Agreement to Sell; Surjit Singh Bhatia Vs. Tej Raj Singh Goel [Delhi High Court, 25-05-2016]

Contract Act, 1872 – Sections 73 & 74 – Agreement to purchase the suit property – Question of liquidated damages specified in a contract- Law on compensation for breach of contract.

Agreement to Sell


IN THE HIGH COURT OF DELHI AT NEW DELHI

CORAM: HON’BLE MR. JUSTICE S. RAVINDRA BHAT

HON’BLE MS. JUSTICE DEEPA SHARMA

PRONOUNCED ON: 25.05.2016

RFA (OS) 160/2014, CM APPL.20644/2014

SURJIT SINGH BHATIA & ANR. ….. Appellants Through: Mr. Samar Bansal and Mr. Vinayak Mehrotra, Advocates. versus TEJ RAJ SINGH GOEL (GOEL) ….. Respondent Through: Mr. Ashish Aggarwal, Advocate.

S.RAVINDRA BHAT, J.

1. An unsuccessful plaintiff whose suit for decree for specific performance was dismissed, appeals the decision of a learned single judge.

2. The facts, to the extent they are uncontroverted, are that the plaintiff entered into an agreement to purchase the suit property i.e. D-104 Defense Colony (hereafter “the suit property”) on 27.06.2008. The total consideration agreed to be paid to the defendants by the plaintiff was ₹15.80crores in terms of the agreement to sell-which was exhibited in court during the trial as Ex. PW-1/2, the plaintiff did pay the sum of Rupees one crore, at the time of execution of the agreement and also that the further sum of ₹60 lakhs was paid on 05.08.2008. According to the plaintiff a further amount of ₹5 lakhs was paid to a representative of the defendant vendors.

This was disputed; likewise the plaintiff’s assertion that he paid Rupees one lakh a day before entering into the agreement to sell was also disputed. Two conditions stipulated in the agreement are important: one that the entire transaction was to be completed within 100 days or in other words on or before the 06.10.2008. The second condition was that since the suit property belongs to Hindu Undivided Family (HUF), the “No objection certificate” (NOC, hereafter) of other members of the family or coparceners was to be obtained before execution of the sale deed.

3. In the suit the plaintiff alleged that despite stipulation of a specific date (for completion of the sale transaction) which was the essence of the contract, the defendant did not honor his commitments in that the NOCs of the coparceners were not made available. Furthermore the coparceners were not in India at the time the Agreement to Sell was entered into. It was alleged that the defendant unilaterally granted a one-time extension to the plaintiff alleging that the latter was in default of compliance with the terms of the agreement in its letter of 08.10.2008; the extension was up to 15.11.2008. The plaintiff protested the letter contending that he was always ready and willing to perform his contract and highlighted that the defendant on the other hand had not complied with the time requirements. The plaintiff alleged further in the suit that in accordance with the agreement and in order to facilitate compliance he had applied-on behalf of the defendants to the Municipal Corporation of Delhi (“MCD”) for appropriate clearance in respect of the construction on the suit property. The suit mentioned a notice of 04.12.2008 to the defendant drawing attention to a condition of the agreement i.e. cl. 14 which highlighted that time was the essence of the contract and the parties were bound to adhere to it. The defendant on the other hand submitted that the plaintiff did not make any specific commitments as regards the date and time by which all members of the HUF would be available in New Delhi for completion of the sale transaction and executing the registered sale deed. It was submitted that in this background of circumstances the so-called extension of time was entirely sham and bogus and that the defendant deliberately took no steps to discharge his obligations. The plaintiff wrote a letter on 15.01.2009 protesting against the defendant’s conduct and alleged about having suffered losses; the plaintiff also complained about the defendant’s lack of interest in performing their obligations.

