CS(OS)/381/2014 of VERSATILE COMMOTRADE PVT LTD Vs ADHARSHILA COUNTRY HOMES PVT LTD

*IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on : 1[st]October, 2018Date of decision :26[th]October, 2018

+CS (OS) 381/2014, I.As. 7320/2015 & 13279/2018+CS (OS) 402/2014, I.As. 7318/2015 & 13278/2018

VERSATILE COMMOTRADE PVT LTD...... PlaintiffThrough:Mr. Nikhlesh Krishnan & Mr. AmanPrasad, Advocates. (M:[REDACTED]& [REDACTED])

versus

ADHARSHILA COUNTRY HOMES PVT LTD.

..... DefendantThrough:Mr. Sanjay Poddar, Senior AdvocatewithMr.JagdeepDharma,Mr.Gyanendra Kumar and Mr. SharafHabibullah, Advs. (M:88000099887)

CORAM:JUSTICE PRATHIBA M. SINGHJUDGMENT

Prathiba M. Singh, J.

1.The present judgment disposes of two suits for recovery filed by thePlaintiff.

Suit no.1 - CS (OS) 402/2014

2.The Plaintiff has filed the present suit under Order XXXVII CPCseeking recovery of sum of Rs.1,50,00,000/- along with interest @16.25%. The brief facts are that the Plaintiff entered into an agreement tosell dated 7[th]April, 2013 (“ATS-1”) with the Defendant, for the sale of 9bighas 6 biswas out of Khasra No. 31//9/2 (2-3), 12 (3-19), & 13/1 (3-4)situated in the revenue estate of Village Jhuljhuli, Tehsil-Najafgarh,NewDelhi-110043. The total sale consideration was Rs.6,20,00,000/- out ofwhich Rs.1,50,00,000/- was paid by means of cheque no.403785 dated 7[th]

April, 2013, drawn on Oriental Bank of Commerce, New Mandi,Muzaffarnagar.

3.The Defendant had executed receipt for the said amount, which waswitnessed by two witnesses.

4.The Defendant claimed to be the absolute owner/Bhumidaar of thesaid land on the basis of an agreement to sell entered into between theDefendant and one Mr. Kapoor Singh Dagar – the Bhumidaar, dated 29[th]March, 2013.

5.The Plaintiff’s case is that as per clause 5 of the agreement, theDefendant was to obtain NOC from the concerned ADM for execution ofthe sale deed, 15 days prior to the date of final payment. The date of finalpayment was to be 22[nd]June, 2013. Since the Defendant did not obtain theNOC in time, the Plaintiff is entitled to refund of the sum paid. ThePlaintiff also got issued legal notice dated 30[th]December, 2013, since theDefendant failed to obtain the NOC. The Plaintiff has placed on record thebank statement to prove that the sum of Rs.1,50,00,000/- was credited to theDefendant’s account.

6.The Defendant filed its leave to defend on the ground that the Plaintiffdid not make the payment of the balance sale consideration. It was furtherstated by the Defendant that it had entered into an agreement to sell dated29[th]March, 2013 with one Mr. Kapoor Singh Dagar. The Defendant took theplea that it had never assured the Plaintiff that the Defendant would get thesale deed executed in its favour on or before 18[th]June, 2013. Since thePlaintiff did not approach the Defendant with the payment of the remainingsale consideration, the Plaintiff failed to prove readiness and willingness.The Defendant relied upon clause 5 of the agreement and contended that the

time period for obtaining the NOC is open ended, and thus the agreement isstill alive. The Defendant has taken the plea that since the Plaintiff did notmake the remaining payment, its transaction with Mr. Kapoor Singh Dagaralso stood cancelled, and hence the transaction with the Plaintiff could notbe fructified. In view of this, the Defendant submits that the Plaintiff itselfbeing in breach, is not entitled to decree.

