Sewa Singh v. R.S. Malhotra

This is a suit for specific performance seeking execution and registration of Sale Deed and delivery of possession and permanent injunction in respect of property bearing plot number B-140, Block B, situated at Vivek Vihar, Delhi measuring 300 sq. yards.

2. The case of the plaintiff, in brief, is that the defendant represented to the plaintiffs through M/s. Amba Property Dealers (Regd) that he is perpetual lessee of Plot No. 140, Block B, situated at Vivek Vihar, Delhi measuring 300 sq. yards and offered to sell the same for valuable consideration. After negotiations the total consideration of sale of the plot was settled at Rs. 7,72,500/-. At the time of execution of agreement to sell, of Rs 20,000/- (Rs. 10, 000 by means of cheque and Rs. 10,000/- by cash) was paid leaving a balance of Rs. 7,52,500/- which was agreed to be paid at the time of registration of the sale deed in the Office of Sub-Registrar, Delhi.

3. In order to complete the sale, the defendant was to obtain necessary permissions from various authorities viz. No Objection Certificates' from the Income Tax, Delhi Development Authority, Urban Land Ceiling etc. which the defendant agreed to obtain within a period of 365 days and as such 365 days time was fixed for the performance of the agreement of sale. It was agreed that in case the defendant failed to execute the sale deed and get the same registered within the stipulated period of 365 days, the plaintiffs could get the agreement of sale enforced specifically through the Court of Law.

4. It was also agreed that the possession of the property shall be delivered to the plaintiffs immediately after the execution of the sale deed and the expense of stamp papers, registration fee shall be borne by the plaintiffs.

5. It was assured by the Defendant that the plot under the sale was free from all kinds of encumbrances, sale, mortgages, gift, transfer etc. and the defendant agreed to convey the property to the plaintiffs to their entire satisfaction. Consequently a Receipt-cum-Agreement to Sell dated 28-4-1988 was executed by the defendant.

6. The defendant after executing the Receipt-cum-Agreement to Sell and after receiving the amount of Rs. 20,000/- did not take an step to convey the property in question to the plaintiff.

7. The plaintiffs asked the defendant several times to convey the property. Sometimes defendant refused to do so, sometimes he promised to convey the property and thus had been marking time on the pretext that he was seeking requisite permissions to complete the sale deed.

8. It is averred that the plaintiffs were always ready and willing to perform their part of commitment and to pay the remaining amount of sale consideration of Rs. 7,52,500/- to the defendant but the defendant is not prepared to execute and register the sale deed in favour of the plaintiff due to rise in the market value of the plot. It is further averred that on 19-4-1992 the defendant flatly refused to convey the property to the plaintiff and on further enquiries it transpired that he was negotiating to sell the same at a higher price to some other persons. Hence, this suit.

9. In Written Statement, the defendant has challenged the maintainability of the suit on the terms that no valid agreement to sell or concluded contract for sale of the property was executed and the alleged agreement to sell is unilateral document and, therefore, does not constitute a concluded contract. Apart from this, the defendant has also taken the plea that the perpetual lease obtained from DDA prohibits sale and transfer of the plot in question for a period of 10 years and therefore the alleged agreement, if any, violates the terms and conditions of the lease and is null and void.

10. On merits the defendant has taken the stand that he was not aware of this fact and this fact came to his knowledge when the perpetual lease deed was executed on 12-6-1989 and was registered on 11-8-1989. However, he admitted having received a sum of Rs. 20,000/- towards the earnest money but denied that the period of 365 days was agreed between the parties or by the defendant unilaterally and this fact seems to have been interpolated later in the agreement to sell. Again the defendant has taken the plea that the alleged receipt cum agreement to sell is unilateral and does not constitute a valid agreement of sale.

11. In replication the plaintiff has reiterated that at the time of execution of agreement to sell, it was very well within the knowledge of the defendant that he is perpetual lessee and was aware of the terms of the perpetual lease and therefore he agreed to obtain No Objection Certificate' or permission from DDA prior to the execution of the sale deed.

12. The aforesaid pleadings gave rise to following issues which were framed on 25-9-1995:—

1. Whether the writing dated 25-4-1988 is an agreement to sell the property bearing plot No. 140, Block B, Vivek Vihar, Delhi?

2. Whether the defendant proved that the writing dated 25-4-1988 has been interpolated by the plaintiff as averred in the written statement?