4. The defendant once again by letter of 24.01.2009 unilaterally extended the time by 15 days for performance of the contract. The plaintiff denies ever having asked for this extension and on the other hand relies upon the terms of its letter of 04.02.2009 through its counsel. This letter reiterated that the defendant had committed a breach of agreement to sell and miserably failed to perform its part of the contract. The defendant time and again continued to extend the time for performance of the contract, insisting that the obligations under the Agreement to Sell continued to bind parties. The plaintiff submits that at the time the reply and the letters of the defendant were sent to it, the suit property had become nonmarketable on account of an order of the Debt Recovery Tribunal (DRT) of 16.01.2009 attaching the suit property. The defendant had filed an appeal to the Debt Recovery Appellate Tribunal (DRAT). On account of these the defendant would not have complied with the agreement to sell, and conveyed the title yet it continued to insist that the obligations could be discharged. The plaintiff alleged that throughout this time, the defendant negotiated the sale of property with various third parties for amounts higher than the consideration agreed under the contract with the plaintiff. In May 2009 the plaintiff was shocked to learn that the defendant had dishonestly concealed from him about the attachment of the property by the DRT through the order of 10.07.2001. The plaintiff obtained information and documents from the DRT and realized that the defendant had deliberately concealed material facts. It was asserted that in the note received in August 2009 the Defendant approached the plaintiff and assured that it had every intention of completing the sale transaction and that it would take all possible steps to settle its disputes with the Bank which had approached the DRT. The plaintiff had complained to the police; the defendant requested that the complaint may be withdrawn. Alleging that the defendant was negotiating for the sale of the property to a third party the plaintiff approached the court seeking the decree for specific performance.

5. The defendant, on being served, filed written statement and denied ever having concealed material facts. The written statement asserted that there was no impediment to the sale of the suit property and that on the contrary the initial attachment order had been vacated in 2007. Though an appeal (by the bank which had claimed amounts against the defendant), was pending, in fact there was no stay order. Thus there was no impediment to the sale of the suit property. The defendant denied having received Rs. One lakh on 26.06.2008 or that it had received ₹5lakhs from a representative of the plaintiff. It contended on the other hand that the plaintiff started resiling from its commitments. The written statement alleged that the defendant had furnished the NOCs. Given that the plaintiff did not object to the extension of time, once the NOCs were issued to the plaintiff by the other coparceners (who were impleaded as parties in the suit), formalities from the defendant’s end were complete and the plaintiff was free to proceed and fulfill his part of the bargain, by paying the agreed balance amount. Instead the plaintiff by three unequivocal letters stated that the commitments and agreement had been canceled. Reliance is placed upon the said three letters dated 27.10.2008, 14.11.2008 and 04.12.2008.

6. The defendant alleged that the plaintiffs’ submission with respect to being prejudiced on account of the stay order of 30.08.2007 is irrelevant because according to it in May 2009 it became aware of the proceedings. Had it wished to cancel the contract on those terms, the plaintiff could have done so. Instead the suit expressly stated that the parties had renegotiated and that the defendant had assured the plaintiff that the sale deed would be executed. In these circumstances the defendant’s conduct could not have been gone into and the plaintiff was obliged to perform his part of the contract. Since the defendants waited for an unduly long period, the plaintiff as a protective measure appears to have filed this suit. The defendant had intimated the plaintiff and it stated in the written statement that the amounts received were liable to be forfeited since the plaintiff did not adhere to the terms of the contract especially in the respective payment of the amounts before the stipulated and agreed date that 06.10.2008 and in any case before 15.11.2008 it is submitted that the defendant did all that was expected including the production of the NOCs which was contemplated under the agreement to sell and on the other hand the plaintiff continuing to insist that the agreement between the parties had ended, the question of refunding the amount did not arise. The question of specific performance of the agreement could not have under any circumstances arisen at all. The defendant furthermore urged that the plaintiff failed to prove that it had the requisite means to pay the balance amount of ₹13.19 crores, as on the date agreed between the parties or even on the later date.