M/S WHITEFIELD SHELTERS PVT LTD vs SRI N NAGARAJA
- Court
- Karnataka High Court
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COMAP No. 265 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
TH
DATED THIS THE 08 DAY OF JULY, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
COMMERCIAL APPEAL NO. 265 OF 2024
BETWEEN:
M/S WHITEFIELD SHELTERS PVT LTD
A PRIVATE LIMITED COMPANY
REGISTERED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
PLOT NO. 775/A1
ROAD NO.45
JUBILEE HILLS
HYDERABAD - 500 033
REPRESENTED BY ITS
EXECUTIVE DIRECTOR
AND AUTHORIZED SIGNATORY
SRI R. SRINIVAS REDDY
…APPELLANT
Digitally
signed by
YASHAVANT
NARAYANKAR
Date:
2026.07.09
14:09:42
+0530
(BY SRI JAYAKUMAR S PATIL, SENIOR ADVOCATE A/W
SRI VISWANATHA SETTY V., ADVOCATE)
AND:
1. SRI N. NAGARAJA
AGED ABOUT 72 YEARS
S/O SRI NAGAPPA
2. SMT. M. SHANTHAKUMAR @ SHANTHAMMA
AGED ABOUT 65 YEARS
W/O N. NAGARAJA
YASHAVANT
NARAYANKAR
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COMAP No. 265 of 2024
BOTH ARE RESIDING AT
'MANJUNATH NILAYA'
NO.69, GARUDACHARPALYA
MAHADEVAPURA POST
BANGALORE - 560 048
3. SRI G.M. SHAMANNA
AGED ABOUT 55 YEARS
S/O MUNIYAPPA
R/AT KAGGADASAPURA VILLAGE
KRISHNARAJAPURA HOBLI
BENGALURU EAST TALUK
REP. BY HIS ATTORNEY
SRI N. NAGARAJA
…RESPONDENTS
(BY SRI ASHOK HARANAHALLI, SENIOR ADVOCATE A/W
SRI CHANDRASHEKAR L., ADVOCATE FOR R-1;
SRI S.N. ASWATHANARAYAN, SENIOR ADVOCATE A/W
SRI SRINIVASAN T., ADVOCATE FOR C/R-2 & R-3)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13
(1-A) OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET
ASIDE JUDGMENT AND ORDER DATED 19.03.2024, PASSED IN
COM. OS No. 46/2022, PASSED BY THE HON'BLE XI ADDITIONAL
DISTRICT AND SESSIONS JUDGE, (DEDICATED COMMERCIAL
COURT) BANGALORE RURAL DISTRICT, BANGALORE
(ANNEXURE-A) & ETC.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MR. JUSTICE C.M. POONACHA
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COMAP No. 265 of 2024
C.A.V. JUDGMENT
(PER: HON'BLE MR. JUSTICE C.M. POONACHA)
The present appeal is filed under Section 13(1-A) of the
Commercial Courts Act, 2015 [CC Act] by the plaintiff impugning
the judgment and decree dated 19.03.2024 passed in Commercial
O.S.No.46/2022 [impugned judgment] by the Court of the XI
Additional District and Sessions Judge, (Dedicated Commercial
Court), Bangalore Rural District, Bangalore District, [Commercial
Court] . Vide the impugned judgment, the suit for specific
performance filed by the appellant seeking to specifically perform
the Memorandum of Understanding dated 27.09.2004 [MOU] has
been dismissed.
2. It is pertinent to note here that the suit was filed for
specific performance of the MOU and to direct the defendants to
execute the Joint Development Agreement [JDA] before the Court
of the Civil Judge (Senior Division), Bangalore Rural District,
Bangalore and was numbered as O.S.No.2121/2007.
Subsequently, the suit was transferred to the Commercial Court
and re-numbered as Com.O.S.No.46 of 2022.
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COMAP No. 265 of 2024
3. During the pendency of the above appeal, the
inter alia,
appellant has filed, I.A.No. 1/2026 under Order VI Rule
17 read with Section 151 of the Code of Civil Procedure, 1908
[CPC] on 06.04.2026 after the final hearing of the appeal had
commenced seeking to amend the plaint whereunder, apart from
various averments that were sought to be incorporated in the plaint,
the plaintiff has also sought for the relief of refund of the security
₹
deposit amount of 2,00,00,000 (Rupees Two Crore) together with
interest at 24% per annum amounting to ` 9,84,00,000/- (Rupees
Nine Crore Eighty-four Lakh), thereby claiming a total sum of
` 11,84,00,000/- (Rupees Eleven Crore Eighty-four Lakh) as also
`
claiming a sum of 106,00,00,000/- (Rupees One Hundred and Six
Crores) as compensation.
BRIEF FACTS:
4. It is the case of the appellant [developer] that the
respondents are the owners of land measuring a total extent of 31
1
acres 11 guntas at Kannamangala Village, Bidarahalli Hobli [suit
properties] .
1
2 acres in Survey No.128, 2 acres 12 guntas in Survey No.129, 2 acres in
Survey No. 130/1, 1 acre 4 guntas in Survey No.130/2, 1 acre 2 guntas in
Survey No.130/3, 2 acres 39 guntas in Survey No.139, 2 acres 33 guntas in
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COMAP No. 265 of 2024
5. It is a further case of the developer that the
respondents [owners] approached the developer, which is a
company registered under the Indian Companies Act, 1956
[Companies Act] for the purpose of carrying on the business of
land development and construction activities to develop the suit
properties by way of a joint venture. The parties had agreed that
the owners would be entitled to 22% of the built-up area as well as
the corresponding undivided right, title and interest in the land in
the suit properties, while the developer would be entitled to 78% of
the built-up area and undivided share. Accordingly, the MOU was
entered into between the parties on 27.09.2004. That the parties
had also entered into a General Power of Attorney dated
09.04.2005 [GPA] , whereunder, the owners authorised the
developer to represent them for the purpose of applying for
conversion of the suit property, as also for the purpose of securing
the necessary permissions for executing the project as
contemplated under the MOU.
Survey No.140/1, 1 acre 3 guntas in Survey No.140/2, 3 acres 9 guntas in
Survey No.141/1, 1 acre 2 guntas in Survey No.157/1, 5 acres 2 guntas in
Survey No.158, 20 guntas in Survey No.160/2, 2 acres 2 guntas in Survey
No.157/2, 1 acre 13 guntas in Survey No.141/2A, 1 acre 2 guntas in Survey
No. 141/2B, 1 acre 20 guntas in Survey No.142/1, 20 guntas in Survey
No.160/2; Respondent Nos.1 and 2 are the absolute owners of 2 acres 2
guntas in Survey No.157/2; and Respondent No.3 is the absolute owner of
01 acre 13 guntas in Survey No.141/2A, 01acre 02 guntas in Survey
No.141/2B and 01 acre 20 guntas in Survey No.142/1.
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COMAP No. 265 of 2024
5.1 It is the case of the developer that it paid the owners a
`
refundable security deposit of 2,00,00,000/- (Rupees Two Crores).
That the developer, consequent to the MOU, has taken various
steps in furtherance of implementing the project for the purpose of
developing the suit property in terms of the MOU, inter alia,
applying for conversion of the suit property, applying for plan
sanction, corresponding with various statutory authorities, etc.
However the order of conversion was granted only for 18½ acres of
the suit property and the application for conversion was rejected in
respect of the remaining 12½ acres of the suit property on the
ground that the said portion was reserved as ‘Park Zone’ in the
Comprehensive Development Plan [CDP], 1995. That when the
said rejection of the conversion was brought to the notice of the
owners, it was represented by the owners that they would ensure
that the said portion of the schedule property would be deleted
from the ‘Park Zone’ in the new CDP, which was to be prepared for
the year 2005. However, consequent to the efforts of the
developer, the said portion of the schedule property was deleted
from the ‘Park Zone’ in the new CDP, which was introduced in July-
2007. That, the developer also put up a compound wall over the
entire suit property and installed a gate; constructed a watchman
shed as also a shed for storing materials. The developer also dug
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COMAP No. 265 of 2024
eight borewells as well as obtained a soil testing certificate for
construction of multi-storied buildings. Hence, the developer was in
permissive possession of the property for the purpose of
development.
5.2 It is a further case of the developer that when the
developer was installing a gate so as to have access to the suit
properties from the Hoskote - Whitefield main road, the petroleum
authorities objected to the same on the ground that they had
installed a petroleum pipeline underneath the said land and,
therefore, the developer could not have any exclusive right to put
up any gate or form any road. That the gate was sought to be put
up in an extent of 20 guntas of land in Survey No.160/2, which was
demarcated in the plan for formation of an approach road to the
entire layout comprising the suit properties.
