IA No. 11048/2006
1. This application has been filed by M/s Aliens Buildcom Pvt. Ltd. through its director Shri Neeraj Aggarwal under Order 1 Rule 10 of the Code of Civil Procedure, 1973 seeking impleadment as a defendant to the present suit. The application has been filed in the suit which has been filed by the plaintiff seeking specific performance of an agreement dated 9th March, 2004 against the defendant.
2. By this application, the applicant has submitted that on 14th December, 2004, it had booked one commercial unit bearing No. 104 at Fun City Multiplex at Prashant Vihar, Sector 14, Outer Ring Road, Rohini, Delhi with the defendant. This unit comprised a super area of 5500 sq. ft. and covered area of 2880 sq. ft. and also an open area/balcony/terrace of 1500 sq.ft. The application form dated 14th December, 2004 was followed up by execution of an agreement dated 13th January, 2005 whereby for a total sale consideration of Rs. 1,25,00,000/-, the afore-noticed commercial unit has been agreed to be sold to the applicant. The applicant submits that it has paid the entire agreed consideration with allied charges of Rs. 10,00,000/- by 30th June, 2005. Receipts of the payments purportedly made by the applicant-company to the defendant have been placed before this Court. In this view of the matter, it has been contended that it is this very commercial unit No. 104 which is the property in respect whereof the plaintiff has claimed an agreement in his favour and filed the present suit. The applicant contends that in these circumstances, for a just and proper adjudication of the controversy in the present suit, it is necessary that it be impleaded as a party defendant.
3. This application has been opposed by the plaintiff primarily on the plea that the commercial unit No. 104 in respect of which the applicant is asserting rights, is not part of the suit property inasmuch as the plaintiff had acquired rights in the food court in the multiplex/mall of the defendant vide agreements dated 31st December, 2003 and 9th March, 2004. In any case, it has been contended that any rights which were acquired by the applicant in respect of the property, assuming that the same was the suit property, would have to abide by the agreement between the plaintiff and the defendant which were prior to the agreement relied upon by the applicant. The plaintiff has also challenged the legality, validity and bindingness of the application dated 14th December, 2004 and the agreement dated 13th January, 2005 purportedly executed by the applicant and the defendant. It has been submitted that the defendant has not absolutely transferred any rights to the applicant even under the agreement dated 13th January, 2005 which was merely in the nature of an agreement to purchase and consequently the applicant had not acquired ownership over the suit property under the agreement dated 13th January, 2005. On these submissions, it has been urged that the applicant is neither a necessary nor a proper party for the purposes of adjudication of the present case.
4. No reply has been filed to this application. However, the defendant has supported the contention of the applicant that all rights of the plaintiff so far as a commercial unit bearing No. 104 on the first floor with a super area of approximately 5500 sq. ft. and a covered area of approximately 2000 sq. ft. and there is open area/balcony, open/refuge area of 1500 sq.ft. stands assigned in favour of the applicant.
5. So far as adjudication in the present application is concerned, it becomes necessary to examine the necessary provisions which stipulate as to who would be a proper party in a suit for specific performance. Section 15 of the Specific Relief Act, 1963 clearly stipulates that only the two persons who have entered into the alleged contract/agreement, specific performance whereof is sought, are necessary and proper parties in a suit for specific performance. By virtue of Section 15 of the Specific Relief Act, 1963, specific performance of a contract can be obtained by any party thereto or by the representative in interest or the principal, of any party thereto or by the persons who have been set out in Section 15 of the statute.
6. So far as the specific performance of the contract is concerned, Section 19 of the Act provides that specific performance can be enforced against any party thereto or any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract.
7. In the instant case, the applicant has claimed under an alleged agreement dated 13th January, 2005 whereby the defendant had agreed to allot the said commercial unit No. 104. The agreement which has been placed before this Court has clearly used the expression "agreement" and "allotment letter". Under this agreement, the defendant as promoter had agreed to transfer the title to him. In clause 4 of the agreement, it is clearly mentioned that the "sale is provisional". In Clause 7, the buyer, i.e. the applicant, has agreed to purchase the said commercial unit as per the schedule mentioned in application form and detailed in annexure 'A' to the agreement. Clause 7 (e) of this agreement records thus:
The cost of the stamp duty and registration charges of the Lease Deed of the Plot executed by the D.D.A. in favour of the Promoter shall be payable by the buyer separately in proportion to the super area of the unit to the entire super built up area, and the same will be calculated on the basis of actual cost paid plus interest @ 18% p.a. accrued up to the date of demand plus administrative charges.
All costs, charges and expenses in connection with the transfer of the Commercial unit including the cost of preparation, embrossing, stamping and registration of the Sale Deed, Deed of Assignment or Conveyance Deed to be executed under these presents in favour of the buyer including the cost payable to the Attorneys of the Promoter shall be paid by the Purchaser.
8. It is an admitted position that there is no registered document of transfer of title in favour of the applicant as well so far as even this commercial unit No. 104 is concerned.
9. On the other hand, even the defendant has contended that the property which stands sold to M/s Aliens Buildcom Private Limited, is a property which according to it was being considered for sale with the plaintiff. The defendant has also admitted receipt of an amount of Rs. 1,25,00,000/- with the allied charges from M/s Aliens Buildcom Private Limited. In this view of the matter, this Court would be required to adjudicate upon the rival contentions and claims of the plaintiff as against the claim being set up by M/s Aliens Buildcom Private Limited in the present proceedings.
10. My attention has been drawn to the judgment passed by this Court in CS (OS) No. 1233/2006 on the issues relevant to a claim for specific performance and necessary parties to such a suit wherein reliance was placed on the principles laid down by the Apex Court in : AIR 2005 SC 2813 Kasturi v. Iyyamperumal and Ors. (Paras 16, 17 & 18).
11. On this issue, the observation in : AIR 1975 Raj 69 Deenanath v. Chunnilal are topical and read thus:
6. I have heard learned Counsel for the parties and in my opinion the enquiry by the trial court on the question whether the suit land was ancestral in the hands of the defendant or whether the defendant was entitled to sell the suit land was wholly irrelevant in the present case. The plaintiff in his plaint has nowhere asserted that Ex A/1 though executed by the defendant was also binding on his adult sons and his wife. In the absence of such assertion in the plaint. It was not open tot he trial court to go into the question that the defendant had defective title as the suit land was ancestral and the defendant was owner of one-fourth share only. In my opinion, the vendor cannot be permitted to set up a defence in a suit for specific performance brought by the purchaser that he had no title or had defective title to the property which he had agreed to sell. In support of my view I place reliance on Mir Abdul Hakeem Khan v. Abdul Mannan Khadri : AIR 1972 Andh Pra 178; Baluswami Aiyar v. Lakshmana Aiyar : AIR 1921 Mad 172 (FB) and Muni Samappa v. Gurunanjappa : AIR 1950 Mad 90. It was observed by the Full Bench of the Madras High Court in BaluswamiAiyar's case (supra):
xxx and the fact that the title which the purchaser may acquire might be defeasible by a third party is no ground for refusing specific performance if the purchaser is willing to take such title as the vendor has. But where a party seeking specific performance seeks to bind the interests of persons not parties to the contract alleging grounds which under Hindu Law would bind their interests and enable the vendor to give a good title as against them and make them parties, it is difficult to see how the question as to the right of contracting parties to convey any interest except his own can be avoided and a decree passed the effect of which will merely be to create a multiplicity of suits.
