Rajiv Sahai Endlaw, J.

1. The appeal impugns the judgment and decree (dated 16th September, 2004 of the Court of the Additional District Judge (ADJ), Delhi in Suit No. 107/2004 filed by the respondents) of specific performance of an Agreement to Sell dated 7th September, 1985 by the appellant of sale of House No. 27, Road No. 17, Punjabi Bagh, New Delhi, to the respondents/plaintiffs.

2. The appeal was admitted for hearing and vide interim order dated 3 rd May, 2005, the direction in the impugned judgment for execution of the Sale Deed and the dispossession of the respondents/plaintiff who were admittedly in possession of the property, stayed. The appellant/defendant died during the pendency of the appeal and an application for substitution of her legal heirs was filed; at that stage the appeal was dismissed in default but on the application of the legal heirs of the appellant/defendant, was restored to its original position and the legal heirs substituted. The counsels have been heard and synopsis of submissions permitted to be filed and which have been perused.

3. The respondent/plaintiff No. 1 Mrs. Adeline D. Lall who died during the pendency of the suit and whose legal heirs were substituted and her husband Shri Tajammul David Lall (respondent/plaintiff No. 2) on 23rd May, 1988 instituted the suit from which this appeal arises, pleading:

(i) that the appellant/defendant vide Agreement to Sell dated 7th September, 1985 agreed to transfer the house aforesaid to the respondents/plaintiffs for a total sale consideration of Rs. 5 lakhs;

(ii) that at the time of execution of the Agreement to Sell, a sum of Rs. 40,000/- was paid by the respondents/plaintiffs to the appellant/defendant;

(iii) that as per the terms and conditions of the agreement to sell, it was the duty of the appellant/defendant to obtain Income Tax Clearance Certificate, Wealth Tax Clearance Certificate and permission to sell under the Urban Land (Ceiling & Regulation) (ULCR) Act, 1976 and all other requisite permissions from the concerned authorities for execution of the regular Conveyance Deed;

(iv) that the appellant/defendant in September, 1986 represented having obtained all the permissions;

(v) that the respondents/plaintiffs believing the word of the appellant/defendant got the bank draft for a sum of Rs. 4,60,000/- prepared;

(vi) that the appellant/defendant was however unable to show the requisite permissions and consequently the Sale Deed could not be executed;

(vii) that though the appellant/defendant assured that she will obtain the permissions in a day or two, but did not produce the same;

(viii) that since the respondents/plaintiffs were tenants in the house which was subject matter of sale, there was no anxiety on the part of the respondents/plaintiffs and they kept on waiting, believing that the appellant/defendant will come forward with requisite permissions;

(ix) that the respondents/plaintiffs have otherwise been always ready and willing;

(x) that the respondents/plaintiffs just before the institution of the suit learnt that the appellant/defendant was attempting to sell the property to some other and hence instituted the suit.

4. The appellant/defendant contested the suit by filing a written statement, on the grounds:

(a) that the respondents/plaintiffs had failed to perform their part of the Agreement to Sell dated 7th September, 1985 and accordingly the amount of Rs. 40,000/- paid, stood forfeited and the respondent/plaintiff No. 2 continued to be a tenant in the property and was liable to pay monthly rent of Rs. 600/- which also he had failed to pay;

(b) that the application for permission to the Competent Authority under ULCR Act was to be submitted jointly by the purchaser and seller, along with the proposed Sale Deed; that the appellant/defendant after execution of the Agreement called upon the respondents/plaintiffs several times to execute and sign the necessary application forms for grant of permission under the ULCR Act but the respondents/plaintif