SH ROHIT AGARWAL vs SH R P ARORA
$~38
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Decision delivered on: 20.03.2024
+ RFA(COMM) 201/2023 & CM No.46975/2023
SH ROHIT AGARWAL ….. APPELLANT
Through: Mr M.C. Premi, Adv.
versus
SH R P ARORA ….. RESPONDENT
Through: Mr Sanjay Rathi, Mr Ashish Khatri, Mr Mukesh Sansawal, Mr Brahm Dev, Mr Shoumik and Mr Tarun, Advs.
CORAM:
HON’BLE MR. JUSTICE RAJIV SHAKDHER
HON’BLE MR. JUSTICE AMIT BANSAL
[Physical Hearing/Hybrid Hearing (as per request)]
RAJIV SHAKDHER, J. (ORAL):
I. Backdrop:
1. This appeal is directed against the judgment and order dated 20.07.2023 passed by the learned District Judge (Commercial Court), North West District, Rohini Courts, Delhi.
2. Via the impugned judgment and order, the learned District Judge has held that the respondent/plaintiff is entitled to recover Rs. 30,00,000/- paid by him to the appellant/defendant as earnest money, along with Rs. 4,56,248/- expended on stamp duty and payment of registration charges.
3. The impugned judgment and order was passed on an application moved on behalf of the respondent/plaintiff under Order XII, Rule 6 of the Code of Civil Procedure, 1908 [in short, CPC] read with Order XIII-A of the CPC.
4. The record shows that the dispute emanating between the parties has its genesis in an Agreement to Sell and Purchase dated 18.09.2018 [hereafter referred to as ATS].
4.1 As per the ATS, the appellant/defendant had agreed to sell two shops, described as DDA, Built Shop Nos. 3 & 4, in Block-BF, situated at Shalimar Bagh, Delhi-110088 [hereafter referred to as suit property] to the respondent/plaintiff.
4.2 Concededly, the total sale consideration was pegged at Rs.1,42,51,000/-, of which earnest money amounting to Rs.15,00,000/- was paid by the respondent/plaintiff to the appellant/defendant at the time of execution of the ATS. The balance sale consideration, i.e., Rs.1,27,51,000/-, as per the ATS, was required to be paid by the respondent/plaintiff in the following manner:
(i) Part payment of Rs.15,00,000/- was required to be remitted on or before 30.09.2018.
(ii) The remaining amount, i.e., Rs.1,12,51,000/- had to be paid on or before 17.12.2018.
5. It is not disputed before us by learned counsel for the appellant/defendant that the respondent/plaintiff not only paid, on 18.09.2018, earnest money amounting to Rs.15,00,000/- but also followed it up by paying the first tranche of Rs.15,00,000/-, on 30.09.2018.
5.1 It was, however, emphasized by the learned counsel for the appellant/defendant that the respondent/plaintiff did not have the wherewithal to pay the balance amount, i.e., Rs.1,12,51,000/-. In other words, according to the appellant/defendant, the respondent/plaintiff was neither ready nor willing to fulfill his part of the obligations, as envisaged under the ATS.
6. It is in this context that our attention was drawn to the Offer letter for Facility dated 25.10.2018 addressed by the concerned branch of ICICI Bank Limited to the respondent/plaintiff. The communication disclosed that ICICI Bank had granted in-principle sanction for a loan facility to the extent of Rs. 25,00,000/- in favour of the respondent/plaintiff.
6.1 Thus, the argument advanced before us by learned counsel for the appellant/defendant was that there was nothing on record that established that the respondent/plaintiff had available with him the necessary funds to pay the entire balance sale consideration to the appellant/defendant.
7. Before we proceed further, we may also note that the record discloses that the respondent/plaintiff had served a notice dated 17.09.2019 under Section 105 of the Transfer of Property Act, 1882 [in short, TPA] on the appellant/defendant. Via this notice, the respondent/plaintiff demanded payment from the appellant/defendant of Rs.45,00,000/- along with 24% pendente lite and future interest [from the date of receipt of the amount]. As per the notice, the appellant/defendant was required to liquidate the demand within fifteen (15) days of its service.