3. What is the date of acquisition of the suit property by the defendant?

4. Whether there is a bar to the sale of the suit property within 10 years of the acquisition thereof by the defendants. If yes, what is the effect?

5. Whether the plaintiffs is and was ready and willing to perform his part of the contract?

6. To what relief the plaintiff is entitled to?

7. What order and decree?

13. The stand taken by the defendant shows that all the issues can be taken up together as the fate of the suit depends upon the fact whether the alleged agreement to sell was a contingent agreement or not. The allegations that the time limit of 365 days was agreed to execute and the same was interpolated later has no relevance and even otherwise has no significance if it is held that the agreement to sell was null and void and was a contingent agreement.

14. Admittedly, the agreement to sell was executed on 25-4-1988 and the perpetual lease deed was registered on 11-8-1989. The relevant Clause of the appellant lease behind which the defendant has taken the shelter is Clause 4(a) and reads as under :—

“The Lease shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the residential plot except with the previous consent in writing of the lessor which he shall be entitled to refuse in his absolute discretion.

Provided that such consent shall not be given for a period of ten years from the commencement of this lease unless in the opinion of the lessor exceptional circumstances exist for the grant of such consent.”

15. Even if credibility is attached to the stand of the defendant that he at the time of the agreement to sell was not aware of such a clause as by then the perpetual leas deed was not registered, the question will arise whether the suit for specific performance is maintainable in the face of bar that the defendant could not sell, transfer and assign or otherwise part with the possession of the whole or any part of the residential plot except with the previous consent in writing of the lessor which the lessor shall be entitled to refuse in his absolute discretion and such consent shall not be given for a period of 10 years from the commencement of the lease unless in the opinion of the lessor exceptional circumstances exist for the grant of such consent.

16. The contention of Mr. Sudhir Nandrajog, learned counsel for the plaintiff is that the defendant cannot take advantage of this clause unless he proves or shows that he had applied for the consent of the DDA. The defendant has admitted that he had never applied to DDA for permission to sell the plot in question. Though in the agreement to sell, the defendant had agreed that he would seek such a permission from DDA it is contended by learned counsel for the plaintiff that even if such a bar exists, it was obligatory upon the defendant to apply for consent and bring to the notice of the DDA exceptional circumstances of his having entered into agreement to sell before the registration of the perpetual lease deed in his favour and his ignorance about such provision in the lease. He further contended that even if defendant failed to apply for consent to the DDA still such a clause is no bar granting a decree for specific performance.

17. While canvassing this promotion the learned counsel relied upon the decision of this Court in Ajit Prasad Jain v. N.K Widhani (1989) 38 Delhi LT 456 : (AIR 1990 Delhi 42) wherein reliance was placed upon the decision of Supreme Court in Chandnee Widya Vati Madden v. Dr. C.L Katial, (1964) 2 SCR 495 : (AIR 1964 SC 978), where similar clause existed in a lease whereby the sale was subject to the sanction by the Chief Commissioner.

18. In Ajit Prasad's case (AIR 1990 Delhi 42) it was held that if after the grant of the decree of specific performance of that contract the sanctioning authority for that purpose refuses to grant permission for sale the decree holder may not be in a position to enforce the decree as such a permission is a condition precedent for executing a decree for specific performance of the contract.

19. In another case of similar nature Kuldip Singh Suri v. Surinder Singh Kalra., 1998 (4) AD Delhi 469, this Court held on the strength of the aforesaid two cases one decided by this Court and another by Supreme Court that appropriate direction can be issued to vendor to apply for permission of the appropriate authority in a suit for specific performance. In Kuldip Singh Suri's case the doctrine of public policy which perhaps forms the basis of introducing Clause 4(a) in the lease deed was dealt with at length and it was observed that such restrictive clauses have worked to the detriment of the State as public policy being a variable concept must be tuned with demand of time and changing concept of public good and public interest. The argument that if the transaction is stated to be agreement to sell then in that event the same would be void as no prior permission for entering into such a transaction or permission was taken from DDA for transfer of land and was repelled being devoid of force. It was further held that such a clause of perpetual lease does not create a bar for a lessee to enter into an agreement to sell.

