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Delhi High Court
Nehru Place Hotels Ltd vs Smt. Kanta Aggarwal on 11 March, 2011

* IN THE HIGH COURT OF DELHI AT NEW DELHI + RFA No.95/1998

% 11th March, 2011 NEHRU PLACE HOTELS LTD. …… Appellant Through: Mr. Harish Malhotra, Senior Advocate

with Mr. R.K.Modi, Advocate.

VERSUS

SMT. KANTA AGGARWAL …… Respondent Through: Mr. R.S. Suri, Senior Advocate with Ms.

Nusrat Khan, Advocate.

CORAM:

HON’BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be

allowed to see the judgment?

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes VALMIKI J. MEHTA, J (ORAL)

1. The challenge by means of this Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is to the impugned judgment and decree dated 27.11.1997 whereby the suit of the respondent/plaintiff for specific performance with respect to showroom/space no.20, on upper Ground Floor, Block E, in the building known as International RFA No.95/1998 Page 1 of 35 Trade Tower, Nehru Place, New Delhi was decreed on payment of escalation and related charges by the respondent/plaintiff to the appellant/defendant.

2. The facts of the case are that the respondent/plaintiff as a buyer and the appellant/defendant as the seller/builder entered into an Agreement on 6.10.1976 for sale of leasehold rights of covered area of 403 square ft., being portion no. 24, on ground floor in block A of the building which was to be constructed by the appellant/defendant at a hotel plot, in Nehru Place, Kalkaji, New Delhi. On the hotel plot, the appellant/defendant was to construct a multi-storey building, which was to include a hotel, shopping arcade, showrooms, commercial spaces, etc. in accordance with the lease executed in favour of the appellant/defendant by the superior lessor, the Delhi Development Authority.

 

3. The respondent/plaintiff after making the initial payment of Rs.24,000/- on 6.9.1976, paid further additional amounts as per the schedule of payment, and out of the total sale consideration of Rs.1,70,500/-, a total sum of Rs.1,62,000/- was paid to the appellant/seller. Thus a balance of only Rs.8,500/-, remained payable, subject, of course, to the rights of the appellant/defendant to claim, inter-alia, amounts towards escalation charges in terms of Clause 18 of the Agreement dated 6.10.1976, Ex.PW1/1.

4. The original agreed space being portion no.24 in the property situated on the ground floor, was substituted by an Agreement between the parties dated 14.9.1985, and the parties mutually agreed to change the RFA No.95/1998 Page 2 of 35 original space/portion no. 24 to space No.20 on upper ground floor of Block E, the area remaining the same at 403 square ft. It may be noted that by the time, the subsequent Agreement dated 14.9.1985 was entered into for change of the space, the final plans had already been sanctioned for construction on the plot in the year 1983 by the local municipal authority. At this stage, I may note that as per Clause 3 of the Agreement dated 6.10.1976, the rate per square feet agreed was the rate per sq. feet of covered area which meant and included area under the peripheral walls and half the area under common walls between two shops/showrooms/spaces.

5. The appellant/defendant sent a notice dated 10.4.1991, Ex.PW1/4 to the respondent/plaintiff seeking a total amount of Rs.1,21,933.96 on account of escalation and also certain recurring charges towards general maintenance, ground rent, sinking fund, building insurance and so on. By this letter, Ex.PW1/4 dated 10.4.1991, the appellant/defendant while asking for escalation amount and other recurring charges, to the prejudice of the respondent/plaintiff, suo moto changed not only the allocated space/portion from its prime location on the upper ground floor to the lower ground floor, but also, reduced the area from 403 square ft. to 372 square ft. The new portion/space which was sought to be allotted by the appellant/defendant, instead of the old portion situated on the upper ground floor, was the showroom no.2 on the lower ground floor. The lower ground floor is euphemistically so-called because in the construction industry what is a lower ground floor is actually the area below the normal ground RFA No.95/1998 Page 3 of 35 floor, an area definitely less valuable than the similar area on the upper ground floor which would in fact fall within the main hotel complex. Though, no reply was sent by the respondent/plaintiff in writing to Ex.PW1/4 dated 10.4.1991 but, the respondent/plaintiff claimed that she met the concerned persons of the appellant/defendant and raised a grievance with respect to the higher cost claimed as also the change of the allocation of the portion, and the reduction in the area. The appellant/defendant thereafter sent its notice dated 29.6.1991, PW1/5, terminating the Agreement on account of failure of the respondent/plaintiff to comply with the notice, Ex.PW1/4 dated 10.4.1991. The respondent/plaintiff responded to the termination notice, Ex.PW1/5 by her letter dated 2.8.1991, Ex.PW1/6, wherein, she disputed the enhanced charges which were claimed besides, challenging the arbitrary change of the space from showroom no. 20 on the upper ground floor to showroom no. 2 on the lower ground floor. In this letter, the respondent/plaintiff seems to have mentioned the area as agreed to be 403 square ft. of carpet area, however, I have already noted that in the Agreement, what is agreed to be sold is covered area and not carpet area. The appellant/defendant replied to letter dated 2.8.1991, Ex.PW1/6 by its letter dated 12.8.1991, Ex.PW1/8 reconfirming the termination of the Agreement on the ground of non-payment of the charges. Curiously, however, there was no dispute raised in Ex. PW1/8 that the area agreed was not carpet area, but only super area as subsequently claimed in the written statement. Of course, this issue of the area being sold is carpet area or RFA No.95/1998 Page 4 of 35 covered area is really irrelevant in view of Clause 3 of the Agreement which categorically and specifically describes the area to be sold as covered area. I am mentioning these facts in the narration because this was an issue urged during the course of arguments.

 

6. The respondent/plaintiff thereafter filed the subject suit for specific performance and claiming only the relief of specific performance. There was no alternative relief prayed for damages.

 

7. Before the Trial Court, the basic issue which was canvassed was as to who was guilty of breach of contract i.e. breach was on the part of the appellant/seller or the respondent/buyer.