8. Learned counsel for the appellant/defendant does not dispute the fact that, although the said demand notice was received by the appellant/defendant, no response was sent to the respondent/plaintiff.
9. The record also reveals that the respondent/plaintiff incurred, cumulatively, Rs.3,80,000/- towards stamp duty and likewise, spent Rs.76,248/- on account of registration charges.
10. It is against this backdrop that the respondent/plaintiff, in and about 01.11.2019, instituted a suit for recovery of Rs.45,00,000/- along with interest and permanent and mandatory injunction.
11. As noticed at the outset, based on the application filed under Order XII Rule 6 read with Order XIII-A of the CPC, via the impugned judgment and order, the learned District Judge directed the appellant/defendant to pay Rs.34,56,248/- to the respondent/plaintiff within fifteen (15) days.
12. The appellant/defendant, being aggrieved, has lodged the instant appeal.
II. Submissions by counsel:
13. The arguments advanced by learned counsel for the appellant/defendant can be, broadly, paraphrased as follows:
(i) Firstly, that the suit should have been put to trial. The learned District Judge has erred in exercising power under Order XII Rule 6 of the CPC.
(ii) Secondly, Rs.30,00,000/- had been rightly forfeited/retained by the appellant/defendant as the respondent/plaintiff had failed to fulfill his obligations under the ATS.
(iii) Thirdly, in any event, there was an in-built contradiction in the impugned judgment and order insofar as the burden of payment of stamp duty and registration charges is concerned. The burden of reimbursement of expenses incurred on stamp duty and registration charges has also been wrongly placed on the appellant/defendant.
14. On the other hand, learned counsel for the respondent/plaintiff has relied upon the impugned judgment in support of the respondents/plaintiffs claim for recovery of the decretal amount.
III.
Analysis and Reasons:
15. Having heard the learned counsel for the parties. According to us, what needs to be dealt with upfront is whether the trial Court has rightly exercised its power under Order XII Rule 6 read with Order XIII-A of the CPC.
16. As is well-established, the power to pronounce judgment under Order XII Rule 6 of the CPC can be exercised if the trial Court finds that there are admissions of fact either in the pleadings or otherwise [that would include documents accompanying the plaint].
17. In this context, what is required to be noticed is that the appellant/defendant does not dispute the receipt of earnest money amounting to Rs. 15,00,000/- from the respondent/plaintiff at the stage of execution of the ATS.
17.1 Furthermore, the appellant/defendant also does not dispute that the first tranche of Rs.15,00,000/- was received from the respondent/plaintiff on 30.09.2018.
17.2 Therefore, clearly, insofar as the receipt of Rs.30,00,000/- is concerned, it is not disputed by the appellant/defendant.
18. Given this position, the only argument that has been put forth on behalf of the appellant/defendant is that since the entire sum, i.e., Rs.30,00,000/- has been treated by the respondent/plaintiff as earnest money [which is also evident from the observations made in the impugned judgment and order passed by the learned District Judge], the appellant/defendant is entitled to forfeit/retain the said amount.
19. There is no doubt that in the impugned judgment and order, the entire amount has been laconically labelled as earnest money.
19.1 However, both in the plaint and legal notice, the respondent/plaintiff asserts that he paid earnest money of Rs.15,00,000/-, followed by remittance of the first tranche of Rs.15,00,000/- as part payment towards total consideration. These assertions are in consonance with the terms of the ATS.
20. Therefore, insofar as the first tranche of Rs.15,00,000/- was concerned, which was part payment made over towards the total sale consideration provided in the ATS, the amount could not have been forfeited/retained by the appellant/defendant.
21. As regards the earnest money, it is relevant to note that in the written statement, the appellant/defendant does not aver that he suffered a loss or an injury because the respondent/plaintiff failed to fulfill his part of the obligations outlined in the ATS.
