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2007 INSC 214
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  • Section 96 of the Code of Civil Procedure, 1908
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Citation Codes
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2007 INSC 214
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Disposition
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  • Section 96 of the Code of Civil Procedure, 1908
Smart Summary

Factual and Procedural Background

The plaintiff filed Civil Suit No. 129 of 1980 before the Additional District Judge, Delhi, seeking specific performance of an agreement dated 24 March 1978 for the sale of Plot No. 334 (524 sq yds) situated in New Friends Cooperative House Building Society, Delhi. Defendant 1, the original sub-lessee, allegedly agreed to sell the plot for ₹85,000 and received ₹8,500 as part-payment, promising to execute all ancillary documents once Delhi Development Authority (DDA) approved the building plan.

When Defendant 1 later purported to cancel the agreement and gifted the plot to his son (Defendant 2) after obtaining DDA permission, the plaintiff declined to accept the refund cheque and instituted the suit. The trial court decreed specific performance, directing the defendants to obtain requisite permissions and execute the sale deed. The defendants’ first appeal under Section 96 CPC was dismissed by the Delhi High Court. The present appeal before the Supreme Court challenges that dismissal.

Legal Issues Presented

  1. Whether the agreement dated 24 March 1978 constituted a valid and enforceable contract for sale, despite transfer restrictions contained in the head-lease and sub-lease.
  2. Whether absence or refusal of DDA permission is a legal bar to decreeing specific performance of the contract.
  3. Whether the plaintiff had been ready and willing to perform his contractual obligations under Section 16(c) of the Specific Relief Act, 1963.
  4. Whether the subsequent gift of the plot to Defendant 2 defeated the plaintiff’s right to specific performance.

Arguments of the Parties

Appellants’ Arguments

  • No valid contract of sale ever existed; Defendant 1 only contemplated a construction contract.
  • Clauses 6(a) and 6(b) of the lease imposed an absolute prohibition on transfer without prior DDA approval, rendering any agreement to sell void.
  • Even if an agreement existed, it was unenforceable because DDA permission had not been obtained.
  • The plaintiff was merely a building contractor, not a bona fide purchaser.

Respondent’s Arguments

  • Lack of prior DDA permission is not an absolute bar; the court can direct the vendor to apply for permission after decreeing specific performance.
  • The plaintiff has always been ready and willing to pay the balance consideration.
  • Rising property prices motivated Defendant 1 to resile from the contract; such commercial considerations cannot defeat specific performance.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Motilal v. Nanhelal (1929-30) 57 IA 333; AIR 1930 PC 287 Court may decree specific performance and direct vendor to seek governmental sanction; implied covenant to do all acts necessary for transfer. Used to justify directing defendants to apply for DDA permission despite initial prohibition.
Chandnee Widya Vati Madden v. Dr. C.L. Katial, AIR 1964 SC 978 Refusal of sanction affects executability, not the grant, of a decree for specific performance. Reinforced that absence of sanction is not a bar to passing the decree.
R.C. Chandiok v. Chuni Lal Sabharwal (1970) 3 SCC 140; AIR 1971 SC 1238 Proper form of decree—direct specific performance and require subsequent transferee to join conveyance. Supported decree obliging Defendant 2 (donee) to join in the conveyance.
Bhim Singhji v. Union of India (1981) 1 SCC 166; AIR 1981 SC 234 Transfer restrictions do not per se bar equitable relief. Cited for the broader proposition that statutory embargoes do not extinguish contractual rights.
Durga Prasad v. Deep Chand, AIR 1954 SC 75 Subsequent transferee with notice must join conveyance. Applied to hold that Defendant 2 cannot claim bona fide purchaser status.
Motilal Jain v. Ramdasi Devi (2000) 6 SCC 420 Sanction may be obtained post-decree; courts can mould relief accordingly. Added contemporary affirmation to earlier Privy Council principle.
Nirmala Anand v. Advent Corpn. (P) Ltd. (2002) 5 SCC 481 Same principle as above. Relied upon to uphold grant of decree.
HPA International v. Bhagwandas Fateh Chand Daswani (2004) 6 SCC 537 Courts’ discretion in decreeing specific performance when statutory permissions are involved. Cited to justify moulding of relief.
Aniglase Yohannan v. Ramlatha (2005) 7 SCC 534 Reaffirmation of ability to decree specific performance subject to subsequent permission. Provided the most recent judicial endorsement of the approach adopted.

