Saturday, 22 January 2022

Can the court refuse to grant specific performance of construction contract after Specific relief amendment Act 2018 if the contract is not precise?

Re. Section 14(1)(b) of Specific Relief Act

55. Though, in the written submissions tendered by the defendant as encapsulating the submissions advanced at the Bar, this contention has not been raised, it was, in fact, argued, and I proceed, therefore, to deal with it.

56. Section 14(1)(b) of the Specific Relief Act completely bars grant of interlocutory relief as sought by the plaintiff, contends Mr. Garg. The provision, as it stands today, reads thus:

14. Contracts not specifically enforceable. - The following contracts cannot be specifically enforced, namely:—

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(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;”

57. This, however, is the amended avatar of Section 14. Prior to its amendment by Section 5 of the Specific Relief (Amendment) Act, 2018, Section 14 (to the extent relevant) read as under:

14. Contracts not specifically enforceable.-

(1) The following contracts cannot be specifically enforced, namely:—

(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.

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(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:—

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(c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land:

Provided that the following conditions are fulfilled, namely:—

(i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work;

(ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such nature that compensation in money for non-performance of the contract is not an adequate relief; and

(iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.”

58. Prior to its amendment, therefore, Section 14 required, for specific performance of a contract for the construction of a building, the contract to describe the building “in terms sufficiently precise to enable the courts to determine the exact nature of the building or work”. That requirement is now done away with. Decisions, which have held a contract for construction of a building or other work not to be capable of being enforced by way of specific performance on the ground that the contract is imprecise or vague, relating to causes of action arising during the currency of the pre-amended Section 14 of the Specific Relief Act cannot, therefore, prima facie, constitute valuable precedents, to guide cases arising after Section 14 was amended.

59. Having said that, “a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise” still remains impervious to enforcement by way of specific performance.


24.3. In order to determine the exact nature of the agreement signed between the parties, the intent of the parties has to be construed by reading the agreement as a whole in order to determine whether it is an agreement simpliciter for construction or an agreement that also creates an interest for the builder in the property. Where under a development agreement, the developer has an interest in land, it would be difficult to hold that such an agreement is not capable of being specifically enforced.

(Italics and underscoring supplied)

73. Where, therefore, as in the present case, the agreement is not merely for development or construction on the property, but also envisages valuable rights enuring, in favour of the developer, in the constructed edifice, the Supreme Court itself holds, unequivocally, that it would be difficult to treat the agreement as incapable of specific performance.

74. The requirement of precision, in the construction contract, as a pre-condition for its enforceability, is relatable to the erstwhile Section 14(3)(c)(iii) of the Specific Relief Act. That requirement no longer figures on the statute book, after the amendment of Section 14 by the 2018 Amendment Act. In my prima facie opinion, lack of precision in the construction agreement can no longer be regarded, by itself, as a sufficient disqualification to its enforceability by specific performance. Else, it would be re-introducing, by a side wind, the consideration in the erstwhile Section 14(3)(c)(iii), which the legislature has consciously removed from the statute. Such an exercise is necessarily to be eschewed, as it would militate against the legislative intent.

75. The sequitur would, therefore, be that a construction contract can no longer be regarded as incapable of specific performance merely because its terms are imprecise or vague. If, however, owing to such imprecision or vagueness, any direction for specific performance would require continuous supervision by the Court, that would, even now, render the agreement incapable of specific performance by virtue of Section 14(b). For that, however, the Court would have to arrive at a finding that, owing to the imprecision of the agreement, or for any other reason, any direction for specific performance would require continuous supervision by the Court. In the scenario of Section 14 as it exists today, and without the support of the erstwhile Section 14(3)(c) and its various clauses, this would, in almost every case, be arguable at the very least.

76. Prima facie, in view of the above legal position, I am unable to convince myself to hold, prima facie, that the defendant has been able to make out a case of the PDA being incapable of specific performance, by operation of Section 14(b) of the Specific Relief Act, as would justify vacation of the interim direction to maintain status quo in respect of the suit property.

In the High Court of Delhi at New Delhi

(Before C. Hari Shankar, J.)

Grovy India Ltd. Vs Balbir Singh

IAs 6433/2020, IA 7643/2020 and CS(COMM) INFRA 1/2020

Decided on October 22, 2021

Citation: 2021 SCC OnLine Del 4783

The Judgment of the Court was delivered by

C. Hari Shankar, J.:— On 4th August, 2020, while issuing summons in CS (Comm) (Infra) 1/2020, IA 6433/2020, filed by the plaintiff under Order XXXIX Rules 1 and 2 of the Civil Procedure Code, 1908 (CPC), was also taken up for preliminary hearing. Ad interim injunction was granted, in favour of the plaintiff, restraining the defendant from transferring, alienating, encumbering or further creating any third party rights in respect of the suit property located at F-6, Kailash Colony, New Delhi, or carrying out any further alteration in the suit property.

2. The defendant filed IA 7643/2020, for vacating the aforesaid ad interim order.

3. Arguments were heard on IA 6433/2020 and IA 7643/2020, which are being disposed of, by this order.

Facts, as per the plaint

4. The dispute relates to a Property Development Agreement (“PDA”), dated 14th January, 2020, executed between the plaintiff and the defendant. The defendant has admitted this document. Clauses 2, 3, 4, 6, 14 and 19 of the PDA read thus:

“2. That the DEVELOPER shall demolish the existing structure on the said plot of land and develop, construct and/or build a building consisting of Basement, Stilt, Ground Floor, First Floor, Second Floor and Third Floor with terrace, at its own costs and expense.

3. That the DEVELOPER shall develop, construct and complete the Building at its own costs and expenses after procuring the requisite permissions, sanctions and approvals for development construction and completion of the said building on the said plot at DEVELOPER's cost.

4. That it has been clearly agreed between the parties that the malba realised from the demolition of the existing structure of the said property shall belong to the DEVELOPER who shall have full right to sell the same and receive the proceeds thereof, without any claim or right of the OWNER in the same.

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6. That in addition to the DEVELOPER incurring the entire costs and expenses etc. for the construction, will pay a sum of Rs. 49,00,000/- (Rupees Forty Nine Lakhs Only) to the OWNER as the total consideration against the rights in the property to be transferred in favour of the DEVELOPER or its nominee/s. The abovesaid amount has been paid by the DEVELOPER to the OWNER, in the following manner:

Rs. 4,00,000/- (Rupees Four Lakhs Only) vide cheque no. 406161 drawn on Axis Bank dated 14/01/2020.

The receipt of which the OWNER hereby admits and acknowledges. The balance sum of Rs. 45,00,000/- (Rupees Forty Five Lakhs) shall be made will be paid by the DEVELOPER to the OWNER. at the time of registration of the sale documents such as Agreement to Sell, General Power of Attorney, Will, Affidavits etc. on or before 5th February, 2020 as the full and final settlement and discharge.