12. The impact of a cloud over title of the vendor has fallen for consideration before courts repeatedly and a catena of judicial pronouncements have authoritatively dealt with the issue. In : AIR (36) 1949 Nagpur 83 Pundlik Daryaji v. Jainarayan Maliram Shop, Shegaon and Ors., it was held thus:
4. xxxx, the doctrine of mutuality can have no application when the Specific Relief Act, as it does in this case, lays down the rights and disabilities in respect of doubts as to title both in respect of the vendor and of the vendee. Those relating to the vendor are to be found in Section 25 and those relating to the vendee in Section 18. The two sections are complementary to each other and the rights of a vendee who brings a suit are not to be deducted by an attempted application of the doctrine of mutuality to the conditions laid down in Section 25 but are to be determined by the conditions in Section 16 which defines the rights of the purchaser.
5. In my opinion, the words "imperfect title" in Section 18 include the absence of a title and certainly include the very contingent interest, far greater than a spes successionis, which exists when a person who has bid at an auction sale has deposited the money and has done everything that is necessary for him to do and has only to wait for the confirmation of the sale when possession, except for unforeseen circumstances, would come to him. It also seems to me that Section 25 itself deals with imperfect titles and puts them into two categories, namely, one when the vendor knows that he has no title at all, and secondly where although he has not got a good title he believes he has, and is usable to perfect his title at the time fixed by the parties for the completion of the sale.
13. It would be instructive also to advert to the following observations made by the Madras High Court in the judgment reported at : AIR 1921 Mad 172 Baluswami Aiyar v. Lakshmamam Iyer:
Where a person sues for specific performance of an agreement to convey and simply impleads the party bound to carry out the agreement there is no necessity to determine the question of vendor's title, and the fact that the title which the purchaser may acquire might be defensible by a third party is no ground for refusing specific performance if the purchaser is willing to take such title as the vendor has. But where a party seeking specific performance seeks to bind the interest of persons not parties to the contract alleging grounds, which under Hindu law would bind their interests and enable a vendor to give a good title as against them and make them parties, it is difficult to see how the question as to the right of contracting parties to convey any interest except his own can be avoided and a decree passed the effect of which will merely be to create a multiplicity of suits.
14. To the same effect are the principles laid down by the court in : AIR (37) 1950 Madras 90 C.V. Muni Samappa v. Kolala Gurunanjappa (dead) and Ors. whereby the court stated the law as hereunder:
When a person sues for specific performance of an agreement to sell a house impleading only the two executants of the agreement who are the only persons bound to carry out the agreement and the plaint does not make any reference to the sons of defendant 1, there is no necessity to determine the question of the purchaser may acquire might be defeasible by sons of defendant 1 is no ground for refusing specific performance if the purchaser is willing to take such title as the vendors have.
15. Further in : AIR 1972 Andhra Pradesh 178 Mir Abdul Hakeem Khan v. Abdul Mannan Khadri the court has elaborated the applicable law and held that:
10. xxx It is settled law that if a person executes an agreement to sell property, the vendor is not entitled to put forward, in a suit for specific performance by the purchaser the defence that the vendor had no title. It is open to the purchaser to set up a defence that the vendor had no title or has defective title in a suit for specific performance by the vendor. But the vendor cannot set up defective in his own title as a defence in a suit for specific performance by the purchaser.
Where a person sues for specific performance of an agreement to convey and simply impleads the party bound to carry out to the agreement there is no necessity to determine the question of the vendor's title and the fact that the title which the purchaser may acquire might be defeasible by a third party is no ground for refusing specific performance if the purchaser is willing to take such title as the vendor has. But where a party seeking specific performance seeks to bind the interests of persons not parties to the contract alleging grounds which under Hindu Law would bind their interests and enable the vendor to give a good title as against them and makes them parties, it is difficult to see how the question as to the right of the contracting party to convey any interest except his own can be avoided and a decree passed, the effect of which will merely be to create a multiplicity of suits.
16. Several judicial pronouncements have been noticed hereinabove wherein the court has held that in a suit for specific performance of a contract for sale, only the parties to the contract or even their legal representatives and the person relying on the agreement is a necessary party. I find that it has been specifically held that in a suit for specific performance, it is not open to the vendor to put up a defence that he had no title. However, it has been held that so far as the person who has also purchased the contracted property from the same vendor is a necessary party as he would be effected if he has purchased the property with the notices of the contract with the plaintiff.
17. In : AIR 2005 SC 2813 Kasturi v. Iyyamperumal and Ors., this Court held that:
6. 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 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 determinating the question who is a necessary party. These 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.
7. We may look to this problem from another angle. Section 19 of the Specific Relief Act provides relief against parties and persons claiming under them by subsequent title. Except as otherwise provided by Chapter II, specific performance of a contract may be enforced against:
(a) either party thereto;
(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;
(c) any person claiming under a title which, through prior to the contract and known to the plaintiff, might have been displaced by the defendant;
(d) when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;
(e) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation, the company;
Provided that the company has accepted the contract and communicated such acceptance to the other party to the contract.
8. We have carefully considered Sub-sections (a) to (e) of Section 19 of the Act. From a careful examination of the afore-said provisions of Sub-sections (a) to (e) of the Specific Relief Act we are of the view that the persons seeking addition in the suit for specific performance of the contract for sale who were not claiming under the vendor but they were claiming adverse to the title of the vendor do not fall in any of the categories enumerated in Sub-sections (a) to (e) of Section 19 of the Specific Relief Act.
10. As noted herein earlier, two tests are required to be satisfied to determine the question who is a necessary party, let us now consider who is a proper party in a suit for specific performance of a contract for sale. For deciding the question who is a proper party in a suit for specific performance the guiding principle is that the presence of such a party is necessary to adjudicate the controversies involved in the suit for specific performance of the contract for sale. Thus, the question is to be decided keeping in mind the scope of the suit. The question that is 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. If the person seeking addition is added in such a suit, the scope of the suit for specific performance would be enlarged and it would be practically converted into a suit for title. Therefore, for effective adjudication of the controversies involved in the suit, presence of such parties cannot be said to be necessary at all. Lord Chancelor Cottenham in Tasker v. Small made the following observations:
It is not disputed that, generally, to a bill for a specific performance of a contract for sale, the parties to the contract only are the proper parties; and, when the ground of the jurisdiction of Courts of Equity in suits of that kind is considered it could not properly be otherwise. The Court assumes jurisdiction in such cases, because a Court of law, giving damages only for the non-performance of the contract, in many cases does not afford an adequate remedy. But, in equity, as well as in law, the contract constitutes the right and regulates the liabilities of the parties; and the object of both proceedings is to place the party complaining as nearly as possible in the same situation as the defendant had agreed that he should be placed in. It is obvious that persons, strangers to the contract, and, therefore, neither entitled to the right, nor subject to the liabilities which arise out of it, are as much strangers to a proceeding to enforce the execution of it as they are to a proceeding to recover damages for the breach of it.
11. The aforesaid decision in 40 E.R. 848 was noted with approval in (1886) 2 Ch. 164 (De Hogton v. Money) at page 170 Turner, L.J. Observed:
Here again his case is met by (1834) 40 E.R. 848 in which case it was distinctly laid down that a purchaser cannot, before his contract is carried into effect, enforce against strangers to the contract equities attaching to the property, a rule which, as it seems to me, is well founded in principle, for if it were otherwise, this Court might be called upon to adjudicate upon questions which might never arise, as it might appear that the contract either ought not to be, or could not be performed.
