RFA No.486-88/2005 Page 1 of 35

IN THE HIGH COURT OF DELHI AT NEW DELHI

RFA No. 486-488/2005

Judgment reserved on: 02.08.2010

Judgment pronounced on:25.08.2010

Mrs. Jaya Bhandari & Ors. ..... Appellant Through: Mr. V.P. Singh, Sr. Advocate With Mr. M.I. Choudhary and Mr. Ramesh Khatri, Advocates.

Versus M/s Malhan Builders & Ors. ..... Respondents Through: Mr. Ashok Gurnani, Advocate With Mr. Ranjan Roy, Advocate. CORAM: HON'BLE MR. JUSTICE KAILASH GAMBHIR, 1. Whether the Reporters of local papers may Yes be allowed to see the judgment? 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest?

KAILASH GAMBHIR, J. *

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1 . By this appeal filed under Section 96 of the Code of

Civil Procedure, 1908 the appellants seek setting aside of the

judgment and decree dated 29.3.2005 passed by the learned

ADJ whereby the suit for specific performance filed by the

appellants for seeking execution of agreement dated 12.5.85

was dismissed.

2 . Brief facts of the case relevant for deciding the

present appeal are that the appellants purchased the third

floor of the property bearing Plot No.15, Siri Fort Road, New

Delhi from the respondents nos. 1 to 5 i.e the builders of the

said property vide agreement to sell dated 12.5.85 for a

consideration amount of Rs. 4, 80,000. The respondents nos. 6

to 15 are the owners of the said property and entered into a

collaboration agreement vide agreement dated 1.6.1983 by

virtue of which the respondent no. 6 to 15 had undertaken to

execute sale deed in favour of the purchasers of the building

constructed by respondents no. 1 to 5. Thereafter the

respondents failed to execute the sale deed as per the

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collaboration agreement in favour of the appellants and

consequently the appellants filed a suit for specific

performance which vide judgment and decree dated 29.3.2005

was decreed against the appellants. Feeling aggrieved with

the same, the appellants have preferred the present appeal

before this court.

3 . Assailing the impugned judgment and decree Mr.

V.P.Singh, learned Senior Advocate appearing for the

appellants submitted that the learned trial court has

committed grave illegality in dismissing the suit of the

appellants seeking specific performance of the contract merely

on the ground that the third floor/barsati floor of the suit

property forming part of the sale transaction between the

appellant and the builder i.e. respondent Nos. 1 to 5, was not

constructed as per the building by-laws. The contention of

the counsel was that there was no breach or violation of any

of the covenants agreed upon by the appellants and the

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respondents, therefore nothing could come in the way of the

appellants to seek specific performance of the contract.

4 . Counsel for the appellants further submitted that

non-fulfillment of any condition either on the part of the

owner or the builder cannot deprive the purchaser i.e. the

appellants herein, to bind the builder to perform his part of

obligation arising under the legally and validly executed

agreement and such a right of the purchaser is indefeasible

right which cannot be defeated merely on account of an

unauthorized construction or some permission not taken from

the competent authority or for some other violation either

on the part of the builder or the owner.

5 . Counsel for the appellants further submitted that

the construction of excess area in the property in any case will

not violate the provisions of Section 23 of the Indian Contract

Act as at the most the construction of excess area can result

in the demolition of the said excess area anticipating the worst

scenario possible but construction of such excess area cannot

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defeat the right of the purchaser to seek specific performance

of the contract under the agreement to sell lawfully executed

in his favour by the seller. Counsel for the appellant further

submitted that in any event of the matter, the construction on

the third floor already stands regularized by the MCD and the

MCD has already issued a regularization plan after deposit of

a compounding amount of Rs.1,14,716/- by the appellants.

Counsel thus submitted that the plea of the construction on

the third floor of the property being unauthorized or in

violation of the MCD by-laws is no more available to the

respondents once the said construction on the third floor

having been regularized by the MCD. Counsel for the

appellants also submitted that the owners i.e. respondent Nos.