5.3 That the developer had engaged architects and
engineers from Singapore for preparing the plan and had also
made correspondence with L&T for supplying concrete for
construction. That the entire cost of the project, which was to
contain all modern facilities and amenities, was estimated at ` 350
crores. That the developer incurred a sum of ` 60 lakhs for getting
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COMAP No. 265 of 2024
`
draft plan of the layout of the project prepared; 36 lakhs towards
obtaining conversion order; and ` 30 lakhs towards inaugural
function; thus spent a total sum of ` 5,00,00,000/- (Rupees Five
Crores) apart from the security deposit amount of ` 2,00,00,000
(Rupees Two Crores) paid to the owners. That the developer had
organised a grand inaugural function on 13.04.2004, along with the
owners in the suit property, attended by many dignitaries.
5.4 The petroleum authorities having objected to putting up
of the gate and formation of the road, the owners were approached
and apprised of the said situation. Accordingly, as per the
understanding between the parties, the owners represented that, in
order to avoid any complications, they would acquire the
neighbouring land belonging to the family of one Sri.
Poornachandra Rao, which is situated in the southern portion of
Item No.14 of the suit properties, where the road and gate were
proposed to be formed and installed, so as to enable the developer
to form the road on the land so acquired. That the developer was
also issued a notice by the concerned authorities under Sections 8,
9 and 15 of the Petroleum and Minerals Pipelines (Acquisition of
Right of User in Land) Act, 1962 [Pipeline Act] . That despite
various efforts made by the developer and the owners with the
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concerned authorities for the formation of road, the same did not
yield any result. That the developer believed the assurance made
by the owners that they would acquire alternate land from the
family of Sri. Poornachandra Rao. However, in the absence of the
same, the developer could not construct the approach road and it
was difficult for the developer to commence the project within the
time stipulated under the MOU. Hence, the parties mutually
decided to extend the time stipulated under the MOU.
5.5 That the developer was always ready and willing to
perform its obligations under the MOU and commence the project
work. That when the developer approached the owners for the
purpose of signing certain papers, they refused to do so. Hence,
the developer wrote a letter dated 02.08.2007 requesting them to
sign the necessary papers. However, one of the owners sent a
reply dated 21.08.2007, making allegations against the developer.
The developer claimed to have invested more than ` 7,00,00,000/-
(Rupees Seven Crores) in the project. That the non-implementation
of the project was due to various factors, including the failure of the
owners to procure the alternate land for the purpose of forming the
road. Hence, the developer filed the suit seeking specific
performance of the MOU.
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6. In the written statement, though the owners admitted
the execution of the MOU, they disputed the fact that the developer
was financially sound and possessed the expertise and skill
required for developing the suit lands. It was specifically contended
that the developer had misrepresented and induced the owners
into entering into the MOU for the development of the suit
properties. That the owners intended to develop the suit properties
by constructing residential apartments themselves. However, since
they were preoccupied and inexperienced in developing the
properties, having regard to the representations made on behalf of
the developer, they were induced into entering into the MOU.
6.1. Various clauses of the MOU were referred to in the
written statement for the purpose of contending that the developer
was aware of the fact that a portion of the suit properties was
declared as a 'Park Zone' in the CDP. That the developer had
undertaken to secure the necessary permissions for change of land
use as well as other requisite permissions including those from the
Petroleum Ministry of the Central Government. That the developer,
in order to cover up the delay and latches on its part, suppressed
material facts, namely that the developer had not cooperated with
the owners for the commencement of the project.
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6.2. It was specifically contended by the owners that the
GPA dated 09.04.2005 was cancelled by them by Cancellation
Deed dated 30.04.2007, consequent to which, a notice dated
21.09.2007 has been issued to the developer. Hence, it is
contended that the owners had suffered huge losses and great
inconvenience by virtue of entering into the MOU with the
developer. Hence, the defendants sought for dismissal of the suit.
6.3. The defendant had also contended that the developer,
who was stated to have been registered under the Companies Act,
had been removed by the Registrar of Companies from the list of
Companies. Hence, it was contended on behalf of the owners that
the suit filed by the developer was not maintainable.
7. Consequent to the pleadings of the parties, the
Commercial Court framed the following issues and additional
issues.
“ISSUES
1) Whether the plaintiff proves that the defendants
entered into an agreement for construction of Apartment
buildings in joint venture?
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2) Whether the plaintiff further proves that defendants
agreed to receive 224 of constructed building and executed
M.O.U on 27.09.2004 by Rs. 2 Crores on different dates?
3) Whether the plaintiff proves that he is ever ready and
willing to perform his part of contract?
4) Whether the defendants prove that the plaintiff failed
to put up construction within stipulated time, as such the
defendants are entitle to forfeit 75% of Rs. 2 Crores?
5) Whether the defendants prove that suit is barred for
non-joinder of necessary parties?
6) Whether the defendants prove that the court fee paid
on the plaint is insufficient?
7) Whether the plaintiff is entitle for the relief of specific
performance as sought for ?
8) What order or decree?
ADDITIONAL ISSUES DT. 11.10.2022
l) Whether the suit filed by the plaintiff is barred by law of
limitation?
2) Whether the suit filed by the plaintiff is maintainable in
the present form?
ADDITIONAL ISSUES DT. 12.03.2024
1) Whether the plaintiff proves that the defendants are
trying to alienate the suit schedule properties and entering into
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JDA with the third parties and also trying to alter the nature of
the suit schedule properties as contended in para No. 24 of the
plaint?
2) Whether the plaintiff is entitled for the relief of
permanent injunction as prayed for in this suit?”
8. One of the directors of the developer examined himself
as PW.1. PW.1 to PW.27 were marked in evidence. One of the
owners was examined as DW.1 and Exs.D1 to Ex.D14 were
marked in evidence.
IMPUGNED JUDGMENT
9. The Commercial Court noticed that the execution of
the MOU (Ex. P13) was admitted between the parties. However, it
was held that the developer did not produce any material to
demonstrate that as on the date of the MOU, it had the financial
`
status to meet the expenses of 350 crores to execute the project
in terms of the MOU. Hence, the Commercial Court held that the
developer had failed to establish that it was ready and willing to
perform its part of the contract.
9.1. While considering issue No.4, as to whether the
owners were entitled to forfeit 75% of the security deposit amount
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₹
`
of 2 crores. The Commercial Court, upon appreciating the terms
of the MOU, more particularly clauses 8.1, 8.2 and 8.3 of the MOU,
held that the owners are entitled to forfeit 75% of the security
deposit amount.
9.2. The Commercial Court noticing the contention raised
by the owners that the developer was removed from the list of
companies by the Registrar of Companies, upon noticing Section
248(5) of the Companies Act, as also noticing a copy of the notice
dated 22.03.2019 issued by the Registrar of Companies,
Hyderabad (Ex. D4), held that the developer had not placed any
material on record to demonstrate that any action has been taken
by it challenging the said notice dated 22.03.2019.
9.3. With regard to the contention of the developer that the
owners had agreed to acquire the neighbouring property belonging
to one Sri. Poornachandra Rao, it was held that the developer
cannot compel the owners to acquire the neighbouring property.
Further, the Commercial Court noticed that having regard to the
suit property not, having a proper approach road, to enable
construction of the project, it is impossible for the project to be
constructed in the suit properties in terms of the MOU. Accordingly,
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noticing Section 14 of the Specific Relief Act, 1963 [S.R Act] , the
Commercial Court held that the MOU is not enforceable and hence,
the developer was not entitled for specific performance of the said
MOU. Accordingly, the suit of the plaintiff was dismissed with costs.
CONTENTIONS:
10. It is the contention on behalf of the appellant-developer
that vide the MOU all the terms that were required to be agreed to
between the parties for the purpose of jointly developing the suit
properties and putting up constructions of residential apartment,
complexes, having been agreed, the said MOU was specifically
enforceable. Further, it was contended that the appellant -
developer had the requisite resources to generate the funds
required for the purpose of completing the project in terms of the
MOU. A detailed reference was made to the various acts done by
the appellant - developer with respect to the suit properties,
including getting the suit properties converted, constructing a
compound wall and gate, preparing the requisite plans for putting
up the constructions by hiring architects from Singapore, etc. It was
also emphasised that the developer had incurred expenses of more
`
than 5,00,00,000/- (Rupees Five Crores) for implementing the
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COMAP No. 265 of 2024
terms and conditions as contemplated under the MOU. It was
further sought to be emphasised that the reason for the hurdles in
the implementation of the MOU was having regard to the fact that a
portion of the suit properties was located in the ‘Park Zone’ in the
CDP; as also having regard to the objections raised of a gas
pipeline being located below the approach road to the suit property.
It is the contention on behalf of the developer that the said aspects
were obligations which the owners were required to fulfil/comply
with and that the project had not been delayed on account of any
laxity/deficit on the part of the developer.
10.1. In support of I.A.No.1/2026 filed for amendment, it is
the contention of the appellant that having regard to Section 22 of
the S.R. Act, the plaintiff is entitled to seek for refund of the earnest
money at any stage of the proceedings by amending the plaint.
