Full Judgment Text
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CASE NO.:
Appeal (civil) 3530 of 1998
PETITIONER:
HER HIGHNESS MAHARANI SHANTIDEVI P. GAIKWAD
Vs.
RESPONDENT:
SAVJIBHAI HARIBHAI PATEL & ORS.
DATE OF JUDGMENT: 21/03/2001
BENCH:
S.P. Bharucha, N. Santosh Hegde & Y.K. Sabharwal
JUDGMENT:
[With T.C.(C) No.63/1998 and SLP(C) No.1692/99]
J U D G M E N T
Y.K.SABHARWAL,J.
L...I...T.......T.......T.......T.......T.......T.......T..J
By judgment under challenge, the High Court modifying
the decree passed by the trial court for specific
performance in respect of land in question, directed that
the plaintiff-respondent No.1 in this appeal, shall be
entitled to enforce the said decree subject to the issue of
final declaration under Section 21 of the Urban Land
(Ceiling and Regulation) Act, 1976 (For short, the ‘ULC
Act’) by the authorities in accordance with law. In other
respects, substantially the judgment and decree of the trial
court was upheld.
The defendants are in appeal. In the appeal and other
connected counter matters the main question is about the
interpretation of certain provisions of the ULC Act. This
Act, in the first instance, came into force on the date of
its introduction in the Lok Sabha, i.e., 28th January, 1976
and covered the Union Territories and 11 states which had
already passed the requisite resolution under Clause (1) of
Article 252 of the Constitution. This provision of the
Constitution empowers the Parliament to legislate for two or
more States on any of the matters with respect to which it
has no powers to make laws except as provided in Articles
249 and 250. The effect of passing of a resolution under
clause (1) of Article 252 is that the Parliament, which has
no power to legislate with respect to the matter which is
the subject matter of the resolution, becomes entitled to
legislate with respect to it. On the other hand, the State
Legislature ceases to have a power to make a law relating to
that matter. On 14th August, 1972 the Gujarat Assembly had
resolved that the imposition of the ceiling on the holding
of urban immovable property and acquisition of such property
in excess of the ceiling and matters connected therewith or
ancillary and incidental thereto should be regulated in the
State of Gujarat by the Parliament by law.
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The ULC Act received assent of the President on 17th
February, 1976. The primary object and the purpose of the
ULC Act is to provide for the imposition of a ceiling on
vacant land in urban agglomerations, for the acquisition of
such land in excess of the ceiling limit, to regulate such
land and for matters connected therewith, with a view to
preventing the concentration of urban land in the hands of a
few persons and speculation and profiteering therein, and
with a view to bringing about an equitable distribution of
land in urban agglomerations to subserve the common good, in
furtherance of the directive principles of Article 39(b) and
(c).
Section 3 of the ULC Act provides that except as
otherwise provided in the Act, on and from the commencement
thereof, no person shall be entitled to hold any vacant land
in excess of the ceiling limit in the territories to which
this Act applies under sub-section (2) of Section 1. The
expression ‘vacant land’ is defined in Section 2(q) to mean
land not being land mainly used for the purpose of
agriculture, in an urban agglomeration, but does not include
certain categories as stated in the section. The term
‘urban land’ is defined in Section 2(o) of the ULC Act which
reads as under : "2.(o) "urban land" means,-
(i) any land situated within the limits of an urban
agglomeration and referred to as such in the master plan;
or
(ii) in a case where there is no master plan, or where
the master plan does not refer to any land as urban land,
any land within the limits of an urban agglomeration and
situated in any area included within the local limits of a
municipality (by whatever name called), a notified area
committee, a town area committee, a city and town committee,
a small town committee, a cantonment board or a panchayat,
but does not include any such land which is mainly used for
the purpose of agriculture. Explanation.- For the purpose
of this clause and Cl.(q),-
(A) "agriculture" includes horticulture, but
does not include,-
(i) raising of grass,
(ii) dairy farming,
(iii) poultry farming,
(iv) breeding of live-stock, and
(v) such cultivation or the growing of
such plant, as may be prescribed;
(B) land shall not be deemed to be used mainly for the
purpose of agriculture, if such land is not entered in the
revenue or land records before the appointed day as for the
purpose of agriculture : Provided that where on any land
which is entered the revenue or land records before the
appointed day as for the purpose of agriculture, there is a
building which is not in the nature of a farm-house then, so
much of the extent of such land as is occupied by the
building shall not be deemed to be used mainly for the
purpose of agriculture :
Provided further that if any question arises whether any
building is in the nature of a farm-house, such question
shall be referred to the State Government and the decision
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of the State Government thereon shall be final;
(C) notwithstanding anything contained in Cl.(B) of this
explanation, land shall not be deemed to be mainly used for
the purpose of agriculture if the land has been specified in
the master plan for a purpose other than agriculture."
The expression ‘master plan’ is defined in Section 2(h).
It reads :
"2.(h) "master plan", in relation to an area within an
urban agglomeration or any part thereof, means the plan (by
whatever name called) prepared under any law for the time
being in force or in pursuance of an order made by the State
Government for the development of such area or part thereof
and providing for the stages by which such development shall
be carried out."