6 to 15 have already registered a sale deed in respect of the

second floor in favour of one Miss Surinder Sodhi who had

also purchased the ground floor of the said property from the

builders i.e. respondent Nos. 1 to 5. Counsel for the

appellants also invited attention of this court to clause 11 of

the Collaboration Agreement whereunder the owner has

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undertaken to execute all the documents and agreements for

the portions as allocable to the share of the builders under the

collaboration agreement. Counsel thus submitted that the

owners cannot escape from their liability to execute the sale

deed in terms of clause 11 which gives right to the builders to

transfer the portions of the said property as were allocated to

their share which included even the unbuilt areas. Counsel

thus submitted that the appellant is entitled to the execution

of the sale deed in terms of clause 11 of the collaboration

agreement. Counsel for the appellant also submitted that the

non-fulfilment of any of the conditions in the collaboration

agreement either on the part of the owner or the builder,

which is not a part of the agreement to sell between the seller

and the purchaser, cannot defeat the right of the purchaser to

seek a specific performance. The contention of the counsel for

the appellants was that it was obligatory on the part of the

owners to execute the sale deed in favour of the appellants in

terms of the collaboration agreement even in respect of the

unauthorized construction and the relief of specific

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performance of the contract based on agreement to sell

between the seller and purchaser could not have been denied

to the purchaser once he was found to be ready and willing to

fulfill his part of the contract and when there was no

complaint of any breach of contract on the part of the

purchaser. Counsel thus submitted that the unsanctioning of

the third floor in the property in question could not have

created any bar in granting the decree for specific

performance in favour of the appellants. Counsel thus

submitted that the ld. Trial court has committed grave

illegality by dismissing the suit of the appellants thereby

denying the relief of specific performance. In support of his

arguments counsel for the appellant placed reliance on the

following judgments:-

1. S.K. Kochar Vs. Smt. Nimmi Singh & Ors 68 (1997) DLT 914

2. Ajit Prasad Jain Vs. N.K. Widhani & Ors. 38 (1989) DLT 456

3. R. Velammal Vs. R. Daivasigamani & Ors. AIR 1993 Madras 100

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4. Vegi Venkateswara Rao Vs. Vegi Venkatarama Rao AIR 1998 Andhra Pradesh 6

6 . Opposing the present appeal, Mr. Ashok Gurnani,

learned counsel appearing for the respondents submitted

that there is no privity of contract between the appellants and

respondent Nos. 6 to 15 and therefore the appellants cannot

seek any relief or remedy against these respondents to

enforce specific performance of the contract entered into

between the appellants on one hand and the respondent Nos.

6 to 15 on the other hand. Counsel for the respondent further

submitted that in terms of the collaboration agreement

executed between the respondent Nos. 1 to 5 on one hand and

the respondent Nos. 6 to 15 on the other hand, it was

obligatory on the part of the builder to raise only lawful and

authorized construction on the property in question after

obtaining due sanctions from the MCD and the DDA in

accordance with the by-laws of the MCD and in conformity

with the Master Plan. Counsel thus submitted that since the

respondent Nos. 6 to 15 raised an objection against the

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unauthorized construction on the third floor of the property in

question which also led to the revocation of the sanctioned

plans, therefore the owners were not bound to execute the

sale deed in favour of the purchasers through the builder. The

contention of the counsel for the respondent was that due to

the said breach and contravention of the terms of the

collaboration agreement, the builder lost every right to get

enforced the terms of the collaboration agreement against the

owner and if the right which the builders could not have

enforced against the owner, then how can the present

appellants enforce their alleged right against the owners.

Counsel thus urged that the appellants cannot be placed on a

higher footing than the builders. Counsel for the respondents

further submitted that the respondents are not a party to the

agreement to sell dated 12.05.1985 executed between the

appellants and the builders and therefore none of the

covenants of the agreement to sell can be enforced by the

appellants against the owners. Inviting attention of this court

to clause 7 of the agreement to sell, counsel submitted that

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the right to file a suit for specific performance has been given

to the purchaser only against the builder and not against the

owner. Counsel for the respondents further submitted that

the owners and builders are bound by the terms of the

collaboration agreement and once the builder commits any

default or breach of the terms of the collaboration agreement

then due to such breach on the part of the builder, even the

builder cannot seek enforcement of the collaboration

agreement and hence there arises no question of appellants

who derived their alleged right from the builders to seek such

enforcement. The contention of the counsel for the

respondents was that the owners cannot be left high and dry

or merely mute spectators in the event of violation committed

by the builder in breach of the terms and conditions of the

collaboration agreement. Counsel for the respondents further

submitted that even in the suit filed by the appellants, no

relief has been claimed by the appellants against the owner

i.e. respondent Nos. 6 to 15 and the averments made in the

plaint are mainly confined against the builder alone.