Hence, it is contended that refund of the security deposit amount
not having been sought at the time of filing of the suit, the
application for amendment filed by the appellant is required to be
allowed and if for any reason the relief of specific performance of
the MOU is not granted by this Court, refund of the security deposit
amount is required to be ordered together with corresponding
interest as sought for in the application .
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11. Per contra, the owners justifying the impugned order
contend that the developer, on one pretext or the other, having
regard to its inability in implementing the project in terms of the
MOU, was prolonging the same and the Commercial Court was
justified in dismissing the suit filed by the developer.
11.1 The various aspects with regard to the developer
company having been ordered to be struck off from the Registrar of
Companies were specifically adverted to and hence, it was
contended that the appellant is not entitled to maintain the above
appeal since the appellant-company ceased to be an entity under
law.
11.2 With regard to the application for amendment, it was
submitted that the said application having been filed after
commencement of hearing of the above appeal, and as an
afterthought, the same is to be rejected.
12. Detailed submissions have been advanced by learned
Senior Counsel representing the developer and the owners.
Various material on record have been pointed out and citations
have been relied upon.
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REASONING AND CONCLUSION:
13. Having regard to the contentions put forth by the
learned counsels the following questions arise for consideration:
i) Whether I.A.No.1/2026 filed for amendment is to be
allowed?
ii) Whether the impugned judgment passed by the
Commercial Court is erroneous and liable to be interfered
with?
REG. QUESTION No.(i):
14. I.A.No.1/2026 is filed under Order VI Rule 17 of the
CPC for amendment of the plaint. The said application was filed on
06.04.2026 after the hearing of the appeal had commenced. Vide
the said application, the developer sought to incorporate paragraph
Nos.25(a) to 25(p) in the plaint. Amendments are sought to claim
the refundable security deposit of ` 2,00,00,000/- (Rupees Two
Crores) with interest at 24% per annum amounting to
`
9,84,00,000/- (Rupees Nine Crore Eighty Four Lakh), i.e., a
cumulative sum of ` 11,84,00,000/- (Rupees Eleven Crore Eighty
Four Lakh) as well as a sum of ` 106,00,00,000/- (Rupees One
Hundred and Six Crores) as compensation. The relief of refund of
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security deposit is sought having regard to Section 22(2) of the
S.R. Act, and compensation is sought in terms of Section 21 of the
S.R. Act. The owners have filed objections to the said application.
15. It is the contention of the developer that, since the
relief of refund of security deposit was not sought at the time of
filing of the plaint, it is entitled to seek for amendment at any stage
of the proceedings having regard to the proviso to sub-section (2)
of Section 22 of the S.R. Act.
16. In this context, it is pertinent to note Order VI Rule 17
of the CPC , which reads as under:
“
17. Amendment of pleadings .—The Court may at
any stage of the proceedings allow either party to
alter or amend his pleadings in such manner and on
such terms as may be just, and all such amendments
shall be made as may be necessary for the purpose
of determining the real questions in controversy
between the parties:
Provided that no application for amendment shall
be allowed after the trial has commenced, unless the
Court comes to the conclusion that in spite of due
diligence, the party could not have raised the matter
before the commencement of trial.”
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17. Section 22 of the S.R. Act reads as under:
“22. Power to grant relief for possession, partition,
refund of earnest money, etc.— (1) Notwithstanding
anything to the contrary contained in the Code of Civil
Procedure, 1908 (5 of 1908), any person suing for the specific
performance of a contract for the transfer of immovable
property may, in an appropriate case, ask for—
(a) possession, or partition and separate possession,
of the property, in addition to such performance; or
(b) any other relief to which he may be entitled,
including the refund of any earnest money or deposit
paid or made by him, in case his claim for specific
performance is refused.
(2) No relief under clause (a) or clause (b) of sub-section
(1) shall be granted by the court unless it has been
specifically claimed:
Provided that where the plaintiff has not claimed any such
relief in the plaint, the court shall, at any stage of the
proceeding, allow him to amend the plaint on such terms as
may be just for including a claim for such relief.
(3) The power of the court to grant relief under clause (b) of
sub-section (1) shall be without prejudice to its powers to
award compensation under section 21.”
18. A plain reading of the proviso to Rule 17 of Order VI of
the CPC stipulates that an application for amendment is to be
made prior to the commencement of trial. However, the proviso to
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sub-section (2) of Section 22 stipulates that the plaintiff should be
allowed to amend the plaint, at any stage of the proceedings for,
inter alia
, refund of earnest money or deposit paid, in case, the
claim for specific performance is refused.
19. Compensation is claimed having regard to Section 21
of the S.R. Act. The same reads as under:
“21. Power to award compensation in certain cases.—
(1) In a suit for specific performance of a contract, the
plaintiff may also claim compensation for its breach, either
in addition to, or in substitution of, such performance.
(2) If, in any such suit, the court decides that specific
performance ought not to be granted, but that there is a
contract between the parties which has been broken by the
defendant, and that the plaintiff is entitled to compensation
for that breach, it shall award him such compensation
accordingly.
(3) If, in any such suit, the court decides that specific
performance ought to be granted, but that it is not sufficient
to satisfy the justice of the case, and that some
compensation for breach of the contract should also be
made to the plaintiff, it shall award him such compensation
accordingly.
(4) In determining the amount of any compensation
awarded under this section, the court shall be guided by the
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principles specified in section 73 of the Indian Contract Act,
1872 (9 of 1872).
(5) No compensation shall be awarded under this section
unless the plaintiff has claimed such compensation in his
plaint:
Provided that where the plaintiff has not claimed any such
compensation in the plaint, the court shall, at any stage of
the proceeding, allow him to amend the plaint on such
terms as may be just, for including a claim for such
compensation.
Explanation.—The circumstance that the contract has
become incapable of specific performance does not
preclude the court from exercising the jurisdiction conferred
by this section.”
20. Section 21 stipulates the power to award
compensation in certain cases. Sub-section (1) entitles the plaintiffs
2
to claim compensation “in addition to specific performance” . Sub-
section (2) stipulates that if specific performance ought not to be
granted but the contract has been broken by the defendant,
compensation can be awarded to the plaintiff for breach of the
contract. Sub-section (3) enables the Court to award compensation
for breach of the contract in addition to specific performance, if
specific performance “not sufficient to satisfy the justice of the
2
The words “in addition to” was substituted in place of the words “either in addition to,
or in substitution of” vide Act 18 of 2018, w.e.f. from 01.10.2018.
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case”. Sub-section (5) mandates that no compensation is to be
awarded unless the same is claimed by the plaintiff in the plaint.
However, the proviso to sub-section (5) mandates that the Court
shall, at any stage of the proceedings, allow the plaintiff to amend
the plaint, claiming for such compensation.
21. It is to be noticed that in the proposed amendments as
detailed in the application, interest is claimed at 24% p.a., on the
ground that the transaction is a commercial one. Compensation is
claimed by stating that the developer has spent various amounts of
money for developing the suit properties consequent to the
execution of the MOU. Various details have been averred for the
first time as to the anticipated profit that the developer would make
if the project would have fructified. There is no material on record
in justification of either the interest claimed or the anticipated profit.
22. At this juncture, it is pertinent to notice the judgment of
the Supreme Court in the case of Life Insurance Corporation of
3
India v. Sanjeev Builders Private Limited and another wherein
the fact situation was that, a suit was filed seeking specific
performance of an agreement and in the alternative damages were
sought. During the pendency of the suit, an application for
3
(2022) 16 SCC 1
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amendment was made seeking enhancement of the award of
damages. The application for amendment was allowed by the
learned Single Judge of the High Court keeping the issue of
limitation open, which order was affirmed by the Division Bench.
Considering the said factual matrix, the Supreme Court considering
Section 21(5) and 22 (2) of the S.R.Act held as under:
“59. Section 22 has a non-obstante provision which
overrides the CPC. A plaintiff who claims specific performance
of a contract for the transfer of immovable property, may in an
appropriate case ask for possession, partition and separate
possession of the property, in addition to specific performance.
The plaintiff may also claim any other relief including the
refund of earnest money or deposit paid, in case the claim for
specific performance is refused. Corresponding to the
provisions of sub-section (5) of Section 21, sub-section (2)
of Section 22 stipulates that such relief cannot be granted by
the court unless it has been specifically claimed. However, the
proviso requires that the court shall at any stage of the
proceedings allow the plaintiff to amend the plaint to claim
such relief where it has not been originally claimed on such
terms which may appear just.
60. ….
61. ….
62. ….
