IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CONTRACT ACT. Judgment reserved on : October 15, Judgment delivered on : November 04, 2008

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1 IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : CONTRACT ACT Judgment reserved on : October 15, 2008 Judgment delivered on : November 04, 2008 RFA 303/1997 SMT. LAJYA WANTI... Through: Appellant Mr. J.K.Seth, Sr. Adv. with Mr. M.L.Bhargava, Adv. VERSUS SH. DEVA RAM (DECEASED)THR. LRs... Through: CORAM: Respondents Mr. Kavin Gulati, Adv. and Mr. Meedanshu Tripathi, Adv. HON'BLE MR.JUSTICE PRADEEP NANDRAJOG HON'BLE MR.JUSTICE J.R. MIDHA PRADEEP NANDRAJOG, J. 1. Late Deva Ram, the predecessor-in-interest of the respondents, entered into an agreement to sell, Ex.PW-1/A in favour of Lajya Wanti. The agreement to sell is recorded in an undated receipt admittedly executed somewhere in the month of June The subject matter of the sale is a plot of land ad-measuring 300 sq. yds. bearing No.D-874, New Friends Colony. The sale consideration recorded is Rs.63,500/- out of which Rs.5,000/- stand acknowledged as having been received. Balance sum of Rs.58,500/- was payable at the time of execution of the sale documents. The receipt records that formal registration of the plot of land has not been effected in the name of Deva Ram but physical possession was with him. Date fixed for execution of the formal sale deed and receipt of balance sale consideration is 22 days after Deva Ram obtained a perpetual lease in his name. 2. It may be recorded here that the plot of land was allotted to Deva Ram being member of the New Friends Cooperative House Building Society and formal title would have been conveyed to him when a perpetual lease deed was executed in his favour by DDA and the cooperative society.

2 3. The perpetual lease deed, certified copy proved as Ex.P/X was executed in favour of Deva Ram on Admittedly, he never informed Lajya Wanti within 22 days reckoned with effect from that he had obtained the perpetual lease deed in his favour requiring Lajya Wanti to tender to him the balance sale consideration and in turn obtain title documents from him. 5. On , vide Ex.PW-1/B, Lajya Wanti caused a legal notice to be served upon Deva Ram informing that she has learnt on that he had obtained a perpetual lease deed in his favour. She called upon him to receive the balance sale consideration and execute the necessary conveyance in her name. 6. Deva Ram having not abided by the requirement of Ex.PW- 1/B, Lajya Wanti filed a suit for specific performance of the agreement in question. The suit was filed on i.e. after nearly 9 months of serving Ex.PW-1/B upon Deva Ram. Deva Ram did not dispute the execution of the receipt in question but urged that the same was not enforceable because the plot of land was carved out on a parcel of land given to the New Friends Cooperative House Building Society by DDA and it was a term that no person other than a member of the cooperative society can own any plot of land carved out by the society. It was additionally pleaded that under the perpetual lease Ex.P/X, vide clause 6-a he was not competent to sell the plot save and except with the prior permission of DDA. He pleaded having been induced into an unfair bargain and blamed one Sh.T.R.Kassa the son-in-law of Lajya Wanti to have made him execute the receipt. He denied that Lajya Wanti was possessed of sufficient funds when she served the legal notice Ex.PW-1/B upon him. 7. As per the pleadings of the parties issues were settled on Needless to state the two main issues were whether the agreement was void and unforceable on account of the reasons pleaded in the written statement, and as noted above, and whether the plaintiff was ready and willing to perform her part of the contract. 8. By the impugned judgment and decree dated , the suit for specific performance has been dismissed but decree in sum of Rs.10,000/- has been passed with 15% per annum from the date of suit till realization. 9. The rationale for awarding Rs.10,000/- is a term in the receipt that in case Deva Ram failed to abide by his obligation under the contract he would recompense Lajya Wanti double the amount. Since Deva Ram had received Rs.5,000/- as advance sale consideration he conceded to pay Rs.10,000/- to Lajya Wanti. Reason for declining specific performance by the learned Trial Judge is that clause 6-a of the perpetual lease deed, Ex.P/X, prohibited a transfer of the plot without prior sanction of DDA and that vide a proviso to the clause, if DDA gave the permission it was entitled to 50% of the unearned increase. It has also been held that the plot of land could not have been transferred to a person who was not a member of the New Friends Cooperative House Building Society.