Suit No.2 - CS (OS) 381/2014

7.The facts of this case are similar to the facts in the abovementionedcase. The Plaintiff entered into an agreement to sell dated 11[th]April, 2013(“ATS-2”) with the Defendant for the sale of 1/2 share In 11 bigha 15 biswaout of Khasra Nos. 74/21/2 (1-2), 85/1 (4-09), 10(3-10), 88/14(2-12), 15(0-2) and ½ share in 4 bigha out of Khasra No.28/23/2(4-0) & 1/6 share in landmeasuring 4 biswas out of Khasra No.31/26 (0-4) and ½ share inlandmeasuring 13 bigha 16 biswa out of Khasra No.62/15 (4-16), 6(4-16), 15(4-04) situated in the revenue estate of Village Ujjwa, Tehsil Najafgarh, NewDelhi. The total sale consideration was Rs.3,20,00,000/- per acre, out ofwhich Rs.1,33,00,000/- was paid by the Plaintiff to the Defendant. Thereceipt dated 11[th]April, 2013 is also on record.

8.The counsel for the Plaintiff has submitted that the Defendant, havingfailed to obtain the NOC, was in breach of the agreement to sell. ThePlaintiff had therefore no obligation to pay the remaining considerationamount. The advance amount is liable to be refunded as the power offorfeiture could not have been exercised by the Defendant. It is furthersubmitted by Ld. Counsel for the Plaintiff that the Defendant was guilty ofbreach on more than one count. The NOC from the concerned ADM was tobe obtained 15 days prior to the final payment. The back-to-back agreements

entered into by the Defendant with Mr. Rambir Singh and Mr. Ranbir Singhwere themselves cancelled and hence the Defendant had no surviving rightsin the property to even obtain NOC.

9.On the other hand, it is submitted by Mr. Sanjay Poddar, Ld. SeniorCounsel appearing on behalf of the Defendant that the above two casesrelate to two agreements for three parcels of land. One parcel of landbelonged to Mr. Ranbir Singh, the second parcel of land belonged to Mr.Rambir Singh and the third belonged to Mr. Kapoor Singh Dagar. These areback-to -back agreements, and time was not of the essence of the contract. Infact, the Plaintiff did not have requisite funds to make the payment asrequired under the agreement to sell and it told the Defendant not to get theNOC. The NOC was in fact obtained and given to the Plaintiff on 13[th]September, 2013, which is Annexure to the leave to defend. After thisNOC was submitted, the Plaintiff, in fact, issued cheque dated 27[th]September 2013, of Rs.20,00,000/- in favour of Mr. Ranbir Singh. Theoriginal cheque, which has been placed on record, was returned due toinsufficient funds. He submits that due to the fault of the Plaintiff, theDefendant incurred huge loss and had to forfeit Rs.12,87,500/- paid to Mr.Ranbir Singh, Rs.40,18,750/- paid to Mr. Rambir Singh and Rs.75,00,000/-paid to Mr. Kapoor Singh Dagar. In fact, all the three agreements betweenthe Defendant and the respective parties were cancelled because the Plaintiffdid not make the payment. He further submits that the payment made by thePlaintiff constituted the earnest money deposit, which was liable to beforfeited.

10.In rejoinder submissions, Ld. counsel for the Plaintiff submits that theamount paid is not the earnest money, but is in fact advance payment which

cannot be forfeited. Mr. Ranbir Singh himself terminated the agreement withthe Defendant on 26[th]September, 2013, and any payment made by thePlaintiff to Mr. Ranbir Singh after the said date is not related to thetransaction with the Defendant. The NOC obtained on 13[th]September, 2013was only in respect to one portion of the land. For the major portion of theland, no NOC was obtained. Since, the Defendant did not adhere to theterms of the agreement, the suit is liable to be decreed.Analysis and findings

11.The agreements to sell dated 7[th]April, 2013 and 11[th]April, 2013 haveidentical clauses except in respect of the description of the property and theconsideration amount. The relevant clauses of the said two agreements tosell, which are necessary for the purpose of deciding the application forleave to defend are set out herein below:

“2. That the first party shall hand over the physicalvacant possession of the said land to the second partyat the time of registration of the Sale Deed.vacant possession of the said land to the second partyat the time of registration of the Sale Deed.

3. That the first party assure/s the second party thathe/she/theyis/aretheabsoluteowner(s)/videagreements to sell dated 25.03.13 of the said land andthat he/she/they has/have not encumbered in anymanner i.e. such as sale, gift, mortgage, court-litigation, dispute, charge, lien, notices, agreement,etc. etc.