16. It is difficult to conceive that while deciding the question as to who is in possession of the contracted property, it would not be open to the Court to decide the question of possession of a third party/or a stranger as first the lis to be decided is the enforceability of the contract entered into between the appellant and the respondent between the appellant and the respondent No. 3 and whether contract was executed by the appellant and the respondent Nos. 2 and 3 for sale of the contracted property, whether the plaintiffs were ready and willing to perform their part of the contract and whether the appellant is entitled to a decree for specific performance of a contract for sale against the respondent Nos. 2 and 3. Secondly in that case, whoever asserts his independent possession of the contracted property has to be added in the suit, then this process may continue without a final decision of the suit. Apart from that, the intervener must be directly and legally interested in the answers to the controversies involved in the suit for specific performance of the contract for sale. In Amol v. Rasheed Tuck and Sons Ltd. 1956 (1) All ER. 273 it has been held that a person is legally interested in the answers to the controversies only if he can satisfy the Court that it may lead to a result that will effect him legally.
17. That apart, there is another principle which cannot also be forgotten. The applicant, who has filed the instant suit for specific performance of the contract for sales is dominus litus and cannot be forced to add parties against whom he does not want to fight unless it is a compulsion of the rule of law, as already discussed above. For the reason aforesaid, we are therefore of the view that respondent Nos. 1 and 4 to 11 are neither necessary parties nor proper parties and therefore they are not entitled to be added as party-defendants in the pending suit for specific performance of the contract for sale.
18. The learned Counsel appearing for the respondent Nos. 1 and 4 to 11, however, contended that since the respondent Nos. 1 and 4 to 11 claimed to be in possession of the suit property on the basis of their independent title to the same and as the appellant had also claimed the relief of possession in the plaint, the issue with regard to possession is common to the parties including respondent Nos. 1 and 4 to 11, therefore, the same can be settled in the present suit itself. Accordingly, it was submitted that the presence of respondent Nos. 1 and 4 to 11 would be necessary for proper adjudication of such dispute. This argument which also weighed with the two courts below although at the first blush appeared to be of substance but on careful consideration of all the aspects as indicated herein earlier, including the scope of the suit, we are of the view that it lacks merit. Merely, in order to find out who is in possession of the contracted property, a third party or a stranger to the contract cannot be added in a suit for specific performance of the contract for sale because the respondent Nos. 1 and 4 to 11 are not necessary parties as there was no semblance of right to some relief against the respondent No. 3 to the contract. In our view, the third party to the agreement for sale without challenging the title of the respondent No. 3, even assuming they are in possession of the contracted property, cannot protect their possession without filing a separate suit for title and possession against the vendor. It is well settled that in a suit for specific performance of a contract for sale the lis between the appellant and the respondent Nos. 2 and 3 shall only be gone into and it is also not open to the Court to decide whether the respondent Nos. 12 and 4 to 11 have acquired any title and possession of the contracted property as that would not be germane for decision in the suit for specific performance of the contract for sale, that is to say in a suit for specific performance of the contract for sale the controversy to be decided raised by the appellant against respondent Nos. 2 and 3 can only be adjudicated upon, and in such a lis the Court cannot decide the question of title and possession of the respondent Nos. 1 and 4 to 11 relating to the contracted property.
21. For the reasons aforesaid, in our view, the stranger to the contract, namely, the respondent Nos. 1 and 4 to 11 making claim independent and adverse to the title of the respondent Nos. 2 and 3 are neither necessary nor proper parties, and therefore, not entitled to join as party defendants in the suit for specific performance of the contract for sale.
18. The Apex Court, in Kasturi's case (supra), placed reliance upon and cited with approval, the principles laid down in its earlier pronouncement in : JT 1995 (1) SC 273 (para 13) Anil Kumar Singh v. Shiv Nath Mishra and JT 1997 (7) SC 226 (para 14) Vijay Pratap and Anr. v. Sambbu Saran Sinha and Ors..
19. It is trite that a person to be joined thus is one whose presence as a party is necessary.
20. The principles which would govern adjudication on this issue were laid down by the Division Bench of the Calcutta High Court in its pronouncement reported at AIR 1995 Cal 355 Sukh Gulgulia v. Habib Ullah, the court has held thus:
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 after the contract. He is a necessary party as he would be affected. If he is a volunteer. Or if a purchaser for value, had purchased with notice of the contract. A person who claims adversely to the vendor is however, not necessary party. Where the property stands in the name of a person other than the vendor and the suit for specific performance is brought by the purchaser, that specific performance is brought by the purchaser, that person may be joined as a defendant as a proper party on an allegation that he is the benamindar of the vendor but if he appears and contends that he is not the benamidar of the vendor the proper procedure would be to discharge him from the suit, leaving it to the plaintiff in the suit for specific performance to institute a suit against him after he had got the conveyance in execution of the decree for specific performance against his vendor. This is on the principle that the scope of a suit for specific performance or a contract for sale ought not to be enlarged and the suit turned also into a title suit between one of either of the parties to the contract and a strange to the contract.
21. The authoritative principles laid down by the Apex Court bind adjudication in the instant case. The plaintiff is placing reliance on an agreement to sell in its favour without any registered conveyance. The applicant has also set up the same plea. Placing reliance on an agreement dated 13th January, 2005, the defendant has claimed that it has received the consideration from the applicant as well. Certainly, adjudication in the present case would impact the rights of the applicant and the decree which may ultimately be passed would certainly impact the rights of the applicant. In view of the principles laid down by the Apex Court in Kasturi's Case (Supra) and the other pronouncements noticed hereinabove, the applicant are certainly necessary and proper parties who would directly be effected by the judgment which the plaintiff is asking. The rights of the applicant would be directly effected by any judgment which may be passed in the instant case.
IA No. 11048/2006 therefore deserves to be and is hereby allowed.
Amended memo of parties shall be filed within a period of two weeks.
IA Nos. 6507/2006, 8051/2006 & 11049/2006
22. In the suit filed by the plaintiff seeking specific performance of an agreement dated 9th March, 2004, the plaintiff also filed an application seeking interim relief (being IA No. 6507/2006) under Order 39 Rules 1 & 2 of the Code of Civil Procedure. The application came up for hearing on 29th May, 2006 when an ex parte interim order of injunction in favour of the applicant was granted directing the defendant not to create any third party rights or hand over possession in respect of 5500 sq. ft. covered area, 2080 sq. ft. open area, and 350 sq. ft. on the first level of the Fun City Mall Multiplex being raised by the defendant at Prashant Vihar, Sector 14, Outer Ring Road, Rohini, Delhi - 110085 as shown in red colour in site plan placed by the plaintiff on record.
23. On receipt of the summons, the defendant filed IA No. 8051/2006 under Order 39 Rule 4 of the Code of Civil Procedure seeking vacation of the ad interim ex parte order passed by this Court on 29th May, 2006. M/s. Aliens Buildcom Pvt. Ltd. has also filed IA No. 11049/2006 seeking vacation of the stay on the ground that it has purchased rights in the subject property disputing the plaintiff's claim. Inasmuch as identical facts and issues of law have been raised in these applications they are taken up together for the purposes of adjudication.
