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2014 Supreme(Del) 1380
High Court of Delhi
RAJIV SAHAI ENDLAW, J.
Tanu Goel & Another
Versus
Girish Chopra & Others
CS (OS) No. 669 of 2011
Decided on : 16-05-2014
For the Plaintiffs:Sudhir Nandrajog, Sr. Adv. with Sudhir Talwar, Jagriti Ahuja, Advocates.
For the Defendants:Sanjay Goswami, Advocate.
Headnote:
Specific Relief Act, 1963 - Section 23 - Contract Act, 1872 - Sections 31 & 32 - Specific performance - Mortgage property - Sale of property - Suit for specific performance of an Agreement of Sale - In alternative plaintiff requested for recovery of paid amount and damages - Property agreed to be sold was mortgaged - Agreement is of Sale free of mortgage - Defendants have not proved any attempts made by them for having the mortgage so discharged and the mortgagee Bank having refused the same - Mortgagee Bank has been floor-wise discharging the mortgage - Mortgage is not an impediment to sell - A seller of mortgaged property cannot be permitted to wriggle out from another wise binding Agreement to Sell by refusing to take steps for making the property free from mortgage - Plaintiffs, if the property on the date when specific performance ordered is still mortgaged, would have a choice to either have the mortgage discharged by paying balance sale consideration to mortgagee Bank, including by payment of additional amount and have the Sale Deed executed and to take proceedings for recovery of the additional amount paid from the defendants - It is order that the plaintiffs are entitled to specific performance of the Agreement to Sell - Suit of the plaintiffs is allowed by passing a decree in favour of the plaintiffs.
Specific performance - Balance sale consideration - Mere availability of the balance sale consideration does not complete the element of readiness and willingness and is only one part thereof.
Specific Relief Act, 1963 - Section 23 - Contract Act, 1872 - Sections 31 & 32 - Agreement of Sale - Willingness to perform - Availability of suit - Suit for specific performance of an Agreement of Sale Parties had agreed for the Sale Deed to be executed by 15th August, 2010 but the Sale Deed was not so executed - Plaintiffs continued to approach the defendants for completion of the transaction and it was the defendants who maintained a sphinx like attitude in the matter - Non-availability of Rs. 33,50,000/- is not can only be checked if defendants shows his readiness - Plaintiffs have proved availability of the balance sale consideration - Agreement to Sell does not record any representation of the plaintiffs as purchasers to the defendants No. 1 & 2 as sellers - Seller ought not to be concerned with the source from which balance sale consideration is arranged by the purchaser - Plaintiffs, after the institution of the suit also are found to have been ready and willing - Agreement to Sell of specific performance was not contingent and the plaintiffs have been ready and willing to perform their part of the Agreement to Sell and the Agreement to Sell by its very nature is specifically enforceable - An Agreement of Sale of immovable property is specifically enforceable and damages in lieu thereof are an exception - Plaintiffs are entitled to specific performance of the Agreement to Sell dated 15th June, 2010 - Suit of the plaintiffs is allowed by passing a decree in favour of the plaintiffs.
Key Points: - The court held that a seller of mortgaged property cannot refuse to take steps to clear the mortgage to avoid a binding Agreement to Sell, and the property remains saleable subject to the mortgage (!) (!) . - Mere availability of funds is insufficient for readiness and willingness; the plaintiff must also communicate this readiness to the seller, which was established via emails and a legal notice (!) (!) (!) . - The defendants failed to prove that the mortgagee bank refused to discharge the mortgage, and since the bank discharges mortgages floor-wise, the mortgage was not an impediment to sale (!) (!) . - The clause in the Agreement allowing refund of advance with interest applies only if the purchaser is in breach, not if the seller fails to perform, thus not negating the right to specific performance (!) (!) . - The plaintiffs were found ready and willing as they had secured a home loan sanction and communicated their intent to pay the balance consideration despite the delay caused by the defendants (!) (!) (!) . - The suit was allowed by passing a decree for specific performance, directing defendants to execute the Sale Deed after clearing the mortgage or allowing plaintiffs to pay off the bank directly (!) (!) . - The defendants were held liable for costs if they fail to comply with the decree within three months (!) . - The court ruled that the seller is not concerned with the source of funds (e.g., home loan) used by the purchaser to arrange the balance sale consideration (!) .