Court’s Reasoning and Analysis

The Supreme Court affirmed concurrent findings of the trial court and High Court that:

  • A concluded contract of sale was proved by documentary evidence and conduct of Defendant 1, including correspondence with property dealers about sale terms and unearned increase.
  • The plaintiff consistently manifested readiness and willingness to perform his obligations, satisfying Section 16(c) of the Specific Relief Act.
  • Transfer restrictions in the lease did not render the contract void; jurisprudence permits decreeing specific performance while directing the vendor to obtain requisite permission later.
  • The subsequent gift to Defendant 2, who had full notice being Defendant 1’s son, cannot defeat the plaintiff’s contractual rights; the proper decree must compel the donee to join the conveyance.
  • Arguments of hardship and the contention that the plaintiff was merely a contractor were neither pleaded nor proved and, therefore, could not be entertained.

The Court relied extensively on Motilal v. Nanhelal and its progeny to hold that absence of DDA sanction is not a condition precedent to granting specific performance; rather, the decree itself can require the vendor to seek such sanction.

Holding and Implications

APPEAL DISMISSED. The Supreme Court upheld the decree for specific performance, maintaining directions that the defendants must apply for DDA permission, and that failing their compliance, the plaintiff may apply and, upon permission, require execution of the sale deed. As a gesture, the Court ordered the respondent–plaintiff to pay an additional ₹5 lakhs to the appellants within four months.

Implications: The decision reinforces the principle that contractual obligations to transfer property subject to governmental approval remain specifically enforceable; lack of prior sanction affects only the mode of execution, not the decree itself. No new legal precedent was set, but existing jurisprudence was reaffirmed and applied.

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    Vishwa Nath Sharma v. Shyam Shanker Goela And Another

    Dr. Arijit Pasayat, J.— Challenge in this appeal is to the judgment rendered by a Division Bench of the Delhi High Court dismissing the first appeal filed by the appellants who were the defendants in the suit filed by the respondents. The regular first appeal under Section 96 of the Code of Civil Procedure, 1908 (in short “the Code”) was directed against the judgment and decree passed by the Additional District Judge, Delhi, in Civil Suit No. 129 of 1980. The trial court had decreed the suit of the plaintiff for specific performance of the agreement to sell directing the appellant-defendant to execute necessary sale deed within a particular period. The defendants were asked to take necessary steps for completing necessary formalities towards execution of the sale deed.