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14. That in view of the above arrangement arrived at between the parties hereto and in lieu of the DEVELOPER (a) re-developing the said property at its own cost using its infrastructure facilities, Man Power, Skill & expertise (b) paying the aforesaid amount/consideration to the OWNER. The parties shall be shall be entitled to the following portions of the newly constructed building as under:

OWNER'S ALLOCATION

i)

ENTIRE BASEMENT

ii)

ENTIRE GROUND FLOOR

iii)

ENTIRE FIRST FLOOR

iv)

ENTIRE SECOND FLOOR

v)

77.5% SHARE/PORTION OF THE ENTIRE STILT AREA FOR CAR PARKING AND COMMON W.C. THEREIN

vi)

USE OF COMMON AREAS, FACILITIES AND SERVICES

vii)

77.5% UNDIVIDED, INDIVISIBLE AND IMPARTIBLE OWNERSHIP RIGHTS IN THE PLOT OF LAND MEASURING 531-6/10 SQ. YDS.

DEVELOPER'S ALLOCATION

i)

ENTIRE THIRD FLOOR

ii)

ENTIRE TERRACE OVER AND ABOVE THE ENTIRE THIRD FLOOR

iii)

22.5% SHARE/PORTION OF THE ENTIRE STILT AREA WITH INDEPENDENT BAY WITH SEPARATE GATE FOR CAR PARKING AND COMMON W.C. THEREIN (As per attached plan)

iv)

USE OF COMMON AREAS, FACILITIES AND SERVICES

v)

22.5% UNDIVIDED, INDIVISIBLE AND IMPARTIBLE OWNERSHIP RIGHTS IN THE PLOT OF LAND MEASURING 531-6/10 SQ. YDS.

19. The DEVELOPER and the OWNER shall be entitled to sell, transfer. convey and assign their respective portions to any prospective buyer and to receive the sale proceeds in respect thereof, in their respective names, before, during or after the completion of the construction, without any objection or hindrance by the other. Further the DEVELOPER and the OWNER shall be fully entitled to enter into any Agreement(s) for the sale/booking of their respective allocations in the newly constructed building and shall be entitled to accept cash/cheque in their respective names. Further the OWNER hereby agree to confirm, execute or enter into Agreement. if required by the DEVELOPER, between the OWNER, DEVELOPER and the prospective purchaser of the portion(s) falling to the share of the DEVELOPER.”

5. Clause 6 of the PDA required the plaintiff to pay, to the defendant, Rs. 49 lakhs. of this, the payment of an amount of Rs. 4 lakhs, vide cheque dated 14th January, 2020, stands acknowledged in the said Clause itself. Clause 6 envisaged payment of the remainder of Rs. 45 lakhs “at the time of registration of the said documents such as the Agreement to Sell, General Power of Attorney, Will, Affidavits etc. on or before 5th February, 2020 as the full and final settlement and discharge”. Out of this amount, according to the plaintiff, TDS of Rs. 2,49,000/- and a further amount of Rs. 1 lakh, payable by the defendant to the plaintiff as per an “Agreement for Construction”, to be executed subsequently, were deductible, resulting in the net amount payable by the plaintiff to the defendant reducing to Rs. 43,51,000/-. This amount, according to the plaintiff, was offered, by way of a crossed cheque, to the defendant, on 31st January, 2020, whereupon further documents, in the form of an Agreement to Sell (ATS), Agreement for Construction (AFC), General Power of Attorney (GPA), a receipt for the advance payment, Will of the defendant, an affidavit by the Defendant recognising creation of title interest of the plaintiff in the suit property, a Power of Attorney by the defendant and possession letter, were executed.

6. The defendant denies the offer of Rs. 43,51,000/-, by the plaintiff to the defendant, as well as the execution of all the aforesaid documents.

7. The plaintiff alleges that it was only at this stage that the defendant informed the plaintiff that the suit property was mortgaged with the Standard Chartered Bank (“the Bank”), thereby evidencing that Recitals H and I in the PDA were untrue.

8. I may note, even at this juncture, that the defendant, having admitted the PDA, has not chosen to deny the fact that the recital, in the PDA, regarding the suit property being unencumbered, was not correct. All that the defendant pleads, by way of a defence, is that, during the course of discussions prior to execution of the PDA, the plaintiff had been informed of the fact that the suit property stood encumbered with the Bank, and that the defendant “blindly” signed the PDA, “believing” that it was in line with the discussions that had taken place prior thereto.

9. On 23rd March, 2020, the plaintiff wrote to the defendant, asserting the above facts and, further, that, during the meeting which took place on 10th February, 2020 (when, according to the plaintiff, it had handed over, to the defendant, a cheque for Rs. 43,51,000/-), it was mutually decided that the aforesaid documents (the ATS, AFC, and other documents) would be exchanged with the plaintiff on receipt of a No Objection Certificate (NOC) from the Bank. The letter alleged that, despite this understanding, when the plaintiff met the defendant on 12th March, 2020, the defendant refused to obtain the NOC from the Bank or part with the original documents and threatened, instead, to forfeit the advance paid by the plaintiff and to enter into an agreement with another builder. The plaintiff, in the circumstances, called upon the defendant to perform his part of the PDA, by producing the original documents of the suit property, registering the said documents such as the ATS, GPA, Will, PoA, affidavit and possession letter in favour of the plaintiff, undertaking, in the bargain, to comply with all its obligations under the PDA and pay the entire remaining consideration. The plaintiff asserts that it had, thereby, expressed its readiness and willingness to comply with its responsibilities under the PDA.

10. The defendant responded, through Counsel, on 4th May, 2020, alleging that, apart from an initial payment Rs. 4 lakhs, the remaining amount of Rs. 45 lakhs had neither been paid, nor offered, by the plaintiff to the defendant on or before 5th February, 2020 or even till the date of the said communication. The plaintiff's assertion that it had offered, to the defendant, a cheque for Rs. 43,51,000/- was categorically denied. Rather, alleged the defendant, the plaintiff was circulating messages, offering the suit property for sale, concealing the entitlements of the defendant. In view of the alleged breaches of the PDA by the plaintiff, the defendant asserted that it had forfeited the advance paid by the plaintiff.

11. It is in these circumstances that the plaintiff moved this Court by means of the present suit.

12. The suit prays thus:

“Wherefore, in the light of the facts and circumstances as aforementioned, it is humbly prayed that this Hon'ble Court may be pleased to:

I. Pass a decree of Specific Performance and Mandatory Injunction in favour of the Plaintiff and against the Defendant, directing the Defendant to perform his obligations as per the Property Development Agreement dated 14.01.2020 including handing over the peaceful possession of the said premises to the Plaintiff, produce the original property papers, hand over all the executed documents, and further execute all necessary documents to fulfil the contemplated terms of the Property Development Agreement dated 14.01.2020.

