IMPORTANT POINTS
1. Buyer s charge under Section 55(6)(b) of the Transfer of Property Act on seller s interest is a statutory charge and enforceable not only against seller but against all persons claiming under him.
2. Seller cannot escape from his liability to pay interest on purchase money under Section 55(6)(b) of the Transfer of Property Act relying on contract that interest will not be payable when contract itself was result of fraud on the part of the seller.
3. The period of limitation for enforcement of the statutory charge created under Section 55(6)(b) is 12 years from the date when becomes due and not 3 years. The period remains the same even for enforcement of the charge on the substituted security.

Headnote:(i) Transfer of Property Act, 1882 -Section 55(6)(b)-Buyer s right-Statutory charge-Nature of-Buyer will have a charge on seller s interest-Buyer s charge is a statutory charge and differ from a contractual charge-Charge on property is enforceable not only against seller but against all persons claiming under him-Buyer is entitled to interest on amount of purchase money paid till date of delivery of property or execution of sale deed.
       Held : It is plain from the provision of Section 55(6)(b) that, in the absence of a contract to the contrary, the buyer will have a charge on the seller s interest in the property which is the subject matter of the sale agreement insofar as the purchase money and interest on such amount are concerned, unless the buyer has improperly declined to accept delivery. The charge is available against the seller and all persons claiming under him. This charge in favour of the buyer is the converse of the seller s charge under Section 55(4)(b). The buyer s charge under this Section is a statutory charge and differs from a contractual charge which a buyer may be entitled to claim under a separate contract. The charge on the property under Section 55(6)(b) is enforceable not only against the seller but against all persons claiming under him. Before the amending Act of 1929, the words with notice of payment occurred after the words "all the persons claiming under him". These words were omitted as they allowed a transferee without notice to escape. After the Amendment of 1929, notice to the purchaser has now become irrelevant. (Para 28)
       When the property upon which the charge is created gets converted into another form, the buyer will be entitled to proceed against the substituted security. This is a general principle of law and Section 73 of the Transfer of Property Act is only an example of the said principle. The above principle has been applied to enforce mortgage on substituted securities. The same principle which is applicable to mortgages applies to cases of statutory charge under Section 55(6)(b). If immovable property is charged and is converted into another property or money, then the charge will fasten on the property or money into which the subject matter of the agreement is converted. (Para 29)
       The above sub-section of Section 55 also makes it clear that the buyer is entitled to interest on the amount of purchase money paid. Interest is payable from the date of payment of the purchase money to the seller till date of delivery of property to the purchaser or till the execution of the sale deed, whichever is earlier. (Para 30)
       (ii) Transfer of Property Act, 1882 -Section 55(6)(b)-Limitation Act, 1963-Article 62-Buyer s right-Statutory charge-Time limit for enforcement of-Period of limitation for enforcement of statutory charge created under Section 55(6)(b) is 12 years from date when became due-Period remains the same even for enforcement of the charge on substituted security. (Paras 31 & 32)
       (iii) Transfer of Property Act, 1882-Section 55(6)(b)-Buyer s right-Statutory charge-Interest on amount of purchase money-Stipulation in agreement that interest will not be payable-Court s finding that contract fraudulent-Seller cannot rely upon term relating to contract to the contrary to escape payment of interest-Seller liable to pay interest. (Paras 33 to 37)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

The statutory charge created under Section 55(6)(b) of the Transfer of Property Act is enforceable against the seller and all persons claiming under him, and it is a statutory charge that differs from a contractual charge (!) (!) .
The buyer’s charge under Section 55(6)(b) is a statutory right, and it is available unless the buyer has improperly declined to accept delivery of the property. This charge applies to the purchase money and interest on such amount, and it is enforceable against the seller and all claimants under him (!) (!) .
When the property on which the charge is created is converted into another form, the charge extends to the substituted security, including money or other property into which the original is converted (!) (!) .
The period of limitation for enforcing the statutory charge under Section 55(6)(b) is 12 years from the date the amount becomes due. This period remains the same even if enforcement is sought against substituted security (!) (!) .
Interest on the purchase money is payable from the date of payment until the date of delivery of the property or until the sale deed is executed, unless the contract states otherwise. However, if the contract is found to be fraudulent, reliance on contractual clauses that deny interest is not permissible (!) (!) (!) .
A finding of fraud by the court affects the enforceability of contractual terms that deny interest, especially when the fraud involves the collection of amounts from more buyers than there are available units, which was established as fraudulent conduct (!) (!) (!) .
The period of limitation for claims to enforce the statutory charge is 12 years from when the amount becomes due, aligning with the provisions of the Limitation Act (!) (!) .
The contractual stipulation that interest will not be payable in case of transaction failure cannot be relied upon by a seller if the court has established that the transaction involved fraud. The court’s earlier finding of fraud overrides such contractual clauses (!) (!) (!) .