    2. Background facts in a nutshell are as follows:

    On 12-12-1979 the plaintiff filed the suit claiming decree for specific performance of agreement to sell dated 24th March, inter alia, alleging that Delhi Development Authority had granted a lease of a big plot of land in favour of New Friends Cooperative House Building Society and the Society had granted sub-lease in favour of its members. Durga Nath Sharma, Defendant 1 being one of the members of the Society was granted a sub-lease with respect to Plot No. 334 measuring 524 sq yd under sub-lease dated 2-7-1974. The said defendant with a view to sell the said plot entered into an agreement with the plaintiff on 24-3-1978 at a fixed price of Rs 85,000. A sum of Rs 8500 was received by him towards part-payment of the price, the balance was payable within 15 days after receipt of approval of building plan by Delhi Development Authority. The said defendant also agreed to execute necessary documents in favour of the plaintiff such as (a) construction agreement; (b) general and special power of attorney; (c) will; (d) agreement to sell; and (e) any other necessary document. These documents were to be executed by Defendant 1 in order to avoid possibility of complication in transfer of the plot to the plaintiff, although the intention of Defendant 1 was to sell the plot to the plaintiff for which the necessary deal was struck. The plaintiff further alleged that he got a building plan prepared from an architect to suit his requirements, which was sent along with draft of the other documents with a covering letter dated 17-5-1978 to Defendant 1. More documents were sent with another letter of the same date for signatures of Defendant 1. Both the letters were sent under registered cover and were duly received by Defendant 1 but no reply was received. On 17-8-1978 another letter under registered cover was sent to Defendant 1, which though received was not replied to by the said defendant. The plaintiff further alleged that Defendant 1 appears to have changed his mind later on and in an attempt to wriggle out of the deal had fraudulently transferred the plot by way of gift in favour of his son Appellant 2-Defendant 2 which the plaintiff alleged was not binding on him and for that reason Appellant 2 was impleaded in the suit. It is further alleged that on 29-8-1978 Defendant 1 wrote a letter to the plaintiff cancelling the agreement to sell and returned the amount of Rs 8510 by cheque which included bank collection charges. Since Defendant 1 could not have unilaterally cancelled the agreement which still subsisted, the plaintiff declined to accept the cheque and did not encash it. The plaintiff had always been ready and willing to perform his part of the contract and is still ready and willing to purchase the plot on payment of the balance price but Defendant 1 had unilaterally backed out. Therefore, the plaintiff was left with no option except to send a notice on 17-8-1978 calling upon the defendants to execute necessary sale deed. No steps were taken by the defendants and, therefore, the suit was filed.

    3. The defendants contested the suit by filing a joint written statement alleging that the suit was false and frivolous based upon incorrect allegations. Defendant 1 never agreed to sell his plot to the plaintiff. The plot was not saleable and even if there was an agreement to sell, the same was void since there was no contract to sell the said plot, transfer of which was prohibited under Clause II sub-clauses (6)(a) and (6)(b) of the lease deed executed between President of India and the New Friends Cooperative House Building Society and of the sub-lease executed between the Society and Defendant 1. Defendant 1 gave his own explanation about the receipt of the amount and of the nature of transaction with the plaintiff stating that at one point of time Defendant 1 was interested in sale of the plot, if he could get a reasonable price and in case there was no legal implication, for which purpose he contacted Pandit Brothers Estate Agency, Lajpat Nagar, a broker. When on his visit from Jamshedpur to Delhi, he consulted the Society officials and was informed that he could not sell, transfer or mortgage the plot, at that time, Defendant 1 thought of constructing a house on the plot. Since he was residing at Jamshedpur the said broker informed him that he could get the services of a building contractor, who could construct the building. The plaintiff agreed to construct a house on the plot according to the plan sanctioned by the authorities in favour of Defendant 1. The plaintiff asked Defendant 1 to execute an agreement for building construction. The plaintiff also deposited with Defendant 1 a sum of Rs 8500 as part-security for carrying out the construction, as per the desire of Defendant 1 within the stipulated time. The plaintiff promised to send draft of the agreement. Some rough drafts were sent by the plaintiff in May 1978, which were not acceptable to Defendant 1. Therefore, he wrote back to the plaintiff that he was not prepared to accept the same. Defendant 1 further alleged that he came to Delhi with a draft of Rs 8500. The plaintiff refused to accept the same. It was specifically pleaded that Defendant 1 never agreed to sell or transfer or convey the plot. There was a complete prohibition in the sub-lease to transfer the plot to anybody who was not a member of the Society. Therefore, the suit was liable to be dismissed. Defendant 1 denied the allegations of the plaintiff that there was an agreement to sell or that he ever agreed to sell the plot. He stated that bona fide and in good faith he made an application to Delhi Development Authority for permission to gift the plot to his son, Defendant 2 and accordingly, after obtaining necessary permission gift deed dated 18-7-1978 was executed, which was accepted by the donee and possession of the plot had also been handed over to Defendant 2.