II. Pass a decree of Specific Performance and Mandatory Injunction directing the Defendant to seek a discharge over the mortgage on the said premises, in the event such a mortgage exists;

III. Pass a decree of Permanent Injunction restraining the Defendants, their agents, supporters and assigns from transferring, alienating, encumbrancing (sic encumbering) or creating any further third-party rights in any manner whatsoever in respect of the said premises;

IV. Alternatively, direct the Defendant to return the advanced payment and pay damages to the tune of Rs. 2,00,00,100/- suffered by the plaintiff;

V. Award costs in favour of the Plaintiff;

VI. Pass such or other reliefs/order as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice.”

Rival Contentions

13. Mr. Rajiv Garg, learned Counsel for the defendant, has opposed grant of interim relief to the plaintiff, on the following grounds:

(i) The PDA was unregistered and insufficiently stamped and could not, therefore, confer any enforceable right on the plaintiff.

(ii) Specific performance of the PDA could not be ordered by the Court, in view of Section 14(1)(b) of the Specific Relief Act, 19631. Reliance was placed, for the purpose, on the judgment of the Supreme Court in Vinod Seth v. Devinder Bajaj2 and of this Court in Prem Kumar Bansal v. Ambrish Garg3.

(iii) The PDA stood novated, within the meaning of Section 624 of the Indian Contract Act, 1872 by the documents alleged, by the plaintiff, to have been executed later, such as the ATS, AFC, etc.

(iv) The plaintiff's assertion of readiness and willingness to perform his part of the PDA was a mere eyewash, as it did not have the financial wherewithal to comply with its obligation. Reliance was placed, for this purpose, on the Axis Bank statement of the plaintiff.

(v) In fact, the plaintiff had, till date, paid only Rs. 4 lakhs, out of the total amount payable by the plaintiff under the PDA or even under Clause 6 thereof. Specific performance of the PDA could not be claimed on payment of such a small amount.

(vi) The plaintiff knew of the fact that the suit property was mortgaged with the Bank at the time of execution of the PDA, having been made aware of the mortgage during the course of discussions prior to execution of the PDA. By its letter dated 23rd March, 2020, this fact was condoned and waived by the plaintiff.

(vii) The defendant had signed the PDA blindly, believing that it was in accordance with the discussions which had preceded its execution.

14. To these objections, Mr. Aditya Wadhwa, learned Counsel for the plaintiff, responded thus:

(i) As the PDA was not a contract for sale, and did not create, by itself, any right or title, it was not required to be registered, by virtue of Section 17 of the Registration Act5.

(ii) Having admitted the PDA, the defendant could not be heard to contend that it was insufficiently stamped, as held in Shyamal Kumar Roy v. Sushil Kumar Aggarwal6 and by this Court in Sudir Engineering Co. v. Nitco Roadways Ltd.7. That apart, Article 23A of the Stamp Act was inapplicable to the PDA. It was merely a contract envisaging sale of property, not a contract selling the property as such. It did not contemplate transfer of possession; ergo, Article 23A of the Stamp Act would also not apply. Reliance was placed on the judgements of the Supreme Court in Omprakash v. Laxminarayan8 and Avinash Chauhan v. Vijay Mishra9. Rather, stamp duty was payable, on the PDA, under Article 5 of the Stamp Act.

(iii) Besides, injunction could be granted even on an insufficiently stamped document, as held by the High Court of Calcutta in GTZ (India Pvt. Ltd.) v. Power Electronics Engineers10 and by the High Court of Bombay in Sanjay v. Vishnupant11.

(iv) The PDA was not incapable of specific performance, for the following reasons:

(a) The PDA was not a mere construction agreement, but also conferred ownership rights on the plaintiff.

(b) The PDA itself contained in a recital that breach of its terms would entitle the aggrieved party to enforce the PDA by suing for specific performance.

(c) The PDA contained detailed plans, layouts and constructions for redevelopment of each floor of the suit property. It did not, therefore, contemplate continuous performance of mutual obligations, but was targeted at a final result. Such a contract was not excepted from specific performance under Section 14(b) of the Specific Relief Act.

15. Mr. Wadhwa placed reliance on the judgements of the Supreme Court in Suraj Lamps & Industries Pvt. Ltd. v. State of Haryana12 and Sushil Kumar Agarwal v. Meenakshi Sandhu13, the High Court of Bombay in Shapoorji Pallonji v. Jignesh Shah14 and the House of Lords in Co-operative Insurance Society Ltd. v. Argyll Stores15Vinod Seth2, it was submitted, involved a vague oral agreement whereas, in Prem Kumar Bansal3, the obligations, sought to be enforced, were required to be performed by both parties; moreover, the judgment was rendered under the pre-amended Specific Relief Act.

Analysis

16. The interim relief that was granted by this Court, and of which the defendant seeks vacation, was a restraint against alienation or creation of third party rights, or for carrying out any further alteration in the suit property. The three considerations, which govern every plea for grant of interim injunction under Order XXXIX of the CPC, are the existence of a prima facie case, balance of convenience and the likelihood of irreparable loss were injunction not to be granted. All three considerations have to coalesce, for injunction to be justified.

17. The plaintiff has, in this suit, sought specific performance of the PDA and thereby a direction to the defendant to hand over peaceful possession of the suit property to the plaintiff, produce the original property papers, handover all the executed documents, and further execute all such other necessary documents to fulfil the contemplated terms of the PDA. Additionally, a direction to the defendant, to have the mortgage, in respect of the suit property, redeemed, has also been sought.

Balance of convenience and irreparable loss:

18. The plaintiff seeks specific performance of an agreement relating to immovable property, whereunder the plaintiff claims that rights enure in its favour. In such a case, unless the claim is found to be, prima facie, entirely insubstantial, considerations of equity and the interests of justice would, classically, justify preservation of status quo in respect of the corpus of the dispute. This is simply because, if, ultimately, the case of the plaintiff is found to be without merit, the defendant could deal with the property as it chooses, and also be adequately recompensed for the prejudice, if any, which has been caused by its inability to do so in the interregnum whereas, if the status of the property, whether in respect of title or possession, alters during the pendency of the lis, the resultant prejudice to the plaintiff might well-nigh be irremediable. Principles of balance of convenience too, therefore, normally justify maintenance of the status quo during the pendency of the litigation.

19. Having said that, it is also true that the plaintiff cannot treat itself as entitled to any interim relief unless it establishes the existence, in its favour, of a prima facie case. Sans a prima facie case, no interim relief can be granted to a litigant before the Court, howsoever serious the consequence of refusal of the prayer might be.

20. Indeed, learned Counsel for the parties did not address any submissions, to this Court, on the aspect of balance of convenience and irreparable loss. Arguments were confined to the aspect of entitlement, of the plaintiff, to the relief ultimately sought in the plaint.

Prima facie merits of the case:

21. Mr. Garg, learned Counsel for the defendant, has not disputed the fact that, contrary to recitals H and I in the PDA, the suit property was, in fact, mortgaged with the bank even at the time when the PDA was executed. Clearly, therefore, the recitals H and I in the PDA were untrue. This fact, even by itself, tilts the equities of the case strongly in favour of the plaintiff.