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7 . Counsel also submitted that even no demand notice

was served by the appellants against the owners and in the

absence of such a demand notice, the suit for specific

performance against the owners is not maintainable. In

support of this argument, counsel placed reliance on a short

note of the Andhra Pradesh High court in the case of Baddam

Prathapa Reddy vs. Chennadi Jalapathi Reddy 2008 (5)

ALD 200 . Counsel for the respondents also placed reliance

on Section 51 and 52 of the Indian Contract Act to support his

argument that the promisor can be called upon to perform

his promise only when the promisee is ready and willing to

perform his reciprocal promises. In support of his arguments,

counsel for the respondents placed reliance on the following

judgments:-

1. Bal Krishna & Anr. Vs. Bhagwan Das (Dead) by L.Rs. & Ors. AIR 2008 SC 1786

2. Sita Ram & Ors. Vs. Radhey Shyam AIR 2008 SC 143

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8 . I have heard learned counsel for the parties at

considerable length and given my thoughtful consideration to

the pleas advanced by them.

9. Before dealing with the arguments, it would be

necessary to refer to certain admitted positions between the

parties:-

i) There is an agreement to sell dated 12.05.1985 duly

executed between the appellants as a purchaser and the

respondent Nos. 1 to 5 being the builders/developers;

ii) There is a collaboration agreement dated 1.06.1983

duly executed between the owners i.e. the respondent

Nos. 6 to 15 and the respondent Nos. 1 to 5 as builders;

iii) The owners i.e. respondent Nos. 6 to 15 are not party to

the agreement to sell dated 12.05.1985;

iv) At the time of execution of the agreement to sell under

the building by-laws of the MCD the builder could have

raised construction of a Barsati on the third floor and

accordingly construction of third floor was

impermissible under the law;

v) Under the MPD-2021 the third floor has been allowed

and the appellants have already paid the compounding

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fee for getting the construction of the third floor

regularized and sanctioned/regularization plan has

already been issued by the MCD regularizing

construction of the third floor;

vi) The appellants are in possession of the third floor of the

property bearing Plot No. 15, Siri Fort Road, New Delhi

since the inception;

vii) The respondent Nos. 1 to 5 did not contest the suit filed

by the appellants before the ld. Trial court and the

stand taken by them in the written statement supports

the case of the appellants;

viii) The respondents no. 1 to 5 have not appeared before

this court to contest the present appeal.

ix) Based on the collaboration agreement dated

01.06.1983, the builders had executed an agreement

to sell in favour of the second floor purchaser and the

respondent Nos. 6 to 15, the owners, have already

executed sale deed in their favour but did not come

forward to execute the sale deed in favour of the

appellants due to the unauthorized construction on the

third floor.

10 . In the background of the aforesaid undisputed

facts, two short questions that arise in the present appeal are

that :-

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1. Whether the relief of specific performance of contract can be denied to the appellants who are purchasers of the third floor of the property in question due to the existence of unauthorized construction on the third floor?

2. Whether in the absence of any privity of contract between the appellants and the owners any direction can be given to the owners to execute the sale deed in favour of the appellants in a suit for specific performance filed by the appellants based on agreement to sell executed between the appellants and the builders?

11 . So far as the answer to the first question is

concerned, it has become more of an academic exercise as the

MCD under the MPD-2021 has allowed raising of the third

floor and that the appellants have already got the construction

on the third floor regularized after paying the necessary

compounding fee of Rs.1,14,716/-. Therefore, the plea of

unauthorized construction coming in the way of the owners to

execute the sale deed in favour of the appellants in terms of

the collaboration agreement would not be available to them in

the present circumstances. It is a settled law that an appeal is

a continuation of the suit and therefore, this Court cannot shut

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its eyes to this subsequent development of sanction of

construction of the third floor which was the sole ground

taken by the owners to deny execution of the sale deed in

favour of the appellants.

12 . So far as the second question is concerned, it is an

admitted case between the parties that the respondent Nos. 6

to 15 are not party to the agreement to sell executed between

the appellants on one hand and the builders i.e. respondent

Nos. 1 to 5, on the other hand. Under the collaboration

agreement, the construction which could be raised by the

builder was to be an authorized construction and not an

unauthorized construction and at the relevant time it was not

permissible to raise the third floor and therefore indisputably

raising of the third floor by the builder was unauthorized.