The Trial court after the pleadings were complete, framed the following issues:

“1. Whether the plaintiff has performed all the allegations of the agreement between the parties? OPP

2. Whether the plaintiff is still ready and willing to perform her part of agreement? OPP

3. Whether the completion certificate has been obtained by the defendant from the concerned authorities? OPD

4. Whether the escalation price demanded by the defendant is justified and legal? OPD

5. Whether termination/cancellation/rescission of the contract dt. 29.6.91 is legal and justified? OPD

6. Whether the decree for specific performance if granted, would operate as undue hardship upon the defendant, if so its effect? OPD

RFA No.95/1998 Page 5 of 35

7. Whether the suit in the present form is not maintainable without claiming relief of declaration of the fact that the termination of the contract is not legal? OPD

8. Whether the plaintiff is entitled to a decree of mandatory injunction? OPP

9. Whether the plaintiff is entitled to a decree for specific performance of the agreement against the defendant? OPP

10. Relief.”

8. Issue no.5 was treated by the Trial Court as the core issue, and which issue was with regard to the entitlement of cancellation of the contract by the appellant/defendant. While dealing with this issue, the Trial Court has referred to Clauses 5 and 6 of the Agreement, Ex.PW1/1 and held that merely because there was an entitlement of the appellant/defendant to change the space, the said eventuality could not be exercised merely at the whim and fancy of the appellant/defendant. I note that Clause nos. 5 and 6 would have to be read together and at the end of Clause 6, the parties had agreed that the alternative space would be accepted by the allottee if it only becomes necessary where the company is unable to allot a particular space due to a change in the plan. There is no change in the sanctioned plan which was alleged or proved by the appellant/defendant to provide the basis that it was entitled to change the portion agreed to be sold to the respondent/plaintiff. The Trial Court has further noted that there could not be a unilateral change of allocation from the agreed showroom/space no. 20 on the upper ground floor to a showroom no. 2 on the lower ground floor, especially keeping in view the fact that when there was an earlier change from space no. 24 to space no. 20, the parties had duly entered into a RFA No.95/1998 Page 6 of 35 written agreement in that behalf dated 14.9.1985. The Trial Court has then arrived at a finding of fact that even the area was illegally altered from the agreed area of 403 square feet to 372 square feet vide the notice dated 10.4.1991, Ex. PW1/4 sent on behalf of the appellant/defendant.

9. While dealing with issue nos. 1, 2 and 4 simultaneously, and which pertain to the entitlement of the claim of the respondent/plaintiff to specific performance, the Trial Court held that the respondent/plaintiff was liable to pay escalation charges under the Agreement, i.e Clause 18 of the Agreement, but however, the appellant/defendant cannot whimsically demand the cost of the escalation. The Trial Court has also noted that the appellant’s/defendant’s witness Sh. D. M. Behl deposed in his cross- examination that escalation in cost was demanded according to a formula however which formula had not been disclosed including before the Trial Court. The Trial Court has also arrived at a finding of fact that the respondent/plaintiff in her cross-examination in any case admitted that she would pay all the charges as required in law towards escalation, however, she deposed in terms of her pleading that the issue of escalation was secondary because the primary issue (because of which the charges claimed in Ex. PW1/4 dated 10.4.1991 were not paid) was the change of the space from the upper ground floor to the lower ground floor and also reduction in the area from 403 square ft. to 372 square ft. The Trial Court has ultimately held that the appellant/defendant would be entitled to escalation because the trial Court felt it had no option but to accept the calculation of the RFA No.95/1998 Page 7 of 35 appellant/defendant simply because there was no contrary evidence led on behalf of the respondent/plaintiff. The Trial Court while dealing with issue nos. 8, 9 and 10 held that the appellant/defendant is entitled to price for the space no. 20 agreed to be sold to the respondent/plaintiff at Rs.423/- per square ft. The Trial Court then arrived at a finding of fact while dealing with issue no. 6 that it was the appellant/defendant itself who was using the agreed space as its own office and which it had agreed to sell to the respondent/plaintiff. The suit for specific performance was therefore decreed with respect to 403 square ft. of the covered area being space no.20 on the upper ground floor, subject to payment of the escalation and other charges.

10. Mr. Harish Malhotra, Learned Senior Counsel for the appellant/defendant argued the appeal under two broad heads. The first argument was that it was the respondent/plaintiff who was guilty of breach of contract in failing to pay the charges as demanded by the notice dated 10.4.1991, Ex.PW1/4. It was therefore contended that the agreement was validly terminated by the notice dated 29.6.1991, Ex.PW1/5. Reliance was placed upon Clause 18 of the Agreement which according to him bound the respondent/plaintiff to pay the escalation charges. Under this argument of breach of the contract by the respondent/plaintiff, the learned senior counsel for the appellant/defendant also argued that what was agreed to be sold was only super area and not covered area. It was urged that the respondent/plaintiff was liable to pay charges even for the common areas and due to which the covered area should be reduced and the area agreed RFA No.95/1998 Page 8 of 35 to be sold should be taken as only super area and for which argument Clause 17 of the Agreement between the parties was relied upon. The second head of argument was that the Court ought not to have granted the relief of specific performance but only ought to have granted the alternative relief of damages because there was rise in the value of the property and increased cost of construction. Reliance, in this regard, was placed upon Para 3 of the preliminary objections of the written statement filed on behalf of the appellant/defendant in the Trial Court.

 

11. The first issue therefore which arises for consideration is whether the respondent/plaintiff was guilty of breach of contract thereby entitling the appellant/defendant to terminate the agreement vide notice dated 29.6.1991, Ex.PW1/5, the breach being the failure by the respondent/plaintiff to pay the charges as claimed by the appellant/defendant vide Ex.PW1/4 dated 10.4.1991. Before proceeding further, it is necessary to reproduce some of the relevant Clauses of the Agreement dated 6.10.1976, Ex.PW1/1, entered into between the parties and these Clauses read as under:- “1. The company has reserved for the allottee showroom/space of an approximate area of 403 sq. ft. No.24 on ground floor in Block No.A in the said building to be construed on the plot mentioned above.

3. The rate per sq. ft. is for the covered area. Covered area means and includes the area under periphery walls and half the area under common walls between two shops/show-rooms or the said space.