4. That the first party further assures the second partythat he/she/they is/are exclusive owner(s)/bhumidar(s)of the said land and as such he/she/they is/are fullycompetent to enter into an agreement and if someone-else claims any right, title and interest as owner orotherwise or raises any objection for the sale then thefirst party shall be liable and responsible for the lossesif any suffered by the second party.that he/she/they is/are exclusive owner(s)/bhumidar(s)of the said land and as such he/she/they is/are fullycompetent to enter into an agreement and if someone-else claims any right, title and interest as owner orotherwise or raises any objection for the sale then thefirst party shall be liable and responsible for the lossesif any suffered by the second party.

5. That the first party shall apply and obtain the NoObjection Certificate in favour of the second party orthenominee/sathis/her/theirowncostsandresponsibility at least 15 (fifteen) days before the dateof final payment. In case the first party fails to obtaintheNOCthenthisagreementshallstandsautomatically extended till the NOC is obtained.

6. That the first party shall execute and register thesale deed and give the physical vacant possessionwithin the said stipulated period to the second party orhis/her/their nominee/s failing which the second partyshall have right to get this transaction executedthrough the court of law under specific performance ofthe contract at the cost of the first party.

7. That in case if the second party fails to pay thebalance amount within the said stipulated period, thenthe advance/earnest money paid shall be forfeited bythe first party. And this agreement to sell willautomatically come to an end.”

12.A perusal of the above clauses in the context of the agreement to sellshows that there was no doubt that these two agreements were back-to-backagreements. The clauses which show that the agreements were back to backagreements are set out herein below:

Agreement to Sell dated 7[th]April, 2013

“Whereas the first party is/are the absolute owner/sand bhumidar/s of 9 Bighas 6 Biswas out of KhasrnaNo.31/19/2 (2-3), 12(3-19) & 13/1 (3-4) throughagreement to sell dated 29-03-13, situated in therevenue estate of Village Jhuljhuli, Tehsil Najafgarh,New Delhi.

Agreement to Sell dated 11[th]April, 2013

Whereas the first party is/are the owner/s videagreements to sell with bhumidars dated 25.3.2013of1/2 share In 11 Bigha 15 Biswa out of K No’s 74/21/2(1-2), 85/1 (4-09), 10(3-10), 88/14(2-12), 15(0-2) and½ share in 4 Bigha out of K.No.28/23/2(4-0) & 1/6share in 4 Biswas out of K No.31/26 (0-4) and ½ sharein 13 Bigha 16 Biswa out of Khasra No.62/15 (4-16),6(4-16), 15(4-04). Total land, situated in the revenueestate of Village Ujjwa, Tehsil Najafgarh, New Delhi”

13.While in CS(OS) 402/2014, the back to back agreement was with Mr.Kapoor Singh Dagar, dated 29[th]March, 2013, in CS(OS) 381/2014, theback-to-back-agreements were with Mr. Rambir Singh and Mr. RanbirSingh, both dated 25[th]March, 2013.

14.The Court is however not dealing with disputes under the said twoagreements. What is relevant to decide the present dispute are the twoagreements to sell dated 7[th]April, 2013 and 11[th]April, 2013. Theconsideration stipulated in the said agreements is not in dispute. Theamounts paid by the Plaintiff i.e. to the tune of Rs.1,33,00,000/- andRs1,50,00,000/- at the time of execution of the agreements to sell, are alsonot in dispute. The only question is whether the Defendant can forfeit thesaid amounts.

15.A perusal of the clauses in the agreements to sell shows that nophysical possession was handed over at the time of execution of theagreements. Execution of the sale deeds had been contemplated. TheDefendant was required, under clause 5, to obtain NOC from theconcerned ADM, 15 days prior to the date of final payment. The date offinal payment in ATS-1 is 22[nd]June, 2013 and in ATS-2 is 90 days from11[th]April, 2013 i.e., 11[th]July, 2013.

16.The NOC was to be obtained 15 days prior to the final payment,which admittedly was not obtained. The Defendant argues that for portionof the land, he obtained NOC from the concerned ADM on 13[th]September, 2013. Such NOC for only part of the land would still not cometo the Defendant’s aid.