22. There is no material, whatsoever, to support Mr. Garg's contention that, prior to executing of the PDA, the defendant was made aware of the fact that the suit property was mortgaged with the Bank. Equally, his contention that the defendant had blindly signed the PDA, believing the PDA to be in line with the discussions which had purportedly taken place prior to its execution, is also too facile to be believed at this prima facie stage. Any such case, if at all, would have to be established by the defendant only consequent on trial. For the time being, the position that stares the Court in the face is that the PDA wrongly stated that the suit property was unencumbered, without disclosing the fact that it stood mortgaged with the Bank.

23. In the face of all these facts and considerations, the Court is only required to examine whether the submissions of Mr. Garg are such as to disentitle the plaintiff to an interlocutory injunction qua maintenance of status quo regarding the suit property, or whether a case has been made out, to justify vacation of the injunction already granted.

Re. PDA being unregistered:

24. Mr. Garg has sought to question the enforceability of the PDA on the ground that it is unregistered and insufficiently stamped. As such, he contends that it can confer no enforceable right on the plaintiff.

25. It is necessary, at the first instance, to examine the PDA itself.

26. The PDA refers to the defendant Balbir Singh as the “Owner” and the plaintiff Grovy India Ltd. the “Developer”. Clauses A to E of the PDA set out the manner in which the defendant became the sole, absolute and exclusive owner of the suit property. Clause F evinces the desire of the defendant to get the suit property redeveloped/reconstructed after demolition of the existing structure, for which the defendant approached the plaintiff. The plaintiff is required, as per the said Clause, to develop the suit property on behalf of the defendant at the plaintiff's cost. Clause H contains the representation that the suit property is free from all sorts of encumbrances, charges, liens, claims, lease, prior agreements and disavows the existence of any right, title or interest in the suit property of any person other than the owner. The purportedly unencumbered nature of the suit property is further emphasized in Clause I. Sub clause (h) of Clause I reads thus:

“(h) That in case any of the representations/assurances made by the OWNER are found to be untrue and/or if the whole or any portion of the said DEVELOPER's Allocation (fully described below) is ever taken away or goes out from the possession of the DEVELOPER on account of any legal defect in the ownership and title of the OWNER then the OWNER will be liable and responsible to make good the loss suffered by the DEVELOPER and shall keep the DEVELOPER saved harmless and indemnified against all such costs, damages, losses suffered by the DEVELOPER, from his properties both movable and immovable.”

27. Clause J evinces the agreement, between the plaintiff and the defendant, to develop, construct and build a fresh building on the area occupied by the suit property, for which purpose the PDA was being executed.

28. The substantive clauses of the PDA follow.

29. Clause 1 states that the defendant had got the building plans sanctioned from the concerned authorities. Clauses 2, 3 and 5 set out the duties and responsibilities of the plaintiff as developer. Clause 2 requires the plaintiff to demolish the existing structure on the suit property and to develop/construct a building consisting of basement, stilt, ground floor, first floor, second floor and third floor with terrace, at the plaintiff's cost and expense. Clause 3 requires the plaintiff to procure the requisite permissions, sanctions and approvals for executing the construction and completion of the building. Clause 5 records the plaintiff's undertaking to modify the building plans in accordance with the building bye-laws as applicable from time to time and to make full efforts to obtain permission for the maximum area to be covered on the suit property. It further records the requirements that the total FAR (Floor Area Ratio) sanctioned on the plot of land comprising the suit property is required to be divided equally on all four floors. Clause 4 entitles the plaintiff to ownership of the malba resulting from demolition of the structure existing on the suit property as well as to sell the malba and appropriate the sale proceeds.

30. Clause 6 sets out the financial liabilities of the plaintiff under the PDA. It requires the plaintiff to, apart from incurring the entire costs and expenses for construction of the new building, additionally pay a sum of Rs. 49 lakhs to the defendant as total consideration against the rights in the property to be transferred in favour of the plaintiff. The payment of Rs. 4 lakhs, out of the said amount, vide cheque dated 14th January, 2020, by the plaintiff to the defendant has also been recorded. Apropos payment of the balance amount, Clause 6 requires the payment to be made by the plaintiff to the defendant “at the time of registration of the sale documents such as Agreement to Sell, General Power of Attorney, Will, Affidavit etc. on or before 5th February, 2020 as the full and final settlement and discharge”.

31. Clause 7 records the consent, of the defendant, to the plaintiff carrying out necessary acts including demolition and reconstruction, in accordance with the preceding terms and conditions of the PDA. Clause 9 empowers the plaintiff to engage or employ architects to carry out the construction at its own cost and expense and to apply for permissions, sanctions and approvals to the municipal authorities. Clause 10 defrays all expenses for carrying out construction, development and completion of building, including architects' charges and fees, to the account of the plaintiff. This aspect is reiterated in Clause 12.

32. Clause 11 requires the quality of construction of the building to be of good standard.

33. Clauses 13 and 14 set out the allocation of the portion reconstructed building, which would fall to the share of the plaintiff and the defendant. Clause 15 further grants exclusive ownership and user rights of the entire terrace over and above the third floor of the property including right of further constructions thereon, to the plaintiff. Clause 16 requires the plaintiff to install a lift in the building, for common use of the owners/occupiers at all floors, and further stipulates that the maintenance costs of the lift and of electricity for use of the lift would be proportionately shared by owners/occupiers of the building.

34. Clause 17 is a standard indemnity clause, indemnifying the plaintiff from any liabilities arising in respect of the suit property, during implementation of the PDA.

35. Clause 18 requires the defendant to pay all outstanding charges and dues in respect of the suit property including house tax, property tax and water and electricity charges, while retaining liability, towards water and electricity charges, borne during the period of construction, with the plaintiff. Consequent on completion of construction, however, Clause 18 stipulates that house tax, water and electricity charges would be borne by the defendant in respect of their respective allocations in the building.

36. Clause 19 entitles the plaintiff and the defendant to sell, transfer, convey and assign their respective portions in the building to be constructed to any prospective buyer, and to receive sale proceedings in respect thereof, either before, during or after the completion of the construction. The plaintiff and the defendant are also entitled, by the said clause, to enter into agreements for sale/booking of their respective allocations in the newly constructed building and accept payments in respect thereof.

37. Clause 20 records the undertaking of the defendant to join in the execution of all necessary documents, to accord legal title to the buyers of any flats or portions of the plaintiff's share in the constructed building, without further payment. Clause 21 requires the building to be completed within 24 months of the date of handing over of possession of the suit property to the plaintiff, subject to force majeure, failing which Clause 22 requires the plaintiff to pay, to the defendant, Rs. 3 lakhs per month as penalty.