5. The allottee has understood that the reservation of the space is provisional on the basis of the drawings displayed in the office of RFA No.95/1998 Page 9 of 35 the company, which are subject to the approval of the sanctioning authority and are also subject to change during the course of approval or construction or any time thereafter without any rights or claims or interference of the allottee.

6. The allotted has also understood and agreed with the company that if for any reason any changes are required to be made by the sanctioning authorities or by the Architect or by the company before or after the sanction of any plans, resulting in the reduction or increase in the area agreed to be allotted or any change in its shape or its location, the allottee shall have no rights to raise any claims, monetary or otherwise, except that the price will be calculated on the changed area at the rate per sq. ft. as agreed above. The allottee has further agreed with the company to accept alternate space if it becomes necessary in the event the company is unable to allot the particular space mentioned in this agreement due to change in the plan displayed in the office of the company.

17. For the space allotted to the allottee as well as for common spaces the allottee would be liable to pay to the company all charges such as for Electric consumption for the A.C. Plants, the repairs and maintenance and running costs of the A.C. plant including Administrative and management charges falling to his share. The allottee would also pay his share for the lighting of the common spaces, including its repairs, replacements, etc. etc. The allottee will also contribute on monthly basis for creating a sinking fund/replacement fund for the A.C. Plant, equipment, machinery, ducting etc. etc. All the above amounts will be fixed by the company at the time of handing over the possession keeping in view at that time the rates and costs of Electricity, articles, wages etc. etc. which would be subject to revision according to the relative increase in the inputs.

18. The charges mentioned in the foregoing paragraphs have been fixed keeping in view the existing rates of the materials as well as the wages of the workers, employees, etc, etc. The charges will stand increased proportionately according to the increase in the rates of Electricity, wages, ground rent, etc, etc. The decision of the company in this respect shall be final and binding on the allottee.” (underlining added)

RFA No.95/1998 Page 10 of 35 12(i). In my opinion, the argument as raised by the appellant/defendant that the respondent/plaintiff was guilty of breach of contract and therefore the contract was validly terminated is an argument without substance and therefore deserves rejection. There were three parts of the notice dated 10.4.1991, Ex.PW1/4 issued by the appellant/defendant to the respondent/plaintiff. The first part pertains to the claim of escalation charges, the second part pertains to the claim of various charges under the head of recurring charges (such as general maintenance, ground rent, sinking fund, etc.) and the third part was the change not only in the location from the upper ground floor to the lower ground floor but also in the area from 403 square ft. to 372 square ft. The Trial Court has held that the respondent/plaintiff was entitled to put the issue of the charges on the back- burner till the issue with regard to change of allocation of space both of the location and the area was first thrashed out. I agree. No doubt, a buyer is entitled to pay all the charges as per the Agreement, however, whenever a unilateral amendment is sought to be made by a seller/builder with respect to the allocation of the space both in terms of its original prime location and also a reduction in the area takes place, a buyer is definitely entitled to first get the issue with regard to location and area sorted out because the buyer pays the price for a particular property and a particular area. Till there is certainty and finalization there cannot be liability for payment of charges. A buyer cannot be put in a position that he should part with the moneys RFA No.95/1998 Page 11 of 35 although the seller is not agreeable to sell the agreed property, and more so when the buyer’s bonafides are clear from the fact that almost the entire basic price stood paid. A buyer is also not bound to accept an ipse dixit as to escalated cost claimed by a builder and the buyer is entitled to seek explanation/justification for the additional moneys he is asked to part with. (ii) The respondent/plaintiff has so deposed in her cross-examination in accordance with the pleading that the basic reason for non-payment was firstly to do with the change of the location and of the area and the issue of cost was secondary thereafter. It is in this context that the respondent admitted in cross-examination that she is otherwise ready to pay all necessary charges in terms of the agreement whether under the head of escalation or otherwise.

(iii) I therefore reject the argument urged on behalf of the appellant/defendant that the respondent/plaintiff was guilty of breach of contract by not paying the charges as demanded vide Ex.PW1/4 dated 10.4.1991 inasmuch as this argument very conveniently overlooks the fact that there was a more important, vital and a relevant issue which required thrashing out i.e. with regard to unilateral change of prime location from upper ground floor to the lower ground floor and also the reduction in area from 403 Sq. feet to 372 sq. feet.

I also reject the argument on behalf of the appellant/defendant that what was agreed to be sold was the super area and not covered area. RFA No.95/1998 Page 12 of 35 In clause 3 it is quite clear that what is agreed to be sold is covered area. Reliance, in this regard, placed upon Clause 17 by the learned senior counsel is misconceived when it is argued on that basis that as a result of this Clause 17 the covered area in Clause 3 would become super area. A reference to Clause 17 shows that the said clause basically pertains to various day to day maintenance charges and other related charges, and which are always payable with respect to a multi-storeyed building and which would be payable in terms of the same, however, this cannot be an excuse to reduce the area, which has been actually agreed to be sold to a buyer. Claim for payment of charges in terms of Clause 17 only entitles payment in respect thereof, but, I fail to understand as to how the claim for charges in terms of Clause 17 can reduce the actual available area of a showroom/space/portion which is otherwise agreed to be sold under the Agreement dated 6.10.1976 and which agreement in so many words as per Clause 3 states that what is sold is covered area. Clearly, therefore the charges which were payable with respect to the common space are the charges which are independent of the price which is payable with respect to the area which is agreed to be sold and there can be no cavil once we look at Clause 3 of the agreement between the parties which clearly states that what is agreed to be sold is the covered area and not the super area.

