Sunday, 27 October 2019

Whether court should grant relief of damages in suit for specific performance of contract in absence of documentary evidence?

16(ii). In my opinion, however, even the relief of grant of damages of Rs. 36,37,500/- cannot be granted to the respondent/plaintiff because damages are granted of a specific amount on the principles contained under Section 73 of the Indian Contract Act, 1872. The requirement of Section 73 of the Contract Act is to prove the loss of a specific amount. It is a loss of a specific amount which is awarded as damages as a money decree. Ordinarily in a suit seeking specific performance with the alternative relief of damages, damages are granted on account of increase of the price of the suit property from the date of the agreement to the date fixed for performance, and this is because the reason is that if a buyer would go to purchase a similar property in the market, a higher price would have to be paid, and therefore the difference between the contract price and the higher price as on the date of the performance are granted as damages. There is no documentary evidence in this case led on behalf of the respondent/plaintiff of any sale deed of a sale of a similar property at a higher price totaling to Rs. 72,75,000/- for the respondent/plaintiff be awarded damages of Rs. 36,37,500/-. Though the ld. counsel for the respondent/plaintiff did seek to argue that the appellants/defendants have admitted in the written statement that prices of the property have gone up to between Rs. 40,00,000/- to Rs. 45,00,000/-, however the figure of "between Rs. 40,00,000/- to Rs. 45,00,000/-" is a vague statement inasmuch as in law when damages are awarded, the damages are awarded of a specific amount as claimed and this specific amount which is claimed by the respondent/plaintiff is a sum of Rs. 36,37,500/-. As already stated in para 15 above that appellants/defendants did make an offer to pay a sum of Rs. 10,00,000/- to the respondent/plaintiff, but the respondent/plaintiff has refused to receive the amount.

IN THE HIGH COURT OF DELHI

RFA No. 108/2017

Decided On: 29.01.2019

 Asha Verma  Vs. Monika Singla

Hon'ble Judges/Coram:
Valmiki J. Mehta, J.

Citation: AIR 2019 Delhi 109


1. This Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is filed by the defendants in the suit impugning the Judgment of the trial court dated 05.11.2016 by which the trial court has decreed the suit for specific performance filed by the respondent/plaintiff pertaining to the Agreement to Sell dated 26/27.05.2005 for the property being Flat no. 37, Second Floor, Cooperative Group Housing Society, Ankur Apartments, I.P. Extension, Plot no. 7, Patparganj, Delhi-110092. Trial court has held that it was the appellants/defendants who were guilty of breach of contract and that the respondent/plaintiff had proved her readiness and willingness for grant of the decree for specific performance. Trial court has also held that the appellants/defendants cannot succeed in displacing the respondent/plaintiff for the grant of relief of specific performance on the ground that the relief of specific performance is a discretionary relief and which ought not to be granted in favour of the respondent/plaintiff in the facts of the present case.

2. I need not narrate the facts of the case in detail, and the limited facts required for the decision of the present appeal are that an Agreement to Sell was admittedly entered into between the parties on 26/27.05.2005 with respect to the suit property. That the total sale consideration was Rs. 36,37,500/- is also not disputed. Out of the total sale consideration, only an amount of Rs. 2,00,000/- was paid as earnest money and this is also not disputed and also that the balance sale consideration of Rs. 34,37,500/- was payable in terms of the Agreement to Sell by 10.08.2005. It is also an undisputed position that at the time of payment of the balance sale consideration on or before 10.08.2005, the sale deed was to be executed and possession of the suit property was to be delivered by the appellants/defendants to the respondent/plaintiff.

3. There are two issues which are argued on behalf of the appellants/defendants for allowing of the present appeal and dismissing the suit for specific performance filed by the respondent/plaintiff. Firstly, it is argued that every plaintiff in a suit for specific performance must strictly prove the existence of financial capacity, and the same is a sine qua non as per Section 16(c) of the Specific Relief Act, 1963. It is argued that the respondent/plaintiff has miserably failed to prove her financial capacity of having the balance sale consideration of Rs. 34,37,500/-, and especially that the financial capacity to prove the balance sale consideration, even if the same is proved as on 10.08.2005, the same has definitely not been proved for the period from 10.08.2005 till the suit was decreed, and this is the requirement of law in view of the ratio of the judgment of the Hon'ble Supreme Court in the case of N.P. Thirugnanam (D) through LRs v. Dr. R. Jagan Mohan Rao & Ors, MANU/SC/0025/1996 : 1995 (5) SCC 115.