24. I also find that there is no material dispute to the factual matrix and the documentation relied upon by the plaintiff. Only a question relating to the interpretation and the effect of the correspondence exchanged between the parties has been raised. While the plaintiff has claimed that a concluded contract was arrived at between the parties placing reliance on the correspondence exchanged, the defendant has vehemently contended that there was no mutuality; that material terms and conditions which were essential for a valid, binding and concluded contract to come into existence, had not come into existence and that the correspondence relied upon by the plaintiff was, at best, in the nature of exchange before final and agreed terms were arrived at between the parties. The defendants have also urged that the suit and the application are in any case hopelessly belated. The communication dated 31st December, 2003 was subject to execution of a contract and no contract was entered into by the parties at any point of time. Even the agreement as relied upon by the plaintiff, has been challenged by Mr. Ravinder Sethi, learned Senior Counsel on behalf of the defendant, on the ground that the terms mentioned in the letter dated 31st December, 2003 of the defendant shows that it was only in the nature of a profit sharing partnership and such a contract cannot be specifically enforced inasmuch as compensation for damages if any, is an adequate remedy in law. Furthermore, the defendant has vehemently challenged the bona fides of the plaintiff and asserted that the plaintiff is a habitual litigant who has a history of entering into similar transactions without settling final terms and conditions and litigating with the mall owners and developers.
25. In support of these various submissions, learned senior counsel for the defendant has placed reliance on the pronouncement reported at : AIR 2006 SC 75 Jaiser Rand S.A. v. Bindal Agra: AIR 1992 Delhi 305 J.K. Industries Ltd. v. Mohan Investments & Properties Private Limited : 2006 (87) DRJ 328 Sheela Gehlot v. Sonu Kochar and Ors.; AIR 2004 SC 636 M.V. Shankar Bhat v. Claude Pinto (D) by LRs and Ors.; 135 (2006) DLT 56 Randhir Singh Chandok v. Vipin Bansal and Anr : AIR 1991 Allahabad 343 Sri Satya Prakash Goel v. Ram Krishan Mission and Ors : 126 (2006) DLT 703 (DB) Ralli Estate Pvt. Ltd. v. N.D.M.C.
26. It has further been urged that even taking the assertions of the plaintiff on their face value, the contract was in the nature of a lease. Such a document requires to be compulsorily registered under the provisions of the Registration Act, 1908. The submission is that the lease of immovable property relied upon by the plaintiff being an unregistered document, is void and cannot be specifically enforced. Consequently, the plaintiff is disentitled to any interim protection.
27. Mr. Ravinder Sethi, learned senior counsel has also urged that the plaintiff has paid an extremely small amount as against the stated total consideration. For this reason, there is no equity in favour of the plaintiff and that no interim relief in its favour can be granted. Reliance in support of this plea is placed on the judgment reported at : 61 (1996) DLT 790 Vinod Saluja and Anr. v. Smt. Sita Rani.
28. In any case, it is submitted that in the plaint, the plaintiff has prayed for specific performance of the letter dated 9th March, 2004, terming it to be a lease. The defendant has stated that it had not accepted the terms stipulated by the plaintiff in the letter dated 31st December, 2003 and that the plaintiff has also never accepted the terms set out by the defendant in the letter dated 9th March, 2004. Reliance in support is placed on the letters written by the defendant and it is argued that for this reason, there is no valid and binding contract between the parties.
29. Having heard learned Counsels at length and on a consideration of the law cited, I find that it is well settled that so far as an agreement to sell is concerned, four ingredients are essential for a valid, binding and enforceable contract to come into existence. The same needs no elaboration and can be usefully set down as follows:
(i) particulars of consideration;
(ii) certainty as to the parties that is the vendor and the vendee;
(iii) certainty as to the property to be sold; and
(iv) certainty as to other terms relating to the probable cost of the conveyance to be borne by the parties, time etc.
The principles in this behalf are succinctly laid down in the pronouncement of this Court reported at : 63 (1996) Delhi 52 entitled Aggarwal Hotels (P) Ltd. v. Focus Properties (P) Ltd.
30. It is equally well settled that the initial burden of proof to prove and establish the existence of such an agreement, specific performance whereof is sought, is on the party which is seeking the relief. In the instant case, the plaintiff has submitted that it is in the business of running a chain of casual dining and fast food restaurants under the name and style of "Ruby Tuesday" and "Mircheez". It is submitted that it is running sixteen restaurants in Delhi and in the national capital region as well as in Chandigarh, Bangalore, Mumbai etc. The parties had considered and discussed terms and conditions of leasing of space in the multiplex-cum-mall being constructed by the defendant in the Prashant Vihar, Sector - 14, Outer Ring Road, Rohini, Delhi - 110 085. The terms and conditions which were discussed between the parties, were incorporated in a letter dated 31st December, 2003, sent by the plaintiff to the defendant. By this communication, the plaintiff had booked space of super area of 5500 sq. ft. and covered area of 2080 sq. ft. open area of 1350 sq. ft. for running a "Mircheez" food court in the said multiplex on the first floor of the shopping mall. The plaintiff had also proposed herein the financial terms based on alleged discussions and confirmed the financial terms of profit sharing with the defendant which was to be at the rate of 10% of the net sale, subject to a minimum guarantee payment of Rs. 2,00,000/- per month to be made by the plaintiff. The letter dated 31st December, 2003 had indicated a security amount equivalent to three months of minimum guarantee which was to the tune of Rs. 6,00,000/-. This security deposit was to be payable in two instalments, an amount of Rs. 1,51,000/- payable on signing of an agreement and the balance, on possession for fit out. The agreement provided a tenure of 9 years (3+3+3 years). Apart from the maintenance charges to be paid on actual basis by the plaintiff to the defendant, the communication also stipulated the terms of a hike in the minimum guarantee of 15% every year.
31. So far as the services which were to be provided by the promoter, are concerned, the promoter/defendant had agreed to provide central air conditioning, 100% power back up, gas bank, grease traps and other essential equipments as per authority's requirements; service stair case and other facilities. Along with this letter, the plaintiff is stated to have enclosed a cheque of Rs. 51,000/- in the name of the defendant. So far as the commencement of the agreement was concerned, the plaintiff has stated that "the opening of the food court shall be linked with the opening of the multiplex".
32. This communication from the plaintiff was replied to by the defendant by a letter dated 9th March, 2004 which deserves to be considered in extenso:
We are pleased to confirm the space and terms & conditions as per your letter dated 31s t December, 2003 in the above upcoming Multiplex Cum Mall. The details of the terms and conditions agreed upon are as follows:
Tenure of agreement: 9 years (3+3+3 years) Maintenance charges: on actual basis directly to professional mall management Company Services to be provided by the promoters:
- Central Air-conditioning
- 100% power back-up
- One Point Connection from Centralised gas bank (Gas Charges will be on consumption basis).
- Service staircase
- Provision for sanitary line for toilets at one point.
- Electrical & water supplies at one point (charges will be on consumption basis)
- Raw shell surface
- Dedicated scrolls
- Dedicated signage space in front of the mall
Further we confirm the receipt of Rs. 51,000/- (Rupees fifty-one thousand only) as token advance of booking the above space.
Format MOU draft shall be sent to you shortly.
H.S. Bawa & Associates, C-403, Defence Colony, New Delhi are the real estate brokers for this deal.
33. A close perusal of the letter dated 31st December, 2003 of the plaintiff and the communication dated 9th March, 2004 from the defendant would show that there is no dispute with regard to the two parties who are concerned. The area which was proposed to be the subject matter of the agreement is also not in dispute. So far as the area in which the plaintiff will be put in occupation and the consideration is concerned, is also determined. As far as the date for commencement of the agreement is concerned, the plaintiff had stated that the same would be commensurate with the opening of the food court which would be linked with the opening of the multiplex. The opening words of this communication dated 9th March, 2004 from the defendant clearly read as a "confirmation" of the space of the "terms and conditions" as per the letter dated 31st December, 2003.