 

13. At this stage, it would be profitable to refer to some of the important findings and conclusions of the trial Court and which read as under:-

RFA No.95/1998 Page 13 of 35 “8. It can be seen that the reservation of the

particular space being nok.24 on ground floor of block A was not a mere formality. The stipulation of possibility of change is given in clause no.5 and 6 reproduced above. The change could be made “if for any reason any

changes are required to be made by the sanctioning

authorities or by the architect or by the company before and after sanction of any plans resulting in reduction or increase in the area agreed to be allotted or any change in its shape or its location.” If only in the actual execution of the plan the area agreed to be allotted was reduced or increased or if there was any change in its shape or location the allottees i.e. the plaintiff could raise no objection. It does not mean that the change could be done at whims and fancy of the company i.e. The defendant. In the present case the change was

actually effected with the agreement of the parties vide document Ex.PW1/3 dt. 14.9.85. The plans were

sanctioned sometime in Dec.1983 of the construction

commenced in January, 1984. Accordingly by 14.9.85

the lay out of the annual construction could be

visualised. The defendant and the plaintiff discussed the space to be reserved for the plaintiff discussed the space to be reserved for the plaintiff and the plaintiff accepted the show room space no.20 of upper ground

floor no.24 rather space no.24 on ground floor block A mentioned in the agreement Ex.PW1/1. Ex.PW1/1 is a

simple letter which can be reproduced below with profit: September, 14, 1985

Mrs. Kanta Aggarwal

W/o Sh. S.P. Aggarwal

A-11, Maharani Bagh,

New Delhi.

Subject: Allotment of alternate space in the

Hotel-cum-commercial Complex

Nehru Place, New Delhi.

Ref: Agreement dated 6.10.76

Dear Madam/Sir,

We refer to our letter dated 5.4.84 and our

subsequent discussion with you concerning

allotment of alternate space. This is to confirm that alternate showroom space no.20 on upper ground

RFA No.95/1998 Page 14 of 35 level in Block ‘E’ measuring approximately the

same area as agreed before has been allotted to

you in the International Trade Tower in the Hotel-

cum-Commercial Complex, Nehru Place, construction of which has already been started.

Thanking you,

Yours faithfully,

FOR NEHRU PLACE HOTELS LTD..

Agreed & Confirmed Sd/-

Sd/-

(MRS. KANTA AGGARWAL)

As is clear from this letter the plaintiff agreed to an alternative show room space measuring approximately the same area and the change was

recorded under signature of both the parties.

9. What gave rise to the cause of action however, is the letter of the defendant dt. 10.4.91 Ex.PW1/4

enclosing therewith the final statement of account. The letter itself does not mention that there has been any change in the location of the space to be allotted to the plaintiff excepting that the revised area of the plaintiff’s shop will be 372 sq. feet. It is only in the annexure-A which is further exhibited as Ex.DW1/3 that the

defendant described the allotted area as show room no. 20 in level ground level in Block E. The third para-graph of the letter Ex.PW1/4 the defendant state:

“As you are aware the areas allotted

at the time of booking were tentative and

subject to change during the cause of

construction. Now that the Shops have been

completed and we has ascertained actual

areas which in certain cases differ from

original areas allotted. The revised area of

your shop is 372 sq. feet.”

The letter does not at all mention that after the original booking there was a mutual agreement to change the

area to be allotted. The letter merely mentions that revised area of the shop was 372 sq. feet without

mentioning that the defendant in fact is offering entirely different space than what had been allotted to the

plaintiff. In the final statement of account Annexure A alone the defendant mentions the space to be allotted RFA No.95/1998 Page 15 of 35 alongwith the cost of construction initially stipulated, the escalation and upgradation charges etc.

10. Obviously the agreement, clause 5 and 6

stipulates that the change in the space allotted could be made in certain circumstances. The letter Ex.PW1/4 or the final statement of account do not at all show the existence of any of these conditions requiring the

change of space from no 20 on the ground floor to no.2 to lower ground floor level SI, Block E. This was an entirely unilateral change without any discussion with the plaintiff and without looking for acceptance of the plaintiff. It is further important to mention that

defendant did not even care to enclose a copy of the lay out plan or even a hand sketch to identifying the space mentioned in the final statement of account which fall to the lot of the plaintiff. It was as if the defendants were entirely the masters of the area and location of the space to be handed over to the plaintiff without any reference to the original contract or of the sanctioned plan. Such arbitrary and unilateral change of the space to be allotted was not within the contract.

11. The plaintiff who did not agree to the change of the space i.e. either the location of the space or its area could not be expected to meet the demands for any

payment for the area and space to be allotted by the defendant to the plaintiff. It cannot be said that it was the plaintiff who violated the agreement. Rather it was the defendants who failed to fulfill their part of the contract. The letter produced on record Ex.PW1/5 dt. 29.6.91 simply says that since the plaintiff had not deposited the amount despite demand vide letter dt.

10.4.91 Ex.PW1/4 and inspite of the reminders, the

defdts terminated the contract and forfeited the earnest money of Rs.60,000/-. The plaintiff in her letter Ex.PW1/6 dt. 2.8.91 the clearly identifies all objections to the allotment of show room no.2 on L.G.level No.S-1 Block E instead of show room no.20 an upper ground

floor level, Block E measuring 403 sq. feet covered area and also to the demand of upgrading and escalation

charges which she considered unjustifiable and

arbitrary. Further she points out that the possession cannot be passed on to her until completion certificate and electricity connection are obtained by the

defendants.

RFA No.95/1998 Page 16 of 35

15. The defendant wants to justify the change in the space as well as in the area by simply saying that the original allotment was provisional. As explained above such a explanation is not correct. Further even if the change could be made it cannot be expected that the

change could be made by the defendant unilaterally.

Ex.PW1/3 indicates the mode of change of the allotted space. Perhaps the defendant could have again

adopted the same mode for changing the space that is by prior discussion. The manner in which the defendant has done the change is entirely against any concept of law of contract. Thus it was the defendant who

committed the breach of contract and not the plaintiff. The defendant having failed to fulfill the contract and having offered the space which was not agreed upon by the parties was not entitled to cancel the contract on the excuse that the plaintiff had not paid the additional amount demanded by the defendant, vide Ex.PW1/4,

hence issue no.5 is decided against the defendant.

