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Mukul Sharma v. Orion India Private Limited Through Its Managing Director .
Factual and Procedural Background
The appellant instituted Title Suit No. 195 of 1998 before the Civil Judge (Senior Division) No. 1, Guwahati, seeking specific performance of an instrument dated 25-8-1992. Under Clause 1 of that agreement, the appellant was to receive:
- Half of the built-up area on the ground floor of the proposed North Block (Drawing No. GBA/891/03A dated 14-12-1990);
- Half of the built-up area on the mezzanine floor of the same building; and
- The complete built-up area on the first floor of that building.
A dispute arose over whether “built-up area” included common areas such as lift wells, corridors, and lobbies. The trial court decreed the suit in favour of the appellant. The respondent appealed. The High Court held that “built-up area” included common areas and remanded the matter for recalculation. The present Supreme Court decision addresses the appellant’s challenge to that High Court determination.
Legal Issues Presented
- Whether the parties had agreed that the expression “built-up area” in the 25-8-1992 agreement included common areas.
- Consequently, whether the appellant was entitled to specific performance on the terms claimed.
- Whether the appellant was entitled to a money decree (an ancillary issue arising in the first appeal).
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Abdulla Ahmed v. Animendra Kissen Mitter, AIR 1950 SC 15; 1950 SCR 30 | Extrinsic evidence of parties’ conduct is admissible to resolve ambiguity in an instrument. | The Court invoked this case to justify examining subsequent correspondence (Exts. 3 & 4) to ascertain the parties’ common understanding of “built-up area”. |
| Godhra Electricity Co. Ltd. v. State of Gujarat, (1975) 1 SCC 199; AIR 1975 SC 32 | Affirmed the principle from Abdulla Ahmed that acts done shortly after an instrument can illuminate its meaning. | The Court relied on this authority to reinforce the permissibility of using the later letters to interpret the undefined term “built-up area”. |
Court's Reasoning and Analysis
The Supreme Court found that the High Court placed undue weight on the appellant’s earlier letter dated 15-9-1997 (Ext. ‘H’) that had treated common areas as part of the built-up area, while ignoring two later letters:
- Ext. 3 (9-3-1998): The respondent acknowledged that “built-up area” should be defined as space within four walls, expressly excluding common areas.
- Ext. 4 (16-3-1998): The respondent reiterated that, using the “accepted definition”, common areas such as lift wells, corridors, lobbies, and ducts were excluded from the built-up area calculations.
Because the original agreement did not define “built-up area”, its meaning had to be gathered from the parties’ conduct. Applying Section 5 of the Indian Contract Act, 1872, the Court reasoned that once the respondent accepted the appellant’s definition in Exts. 3 and 4, it could not later withdraw from that accepted position. The High Court’s conclusion that the appellant was estopped from changing his stance was therefore incorrect; instead, the respondent had in fact altered its position and was bound by the mutually agreed definition.
By invoking Abdulla Ahmed and Godhra Electricity, the Court confirmed that extrinsic evidence—especially the parties’ immediate subsequent conduct—was admissible and decisive in clarifying an ambiguous contractual term.
Holding and Implications
Holding: The appeal is allowed; the High Court’s judgment (2015 SCC OnLine Gau 483) on the meaning of “built-up area” is set aside, and the trial court’s finding is restored.
Implications: The trial court is directed to recalculate the area to be handed over to the appellant in accordance with the Supreme Court’s ruling—excluding common areas—and dispose of the suit expeditiously. No costs were awarded. The decision turns on settled principles of contractual interpretation and does not announce a new legal doctrine.
Judgment
1. Leave granted. The appellant filed Title Suit No. 195 of 1998 before the Civil Judge (Senior Division), No. 1 at Guwahati praying for specific performance of the instrument dated 25-8-1992 between the appellant and the respondent.
2. The dispute is only on a narrow compass. As per Para (1) of the aforesaid agreement, half of the built-up area on the ground floor of the proposed North Block of the complex as per Drawing No. GBA/891/03A dated 14-12-1990 and half of the built-up area on the mezzanine floor of the same building and complete built-up area on the first floor in the same building, were liable to be handed over to the appellant. On a dispute as to what is the built-up area, the appellant filed the civil suit. The suit was decreed. Aggrieved by the same, the respondent-defendant filed first appeal before the High Court. The following points for determination were found to arise in the first appeal:
(i) Whether the parties had entered into agreement knowing that “built-up area” as mentioned in Ext. 1 agreement includes the common area?
(ii) Whether the plaintiff is entitled to specific performance as claimed?
(iii) Whether the plaintiff is entitled to a money decree as prayed for?
3. As per the impugned order 2015 SCC OnLine Gau 483, the High Court has taken the view that the built-up area includes the common area as understood by the parties. Reliance is placed on Ext. ‘H’ letter dated 15-9-1997 written by the appellant-plaintiff to the respondent-defendant. As per the said letter, indisputably, the built-up area has been understood to include the common area.
4. However, the High Court has failed to appreciate Ext. 3 letter dated 9-3-1998 and Ext. 4 letter dated 16-3-1998 in the correct perspective. The relevant portion of Annexure Ext. 3 letter dated 9-3-1998 reads as follows:
“(1) That the “built-up area” as in Clauses 1(i), (ii) & (iii) of the agreement between yourself and the Company (Deed No. 5581 dated 25-8-1998) should be defined as “the area within the four walls excluding the common areas as lift well, lobby, corridor, etc.
(2) That our method of calculation and the area so calculated is not acceptable to you.
Since we wish to resolve this long outstanding issue as early as possible, we agree to your definition of “built-up area” and shall recalculate the area to be allotted to you and shall inform you shortly.”
