notary or not. When a seal of the Notary is put on the document, Section 57 of the Evidence Act comes into play and a presumption can be raised regarding the genuineness of the seal of the said Notary, meaning thereby that the said document is presumed to have been attested by a competent Notary of that country. In Punjab National Bank vs. Khajan Singh, AIR 2004 Punjab and Haryana 282, the Power of Attorney in favour of a bank, which had been duly attested, was rejected by the learned District Judge on the ground that the presumption under Section 85 of Evidence Act was available to a particular class of Power of Attorneys described in the section and was confined to its execution and authenticity alone. The High Court, however, rejected the view taken by the learned District Judge holding that absence of proof of resolution authorizing the executant to CS(OS)No.864/1999, 865/1999, 985/1999 Page 12 of 37 execute the Power of Attorney could not be sustained and a presumption in favour of the attorney would arise under Section 85 Act. In United Bank of India v. Naresh Kumar & Ors. (1996) 6 SCC 660, which was a suit instituted by a bank, the issue which came up for consideration before the Supreme Court was as to whether the plaint was duly signed and verified by a competent person or not. The suit in that case was instituted by one Mr. L.K.Rohatgi. The Supreme Court noted that the suit had been filed in the name of the appellant bank; full amount of the Court fee had been paid by the bank; documentary as well as oral evidence had been led on behalf of the appellant bank and the trial of the suit had continued for about 02 years. Supreme Court found it difficult in these circumstances, even to presume that the suit had been filed and tried without the appellant having authorized the institution of the same. The Court felt that the only conclusion which it could come to was that Shri L.K.Rohtagi must have been authorized to sign the plaint and in any case it must be held that the bank had ratified the action of Shri L.K.Rohtagi in signing the plaint and therefore it continued with the suit. During the course of the judgment, the Court inter alia CS(OS)No.864/1999, 865/1999, 985/1999 Page 13 of 37 observed as under: Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can , by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and dehors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorize any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorized to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer. CS(OS)No.864/1999, 865/1999, 985/1999 Page 14 of 37 This suit filed on behalf of Indian Bank has been pending in this Court for the last about 12 years and no one from the bank has come forward to repudiate this suit which Mr. M.S.Parthasarthy has filed on behalf of the bank. In these circumstances, it cannot be said that Mr. M.S.Parthasarthy was not competent to institute the suit on behalf of the plaintiff bank. The issue is decided against the defendants and in favour of the plaintiff. Issue No. 2 9. The agreements for construction and sale of the flats have been executed between plaintiff and defendant No.1. Hence, the plaintiff has no cause of action against the other defendants. The suits are bad for mis-joinder of other defendants. The names of defendants other than defendant No. 1 are therefore liable to be struck off from the array of defendants. The issue is decided accordingly. Issue No.3 10. The plaintiff bank has paid the requisite Court fee. No arguments on this issue were advanced. The issue is decided against the defendants and in favour of the plaintiff. CS(OS)No.864/1999, 865/1999, 985/1999 Page 15 of 37 Issues No. 5, 6, 8, 9, 10 & 11 11. These issues are inter connected and can be conveniently decided together. The main dispute between the parties is with respect to the amount of Rs 41,38,901/- for which a counter claim has been filed in CS(OS) No. 864/1999. The break up counter-claim is a under: (a) Interest deducted by the plaintiff on the payments which it had made to defendant No. 1 for construction of flats in Property No. C-40, Inder Puri, New Delhi: Rs. 11,77,765/- (b) Interest on the aforesaid amount of Rs 11,77,765/- for the period from 27th December, 1992 to 30th August, 1999: Rs 19,94,765/- (c) Interest on delayed payments made by the plaintiff-bank: Rs 7,91,927/ (d) Amount payable to defendant No. 1 in respect of Property No. C-12, Inder Puri along with interest CS(OS)No.864/1999, 865/1999, 985/1999 Page 16 of 37 on that amount: Rs 50,944/- (e) Amount to defendant No. 1 in respect of Property No. C-17, Inder Puri along with interest on that amount: Rs 1,23,500/- 12. Defendant No.1 had entered into an agreement with the plaintiff-bank for construction of flats on property No. C-40, Inder Puri and sale of those flats to it. The case of the plaintiff, as set out in the counter claim and affirmed