ISSUES NO.1,2 and 4:

The next question to be decided is whether the

plaintiff has performed her part of the contract and whether she is ready and willing to perform her part of contract. The question is whether the plaintiff has

complied with the requirements of the procedural law requiring the plaintiff to plead that she is ready and willing to perform her part of the contract. The plaintiff paid all the amount due as per terms of the agreement till the additional amount was demanded vide document Ex.PW1/4. It was at that point of time that the difference arose between the parties. The defendant

offered a space for which there is no agreement. The plaintiff, therefore, was inno obligation to make

payment for this new space. Had the defendant demanded additional amount for the same space for

which they had entered into a contract the pltff. was under an obligation to pay the same provided, however, the additional amounts were justified. The mere fact that the plaintiff did not comply with the additional demand raised in Ex.PW1/4 does not necessarily lead to the presumption that the plaintiff did not fulfill her part of the contract or that she is not willing to fulfill her part of the contract. The plaintiff has pleaded that she is ready and willing to pay the balance amount due under RFA No.95/1998 Page 17 of 35 the contract being no.8540/- payable within 15 days of the intimation of the completion of the building and offering the space to the allottees. So far as the

escalation and upgradation charges are concerned and same were not specifically provided in the contract

Ex.PW1/1. True, escalation in the cost of construction is accepted position of fact in the present day of rising prices of building material, cost of labour and other expanses required to build a house. The plaintiff under law as well as under the agreement is liable to pay the cost of escalation. Nonetheless the builder or the defendant cannot be whimsical in demanding any

amount by way of cost of escalation. The question that arises is how much the defendant is entitled to claim towards escalation.”

I do not find any illegality or perversity in the aforesaid findings and conclusions in the impugned judgment and decree when it holds that the respondent/plaintiff was not guilty of breach of contract and that the appellant/defendant was not entitled to terminate the agreement between the parties.

14(i). The related issue, then, is that what should be charges which should be payable by the respondent/plaintiff to the appellant/defendant. The trial Court has already been liberal towards the appellant/defendant on this aspect. A reference to the trial Court record shows that except the ipse dixit with respect to claim of a particular amount, no proof of the details alongwith the justifiable formula was given by the appellant as to how the escalation charges and other charges were calculated so as to be payable. Of course, the escalation is a reality and cost of construction does increase when delays takes place in the project and such escalation and other related RFA No.95/1998 Page 18 of 35 charges are payable in terms of the agreement between the parties, however, such charges have to be properly quantified because after all it is a question of imposition of monetary liability upon a buyer and which has necessarily thus to have valid justification. The trial Court has also noted that the escalation and related charges as claimed by the appellant/defendant have been granted only because the respondent/plaintiff had not given any figure towards the escalation and as a result of which the Court had no option but to accept the figure of the appellant/defendant. Therefore, the entire amount claimed by the appellant/defendant towards escalation and other related charges has already been awarded to the appellant/defendant.

(ii) At this stage, I must deal with the argument raised on behalf of the appellant/defendant that since the respondent/plaintiff agreed to pay the escalation charges as per the proceedings in the trial Court, it should be held that she was liable to pay escalation charges in terms of the notice Ex.PW1/4 dated 10.4.1991 and therefore by non-payment of which it was the respondent/plaintiff who committed the breach of the contract. I have already dealt with this aspect above that there were various aspects contained in the notice dated 10.4.1991 Ex.PW1/4, and the respondent/plaintiff was justified in first calling upon the appellant to meet the more crucial aspect of change of location and reduction of area, a stand which was taken in the pleading and also so deposed in the cross- RFA No.95/1998 Page 19 of 35 examination of the respondent/plaintiff in the evidence of the respondent/plaintiff.

 

15. The second main argument raised by the learned senior counsel for the appellant/defendant was that the trial Court ought to have granted the respondent/plaintiff the alternative relief of damages and not the relief of specific performance. This argument was based upon para 3 of the preliminary objections in the written statement and which reads as under:- “3. That even otherwise it is the case where the Hon’ble Court should exercise the discretion not to decree the specific performance as the performance of the contract would involve undue hardship to the defendant, as the defendant did not foresee at the time of the agreement dated 6.10.76, as it could not be foreseen that the building plan would be sanctioned by the DDA only after the delay of seven years that too after a long drawn litigation in December, 1983 and the construction would commence in January, 1984. It is submitted that the plans were sanctioned in December, 1983 and the construction commenced in January, 1984, during which period prices of building materials have gone very high and it became very difficult to complete the construction at the estimated cost of Rs.70/- per sq. ft. and another Rs.25/- sq. ft. for mind while selling the shop to the plaintiff at the rate of Rs.423/- per sq. ft. whereas as a matter of fact the defendant had to spend over Rs.600/- per sft. on the cost of construction along in which the value of the land is not included. Therefore, it became practically impossible for the defendant due to no fault on the part of the defendant to deliver the premises at the rate of Rs.423/- per sq. ft. and as such if this court decrees the specific performance, then it would cause undue hardship upon the defendant, whereas non performance would not cause any such hardship on the plaintiff and this court may be pleased to exercise discretion in not decreeing the performance. Even otherwise the suit for specific performance of the contract is not maintainable as the contract dated 6.10.76 has been validly and legally terminated vide termination letter dated 29.6.1991 because of the faults on the part of the plaintiff. It is submitted that the said termination has been done much prior to the filing of the present suit against the defendant and as such the cause if RFA No.95/1998 Page 20 of 35 any has become infructuous. It is further submitted that the ownership and possession of the shop in question i.e. shop No.2 on lower ground floor (i.e. S.I. LEVEL) of the International Trade Tower, Nehru Place, New Delhi has already been transferred and sold to M/s. Traders India (India) F 89/8 Okhla Industrial Phase-I New Delhi on 19/8/91 after legally and validly terminating the contract of the plaintiff and as such the defendant is no more the owner in possession of the shop in question and, therefore, no decree of specific performance of the contract regarding the shop in question can be passed.”