With the said unauthorized construction in place it is to be

seen whether due to raising of the unauthorized construction

on the said property, the owners had revoked the said

collaboration agreement or the owners did not execute the

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sale deeds in favour of the other purchasers through the same

builder. To a question put by the court to the counsel for the

respondents, the counsel clearly answered that there is no

dispute pending between the owners and builders so far the

collaboration agreement is concerned and certain disputes

arose earlier, but they already stand resolved. It was also not

disputed by the counsel for the respondents that the

respondent Nos. 6 to 15 i.e. owners had executed the sale

deed in respect of the second floor whose purchaser also

entered into an agreement to sell through the same builder.

13 . Mr. V.P. Singh, Senior Advocate appearing for

appellants placed reliance on the judgment of this Court in the

case of Ajit Prasad Jain (Supra) where the court took a view

that the relief of specific performance could not have been

denied to the purchaser for want of permission from L&DO

once the purchaser was found to be ready and willing to

perform his part of the contract. Relevant para of the said

judgment is referred as under:-

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“The permission from Land and Development Office is not a condition precedent for grant of decree for specific performance. In Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial & Ors. : [1964]2SCR495 the Supreme Court confirmed the decision of the Punjab High Court holding that if the Chief Commissioner ultimately refused to grant the sanction to the sale the plaintiff may not be able to enforce the decree for specific performance of the contract but that was no bar to the court passing a decree for that relief. The same is the position in the present case. If after grant of the decree of specific performance of the contract the Land and Development Office refuses to grant permission for sale the decree-holder may not be in a position to enforce

the decree but it cannot be held that such a permission is a condition precedent for passing a decree for specific performance of the contract. I may also notice that Section 27(1) of the Urban Land (Ceiling and Regulation) Act, in so far as it imposes a restriction on transfer of any urban or urbanisable land with a building

or a portion of such building, which is within the ceiling area, was declared invalid by Supreme Court in Maharo Saheb Shri Bhim Singhji Anantalakhshmi Pathabi Ramasharma Yeturi and others v. Union of India : AIR1981SC234 and as such it may not be necessary to obtain permission under the said Act but that is not a matter with which I am concerned at this stage. Assuming such a permission is required that would be a matter for consideration after passing of the decree and at the stage of execution. No fault can be found out with the plaintiffs' anxiousness to take possession in terms of the agreement on payment of the amounts stipulated therein.”

14 . The counsel for the appellants also placed reliance

on the judgment of the Madras High Court in the case of R.

Velammal (Supra) where the purchasers had agreed to

purchase a property along with the encumbrances and the

court took a view that no legal impediment could arise to

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grant the relief of specific performance of contract where the

purchasers themselves were willing to purchase the property

along with the encumbrances. Relevant para of the judgment

is referred as under:-

“10. In fact, the plaintiffs are ready and willing to purchase the A-Schedule property along with the encumbrance. PW 1 in his deposition has stated that the

defendant is willing to execute the sale deed along with the encumbrance. Therefore when the plaintiffs are willing to purchase the A-Schedule property even along with encumbrance, the defendant cannot say that she is not in a position to execute the sale deed, since the A-Schedule property is not free from encumbrance. In the

written statement, there is no pleadings with regard to the contingent contract as argued by the learned counsel for the appellant before this court. In the suit filed by the said Mehaboob Bivi, the injunction was only for restraining the defendant from interfering with her possession and enjoyment of the suit property. In fact, there is no injunction restraining the defendant from executing the sale deed in respect of the A-Schedule property. There is no clause in the sale agreement Exhibit A-32 to the effect that if there is any encumbrance, A-Schedule property cannot be conveyed. Both the plaintiffs and the defendant knew that the suit filed by the said Mehaboob Bivi was pending during the time when the sale agreement was executed. When the

plaintiffs are willing to purchase the A-Schcdule properly with encumbrance, it is not open to the defendant to say that she cannot sell the A-Schedule property with encumbrance. The B-Schedule property was agreed to be sold if the purchasers came to the conclusion that 'A' Schedule property could not be sold on account of some

unforeseen result of the suit filed by the said Mehaboob Bivi. Now it is seen that the pendency of the suit filed by Mehaboob Bivi cannot be an impediment in selling the A-Schedule property. Further the plaintiffs are willing to purchase the A-Schedule property along with

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encumbrance. Hence the defendant cannot refuse to sell the A-Schcdule property.”

15 . Counsel for the appellants also placed reliance on

another judgment of Delhi High Court in the case of S.K.