4
63. In Jagdish Singh v. Natthu Singh , this Court had the
occasion to deal with the provisions of Section 21 of the Act
1963. While analysing the aforesaid provisions, this Court laid
down that if the amendment relates to the relief of
compensation in lieu of or in addition to specific performance
where the plaintiff has not abandoned his relief of specific
performance the court should allow the amendment at any
stage of the proceedings since that is a claim for compensation
falling under Section 21 of the Act 1963 and the amendment is
4
(1992) 1 SCC 647
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one under the proviso to sub-section (5) of Section 21. This
Court, however, issued a note of caution by laying down that
different and less liberal standards would apply if what is
sought by the amendment is conversion of a suit for specific
performance into one for damages for breach of contract, in
which case Section 73 of the Indian Contract Act, 1872 would
get invoked, and then the said amendment would be under the
discipline of Order VI Rule 17 of the CPC. This Court further
held that when the plaintiff by his option had made specific
performance impossible then Section 21 does not entitle him to
seek damages. It is also held that in Indian Law when the
contract, for no fault of the plaintiff, becomes impossible of
performance Section 21 enables award of compensation in lieu
and substitution of specific performance.
64. The legal position, therefore, in respect of scope and
ambit of Section 21 of the Act 1963 is clear and made so more
by the ratio of the aforesaid decision of this Court.
65. The plaintiffs in the original plaint claimed for
compensation in addition to a decree for specific performance
of the agreement to sell. Therefore, strictly speaking the
provisions of Section 21 of the Act 1963 are not attracted to
the facts of the present case. The intention of the plaintiffs in
seeking for amendment of the plaint appears to be to get an
enhanced amount of compensation than what was originally
claimed in the original plaint which was restricted only to
Rs.1,01,00,000/-. The aforesaid intention becomes apparent
when the averments made in the application praying for
amendment are looked into inasmuch as, the plaintiffs have
stated that in view of the fact that in last 30 years there had
been a tremendous escalation of the value of the suit property
which has an adverse effect on the quantum of damages,
compensation, relief sought for the breach of contract by the
appellant/defendant. According to the plaintiffs the raising of
the amount of compensation to Rs.400,01,00,000/- from
Rs.1,01,00,000/- as claimed in the original plaint has been
necessitated in view of undue delay in the prosecution of the
suit which was not earlier foreseen, which in turn has caused
more damage to the plaintiffs through the years and therefore,
they have sought to raise the amount of compensation to the
present value as stated above from Rs.1,01,00,000/-.
66. However, the argument of the learned counsel
appearing for the appellant in regard to the two
provisos referred to above, is quite curious. The argument is
that the power of the court to permit the plaintiff to amend the
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plaint in a suit filed for the specific performance of contract
flows from Sections 21 and 22 respectively of the Act, 1963 &
the proviso to the sub-section (5) of Section 21 of the Act 1963
may entitle the plaintiff to amend the plaint, provided the
plaintiff has inadvertently or otherwise omitted to pray for
compensation. The argument proceeds on the footing that in
the present case, as the plaintiff specifically prayed for
compensation in the plaint, later if he seeks to amend that part
of the relief, the sub-section (5) of Section 21 of the Act 1963
would be an embargo for the court to do so. We do not find
any merit in this argument of the learned counsel appearing for
the appellant.
67. The two provisos referred to above, deal with the
question of permitting the plaintiff to amend his plaint. It is not,
as if, in the absence of these two provisos, it is not permissible
in law for the plaintiff to carry out an amendment in his
pleading by introducing a relief for enhanced compensation.
Rule 17 of Order VI of the CPC does confer power on a Court
to allow a party to alter or amend his pleading in such manner
and on such terms as may be just. This rule does not stop at
that, but it further says that all such amendments should be
made as may be necessary for the purpose of determining the
real question in controversy between the parties. It is pertinent
to note that this provision which empowers the court in its
discretion to permit a party to amend his pleadings, was
already on the statute book, when the Specific Relief Act,
1963 was enacted. It can, therefore, be presumed that when
the latter legislation was on the anvil, the Parliament was
aware of this power of the court to permit amendment of
pleadings. Therefore, it cannot be successfully urged that a
suit for specific performance falling under the provisions of the
Act, 1963 would not be governed by the provisions of the CPC.
It is, therefore, clear that to such a suit the provisions
contained in Order VI Rule 17 of the CPC would apply and a
plaintiff who has earlier failed to incorporate the reliefs for
compensation or who has incorporated the reliefs for
compensation but seeks amendment in the same, could seek
the permission of the court to introduce these reliefs by way of
amendment.
68. It is important to note that sub-section (5) of Section
21 of the Act 1963 was originally introduced to resolve the
confusion over whether the court had the power to grant
compensation in a claim for specific performance in absence of
any pleading to that effect under the provisions of the Act
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1963. Prior to the enactment of the Act 1963 the Law
Commission in its 9th Law Commission Report while referring
to the diverse opinions expressed by the High Courts
recommended that in no case should compensation be
decreed unless it is claimed by a proper pleading.”
(emphasis supplied)
22.1 The Supreme Court in the case of Life Insurance
1
Corporation of India while affirming the judgment of the Single
Judge and Division Bench, allowing the amendment, summed up
its conclusions as under:
“71. Our final conclusions may be summed up thus:
71.1. Order II Rule 2 CPC operates as a bar against a
subsequent suit if the requisite conditions for application
thereof are satisfied and the field of amendment of pleadings
falls far beyond its purview. The plea of amendment being
barred under Order II Rule 2 CPC is, thus, misconceived and
hence negatived.
71.2. All amendments are to be allowed which are
necessary for determining the real question in controversy
provided it does not cause injustice or prejudice to the other
side. This is mandatory, as is apparent from the use of the
word “shall”, in the latter part of Order VI Rule 17 of the CPC.
71.3. The prayer for amendment is to be allowed
71.3.1. if the amendment is required for effective and
proper adjudication of the controversy between the parties,
and
71.3.2. to avoid multiplicity of proceedings, provided
(a) the amendment does not result in injustice to the other
side,
(b) by the amendment, the parties seeking amendment
does not seek to withdraw any clear admission made by the
party which confers a right on the other side and
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(c) the amendment does not raise a time barred claim,
resulting in divesting of the other side of a valuable accrued
right (in certain situations).
71.4. A prayer for amendment is generally required to be
allowed unless
71.4.1. By the amendment, a time barred claim is sought to
be introduced, in which case the fact that the claim would be
time barred becomes a relevant factor for consideration,
71.4.2. The amendment changes the nature of the suit,
71.4.3. The prayer for amendment is malafide, or
71.4.4. By the amendment, the other side loses a valid
defence.
71.5. In dealing with a prayer for amendment of pleadings,
the court should avoid a hypertechnical approach, and is
ordinarily required to be liberal especially where the opposite
party can be compensated by costs.
71.6. Where the amendment would enable the court to pin-
pointedly consider the dispute and would aid in rendering a
more satisfactory decision, the prayer for amendment should
be allowed.
71.7. Where the amendment merely sought to introduce an
additional or a new approach without introducing a time
barred cause of action, the amendment is liable to be allowed
even after expiry of limitation.
71.8. Amendment may be justifiably allowed where it is
intended to rectify the absence of material particulars in the
plaint.
71.9. Delay in applying for amendment alone is not a
ground to disallow the prayer. Where the aspect of delay is
arguable, the prayer for amendment could be allowed and the
issue of limitation framed separately for decision.
71.10. Where the amendment changes the nature of the
suit or the cause of action, so as to set up an entirely new
case, foreign to the case set up in the plaint, the amendment
must be disallowed. Where, however, the amendment sought
is only with respect to the relief in the plaint, and is predicated
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on facts which are already pleaded in the plaint, ordinarily the
amendment is required to be allowed.
71.11. Where the amendment is sought before
commencement of trial, the court is required to be liberal in its
approach. The court is required to bear in mind the fact that
the opposite party would have a chance to meet the case set
up in amendment. As such, where the amendment does not
result in irreparable prejudice to the opposite party, or divest
the opposite party of an advantage which it had secured as a
result of an admission by the party seeking amendment, the
amendment is required to be allowed. Equally, where the
amendment is necessary for the court to effectively adjudicate
on the main issues in controversy between the parties, the
amendment should be allowed. (See Vijay Gupta v.
5
Gagninder Kr. Gandhi & Others .)
23. Having regard to the settled position of law as noticed
above, more particularly, having regard to the proviso to sub-
section 5 of Section 21 as well as the proviso to sub-section 2 of
Section 22, which specifically mandates that the amendment is to
be allowed at any stage of the proceedings, the application for
amendment merits consideration and the developer is to be
permitted to claim the amounts as sought for.
REG. QUESTION No.(ii):
24. The execution of the MOU (Ex.P.13) is admitted
between the parties as also the execution of the GPA dated
09.04.2005 (Ex.P.1). It is pertinent to note that the GPA dated
5
2022 SCC OnLine Del 1897
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09.04.2005 (Ex.P.1) was executed, more than six months after the
execution of the MOU dated 27.09.2004 (Ex.P.13). Vide the said
GPA, the owners have permitted the developer to represent them
before statutory authorities, local bodies, etc., for the purpose of
applying for change of land use, conversion, approval of layout
plans, building plans, water and sanitary and electrical connections,
applying for no objection certificate [NOC] from various authorities,
etc.
