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Case Number

FAO (OS) No. 177 of 2012

Attorney(S)

Mr. U.U Lalit, Sr. Adv. with Mr. Mohit Chaudhary, Ms. Rashi Bansal & Mr. A. Das, Advs.

Judges

Sanjay Kishan Kaul
Valmiki J. Mehta, JJ.

Acts

provisions of Section 19(b) of the Specific Relief Act, 1963.7.
Order 1 Rule 10 sub-rule (2) of the CPC
Order 2 Rule 1 of the said Code

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Smart Summary

Judgment Summary — SANJAY KISHAN KAUL, J. (Oral)

Factual and Procedural Background

The original plaintiff (respondent No.1) filed a suit for specific performance based on a Receipt-cum-Agreement dated 24.12.2009 for flat No. 84-D, Entire 1st floor, Malcha Marg, Chanakya Puri, New Delhi, for an apparent consideration of Rs. 12.51 crore. The original plaintiff alleges payment of Rs. 1.21 crore to the original defendants (respondents 2 & 3), while the original defendants dispute that amount and claim Rs. 1,08,50,000.00 was received. The Receipt-cum-Agreement provided that the balance payment was to be made on or before 27.7.2010.

Prior to the crucial date for balance payment, the original defendants claim to have entered into an agreement to sell with the appellant on 7.1.2010, culminating in a sale deed executed on 28.4.2010. The original plaintiff sought to amend the plaint to add the appellant as a party to the suit. The learned Single Judge, by order dated 13.2.2012, allowed the application to add the appellant. The appellant filed FAO (OS) No. 177/2012 challenging that order.

Procedural miscellanea recorded in the opinion: CM No. 7435/2012 (Exemption) was allowed subject to just exceptions. After the dismissal of the appeal, CM No. 7434/2012 (Stay) was disposed of as it did not survive for consideration.

Legal Issues Presented

Whether a third party (the appellant), who acquired the property by a sale deed from the vendor, is a necessary or proper party to a suit for specific performance instituted by the purchaser against the vendor.
Whether the original plaintiff may join causes of action and amend the plaint to add the appellant, and whether such joinder is permissible under Order 2 Rule 1 of the Code of Civil Procedure (CPC).
Whether the controversy arising out of the sale deed executed in favour of the appellant can be adjudicated within the existing suit for specific performance (i.e., whether the addition of the appellant would permit a single final adjudication of the disputes between the parties).

Arguments of the Parties

Appellant's Arguments

The sale deed executed in favour of the appellant gives rise to a controversy that cannot be adjudicated in the suit filed by the original plaintiff.
The appellant is neither a necessary nor a proper party to the suit because the appellant was not a party to the Receipt-cum-Agreement in respect of which specific performance is sought.
The appellant is a third party to the original agreement and therefore cannot assist the court in deciding the controversy between the original plaintiff and the original defendants.
The appellant asserts it is a bonafide purchaser for consideration; the sale to the appellant was for Rs. 6.00 crore (allegedly less than the agreed consideration between original plaintiff and original defendants).

Plaintiff's Position (as reflected in the application to the court)

The original plaintiff sought to amend the plaint to add the appellant as a party, invoking the plaintiff's role as dominus litis and the procedural provisions permitting joinder of causes of action and parties.
The claim against the appellant as added party is not barred by limitation (this fact was noted by the court).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Bharat Karsondas Thakkar v. Kiran Construction Company, (2008) 13 SCC 658	Consideration of whether a stranger/third party who acquired an interest in the property is a necessary or proper party in a suit for specific performance; reliance on ratio about impleadment where a third party claims independent rights.	The court cited this decision to show that the question in the present case—whether a purchaser who acquired independent rights is a necessary or proper party—has been examined by the Supreme Court and to draw parallels in analyzing if the appellant should be added.
Kasturi v. Iyyamperumal, (2005) 6 SCC 733	Principle that a stranger to a contract who claims title under a separate contract may or may not be a necessary party; para 7 (as quoted) sets out tests for who is a necessary party (including that a purchaser may be a necessary party if purchased with notice).	The court relied substantially on paragraph 7 of Kasturi to extract the two tests (right to some relief against such party and inability to pass an effective decree in the absence of such party) and to hold that a purchaser can be impleaded as a necessary party when affected by notice of the contract; the Single Judge's reasoning was supported from Kasturi.
Padma Sundara Rao (Dead) v. State of T.N, (2002) 3 SCC 533	Warning that decisions should be applied by matching factual situations; courts should explain how facts of the cited case fit the present case; judicial utterances are fact-sensitive.	The court invoked this authority to emphasize that judgments must be read for their ratio in light of their facts, and to caution against treating judgments as statutes without fitting factual matrices together.
Herrington v. British Railways Board, (1972) 2 WLR 537	Illustrative quote (via Padma Sundara Rao) about the dangers of treating judicial utterances as legislative words; used to support caution in applying precedent.	Quoted indirectly (through Padma Sundara Rao) to reinforce the court's guidance on careful application of precedent to the facts of the present case.