34. The correspondence thereafter appears to be one sided. The plaintiff had addressed letters dated 15th April, 2004, 14th September, 2004, 22nd November, 2004; 27th September, 2005; 8th November, 2005; 16th December, 2005; 12th April, 2006 and thereafter has filed the present suit on or around the 26th May, 2006. By these communications from the plaintiff, it would appear that the parties were finalising the lease agreement to be formally executed on the terms and conditions which had been agreed to between the parties. The plaintiff was also repeatedly reminding the defendant to expedite the project and was requesting advise from the defendant as to when lease agreement would be executed. In the communication of 16th December, 2005, the plaintiff has specifically requested the defendant for execution of the agreement to lease and also provision of the mall opening schedule to be provided. The plaintiff requested the defendant to hand over the food court space to enable the plaintiff to plan the lay out and the services as per its requirements. In the communication of 12th of April, 2006, the plaintiff further stated that its project team and architect had even visited the site and inspected the premises. A reminder for execution of the agreement and possession for fitting out activities to be taken by the plaintiff was also repeated therein.
35. Despite receipt of these letters, the defendant has admittedly not addressed a single communication in response or ever stated that there was no agreement between the parties.
36. The plaintiff had also admittedly paid a sum of Rs. 51,000/- by cheque bearing No. 912074 drawn on the ABN AMRO Bank dated 31st December, 2006 which was duly received and encashed by the defendant. This amount has also never been returned and continues to be with the defendant.
37. The plaintiff has also pointed out another factor which prima facie supports the contention that the terms and conditions between the parties stood settled. The defendant has issued and caused to be published advertisements on the 15th August, 2005 & 14th October, 2005 in the Indian edition of the trade journal "Franchising" which is a business opportunity magazine and raises issues of international, retailing and real estate businesses. The advertisements issued by the defendant show that the defendant had advertised its Fun City Project which was stated as coming up at Prashant Vihar in Rohini which is located in the NorthWest of Delhi. This Fun City was described as a mall with multiplex located in the Central Market of Prashant Vihar, Sector - 14, Outer Ring Road, Rohini, Delhi. The defendant published the names of the various businesses which were to be housed in this multiplex which included a food court wherein the defendant prominently displayed the logos of the Ruby Tuesday, Archies, Nakshatra, Lilliput etc.
38. It has been pointed out that the plaintiff is holding a licence for "Ruby Tuesday" for running restaurants in India and therefore it is evident that the defendant was itself endorsing the agreement entered into by it with the plaintiff so far as running its restaurants is concerned. I find that in the letter dated 22nd November, 2004, the plaintiff had drawn attention of the defendant to this advertisement and had pointed out that the defendant had used the logo of the international brand "Ruby Tuesday" as an occupant of the proposed mall while the agreement which had been entered into between the parties was for the brand "Mircheez" of the defendant.
No dispute was raised thereto by or on behalf of the defendant, who has also given no explanation of these facts.
39. Before this Court, the defendant, on the other hand, had sought to capitalize only on the fact that the communications from the defendant have repeatedly referred to "execution of the lease agreement". The defendant has also urged that the letter dated 31st December, 2003 sent by the plaintiff itself stated that the same was "subject to contract" and consequently there was no undisputed contract within the meaning of Section 10 of the Specific Relief Act, 1963 for the reason that the parties were not ad idem on the material terms and conditions on which the property was to be leased to the defendant.
40. Mr. Pravir Jain, learned Counsel for the plaintiff, has placed reliance on several judicial pronouncements to urge that a valid, binding and subsisting contract comes into existence by mere acceptance of an offer and that any requirement to execute a formal contract thereafter cannot displace the binding agreement which had been entered into by the parties.
41. So far as the objections of the defendant to the effect that no time or date of commencement of the lease was stipulated, that the agreement to take lease of immovable property was compulsorily registerable and a suit for specific performance of such an unregistered agreement therefore, would not be tenable, I find that these issues have been authoritatively adjudicated upon by the Apex Court in : JT 1999 (9) SC 469 V.B. Dharmyat (Deceased) through LRs. v. Shree Jagadguru Tontadrya and Ors. In this case, the suit for specific performance was dismissed on the ground that the plaintiff's agreement dated 25th November, 2006 to take on a 99 years lease of a plot of land postulated that the municipality, which was in possession, would vacate the same and thereupon the same would be given on such 99 years lease. The suit was decreed by the munsif and the appeal against the same was also dismissed by the District Judge. However, these judgments were reversed by the High Court on the ground that the document relied upon by the appellant was not signed by the parties; that the document was a lease as defined under Section 2(7) of the Registration Act, 1908 and for this reason, though required, it had not been registered in terms of Section 17(d) of the Registration Act, 1908. It was held that consequently the appellant could not file a suit on the basis of such document. The Apex Court placing reliance on its earlier pronouncement in : 1959 Supp. (2) SCR 107 Trivenibai v. Lilabai and the decision of the privy council in (1919) 46 IA 240 Hemanta Kumari Devi v. Midnapur Zamindari Co. Limited, held thus:
7. We have heard the counsel for the parties at length. It is quite clear from a perusal of the document in question that on the date when the same was executed the possession of the property was still with the municipality. The document contains the recital that Rs. 3,500/- would be paid as advance rent for 50 years and Rs. 1000 had been taken as advance on that day. The decision was to execute the lease for 99 years but the date from which the lease was to commence was not stipulated. It was provided in the agreement that the lease would commence only after the municipality vacates the premises and removes the postmortem house which had been constructed on the plot in question. The document envisaged that the possession of the land would be given simultaneously with the execution and registration of a lease deed. All this was to happen in future at a non-specified point of time because it was not known as to when the plot in question would fall vacant.
8. It is no doubt true that Section 2(7) of the Registration Act defines lease as including an "agreement to lease". It is on this basis that Shri Bhat, learned Counsel appearing for the respondents contends that an agreement to lease was compulsorily registrable and because the document was not registered, therefore, the High Court was right in coming to the conclusion that a suit for specific performance based on this document was not maintainable.
9. Mr. Javali, learned senior counsel appearing for the appellant has rightly relied, to meet this contention, on the decision of this Court in Trivenibai v. Lilabai : 1959 Supp (2) SCR 107. After interpreting the provisions of Section 2(7) of the Registration Act and taking into consideration the decision of the Privy Council in Hemanta Kumari Devi v. Midnapur Zamindari Co. Ltd. (1919) 46 IA 240, this Court came to the conclusion that an agreement to lease under Section 2(7) of the Registration Act, 1908 must be a document which effects an actual demise and operates as lease. An agreement between two parties, it was held which entitles one of them merely to claim the execution of a lease from the other without creating a present and immediate demise in his favour is not an agreement to lease within the meaning of Section 2(7) of the Act.
10. Applying the aforesaid ratio to the present case we find that the document in question was not intended to, nor did it in fact result in a demise in present in favour of the appellant. This agreement was nothing more than a promise to do something in future, namely, to execute a lease deed and hand over possession of the plot in question to the appellant after the same was vacated by the municipality. The document, in other words, was a sort of understanding or a promise given by Respondent 1 to the appellant that on the municipality vacating the plot, the same would be given on 99 years lease to the appellant and the lease deed would be registered with the Sub-Registrar. Under no circumstances, in our opinion, did this document amount to a memorandum of a demise in the present time.