Kochar (Supra) where also the defendant never applied to

seek permission under the Foreign Exchange Regulation Act,

1973 and the court took a view that such a permission cannot

put an absolute bar for entering into an agreement and

therefore relief for specific performance of contract in such a

case could not be denied. The relevant para of the said

judgment is referred as under:-

“The statement of the law in Story of Specific Performance is instructive and it has to be extracted to appreciate the view of the author which is as follows: In truth, the exercise of this whole branch of equity jurisprudence, respecting the recission and

specific performance of contracts, is a matter of discretion in the Court; nor indeed, of arbitrary and capricious discretion, dependent upon the mere pleasure of the fudge, but of that sound and reasonable discretion which governs itself, as far as it may be, by general rules and principles; but at the same time which withholds or grants relief according to the circumstances of

each particular case, when these rules and principles will not furnish any exact measure of justice between the parties.

IT is not possible to lay down any rules and principles which are of absolute obligation and authority to all cases, and therefore, it would be a waste of time to

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attempt to limit to principles, or the exceptions which the complicated transactions of the parties, and the ever-changing habits of society may at different times, require the Court to recognise and consider. But from decided cases the following circumstances, conditions and incidents may be deduced to the factors to be taken into consideration 'the contract must be certain, unambiguous, mutual and upon a valuable consideration; it must be perfectly fair in all its parts; free from any misrepresentation, imposition or surprise; not an unconscionable or hard bargain; and its performance not oppressive upon the defendant; finally it must be capable of specific execution through a decree of the Court".

About obtaining permission from the Reserve Bank under the Foreign Exchange Regulation Act, 1973 it is the duty of the first defendant to have applied for the permission. She did not apply. therefore, the first defendant cannot be heard to contend

that inasmuch as the permission had not been obtained from the Reserve Bank of India, the relief of specific performance should be denied to the plaintiff. Much water has flown under the bridge. Now in the light of the policy of the Government of India, the non-resident Indian can get permission if relevant facts are stated. The general policy of the Government is, if the non-residents are allowed to buy and purchase the property in India

there will be free flow of business and other activities. therefore, the defense that the first defendant did not obtain permission from the Reserve Bank for the sale of the property is no defense at all. The well-known principle is one cannot take advantage of one's own wrong. In this connection, the decision of this Court reported in Ajit Prashad Jain v. N.K. Widhani and Others, :

AIR1990Delhi42 has to be noticed while dealing with the plea by the defendant agreement/vendor that the prohibition under Section 31 of the Foreign Exchange Regulation Act, 1973 would operate in case the agreement/ vendor had not obtained permission from the concerned authority under that act, the Court held: In support of the objection under this issue defendants have relied upon Section 31 of the Foreign Exchange Regulation Act,-1973. The contention of defendants is that defendant No. 2 is not a- citizen of India and as such he could not transfer or dispose of by sale settlement or otherwise any immovable property situate in India without prior permission of the Reserve Bank of India and as such the agreement to sell is void. In support of the contention that defendant 2 has acquired

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citizenship of German Democratic Republic, reliance is placed on citizenship certificate dated 17.7.1970 (Ex. D6/1). It does appear from the said certificate that defendant No. 2 had acquired citizenship of German Democratic Republic but in my view that has no effect on the validity of the agreement in question. Section 31 of the Foreign Exchange Regulation Act on which reliance has been placed by the defendants only places a restriction on a foreign citizen on transfer or sale, mortgage lease, gift, settlement or otherwise of any immovable property situate in India except with the previous general or special permission of the Reserve Bank of India. The said provisions do not place any restriction on entering into agreement like Ex. Public Witness 2/1. The said provisions also do not place an absolute bar to the transfer or sale of any property at as such it

cannot be said that the agreement itself will become void. It is well-settled that a contract for sale by itself does not create any interest in or charge on such property (see Section 54 of the Transfer of Property Act). Thus it cannot be held that the agreement is void on the objection raised in preliminary objection No. 4 based on Section 31 of the Foreign Exchange Regulation

Act. The said provisions do not bar grant of relief of specific performance to the plaintiff and the question of permission of the Reserve Bank of India will arise, if at all at the stage of execution of the sale deed. Consequently, issue No. 5A is also answered against the defendants. Section 31 of the Foreign Exchange Regulation Act, 1973 reads as under : Restriction on acquisition, holding etc. of immoveable property in India

……………………

Therefore, in any event there is no impediment for the plaintiff in getting the relief to specific performance. The plaintiff can apply to the Reserve Bank of India staling all the facts for permission and the Reserve Bank of India shall grant the necessary

permission.”