It was contended that on this defence issue No.6 was framed by the trial Court as to whether the grant of specific performance would cause undue hardship to the appellant/defendant. I must, however, straightaway note that what was really argued before this Court for claiming that the alternative relief of damages must be granted and not specific performance was that there has been an increase in the value of the property and therefore it would be inequitable to grant specific performance and which is not a defence found in the entire record of the Trial Court. Also, in this regard, it is necessary to reproduce the related finding of the trial Court with respect to issue No.6 and which finding will be relevant for dealing with the argument of the disentitlement for specific performance on the ground of rise in the prices. The said discussion on issue no.6 reads as under:- “ISSUE No.6

The onus of this issue was on the defendant. There is nothing on record to show that granting of the relief prayed for would cause any undue hardship to the defendant. True, specific performance of a contract is a equitable relief and equity of both the sides has to be weighed. The defendant has been using the space no.20 of the upper ground floor level as its own office. The defendant has put that space to profitable use all these years. Since the plaintiff is rightfully entitled to get the space as per the agreement between the parties, the defendant must part with it in favour of RFA No.95/1998 Page 21 of 35 the plaintiff. Issue No.6 is decided in favour of the plaintiff.” (underlining added)

A reading of the preliminary objection No.3 in the written statement shows that it was pleaded that the cost of construction had gone upto Rs.600/- per sq. feet and therefore the appellant/defendant cannot sell the subject premises at Rs.423/- per sq. feet. This para also contains the pleading that it was the respondent/plaintiff who was guilty of breach of contract and hence not entitled to specific performance. Finally, in this paragraph, it is stated that the shop No.2 on the lower ground floor has already been transferred to one M/s. Traders India and hence the suit for specific performance ought not to have been decreed. 16(i). In my opinion, the argument as raised by the learned senior counsel for the appellant/defendant that instead of specific performance only the relief of damages ought to have been granted deserves rejection for the various reasons stated herein after. What has been argued before this Court is that there has been considerable rise in the price of the property and therefore specific performance should not be granted. Reliance for this proposition was placed on behalf of the appellant/defendant, on the judgments of the Supreme Court reported as Kanshi Ram Vs. Om Prakash Jawal and Others (1996) 4 SCC 593, M. Meenakashi and Others Vs. Metadin Agarwal (dead) by LRS. (2006) 7 SCC 470, Nirmala Anand Vs. Advent Corporation (P) Ltd. AIR 2002 SC 3396 and Jai Narain RFA No.95/1998 Page 22 of 35 Parasrampuria (dead) and Others Vs. Pushpa Devi Saraf and Others (2006) 7 SCC 756.

(ii) This argument so raised deserves rejection firstly, because this stand is not contained in the pleadings of the appellant/defendant before the trial Court nor the case was so argued before the trial Court on this basis. Had such a case been argued, the impugned judgment which is a detailed and exhaustive one would have surely dealt with this aspect, however because no argument would have been raised by the appellant/defendant for denial of the claim of specific performance on the ground of increase of the price before the trial Court, therefore, the trial Court in the impugned judgment did not deal with the same. A totally new argument therefore cannot be allowed to be set up in appeal when there is complete absence of any pleading whatsoever in this regard. If the case of the appellant was that such an argument was raised which was not dealt with by the trial Court, the appellant/defendant would have in terms of the decision of the Supreme Court in the case of State of Maharashtra Vs. Ramdas Srinivas Naik AIR (1982) 2 SCC 463 immediately after the impugned judgment was passed, moved the trial Court that the argument as raised has not been dealt with. However, this was admittedly not done and therefore a totally new argument cannot be allowed to be raised in the appeal. In fact even in the grounds of appeal no ground is found where it is pleaded that specific performance should be denied on the ground of increase in prices. Learned senior counsel for the appellant in response to the argument that even in the RFA No.95/1998 Page 23 of 35 grounds of appeal no plea with respect to disentitlement to specific performance and the grant of alternative relief of damages on the ground of increase prices was raised, has referred to ground (s) of the appeal. A reference to ground (s) shows that it has not been pleaded that specific performance should be refused on the ground of increase of prices and what has only been pleaded in this ground is that the showroom in question was not available with the appellant/defendant and therefore the relief of specific performance should not be granted.

(iii) Not only there is absence of pleadings, the trial Court while dealing with issue No.6 has held that the appellant has failed to lead any evidence with respect to the plea of undue hardship for denying the relief of specific performance. To succeed in this plea of undue hardship, the appellant/defendant was bound to lead evidence to substantiate the aspects that prices had increased and also that it was forced to sell at Rs.423/- per sq. feet whereas the cost was Rs.600/- per sq. feet, however, no such evidence has been led and therefore the trial Court has given finding of fact that since there is no evidence on record in terms of what was pleaded in para 3 of the preliminary objection, there is no case of undue hardship that can be held in favour of the appellant/defendant. Therefore, in the absence of pleadings and evidence, the trial Court has rightly held that there is no case of undue hardship for refusing specific performance on the alleged ground that cost of construction had increased to beyond what was asked for from the respondent/plaintiff. This aforesaid conclusion will also equally RFA No.95/1998 Page 24 of 35 apply to the argument for denying specific performance on the ground of increase in prices because there is no evidence led in the Trial Court as to the increase of prices, what is the rate of increase, what is the quantification thereof, how does the increased price stand when compared to the agreed price, how would a seller/builder be prejudiced and in what manner etc. etc. In fact, in my opinion, the part of the argument that increased cost should disentitle specific performance is indeed a very specious one, inasmuch as, after all, for the escalated cost of construction, the appellant/defendant is getting duly compensated in terms of actual escalation which it was entitled to in terms of Clause 18 of the agreement. Additionally, besides the escalated cost of construction, the appellant/defendant was also entitled to charges in terms of Clause 17 of the agreement. Both these charges under Clauses 17 and 18 have been granted to the appellant/defendant by the trial Court. One therefore fails to understand as to how it can be argued either in fact or in law that specific performance ought not to be granted because the performance will cause undue hardship to the appellant/defendant inasmuch it has incurred more cost of construction and it is taking a lesser cost from the buyer. So far as the argument of increase of prices, in addition to what is already stated above, in law, the same is only one of the factors which the Courts see alongwith a host of other factors in order to balance the equities so as to decide whether the relief of specific performance should or should not be granted. In the present case, to allow the appellant to take up such a plea would be to put a premium upon its lack of bona fides in altering the RFA No.95/1998 Page 25 of 35 prime location of the shop as also reducing the area agreed to be sold. Respondent/plaintiff had paid almost the entire basic price and the disputes came into existence because of the mala fide attitude of the appellant in changing the location and area of the shop. It is also not a case that the respondent/plaintiff had paid only a very insignificant part or a very small part of the consideration and therefore should not be held entitled to benefit of the increase in the price of the property. In fact, I am dealing with this argument of rise in prices only in deference to the oral arguments raised by the learned senior counsel for the appellant inasmuch as I have already referred to the fact that there is neither a pleading nor any evidence to this effect in the trial Court and no argument under this head was raised before the trial Court and hence not dealt with in the impugned judgment. (iv) Another reason for rejecting the argument for denying specific performance is that the respondent/plaintiff in her suit only claimed for specific performance and did not ask for the alternative relief of damages. Surely, the respondent/plaintiff cannot be forced to claim a particular relief in her plaint. The suit was only for specific performance and which suit either would have been dismissed for specific performance or granted for specific performance, however, I am very much doubtful as to how the alternative relief of damages can be imposed upon the respondent/plaintiff, when the plaintiff herself has not prayed for the same.

