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2013 DIGILAW 2270 (DEL)

Ghanshyam Dass Gupta v. Makhan Lal

2013-11-25

RAJIV SAHAI ENDLAW

body2013
Judgment : Rajiv Sahai Endlaw, J. 1. The appeal impugns the judgment and decree (dated 29.03.2003 of the Court of Additional District Judge (ADJ) in Suit No.96/2002 filed by the respondent) of recovery of Rs.2,65,000/- with costs and interest from the appellant. 2. Notice of the appeal and the application for stay was issued. Vide order dated 05.12.2003, the appeal was admitted for hearing, Trial Court record requisitioned and execution stayed without imposing any condition of deposit of decretal amount or furnishing security therefor on the appellant. The appeal was, vide judgment dated 13.01.2012 pronounced in the absence of the counsels for both the parties, dismissed. The appellant preferred SLP(C) No.13475/2012 which was granted and converted to Civil Appeal No.5950/2012 which was allowed for the reason that in the absence of the appellant or his counsel, the appeal could not have been dismissed on merits and the appeal remanded to this Court for decision afresh. The appellant however thereafter did not apply to this Court for having the appeal listed. When the counsel for the appellant finally appeared in response to a Court Notice, he sought adjournment. In view of the said conduct of the counsel for the appellant, vide order dated 21.10.2013, the stay of execution earlier granted was vacated. However, it is informed that the decree has not been executed as yet. The counsels have been heard. 3. The respondent instituted the suit from which this appeal arises, for specific performance of an Agreement of Sale dated 09.11.2000 by refund to the respondent/plaintiff of the earnest money of Rs.2,50,000/- paid by him with equivalent amount of damages of Rs.2,50,000/- i.e. for recovery of a total sum of Rs.5,00,000/-from the appellant, pleading: (i) that the appellant/defendant had vide Agreement to Sell dated 09.11.2000 agreed to sell his 2½ storeyed property built on an area measuring 100 sq. yds. yds. bearing No.A-125, Shastri Nagar, Delhi to the respondent/plaintiff and the respondent/plaintiff at the time of execution and signing of the said Agreement had paid a sum of Rs.2,50,000/- to the appellant/defendant; (ii) that it was a specific term of the Agreement that if the appellant/defendant fails to perform his part of the agreement and fails to register the Sale Deed with transfer of a clear marketable title with vacant possession, the respondent/plaintiff will be entitled to recover double the amount i.e. Rs.5,00,000/- on the expiry of the period of the agreement i.e. 10.01.2001; (iii) that it was specifically agreed that the appellant/defendant will get the said house vacated from the tenants before the date fixed for completion of the sale and will obtain Income Tax Clearance Certificate and other no objection permission to sell from other concerned departments and a sanctioned plan was also to be obtained by the appellant/defendant from the MCD; (iv) that the appellant/defendant failed to perform his part of the agreement and did not get the property vacated from the tenants and did not obtain the sanctioned plan from the MCD and did not obtain Income Tax Clearance Certificate and did not obtain the permission from the competent authority to sell the property; (v) that the appellant/defendant approached the respondent/plaintiff for extension of time for completion of the sale and the respondent/plaintiff agreed to extension of time till 10.03.2001; (vi) that the appellant/defendant could not perform his aforesaid obligations till 10.03.2001 also and sent a false and frivolous notice dated 26.04.2001 claiming balance payment of consideration with interest from 10.01.2001; and, (vii) that the respondent/plaintiff replied thereto on 10.05.2001 demanding the sum of Rs.5,00,000/- and ultimately for which the suit was filed. 4. 4. The appellant/defendant contested the suit, by filing a written statement, on the grounds: (A) that it was the respondent/plaintiff who was in breach of the agreement and the appellant/defendant even then was ready and willing to execute the document of sale and hand over vacant possession of the property to the respondent/plaintiff against receipt of balance sale consideration with interest thereon from 10.01.2001 till the date of payment; (B) that in fact a written Agreement dated 03.10.2000 was first drawn between the parties and the respondent/plaintiff had then paid Rs.1,25,000/-as earnest money and the sale was to be completed by 01.01.2001 on payment of balance sale consideration; (C) the respondent/plaintiff however changed his mind and sought