2021 Supreme(Del) 2452

IN THE HIGH COURT OF DELHI
C. Hari Shankar, J.
Grovy India Ltd. - Appellant
Versus
Balbir Singh - Respondent
IAs 6433 of 2020 & IA 7643 of 2020 in CS(COMM) INFRA 1 of 2020
Decided On : 22-10-2021

Headnote:

PROPERTY DEVELOPMENT AGREEMENT - SPECIFIC PERFORMANCE - INTERIM INJUNCTION - SUIT FOR SPECIFIC PERFORMANCE OF PROPERTY DEVELOPMENT AGREEMENT - BALANCE OF CONVENIENCE AND IRREPARABLE LOSS - PRIMA FACIE CASE - UNREGISTERED AND INSUFFICIENTLY STAMPED DOCUMENT - SECTION 14(1)(B) OF SPECIFIC RELIEF ACT - NOVATION - FINANCIAL WHEREWITHAL OF THE PLAINTIFF - STATUS QUO ORDER - INTERIM ORDER MADE ABSOLUTE.

Fact of the Case:

Plaintiff and defendant entered into a Property Development Agreement (PDA) for the redevelopment of the suit property. The defendant admitted the PDA but denied the fact that the suit property was unencumbered. The plaintiff alleged that the defendant had informed him about the mortgage only at a later stage. The plaintiff filed a suit for specific performance of the PDA and sought an injunction restraining the defendant from transferring, alienating, encumbering or creating any third-party rights in respect of the suit property. The defendant opposed the grant of interim relief on the grounds that the PDA was unregistered and insufficiently stamped, it was incapable of specific performance under Section 14(1)(b) of the Specific Relief Act, it stood novated by the execution of subsequent documents, the plaintiff did not have the financial wherewithal to comply with its obligations under the PDA, and the plaintiff had paid only a small amount out of the total amount payable under the PDA.

Finding of the Court:

The court held that the PDA was not required to be registered as it was not a contract for sale and did not create any right or title in the suit property. The court also held that the PDA was not incapable of specific performance under Section 14(1)(b) of the Specific Relief Act as the requirement of precision in the construction contract as a pre-condition for its enforceability was no longer applicable after the amendment of Section 14 by the 2018 Amendment Act. The court further held that there was no evidence of any inclination, much less indication, of the plaintiff and defendant having agreed to substitute the PDA with any other contract and therefore, the plea of novation was misconceived. The court also held that the mere reference to the Axis Bank statement of the plaintiff was hardly sufficient for the Court to be satisfied, even prima facie, that the plaintiff did not have the financial wherewithal to comply with its obligations under the PDA.

Issues: Whether the PDA was required to be registered.

Ratio Decidendi: The court held that the PDA was not required to be registered as it was not a contract for sale and did not create any right or title in the suit property. The court also held that the PDA was not incapable of specific performance under Section 14(1)(b) of the Specific Relief Act as the requirement of precision in the construction contract as a pre-condition for its enforceability was no longer applicable after the amendment of Section 14 by the 2018 Amendment Act.

Final Decision: The court dismissed the defendant's application to vacate the interim injunction and made the interim order absolute, pending disposal of the suit.