What are the rights of a seller of mortgaged property regarding specific performance when the property is not freed from the mortgage?
What constitutes readiness and willingness for specific performance when the balance sale consideration is arranged via a home loan rather than liquid cash?
Can an Agreement to Sell be enforced for specific performance if the agreement contains a clause providing for refund of advance only in case of purchaser's default?
1. The two plaintiffs have sued for specific performance of an Agreement of Sale of third floor along with terrace rights of property No.9, Sukhdev Vihar, New Delhi constructed over land admeasuring 450 sq. yds, together with one servant quarter having common WC on the terrace floor and one car parking space in the drive way, and in the alternative, for recovery, of Rs.1 crore already paid as advance to the three defendants and Rs.3,25,00,000/-as damages, pleading:
(i) that the defendants No.1 & 2 i.e. Sh. Girish Chopra and Smt. Ashima Chopra vide Agreement to Sell dated 15th June, 2010 agreed to sell the aforesaid property to the two plaintiffs for a total sale consideration of Rs.4,25,00,000/-;
(ii) that in terms of the said Agreement to Sell, the plaintiffs paid a sum of Rs.50 lakhs in the name of the defendant No.1 as earnest money at the time of signing of the Agreement to Sell and a further sum of Rs.25 lakhs on 9th July, 2010;
(iii) that the balance sale consideration of Rs.350 lakhs was payable at the time of execution of the Sale Deed on or before 15th August, 2010, after the defendants No.1 & 2 had cleared the dues in respect of the home loan taken by them from the Bank of Baroda in respect of the entire property No.9, Sukhdev Vihar, New Delhi;
(iv) that though the plaintiffs were ready to perform their part of the agreement and had applied for a home loan to Standard Chartered Bank which had been sanctioned in the sum of Rs.2,91,50,000/- vide sanction letter dated 31st July, 2010 but the defendants No.1 & 2 did not produce the No Dues Certificate from the Bank of Baroda and on the contrary in the last week of August, 2010 requested the plaintiffs for a further sum of Rs.25 lakhs out of the sale consideration;
(v) that a cheque in the said sum of Rs.25 lakhs was initially given in the name of the defendant No.1 as sought by the defendants No.1 & 2 but on the asking of the defendants No.1 & 2 the payment under the said cheque was subsequently stopped and a cheque for Rs.25 lakhs in the name of the defendant No.3 M/s. Divij Infraprojects Pvt. Ltd. of which defendants No.1&2 were Directors, as per the request of the defendants No.1 & 2, was given and which was encashed;
(vi) the defendants No.1 & 2 however did not come forward to execute the Sale Deed, not even inspite of legal notice dated 21st January, 2011;
Hence this suit.
2. Summons of the suit and notice of the application for interim relief were issued. After hearing the counsel for the defendants, the defendants were vide order dated 31st March, 2011 restrained from creating any third party interest and/or parting with possession of the property agreed to be sold. The said ad interim order was vide subsequent order dated 6th April, 2011 confirmed subject to the plaintiffs depositing an FDR of Rs.34 lakhs in favour of the Registrar General of this Court. FAO(OS) No.342/2011 preferred by the defendants against the said order was dismissed vide order dated 19th July, 2011. The plaintiffs have complied with the said condition.
3. The defendants have contested the suit by filing a common written statement pleading:
(a) that the Agreement to Sell dated 15th June, 2010 by its very terms, is a contingent contract within the meaning of Sections 31 & 32 of the Indian Contract Act 1872, performance of which was contingent upon the defendants obtaining the necessary permission from the Bank of Baroda with whom the entire property was mortgaged and as per the Agreement, in case the defendants failed to obtain the permission and transfer the property agreed to be sold on or before 15th August, 2010, the defendants had a right to return the advance amount to the plaintiffs along with interest @ 12.5% per annum on or before 15th September, 2010; the defendants having failed to obtain the necessary permission from the Bank of Baroda, offered refund of the advance received with interest and which was not accepted by the plaintiffs; the contingent contract had becom
