In Sushil Kumar Agarwal vs Meenakshi Sadhu, the respondent appealed against the judgment of the Division Bench Of The Calcutta High Court, wherein the High Court dismissed instituted a suit for specific performance of a development agreement, against the respondents, who are owners of the premises.
In the instant case, the appellant had entered into a development agreement with the owners/respondent for the development of a property, wherein the conditions were that the appellant would at their own expense apply for sanction of the plan of a proposed building to the Calcutta Municipal, submit plan of the building, deposit with the respondent an amount of ₹ 4,00,000/- without interest which shall be refundable upon the completion of the building, if for any reason the construction cannot take place, the appellant shall refund the deposit in addition to all costs, charges and expenses, the respondent shall retain 42% of the total constructed area as ‘sole owned’ and the balance 58% of the total constructed area shall remain secured for due payment of the construction costs and the respondent agreed to pay the appellant the costs and expenses along with agreed remuneration upon completion of the construction and if the respondent failed to pay, the appellant was entitled to realise its money by selling 58% of the total constructed area.
The appellant alleges that on finding the premises already encumbered wrote to the respondents demanding that they share the sanctions fees as agreed to which respondent replied that the agreement has already been cancelled by an earlier letter sent to the appellant and request the appellant to return all the property documents and collect the deposit.
The appellant filed a suit challenging this cancellation before the City Civil Court. The said court referring to a judgment of a Division Bench of the High Court of Calcutta in Vipin Bhimani v Smt Sunanda Das, rejected the suit as it had found no evidence that the appellant were in possession of the property as required under Section 14(3)(c) of the Specific Relief Act. Division Bench of the High Court rejected the appeal on the ground that the suit was not maintainable under Section 14(3)(c) of the Act.
The Supreme Court decided that the question is whether Section 14(3)(c) of the Act is a bar to a suit by a developer for specific performance of a development agreement between himself and the owner of the property. The Supreme Court also said that there is ambiguity in the wording of the said section which needs to be looked into.
The Section 14 states the type of contract which are not enforceable and subsection 3 has nonobstant clause where a suit can be enforced but also carries a provisio.
The Supreme Court held that in a construction contract, the contractor has no interest in either the land or the construction carried out on the land. This was an agreement to carry out the construction of the building for which payment of the construction costs and agreed remuneration had to be made. The agreement did not create an interest in the land for the developer. If the payment due to the developer was made, there would arise no security interest. Moreover, the security interest in respect of 42% of the constructed area would arise only if the construction came up and the payment due to the builder was not made. In present case, admittedly there is no construction at all.
While pursuing along this line, the Supreme Court found that in order to avoid bar of suit by a developer for specific performance of a development agreement between himself and the owner of the property, the construction of the said section mandated that the defendant has to, by virtue of the agreement, obtain 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. However, if the rule of literal interpretation is adopted to interpret Section 14(3)(c)(iii), it would lead to a situation where a suit for specific performance can only be instituted at the behest of the owner against a developer, denying the benefit of the provision to the developer despite an interest in the property having been created. This anomaly is created by the use of the words “the defendant has, by virtue of the agreement, obtained possession of the whole or any part of the land” in Section 14(3)(c)(iii). Under a development agreement, an interest in the property may have been created in favour of the developer. If the developer is the plaintiff and the suit is against the owner, strictly applied, clause (iii) would require that the defendant should have obtained possession under the agreement. In such a case if the developer files a suit for specific performance against the owner, and the owner is in possession of the land by virtue of a lawful title, the defendant (i.e. the owner) cannot be said to have obtained possession of the land by way of the agreement. This would lead to an anomalous situation where the condition in Section 14(3)(c)(iii) would not be fulfilled in the case of a suit by a developer. Application of the literal rule of interpretation to Section 14(3)(c)(iii), would lead to an absurdity and would be inconsistent with the intent of the Act.
By giving a purposive interpretation to Section 14(3)(c)(iii), the anomaly and absurdity created by the third condition will have no applicability in a situation where the developer who has an interest in the property, brings a suit for specific performance against the owner. The developer will have to satisfy the two conditions laid out in sub clause (i) and (ii) of Section 14(3)(c), for the suit for specific performance to be maintainable against the owner. This will ensure that both owners and developers can avail of the remedy of specific performance under the Act. A suit for specific performance filed by the developer would then be maintainable.
Finally, looking into the present matter, the court decided that as per the other undisputed conditions of the said section, Section 14(3)(c)(i) states that the buildin.g or other work described in the contract is sufficiently precise to enable the court to determine the exact nature of the building or work which is not the case for the present agreement. Further Section 14(3)(c)(ii) states that the plaintiff should have a substantial interest in the performance of the contract to which compensation in money for non-performance of the contract is not an adequate relief. In the present matter, it is clear that the plaintiff can be provided recompense for the losses allegedly incurred by payment of adequate compensation in the form of money. The developer has failed to satisfy the conditions under sub-clause (i) and (ii) of Section 14(3)(c) of the Act. In such a case, specific performance cannot be granted.
Comments
Post a Comment