42. In the instant case, it had been stated that opening of the food court shall be linked with the opening of the multiplex. The consideration which the plaintiff was required to pay was directly linked to the opening of the food court and envisaged profit sharing on the basis of 10% of net sales, subject to a minimum amount of Rs. 2,00,000/- per month. From the document on record, it is apparent that the mall and multiplex have not commenced on the date of filing of the suit or hearing in the application and the binding on the plaintiff to start making payment has not commenced as yet. For the failure of the defendant to respond to the repeated requests of the plaintiff to execute the lease deed of the formal document, the time provided even in the letter dated 9th March, 2004 for making deposit of the security amount has not arisen. There is not a single communication from the defendant ever calling upon the plaintiff to make payment which the plaintiff has failed to do so.
43. In support of the proposition that even if no date of commencement of the agreement was mentioned in the agreement, it would not be fatal to a prayer for specific performance of an agreement to lease, my attention has been drawn to the judicial pronouncement reported at AIR 1958 Patna 162 Y. Baby Kameshwar Prasad and Ors. v. Shahamat Mian and Ors. and 1919 (1) IC 177 Kailas Chandra v. Bejoy Kanta Lahiri Chowdhury.
44. The submission of the defendant is that the plaintiff is not entitled to any relief for the reason that only a miniscule amount has been paid. I have noticed hereinabove that the amount of payment envisaged and agreed upon under the agreement between the parties was a monthly payment and not a large lump sum amount. On the own showing of the defendant, the occasion to make such payment has not arisen yet. This is manifested even from the fact that the defendant has not demanded any amount from that plaintiff. The period envisaged being a monthly payment, certainly the principles laid down in : 61 (1996) DLT 790 Vinod Saluja and Anr. v. Smt. Sita Rani, relied upon by the plaintiff, would not apply.
45. It has been strenuously urged on behalf of the defendant that several licenses for running the food court had to be obtained and several matters including the appointment of staff, manner of collection of commission etc. are yet to be determined and consequently, the agreement would not be specifically enforceable as it is not possible to monitor implementation of the contract in such detail.
Such terms relate to implementation & effectuating the agreement between the parties. I have hereinabove held that only such matters as were really in the nature of details and were not the material terms so far as the conclusion of the contract between the parties is concerned are required to be considered for construing as to whether a binding contract has come into existence.
46. In 1996 II AD (Delhi) 492 Shri Vijay Dixit v. Mrs. Sheila Khanna, the court was concerned with a collaboration agreement for construction of an immovable property. There is no comparison between such a contract and a contract for lease of space to run a food court as in the instant case. Certainly, the principles laid down in Vijay Dixit v. Sudhir would have no application here.
47. So far as the pronouncement of the Division Bench of the Calcutta High Court reported at : AIR 2001 Calcutta 177 National Properties Limited v. Bata India Limited is concerned, the court has noticed the difference between the stipulation of sending a draft lease for approval of the plaintiff-lessee was a condition of bargain and not merely commemorative of the bargain between the parties.
The plaintiff in this case also placed reliance on an agreement to be deduced from the exchange of correspondence between the parties. However, it was an admitted position that no draft lease was ever prepared and the plaintiff could not approve the terms thereof. On such facts, it was held that the suit for specific performance was not maintainable.
48. In 135 (2006) DLT 56 Randhir Singh Chandok v. Vipin Bansal and Anr., a photocopy of a pre-typed proforma has been used on which, blanks have been filled up by hand and the concluding two lines of the para of the document, as noted in para 10 the judgment, made no sense at all and were totally unconnected with the general tenor of the document. On these facts, this Court has held that an unsigned receipt relied upon by the plaintiff lacked mutuality and was unenforceable as an agreement to sell.
This judgment is clearly distinguishable on facts from the present case as noticed hereinabove and would have no application to the agreement between the parties noticed by me hereinabove.
49. Even in this judgment, I find that the court had placed reliance on a pronouncement of the Apex Court reported in AIR 1968 SC 1228 Kollipara Sriramulu v. T. Aswatha Narayana, wherein the court held thus:
24. It is well established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton (1857) 6 HLC 238 at p.263, the fact of a subsequent agreement being prepared may be evidence that the previous negotiation, did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement.
50. The defendants have placed reliance on several other cases wherein the parties had sought specific performance of an agreement containing conditional acceptance. In : 126 (2006) DLT 703 (DB) Ralli Estate Pvt. Ltd. v. N.D.M.C. the letter of acceptance referred to future negotiation for finalising of mere terms of the contract. There is no such thing in the instant case.
51. Reference has been made to : AIR 1991 Allahabad 343 (Sri Satya Prakash Goel v. Ram Krishan Mission and Ors.) wherein it was held that the defendant had no authority to let out the premises. There is no such prohibition in the instant case.
52. Learned Counsel for the defendant has placed reliance on : AIR 1992 Delhi 305 J.K. Industries Ltd. v. Mohan Investments & Properties Private Limited wherein it was held that the tender document by itself was neither an agreement nor a contract and the appellant suggested modifications to the general conditions by the respondents to which the respondents had merely responded by saying that they were willing to place a purchase order which had not been placed.
53. So far as the instant case is concerned, I find that the principles which would apply have been laid down in the pronouncement reported at : AIR 1992 Delhi 305 J.K. Industries v. Mohan Investment which also deserve to be considered in extenso and read thus:
13. There is no dispute about the principles enunciated in the aforesaid judgment. It will depend on the peculiar facts of particular case whether parties have entered into a contract and the execution of a document was only a formality and was not a condition precedent for coming into existence the contract between the parties. He has then referred to Jainarain Ram Lundia v. Surajmull Sagarmull : AIR 1949 FC 211, which lays down that if after a contract is concluded and its terms settled, further negotiations are started with regard to the new matters, that would not prevent full effect being given to the contract already existing, unless it is established as a fact that the contract was rescinded or varied with the consent of both the parties or that both parties treated it as incomplete and inconclusive. There is no dispute that if court is to come to the conclusion in the present case on perusing the aforesaid documents that a concluded contract has come into existence then any subsequent correspondence between the parties would not change the nature of the contract till there was mutual agreement to change the nature of the concluded contract. It was also contended by the learned Counsel for the defendant that entire negotiations and the correspondence need to be perused in deciding whether a concluded contract has come into existence between the parties and he referred to Dhulipudi Namayya v. Union of India : AIR 1958 AP 533 in which it was laid down that it is also well settled that in order to decide these matters the entire negotiations and the correspondence on which the contract depends must be considered. Reference was then made to Kollipara Sriramulu v. T. Aswatha Narayana : AIR 1968 SC 1028 wherein the Supreme Court has laid down that a mere reference to a future formal contract in an oral agreement will not prevent a binding bargain between the parties. Again, as far as the principle of law is concerned, there cannot be indeed, any dispute that if the parties had settled all the vital terms of the contract and had mutually agreed to those terms then the contract comes into existence between the parties and if reference has been made by the parties for executing any formal contract in writing then mere fact that such formal contract in writing has not been executed would not result in already concluded contract being not binding on the parties. If the facts of a particular case show that execution of a written contract was a condition precedent for coming into force of the contract between the parties, then it cannot be said that any concluded contract in absence of any written contract being executed has come into force between the parties.
54. Learned senior counsel for the defendants has also relied upon the judgment which is reported at : (2006) 1 SCC 751 Dresser Rand S.A. v. Bindal Agro Chemical Limited & K.G. Khosla Compressors Ltd. which is clearly distinguishable on facts. This case related to a tender for purchase of goods and also did not relate to immovable property.