3 10. On the twin reasoning afore-noted the learned Trial Judge has held that the agreement was hit by Section 23 of the Contract Act. 11. The issue whether the agreement in question is hit by Section 23 of the Contract Act is no longer res integra. In the decision reported as 2007 (10) SCC 595 Vishwa Nath Sharma Vs. Shyam Shanker Goela and Anr. it has been held that where sale permissions or transfer permissions are required, an agreement to sell qua said land is legal and valid and that the decree for specific performance can hedge a direction that the sale deed would be executed if the requisite permissions are granted. 12. Incidentally, it would be interesting to note that the decision in Vishwa Nath Sharmas case pertains to an agreement to sell dated pertaining to a plot of land bearing No.334, New Friends Colony i.e. the land which was developed by the New Friends Cooperative House Building Society. 13. Thus, on the reasoning of the learned Trial Judge the appeal has to succeed for the reason the impugned judgment cannot be sustained in light of the decision of the Honble Supreme Court in Vishwa Nath Sharmas case. 14. But, the appellant would not be entitled to a decree for specific performance for the reason under Section 20 of the Specific Relief Act 1963 it is the discretion of the Court to grant specific performance or not. 15. A discretion has to be exercised not on the ipxi dixit of a Judge. It has to be informed by reason and guided by past precedents. 16. Equitable considerations are a good ground to exercise or not to exercise a discretion. 17. The agreement to sell relates to a vacant plot of land. It has been so recorded in Ex.PW-1/A. 18. The terms of the perpetual sub-lease Ex.P/X mandate that Deva Ram would construct a building on the plot within 2 years under pains of forfeiture. Since the suit could not be disposed of within 2 years, to save the plot of land, Deva Ram constructed a building thereon which was extensively renovated pursuant to a permission granted in appeal on No doubt said order records that the reconstruction would not create any equities in favour of the legal heirs of Deva Ram. It be noted that Deva Ram died during the pendency of the suit and his legal heirs were brought on record before the learned Trial Judge. 19. In a somewhat similar situation where the plot would have been forfeited if construction was not effected within a specified time and the proposed seller had constructed the building after entering into an agreement to sell qua the vacant plot, in the decision reported as 1989 SUPP 2 SCC 409 M/s Eldee Velvet and Silk Mills Pvt. Ltd.

4 Vs. Anand Ram Whigh Honble Supreme Court observed as under:- 1. We heard Shri Salve, learned counsel for the appellant at quite some length. The appeal arises out of a suit for specific performance brought by the appellant as the plaintiff on July 21, 1958 in the Court of the First Commercial Sub-Judge, First Class, Delhi of an agreement dated April 5, 1956 entered into between the appellant and the late A.R.Whigh, the predecessor-in-title, whereby he agreed to sell his leasehold rights in plot No.4, block No.10, Golf Links, New Delhi for a sum of Rs.55,000, or in the alternative, for damages for alleged breach of contract. The plaintiffs suit has been dismissed both by the learned Sub-Judge and the High Court on various grounds. The learned counsel has mainly advanced two contentions, namely: (1) There was no hardship which the defendant could not foresee, particularly when he was put to notice by the plaintiff and therefore the High Court was not justified in disallowing the plaintiffs claim for specific performance on the ground that the case fell within Section 22 of the Specific Relief Act, 1877 (2) In any event, the High Court having held that the defendant was in breach, should have decreed the alternative claim for damages. We find no merit in either of these contentions. 2. As to the first, we are in agreement with the High Court that the change in the circumstances brought out in this case were such that if would cause great hardship to the defendant if a decree for specific performance were to be passed inasmuch as the defendant at considerable cost had constructed a massive residential building on the plot under a compelling necessity and this was not a fit case for grant of the discretionary relief for specific performance. The fact is undisputed that the allotment of the plot to the defendant by the Government of India, Ministry of Rehabilitation was subject to the condition that he was to construct the building within a period of two years of the handing over of the possession. It cannot be doubted that that period was fast running out and there was no alternative for the defendant but to start construction of the building to save the property from forfeiture. The mere fact that the plaintiff sent a notice while the work of construction was in progress does not alter the legal position. As regards the comparative hardship, the plaintiff would be put to no loss if the relief of specific performance was not granted. Apart from payment of a sum of Rs.5,000/- by way of earnest money, it took no further steps for getting the conveyance executed and did nothing beyond sending a lawyers notice. We are inclined to think that the High Court was not justified in disturbing the finding of the learned Sub- Judge that the plaintiff was disentitled by his conduct from claiming specific performance by reason of his standing by. The suit was not brought till July 21, 1958 by which time the defendant had already put up a substantial portion of the residential building at considerable cost. As to the claim for damages, both the learned Sub-Judge as well as the High Court have rightly held that the plaintiff has failed to substantiate its claim for damages. There is no evidence to show that the plaintiff was put to any loss. 20. At the hearing held on , learned counsel for the respondents made a statement which stands recorded in the said order that in lieu of specific performance his clients are prepared to compensate appellant Rs.10,00,000/- (Rupees Ten Lacs). 21. Following the precedent in Eldee Velvets case we dispose of the appeal affirming the impugned decree which has declined specific performance, but for different reasons.

5 22. In view of the concession made by learned counsel for the respondents, apart from the sum already decreed by the learned Trial Judge, we pass a further decree in favour of the appellant and against the respondents in sum of Rs.10,00,000/- (Rupees Ten Lacs). The said sum shall be paid within a period of 6 weeks failing which it shall carry 9% per annum from the date of the present judgment till payment. 23. No costs. Sd./- PRADEEP NANDRAJOG, J. Sd./- J.R. MIDHA, J. November 04, 2008

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