WHETHER THE TERMS OF THE JDA WERE AGREED
BETWEEN THE PARTIES:
25. Under the terms of the MOU, the parties had agreed to
enter into a JDA at a subsequent stage. The relevant clauses 2.5,
5.1 and 5.2 of the said MOU pertaining to the execution of the JDA
is as under:
“2.5 The parties agree that the contemplated project will be
carried on and completed in strict compliance of legal
requirements and in terms of detailed specifications and
sanctioned plan, separately agreed between them, which
details shall be enshrined in the Joint Development
Agreement, which shall be entered into between them at a
future date.
x x x x x
5.1 The Second Party shall develop the Schedule Lands
into a full fledged exclusive township project of residential
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apartments with all infrastructure, like roads, drains, water lines
with overhead tank, sewerage lines, septic tank and electricity
connections as per the detailed specifications agreed between
the parties which shall be enshrined in the Joint Development
Agreement to be entered into between them;
5.2 The Second Party shall construct in the Schedule
Lands one or more blocks of residential apartment buildings as
per the sanctioned plan with internal and external services,
amenities, facilities, including compound walls, lobbies, roads,
staircases and passages, car parking, etc., The construction
shall be in accordance with the specifications that may be
mutually agreed upon between the parties at the time of
entering into a proper Joint Development Agreement;”
26. Clause 2.5 of the MOU specifically stipulates that the
detailed specifications of the construction shall be enshrined in the
JDA, which was to be executed at a subsequent date. Although in
clause 5.1 of the MOU, it is stated that the construction was to be
made “as per the detailed specifications agreed between the
parties, which shall be enshrined in the joint development
agreement”, at clause 5.2 it is stated that “the construction shall be
in accordance with the specifications that may be mutually agreed
between the parties at the time of entering into a proper joint
development agreement”. The specifications as to the nature and
quality of construction have not been stipulated in the MOU. Apart
from the said clauses 2.5, 5.1 and 5.2, there is no other material on
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record setting out the details/specifications of the development
contemplated.
27. In view of the aforementioned, it is clear that the
specifications as to the nature of development had not been agreed
between the parties.
WHETHER THE MOU IS SPECIFICALLY ENFORCEABLE:
28. It is the contention of the owners that under the MOU,
the parties having agreed to execute a JDA and the specifications
as to the nature, quality and details of the contract not having been
agreed upon the said MOU is not specifically enforceable. Reliance
6
is placed on Section 14(3)(c) of the S.R. Act in support of the
contention. Sub-section 3(c) of Section 14 of the S.R. Act prior to
its amendment reads as under:
“14. Contracts not specifically enforceable. —
The following contracts cannot be specifically
enforced, namely:—
(1) ….
(2) ….
(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:—
6
Section 14 substituted by the S.R. Act of 2018 w.e.f.01.10.2018.
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(a) …..
(b) …..
(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 a 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.”
29. The present suit having been filed on 21.09.2007, i.e.,
prior to the amendment, the provision as it stood prior to its
amendment is considered.
30. The Supreme Court in the case of Sushil Kumar
7
Agrawal v. Meenakshi Sadhu while noticing Section 14(3)(c) of
the S.R. Act held as under:
7
(2019) 2 SCC 241
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“24. Various High Courts have interpreted the
requirements under Section 14(3)(c) of the Act and
opined on the maintainability of a suit by the developer
for specific performance against the owner of the
property for a breach in the conditions of the
development agreement. A common thread that runs
through the analysis in decided cases is the following:
24.1.The courts do not normally order specific
performance of a contract to build or repair. But this rule
is subject to important exceptions, and a decree for
specific performance of a contract to build will be made
only upon meeting the requirements under law;
24.2. The discretion to grant specific performance is not
arbitrary or capricious but judicious; it is to be exercised
on settled principles; the conduct of the plaintiff, such as
delay, acquiescence, breach or some other
circumstances outside the contract, may render it
inequitable to enforce 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; and
24.4. A decree for specific performance of a contract to
build will be made if the following conditions are fulfilled:
24.4.1. the work of construction should be described in
the contract in a sufficiently precise manner in order for
the court to determine the exact nature of the building or
work;
24.4.2. the plaintiff must have a substantial interest in
the performance of the contract and the interest should
be of such a nature that compensation in money for
non-performance of the contract is not an adequate
relief; and
24.4.3. the defendant should have, by virtue of the
agreement, obtained possession of the whole or any
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part of the land on which the building is to be
constructed or other work is to be executed.
25. The issue before this Court is whether Section
14(3)(c)(iii) 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 condition
under Section 14(3)(c)(iii) is that the defendant has, by
virtue of the agreement, 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. 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.”
26. ......
27. 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
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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. Whether specific performance should in
the facts of a case be granted is a separate matter,
bearing on the discretion of the court.
28. ......
29. The condition under Section 14(3)(c)(i) is that the
building or other work described in the contract is
sufficiently precise to enable the court to determine the
exact nature of the building or work. To examine the
question as to whether the scope of the building or work
described in the agreement is sufficiently defined, the
Court needs to determine the exact nature of the work
by referring to the relevant clauses of the agreement.
Clause 8 of the agreement provides that the building
shall be constructed in accordance with approved plans
and built with “first class materials” with wooden doors,
mosaic floor, basin and lavatories, tap water
arrangement, masonry work, electric points, finished
distemper and bath room fittings of glazed tiles up to 6”
height and lift, “etc.” Further, at clause 13 of the
agreement, the parties have agreed that the contractor
would construct a building at the premises consisting of
“residential apartments of various sizes and
denomination” in the said building complex in
accordance with plans sanctioned by the Calcutta
Municipal Corporation and the owner shall convey the
proportionate share in the land to the respective buyers.
Clause 22 of the agreement states that if for any reason
after the plan is sanctioned or “for any act or omission
on the part of the owner” the building cannot be
constructed; the owner shall refund to the contractor
Rs.4,00,000/- in addition to all costs, charges and
expenses incurred by the contractor. At clause 20 of the
agreement, the parties have agreed that the apartments
of the owner shall be constructed and be made in
“similar condition” as that of the contractor with water
connection, sewerage, electric wiring except “special
fittings”.
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30. Use of such vague terms in the agreement such as
“first class materials”, “residential apartment of various
sizes and denomination”, “etc.”, “similar condition”, and
“special fittings”, while discussing the scope of work
clearly shows that the exact extent of work to be carried
out by the developer and the obligations of the parties,
have not been clearly brought out. Parties have not
clearly defined, inter alia, the nature of material to be
used, the requirements of quality, structure of the
building, sizes of the flats and obligations of the owner
after the plan is sanctioned. Further, clause 9 of the
agreement states that the owner shall pay the contractor
costs, expenses along with agreed remuneration only
after completion of the building on receiving the
possession. However, the exact amount of
remuneration payable by the owner to the contractor is
not to be found in the agreement. The agreement
between the parties is vague. The court cannot
determine the exact nature of the building or work. The
first condition in Section 14(3)(c)(i) is not fulfilled.
31. Another condition under Section 14(3)(c)(ii) is that
the plaintiff has a substantial interest in the performance
of the contract and the interest is of such a nature that
compensation in money for non-performance of the
contract is not an adequate relief. The intent of the
section is to make a distinction between cases where a
breach of an agreement can be remedied by means of
compensation in terms of money and those cases
where no other remedy other than specific performance
will afford adequate relief. Therefore, before granting the
remedy of specific performance, we need to analyse the
extent of the alleged harm or injury suffered by the
developer and whether compensation in money will
suffice in order to make good the losses incurred due to
the alleged breach of the agreement by the owner. From
the facts of the case, it is clear that the case of the
₹
developer is that he incurred an expenditure of
18,41,000/- towards clearing outstanding dues, security
deposit and development, incidental and miscellaneous
expenses. The alleged losses/damages incurred by the
Plaintiff can be quantified. 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
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14(3)(c) of the Act. In such a case, specific performance
cannot be granted.
(emphasis supplied)
31. In view of the legal position as noticed above, it is also
to be considered as to whether the developer was put in
possession of the property in order to consider as to whether the
stipulations as contemplated under Section 14(3) have been
satisfied.
32. In the facts of the present case, the developer has not
been put in possession of the property. In this context, it is relevant
to notice clause 2.3 of the MOU, which reads as under:
“2.3 It is hereby agreed between the parties, that
nothing herein contained shall be construed as
delivery of possession in part performance of any
Agreement of Sale, under Section 53-A of the
Transfer of Property Act and/or such other law for
the time being in force;”
33. It is clear from the same that the requirement of the
developer carrying on any works in the suit properties cannot be
construed as the developer being in possession of the suit
properties. There is no clause in the GPA (Ex.P1), wherein, it is
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stated that possession of the properties has been handed over by
the owners to the developer.