RFA No.95/1998 Page 26 of 35 (v) The stand in the written statement and grounds of appeal that specific performance should be refused because of the fact that the shop No.2 on the lower ground floor has been transferred to some other person deserves rejection because the specific performance is prayed not with respect to the shop No.2 on the ground floor but with respect to shop/premises/portion being No.20 on the upper ground floor. In my opinion, ground (s) only further accentuates the mala fides of the appellant/defendant in seeking to deny the benefit of specific performance to the respondent/plaintiff, and even if the shop No.2 on the ground floor has been transferred by the appellant/defendant then the same is immaterial inasmuch as specific performance is not being asked with respect to the shop No.2 on the lower ground floor but with respect to shop No.20 on the upper ground floor.

17(i). Let me now assume that a ground was raised in the written statement and in the grounds of appeal that instead of specific performance alternative relief of damages should be granted and deal with the same. Let us also assume that this has also been proved in evidence, though it has not been so proved and as noted in para 16(iii) above. There is no quarrel to this proposition that a Court can and does in the facts and circumstances of a particular case use its discretion, which is a judicial discretion, so as to deny the relief of specific performance and grant only the relief of damages. A reference to the decision of Kanshi Ram (supra) cited by the learned senior counsel for the appellant/defendant shows that the said decision is in RFA No.95/1998 Page 27 of 35 the nature of an order and there is no discussion in the same as to what were the facts and circumstances due to which the Supreme Court granted the alternative relief of damages instead of specific performance. This becomes clear from para 5 of the said judgment which is relied upon by the learned counsel for the appellant/defendant and which reads as under:- “5. Having regard to the facts of this case and the arguments addressed by the learned counsel, the question that arises for consideration is: whether it would be just, fair and equitable to grant the decree for specific performance? It is true that the rise in prices of the property during the pendency of the suit may not be the sole consideration for refusing to decree the suit for specific performance. But it is equally settled law that granting decree for specific performance of a contract of immovable property is not automatic. It is one of discretion to be exercised on sound principles. When the court gets into equity jurisdiction, it would be guided by justice, equity, good conscience and fairness to both the parties. Considered from this perspective, in view of the fact that the respondent himself had claimed alternative relief for damages, we think that the courts would have been well justified in granting alternative decree for damages, instead of ordering specific performance which would be unrealistic and unfair. Under these circumstances, we hold that the decree for specific performance is inequitable and unjust to the appellant.”

The decisions in the cases of M. Meenakashi and Others (supra) and Jai Narain Parasrampuria (dead) and Others (supra) lay down the same ratio and holds that in certain cases once there is increase in prices during the pendency of the litigation or some increase in cost, instead of specific performance, the relief of damages can be granted. Reliance is also similarly placed on the decision of Nirmala Anand (supra) and para 6 whereof reads as under:-

RFA No.95/1998 Page 28 of 35 “6. It is true that grant of decree of specific performance lies in the discretion of the Court and it is also well settled that it is not always necessary to grant specific performance simply for the reason that it is legal to do so. It is further well settled that the Court in its discretion can impose any reasonable condition including payment of an additional amount by one party to the other while granting or refusing decree of specific performance. Whether the purchaser shall be directed to pay an additional amount to the seller or converse would depend upon the facts and circumstances of a case. Ordinarily, the plaintiff is not to be denied the relief of specific performance only on account of the phenomenal increase of price during the pendency of litigation. That may be in a given case, one of the considerations besides many others to be taken into

consideration for refusing the decree of specific performance. As a general rule, it cannot be held that ordinarily the plaintiff cannot be allowed to have, for her alone, the entire benefit of phenomenal increase of the value of the property during the pendency of the litigation. While balancing the equities, one of the consideration to be kept in view is as to who is the defaulting party. It is also to be borne in mind whether a party is trying to take undue advantage over the other as also the hardship that may be caused to the defendant by directing the specific performance. There may be other circumstances on which parties may not have any control. The totality of the circumstances is required to be seen.”