17.The Defendant argues that clause 5 is open ended, and the NOC couldhave been obtained at any point of time. This is self-defeating argument ofthe Defendant. On the one hand, the Defendant has pleaded that the Plaintifffailed to make payment within the prescribed period. Thus, the Defendant,while arguing that time was of the essence of the contract for making ofpayment, in the same breath, argues that time was not the essence of thecontract for obtaining the NOC. The NOC was pre-condition for making ofthe payment. No payment could have been made till the NOC was obtained.No sale deed could have been executed without first, the NOC and secondlythe payment. The NOC and payment were interlinked and the NOCpreceded the payment.

18.The plea of the Defendant that the Plaintiff told the Defendant not toobtain the NOC is not borne out from the record. In fact, the Plaintiff hasclaimed that after realizing that the Defendant may not be able to get the saledeed executed, it entered into an independent transaction with the owners.

19.The fact that the agreement, which the Defendant had with Mr. Ranbirwas itself terminated as per Annexure to the leave to defend applicationgoes to show that after 26[th]September, 2013, the Defendant could not have,in any event, obtained NOC. Thus, for the Defendant to obtain the NOC,was an impossibility.

20.The Defendant’s reliance on cheque of Rs.20 lakhs in favour of Mr.Ranbir Singh, does not improve its case in any manner as there appears to besome relationship between the Defendant and Mr. Ranbir Singh, and musthave come in possession of the said cheque. The Defendant has attempted toweave story around the said cheque, which is not borne out from therecord. This fact is extraneous to the case between the Plaintiff and theDefendant. Thus, the Plaintiff had rightly issued the notice seeking refund ofthe amount.

21.In leave to defend application, the Court has to only see whether theDefendant has triable defence. The argument of the Defendant, that timewas not the essence of the contract for obtaining NOC is liable to be rejectedon two counts:

The Defendant itself pleaded that the Plaintiff failed to make paymentof the balance consideration with the stipulated time, hence forpayment being made, time was the essence of the contract;The Defendant itself pleaded that the Plaintiff failed to make paymentof the balance consideration with the stipulated time, hence forpayment being made, time was the essence of the contract;

Even if there is an open-ended clause, as per Section 46 of the IndianContract Act, 1872, in case no specific time period is prescribed forthe performance of an obligation, the obligation must be performedwithin reasonable time.Even if there is an open-ended clause, as per Section 46 of the IndianContract Act, 1872, in case no specific time period is prescribed forthe performance of an obligation, the obligation must be performedwithin reasonable time.

22.In the present case, reasonable time would include that amount oftime during which the Defendant could have obtained NOC. Aftertermination of the contract by Mr. Ranbir Singh on 26[th]September, 2013,the Defendant could not have even obtained the NOC since the very basis ofthe agreement to sell had collapsed.

23.Thus, clause 5 cannot be interpreted in the manner in which theDefendant seeks to interpret the same.

24.The agreement does not permit forfeiture in any situation except if thePlaintiff fails to pay the balance amount. Clause 7 is clear to this effect. Theclear position on record is that prior to the final date for making payment i.e.22[nd]June, 2013 in case of ATS-1 and 11[th]July, 2013 in case of ATS-2, itdid not obtain the NOC. The NOC had to be obtained 15 days prior to thefinal date of payment.

25.Thus, no occasion arose for the Plaintiff to pay the balance saleconsideration. Thus, the Plaintiff is not in breach, and the advance/earnestmoney cannot be forfeited by the Defendant.

26.The Defendant has raised further issue as to the nature of theamount received by it. The agreement to sell itself describes the amount asadvance/earnest money.

27.The Defendant’s counsel has submitted that it has already filed suitagainst the Plaintiff in respect of Rs.40 lakhs, which it had to forego in viewof the transaction with Mr. Rambir Singh. The said suit is pending before theDistrict Courts in Dwarka, Delhi and the Defendant can pursue the sameagainst the Plaintiff.