34. Further, it is pertinent to note that admittedly the
developer has not commenced construction within four months as
was required to be done under the MOU. It is the case of the
developer that he has carried out survey works and put up a
compound wall in the suit property. Although, at paragraph No.23
of the plaint, it is averred that the developer and the owners are in
joint possession of the suit property, having regard to the specific
stipulation contained in Clause 2.3 of the MOU, in the absence of
any further agreements executed between the parties (apart from
the GPA-Ex.P1 and the MOU-Ex.P13), the developer has failed in
demonstrating that they are in possession of the suit properties.
35. In the absence of the specification of the development
having been agreed in the MOU and in the absence of the
developer having been put in possession of the property, it is clear
that the MOU is not specifically enforceable.
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REG. READINESS AND WILLINGNESS OF THE DEVELOPER:
36. As already noticed above, vide the said MOU, it was
agreed that the developer shall be entitled to 78% share in the suit
properties together with the super built-up area and the owners
shall be entitled to 22% of the suit properties together with super
built-up area. Obligations of the developer included obtaining a
change of land use, sanction for conversion and permissions, apart
from putting up construction of the residential apartments. At this
juncture, it is relevant to notice clause 5.5 of the MOU which reads
as under:
“5.5 The First Party declare that the Schedule Lands
are in C-Zone and the declared user of the schedule
lands as per the Comprehensive Development Plan, is
for "residential" use, except Sy. Nos. 141, 142 and 158,
the declared user of which is specified as "park". The
Second Party shall obtain necessary change of land
use from the competent authority, and if need be, to
obtain sanction of conversion of the Schedule Lands for
enabling construction of residential apartment
complexes therein, at the cost of the Second Party;”
37. It is clear from the said clause 5.5, that the developer
was aware that a portion of the property was located in the 'Park
Zone' in the CDP. It was the responsibility of the developer to
obtain the necessary change of land use from the competent
authority together with obtaining sanction for conversion of the suit
property. With regard to the time for completion of the project, it is
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relevant to notice Clause 8 to 8.3 of the MOU, which reads as
under:
“8. DELIVERY
8.1 The Second Party shall commence the construction
work within one month from the date of receipt of the
consent/permission/sanction of plans and within 10 days
of issue of work order, whichever is earlier, in terms of this
MOU, but not however, later than 4 months from the date
of this MOU. The First Party shall sign a letter evidencing
commencement of construction. However, the Second
Party shall be entitled to carry on the civil works pertaining
to such development, by way of taking out surveys,
fencing/putting up compound wall, leveling the land,
closing the ditches and every way preparing the land for
commencement of construction, by laying the roads,
drains, pathways, culverts, bridges, etc., as may be
required, within one month from the date of taking
possession of the Schedule Lands;
8.2 The Second Party hereby agree to deliver possession
of the First Party's constructed area to the First Party,
immediately within 30 days of the date of completion of
every such blocks and subject to the condition that the
entire 22% share of apartments of the First Party shall be
delivered to the First Party within 36 (thirty six) months
from the date of commencement of construction, however,
due to unavoidable circumstances, if there is a delay after
the 36 (thirty six) months a further period of 12 (twelve)
months as grace period is agreed upon for completion of
the construction of the First Party's share. However, the
Second Party shall not incur any liability for any delay in
delivery of the possession of First Party's constructed
area, by reason of conditions force majeure. In any of the
aforesaid events, which are beyond the reasonable
control of the Second Party, the Second Party shall be
entitled to corresponding extension of time, for delivery of
the First Party's constructed area, the time shall also
stand reasonably extended in the event of delay in
obtaining permission/consent/clearance for occupying the
building and/or including power/water/ sanitary
connections;
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8.3 The Second Party has agreed that if they have not
completed the construction of the First Party's share
within the agreed period as per Clause 8.2, then the First
Party shall forfeit 75% (seventy five percent) of the
advance amount paid by the Second Party;”
38. It is clear from a plain reading of clause 8.1 that the
developer was required to commence construction within one
month from the date of receipt of permission/sanction plans and
within 10 days of issuing work order, whichever is earlier “but not
later than 4 months from the date of the MOU”. The owners were
required to sign a letter evidencing commencement of construction.
The developer was required to carry out civil works by carrying out
surveys, putting up a compound wall, levelling of the land for
commencement of construction, laying roads, drains, pathways,
culverts, bridges etc., within one month from taking possession of
the lands. Clause 8.2 pertains to the dates on which the
constructed area would be handed over by the developer to the
owners.
39. In the present case, admittedly, although the
construction was required to commence within four months from
the MOU, only vide letter dated 02.08.2007 (Ex.D2) written by the
developer were the owners intimated that the developer was
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intending to file the application for conversion. The same was
responded by the owners vide letter dated 21.08.2007 (Ex.D3)
whereunder the owners stated the MOU was abandoned.
Thereafter, the suit was filed on 21.09.2007.
40. The vehement contention put forth on behalf of the
developer that the portion of the scheduled property was located in
the 'Park Zone' and hence the same created an impediment for the
developer to commence construction within the time stipulated will
not aid the case of the developer having regard to the fact that the
developer was aware as on date of the MOU that portion of the suit
property was situated in the 'Park Zone'. The developer had
specifically undertaken the obligation of obtaining the necessary
permissions for change of land use of the suit property to the
‘Residential Zone’.
41. Reliance was placed by the developer on clause 9.1 of
the MOU. The said clause 9.1 reads as under:
“ INDEMNITY:
9.1 The First Party hereby confirms that their title to
the Schedule Lands are good, marketable and
subsisting and that none else has any right, title,
interest or share in the Schedule Lands and that the
Schedule Lands are not subject to any encumbrance,
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COMAP No. 265 of 2024
attachment, court or taxation or acquisition proceedings
or charges of any kind and that residential apartment
buildings can be constructed on the Schedule Lands.
The First Party shall keep the Second Party fully
indemnified and harmless, against any loss or liability,
cost or claim, action or proceedings that may arise or
accrue against the Second Party on account of any
defect in or want of title on the part of the First Party or
on account of any delay caused at the instance of the
First Party;”
42. It is sought to be contended that the project got
delayed due to the gas pipeline that was located in the approach
road. That, the owners had specifically stated (vide the said clause
9.1) that no part of the suit property was subject to any attachment
or acquisition proceedings or charges of any kind. Hence, it was
contended that the objection by the concerned statutory authorities
for construction of the approach road as a gas pipeline was
situated under the said proposed approach road was a
responsibility for which the owners had to get clearance.
43. In this context, reliance is placed by the developer on
various provisions of the Pipeline Act. Sub-section (1) of Section 3
of the Petroleum Act stipulates that the Central Government or
State Government or a Corporation may acquire the right of user in
any land for laying of pipelines after issuing a notification. Section 5
contemplates hearing of objections. Thereafter, a notification under
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COMAP No. 265 of 2024
sub-section (1) of Section 6 is to be issued. Section 7 stipulates
that the Central Government or State Government or Corporation
has a right to lay pipelines, where the right of user of the land is
vested with the Government. The proviso to sub-section (1) of
Section 7 also stipulates that the areas where pipelines shall not be
laid. Section 9 stipulates the restrictions regarding the use of land,
which has been notified under sub-section (1) of Section 6.
44. It is pertinent to note that the developer has not
produced either the notification that has been issued under sub-
section (1) of Section 6 of the Pipeline Act or any other document
to demonstrate that the land abutting the suit property has been
notified under the provisions of the said Pipeline Act. Apart from
certain correspondences, where reference to pipelines have been
made, no other material has been produced by the developer to
demonstrate that there was any restriction in the use of land having
regard to the provisions of the Pipeline Act.
45. Although elaborate submissions have been made on
behalf of the appellant with regard to the alleged understanding
between the parties to procure the land belonging to one
Sri. Poornachandra Rao, which is abutting the suit property, apart
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COMAP No. 265 of 2024
from certain questions that have been put forth in the cross-
examination of PW.1 and DW.1, no documentary material has
been produced by the developer to demonstrate that there was an
understanding between the parties to acquire the land abutting the
suit properties. The owners had consistently denied that there was
any such understanding between the parties to acquire the abutting
land. Hence, the developer has miserably failed in demonstrating
its contention regarding the proposed acquisition of the abutting
land.
46. It is the specific case of the developer as averred in the
plaint that an extent of 18½ acres of the suit property was
converted to residential use and 12½ acres was not converted,
since the same was under the 'Park Zone'. However, the owners
had specifically denied the said averment. The developer has not
produced any conversion order to prove its case that a portion of
the suit property has been converted as averred. On the contrary,
the defendants have produced a conversion order dated
30.10.2008 (Ex.D.14) to demonstrate that the suit properties have
been converted subsequently.