some more time with the condition that first the appellant/defendant should have a sale deed of the property executed in his favour; (D) that the appellant/defendant accordingly on 06.11.2000 got executed the sale deed in his favour; (E) thereafter another Agreement dated 09.11.2000, having final date of completion of the deal as 10.01.2001 was executed; (F) that the respondent/plaintiff on account of his financial problems could not complete the deal; (G) denying that it was agreed that the appellant/defendant shall obtain Income Tax Clearance Certificate, no objection permission or the sanctioned plan from the MCD; (H) pleading that all the documents in possession of the appellant/defendant were shown to the respondent/plaintiff to his satisfaction at the time of signing the agreement and this fact is mentioned in the agreement also; and, (I) that the property was got totally vacated about a month before the last date of agreement and remained vacant even after the reply dated 10.05.2001 was received and the first and second floors of the property were even then lying vacant and the appellant/defendant was suffering loss of rental income due to the respondent plaintiff; the ground floor had been let out again in June, 2001. 5. The respondent filed a replication denying the contents of the written statement and reiterating the case in the plaint. The offer of the appellant/defendant in the written statement, to complete the sale even then, was not accepted. 6. On the pleadings aforesaid of the parties, the following issues were framed in the suit on 22.10.2001: “1. Whether the suit is not properly valued for the purpose of court fee and jurisdiction? OPD 2. Whether the plaintiff is entitled to the relief claimed for? 6. On the pleadings aforesaid of the parties, the following issues were framed in the suit on 22.10.2001: “1. Whether the suit is not properly valued for the purpose of court fee and jurisdiction? OPD 2. Whether the plaintiff is entitled to the relief claimed for? OPP 3. Relief.” 7. Both parties examined themselves in support of their respective cases. 8. Vide order dated 23.10.2002, issue No.1 was decided in favour of respondent/plaintiff. Whether the suit is not properly valued for the purpose of court fee and jurisdiction? OPD 2. Whether the plaintiff is entitled to the relief claimed for? OPP 3. Relief.” 7. Both parties examined themselves in support of their respective cases. 8. Vide order dated 23.10.2002, issue No.1 was decided in favour of respondent/plaintiff. The learned ADJ has decreed the suit in favour of the respondent/plaintiff for Rs.2,65,000/-, finding/observing/holding: (I) that it was the admitted case of the parties that besides the earnest money of Rs.1,25,000/- paid on 03.10.2000, a further sum of Rs.1,25,000/- was paid by the respondent/plaintiff to the appellant/defendant on 09.11.2000; (II) that the Agreements of two dates as pleaded by the appellant/defendant were not in dispute; (III) that since the deal was for Rs.28,00,000/-, as per provisions of Section 230A and 269UC of the Income Tax Act, 1995 specific permission from the Income Tax Authority was required to finalize the deal; (IV) it was not the case of any party that this permission was ever applied for; (V) that since the permission was neither applied nor obtained, the sale deed could not have been executed on the date fixed in the agreement; (VI) the agreement as such was not capable of performance on the date fixed for finalization of the sale deed; (VII) that though the appellant/defendant claimed to have got the sale deed of the property executed in his favour in compliance of his obligations under the Agreement to Sell with the respondent/plaintiff but from the said sale deed, the modus operandi of deceiving the revenue authorities was clear; the said sale deed though dated 06.11.2000 was for a total sale consideration of Rs.1,50,000/- only, though the market price of the property agreed between the parties at that time was Rs.28,00,000/-; the transaction was thus under-valued, causing loss to the exchequer; (VIII) that the contention of the appellant/defendant that there was no clause in the agreement providing for obtaining Income Tax Clearance Certificate was meritless as such permission was required as per the law and it was immaterial whether it was incorporated in the agreement or not; (IX) that since the agreement had become incapable of performance owing to the parties having not obtained the income tax permission, the parties were required to be restored to the same position as prevailing before they entered into the agreement; (X) accordingly, the appellant/defendant was liable to refund the earnest money of Rs.2,50,000/- to the respondent/plaintiff; (XI) that the agreement having become incapable of performance by operation of law, the respondent/plaintiff was not entitled to double the amount which was by way of penalty; (XII) since the appellant/defendant had enjoyed the sum of Rs.2,50,000/-of the respondent/plaintiff, he was liable to pay interest thereon; and, accordingly, decree for Rs.2,65,000/- with interest was passed. 