4. The following issues were framed in the suit:-

(i) Whether the plaintiff is entitled to specific performance of an agreement to sell dated 26/27.05.2005 in respect of the suit property agreed to be sold by the defendants to her? OPP

(ii) Which party to the suit was guilty of breach of the agreement to sell dated 26/27.05.2005 and to what effect? OP Parties.

(iii) Whether the plaintiff was ready and willing to perform his part of the contract as contained in the agreement to sell dated 26/27.05.2005? OPP.

(iv) In case the plaintiff is found not entitled to specific performance, to what amount the plaintiff shall be entitled to get as damages or otherwise from the defendants in terms of agreement to sell dated 26/27.05.2005? OPP

(v) Relief."

5. On the aspect of financial capacity, the trial court has held that the respondent/plaintiff has proved her financial capacity. For this purpose, besides the oral averments of the husband of the respondent/plaintiff who appeared in the witness box as PW-2, who deposed with respect to the readiness of the respondent/plaintiff, the documentary evidence proved by PW-2 to show the financial capacity of the respondent/plaintiff to complete the sale transaction are two documents being Ex. PW2/1 and Ex. PW2/2. In the cash book proved as Ex. PW2/1, on 10.08.2005 being the last date of performance, the cash balance is shown as Rs. 9,46,917/-. This cash book shows a cash balance as on 31.08.2005 of Rs. 72,279/-. Ex. PW2/2 is a cash credit loan facility granted for the business of the husband of the respondent/plaintiff by Oriental Bank of Commerce with a limit of Rs. 15,00,000/-. It is also noted that the respondent/plaintiff through the deposition of other witnesses had proved pay orders issued by the Oriental Bank of Commerce for a total sum of Rs. 8,00,000/-, Ex. PW1/5 and Ex. PW1/6, and these pay orders of Rs. 4,00,000/- each were dated 08.08.2005. The respondent/plaintiff had also proved as Ex. PW4/1 a pay order for a sum of Rs. 8,50,000/- dated 09.08.2005 in the name of the appellant no. 2/defendant no. 2. The respondent/plaintiff also proved as Ex. PW4/2 a copy of Demand Draft dated 09.08.2005 for a sum of Rs. 3,50,000/- in the name of the appellant no. 1/defendant no. 1 of Punjab National Bank, Delhi. Another demand draft for a sum of Rs. 5,00,000/- of Delhi State Cooperative Bank Ltd. Darya Ganj, Delhi was proved as Ex. PW10/6 in the name of appellant no. 1/defendant no. 1.

6. Before I turn to this aforesaid documentary evidence led on behalf of the respondent/plaintiff to show her financial capacity, it would be apposite to refer to the ratio of the judgment of the Hon'ble Supreme Court in the case of N.P. Thirugnanam (D) through LRs (supra). Para 5 of the judgment in the case of N.P. Thirugnanam (D) through LRs (supra) clearly requires that the amount of consideration which a buyer has to pay must necessarily be proved to be available right from the date of execution of the Agreement to Sell till the date of the decree. This para 5 of the judgment in the case of N.P. Thirugnanam (D) through LRs (supra) reads as under:-

"5. It is settled law that remedy for specific performance is an equitable remedy and is in the discretion of the court, which discretion requires to be exercised according to settled principles of law and not arbitrarily as adumbrated under s. 20 of the Specific Relief Act 1963 (for short, 'the Act'). Under s. 20, the court is not bound to grant the relief just because there was valid agreement of sale. Section 16(c) of the Act envisages that plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than those terms the performance of which has been prevented or waived by the defendant. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit alongwith other attending circumstances. The amount of consideration which he has to pay to the defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of contract."

(emphasis supplied)

7. Therefore, we have to examine as to whether the respondent/plaintiff has proved financial capacity to pay the balance sale consideration of Rs. 34,37,500/- from 10.08.2005 and till the evidence of the respondent/plaintiff was completed on 25.11.2011 i.e. the date when respondent/plaintiff closed her evidence. It is noted that the requirement of financial capacity continues to exist as stated in the case of N.P. Thirugnanam (D) through LRs (supra) because Section 16(c) of the Specific Relief Act requires that the buyer has been 'always ready' (and willing) to perform the agreement to sell.