    4. The plaintiff filed replication denying the defendants' version. Learned trial court framed the following issues:

    1. Whether Defendant 1 on 24-3-1978 agreed to sell the plot in dispute to the plaintiff at Rs 85,000?
    2. If Issue 1 is proved, whether this agreement of sale is void being not permissible by law? OPD
    3. If Issue 2 is not proved, in favour of the defendant whether the plaintiff was ready and willing to perform his part of the contract?
    4. Whether Rs 8500 was received by Defendant 1 as security for carrying out the construction on the plot in dispute by the plaintiff on behalf of Defendant 1 as alleged in Para 4 of the written statement? OPD
    5. Whether Defendant 2 is not bound by any agreement to sell in between the plaintiff and Defendant 1 if Issue 1 is proved? OPD-2
    6. Relief.

    5. Considering the evidence led, the trial court held that the plaintiff must succeed. In appeal, the High Court after considering the rival submissions came to hold that there were several documents which tended to suggest that Defendant 1 was aware of the fact that there was an embargo in the lease deed that transfer could not take place without permission. It appears that he was also aware of the fact that permission, if accorded, by the Delhi Development Authority for affecting transfer, would be subject to payment of unearned increase and for that reason alone, in one of the letters Defendant 1 had specifically informed the property dealer that while making offers that aspect was to be kept in view i.e 50% of the unearned increase should be paid by the transferee. The High Court made reference to the lease deed dated 2-7-1974 (Exhibit P-4), letter dated 27-9-1977 addressed by Defendant 1 to the property dealer indicating his intention to sell if the value would be reasonable and there was no implication in future; Exhibit P-5 i.e letter dated 16-10-1977 by which Defendant 1 asked the property dealer that buyer shall have to pay 50% of the difference between original cost and the market value; Exhibit P-6 i.e the letter dated 10-1-1978 exchanged by Defendant 1 and the property dealer to show that the amount which the prospective buyer was willing to pay was less according to Defendant 1; Exhibit P-7 i.e letter dated 1-2-1978 by Defendant 1 with reference to previous letter asking for more amount from the prospective purchaser. Similar was the situation in several other letters addressed by Defendant 1 to the property dealer. The High Court was of the view that instead of performing his part of the agreement, Defendant 1 being conscious of the fact that property prices were rising resiled from his commitment and transferred by way of gift in favour of his son after obtaining the permission for transfer. The High Court also noticed that the plaintiff was ready and willing to perform his part of the contract.

    6. The High Court did not accept the contention that since there was some restriction on transfer, that disentitled the plaintiff from obtaining a decree for specific performance of the contract.

    7. The appeal was dismissed observing, inter alia, as follows:

    “Consequently, we find no force in the appeal which is hereby dismissed with costs. We make it clear that the learned trial court rightly directed the defendant-appellants to apply for necessary permissions within the period specified therein. In case permissions are not applied for, it will be permissible for the plaintiff to make such an application and in case requisite permission is accorded, on receipt thereof, the plaintiff will call upon the defendant-appellants to execute requisite sale deed in accordance with law and on failure to do so execution and resignation of the sale deed will be as per law.”

    8. Learned counsel for the appellant submitted that the trial court and the High Court failed to appreciate that there was an impediment on the transfer. There could not have been a valid agreement. In the background noticed by the trial court and the High Court if the transfer was prohibited by DDA, agreement could not have been enforced by a decree in a suit for specific performance.

    9. Learned counsel for the respondent on the other hand submitted that the lack of permission, if any, cannot act as absolute bar on a decree being passed. The decree may not be executable. As noticed by the High Court it was submitted that the price rise is not a ground to deny specific performance.

    10. In this case the trial court as well as the High Court have categorically found that the plaintiff was ready and willing to perform his part of the arrangement. In fact, if DDA refused to grant permission a suit for damages can be filed.

