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SUPREME COURT OF INDIA
A.M. KHANWILKAR, DHANANJAYA Y. CHANDRACHUD, JJ.
Sushil Kumar Agarwal – Appellant
Versus
Meenakshi Sadhu & Ors. – Respondents
Civil Appeal No. 1129 of 2012
Decided On : 09-10-2018
(b) Property law – Ownership – The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it – Ownership denotes the relationship between a person and an object forming the subject matter of the ownership – It consists of a complex of rights in rem, being good against the world and not merely against specific persons – Under a development agreement, an owner may part with such rights to a developer – This in essence is a parting of some of the incidents of ownership of the immovable property. (Para 17)
(1995) 5 SCC 239; (1991) 4 SCC 572 – Relied upon
© Specific Relief Act 1963 – Section 14(3)© – There cannot be a uniform formula for determining specifically enforceability of an agreement granting development rights – It would depend on the nature of the agreement in each case and the rights created under it – discretion to grant specific performance is not arbitrary or capricious but judicious – Conditions for passing a decree for specific performance of a contract specified – Literal interpretation of Section 14(3)©(iii), would lead to an absurdity and would be inconsistent with the intent of the Act – Purposive interpretation to Section 14(3)©(iii) – Suit for specific performance filed by developer against the owner who has an interest in the property, will be maintainable if the developer will satisfies two conditions – (i) the building work is sufficiently defined by the contract – And, (ii) the plaintiff has a substantial interest in the performance of the contract of such a nature that damages would not compensate him for the defendant’s failure to build. (Para 17, 22, 23, 24)
(2007) 3 MhLJ 402; (2010) 2 BomCR 13; AIR 2014 Cal 92 – Cited with approval
(1940) Ch. D 160; [1978] 1 Ch. 337 – Referred
(d) Specific Relief Act 1963 – Section 14(3)© – Agreement using such terms as “first class materials”, “residential apartment of various sizes and denomination”, “etc.”, “similar condition”, and “special fittings” – Instantly, exact extent of work to be carried out by the developer and the obligations of the parties, not stated – a Exact amount of remuneration payable by the owner to the contractor also not specified – Agreement is vague – First condition in Section 14(3)©(i) not fulfilled – Further, developer claiming to have incurred loss of Rs. 18,41,000/- – The loss can be compensated but developer not entitled to specific performance. (Para 26, 27)
AIR 2001 SC 1462; (2008) 10 SCC 345 – Distinguished
(2006) 2 CHN 396; [1901] 1 K.B. 515 – Referred
Facts of the case:
The appellant, who is a builder, instituted a suit for specific performance of a development agreement, against the respondents, who are owners of the premises. The suit was dismissed by the City Civil Court. The High Court dismissed the first appeal.
Finding of the Court:
There is no merit in the appeal.
Result: Appeal dismissed.
JUDGMENT :
Dhananjaya Y. Chandrachud, J.
1. The present appeal [Leave was granted on 12 January 2012.] is from the judgment of a Division Bench of the High Court of Calcutta [The High Court delivered judgment on 18 February 2009.]. The appellant, who is a builder, instituted a suit for specific performance of a development agreement, against the respondents, who are owners of the premises. The suit was dismissed by the City Civil Court. The High Court dismissed the first appeal.
2. The subject matter of the suit for specific performance is a development agreement dated 14 April 1992, entered into by the appellant with the predecessor-in-interest of the respondents (Late Kalidas Sadhu) [Late Kalidas Sadhu was the original respondent. Upon his death, by an order dated 12 May 2018, the legal heirs of the original respondent were substituted as existing respondents.] in respect of premises situated at 243N, Acharya Prafulla Chandra Road, P.S. Burtolla, Kolkata – 700 006. The agreement recites that the owners had approached the appellant for construction of a building on the land and that the following terms, inter alia, were agreed upon by and between the parties:
a. The appellant agreed to apply at his own costs and expenses for sanction of the plan of a proposed building complex on 14 cottahs 5 chittacks and 40 square feet, to the Calcutta Municipal Corporation (Clause-1 of the agreement);
b. The plan of the building complex would be prepared and submitted by the appellant to the Calcutta Municipal Corporation, after the approval of the respondent (Clause -2 of the agreement);
c. The appellant shall deposit with the respondent an amount of Rs. 4,00,000/- without interest which shall be refundable upon the completion of the building (Clause-3 of the agreement);
d. If for any reason after the plan is sanctioned or for any act or omission on the part of the appellant, the construction cannot take place, the appellant shall refund the deposit in addition to all costs, charges and expenses incurred by the respondent (Clause-22 of the agreement);
e. The respondent shall retain 42% of the total constructed area as ‘sole owned’ and the balance 58% of the total constructed area shall remain secured for due payment of the construction costs. The total construction cost shall not exceed the value of 58% of the constructed area. The respondent agreed to pay the appellant the costs and expenses along with agreed remuneration upon completion of the construction and if the respondent failed to pay, the appellant was entitled to realise its money by selling 58% of the total constructed area (Clauses – 6, 10 and 11 of the agreement); and
f. The respondent was entitled to demand any loss and/or damage suffered by him for any illegal activities of the appellant and the appellant was also entitled to recover damages from the respondent for lapse and negligence, in addition to the right of the parties to claim specific performance (Clause - 24 of the agreement).
3. The appellant alleged that upon the execution of the agreement, he found that the premises were encumbered and that there were arrears of municipal tax and electricity dues, besides which there were labour and industrial disputes and ‘factory closure problems’. The respondent is alleged to have requested the appellant to make payments and assured that he will reimburse him before the sanction of the building plan was obtained. Accordingly, the appellant claims to have made a payment of Rs. 7,03,000/-.
4. On 18 March 2002, the respondent addressed a letter to the appellant and denied the execution of the agreement. The appellant, by a letter dated 4 April 2002 protested the denial and requested the respondent to give him the authority to obtain sanction of the building plans. Parties thereafter met and agreed to modify the terms of the agreement with revised terms under which (i) allocation of the owner would be 47% instead of 42%; and (ii) allocation of the developer would be 53% instead of 58%.
5. O
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