20. On the contrary, Mr. V.K Sharma the learned counsel for the defendant has contended that the aforesaid clause in perpetual lease deed prohibits sale, transfer etc. as governed by Section 2 of the Government Grants Act, 1895 which provides that the Transfer of Property Act 1882 does not apply to the Government Grants. Section 3 of the Act further provides that all provisions, restrictions, conditions and limitations contained in any such grant or transfer as aforesaid shall be valid and take effect according to their tenor, any rule or law, statute or enactment of the Legislature to the contrary notwithstanding.”

21. In order to show that clause 4 is a debarring clause rendering the agreement to sell as null and void being in violation of the terms of the perpetual lease, Mr. Sharma has relied upon the pleadings of the plaintiff.

22. The main emphasis of Mr. Sharma is upon the averment of the plaintiff made in para 3 of the replication that the plot was allotted to the defendant on 25-8-1967 and the period of 10 years had expired on the date of agreement to sell and further that prior to auction of the plot the DDA announced its terms and conditions at site and since the plot in question was sold by the defendant, the defendant played a fraud upon the plaintiff and manipulated the records and got the false documents fabricated.

23. At the same time Mr. Sharma has also relied upon the perpetual lease which was though executed on 12-6-1989 but it commenced from 1982, therefore, the 10 years period was to expire in 1992 whereas the agreement to sell was executed in 1988. It is contended that any contract which is contrary to the public policy or against any other law namely the Government Act the agreement or contract for that purpose is void and ineffective. It is also contended that the question of applying to the DDA for consent to transfer or sell the plot in question did not arise as 10 years were at the most going to expire in 1992 and not in 1989 and therefore, to say that the defendant did not perform his part of obligation is not correct.

24. In support of this contention Mr. Sharma has relied upon Ocean Investment and Finance Co. v. Union of India, 1990 RLR (Note) 56 wherein it was held that since the prohibition to sell the plot which in the aforesaid case was rehabilitation plot was on the ground of public policy, the sale agreement and delivery of possession pursuant thereto are illegal.

25. Last but no the least Mr. Sharma also contended that the question of existence of exceptional circumstances in favour of the defendant did not arise as the consent can not be granted by the DDA before the expiry of sale (Ex.P.1) to show that plaintiff is entitled to claim only double the amount of earnest money. It provides as under :—

“If the purchaser fails to make payment within the period as mentioned above his earnest money shall be forfeited and in case my failure in the execution and registration on the relevant documents in connection with the above said property in favour of the purchaser or his/her nominee(s) with the above mentioned period, then I.R.S Malhotra, S/o Kanhiya Lal Malhotra R/o GI/793, Sarojini Nagar, New Delhi 110023 (Seller) will pay double the amount of the earnest money to the purchaser. The purchaser has option either to accept double amount of the earnest money or to get the sale deed registered through the Court of law by the specific performance on my cost and expenses.

27. According to Mr. Sharma the effect of the aforesaid clause of agreement to sell is that in case the defendant refused to execute the sale deed, the plaintiff does not perform his part of obligation, earnest money would be forfeited. Thus according to Mr. Sharma the arguments of learned counsel that the plaintiff cannot force the defendant to execute the sale deed by way of suit of specific performance has no force. He has placed reliance on Dadarao v. Ramrao (1999) 8 (JT) (SC) 608 : (1999 AIR SCW 4818). The Supreme Court has held that the relationship between the parties has to be regulated by terms of agreement between them and in the said case, the following term of the agreement was subject matter of interpretation:—

“Tukaram Devsarkar, Agriculturist R/O Devsar, Purchaser (GHENAR) -Balwantrao Ganpatrao Pande aged 76 years r/o Dijadi Post Devsr, Vendor (DENAR) who hereby gave in writing that a paddy field situated at Dighadi Mouja, Survey No. 7/2 admeasuring 3 acres belonging to me hereby agree to sell to you for Rs. 2000/- and agree to receive Rs. 1000/- from you in presence of V.D.N Sane. A sale deed shall be made by me at any cost by 15-4-1972. In case the sale deed is not made to you or if you refuse to accept, in addition of earnest money an amount of Rs. 500/- shall be given or taken and no sale deed will be executed. The possession of the property has been agreed to be delivered at the time of purchase. This agreement is binding on the legal heirs and successors and assigns.”