8. First of all, it is an undisputed fact on record that there is no documentary evidence led and proved by the respondent/plaintiff to show financial capacity except of August 2005. Each of the banking instruments stated above, which have been proved on behalf of the respondent/plaintiff, are only of August 2005. No financial capacity to pay the balance sale consideration of Rs. 34,37,500/- has been proved from 2005 till the evidence of the respondent/plaintiff was closed in November 2011. As already stated, the observations which have been made by the Hon'ble Supreme Court in the case of N.P. Thirugnanam (D) through LRs (supra) with respect to financial capacity continuing till the decree of the suit have been made because Section 16(c) of the Specific Relief Act states that a buyer has always been and continues to be ready to perform his part of the contract, and readiness admittedly means financial capacity. Therefore, financial capacity has to be shown to exist right from the date of the execution of the agreement to sell till the decree of the suit, and till the date of decree which in one way can be equated to completion of evidence by the plaintiff/buyer in the suit. Therefore, at best since financial capacity to pay the balance sale consideration is proved by the respondent/plaintiff only as on August 2005, i.e. the respondent/plaintiff has miserably failed to prove financial capacity from August 2005 till November 2011, thus/hence it has to be held that the respondent/plaintiff has failed to prove financial capacity as required by Section 16(c) of the Specific Relief Act read with the ratio of the judgment in the case of N.P. Thirugnanam (D) through LRs (supra).

9. I would also like to note that even the evidence which is led on behalf of the respondent/plaintiff with respect to banking instruments, only totals to an amount of Rs. 25,00,000/- i.e. no documentary evidence has been led to show the availability of finance for the payment of the balance sale consideration of Rs. 9,37,500/-. Though it is argued by the ld. counsel for the respondent/plaintiff that her husband deposed to the availability of Rs. 11,00,000/- in cash on the date of 10.08.2005 which was fixed for execution of the sale deed, but there is no documentary evidence to support any availability of cash of Rs. 11,00,000/- with the respondent/plaintiff. I may also note that no oral deposition of the brother of the respondent/plaintiff of having cash amount of Rs. 11,00,000/- is found in the record, and even if the same has been made, it is only a self-serving statement, not backed by any documentary evidence as to the availability of amount of Rs. 11,00,000/- with PW5 namely Sh. Ashok Singla.

10. It has been held by the Hon'ble Supreme Court in the judgment in the case of Saradamani Kandappan v. Mrs. S. Rajalakshmi, MANU/SC/0717/2011 : 2011 (12) SCC 18, that in these times of rising prices, especially in cities, financial capacity has to be very strictly proved by a buyer. 'Strictly proved' must mean that there is such evidence which the court would believe, and evidence, therefore, necessarily has to be clinching documentary evidence. In this regard, I have also held so in the judgment in the case of Baldev Behl & Ors. v. Bhule & Ors., 2012 SCC OnLine Del 4730 that mere self-serving averments of financial capacity will not prove financial capacity. The relevant paras of the judgment in the case of Baldev Behl & Ors. (supra) are paras 26(i) and 26(ii), and these paras read as under:-

"26(i). This issue pertains to plaintiff No. 1 being ready and willing to perform his part of the agreement to sell. As per Section 16(c) of the Act, every plaintiff in a suit for specific performance must aver and prove that the plaintiff has always been and continues to be ready and willing to perform his part of the contract/agreement to sell. Readiness is financial capacity to go ahead with the agreement to sell and willingness is the intention. I may, at this stage, specifically invite attention to the observations of the Supreme Court in the case of Balraj Taneja and Anr. (supra), and relevant paras have been reproduced above, and which show that in a suit for specific performance even if there is no defence of the defendant, yet, the aspect of readiness and willingness has to be specifically proved by the plaintiff. This is stated by the Supreme Court in para 30 of the said judgment. The question is whether the plaintiff No. 1 has proved his readiness and willingness at the relevant time and also continues to be ready and willing to perform his part of the contract/agreement to sell.

