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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P. NAVEEN RAO, G. RADHA RANI, JJ.
Mr. P.Venkata Ravi Kishore, s/o. P. Subba Rao and Another - Appellants
Versus
M/s. JMR Developers Pvt. Ltd., Rep.by its Managing Director, Sri K.Jagan Mohan Rao and Others – Respondents
City Civil Court Appeal Nos.111 & 112 of 2021
Decided On : 10-06-2022
Cancellation of Development Agreement-cum-GPA - Indian Contract Act - [UNILATERAL CANCELLATION] - [PROPERTY OWNERSHIP] - [SECTIONS 182, 202, 204, 206] - The court held that the unilateral cancellation of the Development Agreement-cum-GPA by one party to the detriment of another party is not permissible under the Indian Contract Act. The agreement was comprehensive and authorized the developer to sell the property fallen to the share of the landowners without individual demarcation and then share the sale proceeds with the owners in the ratio of 60:40. The court also emphasized that the agreement was tripartite and binding on all parties, and the cancellation by one owner in a property having undivided ownership prejudiced the interest of the developer and affected the interest of other owners who were not signatories to the cancellation deed. The court further held that the termination of the agency by the principal was not valid as the agent had an interest in the subject property and no express termination clause was incorporated in the agreement. The court also rejected the plea of termination of agency by taking recourse to the Indian Contract Act, as it was not raised in the appropriate pleadings. The trial court's findings were upheld, and both appeals were dismissed.
Fact of the Case:
The plaintiffs entered into Development Agreements-cum-GPA with the property owners to develop a composite block of land and construct residential buildings. The defendants unilaterally cancelled the agreements, claiming that the construction was not completed on time and that the GPA powers conferred in respect of their share were subject to their option and could be exercised only after allocation and allotment of the flats with specific flat and floor numbers towards their proportionate share. The trial court found in favor of the plaintiffs, holding that the cancellation of the GPA was unilateral and null and void, and that the plaintiffs were entitled to sell the property as per the terms of the agreement.
Finding of the Court:
The trial court found that the cancellation of the GPA was unilateral and null and void, and that the plaintiffs were entitled to sell the property as per the terms of the agreement. The court also held that the termination of the agency by the principal was not valid as the agent had an interest in the subject property and no express termination clause was incorporated in the agreement. The trial court's findings were upheld, and both appeals were dismissed.
Issues: The issues involved in the case concerned the unilateral cancellation of the Development Agreement-cum-GPA, property ownership, and the validity of the termination of the agency by the principal.
Ratio Decidendi: The court held that the unilateral cancellation of the Development Agreement-cum-GPA by one party to the detriment of another party is not permissible under the Indian Contract Act. The agreement was comprehensive and authorized the developer to sell the property fallen to the share of the landowners without individual demarcation and then share the sale proceeds with the owners in the ratio of 60:40. The court also emphasized that the agreement was tripartite and binding on all parties, and the cancellation by one owner in a property having undivided ownership prejudiced the interest of the developer and affected the interest of other owners who were not signatories to the cancellation deed. The court further held that the termination of the agency by the principal was not valid as the agent had an interest in the subject property and no express termination clause was incorporated in the agreement. The court also rejected the plea of termination of agency by taking recourse to the Indian Contract Act, as it was not raised in the appropriate pleadings.
Final Decision: The trial court's findings were upheld, and both appeals were dismissed.
JUDGMENT :
[P. Naveen Rao, J.]
1. Appellants herein are defendants in O.S.No.719 of 2009 and plaintiffs in O.S.No.173 of 2015 on the file of XIV Additional Chief Judge (F.T.C.), City Civil Court at Hyderabad. For convenience, parties are referred to as plaintiffs and defendants as arrayed in O.S.No.719 of 2009.
2. The prayers sought in both suits read as under:
a) Declaring that the cancellation of the document bearing No.2635 of 2007 dated 12.-07.2007 by impugned document No.3573 of 2009 dated 25.11.2009 executed by defendant no.1 unilaterally as null and void and not enforceable against the plaintiffs 1 and 2;
b) Declaring that the purported cancellation of the document No.9194 of 2007 dated 12.07.2007 by impugned document No.2870 of 2009 dated 25.11.2009 executed by the defendant no.2 unilaterally as null and void and not enforceable against the plaintiffs;
c) Grant consequential relief of permanent injunction restraining the defendants 1 and 2 and their men, agents, servants from interfering with the peaceful possession and enjoyment of the schedule property by the plaintiffs; and
d) Costs of the suit; and e) to grant any other relief or reliefs as may deem fit and proper by the Hon’ble Court in the circumstances of the case.
O.S.No.173 of 2015:
a) To declare that the plaintiffs are the owners of the flats bearing No.102-A, Flat No.203-A, Flat No.104-A, Flat No.401-B, Flat No.302-C, and Flat No.501-C, and to extent of 1951 Sqft in Flat No.404A and 2054A which are more fully described in schedule here under;
b) To direct the Defendant No.1 to deliver the possession of six flats bearing No.102-A, Flat No.203-A, Flat No.104-A, Flat No.401-B, Flat No.303-C, and Flat No.501-C and to extent of 1951 Sqft in Flat No.404A and 204A more fully described in the schedule here under completed in all aspects together with parking areas in favour of the plaintiffs;
c) To declare the sale deed dated 16.02.2015 bearing registered document No.2048 of 2015 executed by 1st defendant in favour of defendant no.7 in respect of the flat no.302-C as null and void;
d) To direct the 1st defendant to pay an amount of Rs.1,17,73,440/- to the plaintiffs towards compensation for loss of rents w.e.f. 20.11.2009 to till the date of filing suit together with interest @ 18% per annum;
e) to grant permanent injunction restraining the defendant Nos.1 & 7 herein from alienating, conveying and transferring the suit schedule properties in favour of any third parties;
f) to ward costs of the suit; and
To grant any such other relief or further reliefs as the plaintiffs are found to be entitled to in law and deems fit and proper in the circumstances of the case and in the interest of justice.
3. As the issue involved in both the appeals concerns the same suit schedule property, by this common judgment both appeals are considered and decided.
4. Heard learned senior counsel Sri V.Ravinder Rao appearing for Smt. Divya Rai learned counsel for appellants in both appeals and Sri Tarum G.Reddy, learned counsel for respondent Nos.1 to 6 in both appeals.
5. Case of the plaintiffs:
5.1. Plaintiff No.1 (hereinafter referred to as P1) is a Private Limited Company while Plaintiff No.2 (hereinafter referred to as P2) is the Managing Director of P1 having registered office at Hyderabad. Defendant No.1 (D1) and P2 in their personal capacity purchased a property to the extent of 2380 sq. yards, house bearing H.No.8-1-293/A/1, in ward No.8, Block No. 1 of Shaikpet Village and Mandal, Hyderabad, vide registered sale deed document No.2595 of 2006 dated 04.04.2006 registered at Office of the Sub-Registrar, Banjara Hills, Hyderabad. P2 and D1 also entered into an Irrevocable Development Agreement-cum-General Power of Attorney with P1 Company, vide Document No.2635 of 2007 dated 12.07.2007 with the object of enabling P1 company to develop the said property by constructing residential apartments and then to sell the apartments. As per the terms of the said agreement, P1
Unilateral cancellation of the Development Agreement-cum-GPA by one party to the detriment of another party is not permissible under the Indian Contract Act.
A registered Agreement of Sale-cum-GPA cannot be unilaterally cancelled.
A General Power of Attorney can be revoked unless coupled with interest, and unilateral cancellation by the principal is permissible if the agency lacks such interest.
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