Date of Judgment:
24th May 1999
Judges:
Justice Sujata V. Manohar
Justice R.C. Lahoti
Parties:
Appellant: K. Narendra
Respondent: Riviera Apartments (P) Ltd.
Legal Provisions
- Section 20(1)(a), the Urban Land Ceiling & Regulation Act, 1976 –When a person holds vacant land over the ceiling limit and the State Government is satisfied that it is necessary or expedient in the public interest to do so, that Government may, by order, exempt, subject to such conditions, if any, as may be specified, the purpose for which such land is being or is proposed to be used.
- Section 22, the Urban Land Ceiling & Regulation Act, 1976 – If a person destroys or demolishes a building on his land, or if a building is destroyed or demolished by natural causes, the land becomes vacant. The combined extent of such land and other vacant land owned by the person exceeds the ceiling limit. He must file a statement with the competent authority specifying the location, value, and other details of all vacant lands he owns within three months of the demolition or destruction.
- Section 18 of the Specific Relief Act, 1963 – When a plaintiff seeks a specific contract performance in writing, the defendant establishes a variation. The plaintiff cannot obtain the performance sought unless the defendant establishes the variation.
- Section 20 of the Specific Relief Act, 1963 – The Court's authority to order specific performance is discretionary, and it is not obligated to do so simply because it is legal; however, the Court's discretion is not arbitrary, but sound and reasonable, guided by judicial principles and subject to review by an appeals court.
- Section 21 of the Specific Relief Act, 1963 – This Section gives the Court the authority to award compensation in certain circumstances. The fact that the contract has become incapable of specific performance has no bearing on the Court's ability to exercise the jurisdiction granted by this Section.
Overview
- The property in question is a plot of land in New Delhi, which the President of India granted to M/s Shiv Ram, Mahashaya Krishna, and K. Narendra (the appellants) in 1956. In 1972, the appellant agreed to sell, transfer, and assign all of his rights, title, and interest in the property to the respondents in exchange for a sum of money.
- The contract required payment at the time of execution, which was done. On mutual agreement, the appellant was to encash a postdated cheque after the NDMC and the Land and Development Office had approved the building plans for the proposed multi-storey building. However, the appellant cashed the check before such approval.
- An application for an exemption to construct a multi-story building was made in 1976. The appellant was informed that the application would be rejected due to the existing guidelines. According to the Act, the agreement to sell could be deemed infructuous. Thus the required exemption could be granted for the appellant's scheme of group housing.
- An order under Section 20(1)(a) and Section 22 of the ULCRA exempted excess vacant land from Chapter III of the Act, subject to certain conditions. Affirming the lack of sanction and clearance, the appellant wrote the respondents. The appellant humbly urged the respondents to honour their contracts.
- A legal notice followed the letter. Due to the respondents' failure to obtain sanctions/clearances and the insurmountable difficulty created by ULCRA in the transfer, the appellant ruled that the agreement was void and unenforceable and that respondents must vacate a portion of the property within two weeks or the appellant will be forced to file a lawsuit.
- The appellant sued, seeking a declaration that the agreement was null and void and a decree for possession of a portion of the land. The respondents filed a decree for compensation seeking specific performance of the sale contract and a mandatory injunction ordering the appellant to hand over vacant possession of the premises/part of the old building.
Issues
- Is there a complete transfer of possession of the property from the appellant to the respondent?
- Whether a party's hardships causing a breach of contract are a valid reason for the Court not to order specific performance?
Judgment
- The Court explained that under Section 20 of the Specific Relief Act, 1963, the Court's discretion to order specific performance is not arbitrary but guided by judicial principles and subject to review by an appeals court.
- A contract's performance causing the defendant undue hardship, while non-performance causes the plaintiff no such hardship, is one of the circumstances in which the Court may properly refuse to order specific performance. In India, the doctrine of comparative hardship is statutorily recognised. However, insufficient consideration or an unfavourable contract for the defendant does not constitute an unfair advantage for the plaintiff or an unforeseeable hardship for the defendant.
- The Court ruled that the respondents had breached their contract. According to the agreement, the respondents obtained several sanctions and clearances beyond the parties' control. The respondents' multi-story complex appears impractical.
- The Court stated that while valid at the time of entry, the contract is entangled in such circumstances that its performance is uncertain. In this case, the respondents should not be granted discretionary jurisdiction to order specific performance.
- The Court further explained that Section 18 of the Specific Relief Act, 1963 covers non-enforcement except variation. The plaintiff may have the contract specifically performed subject to the defendant's variation only in cases of fraud, mistake of fact, or misrepresentation, or where the contract has failed to produce the intended legal result, or where the parties have changed the contract's terms after it has been executed. It was held that the case at hand is not covered by any of the situations contemplated by Section 18 abovesaid.
- However, the Court decided that the respondents should be compensated despite the refusal of their specific performance in this case. Section 21 of the Specific Relief Act allows for compensation instead of or in addition to performance. The Section's explanation explicitly states that the Court may award compensation even if the contract is incapable of specific performance.
Conclusion
The Court ruled in favour of the appeals. The Trial Court's decrees, which had been upheld on appeal, were overturned.Instead, a decree was issued ordering that the respondents' suit for specific performance of a purchase agreement is dismissed. The appellant was ordered to return the amount of consideration paid by the respondents to the appellant, plus interest calculated at a rate of 12 percent per annum from the date of payment to the appellant until the date of return to the respondents.
The appellant was also ordered to pay the respondents Rs.3,25,000/- in compensation in lieu of specific performance, with interest accruing at a rate of 12 percent per annum from the date of the decree until realisation. It was also ordered that the respondents deliver possession of the part of the property admeasuring 45 sq.yards (approximately) with the plaint filed by the appellant to the appellant by removing any structures raised by the respondents.
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Questions
- Which Section of the Specific Relief Act, 1963 deals with the powers of the Court to award compensation in some instances?
- Can specific relief be granted for enforcing penal laws too?