Please let me know if you need further elaboration or assistance.

JUDGMENT

M. Jagannadha Rao, J.-On May 6th, 1996 this Court delivered judgment in Delhi Development Authority v. Skipper Construction Co. (P) Ltd.1. Thereafter, various other issues regarding the Skipper group of Companies continued to pose serious issues of law and fact. Sometimes, it looked like a maze which could baffle lawyers and courts alike. More claims with regard to Jhandevalan property which was the subject matter of the above case, - of persons who claimed to be purchasers of space proposed to be built at Jhandevalan came before us. In addition, claims of similar purchasers of property at Barakhamba Road and also in regard to Technology Park, came before us. In this judgment, we propose to deal with certain issues concerning the Jhandevalan property which have remained undecided or not decided finally in the earlier orders of this Court.

2. In order to understand how these issues arise, it is necessary to go back (A) to the long history of events set out in the above said judgment and (B) to the subsequent events. In Part (C) we shall deal with four issues which have crystallised. In the rest of this judgment Delhi Development Authority is described as DDA and Skipper Construction Company (P) Ltd is described as Skipper, for convenience.

PART A

3. In October, 1980, Skipper became the highest bidder for purchase of a plot of land at Jhandevalan in Delhi which was advertised for sale for Rs. 9.82 crores and deposited 25 of the price. The balance was to be deposited as per the tender schedule. Skipper defaulted in spite of seven extensions during January 1981 to April 1982. When proceedings for cancellation of the bid were in the offing, Skipper moved the Court and obtained a stay order on 29.5.82 and started making representations. DDA appointed a Committee to work out a formula and pursuant to the recommendations of the Committee, Skipper was asked to enter into a revised agreement incorporating fresh terms. Skipper raised objections to these proposals from 1984 till 1987 but finally the agreement was entered into on 11.8.87. Even before permission to enter was however granted under the revised agreement, Skipper started selling the space to be built in the proposed structure and started receiving monies. Though Skipper paid the 1st instalment much beyond the time, it did not pay the second instalment but furnished Bank guarantees which were found to be defective. It however made some token payments to DDA. Subsequently, CWP. 2371/1989 was filed for a direction to DDA to sanction plans/permit construction at its risk. On 19.3.90, High Court of Delhi permitted construction in accordance with sanctioned plan subject to deposit of Rs. 20 lakhs in two instalments and 1.94 crores in one month. DDA filed SLP(C) 6338/90 and 6339/90. Meanwhile, the Delhi High Court passed an order in the WP. 2371//89 on 21.12.90 directing payment of Rs. 8.12 crores approx. in 30 days and stopped further construction w.e.f. 9.1.91 till payment and stated that in default, the revised agreement dated 11.8.87 would stand cancelled and DDA would be entitled to re-enter the plot. Reasons for the order were given on 14.1.91, Skipper defaulted but approached this Court on 29.1.91 in SLP(C) 186/91 when this Court passed an interim order for deposit of Rs. 2.5 crores in one month and Rs. 2.5 crores before 8.4.91 and Skipper was expressly prohibited from inducting any person in the building and from creating any rights in favour of third parties. In spite of it, Skipper issued advertisement on 4.2.91 and on latter dates in newspapers in Delhi and invited further purchasers to purchase the space in the proposed building. Sales agreements were entered into by certain purchasers inspite of DDA s warning dated 13.2.91 published in newspapers. SLP(C) 186/91 was dismissed on 25.1.93.

4. DDA re-entered the plot and took physical possession on 10.2.92 along with the building thereon "free from all encumbrances" in terms of the revised agreement/licence and as provi

Click Here to Read the rest of this document

1999 Supreme(SC) 1553

Cases Referred (4)