(ii) Readiness to perform the obligations by a proposed purchaser is a very important aspect and it has to be proved by categorical evidence. Mere oral evidence and self-serving depositions cannot be a substitute for categorical evidence on the specific statutory requirement of Section 16(c). It is not disputed on behalf of the plaintiff No. 1 that plaintiff No. 1 has not filed any income tax returns or any bank account or proof of any other assets/properties or any other evidence to show the financial capacity of the plaintiff No. 1 to pay the balance sale consideration. As per the case of the plaintiff No. 1, the balance sale consideration would be approximately Rs. 19.5 lacs and there is no evidence worth the name in the record to show the plaintiff No. 1's financial capacity for this amount. Of course, while on this argument, I am assuming that there is a certainty as to consideration because in reality there is no certainty as to balance sale consideration inasmuch as the plaintiff No. 1 has failed to exercise the option in terms of the agreement to sell as to which area of the balance land less the hutment/portion the plaintiff No. 1 seeks specific performance of. Also, as already stated above, this area claimed by the plaintiff No. 1 has to be further conditioned by an area of 12 bighas which has already been sold to be defendant No. 3 under the sale deed dated 8.4.1988. In any case, I need not state anything further inasmuch as there is not a single piece of paper on record or any credible evidence which proves the financial capacity of the plaintiff No. 1. I accordingly hold that plaintiff No. 1 has miserably failed to prove his readiness to perform his obligations under the agreement to sell dated 27.8.1988. In fact, even willingness on the part of the plaintiff No. 1 is absent inasmuch as there is no certainty of any option exercised by the plaintiff No. 1 as to specific area which the plaintiff No. 1 seeks to purchase, and which specific area had necessarily to be clear inasmuch as there is the issue of lessening the area whether on account of hutments or on account of 12 bighas of land already purchased by the defendant No. 3 vide sale deed dated 8.4.1988 and hence of clarity as to for what area and for what price the agreement to sell has to go ahead."

(emphasis is mine)

11(i). At this stage, I may also note that the respondent/plaintiff had led evidence of ICICI bank that the ICICI bank had sanctioned a loan of Rs. 16,00,000/- in favour of the respondent/plaintiff vide Ex. PW14/1 dated 26.07.2005, however, in my opinion, the trial court has rightly rejected this document by observing that this sanction of Loan Letter Ex. PW14/1 pertains to the loan application Ex. PW14/D1, and this loan application was not for the suit property but was for a different property bearing no. C-303, Mayurdhwaj Apartments, Patparganj, Delhi. I must also note that a loan is granted qua a specific property because the bank will have to be convinced as to the title of the property vesting with the loanee, and therefore, a loan application and sanction is 'property-specific' and not general.

11(ii). I reject the argument urged on behalf of the respondent/plaintiff by placing reliance upon the deposition of the witness from the ICICI bank who deposed as PW-14, namely Sh. Gaurav Kala, that loan is not 'property-specific' inasmuch as oral statements of officers of the bank cannot be help to prove that the loan is sanctioned not for the property which is specifically written in the sanction of loan letter but for another property. Of course, I would hasten to add that the witness, PW-14/Sh. Gaurav Kala, when specifically put a question if the loan was sanctioned not for the suit property but for another property no. C-303, Mayurdhwaj Apartment, Patparganj, Delhi, he tried to help the respondent/plaintiff by stating that "I am not aware" and obviously this was not expected from a witness from a bank, and in any case, and as stated above, oral statements cannot change the factual position which is found in the documentary evidence.

12. As regards the cash book/ExPW2/1 showing cash balance of Rs. 9,46,917/-, besides the amount being allegedly available only in August 2005, even this cash book bank balance is only an entry without supporting evidence of actual cash availability of Rs. 9,46,917/-. So far as the cash credit loan facility of Rs. 15,00,000/- proved as Ex. PW2/2 (and only in August 2005), this is a loan facility for the business of the husband of the respondent/plaintiff and will not be available from the bank for purchase of an immovable property and that too of a property which is not being purchased by the person to whom the cash credit loan facility is granted.

13. Therefore, it is clear that at best the respondent/plaintiff has proved financial capacity of Rs. 25,00,000/- by documentary evidence, and that too only in August, 2005 and not from August, 2005 till November, 2011, when the evidence of the respondent/plaintiff was completed and thus it is held that the respondent/plaintiff has failed to show continuous readiness/financial capacity as required by Section 16(c) of the Specific Relief Act read with the ratio of the judgment of the Hon'ble Supreme Court in the case of N.P. Thirugnanam (D) through LRs (supra). Once the respondent/plaintiff has failed to prove the financial capacity to pay the balance sale consideration for the period from the year 2005 till the year 2011, the trial court, in my opinion, has gravely erred in holding that the respondent/plaintiff continued to be ready, i.e. had financial capacity to pay the balance sale consideration.