28.No other claims have been raised in respect of any losses suffered bythe Defendant. The losses, if any, are not the subject matter of the presentsuit as the Defendant has not raised any claims in this regard. Theadvance/earnest money having been admittedly received by the Defendant,the NOC having not been obtained as per the stipulation in the agreement tosell, the obligation to pay the balance sale consideration did not arise. Thus,there is no triable defence raised by the Defendant. The law on this subject is

well settled in IDBI Trusteeship Services Ltd. v Hubtown Ltd. Civil AppealNo. 10860/2016, Decided on November 15[th], 2016. The Supreme Court heldas under:

“18. Accordingly, the principles stated in paragraph8 of Mechelec’s case will now stand superseded, giventhe amendment of O.XXXVII R.3, and the bindingdecision of four judges in Milkhiram’s case, asfollows:

a. If the defendant satisfies the Court that he has asubstantial defence, that is, defence that is likely tosucceed, the plaintiff is not entitled to leave to signjudgment,andthedefendantisentitledtounconditional leave to defend the suit;b. if the defendant raises triable issues indicating thathe has fair or reasonable defence, although not apositively good defence, the plaintiff is not entitled tosign judgment, and the defendant is ordinarily entitledto unconditional leave to defend;

c. even if the defendant raises triable issues, if doubtis left with the trial judge about the defendant’s goodfaith, or the genuineness of the triable issues, the trialjudge may impose conditions both as to time or modeof trial, as well as payment into court or furnishingsecurity. Care must be taken to see that the object ofthe provisions to assist expeditious disposal ofcommercial causes is not defeated. Care must also betaken to see that such triable issues are not shut outby unduly severe orders as to deposit or security;

d. if the Defendant raises defence which is plausiblebutimprobable,thetrialJudgemayimposeconditions as to time or mode of trial, as well aspayment into court, or furnishing security. As such adefence does not raise triable issues, conditions as todeposit or security or both can extend to the entireprincipal sum together with such interest as the courtfeels the justice of the case requires.

e. if the Defendant has no substantial defence and/orraises no genuine triable issues, and the court findssuch defence to be frivolous or vexatious, then leaveto defend the suit shall be refused, and the plaintiff isentitled to judgment forthwith;

f. if any part of the amount claimed by the plaintiff isadmitted by the defendant to be due from him, leave todefend the suit, (even if triable issues or substantialdefence is raised), shall not be granted unless theamount so admitted to be due is deposited by thedefendant in court.”

29.If the Defendant has no triable defence, the leave to defend is notliable to be granted.

30.The Plaintiff has relied upon Subhash Chand v. M/s VersatileCommotrade Pvt. Ltd., RFA (OS) (COMM) 12/2017, Decided on 18[th]August, 2017, which is suit involving similar agreement to sell enteredinto by the Plaintiff with third party. In the said suit, Division Bench ofthis court upheld the decree granted by the Ld. Single Judge and held that,the Plaintiff was entitled to seek refund of money.

31.The Defendant has relied upon judgment of this Court in M/sVersatile Commotrade Pvt. Ltd. v M/s Angad Developers Pvt. Ltd CS (OS)802/2014, Decided on 20[th]July, 2018 .In the said case, there were twoamounts of which recovery was sought. One amount was the earnest moneyand the second amount was part of the balance sale consideration. In respectof the second amount, the suit was decreed. In respect of the first amount,the matter was sent to trial, as there was forfeiture clause, which was reliedupon by the Defendant and the matter required evidence to be led to justifythe forfeiture and to establish as to who was in breach. This judgement is ofno application in the present case as the amount has been paid at one go and

has been described as Earnest money/advance payment. In the saidjudgment, the amounts were paid in two different tranches and weredifferently described and in the present case, the aspect as to who is inbreach does not require oral evidence as the facts are not in dispute.

32.The leave to defend applications are accordingly liable to bedismissed and the suits are liable to be decreed. CS (OS) 381/2014 isdecreed for sum of Rs.1,33,00,000/- along with simple interest @ 10% perannum from the date of issuance of notice dated 13[th]December, 2013, tillthe date of decree.

33.CS (OS) 402/2014 is decreed for sum of Rs.1,50,00,000/-alongwith simple interest @ 10% per annum from the date of issuance of noticedated 30[th]December 2013, till date of decree.

34.Decree sheet be drawn. All pending I.As are disposed of.

OCTOBER 26, 2018Rahul

PRATHIBA M. SINGHJUDGE