    11. The plea of hardship which is presently being raised was never raised before the courts below and was not also pleaded. Conditions 6-A and 6-B to the reference made by learned counsel for the appellant do not create an absolute bar. The plea that the plaintiff was merely a contractor was also not accepted and it was found that the finding of fact is that the plaintiff was not a contractor as claimed by the appellant.

    12. The Privy Council in Motilal v. Nanhelal (1929-30) 57 IA 333, AIR 1930 PC 287 laid down that if the vendor had agreed to sell the property which can be transferred only with the sanction of some government authority, the court has jurisdiction to order the vendor to apply to the authority within a specified period, and if the sanction is forthcoming, to convey to the purchaser within a certain time. This proposition of law was followed in Chandnee Widya Vati Madden v. Dr. C.L Katial AIR 1964 SC 978 and R.C Chandiok v. Chuni Lal Sabharwal (1970) 3 SCC 140, AIR 1971 SC 1238. The Privy Council in Motilal case (1929-30) 57 IA 333, AIR 1930 PC 287 also laid down that there is always an implied covenant on the part of the vendor to do all things necessary to effect transfer of the property regarding which he has agreed to sell the same to the vendee. Permission from the Land and Development Officer is not a condition precedent for grant of decree for specific performance. The High Court relied upon the decisions in Chandnee Widya Vati Madden v. Dr. C.L Katial AIR 1964 SC 978 and Bhim Singhji v. Union of India (1981) 1 SCC 166, AIR 1981 SC 234 to substantiate the conclusion. In Chandnee Widya AIR 1964 SC 978 this Court confirmed the decision of the Punjab and Haryana High Court holding that if the Chief Commissioner ultimately refused to grant the sanction to the sale, the plaintiff may not be able to enforce the decree for specific performance of the contract but that was not a bar to the court passing a decree for that relief. The same is the position in the recent case. If after the grant of the decree of specific performance of the contract, the Land and Development Officer refused to grant permission for sale, the decree-holder may not be in a position to enforce the decree but it cannot be held that such a permission is a condition precedent for passing a decree for specific performance of the contract.

    13. In R.C Chandiok v. Chuni Lal Sabharwal (1970) 3 SCC 140, AIR 1971 SC 1238 it was held that proper form of decree in a case like the instant one would be to direct specific performance of the contract between the defendant and the plaintiff and to direct the subsequent transferee to join in the conveyance so as to pass on the title residing in him. This is because Defendant 2, son of Defendant 1 cannot take the stand that he was a transferee without notice. Admittedly, he is the son of Defendant 1. The view in R.C Chandiok (1970) 3 SCC 140, AIR 1971 SC 1238 was a reiteration of earlier view in Durga Prasad v. Deep Chand AIR 1954 SC 75. This Court has repeatedly held that the decree can be passed and the sanction can be obtained for transfer of immovable property and the decree in such a case would be in the way the High Court has directed. [See Motilal Jain v. Ramdasi Devi (2000) 6 SCC 420, Nirmala Anand v. Advent Corpn. (P) Ltd. (2002) 5 SCC 481, HPA International v. Bhagwandas Fateh Chand Daswani (2004) 6 SCC 537 and Aniglase Yohannan v. Ramlatha (2005) 7 SCC 534.]

    14. Above being the position we find no merit in this appeal. However, considering the long passage of time it was suggested to Respondent 1 that he could pay an additional sum to the appellant. Learned counsel for the respondent left the quantum to be decided by this Court. To a similar effect was the suggestion of learned counsel for the appellant. Considering the background facts, we direct that as a matter of good gesture, let the respondent pay a sum of rupees five lakhs to the appellant within a period of four months from today.

    15. The appeal is dismissed subject to the aforesaid observations.

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    Vishwa Nath Sharma v. Shyam Shanker Goela And Another
    (Feb 26, 2007)