14(i). In my opinion, no further discussion is required for allowing the present appeal, and therefore this Court is not deciding the second issue which has been urged on behalf of the appellants/defendants that the respondent/plaintiff is not entitled to the discretionary relief of specific performance, and for this argument reliance was placed upon the judgment passed by this Court in the case of M/s. Hotz Industries Pvt. Ltd. v. Dr. Ravi Singh (Since deceased through L.Rs) & Ors., CS (OS) No. 1261/1995. Since this Court is not adverting to this argument of the relief of specific performance being a discretionary relief for being declined as such to the respondent/plaintiff, hence, I also need not examine the argument urged on behalf of the respondent/plaintiff that Section 20 of the Specific Relief Act now stands repealed from the statute book as it existed when the suit was filed being now substituted by a different Section 20, and the new Section 20 has the effect of taking away the powers of the Court for declining the specific performance as a discretionary relief.

14(ii). I further note that it was also argued by the respondent/plaintiff by placing reliance upon Section 10 of the Specific Relief Act as existing today that specific performance "shall" be granted, and though prima facie, I doubt this argument because no doubt the word "shall" is used in Section 10, however, the said Section 10 itself specifically states that it is subject to the provisions of Sections 11, 14 and 16 of the Specific Relief Act, but once again this argument need not be considered as this appeal is being disposed of on the aspect of lack of readiness of the respondent/plaintiff.

15. I may note that appellants/defendants during the course of final arguments in this appeal had offered to pay to the respondent/plaintiff a sum of Rs. 10,00,000/-, this amount being as a return on investment of a sum of Rs. 2,00,000/- which was paid by the respondent/plaintiff to the appellants/defendants as advance earnest money, but the ld. counsel for the respondent/plaintiff on taking instructions from the respondent/plaintiff has rejected the offer. In my opinion, if a sum of Rs. 2,00,000/- was invested by the respondent/plaintiff in the year 2005, as on date even the best security and the best investment would not have in a period of 15 years brought the investment to five times i.e. Rs. 10,00,000/-, and therefore, I did find that the offer made on behalf of the appellants/defendants to pay an amount of Rs. 10,00,000/- to the respondent/plaintiff as a reasonable figure to finish the litigation but unfortunately the respondent/plaintiff has rejected the offer and insists for disposal of this appeal on merits by a judgment.

16(i). The ld. counsel for the respondent/plaintiff then argued that respondent/plaintiff is entitled to a money decree for damages as prayed for in the suit being a sum of Rs. 36,37,500/-, as it is argued that the appellants/defendants are indeed guilty of breach of contract, and so confirmed by this Court.

16(ii). In my opinion, however, even the relief of grant of damages of Rs. 36,37,500/- cannot be granted to the respondent/plaintiff because damages are granted of a specific amount on the principles contained under Section 73 of the Indian Contract Act, 1872. The requirement of Section 73 of the Contract Act is to prove the loss of a specific amount. It is a loss of a specific amount which is awarded as damages as a money decree. Ordinarily in a suit seeking specific performance with the alternative relief of damages, damages are granted on account of increase of the price of the suit property from the date of the agreement to the date fixed for performance, and this is because the reason is that if a buyer would go to purchase a similar property in the market, a higher price would have to be paid, and therefore the difference between the contract price and the higher price as on the date of the performance are granted as damages. There is no documentary evidence in this case led on behalf of the respondent/plaintiff of any sale deed of a sale of a similar property at a higher price totaling to Rs. 72,75,000/- for the respondent/plaintiff be awarded damages of Rs. 36,37,500/-. Though the ld. counsel for the respondent/plaintiff did seek to argue that the appellants/defendants have admitted in the written statement that prices of the property have gone up to between Rs. 40,00,000/- to Rs. 45,00,000/-, however the figure of "between Rs. 40,00,000/- to Rs. 45,00,000/-" is a vague statement inasmuch as in law when damages are awarded, the damages are awarded of a specific amount as claimed and this specific amount which is claimed by the respondent/plaintiff is a sum of Rs. 36,37,500/-. As already stated in para 15 above that appellants/defendants did make an offer to pay a sum of Rs. 10,00,000/- to the respondent/plaintiff, but the respondent/plaintiff has refused to receive the amount.

17. In view of the aforesaid discussion, the appeal of the appellants/defendants is allowed. Impugned judgment of the trial court dated 05.11.2016 is set aside. The suit of the respondent/plaintiff will stand dismissed. All pending applications are also disposed of. Parties are left to bear their own costs.


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