28. Though there was a dispute whether the document was an agreement to sell or not but on the representation of the plaintiff that it was an agreement to sale, the Supreme Court held as under :—

“As we read the agreement, it contemplates that on or before 15th April, 1972 the sale deed would be executed. But what is important is that the agreement itself provides as to what is to happen if either the seller refuses to sell or the purchaser refused to buy. In that event the agreement provides that in addition to the earnest money of Rs. 1000/- a sum of Rs. 500/- was to be given back to Tukaram Devsarkar and that “no sale deed will be executed”. The agreement is very categorical in envisaging that a sale deed is to be executed only if both the parties agree to do so and in the event of the sale deed not being executed Rs. 500/- in addition to the return of Rs. 1000/- was the only sum payable. This sum of Rs. 500/- perhaps represented the amount of quantified damages or, as the defendants would have it, interest payable of Rs. 1000/-”

29. As is apparent the aforesaid agreement envisaged that the sale deed is to be executed only if both the parties agreed to do so and in the event of any one of them resiling, there was not to be no question of other party being compelled to go ahead with the execution of the sale deed.

30. It is the cardinal principle that the parties to the agreement are bound by its terms and cannot go beyond them. They have to remain within the precincts of the terms of the agreement. The stand of the defendant is that clause 4(a) of the perpetual lease deed is an unspeakable obstacle as it prohibits sale or transfer of the plot without the consent in writing of DDA and it is mandatory for the DDA not to grant such consent before 10 years from the date of registration of sale deed.

31. I am afraid, the contention of learned counsel for the defendant that there is complete bar from granting consent to the defendant from selling or transferring the suit property before 10 years from the date of registration of perpetual lease holds no water and therefore the provisions of Sections 2 and 3 of the Government Grants Act, 1895 are not applicable. What does clause 4(a) contemplate is that DDA in ordinary course shall not grant consent before 10 years for sale or transfer of the plot but it no where provides that it has no discretion or power at all to grant such a consent. The proviso to clause 4(a) itself provides that such a consent shall not come for a period of 10 years from the commencement of lease unless in the opinion of lessor exceptional circumstances exist for the grant of consent. Thus clause 4(a) vests the discretion in lessor for granting such a consent if there exists exceptional circumstances. There is no complete or total bar. Had there been total bar, the contention of the counsel for the defendant would have held the field and that too for the purpose of execution of a decree of a specific performance.

32. The substance and tenor of clause 4(a) is as under :—

(i) The lessee cannot sell or transfer, assign or otherwise part with possession of residential plot without the previous consent in writing of lessor.

(ii) The lessor is empowered to refuse such a consent in its absolute discretion.

(iii) In ordinary course such a consent shall not be given for ten years from the commencement of the lease.

(iv) If in the opinion of the lessor exceptional circumstances exist for the grant of consent, the limitation of 10 years can be relaxed or reduced or even removed.

33. Admittedly the defendant has not taken a chance with the lessor to seek their permission or consent for sale or transfer of the plot by bringing out the exceptional circumstances for such a consent. Thus neither does clause 4(a) of the perpetual lease render the agreement to sell null or void ab initio or inoperative or unforceable or against public policy. The only benefit the defendant in such a situation can take is that he would be relieved from an obligation of executing the sale deed in case he fails to obtain consent from the lessor to sell or transfer the plot in question during the relevant period.

34. However, the contention of the counsel for the defendant that receipt-cum-agreement to sell is a unilateral document appears to peripheral argument. This is an agreement which has been signed by the seller and witnessed by two witnesses. This agreement does not postulate that the purchaser should also have signed the same. Clause 3 of the agreement to sale lies at its heart. Such a clause if executed and signed by the seller does not render the agreement unilateral or void or inoperable. The seller himself is telling the purchaser that the purchaser has option either to accept double the amount of earnest money or get the sale deed executed by the Court of law by specific performance in case defendant fails to perform his part of obligation. The whole obligation is upon the seller so far as execution of sale deed is concerned. The very fact that it was receipt of earnest money which shows acceptance of terms and conditions of the agreement to sell by both the parties particularly the defendant-vendor, such an agreement which is an agreement to sell as well as receipt of earnest money need not be signed by both the parties. If it is signed by vendor alone it still acquires the status of agreement to sell. None of the obligations contained in this agreement are of such nature which in the absence of signatures of the plaintiff may render agreement to sell as inoperable or unenforceable or meaningless. Throughout vendor had been telling the purchaser that the plot in question is free from all kinds of encumbrances and he was ready to execute the sale deed in case the purchaser pays the remaining consideration amount within 365 days.