These judgments would have clearly no application to the transactions and the facts of the instant case.
55. Mr. Ravinder Sethi, learned senior counsel for the plaintiff, has also placed reliance on the pronouncement of the learned Single Judge of this Court reported at 2006 (87) DRJ 41 Smt. Sheela Gehlot v. Sonu Kochar to urge that the terms of the contract were uncertain and could not be specifically enforced and for this reason, no interim order can be granted in favour of the plaintiff. In this judgment, the plaintiff had relied on an oral agreement to sell, coupled with a draft of sale deed with some hand written changes. On the facts of the case, the court had concluded that the exact terms and conditions were not clearly stated and consequently there was no certainty to the terms of the contract. This judgment is also clearly distinguishable on the facts of the case. I find that in paras 21 to 25, the court has considered two prior judicial pronouncements wherein proof governing the construction of a contract have been dealt with. In my view, the same would have a bearing on the instant case and read thus:
21. Learned senior counsel for the defendants, on the other hand, submitted that the judgment of the apex court in Ganesh Shet v. Dr. CSGK Setty and Ors : AIR 1998 Supreme Court 2216 applies on all fours as a concluded contract in respect of sale of property is a sine qua non for specific enforcement of a contract. The Supreme Court relied on the observations in Pomeroy on 'Specific Performance of Contracts' to conclude that "there has to be a greater degree of certainty in order to enforce the equitable relief of specific performance." It was observed in para 14 as under:
In Pomeroy on 'Specific Performance of Contracts' (3rd Edn) (Para 159) it is stated clearly that a "greater amount or degree of certainty is required in the terms of an agreement, which is to be specifically executed in equity, than is necessary in a contract which is to be the basis of an action at law for damages. An action at law is founded upon the mere non performance by the defendant, and this negative conclusion can often be established without determining all the terms of the agreement with exactness. The suit in equity is wholly an affirmative proceeding. There mere fact of non-performance is not enough; its object is to procure a performance by the defendant, and this demands a clear, definite, and precise understanding of all the terms; they must be exactly ascertained before their performance can be enforced....
22. A reading of the aforesaid judgment thus clearly shows that there has to be a concluded contract, oral or in writing, with certainty about its terms.
23. Learned senior counsel for the defendants also referred to the judgment of the Division Bench of this Court in Mirahul Enterprises and Ors. v. Mrs. Vijaya Sirivastava : AIR 2003 Delhi 15. The relevant portion reads as under:
24. Before we proceed to analyse the evidence in this case and to appreciate the submissions made at the bar, it will be but necessary to take into consideration the provisions of Specific Relief Act and the requirements of law before a decree for specific performance be granted. Grant of decree for specific performance under Section 20 of the Specific Relief Act, 1963 rest in the discretion of the Court and cannot be claimed as of right. Parties seeking performance of contract must satisfy all the requirements necessary for seeking relief in equity. In exercising discretion, Court is obliged to take into consideration circumstances of the case, conduct of the parties and the respective interests under the contract. At the same time, it should not be lost sight of that the discretion has to be exercised by the Court not arbitrarily but based on sound judicial principles. The first fundamental, which must be proved beyond all reasonable doubts is the existence of a valid and enforceable contract. Where a valid and enforceable contract has not been made, Court will not make a contract for the parties. Specific performance will not be ordered if the contract itself suffers from some defect, which makes the contract invalid or unenforceable. Reference at this stage be made to a decision of the Supreme Court in Mayawanti v. Kaushalya Devi : (1990) 3 SCC 1.
25. Section 10 of the Contract Act
defines as to what agreements are contracts. All agreements are contracts, if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. A true contract thus requires the agreement of the parties freely made with full knowledge and without any feeling of restraint. Parties must be ad-idem on the essential terms of the contract in case, it is an agreement to sell of immovable property, the law requires that it must with certainty identify the property agreed to be sold and the price fixed as consideration paid or agreed to be paid. Price has not been defined in Transfer of Property Act but that expression has to be understood in the same sense as is understood in the Sales of Goods Act. Every sale implies a contract of sale and like any other contract, the contract for sale of immovable property must be based on mutuality.
26. Where in a suit for specific performance of contract, the contract on which relief is based is found to be not a concluded contract, relief cannot be given on the basis of another contract alleged by the plaintiff to be a concluded contract, for which we make reference to the decision of Supreme Court in Ganesh Shet v. Dr. C.S.G.K. Setty. The facts in the said case were that the property was owned jointly by three brothers. The purchaser clearly stated that at their meeting with one of the brothers, he told that he is yet to consult his two brothers about sale consideration. Tenor of that sale consideration was not finalised in their meeting. It was held that there was no concluded contract between the parties on which decree for specific performance could not be passed. In the said case, Supreme Court held that in a suit for specific performance the evidence and proof of agreement must be absolutely clear and certain. Reference was made in the said decision to Pomery on "Specific Performance of Contracts' (3rd Edn) (para 159) wherein it is stated clearly that a "greater amount or degree of certainty is required in the terms of an agreement, which is to be specifically executed in equity, than is necessary in contract; which is to be the basis of an action at law for damages. An action at law is founded upon the mere non-performance by the defendant, and this negative conclusion can often be established without determining all the terms of the agreement with exactness. The suit in equity is wholly an affirmative proceeding. The mere fact of non-performance is not enough; its object is to procure a performance by the defendant and this demands a clear, definite and precise understanding of all the terms; they must be exactly ascertained before their performance can be enforced....
24. The Division Bench has thus clearly set out that there has to be first a valid and enforceable contract and if it is not a concluded contract, the relief cannot be given on the basis of the same.
25. Learned Counsel also referred to the judgment of the Supreme court in Smt. Mayawanti v. Smt. Kaushalya Devi wherein it was observed in paras 8 and 19 as under:
8. In a case of specific performance it is settled law, and indeed it cannot be doubted, that the jurisdiction to order specific performance of a contract is based on the existence of a valid and enforceable contract. The Law of Contract is based on the ideal of freedom of contract and it provides the limiting principles within which the parties are free to make their own contracts. Where a valid and enforceable contract has not been made, the court will not make a contract for them. Specific performance will not be ordered if the contract itself suffers from some defect which makes the contract invalid or unenforceable. The discretion of the court will be there even though the contract is otherwise valid and enforceable and it can pass a decree of specific performance even before there has been any breach of the contract. It is, therefore, necessary first to see whether there has been a valid and enforceable contract and then to see the nature and obligation arising out of it. The contract being the foundation of the obligation, the order of specific performance is to enforce that obligation.
19. The specific performance of a contract is the actual execution of the contract according to its stipulations and terms, and the courts direct the party in default to do the very thing which he contracted to do. The stipulations and terms of the contract have, therefore, to be certain and the parties must have been consensus ad idem. The burden of showing the stipulations and terms of the contract and that the minds were ad idem is, of course, on the plaintiff. If the stipulations and terms are uncertain, and the parties are not ad idem, there can be no specific performance, for there was no contract at all. Where there are negotiations, the court has to determine at what point, if at all, the parties have reached agreement. Negotiations thereafter would also be material if the agreement is rescinded.
It has been pointed out that the decision of the learned Single Judge was approved by the Division Bench in its decision dated 27th March, 1996 in FAO (OS) No. 6124/96 which decisions have been upheld by the Apex Court as well. 35. Learned Counsel for the plaintiff has also placed reliance on : AIR 1963 S.C. 1685 Union of India v. A.L. Rallia Ram before this Court in support of the submissions that it is not necessary for a concluded contract to be arrived at only by a formal document and that such a contract can be made out from the correspondence between the parties as well.