9. I may at the outset state that the two reasons aforesaid on which the learned ADJ has decreed the suit appear to be a creation of the Court itself as no reference thereto is to be found in the pleadings as enumerated above or in the evidence recorded. Though the respondent/plaintiff had referred to income tax permission/clearance but it is nowhere found to be the case of the respondent/plaintiff that Section 269UC of the Income Tax Act was attracted. Similarly, it was not the case of the respondent/plaintiff that the sale deed dated 06.11.2000 in favour of the appellant/defendant was of the respondent/plaintiff that was under-valued. 10. Be that as it may, the first of the aforesaid two reasons being a matter of law, it still has to be seen whether the law has been correctly applied. 11. I will however first take up the second reason given by the learned ADJ of the appellant/defendant having caused loss to the exchequer or having under-valued the sale deed. 12. As aforesaid, there are no pleadings in this respect. Neither was it the case of the respondent/plaintiff nor the learned ADJ is found to have put the appellant/defendant to notice that why the said sale deed should not be held to be under-valued. Without the same being done, the finding in this regard cannot be upheld. Moreover, the learned ADJ did not make any enquiry as to in pursuance to agreement of which date, the said sale deed was executed. It is well nigh possible that the appellant/defendant had entered into an agreement for purchase of the said property at a sale consideration of Rs.1,50,000/- much prior to the date of execution of the sale deed and the sale deed was in pursuance to such an agreement and would thus be for the consideration earlier settled and paid and cannot be for any other consideration. The valuation of the said sale deed in favour of the appellant/defendant in pursuance to an agreement of an earlier date cannot be governed by the price of the property in November, 2000 as borne out from the agreement between the parties. Moreover, the Sub-Registrar, who is entitled and competent to seize an undervalued document presented for registration and withhold its registration had registered the sale deed and which raised a presumption of validity in its favour. Moreover, the Sub-Registrar, who is entitled and competent to seize an undervalued document presented for registration and withhold its registration had registered the sale deed and which raised a presumption of validity in its favour. To dislodge such presumption, the learned ADJ did not even conduct any enquiry. Thus, the said finding which appears to have largely swayed the learned ADJ has but to be set aside. There is another aspect. Even if it were to be held that the appellant/defendant had under-valued the sale deed in his own favour, the consequence thereof could not have affected the outcome of the subject litigation; for such undervaluation, only penalty could have been imposed. 13. The counsel for the appellant/defendant has argued that the learned ADJ has misdirected himself in holding that Section 269UC of the Income Tax Act was applicable to the subject transaction. It is contended that the subject transaction was admittedly for a sum of Rs.28,00,000/- only. It is argued that Section 269UC of the Act was applicable only to sale transactions, apparent consideration whereof was Rs.50,00,000/- or more. An extract from a book on Income Tax showing the applicability of Section 269UC to transactions above Rs.50,00,000/- with effect from 01.07.1995 is handed over. 14. The counsel for the respondent/plaintiff states that he has not verified in this respect. 15. I have examined the matter. Section 269UC was introduced in the Income Tax Act with effect from 01.10.1986. The apparent sale consideration, above which the said Section was applicable (in Delhi), till 30.06.1995 was Rs.20,00,000/- and from 01.07.1995 was Rs.50,00,000/- Section 269UC was ultimately deleted in the year 2002. Thus, at the time of subject transaction, in the year 2000-2001, for Rs.28,00,000/-, the said provision was not attracted 16. Thus the said reasoning also of the learned ADJ is erroneous and cannot be sustained. 