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47. A perusal of the material on record indicates that the
developer had not corresponded with the owners with regard to the
progress made pursuant to execution of the MOU. The only letter
available on record written by the developer to the owners is the
letter dated 02.08.2007 (Ex.D2), which was nearly 3 years after the
execution of the MOU. Vide the said letter, apart from the
developer stating regarding the alleged attempt to acquire the
abutting land, the developer had intimated the owners that it
intends to apply for conversion, since in the Master Plan for
Bangalore, 2021, a portion of the suit property, which was declared
as 'Park Zone' has, in the subsequent Master Plan, been declared
as 'Residential Zone'. In response, the owners, by their reply dated
21.08.2007 (Ex.D3), have categorically refused to proceed further
in the understanding with the developer. It was stated in the said
reply that the GPA dated 09.04.2005 was already cancelled and
the MOU dated 27.09.2004 stood abandoned and repudiated. In
the said reply, the owners had specifically denied regarding any
agreement with the developer to acquire property abutting the suit
property belonging to Sri. Poornachandra Rao. The owners have
specifically denied that no one by name Sri. Poornachandra Rao
holds any land abutting the suit property.
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48. The owners had also specifically stated that the
offices of the developer company both at Bangalore and
Hyderabad have been closed and that the developer company was
not functioning. It is necessary to note that in the written statement
itself the owners had specifically stated that immediately after
execution of the MOU, there were differences and disputes
between the directors of the developer company and that the
owners were not able to contact the directors of the developer. It
was specifically averred that the developer has abandoned the
MOU and that there was a dispute pending amongst the directors
of the developer before the Company Law Board [CLB] , Additional
Principal Bench, Chennai, in Company Petition No.77/2004. The
owners had also produced a copy of the notice dated 22.03.2019
(Ex.D4) issued by the Ministry of Corporate Affairs to the
developer, whereunder, pursuant to sub-section (5) of Section 248
of the Companies Act, 2013, the name of the developer has been
struck of from the Register of Companies and the said company is
dissolved.
49. At the time of hearing of the present appeal, the
learned counsel for the appellant has filed a memo along with a
copy of the order dated 08.01.2025 passed in
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C.A.No.14/252/HDB/2024 by the National Company Law Tribunal
[NCLT] [Rajareddy Kolon vs Whitefield Shelters Private
Limited] . The said proceedings were initiated under Section 252(3)
of the Companies Act, 2013, to restore the name of the developer
company in the Register of Companies. A perusal of the said order
indicates that consequent to the developer defaulting in filing the
financial statements and annual returns for more than 2 years, the
notice for striking off the name of the company was issued. The
said order also indicates that a promoter of the developer had filed
Company Petition No.77/2004 before the CLB and vide order dated
16.10.2015, the CLB had directed the developer and other
directors to transfer 26.25%, i.e., 1,55,000 shares, which order was
the subject matter of challenge in Company Appeal No.2/2016
before the High Court of Hyderabad, which is pending. That the
developer had filed copies of the balance sheets for the defaulting
periods in the said proceedings, as also stated regarding the
pendency of the present suit before the Commercial Court. It is
also forthcoming that the total assets of the company have been
declared as ` 3,82,66,854/- and the total liabilities as ` 3,98,03,334/-
. It is clear that the liabilities of the developer are more than the
assets.
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50. The owners have seriously disputed the capacity of the
developer in implementing the project.
51. It is relevant to notice Section 16(c) of the S.R. Act,
which reads as under:
16. Personal bars to relief. – Specific performance
of a contract cannot be enforced in favour of a
person –
(a) ….
(b) …
(c) who fails to aver and prove that he has
performed or has always been ready and willing to
perform the essential terms of the contract which are
to be performed by him, other than terms the
performance of which has been prevented or waived
by the defendant.
Explanation.— For the purposes of clause (c),—
(i) where a contract involves the payment of money,
it is not essential for the plaintiff to actually tender to
the defendant or to deposit in court any money
except when so directed by the court;
(ii) the plaintiff 4 [must prove] performance of, or
readiness and willingness to perform, the contract
according to its true construction.
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52. In the case of U. N. Krishna Murty (dead) by LRs v.
8
A. N. Krishna Murthy while considering Section 16(c) of the S.R.
Act, the Supreme Court held as under:
“24. Section 16 (c) of the Specific Relief Act, 1963 bars
the relief of specific performance of a contract in favour
of a person, who fails to aver and prove his readiness
and willingness to perform his part of contract. In view of
Explanation (i) to clause (c) of Section 16, it may not be
essential for the plaintiff to actually tender money to the
defendant or to deposit money in Court, except when so
directed by the Court, to prove readiness and willingness
to perform the essential terms of a contract, which
involves payment of money. However, explanation (ii)
says the plaintiff must aver performance or readiness
and willingness to perform the contract according to its
true construction.
25. To aver and prove readiness and willingness to
perform an obligation to pay money, in terms of a
contract, the plaintiff would have to make specific
statements in the plaint and adduce evidence to show
availability of funds to make payment in terms of the
contract in time. In other words, the plaintiff would have
to plead that the plaintiff had sufficient funds or was in a
position to raise funds in time to discharge his obligation
under the contract. If the plaintiff does not have sufficient
funds with him to discharge his obligations in terms of a
contract, which requires payment of money, the plaintiff
would have to specifically plead how the funds would be
available to him. To cite an example, the plaintiff may
aver and prove, by adducing evidence, an arrangement
with a financier for disbursement of adequate funds for
timely compliance with the terms and conditions of a
contract involving payment of money.
(emphasis supplied)
8
AIR 2022 SC 3361
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53. It is also pertinent to note that the Supreme Court,
while interpreting Section 16(c) of the S.R. Act has drawn a
distinction between readiness to perform the contract and
willingness to perform the same. In the case of His Holiness
9
Acharya Swami Ganesh Dassji v. Sita Ram Thapar , the
Supreme Court appreciating that the said distinction held as under:
“2. There is a distinction between readiness to perform
the contract and willingness to perform the contract. By
readiness may be meant the capacity of the plaintiff to
perform the contract which includes his financial
position to pay the purchase price. For determining his
willingness to perform his part of the contract, the
conduct has to be properly scrutinised. There is no
documentary proof that the plaintiff had ever funds to
pay the balance of consideration. Assuming that he had
the funds, he has to prove his willingness to perform his
part of the contract. According to the terms of the
agreement, the plaintiff was to supply the draft sale
deed to the defendant within 7 days of the execution of
the agreement, i.e., by 27-2-1975. The draft sale deed
was not returned after being duly approved by the
petitioner. The factum of readiness and willingness to
perform plaintiff's part of the contract is to be adjudged
with reference to the conduct of the party and the
attending circumstances. The court may infer from the
facts and circumstances whether the plaintiff was ready
and was always ready and willing to perform his part of
the contract. The facts of this case would amply
demonstrate that the petitioner/plaintiff was not ready
nor had the capacity to perform his part of the contract
as he had no financial capacity to pay the consideration
in cash as contracted and intended to bide for the time
9
(1996) 4 SCC 526
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COMAP No. 265 of 2024
which disentitles him as time is of the essence of the
contract.”
(emphasis supplied)
54. Further, it is a settled proposition of law that the
plaintiff was required to prove the aspect of readiness and
willingness right from the date of agreement till the date of passing
of the decree. In this context, it is relevant to notice the judgment of
10
the Supreme Court in the case of I. S. Sikandar v. K. Subramani
wherein it has been held as under:
“45. … Further, the plaintiff is required to prove the fact that
right from the date of execution of the Agreement of Sale till
the date of passing the decree he must prove that he is
ready and has always been willing to perform his part of the
contract as per the agreement. …
46. …
47. Further, there is nothing on record to show that the
plaintiff could have made arrangement for payment of the
balance consideration amount to them. But, on the other
hand the trial court has recorded the finding of fact to the
effect that the correspondence between the parties and
other circumstances would establish the fact that the
plaintiff had no money for payment of balance sale
consideration …”
(emphasis supplied)
10
(2013) 15 SCC 27
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55. The developer, while asserting that it was always
ready and willing to complete the sale transaction, has produced a
letter dated 13.08.2005 (Ex.P19) written to it by the Dewan
Housing Finance Corporation Ltd. [DHFCL], whereunder,
responding to the application dated 11.08.2005 of the developer,
the DHFCL had granted “In Principle Sanction” of project loan of
` 50,00,00,000/- (Rupees Fifty Crores) for payment of mobilisation
advance of ` 36,00,00,000/- (Rupees Thirty Six Crores) to M/s.
Larsen & Turbo Ltd., the structural contractors. The said 'In
Principle Sanction' was having regard to the request made by the
developer for financial assistance for implementing the project in
the suit property in terms of the MOU. The said 'In Principle
Sanction' was subject to various terms and conditions that have
been enumerated in the said letter. Apart from the said letter -
Ex.P19, the developer has not produced any other documentary
material on record to demonstrate its financial ability to implement
the project. It is forthcoming from the record that the project that
was sought to be implemented in terms of the MOU in the suit
properties was of a total cost of ` 350 crores. Hence, the said letter
– Ex.P19, which grants 'In Principle Sanction' approval for only a
sum of ` 36,00,00,000/- (Rupees Thirty Six Crores), will not aid the
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COMAP No. 265 of 2024
case of the developer in demonstrating its readiness and
willingness.