38. Clause 23 indemnifies the defendant against any accident or claim from any person, including neighbours, on account of the construction of the proposed building, and renders the plaintiff solely responsible in that regard. Clause 24 clarifies that the PDA would not constitute a partnership, between the plaintiff and the defendant. In the event of any deviation from the agreed specifications, Clause 25 requires the defendant to inform the plaintiff, who would rectify the deviation at its own costs/arrangements, but otherwise proscribes any interference, or obstruction, by the defendant, with the execution and completion of the work of development and construction of the new building. Financial liabilities, arising out of the sale of the respective shares of the suit property, falling to the lot of the plaintiff and the defendant, are, by Clause 26, to be borne by them.

39. Clauses 28 to 31 deal with the rights to use common areas of the suit property during construction. Clause 32 requires that, upon completion of construction, the plaintiff would first hand over possession of the defendant's share, complete in all respects, by way of a written intimation, and requires the defendant to take possession of his share within 15 days as of the said offer. Failure, on the part of the defendant, to take possession within the said period of 15 days would result in possession being deemed to have been handed over to the defendant.

40. Clause 32 inhibits the plaintiff from assigning or nominating the PDA in favour of any third party, and contains the following specific recital:

“The contract being personal in nature and dependent on respective rights and obligations of the parties and thus is not in the nature of contract for sale, as defined U/s 54 of the Transfer of Property Act and not required to be registered U/s 17 (1) (A) of the Registration Act. 1908.”

(Emphasis supplied)

41. Clause 33 requires GST to be borne by the plaintiff. Clause 34 states that the PDA is irrevocable under all circumstances and Clause 35 entitles either party to, in the event of infringement, by the opposite party, of any terms or conditions of the PDA, have the PDA enforced through court by claiming specific performance.

42. As already noted, Clause 32 of the PDA itself states that it is not in the nature of a contract for sale within the meaning of Section 54 of the Transfer of Property Act and that it is, therefore, required to be registered under Section 17 (1) of the Registration Act.

43. Section 17(1)(b) of the Registration Act requires registration of instruments which create right, title or interest in immovable property. The various Clauses of the PDA, holistically read, merely set out the obligations of the plaintiff and the defendant, and the rights and the entitlements which flow therefrom. Clause 6 specifically envisages, after completion of construction, execution of documents such as agreement to sell, general power of attorney, will, affidavit, etc., which are referred to, in the said clause, specifically as “the sale documents”. It cannot, therefore, prima facie, be said that transfer of right or ownership in the suit property was conveyed by the PDA itself, as would require its registration, mandatorily, under Section 17(1) of the Registration Act.

44. The objection of Mr. Garg to the unregistered nature of the PDA as a ground to non-suit the plaintiff from claiming interlocutory reliefs, therefore, fails to impress.

Re : objection regarding insufficient stamping

45. Mr. Garg has sought to contend that the PDA was required to be stamped in accordance with Article 23A of Schedule 1 of the Stamp Act and that, not having been so stamped, the plaintiff could not derive any rights therefrom. Article 23A of Schedule 1 of the Stamp Act which provides for the requisite stamp duty on instruments reads thus:

Description of instrument

Proper Stamp Duty

23A. Conveyance in the nature of Part Performance— Contracts for the transfer of immovable property in the nature of part performance in any Union territory under section 53A of the Transfer of Property Act, 1882 (4 of 1882).

Ninety per cent of the duty as a Conveyance (No. 23).

46. “Conveyance” is defined, in clause (10) of Section 2 of the Stamp Act, thus:

“(10) Conveyance - “Conveyance” includes a conveyance on sale every instrument by which property, whether moveable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by schedule I”

47. Omprakash8, on which Mr. Wadhwa relies, precisely dealt with the interpretation of this clause. In that case, specific performance was sought, by the respondent before the Supreme Court, of an agreement to sell. Para 11 of the report records that the agreement to sell acknowledged “payment of the part of consideration money and further giving actual physical possession to the purchaser by the seller”. The question before the Supreme Court was whether the agreement to sell was a “conveyance”, which was required to be stamped in accordance with Article 23 of Schedule I-A of the Stamp Act. Referring to the definition of “conveyance” in Section 2(10), the Supreme Court held, in para 13 of the report, that it was “evident that an instrument by which movable and immovable property is transferred, comes within the expression “conveyance””. Transfer, it was further held, required payment of the consideration in whole or in part and handing over of the possession of the property. In this context, the Supreme Court held that the recitals in the document/deeds were relevant to determine whether the document was required to be stamped.

48. Applying the said principle, it cannot be said that the PDA is a document which conveys title in property, or results in transfer, by handing over of possession against payment of consideration.

49. Three decisions of this Court further illumine this path.

50. A Division Bench of this Court has clearly held as follows, in Pawandeep Singh v. Gurdeep Singh Virdi16:

“19. The law on this aspect is clear. An unregistered Agreement to Sell cannot be used as a shield under Section 53 A of the TPA since Section 17(1-A) of the Registration Act, 1908 makes the documents containing a contract to transfer for consideration, any immovable property for the purpose of Section 53 A, compulsorily registrable. If such documents are not registered, they shall have no effect for the purposes of Section 53 A. For purposes of ready reference, Section 17 of the Registration Act, 1908 is reproduced below:—

17. Documents of which registration is compulsory-

(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been examined on or after the date on which, Act XVI of 1864, or the Indian Registration Act, 1866 (20 of 1866), or the Indian Registration Act, 1871 (8 of 1871), or the Indian Registration Act, 1877 (3 of 1877), or this Act came or comes into force, namely -

(a) instruments of gift of immovable property;

(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;

(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and

(d) lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;

(e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:

Provided that the State Government may, by order published in the Official Gazette, exempt, from the operation of this sub-section any leases executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.

(1-A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53-A of the Transfer of Property Act, 1882 (4 of 1882), shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and, if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said Section 53-A.”

20. The remedy, if any, for the appellant no. 1 would have been to sue for specific performance as Section 49 of the Registration Act, 1908 states that a suit for specific performance can be initiated on the basis of an unregistered Agreement to Sell. Section 49 reads as under:

“49. Effect of non-registration of documents required to be registered. - No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 to be registered shall -

(a) affect any immovable property comprised therein, or

(b) confer any power to adopt, or

(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:

Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 or as evidence of any collateral transaction not required to be effected by registered instrument.”