Section 4 fixes different ceiling limits with respect to
vacant land falling in categories A, B, C and D. By Section
4(1)(c), the ceiling limit placed on such land situated in
an urban agglomeration falling within category C specified
in Schedule I is fixed at 1500 square meters. Section 5
prohibits certain transfers of vacant land. Section 5(3),
inter alia, provides that transfer made in contravention of
the said provision shall be deemed to be null and void.
Section 6 provides for the filing of statements before the
competent authority by persons holding vacant land in excess
of ceiling limit. Section 8 provides for preparation of
draft statement as regards vacant land held in excess of
ceiling limit. The particulars of the statement shall
contain details as enumerated in sub-section (2).
Sub-section (3) provides for service of the draft statement
on the person concerned and also for calling from him
objections to the draft statement. Sub-section (4) provides
that the competent authority shall duly consider any
objection received from such person and it shall, after
giving such person a reasonable opportunity of being heard,
pass such orders as it deems fit. After disposal of the
objections, if any, received under sub-section (4) of
Section 8, final statement is prepared under Section 9 of
the Act. Section 10 provides for acquisition of vacant land
in excess of the ceiling limit whereas Section 11 provides
for the payment for such acquired land. Section 15 provides
that where any person acquires by inheritance etc. any
vacant land which, together with the vacant land, if any,
already held by him, exceeds in aggregate the ceiling limit,
such person will have to file a statement before the
competent authority and the provisions of Sections 6 to 14
shall, so far as may be, apply to the statement filed under
this section and to the vacant land held by such person in
excess of the ceiling limit. Section 20 empowers the
Statement Government to exempt any vacant land in public
interest and also in cases where such exemption is
considered to be necessary to avoid undue hardship to any
person.
Section 21 of the ULC Act provides for cases where
excess land will not to be treated as excess. The said
section reads thus :
"21. Excess vacant land not to be treated as excess in
certain cases.-(1) Notwithstanding anything contained in any
of the foregoing provisions of this chapter, where a person
holds any vacant land in excess of the ceiling limit and
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such person declares within such time, in such form and in
such manner as may be prescribed before the competent
authority that such land is to be utilised for the
construction of dwelling unit (each such dwelling unit
having a plinth area not exceeding eighty square meters) for
the accommodation of the weaker sections of the society, in
accordance with any scheme approved by such authority as the
State Government may, by notification in the official
Gazette, specify in this behalf, then, the competent
authority may, after making such inquiry as it deems fit,
declare such land not to be excess land for the purposes of
this chapter and permit such person to continue to hold such
land for the aforesaid purpose, subject to such terms and
conditions as may be prescribed, including a condition as to
the time limit within which such buildings are to be
constructed. (2)Where any person contravenes any of the
conditions subject to which the permission has been granted
under sub-section (1), the competent authority shall, by
order, and after giving such person as opportunity of being
heard, declare such land to be excess land and thereupon all
the provisions of this chapter shall apply accordingly."
Section 23 provides for disposal of vacant land acquired
under the Act.
The land in Vadodara falls in Category C. The ceiling
limit is 1500 square meters. On 14th September, 1976 a
declaration in Form No.(1) under Section 6(1) was filed by
Fatehsinhrao Gaekwad declaring 242 acres as vacant land
under the ULC Act.
From facts it is evident that the transaction in
question was entered into because of enactment of the ULC
Act. An agreement dated 24th March, 1977 was entered into
between the Fatehsinhrao P. Gaekwad as the owner and
Savjibhai Haribhai Patel as the licensee in respect of a
portion of property known an Laxmi Vilas Palace Estate,
Vadodara. For sake of convenience hereinafter Fatehsinhrao
P. Gaekwad has been referred as ‘original defendant No.1’
and Savjibhai Haribhai Patel as ‘plaintiff’. The Memorandum
of Agreement (for short, ‘the agreement’) recites that the
plaintiff has evolved a scheme for constructing dwelling
units for the accommodation of the weaker sections of the
society as envisaged by Section 21(1) of the ULC Act. The
said units are to be constructed on a portion of land of the
owner’s property - Laxmi Vilas Palace Estate, save and
except Laxmi Vilas Palace, Moti Baug Palace and Nazar Baug
Palace. The area under these three palaces which is to be
excluded is said to be approximately 100 acres - equivalent
to about 4,00,000 square meters. The total land of the
property is about 707 acres. A Power of Attorney (For
short, ‘the power’) was also executed on 24th March, 1977 by
original defendant no.1 in favour of the plaintiff. It,
inter alia, stipulates that the power is irrevocable.
Five schemes under Section 21 of the ULC Act were filed
before the competent authority for the construction of the
dwelling units for accommodation of the weaker sections of
the society. The first scheme was filed under the
signatures of original defendant No.1 on 15th March 1977.
It stipulated construction of 64,306 dwelling units at the
proposed cost of about 89,00,000,000/-. It is not in
dispute that even this scheme was evolved by the plaintiff.