56. In support of its contention that he was ready and
willing to perform the obligations as contemplated under the MOU,
the developer has relied upon certain correspondences (Exs.P17,
P20, P22 to 25). The said letters have been written by various
entities expressing their interest to book apartments proposed to be
constructed in the suit properties. The said letters are in response
to the letter of the developer intimating them regarding the project
sought to be implemented in terms of the MOU. The said letters do
not in any manner demonstrate the financial capability of the
developer to implement the project in terms of the MOU.
57. The Commercial Court while considering the aspect of
readiness and willingness, held as under:
“125. Further, on perusal of the evidence of
PW1, it shows that in the Cross-examination, the
PW1 has clearly admitted at page No. 53 (para No.
28) that he has not produced any documents before
this court to show that on the date of entering into
MOU, the plaintiff company is having financial status
to meet out the expenses of Rs.350 Crores to
execute the project as per Ex.P13 by constructing
multi storied residential apartment in the suit
schedule properties.
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126. Further, on perusal of the evidence of PW1,
it shows that in page No.55 (para No.31), the PW1
has clearly admitted that at present also the plaintiff
company is not having any extent of amount in its
custody to implement the project as per the contents
of MOU by constructing a multi storied residential
apartment in the suit schedule properties.
127. Considering the above facts and
circumstances of the case and for the above
reasons, I am of the opinion that the oral version of
the plaintiff is not supported with corroborative
evidence and documents and also the plaintiff has
failed to prove that he was/is always ready and
willing to perform its part of contract as contended in
the plaint.
128. Further, the plaintiff has also failed to prove
the financial status of the plaintiff company to meet
out the cost of the construction of project work
undertaken in the suit schedule properties, as the
PW1 himself admitted in his Cross-examination that
at the time of entering into MOU between it and the
defendants for construction of multi-storied
residential buildings and complex in the suit
schedule properties, the plaintiff company was not
having any financial status. Considering the above
facts and circumstances of the case and for the
above reasons, I am of the opinion that the plaintiff
has failed to prove his contention that he was always
ready and willing to perform his part of contract as
contended in the plaint by producing cogent and
corroborative evidence and documents in respect of
the said fact.
129. Further, on perusal of the evidence of PW1,
it shows that PW1 has clearly admitted in his Cross-
examination at page No. 52, (para No. 26) that as
per the clauses mentioned in the MOU, till today he
has not sent any notice or request letter to the
defendants requesting them to handover the
possession of the suit schedule properties to him to
execute the project work by constructing the multi-
storied buildings in the suit schedule properties.
Considering the facts and circumstance of the case,
I am of the opinion that the contention of the plaintiff
is that he was always ready and willing to perform
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COMAP No. 265 of 2024
his part of obligation as contended in the plaint is not
supported with proper documents and as such the
oral version of the plaintiff is not acceptable one.
130. Considering the above facts and for the
above reasons, I am of the opinion that when the
plaintiff has failed to prove his readiness and
willingness to perform his part of obligation as
contended in the plaint by adducing proper evidence
and also by producing supportive documents, then
he is not entitle for the relief of specific performance
of contract as prayed in this suit.”
58. As noticed above, Clause 8.1 of the MOU specifically
stipulates that the developer is required to commence construction
within one month from the date of receipt of the permissions, which
shall not be later than four months from the date of the MOU.
Admittedly, the developer has not commenced construction as per
the terms clause 8.1of the MOU.
59. Further, it is relevant to note that despite the Clause
5.5 of the MOU specifically stipulating that the developer was to
obtain change of land use as well as conversion of lands, to enable
construction of the residential apartment complex in the context of
the owners specifically stipulating that a portion of the suit
properties have been notified to be in the 'Park Zone' in the CDP,
as noticed above, it is only vide the letter dated 02.08.2007 (Ex.D2)
that the developer has called upon the owners to confirm the GPA
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to enable the developer to apply for conversion of the lands. It is
clear from the same that the developer has not even made an
application for conversion for nearly three years consequent to the
MOU.
60. As already noticed above, although the developer has
contended that 18½ of the suit property have been converted for
residential use and 12½ acres of the suit property have not been
converted, since the same is in the 'Park Zone' in the CDP, no
documents have been produced to demonstrate that 18½ acres of
the suit property have been converted.
61. The developer has also not placed any documentary
evidence on record (except the letter dated 02.08.2007 – Ex.D2) to
demonstrate that it had intimated the owners of its readiness and
willingness to comply with the terms and conditions of the MOU.
62. It is clear from the aforementioned that the developer
was not ready and willing to perform the terms of the MOU.
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REG CLAIM OF THE DEVELOPER FOR REFUND OF SECURITY
DEPOSIT:
63. With regard to the claim for refund of the security
deposit amount and interest as well as the claim for co mpensation
it is pertinent to note that vide clause 8.3 of the MOU, if the
developer has not completed construction of the owners share
within the agreed period, as per Clause 8.2 of the MOU, the owner
is entitled to forfeit 75% of the advance amount paid by the
developer. Clause 8.2 stipulates that the developer is required to
deliver possession of the owner's constructed area within 30 days
of the completion of each block. In the present case, the developer
not having even commenced construction in terms of Clause 8.1 of
the MOU, it is clear that the developer has defaulted in handing
over the constructed area as stipulated under Clause 8.2 of the
MOU.
64. The Commercial Court has recorded a finding while
answering Issue No.4 that the owner is entitled to forfeit 75% of the
advance amount since the developer has not commenced the
construction. The said finding of the Commercial Court is just and
proper.
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65. Hence, the developer is entitled to a refund of (25% of
₹ ₹
2,00,00,000/-) 50,00,000/- (Rupees Fifty Lakhs).
66. With regard to interest, although in the application for
amendment, interest is claimed at 24%, since the transaction
between the parties is a commercial one, keeping in mind the
factual matrix, it is just and proper that interest be awarded at 12%
per annum from the date of the application for amendment (i.e.,
from 06.04.2026 up to the date of payment).
REG. THE CLAIM OF THE DEVELOPER TOWARDS COMPENSATION:
67. With regard to the claim for compensation, the
₹
developer has claimed a sum of 106,00,00,000/- (Rupees
Hundred and Six Crores). The said claim is premised as to the
profit, the developer would have earned and the development been
completed in terms of the MOU. The claim for compensation is
made having regard to Section 21 of the S.R. Act. In terms of sub-
section (2) of Section 21 of the S.R. Act, a plaintiff is entitled to
compensation, if the Court decides that specific performance ought
not to be granted and the contract has been broken by the
defendant. Under sub-section (3) of Section 21, even in the event
specific performance is granted, if the Court is satisfied that “if the
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relief for specific performance is not sufficient to satisfy the justice
of the case”, compensation could be awarded.
68. In the facts of the present case, the developer has
failed to demonstrate that the owners have committed breach of
terms of the MOU. Under the said circumstances, the question of
the developer, being entitled to compensation as claimed, does not
arise.
69. The claim of the developer for refund of security
deposit and compensation has been considered consequent to
allowing the application for amendment. Although, vide the
application for amendment, the plaintiff has been permitted to
amend the plaint, the material already on record i.e., MOU
(Ex.P13) is sufficient to consider the claim of the developer for
refund of security deposit. With regard to the claim for
compensation, although the developer has been permitted to make
the claim, having regard to the clear stipulations contained in
Section 21(2) and (3) of S.R Act as noticed above, the developer
having failed to demonstrate that the owners have committed
breach of the terms of the MOU, it is not entitled to compensation
as noticed above. The evidence regarding the allegation of breach
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of the MOU has already been considered by the Commercial Court
as well as in the present appeal and it is been concurrently held
that it is the developer who has committed breach of the terms of
the MOU. Although, the developer was permitted to make his claim
for compensation, in the absence of developer demonstrating that
the owners had committed breach of the terms of MOU, the
question of awarding compensation in terms of Section 21 of the
S.R. Act does not arise.
70. Having regard to the aforementioned discussion,
Question No.(i) is answered in the affirmative and Question No.(ii)
is answered partly in the affirmative.
71. Hence the following:
ORDER
(i) I.A.No.1/2026 is allowed.
(ii) The appeal is partly allowed with proportionate costs.
(iii) The impugned judgment and decree is modified only to
the extent of holding that the respondents-defendants
₹
shall pay the appellant-plaintiff a sum of 50,00,000/-
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(Rupees Fifty Lakh) together the interest at 12% per
annum from 06.04.2006 up to the date of payment.
(iv) Modified decree to be drawn accordingly.
SD/-
(VIBHU BAKHRU)
CHIEF JUSTICE
SD/-
(C.M. POONACHA)
JUDGE
RKM/PMP/YAN