16 . Counsel for the respondent, on the other hand,

placed reliance on the judgment of the Apex Court in the case

of Bal Krishan & Anr. (Supra) to support his argument that

relief for specific performance is a discretionary relief and the

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court is not bound to grant such a discretionary relief merely

because it is lawful to do so. Counsel for the respondent laid

special emphasis on para 8 of the said judgment which is

reproduced as under:-

“8. Section 16 of the Specific Relief Act, 1963 (hereinafter referred to as 'the Act') corresponds with

Section 24 of the old Act of 1877 which lays down that the person seeking specific performance of the contract, must file a suit wherein he must allege and prove that he has performed or has been ready and willing to perform the essential terms of the contract, which are to be performed by him. The specific performance of the contract cannot be enforced in favour of the person who

fails to aver and prove his readiness and willingness to perform essential terms of the contract. Explanation (ii) to clause (c) of Section 16 further makes it clear that plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction. The compliance of the requirement of Section 16(c) is mandatory and in the absence of proof

of the same that the plaintiff has been ready and willing to perform his part of the contract suit cannot succeed. The first requirement is that he must aver in plaint and thereafter prove those averments made in the plaint. The plaintiff's readiness and willingness must be in accordance with the terms of the agreement. The

readiness and willingness of the plaintiff to perform the essential part of the contract would be required to be demonstrated by him from the institution of the suit till it is culminated into decree of the court. It is also settled by various decisions of this Court that by virtue of Section 20 of the Act, the relief for specific performance lies in the discretion of the court and the court is not bound to grant such relief merely because it is lawful to do so. The exercise of the discretion to order specific performance would require the court to satisfy itself that the circumstances are such that it is equitable to grant decree for specific performance of the contract. While exercising the discretion, the court would take into

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consideration the circumstances of the case, the conduct of parties, and their respective interests under the contract. No specific performance of a contract, though it is not vitiated by fraud or misrepresentation, can be granted if it would give an unfair advantage to the plaintiff and where the performance of the contract would involve some hardship on the defendant, which he did not foresee. In other words, the court's discretion to grant specific performance is not exercised if the contract is not equal and fair, although the contract is not void.”

17. So far the contention of the counsel for the respondent

that no demand notice was served upon the owners by the

appellants is concerned; it would be suffice to say that the

purpose of sending demand notice is to convey to the seller

that the purchaser is ready and willing to perform his part of

the contract. There is no provision in the Specific Relief Act

which mandates the service of the demand notice by the

vendee before seeking specific performance of the contract.

Even under Article 54 of the Limitation Act, in an agreement

of sale where no specific date for performance is fixed, three

years period of limitation is to be reckoned from the date

when the plaintiff has the notice of the refusal of performance

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by the defendant. Hence, the short note in case of Baddam

Prathapa Reddy (supra) relied upon by the respondent

would be of no help. Even otherwise in the said judgment the

Hon’ble High Court was of the clear view that this matter has

to be gone into a little deeper in an appropriate case and has

thus left the question open ended.

18. It is true that the respondent Nos. 6 to 15 are not privy

to the agreement to sell dated 12.05.1985 but it is equally true

that the respondent Nos. 1 to 5 had executed the said

agreement to sell, deriving their power and authority from the

collaboration agreement dated 1.6.1983 executed between the

builders and the owners. In terms of clause 11 of the

collaboration agreement, the respondent Nos. 1 to 5 were

given the authority by the owners to execute all documents

and agreements in favour of the purchasers. Clause 11 of the

collaboration agreement is reproduced as under:-

“11. THAT the “OWNER” has undertaken to execute all documents, agreements and assurances as may be necessary and requisite to be extended and vouchsafed to the “BUILDERS” in respect of the property or purchase of the property allocable to the share of the

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“BUILDERS”. Accordingly, the “BUILDEERS” shall always be fully competent to transfer any part or portion built or unbuilt areas in the aforesaid out of the area allocable to the buildings project to any person at any time either before the building is completed or after the building is completed and by entering into agreement and accept cash, cheques, pay order, draft etc. from all such transferees on his own name and can issue receipts or all such payments; The “BUILDERS” have full discretion to put their sign board on the premises;”