21.1 To put the matter beyond doubt, we queried the learned counsel for the appellant/defendant, who, fairly, conceded that there is no such assertion made in the written statement.
22. In this context, it would also be relevant to Clause 9 of the ATS, which is the provision that the appellant/defendant took recourse to retain the said amount in issue. Thus, for convenience, Clause 9 is set forth hereafter:
9. That if the first party infringes the terms and conditions of this agreement or fails to execute regarding sale of the said property in the name of the second party, then the second party shall be entitled to recover the double of earnest money, from the first party or the second party is also liberty to get the said transaction completed through the court of law under the suit for specific performance at the costs, expenses and damages of the first party, and on the other hand if the second party refuses in writing to purchase the said property, then earnest money shall be forfeited by the first party, also then the first party shall be free to resell the said property to any other person(s ).
[Emphasis is ours]
23. Notably in the ATS, the appellant/defendant is referred to as the first party, whereas, the respondent/plaintiff is treated as the second party.
23.1 A careful perusal of Clause 9 of ATS would show that if the appellant/defendant, i.e., the first party failed to fulfill his obligations, then, the second party, i.e., the respondent/plaintiff was, inter alia, entitled to recover an amount equivalent to twice the amount that he had paid as earnest money. On the other hand, if the respondent/plaintiff, i.e., the second party tendered a refusal in writing to purchase the suit property, the appellant/defendant, i.e., the first party could forfeit/retain the earnest money.
23.2 Therefore, a plain reading of Clause 9 would show that the amount retained as earnest money could be forfeited/retained by the first party, i.e., the appellant/defendant, and nothing more, upon refusal (tendered in writing) by the respondent/plaintiff, i.e., the second party, to purchase the suit property.
23.3 Thus, clause 9 of the ATS did not extend the power of forfeiture to Rs. 15,00,000/- paid towards the sale consideration.
23.4 That said, the forfeiture/retention of earnest money, could have been defended and the matter could have been sent for trial if the appellant/defendant had asserted that he had suffered an injury and loss on account of the failure of the respondent/plaintiff to fulfill his obligations under the ATS [See Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136].
24. Therefore, based on the pleadings and the document on record, i.e., ATS, in our opinion, the trial Court was well within its right to exercise powers under Order XII Rule 6 of the CPC read with Order XIII-A of the CPC.
25. The fact that the trial Court wrongly categorized the first tranche, paid towards the sale consideration, as earnest money does not persuade us to deviate from the conclusion reached by the trial Court that Rs.30,00,000/- would have to be refunded by the appellant/defendant to the respondent/plaintiff for reasons set forth hereinabove.
26. This brings us to the last limb of the impugned judgment and order, i.e., the burden cast on the appellant/defendant to reimburse stamp duty and registration charges cumulatively amounting to Rs.4,56,248/- borne by the respondent/plaintiff.
27. Qua this aspect, learned counsel for the respondent/plaintiff says, having recognized that the appellant/defendant has been wrongly mulcted with the burden concerning expenses incurred on stamp duty and registration fee, that this part of the judgment can be excised since the respondent/plaintiff intends to take steps to claim a refund of the said amount, i.e., Rs.4,56,248/-, from the concerned statutory authorities.
28. Thus, for the foregoing reasons, the appeal is partially allowed. The respondent/plaintiff will be entitled to recover Rs.30,00,000/- from the appellant/defendant paid towards earnest money and the first tranche under the ATS.
28.1 However, the burden concerning the funds expended on stamp duty and registration fee by the respondent/plaintiff, which is quantified at Rs.4,56,248/-, will not be borne by the appellant/defendant.
29. The impugned judgment and order is modified to the extent indicated above.
30. The appeal is disposed of in the aforesaid terms.
31. Consequently, the pending interlocutory application shall stand closed.
32. Parties will act based on the digitally signed copy of the order.
RAJIV SHAKDHER, J
AMIT BANSAL, J
MARCH 20, 2024/aj
RFA(COMM) 201/2023 Page 1 of 9