(Emphasis supplied)

51. To the same effect, paras 24 and 25 of the judgment of a coordinate single Bench of this Court in Rishi Raj v. Rakesh Yadav17, reads thus:

24. This decision has been followed by a Ld. Single Judge of this Court in Vinod Kumar v. Ajit Singh18, where the Court held:

“10. In the instant case, the plaintiff has not sought relief based on part performance under Section 53A of the Transfer of Property Act and that being so, Section 17(1A) of the Registration Act, which was only meant for the provisions of Section 53A of the Transfer of Property Act, was not attracted and thus, the agreement did not require registration. Such an agreement falls under the mischief of Section 17(2)(v) of the Registration Act, and it itself does not create, declare, assign, limit or extinguish any right, title or interest in the property. Rather as held in Sukhwinder Kaur (supra)19 it creates a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish right, title or interest in the property. Not only this, provisions of Section 49 of the Registration Act make the position more clear. It envisages that an unregistered document affecting immovable property and required by this Act and the Transfer of Property Act to be registered may be received as evidence of a contract in a suit for specific performance under Chapter-II of Specific Relief Act, 1877. As further held in Sukhwinder Kaur (supra), a conjoint reading of Section 17(2)(v) and proviso of Section 49 of the Act leaves no room for doubt that agreement to sell property itself does not create any right or title over the property. It is the sale deed, which when executed will create such right in the property. Hence, an agreement to sell is not required to be registered and the same is receivable in evidence in a suit for specific performance under Chapter-II of the Specific Relief Act, 1877.”

25. Based on the above judgments it is clear that it is permissible in law to seek specific performance of an unregistered agreement to sell, when possession of the property has not been handed over. In this case, from the evidence which has now come on record, it is clear that physical possession of the property was not handed over to the Plaintiff at the time of the execution of the documents dated 6th August, 2013. As per the documents dated 6th August, 2013 no registration was required for the same.”

(Emphasis supplied)

52. And again, paras 7 and 8 of the judgment of another coordinate Bench of this Court in Devender Singh v. Hari Singh20 ruled thus:

7. Before the first appellate court an issue was raised that the receipt-cum-agreement to sell dated 22.1.2002 is not registered and hence cannot be looked into by virtue of provision of Section 17(1)(a) of the Registration Act, 1908, however, this contention is unsound, inasmuch as, an unregistered agreement to sell cannot be looked into only for seeking benefit of part performance under Section 53A of the Transfer of Property Act, 1882 in view of Amendment of Section 53A by Act 48 of 2001 with effect from 24.9.2001, however, an unregistered agreement to sell can always be a basis for a suit for specific performance in view of Section 49 of the Registration Act.

8. Learned counsel for the appellant/defendant relied upon a judgment of a learned Single Judge of the Punjab and Haryana High Court in the case of Gurbachan Singh v. Raghubir Singh21, to argue that an unregisterd agreement to sell cannot be a basis for a suit for specific performance, however, with utmost respect and humility to the learned Single Judge, I cannot agree with the ratio of the judgment because the ratio of the judgment is against the direct and categorical language of Section 49 of the Registration Act which permits an unregistered agreement to sell for being looked into as a basis in a suit seeking specific performance. An unregistered agreement to sell cannot be used only if the same is sought to be used as one for seeking benefit of Section 53A of the Transfer of Property Act containing the doctrine of part performance, however, once, the unregistered agreement to sell is not used for seeking benefit of the doctrine of part performance under Section 53A of the Transfer of Property Act, then by virtue of Section 49 of the Registration Act, surely a suit for specific performance will lie on the basis of unregistered agreement to sell.”

53. The plaintiff, in the present case, seeks specific performance of the PDA. The claim of the plaintiff is not for part performance under Section 53A of the Transfer of Property Act.

54. Following the law laid down in the aforesaid decisions, prima facie, the submission of Mr. Garg that the suit is not maintainable as the PDA is unregistered and is insufficiently stamped, cannot pass muster.

Re. Section 14(1)(b) of Specific Relief Act

55. Though, in the written submissions tendered by the defendant as encapsulating the submissions advanced at the Bar, this contention has not been raised, it was, in fact, argued, and I proceed, therefore, to deal with it.

56. Section 14(1)(b) of the Specific Relief Act completely bars grant of interlocutory relief as sought by the plaintiff, contends Mr. Garg. The provision, as it stands today, reads thus:

14. Contracts not specifically enforceable. - The following contracts cannot be specifically enforced, namely:—

*****

(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;”

57. This, however, is the amended avatar of Section 14. Prior to its amendment by Section 5 of the Specific Relief (Amendment) Act, 2018, Section 14 (to the extent relevant) read as under:

14. Contracts not specifically enforceable.-

(1) The following contracts cannot be specifically enforced, namely:—

(d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise.

*****

(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section (1), the court may enforce specific performance in the following cases:—

*****

(c) where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land:

Provided that the following conditions are fulfilled, namely:—

(i) the building or other work is described in the contract in terms sufficiently precise to enable the court to determine the exact nature of the building or work;

(ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of such nature that compensation in money for non-performance of the contract is not an adequate relief; and

(iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.”

58. Prior to its amendment, therefore, Section 14 required, for specific performance of a contract for the construction of a building, the contract to describe the building “in terms sufficiently precise to enable the courts to determine the exact nature of the building or work”. That requirement is now done away with. Decisions, which have held a contract for construction of a building or other work not to be capable of being enforced by way of specific performance on the ground that the contract is imprecise or vague, relating to causes of action arising during the currency of the pre-amended Section 14 of the Specific Relief Act cannot, therefore, prima facie, constitute valuable precedents, to guide cases arising after Section 14 was amended.

59. Having said that, “a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise” still remains impervious to enforcement by way of specific performance.

60. Mr. Garg has cited, in support of this submission, the judgement of the Supreme Court in Vinod Seth2 and of this Court in Prem Kumar Bansal3 whereas Mr. Wadhwa has relied on the judgment in Sushil Kumar Agarwal13.

61. All the aforesaid decisions relate to the pre-amended Section 14 and involve a consideration, to one extent or the other, of the erstwhile Section 14(3)(c) of the Specific Relief Act.

62. Vinod Seth2:

63. The issue before the Supreme Court in this case was peculiar, as is apparent from the opening paragraph of the decision, which reads thus:

“Leave granted. Heard. The validity of a novel and innovative direction by the High Court, purportedly issued to discourage frivolous and speculative litigation is under challenge in this appeal. To understand the issue, it is necessary to set out the facts and also extract relevant portions of the plaint and the impugned orders of the High Court.”

64. In Vinod Seth2, the appellant Vinod Seth was a builder. He sued the respondent Devender Bajaj for specific performance of an alleged oral agreement for “commercial collaboration for business benefits”, in connection with premises of which Devender Bajaj was the owner.

65. The matter came up before a learned Single Judge of this Court who held that, as the agreement was undocumented, all terms thereof would have to be established by evidence. As such, the prayer for specific performance of the agreement would require constant supervision by the Court, which was difficult. Opining, therefore, that the suit was unlikely to succeed, the learned Single Judge deemed it appropriate to indemnify the defendant, in advance, so as to “equalize” the plaintiff and the defendant. He, therefore, directed the plaintiff to file an undertaking to pay the defendant a sum of Rs. 25 lakhs in the event of the plaintiff failing in the suit.

66. This direction was upheld by the Division Bench of this Court, compelling the plaintiff to approach the Supreme Court. The main issue before the Supreme Court was whether a direction to pay the defendant, in the case of the plaintiff failing to succeed in the suit, a sum of Rs. 25 lakhs, was sustainable in law.