19 . It is a matter of fact that in the suit for specific

performance filed by the appellants, they have duly impleaded

the owners as well as the builders. It is not in dispute that the

appellants have already paid a substantial amount of the sale

consideration to the respondent Nos. 1 to 5 i.e. a sum of

Rs.3,86,000/- out of the total sale consideration amount of

Rs.4,80,000/- and for the balance sale consideration amount of

Rs.94,000/- the appellants have always shown their willingness

to pay. The appellants in para 11 of the plaint have clearly

averred that the respondent Nos. 6 to 15 are bound and liable

to execute all necessary and requisite documents, agreements,

etc. in terms of the collaboration agreement dated 1.6.1983

and in the prayer para also the appellants have sought a

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decree for specific performance based on the agreement to

sell dated 12.05.1985 against all the respondents. Therefore,

this court does not find any merit in the argument of the

counsel for the respondent Nos. 6 to 15 that no specific relief

was claimed by the appellants/plaintiffs in their suit against

respondent Nos. 6 to 15 to claim decree for specific

performance against them. The agreement to sell dated

12.05.1985 cannot be taken into consideration independent of

the collaboration agreement as the collaboration agreement is

the soul of the agreement to sell. In the absence of the

collaboration agreement neither the builders could have

executed the agreement to sell in favour of the appellant nor

the appellants could have come forward to purchase the third

floor in question. As already stated above, in para 11 of the

plaint there is a categorical averment made by the appellants

holding these respondents liable to execute all necessary and

requisite documents, agreements, etc in favour of the

appellants. Even otherwise, the parties have entered the

trial fully conscious of the controversy involved and the relief

RFA No.486-88/2005 Page 27 of 35

being claimed by the appellants and therefore respondent

Nos. 6 to 15 cannot be heard to say that no relief for specific

performance was claimed by the appellants against the

respondent Nos. 6 to 15. It is also a matter of record that in

the written statement filed by the respondent Nos. 1 to 5, they

have clearly supported the case of the appellants being fully

entitled to get the sale deed executed in their favour in terms

of the collaboration agreement read with the agreement to

sell. The respondent Nos. 1 to 5 have squarely blamed the

respondent Nos. 6 to 15 for not fulfilling their obligation

arising under the said collaboration agreement. So far the

respondent Nos. 6 to 15 are concerned, the main defence

taken by them is that since respondent Nos. 1 to 5 did not

raise the construction in accordance with the building by-laws

of the MCD and as per the Zonal & Master Plan of DDA

therefore they were not obliged to honour the terms of the

collaboration agreement to execute the sale deed in favour of

the appellants. The objection of privity of contract was also

taken by these respondents in their written statement. The

RFA No.486-88/2005 Page 28 of 35

Ld. Trial Court also declined the relief of specific performance

to the appellants primarily on the ground that the alleged

third floor of the suit property under sale was not constructed

in accordance with the building by-laws and the defendant

Nos. 6 to 15 being the lessees could not have executed the

registered sale deed in favour of the appellants. The court

also observed that by granting relief as prayed for by the

plaintiffs, the court cannot perpetuate the wrong doings of

the builders by granting a legal warrant in the form of relief to

the plaintiffs.

20 . Indisputably, the court is not bound to grant decree

for the specific performance of the contract simply because it

would be lawful to do so, and thus a party approaching the

court cannot claim specific performance as a matter of right.

It is within the discretion of the court to decree a suit for

specific performance after taking into consideration the

totality of the facts of the case and when the question of

discretion comes then necessarily it is not to be exercised

RFA No.486-88/2005 Page 29 of 35

arbitrarily but should be based on sound judicial principles.

The appellants in the present case have been denied the relief

of specific performance only on the ground that the builders

had raised unauthorized construction on the third floor of the

suit property. It is no more in dispute between the parties

that the construction of third floor has been allowed under the

MPD 2021 and the appellants have already paid the necessary

compounding fee of Rs.1,14,726/- and on the payment of the

same, the MCD has issued the regularization plan. As a result

of this subsequent development, the said plea of the third

floor being an unauthorized construction is no more available

to the respondent Nos. 6 to 15. The respondents have also not

disputed the fact that based on the same collaboration

agreement they have already executed sale deed in favour of

the purchasers of the second floor of the property. The

respondents No.6 to 15 have further not disputed the fact that

there are no inter se disputes pending between them and

respondents Nos. 1 to 5 arising out of the collaboration

agreement. In the background of this scenario, the question

RFA No.486-88/2005 Page 30 of 35

would arise that as to why the appellants should be denied the

relief of specific performance of the contract when they have

already paid the substantial amount of the total sale

consideration amount in terms of the agreement to sell and as

a part performance of the contract the possession of the suit

premises was delivered to them. The respondent Nos. 1 to 5

who have supported the case of the appellants before the Ld.

