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HIGH COURT OF DELHI
M/S VERSATILE COMMOTRADE PVT LTD ..... Plaintiff
Through: Mr. Ratan K. Singh and Mr. Nikhlesh Krishnan, Advocates.
Through: Mr. Dharmesh Misra and Mr. Ankit Kakkar, Advocates.
JUDGMENT
1. This is an application seeking exemption from filing original/certified copies/legible copies of the documents. Exemption allowed, subject to just exceptions. I.A. No.8943/2014, I.A. No.14384/2014 & I.A. No.8896/2017 in CS(OS) 802/2014
2. The Plaintiff entered into an Agreement to Sell dated 21st April, 2013 for sale of a land admeasuring 14 bighas and 12 biswa out of Khasra Nos. 4/12, 7, 8/2, 22 & 23 situated in the revenue estate of Village Ujjwa, Tehsil Nazafgarh, Delhi (hereinafter referred to as “subject land”). The sale consideration agreed was Rs.3,41,00,000/-. (Rupees Three Crores Forty One Lakhs only) per acre for total 292 biswa amounting to Rs.10,37,20,833/- 2018:DHC:4400 (Rupees Ten Crores Thirty Seven Lakhs Twenty Thousand Eight Hundred Thirty Three Only). The terms and conditions of the Agreement to Sell are as under: -
10. Breach of Agreement 10.[1] That the intending sellers has specifically made it clear to the intending purchasers that the intending sellers are in urgent need of funds and only therefore, the intending sellers has agreed to transfer her rights in the said land to the second party and in case the payment of the full balance consideration is not made to the first party within 80 days from the date hereof, huge financial losses and other irreparable losses would be suffered by the intending sellers and accordingly time is the essence of this transaction. 10.[2] That as stated above and as also specifically agreed between the parties, TIME IS THE ESSENCE OF THIS CONTRACT, and in case the INTENDING PURCHASERS fails to make the payment of balance sale consideration to the Seller, within the stipulated period as mentioned hereinabove, then the earnest money so received by the Seller from the INTENDING PURCHASERS shall stand forfeited and this Agreement shall automatically be deemed to be cancelled, null and void ab-inito, without any further reference to the INTENDING PURCHASERS and further the Seller shall be fully entitled to sell the said land, without any objection, claim, demand and lien, by the INTENDING PURCHASERS. The INTENDING PURCHASERS hereby un-conditionally agree that the INTENDING PURCHASERS shall not resort to any legal action against the said land and/or against the Seller in case the INTENDING PURCHASERS fails to pay the full sale consideration to the Seller within the stipulated period as mentioned above and the INTENDING PURCHASERS hereby expressly waives such rights, if any, in favour of the Seller. 10.[3] In case despite receiving the balance sale consideration from the INTENDING PURCHASERS, the INTENDING SELLERS fail to execute and present themselves for registration of the sale deed then in that event the INTENDING PURCHASERS shall have the right to enforce the specific performance of this Agreement at the cost and risk of the INTENDING SELLERS.
13. Validity This Agreement to Sell is valid for 80 days from the date of execution subject to realization of payments.”
3. Pursuant to the execution of the Agreement to Sell, the Plaintiff paid a sum of Rs.1,25,00,000/- as the earnest sale consideration. The balance sale consideration was to be paid within 80 days from the execution of the Agreement i.e. the closing date. Thereafter, the Defendant requested for further payment which was acceded to by the Plaintiff. A payment of Rs.50,00,000/- was made on 11th May, 2013 and another payment was also made of Rs.25,00,000/-. However, the date of receipt of the said sum is not clear.
4. It is the case of the Plaintiff that it repeatedly requested the Defendant to furnish the No Objection Certificate for enabling the transfer but the Defendant did not furnish the same. On 16th September, 2013, the Defendant issued a notice to the Plaintiff stating that the earnest money stood forfeited as the balance sale consideration was not paid and that the Agreement was, accordingly discharged. Thus, the Defendant forfeited the entire sum of Rs. 2 crores.