67. The Supreme Court ultimately answered this question in the negative, essentially on the premise that necessary safeguards, against frivolous suits and their prosecution, were already inbuilt in the CPC, and the Court could not, even acting ex debito justitiate, innovate and pass directions which were not envisaged by the CPC. Clearly, this aspect of the decision in Vinod Seth2 does not concern us in the present matter.

68. The Supreme Court, however, expressed its broad agreement with this Court that, “on the material presently on record, the likelihood of the appellant succeeding in the suit or securing any interim relief against the defendant (was) remote”.22 The Supreme Court went on to set out the reasons for this tentative conclusion. The first was that it was “doubtful whether the collaboration agreement, as alleged by the appellant, (was) specifically enforceable, having regard to the prohibition contained in Sections 14(1)(b) and (d) of the Specific Relief Act, 1963”. It was observed that the agreement was not a usual agreement for sale/transfer, which was enforceable in nature. In this context, para 15 of the report merits reproduction, thus:

15. The alleged agreement being vague and incomplete, requires consensus, decisions or further agreement on several minute details. It would also involve performance of a continuous duty by the appellant which the court will not be able to supervise. The performance of the obligations of a developer/builder under a collaboration agreement cannot be compared to the statutory liability of a landlord to reconstruct and deliver a shop premises to a tenant under a rent control legislation, which is enforceable under the statutory provisions of the special law. A collaboration agreement of the nature alleged by the appellant is not one that could be specifically enforced. Further, as the appellant has not made an alternative prayer for compensation for breach, there is also a bar in regard to award of any compensation under Section 21 of the Specific Relief Act.”

(Italics and underscoring supplied)

69. The Court was, therefore, in Vinod Seth2, dealing with a vague, imprecise and oral agreement. A reading of the decision makes it clear that the difficulty which, in the opinion of the Court, would arise in attempting specific performance of such an undocumented agreement was one of the main considerations which compelled the Supreme Court to agree with the view of this Court that the agreement was incapable of specific performance.

70. In appreciating the law enunciated in Vinod Seth2, the Court cannot, in my view, proceed unmindful of the nature of the controversy, and, especially, the agreement, which was before the Supreme Court. Judgements of courts, including the Supreme Court, it is trite, are not to be treated as analogous to Euclid's theorems, and followed blindly, without appreciating the fact-situation in which they came to be rendered.23

71. Sushil Kumar Agarwal13:

72. As against this, Sushil Kumar Agarwal13, also by a Bench of two Hon'ble Judges of the Supreme Court, involved a suit for specific performance of a written development agreement. It is unnecessary to delve into the specifics of the disputes in that case. Suffice it to reproduce paras 18, 19 and 24.3 of the report, which read as under:

18. When a pure construction contract is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights.

19. In a construction contract, the contractor has no interest in either the land or the construction carried out on the land. But, in other species of development agreements, the developer may have acquired a valuable right either in the property or the constructed area. There are various incidents of ownership in respect of an immovable property. Primarily, ownership imports the right of exclusive possession and the enjoyment of the thing owned. The owner in possession of the thing has the right to exclude all others from its possession and enjoyment. The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it. [B. Gangadhar v. B.G. Rajalingam, (1995) 5 SCC 238, para 6]. Ownership denotes the relationship between a person and an object forming the subject-matter of the ownership. It consists of a complex of rights, all of which are rights in rem, being good against the world and not merely against specific persons. There are various rights or incidents of ownership all of which need not necessarily be present in every case. They may include a right to possess, use and enjoy the thing owned; and a right to consume, destroy or alienate it. [Swadesh Ranjan Sinha v. Haradeb Banerjee, (1991) 4 SCC 572]. An essential incident of ownership of land is the right to exploit the development, potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in essence is a parting of some of the incidents of ownership of the immovable property. There could be situations where pursuant to the grant of such rights, the developer has incurred a substantial investment, altered the state of the property and even created third-party rights in the property or the construction to be carried out. There could be situations where it is the developer who by his efforts has rendered a property developable by taking steps in law. In development agreements of this nature, where an interest is created in the land or in the development in favour of the developer, it may be difficult to hold that the agreement is not capable of being specifically performed. For example, the developer may have evicted or settled with occupants, got land which was agricultural converted into non-agricultural use, carried out a partial development of the property and pursuant to the rights conferred under the agreement, created third-party rights in favour of flat purchasers in the proposed building. In such a situation, if for no fault of the developer, the owner seeks to resile from the agreement and terminates the development agreement, it may be difficult to hold that the developer is not entitled to enforce his rights. This of course is dependent on the terms of the agreement in each case. There cannot be a uniform formula for determining whether an agreement granting development rights can be specifically enforced and it would depend on the nature of the agreement in each case and the rights created under it.

*****

24.3. In order to determine the exact nature of the agreement signed between the parties, the intent of the parties has to be construed by reading the agreement as a whole in order to determine whether it is an agreement simpliciter for construction or an agreement that also creates an interest for the builder in the property. Where under a development agreement, the developer has an interest in land, it would be difficult to hold that such an agreement is not capable of being specifically enforced.

(Italics and underscoring supplied)

73. Where, therefore, as in the present case, the agreement is not merely for development or construction on the property, but also envisages valuable rights enuring, in favour of the developer, in the constructed edifice, the Supreme Court itself holds, unequivocally, that it would be difficult to treat the agreement as incapable of specific performance.

74. The requirement of precision, in the construction contract, as a pre-condition for its enforceability, is relatable to the erstwhile Section 14(3)(c)(iii) of the Specific Relief Act. That requirement no longer figures on the statute book, after the amendment of Section 14 by the 2018 Amendment Act. In my prima facie opinion, lack of precision in the construction agreement can no longer be regarded, by itself, as a sufficient disqualification to its enforceability by specific performance. Else, it would be re-introducing, by a side wind, the consideration in the erstwhile Section 14(3)(c)(iii), which the legislature has consciously removed from the statute. Such an exercise is necessarily to be eschewed, as it would militate against the legislative intent.

75. The sequitur would, therefore, be that a construction contract can no longer be regarded as incapable of specific performance merely because its terms are imprecise or vague. If, however, owing to such imprecision or vagueness, any direction for specific performance would require continuous supervision by the Court, that would, even now, render the agreement incapable of specific performance by virtue of Section 14(b). For that, however, the Court would have to arrive at a finding that, owing to the imprecision of the agreement, or for any other reason, any direction for specific performance would require continuous supervision by the Court. In the scenario of Section 14 as it exists today, and without the support of the erstwhile Section 14(3)(c) and its various clauses, this would, in almost every case, be arguable at the very least.

76. Prima facie, in view of the above legal position, I am unable to convince myself to hold, prima facie, that the defendant has been able to make out a case of the PDA being incapable of specific performance, by operation of Section 14(b) of the Specific Relief Act, as would justify vacation of the interim direction to maintain status quo in respect of the suit property.