(emphasis supplied)
5. This was followed by Ext. 4 letter dated 16-3-1998 wherein it is stated in the very opening paragraph of the said letter as follows:
“Further to our Letter No. ORION/44-1/98/028 dated 9-3-1998, we furnish below the built-up areas calculated for Drg. Nos. GBA/891/03A, GBA/891/04A and GBA/891/05A using our accepted definition of “built-up area”. Please note that all common areas such as lift well, corridor, lobby, duct, etc., have been excluded as suggested by you.”
(All emphasis supplied)
6. It is unfortunate that the High Court has gone by the earlier understanding of the plaintiff on the concept of built-up area and wholly ignoring the understanding mutually entered into between the plaintiff and the defendant on a later date. According to the High Court, since the plaintiff had once accepted the position that built-up area included common areas, he is always bound by the same. If the plaintiff had once accepted the position in regard to the concept of “built-up area” he cannot resile subsequently in view of bar under Section 5 of the Contract Act, 1872, once offer and acceptance is complete, it is held.
7. The relevant consideration by the High Court at para 29 of the impugned judgment 2015 SCC OnLine Gau 483 reads as follows: (Mukul Sharma case 2015 SCC OnLine Gau 483, SCC OnLine Gau)
“29. If Ext. 3 and Ext. 4 are studied and compared, it would appear that prima facie, defendant undertook to accept the definition of “built-up area” given by the plaintiff and thereafter deferred the matter for recalculation of the entitlement on the light of such definition. But in the subsequent communication, the defendant made recalculation as to entitlement of the plaintiff by applying his own definition of the “built-up area” and thus included common areas in the “built-up area”. This letter was written on 16-3-1998. But prior to that it is the plaintiff who had accepted the concept of “built-up area” as given by the defendant in his letter dated 15-9-1997 and made his own calculation about the entitlement of “built-up area”. According to the version of the plaintiff in the said letter dated 15-9-1997 (Ext. H), he was allotted possession of 8726.43 sq ft of “built-up area” in total in three floors, namely, first floor, mezzanine floor and the third floor. Out of this total “built-up area” of 8726.43 sq ft, the plaintiff himself admitted in the said letter that there was 558.19 sq ft common area in the first floor, 544.74 sq ft common area in the mezzanine floor and 540 sq ft in the third floor. Thus, out of 8726.43 sq ft “built-up area” handed over to the plaintiff, there was 558.19 sq ft + 554.74 sq ft + 540 sq ft = 1652.93 sq ft common area and balance 7083.50 sq ft under exclusive possession of the plaintiff. The plaintiff after showing this calculation claimed thereafter that he was still entitled to 3445.57 sq ft in the top floor i.e. eighth floor. The sum of 8726.43 sq ft + 3445.57 sq ft is 12,172 sq ft and so there is logic behind this calculation shown by the plaintiff. Once this calculation is accepted, it is clear that prior to the issuance of letter dated 9-3-1998, the plaintiff had accepted the proposition that built-up area would include common areas. If the plaintiff had accepted the proposition of the defendant in regard to concept of “built-up area” he cannot resile subsequently in view of bar under Section 5 of the Contract Act, 1872.”
8. It is not a case where the plaintiff resiled from the agreement. It is a case where the defendant himself subsequently accepted the dispute raised by the plaintiff with regard to the concept of “built-up area”. In express terms, the respondent-defendant has subsequently agreed that the built-up area will not include the common areas like lift well, corridor, lobby, duct, etc. Admittedly, the expression “built-up area” is not defined in the sale deed. It is something to be deciphered from the conduct of the parties. No doubt, the appellant-plaintiff had, after five years of the sale deed, as per letter Ext. ‘H’ dated 15-9-1997 understood the built-up area as including common area. But subsequently, he disputed the position and it was the respondent-defendant who accepted and agreed to the position that built-up area does not include common area. It is not as if an attempt is made for interpreting the express terms of an agreement, by subsequent conduct. It is a situation where there is a dispute on a concept relating to an expression/concept which is not explained in the agreement. The plaintiff had initially understood the concept in a particular angle or manner. But that does not prevent him from raising a dispute. And on raising such a dispute, nothing prevented the defendant from insisting the plaintiff to stick to his original stand. On the contrary, it is the defendant who changed his stand as per Ext. 3 and Ext. 4 and accepted the position as raised by the plaintiff. Thereafter and therefore, under the true spirit of Section 5 of the Contract Act, the defendant cannot resile from the mutually agreed position.
9. In Abdulla Ahmed v. Animendra Kissen Mitter AIR 1950 SC 15, 1950 SCR 30, this Court has dealt with a similar situation and it has been held that: (AIR p. 21, para 23)
“23. … Extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning. Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done shortly after the date of the instrument.”
This was followed in Godhra Electricity Co. Ltd. v. State of Gujarat (1975) 1 SCC 199, AIR 1975 SC 32:
“18. In these circumstances, we do not think we will be justified in not following the decision of this Court in Abdulla Ahmed v. Animendra Kissen Mitter AIR 1950 SC 15, 1950 SCR 30, SCR at p. 46 : AIR at p. 21, where this Court said that extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning and that evidence of the acts done under it is a guide to the intention of the parties, particularly, when acts are done shortly after the date of the instrument.”
10. We, accordingly, allow this appeal, set aside the impugned judgment 2015 SCC OnLine Gau 483 of the High Court with regard to the finding on the “built-up area” and restore that of the trial court.
11. We find that the High Court has remanded the matter to the trial court for the purpose of calculation of the built-up area to be handed over to the appellant-plaintiff. We direct the trial court to make the calculation in terms of this judgment and accordingly, dispose of the suit expeditiously.
12. No costs.
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