Court's Reasoning and Analysis

The court proceeded by examining prior authorities and by applying procedural provisions to the factual matrix before it.

The court began by noting the factual timeline: the original plaintiff's contract dated 24.12.2009 required balance payment by 27.7.2010, whereas the vendor allegedly contracted to sell to the appellant on 7.1.2010 and executed a sale deed on 28.4.2010. The Single Judge had observed that the sale to the appellant occurred before the last date of performance inter se the original parties.
The court emphasized a methodological point — judgments must be read for their ratio in light of the facts (citing Padma Sundara Rao). It reiterated the need to match the factual situations of authorities to the present facts rather than applying case law mechanically.
The court considered precedents on impleadment in suits for specific performance, notably Kasturi and Bharat Karsondas Thakkar. From Kasturi (paragraph 7) it extracted the tests (as stated in the judgment) for determining necessary parties: (1) existence of a right to some relief against such party in respect of the controversies involved; and (2) whether no effective decree can be passed in the absence of such party.
Applying these tests and the procedural objective of Order 2 Rule 1 CPC (to frame suits so as to afford grounds for final decision and prevent further litigation), the court found that the original plaintiff's attempt to join causes of action and add the appellant was permissible. The court noted that the claim against the appellant was not barred by limitation.
The court endorsed the Single Judge's detailed factual analysis and agreed that a purchaser of the contracted property is a necessary party when affected by notice of the contract; the present case was found to fall within that rationale because the sale to the appellant occurred before the last date for performance between the original parties.
The court declined to pre-judge contested factual issues: whether the appellant is a bonafide purchaser, whether there is collusion between the appellant and the original plaintiff, or collusion between the original plaintiff and the original defendants, are all matters to be decided at trial and were left to be decided in the suit.
The court expressed concern about the large discrepancy between the apparent consideration in the Receipt-cum-Agreement (Rs. 12.51 crore) and the consideration in the sale deed to the appellant (Rs. 6.00 crore). Given the proximity in time of the agreements and a 100% difference in consideration, the court observed that questions arise regarding possible concealment of consideration or under-the-table payments, and noted these are matters where investigation by the Revenue may be required. The court left it to the Single Judge to issue any necessary directions for such investigation.

Holding and Implications

Holding: The appeal (FAO (OS) No. 177/2012) is dismissed.

Implications:

The Single Judge's order allowing the original plaintiff to amend the plaint and add the appellant as a party stands (the appeal challenging that order has been dismissed).
Direct factual and contested issues—such as the appellant's status as a bonafide purchaser, allegations of collusion, and discrepancies in consideration—were not decided by this Court and remain to be adjudicated in the trial court (the suit).
The Court directed that a copy of this order be placed before the learned Single Judge and left to the Single Judge the task of issuing any directions necessary for revenue investigation into the differing considerations.
The ancillary stay application (CM No. 7434/2012) was disposed of as having no further life after the dismissal of the appeal.
No assertion is made in the opinion that this decision establishes a new legal precedent; the Court relied upon existing authorities and applied them to the facts, leaving disputed fact-finding to the trial process.

This summary is based exclusively on the information contained in the provided opinion and does not add or infer facts beyond that text.