Re. Section 62 of the Contract Act and the plea of novation

77. Section 62 of the Contract Act, which accords statutory recognition to the principle of novation of a contract, states that where the parties to a contract consciously elect to substitute the existing contract with another, the original contract need not be performed. The submission of Mr. Garg is that the PDA stood novated by the execution of the ATS, AFC and other agreements.

78. Prima facie, the plea of novation, as advanced by Mr. Garg is completely misconceived on facts as well as in law. There is no evidence of any inclination, much less indication, of the plaintiff and defendant having agreed to substitute the PDA with any other contract. This argument is, in fact, belied even by Clause 4 of the PDA, which envisages the execution, at a later point of time, of the ATS, AFC, GPA etc. The PDA and the documents to be executed subsequently, form, therefore, a composite transaction. The documents to be executed subsequently are intended to facilitate the transfer of title and possession, as envisioned in the PDA. They owe their existence, therefore, to the PDA. It would be militating against the very intent of the PDA to hold that it stood novated with the execution of the ATS, AFC etc.

79. On a holistic reading of the ATS and AFC, vis-√†-vis the PDA, I am unable to subscribe to the submission of Mr. Garg that there was any such glaring inconsistency, between the documents, as would evince an intent, on the part of the contracting parties, to do away with the PDA and substitute the ATS, AFC and other documents in its place.

80. On novation, the Supreme Court held, in Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board24, thus (in para 82 of the report):

“In our opinion the ground or issue of novation of contract is a mixed question of fact and law and it is being raised for the first time at the time of hearing of the case before us, which cannot be permitted to be raised. The said fact of novation or alteration of contract is required to be urged evidentially and scrutinised by the courts below. In absence of such factual findings, it is not possible to decide such a mixed question of law and facts. In Shakti Tubes Ltd. v. State of Bihar, (2009) 7 SCC 673 : (2009) 3 SCC (Civ) 258, the issue of novation of contract was raised before this Court for the first time at the time of hearing. This Court declined to entertain such ground as being a mixed question of law and fact. This Court further observed that even on the merits of the case the escalation of price, reduction of the quantity of the supply order and extension of the date of supply does not amount to novation or alteration in the supply order.”

(Emphasis supplied)

81. Nearly a century and a quarter ago, one finds this clear exposition of the principle of novation, in the judgement of the Court of the Judicial Commissioner at Nagpur in Ganpat v. Mahadeo25:

“Where the question is whether one party is set free by the action of the other, the matter for consideration is whether the acts or conduct of the one do or do not amount to an intimation of an intention to abandon and altogether to refuse performance of the contract. The true question is whether the acts and conduct of the party evince any intention no longer to be bound by the contract : Mersay Steel and Iron Company v. Naglir Benzon & Co. [L.R.] 9 A.C. 434 General Bill Posting Co. v. Atkinson (13). The Court requires as clear evidence of the waiver as of the existence of the contract itself and will not act upon less : Carolan v. Brabazon [1900] A.C. 118 : 78 L.J. C.H. 77 : 99 LT 913 : 25 T.L.R. 173. What is then required is that an abandonment of the old agreement, must be clearly made out. There must be clear and precise evidence of a mutual intention to determine and abandon the contract : Mathura Mohan Saha v. Ram Kumar Saha [1946] 43 Cal. 700 : 23 CLJ 26 : 30 I.C. 305 : (1915-16) 20 CWN 370. Where the intention to substitute a new contract is frustrated by the fact that the new contract is a nullity, the original contract may be enforceable : see Har Chandi Lal v. Sheoraj Singh 3 J & L 200 : 9 Ir. & E. 121. Much more so, where the agreement itself is a contravention of the statute and does not ripen into a contract in the legal sense of the term.”

(Emphasis supplied)

82. A coordinate Bench of this Court has held, recently in Knowledge Podium Systems Pvt. Ltd. v. S.M. Professional Services Pvt. Ltd.26, that “a novation takes place only when there is a complete substitution of a new contract in place of the old”.

83. No such substitution of the PDA with the ATS, AFC and other documents subsequently executed, in terms of Clause 4 of the PDA itself, can, prima facie, be said to have taken place.

84. This argument of Mr. Garg, too, does not convince me to vary the status quo order already passed.

85. Re. financial wherewithal of the plaintiff : Mr. Garg has also sought to plead that the plaintiff did not have the financial wherewithal to comply with its obligation under the PDA. Mr. Wadhwa has disputed this contention, and has reiterated his client's willingness in this regard. At this stage, it is not possible for me, prima facie, to hold that the plaintiff to be incapable of complying with its obligations. The mere reference to the Axis Bank statement of the plaintiff is hardly sufficient for the Court to be satisfied, even prima facie, on this aspect. of course, it would be for the defendant to establish, during trial, its capability to adhere to its obligations under the PDA.

Conclusion

86. As a result, I am of the opinion that the defendant has not been able to make out any case to vacate the interim order passed by this Court on 4th August, 2020.

87. Resultantly, I.A. 7643/2020 is dismissed and the interim order passed in I.A. 6433/2020 is made absolute, pending disposal of the suit. I.A. 6433/2020 stands allowed accordingly.

———

1 14. Contracts not specifically enforceable. - The following contracts cannot be specifically enforced, namely:—

*****

(b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;”

2 (2010) 8 SCC 1

3 (2016) 230 DLT 360

4 62. Effect of novation, rescission and alteration of contract. - If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

5 17. Documents of which registration is compulsory.-

(1) The following documents shall be registered, if the property to which they relate is situate in the district in which, as if they had been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:—

*****

(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of Rs. 100 or upwards, to or in immovable property;

(c) non-testamentary instruments which acknowledge the receipt of payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;

*****

(2) Nothing in clauses (b) and (c) of sub-section (1) applies to - *****

(v) any document other than the documents specified in sub-section (1A) not itself creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in any immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest;

6 (2006) 11 SCC 331

7 (1995) 34 DRJ 86

8 (2014) 1 SCC 618

9 (2009) 2 SCC 532

10 2009 SCC OnLine Cal 2162

11 (2007) 6 Mah LJ 550 : 2007 SCC OnLine Bom 610

12 (2012) 1 SCC 656

13 (2019) 2 SCC 241

14 (2013) 6 Bom CR 575 : 2013 SCC OnLine Bom 709

15 [1998] A.C. 1

16 2019 SCC OnLine Del 9495

17 2018 SCC OnLine Del 9425

18 (2013) 138 DRJ 324

19 AIR 2012 P&H 97

20 2017 SCC OnLine Del 8036

21 AIR 2010 P&H 77

22 Refer para 11 of the report

23 Refer Union of India v. Major Bahadur Singh(2006) 1 SCC 368Chintels India v. Bhayana Builders Pvt. Ltd. (2021) 4 SCC 602Amar Nath Om Prakash v. State of Punjab (1985) 1 SCC 345

24 (2012) 7 SCC 462

25 AIR 1925 Nag 26

26 (2021) 278 DLT 348

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