56. From the two communications dated 31st December, 2003 of the plaintiff and the letter dated 9th March, 2004, coupled with the fact that the defendant had advertised the plaintiff's restaurant in the complex as late as in November, 2005; the fact that the defendant has not once repudiated the fact that it had agreed on the terms and conditions set out by it in its letter dated 9th March, 2004 to let out the space to the plaintiff as well as the fact that it continues to retain even on date the amount of Rs. 51,000/- paid by the plaintiff, in my view, prima facie sufficiently evidence that so far as the terms and conditions which would govern the contract between the parties are concerned, there was no ambiguity and the same would be governed by the terms and conditions communicated by the defendant in its letter of 9th March, 2004. Exchange of letters between the parties seeking variation or negotiations would not in any manner detract from the material terms and conditions which stood agreed upon between the parties. The formal lease agreement could not be signed, not because the parties had not entered into an agreement but only on account of the silence from the side of the defendant. The defendant at no point of time, has stated that there was no agreement between the parties. It has never communicated that it was not agreeable to executing the formal lease deed.
57. So far as the execution of a formal document signed by both parties not being executed despite negotiations and acceptance of tender is concerned, such requirement has been considered
Please Login To View The Full Judgment!
as an essential condition or term of bargain only if the terms of tender or the terms on which the offers were invited so stipulated. 58. In this behalf, the principles which would govern adjudication of such an issue, have been most succinctly stated by the High Court of Madras in : AIR 1974 Mad 39 Maheshwari Metals and Metal Refinery, Bangalore-2 v. The Madras State Small Industries Corporation Limited. In this pronouncement, the Madras High Court stated the principles thus: 19. Thiru Vedantham Srinivasan, however, makes another submission on the contention that there was no concluded contract. The submission is that under Cl II of Ex. B1 the successful tenderer was required to execute an agreement within ten days of the announcement of the acceptance of the tender for the fulfilment of the contract and that the intention of the parties was therefore that, till such an agreement was executed, there was to be no contract. 20. The principle in such cases has been stated thus in Von Hatzfeldt-Wildenburg v. Alaxander (1912) 1 Ch 284 at p.289, which has been approved by the Privy Council in Shankarlal Narayandas Mundade v. New Mofussil Co. Ltd : AIR 1946 PC 97: It is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the mere formal document may be ignored. In this case Ex.B-1 required the tenderer to quote the rates and make a deposit, and under clause 9, once the defendant accepted the tender, there would be a concluded contract, because all the material terms would become settled by that stage itself. Clause 11 is therefore a mere formality. The contention of Thiru Vendantham Srinivasan is clearly untenable. 59. Before this Court also, all material terms and conditions required in law which constitute valid and binding contract, stood accepted and concluded in the letter dated 9th March, 2004 sent by the defendant. Mr. Ravinder Sethi, learned senior counsel for the defendant has painstakingly pointed out that there were several issues on which there was no agreement and my attention has been drawn to these differences which had been set out in para 47 of the preliminary objections of the written statement. I find that the differences set out in the written statement relate to minor variations so far as installations etc. are concerned. However, there is no dispute so far as the material terms in regard to the location and identity of the property, the consideration or the tenure of arrangement between the parties are concerned. 60. The view I have taken finds support from the pronouncement of this Court in the judgment reported at : AIR 1996 Delhi 92 Progressive Constructions Ltd. v. Bharat Hydro Power Corporation Limited wherein the court held that a concluded contract was reached between the parties even though a formal contract remained to be signed because there were minor discrepancies or variations in the terms which were being negotiated between the parties. It was held that finalisation of the details would not adversely effect the conclusion of the contract which stood arrived at with the acceptance of the tender and the award/letter of intent issued by the respondent to the petitioner. 61. Before this Court, it is pointed out that the plaintiff had, on its understanding of the agreed terms and conditions, addressed a letter dated 31st December, 2003 to the defendant enclosing a bank draft for the amount payable. The defendant had replied to the same stating that it was pleased to "confirm the space and terms and conditions as per your letter dated 31st December, 2003 in the FUN CITY Multiplex-cum-Mall". The details of the terms and conditions agreed upon were set out in this letter by the defendant. 62. An issue has been raised before this Court with regard to the brand name of the plaintiff by which it had to run and operate the restaurant. I find that there is also no ambiguity inasmuch as both the letter dated 31st December, 2003 of the plaintiff as well as the defendant's letter of 9th March, 2004 clearly refer to the "Mircheez" food court at FUN CITY, Prashant Vihar, Sector - 14, Outer Ring Road, Rohini, Delhi. In fact in the defendant's letter dated 9th March, 2004, the subject of the letter has also clearly stated that the same is in respect of the "Confirmation for the Mircheez food court". Therefore, prima facie I find no merit in the submissions raised by the defendant. 63. Consideration of a prayer for interim injunction is governed by well settled judicial principles. It is well settled that a plaintiff has to establish a prima facie case in its favour and that grave and irreparable loss and damage shall enure to the plaintiff if the interim protection is not granted. Balance of convenience, interest of justice and equity are also to be weighed. 64. Law does not prohibit a written offer, signed by one party being accepted orally by the other party. Therefore, a written offer maybe a good memorandum if shown to be accepted by the plaintiff by contemporaneous material. (Ref: Decision dated 21st August, 2006 in CS (OS) No. 1415/2003 Sanjay Puri v. Radhey Lal and Ors. Ref.; (1835) 3 A & E 355 Dobell v. Hutchinson; (1866) 1 LR Ex.342 Reuss v. Picksley and Anr.; (1901) 1 Ch.D 543 Lever v. Koffler and (1960) 1 WLR 286 Parker and Anr. v. Clark and Anr.) 65. In the light of the foregoing discussion, I have held that prima facie the parties are at ad idem on all material terms and entered into a concluded contract. There can be no doubt that grave and irreparable loss shall enure to the plaintiff in case the defendant succeeds in the apprehended threats of the transfer and parting with the possession of the property to a third party. In this view of the matter, I am of the view that the plaintiff deserves to be protected by ad interim protection. M/s Aliens Buildcom Private Limited is claiming under an agreement whereby the defendant has proposed to transfer its right, title and interest in the subject property to it. There is no dispute that the plaintiff is asserting limited rights over the subject property and that nothing would preclude M/s Aliens Buildcom from abiding by the agreement entered into between the plaintiff and the defendant. However, no intention to do so has been placed before this Court. On the contrary, M/s Aliens Buildcom Private Limited has also assailed the agreement entered into between the plaintiff and the defendant. In this background, relief cannot be moulded to facilitate implementation of the transaction between the defendant and M/s Aliens Buildcom Private Limited on the one hand as well as between the plaintiff and the defendant on the other. 66. Accordingly, the defendant M/s Aggarwal Entertainment Private Limited is directed to maintain the status quo in respect of title and possession in the premises comprising of super built-up area 5500 sq. ft., covered area 2080 square feet, open covered area 1350 sq. ft. on Level First of their "Fun City Mall" with Multiplex coming up at Prashant Vihar, Sector 14, Outer Ring Road, Rohini, Delhi - 110 085 more specifically shown in red colour in the site plan filed by the plaintiff, till adjudication in the present suit. Accordingly, IA No. 6507/2006 is allowed in the above terms. IA No. 8051/2006 & IA No. 11049/2006 filed by the defendant and M/s Aliens Buildcom Private Limited respectively are consequently dismissed.