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Samarjit Singh Chattha v. Fashion Flare & Ors. S

SANJAY KISHAN KAUL, J. (Oral)

CM No. 7435/2012 (Exemption)

Allowed subject to just exceptions.

FAO (OS) No. 177/2012

1. A suit was laid by respondent No. 1 as original plaintiff against respondents 2 & 3 as original defendants for specific performance of a Receipt-cum-Agreement dated 24.12.2009 for sale of immovable property bearing flat No. 84-D, Entire 1st floor, Malcha Marg, Chanakya Puri, New Delhi for an apparent consideration of Rs. 12.51 crore. It is the say of the original plaintiff that a sum of Rs. 1.21 crore was paid to the original defendants but the amount is disputed by the original defendants who claimed only Rs. 1,08,50,000.00 was received. It is, however, not disputed that as per the said Receipt-cum-Agreement the balance payment was to be made on or before 27.7.2010

2. The original defendants prior to this crucial date claim to have entered into an agreement to sell with the appellant on 7.1.2010 which culminated into a sale deed executed on 28.4.2010 The controversy in the appeal has arisen on account of the endeavour of the original plaintiff to amend the plaint and to add the appellant as a party in the suit. The learned single Judge in terms of the impugned order dated 13.2.2012 has allowed the application.

3. Learned senior counsel for the appellant assails the judgement and contends that the controversy arising out of the execution of the sale deed in favour of the appellant cannot be adjudicated in the suit filed by the original plaintiff and that the appellant is neither a necessary nor a property party to the suit, the appellant not being a party to the agreement of which the specific performance is sought. It is, thus, pleaded that the appellant is a third party to the transaction in question and, thus, cannot assist the Court in any manner whatsoever in deciding the controversy in the present suit. It is, of course, his contention that the appellant is a bonafide purchaser for consideration. We may note that the apparent consideration for which the property has been sold to the appellant is Rs. 6.00 crore, i.e, less than half the value alleged to be agreed consideration between the original plaintiff and the original defendants.

4. In support of his plea learned counsel has relied upon the judgement of the Supreme Court in Bharat Karsondas Thakkar v. Kiran Construction Company(2008) 13 SCC 658. The only facts which need to be set out are that in pursuance of termination of an agreement, a suit was instituted for specific performance of the agreement which resulted in a consent decree. Subsequently the endeavour of the third party to seek specific performance on the basis of a prior agreement and also seek cancellation of the decree was called into question. Learned senior counsel has invited our attention to the observations made in paragraph 13 of the said judgement where it has been observed that whether in a suit for specific performance of an agreement for sale of immovable property instituted by the beneficiary of the agreement against the vendor, a stranger or a third party to the agreement who had acquired an interest in the same property is either a necessary or a proper party to the suit was the issue in question as in the present case. The Court elucidated the controversy by stating that really the same revolved around the issue as to whether the person who had acquired an independent right in the suit property by way of a separate decree but was not a party to the agreement between the other two parties be added as a party in the suit for specific performance. In our considered view this was the crucial question which had to be answered. It is, thus, in that context that while placing reliance on the earlier judgement of the Supreme Court in Kasturi v. Iyyamperumal(2005) 6 SCC 733 observations have been made qua the status of a stranger to an agreement and it has been found that the nature, character of the suit was sought to be changed by calling into question the decree passed earlier.

5. The reason we have set out the aforesaid ration is that a judgement cannot be read like a statute and, thus, one has to see what is the ratio of the judgement as applicable to a given factual situation. We may usefully refer to in this behalf to the judgement of the Supreme Court in Padma Sundara Rao (Dead) v. State of T.N(2002) 3 SCC 533 where in paragraph 9 it is observed as under:

“9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board(1972) 2 WLR 537.Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases.”