in affidavit by Mr Vipin Gwari, director of the defendant No. 1- company by way of evidence in this regard, is that the plaintiff-bank made payment of Rs 22.35 lakh to it for construction of flats on Property No. C-40, Inder Puri. This is also the case of defendant No. 1 that construction up to basement stage was completed by it and the plans for raising further construction were submitted to the bank for approval, but the bank failed to take action in this regard for more than 11 months, despite request by defendant No. 1. Since defendant No. 1 had taken a loan of Rs 1 crore from Citi Bank to complete the construction, it requested the bank either to approve the plans or to cancel the agreement. The bank acceding to the request of defendant No. 1, cancelled the agreement for construction of flats on CS(OS)No.864/1999, 865/1999, 985/1999 Page 17 of 37 Property No. C-40, Inder Puri, New Delhi, subject to payment of interest at the rate of 18% per annum and adjusted the amount which it had paid to defendant No. 1 along with a sum of Rs 11.77 lakh towards interest. The adjustment was made out of the amount which had to pay to defendant No. 1 for construction of other flats. In his affidavit by way of evidence, Shri Vipin Gwari, Director of defendant No. 1-company has stated that defendant No. 1 was forced to agree to the adjustment of illegal demand of interest because original documents of the property were with the bank, which was not ready to part with them unless the aforesaid amount was adjusted. Ex.PW-3/D-10 is the letter dated 05th March, 1991, written by defendant No. 1 to the plaintiff-bank, requesting that either the bank may get the building constructed as per the sanctioned plan or it may get the building constructed as per their own design, at its own risk. It was further requested that in the event of the bank failing to give an early reply, they suggest that the bank may cancel the agreement and take back the amount paid so far. This letter was followed by a reminder dated 30th March, 1991 which is Ex-PW-3/D-11. Vide letter dated 22nd June, 1991, Ex.PW-3/D-26, the plaintiff- CS(OS)No.864/1999, 865/1999, 985/1999 Page 18 of 37 bank, with reference to defendant No. 1’s letter dated 19th May, 1991, informed defendant No. 1 that its Head Office had permitted cancellation of the agreement for C-40, Inder Puri, New Delhi after recovery of the amount paid to it along with interest. Defendant No. 1 was accordingly requested to pay back the amount which it had received from the plaintiff for this project along with interest at the rate of 18% per annum. Admittedly, defendant No. 1 agreed to adjustment of not only the principal sum which it had received from the plaintiff-bank for this project, but also for the interest on that amount. It appears from the letter dated 16th September, 1992 (Ex.DW-1/8), written by defendant No. 1 to the plaintiff that it wanted to pay interest at the rate of 18% per annum from the date of the cancellation of the agreement, i.e., 22nd June, 1991 to 22nd September, 1992, which worked out to Rs 5,02,875/-. Thus, defendant No. 1 at that time made no protest about payment of interest though it wanted to pay it only from the date the agreement came to be cancelled. As noted earlier, the agreement in respect of the flats to be constructed on Property No. C-40, Inder Puri, New Delhi was cancelled by the plaintiff-bank on the specific request of defendant No. CS(OS)No.864/1999, 865/1999, 985/1999 Page 19 of 37 1. The bank cancelled the agreement subject to defendant No. 1 paying interest at the rate of 18% per annum on the amount which it had received from the bank. If the condition imposed by the plaintiff-bank for cancellation of the agreement, on the request of defendant No. 1, was not acceptable to it, defendant No. 1 could very well have refused to accept the cancellation on payment of interest and could have decided to go ahead with the agreement which it had executed with the plaintiff-bank. If defendant No. 1 was suffering any loss on account of the delay on the part of the bank in approving the building plans, defendant No. 1 could have sued the plaintiff-bank for damages. If defendant No. 1 felt that bank had committed breach of the by not approving the building plans within a reasonable time, it could have rescinded the agreement between the parties, instead of requesting the bank to cancel the agreement and then accepting that cancellation on the condition imposed by the bank. But, having accepted the conditional cancellation of the agreement, defendant No. 1 cannot deny its liability to pay interest on the amount which it had received from the plaintiff-bank. As regards the stand taken by defendant No. 1 in its letter dated 16th CS(OS)No.864/1999, 865/1999, 985/1999 Page 20 of 37 September, 1992 (EX-DW-1/8), I am of the view that the bank was justified in seeking interest from the date it had