5. The Plaintiff replied through his counsel on 25th September, 2013, challenged the said forfeiture and called upon the Defendant to furnish the No Objection Certificate so that the sale deed could be executed on a mutually agreed date. By a further legal notice dated 15th November, 2013, the Plaintiff called upon the Defendant to pay back a sum of Rs.2.18 crores however, the Plaintiff did not receive any reply. Accordingly, the Plaintiff filed the present suit under Order XXXVII seeking a decree for a sum of Rs.[2] crores along with interest @ 16.25% per annum w.e.f. 15th November, 2013 till the date of actual payment.
6. The Plaintiff filed I.A. No.8943/2014 seeking summons for judgment and the Defendant filed its leave to defend I.A. No.14384/2014.
7. The case of the Defendant in its application for leave to defend is that a suit under Order XXXVII is not maintainable in respect of money paid under an Agreement to Sell. The Defendant’s further case was that despite repeatedly calling upon the Plaintiff to pay the remaining sale consideration after obtaining the No Objection Certificate, the Plaintiff failed to come forward with the sale consideration. The Defendant thus argues that time was the essence of the contract as per the Agreement to Sell and the Plaintiff having not performed its part of the contract, is not entitled to recovery. The Defendant relies upon the following judgments: -
(i) CS(COMM) 925/2016 - Versatile Commotrade Private
Limited vs. Kesar Devi
(ii) CS(COMM) 925/2016 - Versatile Commotrade Private
Limited vs. Kesar Devi
(iii) Delhi Power Supply Company Limited vs. Hindustan Vidyut
(iv) M/s B.T.M. Exports Limited vs. M/s Adhunik Corporation
(v) Satish Batra vs. Sudhir Rawal (2013) 1 SCC 345.
(vi) Shree Hanuman Cotton Mills & Ors. vs. Tata Air Craft Ltd.
(1970) 3 SCR 128
(vii) Mechelec Engineers and Manufacturers vs. Basic Equipment
8. The Plaintiff however submits that the No Objection Certificate having not been obtained, there was no question of the remaining sale consideration being paid.
9. A perusal of the Agreement to Sell and the clauses thereof shows that the earnest money was to the tune of Rs.1.25 crores. The Defendant was entitled to forfeit the earnest money if the Plaintiff was in breach and did not pay the balance sale consideration.
10. It is, however, clear that the remaining Rs.75 lakhs which was paid in May, 2013 after a month had passed from the execution of the Agreement to Sell was not the earnest money but was part of the balance sale consideration. As per clause 2.1.[1] in the Agreement, only Rs.1.25 crores out of the total sale consideration formed the earnest sale consideration, hence the amount of Rs.75 lakhs could not have been forfeited by the Defendant. Thus the Plaintiff is entitled to a decree qua for a sum of Rs.75 lakhs. This also finds support in the judgment of the Supreme Court in Satish Batra vs. Sudhir Rawal (2013) 1 SCC 345 wherein in paragraph 15, the Supreme Court held as under: -
11. The sum of Rs.75 lakhs being a part of the balance sale consideration and not the earnest sale consideration is not liable to be forfeited. A Ld. Single Judge of this Court in Palm Art Apparel Pvt. Ltd. v. Enkay Builders Pvt. Ltd. [C.R.P. 3/2017 decision dated 31st July, 2017], had adopted a similar approach. The Court observed as under:
12. Insofar as the sum of Rs.1.25 crores is concerned, the case of the Defendant is that the Defendant repeatedly sent emails to the Plaintiff informing the Plaintiff that the No Objection Certificate had been obtained from the competent authority. The No Objection Certificate was claimed to have been obtained on 6th June, 2013 and forwarded via email on 13th June,
2013. A perusal of the documents filed by the Defendant shows that an email was sent to Mr. Devendra Dahiya at email devender_dahiya77@yahoo.co.in and Mr. Rajesh Gullah at rgullah@yahoo.com, attaching the No Objection Certificate.