(ii) The proposition of law that relief of specific performance is a discretionary relief is in fact statutorily provided in Section 20 of The Specific Relief Act, 1963 which contains various instances where specific performance is not granted but only damages are granted. Section 20 has been expounded upon by the Supreme Court in various decisions, including in the decisions which have been cited by the learned senior counsel for the appellant/defendant. However, a reference to each of these cases shows that the discretion is a judicial discretion which is exercised in the facts of each case and increase in price (or cost) is only one of the factor which has to be considered in the totality of the facts of each case. For example, a RFA No.95/1998 Page 29 of 35 buyer may have paid only a very nominal consideration of about 5% to 10% of the total price and in which circumstances, the Court may feel that instead of specific performance alternative relief of damages is to be granted. This is to be contrasted with the case where a buyer has paid most of the price or after paying the price has received actual possession of the property and in which cases the relief of specific performance is granted and not the alternative relief of damages. Further, there are many cases and circumstances where there is caused undue hardship or inequity on account of specific performance therefore instead of specific relief only the relief of damages is granted. In the present case, I do find it a very strained logic of the appellant/defendant to argue that as a builder since his property became more valuable, (inasmuch as the price has increased), instead of specific performance, damages should be granted. The argument in fact is totally without substance because if this argument is accepted every builder whose project is delayed, whether for genuine reasons or not, will come and say that now contemporary prices during the litigation are much higher and therefore instead of specific performance only damages must be granted. In fact, I may note that the decision of Nirmala Anand (supra) in fact goes against the appellant/defendant because what is held in that judgment is that ordinarily specific performance ought to be granted and only very rarely the relief of specific performance is to be denied. In the present case it is the appellant who is the defaulting party and who in any case is getting the requisite escalated cost. I have also in the subsequent part of this judgment RFA No.95/1998 Page 30 of 35 not only granted interest (which was not granted by the Trial Court) to the appellant/defendant but a very high one. I therefore reject this argument of the learned counsel for the appellant/defendant that only damages should have been granted and not specific performance. In fact, I have already noted above if there is any equity the same is towards the respondent because almost the entire basic price was paid and the dispute for the balance and additional payment became inextricably linked with the illegal and unreasonable action of the appellant/defendant in changing the prime location and also reducing the area which had been agreed to be sold. Further it is the appellant/defendant itself who started using the space which was constructed for being allotted to the respondent/plaintiff, as its own office, and as so noted by the trial Court in the impugned judgment. The injustice/prejudice/undue hardship will thus be to the respondent/plaintiff if specific performance is not granted.

 

18. There is finally one aspect which I need to address in favour of the appellant/defendant, though no argument was raised before me, being grant of interest on the charges which have been held to be payable by the trial Court in favour of the appellant/defendant and against the respondent/plaintiff. I note that the trial Court has not granted any interest to the appellant/defendant for the monies which are required to be paid by the respondent/plaintiff to the appellant/defendant. No doubt, it is because of the appellant/defendant that the situation came to the present pass inasmuch as the appellant/defendant wrongly changed the allocation of RFA No.95/1998 Page 31 of 35 space from the prime location of upper ground floor to the lower ground floor and also reduced the area from 403 Sq. feet to 372 sq. feet, however, the respondent has used these monies which are held payable by her to the appellant/defendant. However, while dealing with this aspect I must hasten to add that so far as the portion of charges relating to maintenance etc. under Clause 17, the respondent/plaintiff has not received the benefit of possession which would have been received by her on payment of these charges and the escalation charges, and also that the appellant/defendant itself has been using this allocated space as its own office space. Therefore, balancing the equities, though interest should be awarded to the appellant/defendant on the escalated cost portion of the price payable, the issue really would be of the rate of interest which ought to be awarded in favour of the appellant/defendant and against the respondent/plaintiff with respect to the escalation charges which are payable to the appellant/defendant as per the impugned judgment and whether interest should be payable on the charges other than the escalation charges. Nowadays the Supreme Court has been directing that the rates of interest which should be awarded by the Courts should be at a lower side in view of the changed economic scenario, liberalization of the economy and the consistent fall in the rates of interest. The recent judgments of the Supreme Court, in this regard, are Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority and others, 2005 (6) SCC 678, McDermott International Inc. v. Burn Standard Co. Ltd. and RFA No.95/1998 Page 32 of 35 others, 2006 (11) SCC 181, Rajasthan State Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700 & Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra, 2007 (2) SCC 720 and State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd (2009) 3 Arb. LR 140 (SC). The Supreme Court has granted rates of interest varying between @ 6% to 9%. per annum simple.

In the facts of the present case, however, I find that instead of a lower rate of interest, the appellant/defendant should get a higher rate of interest considering that the transaction pertains to an immovable property and benefit of which will go to the respondent/plaintiff. Therefore, I hold the appellant/defendant entitled to pendente lite and future interest @ 21% per annum simple on the amount of escalation charges as decreed by the trial Court. For the other charges which are payable by the respondent/plaintiff to the appellant/defendant which have been granted by the trial Court, the same however would be without payment of any interest because the said charges are towards maintenance and other related charges with respect to the property and the respondent has not enjoyed the property during all this period which in fact the appellant/defendant has used.

19. In view of the above, so far as the merits of the case are concerned as regards the grant of the relief of specific performance, I do not find any illegality or perversity in the findings and conclusions in the impugned judgment calling for any interference by this Court. This Court is RFA No.95/1998 Page 33 of 35 not entitled to interfere with the findings and conclusions of the trial Court merely because out of two views, one plausible and possible view has been taken by the trial Court. I also do not find that there is any injustice/prejudice which has been caused to the appellant/defendant requiring interference with the impugned judgment and decree. In fact, if there is any injustice/prejudice, the same has been caused to the respondent/plaintiff.

 

20. In view of the above, the appeal being devoid of merits is dismissed, so far as the challenge to the impugned judgment by which specific performance has been granted. The appellant/defendant however will be entitled to interest of 21% per annum simple on the escalation charges which are payable by the respondent/plaintiff to the appellant/defendant pendente lite and future till realization. No interest will be payable on the other charges which have to be paid to the appellant/defendant as per the impugned judgment. It is decreed and directed that the appellant/defendant will specifically perform the agreements dated 6.10.1976 and 14.9.1985 between the parties with respect to space No.20 on the upper ground floor in block E measuring 403 Sq. feet in the building known as International Trade Tower, Nehru Place, New Delhi by executing the conveyance deed or any other document so required in law in favour of the respondent/plaintiff. The appellant will raise a demand upon the respondent/plaintiff in accordance with this judgment within a period of 45 days from today and the respondent/plaintiff will pay RFA No.95/1998 Page 34 of 35 the said amount to the appellant within 45 days thereafter and whereupon the respondent/plaintiff will be entitled to execution in her favour of the appropriate title document. Decree sheet be prepared. Interim orders are vacated. Trial Court record be sent back.

MARCH 11, 2011 VALMIKI J. MEHTA, J. Ne

RFA No.95/1998 Page 35 of 35

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