6. Similarly the other judgement relied upon by learned senior counsel which has also been referred to in Bharat Karsondas Thakkar case (supra) is Kasturi v. Iyyamperumal. The question to be examined was posed in the second paragraph of the judgement as to whether in a suit for specific performance of contract for sale of a property instituted by a purchaser against the vendor, a stranger or a third party to the contract claiming an independent title and possession over the contracted property, is entitled to be added as party-defendant in the said suit. This question is to be read with the factual matrix where the said third party itself sought impleadment as a party in the proceedings. It is trite to say that a plaintiff is a dominus litis in any legal proceedings and if the plaintiff chooses not to add a party and take the consequences thereof, the plaintiff cannot be compelled to add as a party who claims rights under a separate contract. In order to ensure that the party seeking impleadment was not prejudiciously affected the rights of such a party have been safeguarded by making observations in paragraph 15 of the judgement to the effect that such a party would be at liberty either to obstruct the execution in order to protect their possession by taking recourse to relevant provisions of the Code of Civil Procedure, 1908 (hereinafter referred to as the ‘said Code’) if they are available to them or file an independent suit for declaration and possession against those parties. In the present case it is the plaintiff himself who is seeking the addition of a party in view of provisions of Section 19(b) of the Specific Relief Act, 1963.

7. Now turning to the impugned order, what the plaintiff seeks to do is to join the causes of action and it is really not disputed before us that the claim of the plaintiff is not barred by limitation as against the appellant herein. We find that such a course of action is, thus, permissible on the part of the original plaintiff. Such a course of action is also mandated by Order 2 Rule 1 of the said Code which prescribes that every suit shall as far as practicable be framed as to afford ground for final decision upon the subjects in dispute and to “prevent further litigation concerning them”. Thus, multiplicity of proceedings are to be prevented especially when the plaintiff who is the dominus litis seeks to do so.

8. We may notice that the learned single Judge has analyzed the controversy in detail. On the factual matrix the learned single Judge has noted the crucial fact of sale of property to the appellant by the original plaintiff even prior to the last date for performance of the obligations inter se the original plaintiff and the original defendants. The learned single Judge has rightly drawn support from the observations made in paragraph 7 of the judgement in Kasturi v. Iyyamperumal Case (supra) to the following effect:

7. In our view, a bare reading of this provision namely, second part of Order 1 Rule 10 sub-rule (2) of the CPC would clearly show that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with notice of the contract, but a person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who is a necessary party. Tests are - (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings (2) no effective decree can be passed in the absence of such party.”

(emphasis supplied)

It has, thus, been categorically held that where a person had purchased a contracted property from a vendor, he/she can be impleaded as a party as the purchaser is a necessary party being affected if he has purchased with notice of the contract, the exception being a person who claims adversely to the claim of the vendor where such party would not be a necessary party. The latter is not so in the facts of the present case. It is, once again, emphasized in paragraph 11 of the said judgement that the question to be decided in a suit for specific performance of the contract for sale is to the enforceability of the contract entered into between the parties to the contract.

9. Whether the appellant is a bonafide purchaser and what is its effect or whether there is a collusion between the appellant and the original plaintiff or a collusion between the original plaintiff and the original defendants as alleged by learned counsel for the appellant are matters to be decided in the suit.

10. We may in the end express some concern arising from the stated apparent consideration under the two agreements. The apparent consideration as per the Receipt-cum-Agreement between the original plaintiff and the original defendant is Rs. 12.51 crore on the other hand the sale deed executed in favour of the appellant by the original plaintiff is only for Rs. 6.00 crore. The agreements are in close proximity of time and the difference in consideration is 100 per cent. It is a matter of public knowledge that the property in this area is extremely valuable. It is a matter of public revenue as stamp duty is payable. Thus, the question would arise as to whether there is concealment of consideration or whether the consideration has flowed under the table qua the transaction between the original plaintiff and the appellant requiring investigation by the Revenue. We, however, leave it to the learned single Judge to issue necessary directions in this behalf so that the matter is properly investigated.

11. The appeal is dismissed with the aforesaid observations.

12. A copy of the order be placed before the learned single Judge.

CM No. 7434/2012 (Stay)

In view of the dismissal of the appeal the application does not survive for consideration and the same stands disposed of.

Samarjit Singh Chattha v. Fashion Flare & Ors. S

Judgment Summary — SANJAY KISHAN KAUL, J. (Oral)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Plaintiff's Position (as reflected in the application to the court)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Samarjit Singh Chattha v. Fashion Flare & Ors. S

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