Trial Court have not come forward to contest the present

appeal and it is the respondent Nos. 6 to 15 alone who have

contested the present appeal but without giving any justifiable

reasons as to why they are not prepared to execute the sale

deed in favour of the present appellants in terms of the

collaboration agreement. It is true that there is no privity of

contract between the appellants and respondent Nos. 6 to 15

and the appellants cannot directly enforce terms of the

agreement to sell against these respondents. However, in the

facts of the present case, the appellants have duly impleaded

these owners as defendants in the main suit and have also

placed reliance on the collaboration agreement dated 1.6.1983

RFA No.486-88/2005 Page 31 of 35

and therefore the respondent Nos. 6 to 15 cannot be heard to

say that the appellants are seeking a specific performance

merely based on the agreement to sell dated 12.05.1985. The

appellants are well within their rights to seek relief of specific

performance of the contract based on the agreement to sell

dated 12.05.1985 read with the said collaboration agreement

dated 1.6.1983. Nowhere in the written statement these

respondents have denied the execution of the said

collaboration agreement and the dispute which was referred

to in the written statement does not subsist any more and

therefore there is no escape for these respondents but to

execute the sale deed in favour of the appellants.

21. The reasoning given by the Ld. Trial Court for not

granting relief to the appellants is that since the third floor of

the property was not constructed in accordance with the

building plans and the construction on the third floor has been

raised beyond permissible limits in violation of the building by-

laws and in such a scenario to grant relief to the appellant

RFA No.486-88/2005 Page 32 of 35

would amount to perpetuating the wrong doing of the builder.

This reasoning of the ld. Trial Court does not totally sound

illogical as it was expected of the builder not to have raised

the construction on the third floor in violation of the building

plans and the floor area ratio but the more relevant question is

that if such a construction has been raised by the builder in

violation of the building plans then should such unauthorized

construction come in the way of the owners not to execute the

sale deed in respect of the third floor which floor has been

lawfully sold by the builders to the appellants. It is not in

dispute that the entire construction raised by the builders on

the third floor was not illegal even at the time of execution of

the said agreement to sell. It also cannot be in dispute that

any portion constructed by the builder in excess of the floor

area ratio and in violation of the building by-laws would have

resulted in demolition of only that portion which was

unauthorized. Further in terms of clause 9 of the

collaboration agreement, for any violation committed by the

builder they were to keep the owners harmless and

RFA No.486-88/2005 Page 33 of 35

indemnified for any loss claims or demands resulted to the

owners due to such non-performance or non-observance of

rules and regulations. In the backdrop of these facts, it cannot

be said that any illegality was committed by the builders in

executing the agreement to sell in favour of the appellants for

the sale of the third floor of the said property. As there was

nothing illegal in the transfer of the third floor of the said

property by the builders in favour of the appellants, therefore

so far the said agreement to sell is concerned, the same can

neither be treated as unlawful or void on account of

unauthorized construction on the part of the builder on the

said floor. This court is therefore of the considered view that

the existence of unauthorized construction on the third floor of

the said property could not have created any bar in the grant

of decree for specific performance by the Ld. Trial Court in

favour of the appellants and against the respondents. The

existence of any unauthorized construction on the third floor

would have certainly caused suffering to the purchasers i.e.

the appellants herein or the same could have been at the

RFA No.486-88/2005 Page 34 of 35

sufferance of the builders in terms of Clause 9 of the

Collaboration Agreement had there been any loss occasioned

to the owners as a result of raising of the illegal construction

by the builder. Nevertheless, as already discussed above, this

question in any case has now become academic since now the

third floor construction already stands regularized by the

MCD.

22 . In the light of the above discussion, this court is of

the considered view that the appellants are entitled to the

grant of decree of specific performance of the contract and

accordingly the suit is decreed against all the respondents and

in favour of the appellants. The impugned judgment and

decree dated 29.03.2005 is accordingly set aside. The

respondents are directed to execute the sale deed in favour of

the appellants in terms of Clause 11 of the collaboration

agreement dated 01.06.1983 within a period of one month

from the date of this order and at the time of execution of

sale deed the appellants shall pay the balance sale

RFA No.486-88/2005 Page 35 of 35

consideration amount to the builders i.e. respondent Nos. 1

to 5.

23. Hence, the appeal is allowed.

KAILASH GAMBHIR, J August __, 2010 pkv