13. Almost a month later, on 11th July, 2013, a reply was sent by Mr. Rajesh Gullah that the last date for execution of the sale deed was 11th July, 2013, however, the No Objection Certificate had expired on 5th July, 2013. Thus, the Plaintiff called upon the Defendant to get the No Objection Certificate extended. The Defendant claims to have obtained a fresh No Objection Certificate on 16th August, 2013, which was valid for another month and the same was again sent on 25th August, 2013. However, the Plaintiff did not come forward with the balance sale consideration.
14. The first and foremost feature is that the Agreement to Sell does not make any mention of the No Objection Certificate to be obtained by the Defendant. In any event, from the documents placed on record, it is clear that the Defendant did obtain the No Objection Certificate within the time period. The emails sent are challenged by the Plaintiff on the ground that Mr. Rajesh Gullah was not authorized to receive the emails and the emails are not proved as per Section 65B of the Indian Evidence Act, 1872. This Court has perused the emails placed on record along with the Plaintiff’s stand in the reply to the leave to defend application. Collusion is alleged in the said reply between the Defendant and Mr. Rajesh Gullah. At this stage, without trial, the question as to whether the No Objection Certificates were sent or whether Mr. Rajesh Gullah was duly authorized to receive the No Objection Certificate/emails on behalf of the Plaintiff cannot be determined by this Court. Moreover, the question as to whether there was a breach would also require oral evidence and the same cannot be decided in an Order XXXVII suit. The conflicting claims of the parties require adjudication after trial. The question, however, is as to whether leave to defend ought to be granted unconditionally.
15. A perusal of the Agreement shows that nowhere in the Agreement, is Mr. Rajesh Gullah’s name mentioned. It is further alleged that the forfeiture notice itself was sent to Mr. Rajesh Gullah who shares the same office as that of the Plaintiff. Thus, it was alleged that Mr. Rajesh Gullah was representing the Plaintiff with the Defendant. There is no clarity as to why no response was given by the Plaintiff to the email dated 13th June 2013, till 11th July, 2013 though the No Objection Certificate was sent on 13th June, 2013 to Mr. Devendra Dahiya and Mr. Rajesh Gullah. The silence on behalf of the Plaintiff, for almost a month, thereby allowing the No Objection Certificate to expire appears to suggest that there was some hesitation or lack of preparedness or willingness to pay the balance sale consideration. Though 11th July, 2013 was the last date, there was no need for the Plaintiff to wait till the last date for payment of balance sale consideration to reply to the Defendant or in expressing readiness and willingness, especially when the No Objection Certificate was sent a month back, i.e., on 13th June, 2013 itself. There is no serious dispute to these emails except saying that Mr. Devendra Dahiya and Mr. Rajesh Gullah were not duly authorized. Prima facie, at this stage, it appears that the Defendant had performed its part of the Agreement.
16. However, the legal position is that forfeiture of earnest money cannot happen automatically. As per Kailash Nath Associates Vs. DDA (2015) 4 SCC 136, the party has to establish that it actually suffered a loss and there can be no windfall in the absence of establishing actual loss. The Supreme Court observed as under:
17. Thus, actual loss can be established only in trial. The test as to whether the forfeiture is valid or not is to be determined as per Section 73 and 74 of the Indian Contract Act, 1872. Thus insofar as the sum of Rs.1.25 crores is concerned, the Order XXXVII suit is converted into an ordinary suit. The suit shall proceed for trial.
18. The leave to defend is granted to the Defendant subject to furnishing of some security in the form of immovable property or a bank guarantee to the satisfaction of this Court in respect of the sum of Rs.1.25 crores. The leave to defend is, thus, partly allowed.
19. The suit is, however, decreed for a sum of Rs.75 lakhs which is not liable to be forfeited as it was part of the balance sale consideration, as per Satish Batra (Supra). A decree for a sum of Rs.75 lakhs along with interest @9% per annum from 13th March, 2014 till date of payment is passed in favour of the Plaintiff against the Defendant.
20. All the three applications are disposed of in the above terms.
PRATHIBA M. SINGH, J. Judge JULY 20, 2018