17. A perusal of the Agreements to Sell does not show any term requiring the appellant/defendant to obtain any of the permissions as were pleaded in the plaint by the respondent/plaintiff. Rather the execution and registration of the sale dated 06.11.2000 in favour of the appellant/defendant shows that no such permissions were required. The said sale deed does not record or show any such permissions having been obtained prior to the execution thereof. 18. The counsel for the respondent/plaintiff is also unable to tell as to which permissions were required. Rather the execution and registration of the sale dated 06.11.2000 in favour of the appellant/defendant shows that no such permissions were required. The said sale deed does not record or show any such permissions having been obtained prior to the execution thereof. 18. The counsel for the respondent/plaintiff is also unable to tell as to which permissions were required. The only thing which he is able to say is that since the appellant/defendant had under the Agreement to Sell agreed to convey a clean (Paak and Saaf in Hindi) title in the property to the respondent/plaintiff, the appellant/defendant was required to show the sanctioned plan of construction on the property and it was not shown. 19. Needless to state, there is no mention of any such sanctioned plan in the Agreement to Sell. On the contrary, the Agreement to Sell clearly records that the respondent/plaintiff prior to execution thereof had fully satisfied himself after examining all the documents with respect to the property and had agreed to purchase on those documents only. It is not the case that at the time of Agreement to Sell any sanctioned plan was shown. 20. The crucial question falling for adjudication in the present suit, as to who was in breach of the agreement, has not been addressed by the learned ADJ. However, a detailed discussion on the said aspect is not felt necessary inasmuch as it is writ large that it was the respondent/plaintiff who did not want to proceed with the agreement. Admittedly, the date fixed for performance was 10.01.2001. The respondent/plaintiff did not issue any letter or notice to the appellant/defendant to perform his part of the Agreement to Sell. It is the appellant/defendant who vide notice dated 26.04.2001 called upon the respondent/plaintiff to pay the balance sale consideration and informed the respondent/plaintiff that upon the respondent/plaintiff’s failure to do so, the earnest money shall be forfeited. It is only in response dated 10.05.2001 to the said legal notice that the respondent/plaintiff set up the case on which the suit was ultimately filed. The respondent/plaintiff even then did not call upon the appellant/defendant to obtain the permissions or show his willingness to, on such permissions being obtained, go forward with the transaction. On the contrary, demand for Rs.5,00,000/- was made. The respondent/plaintiff even then did not call upon the appellant/defendant to obtain the permissions or show his willingness to, on such permissions being obtained, go forward with the transaction. On the contrary, demand for Rs.5,00,000/- was made. Not only so, from the conduct of the respondent/plaintiff, of concealing the earlier agreement dated 03.10.2000 in the plaint and of giving false reasons for breach by the appellant/defendant of the agreement, and which reasons are not borne out from the written Agreement to Sell it is evident that it is the respondent/plaintiff who was in breach. Though a plea of the appellant/defendant having not got the property vacated was also taken but the same was not proved; rather the appellant/defendant proved having got the property vacated prior to the date for completion of sale. 21. Once, it is found that it was the respondent/plaintiff who was in breach, the question of the respondent/plaintiff being entitled to the earnest money which was expressly agreed to be forfeited in the event of breach by the respondent/plaintiff does not arise. 22. This Court in the earlier judgment dated 13.01.2012 supra dismissing the appeal had relied on Fateh Chand Vs. Balkishan Das AIR 1963 SC 1405 . However, the Supreme Court in Satish Batra Vs. Sudhir Rawal (2013) 1 SCC 345 has held that the monies given as earnest or security for performance, once paid continue to remain the property of the recipient, having been paid as a contract of security which is distinct and separate from real or pure contract and the right to forfeiture arises under a contract of security, which can be provided expressly or impliedly. 23. The appeal therefore succeeds. The judgment and decree of the learned ADJ is set aside and the suit of the respondent/plaintiff is dismissed. I however refrain from imposing any costs on the respondent/plaintiff. Decree sheet be prepared.