35. Even if it is assumed for the sake of argument that agreement to sell or receipt has not been signed by the plaintiff, the defendant is still in better position as he can absolve himself from his liability in case of failure of the plaintiff to perform any of the obligations contained in agreement to sell as it is the plaintiff who has sought specific performance of the agreement and not the defendant. The defendant is already in receipt of earnest money and if the plaintiff fails to make payment of remaining consideration amount, the defendant will be well within his rights to forfeit the earnest money. In case of such a forfeiture it is again plaintiff who will rush to the Court. Thus, in any eventuality it is the plaintiff and the plaintiff alone who will have the right to invoke enforcement of the agreement to sell signed by the defendant vendor. Thus to say that in the absence of signature of plaintiff on the agreement to sell the document is void or contract is unconcluded is wholly erroneous and is misconceived proposition. It is the defendant who has agreed to sell the property and not the plaintiff. Plaintiff has only agreed to purchase the same. Plaintiff has therefore to seek its specific performance. The terms of the agreement to sell have been duly accepted by the defendant. Such a plea is available to the plaintiff and not to the defendant. The plaintiff has by filing the suit accepted the terms of the agreement to sell as were offered and agreed by the defendant-vendor.

36. The reliance by Mr. Sharma on Dadarao's case (1999 AIR SCW 4818) is wholly misconceived as terms of agreement in question and the terms of agreement in Dadarao's case are wholly distinct as in Dadarao's case no option was given to the plaintiff to enforce the contract by way of specific performance. The option was limited. The agreement in Dadarao's case contemplated that on or before 15th April, 1972 the sale deed would be executed and it also provided as to what will happen if either the seller refuses to sell or the purchaser refuses to buy. In that event in addition to the earnest money of Rs. 1000/- a sum of Rs. 500/- was to be given back to the purchaser and that no sale deed will be executed. Observations of the Supreme Court in this regard are self axiomatic “The agreement is very categorical in envisaging that a sale deed is to be executed only if both the parties agree to do so and in the event of anyone of them resiling from the same there was to be no question of the other party being compelled to go ahead with the execution of the sale deed.” In the instant case, two options were given to the plaintiff. Either he could seek specific enforcement of the agreement to sell or he may accept the double amount of earnest money. The plaintiff has chosen the course of specific performance.

37. Again, the argument that plaintiff did not perform his part of the obligation in not adhering to the limitation of 365 days by way of not approaching the defendant is of no consequence at all in view of the defence taken by the defendant that clause 4(a) prohibits him from selling or transferring the sale. In view of such a stand taken by the defendant, the obligation of the plaintiff in approaching the defendant in 365 days was meaningless. For that reason alone, the interpolation of 365 days in the agreement to sell if any has lost its sting and is rather rendered insignificant and irrelevant. Moreover, the plaintiff by way of legal notice asked the defendant to execute the sale deed but defendant took the stand that the sale deed could not be executed as sale is not permissible before 10 years of commencement of lease. Moreover, there is a limitation of 3 years from such refusal. Three years were available to the plaintiff to seek specific performance from the date of refusal The defendant cannot be allowed to play hot and cold. On the hand, defendant took the stand that agreement to sell was unilateral and perpetual lease prohibited him from selling the plot before 10 years from the commencement, on the other hand, defendant is harping on the fact that plaintiff did not approach him within 365 days which is self-contradictory and self-defeating and as such cannot come to the rescue of defendant.

38. In view of settled law that restrictive clause does not bar nor does it put an embargo for passing a decree for specific performance, the only effect of such a restriction which in the instant case vests a discretion in the authority to relax the same, the decree may not be enforceable in case DDA refuses to grant consent for or transfer of suit property.

39. In view of similarity and identical nature of facts of this case as well as case relied by the counsel for the plaintiff particularly Ajit Prasad Jain's case (AIR 1990 Delhi 42) as well as Chandnee Widya Vati Madden's case (AIR 1964 SC 978), the only direction which can be issued to the defendant is to apply for permission from the appropriate authority as envisaged in Clause 4(a) of the perpetual lease deed.

40. In view of the aforesaid reasons, decree for specific performance is passed with the direction to the defendant to apply to the DDA for permission/consent to sell the suit land bringing out the factual position and exceptional circumstance. Relevant period of consideration for the DDA shall be from 1982 to 1992. On receipt of permission defendant shall execute the conveyance deed in favour of the plaintiff within one month. No order as to costs.

Ordered accordingly.