The plaintiff as power of attorney holder of original
defendant No.1 submitted a second scheme on 5th October,
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1977 for construction of 38,375 dwelling units at the
estimated cost of about Rs.78,38,00,000/-. On 6th February,
1978 another scheme was submitted by the plaintiff which
stipulated construction of 35,660 dwelling units at the
proposed cost of Rs.39,59,00,000/-. On 5/8th January, 1979
yet another scheme (4th scheme) for construction of 25,482
dwelling units at the estimated cost of about
Rs.48,35,00,000/- was submitted. Finally, a scheme (5th
scheme) proposing construction of 4,356 dwelling units at
the estimated cost of about Rs.13,37,00,000/- was submitted
on 29th January, 1979 by the plaintiff as a power of
attorney holder of original defendant No.1.
Soon after the submission of the scheme dated 6th
February, 1978, original defendant No.1 executed on 10th
February, 1978 an affidavit-cum-declaration. This document,
inter alia, declares that all terms and conditions contained
in Para 1 to 19 of the agreement were agreed to and approved
by original defendant No.1 and that the agreement was
executed by him voluntarily while in sound state of mind and
consciousness and is in no circumstances liable to be
cancelled. It also reiterates the execution of the
irrevocable Power dated 24th March, 1977 authorising the
plaintiff to administer the property of the declarant and to
put the housing scheme for constructing the houses for the
weaker sections on the said property and to make necessary
additions and alterations in the scheme and to modify the
same consistent with the ULC Act and the guidelines issued
thereunder :
On 23rd February, 1980, original defendant No.1 through
his advocate sent a notice to the plaintiff, inter alia,
stating that the agreement and the power dated 24th March,
1977 and affidavit-cum- declaration dated 10th February,
1978 were illegal and inoperative and cancelling the
agreement and the power. A letter was also sent to the
competent authority requesting the said authority not to
proceed with any application in respect of the property
under Section 21 of the ULC Act which may either be pending
or may be made in future by the plaintiff.
Under the aforesaid circumstances, a suit was filed by
the plaintiff against original defendant no.1 on 7th April,
1980 seeking declaration that cancellation of the agreement
and the power was illegal and also praying for decree of
specific performance of the agreement besides seeking
injunction and other consequential reliefs. The suit was
originally filed against Fatehsinhrao Gaekwad as the only
defendant. Later, however, the specified authority, the
competent authority and the State of Gujarat were impleaded
as defendants to the suit. Original defendant No.1 died
during the pendency of the suit and his legal
representatives were brought on record.
By judgment and decree dated 12th March, 1992 the trial
court decreed the suit declaring the agreement and the power
and affidavit-cum-declaration as valid and subsisting
documents binding on original defendant no.1 and on his
legal representatives. A decree for specific performance of
the agreement was also granted in favour of the plaintiff.
The defendants were ordered to specifically perform the
agreement and were restrained from committing breach of the
agreement, power of attorney and obstructing the plaintiff
from acting as constituted attorney of defendant no.1 and
from taking any action regarding the scheme.
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In the first appeal filed in the High Court challenging
the judgment and decree of the trial court, three main
questions considered were; (1) Whether the agreement could
be rescinded; power of attorney could be revoked and
affidavit-cum-declaration ceased to be operative or not.
(2) Whether it is a case for grant of relief of specific
performance and; (3) If specific performance was to be
ordered, whether any conditions were required to be imposed.
The High Court by impugned judgment dated 15th June,
1998 held that the main purpose for which the agency was
created was the execution of the scheme for constructing
dwelling units for weaker sections of the society and with
that end in view the plaintiff had to prepare the scheme and
get sanction from the authority in accordance with law and
invoking Section 202 of the Contract Act, the High Court
concluded that it is a case of agency coupled with interest.
Answering the first question, the High Court held that the
agreement could not be rescinded, power of attorney could
not be revoked and affidavit-cum-declaration did not cease
to be operative. The second question was also answered in
favour of the plaintiff holding that the compensation in
money was not adequate relief and the plaintiff was entitled
to specific performance of the agreement.
In respect of the third question the High Court held
that the decree for specific performance could be enforced
subject to conditions but for the said purpose it was not
necessary to remand or reverse the decree and it could be
modified imposing the condition. It, therefore, held that
the plaintiff was entitled to enforce the specific
performance as granted by the trial court subject to the
condition of final declaration under Section 21 of the ULC
Act being issued with regard to the land in question by the
specified authority, the competent authority and the State
of Gujarat in accordance with law. The authorities were
directed to take a final decision either way with regard to
the issue of the declaration under Section 21 of the ULC Act
at the earliest possible opportunity but in no case later
than 15th August, 1998. On 20th June, 1998, an order was
passed by the Competent Authority under Section 21(1) of the
ULC Act approving the fifth scheme dated 29th January, 1979
and declaring that the plaintiff is entitled to hold as a
power of attorney holder the land admeasuring 23,91,125
sq.mtrs. (approximately 598 acres) as additional vacant
land for the purpose of Chapter III of the ULC Act and has
right to make maximum construction as admissible under the
rules. The order dated 20th June, 1998 was challenged in a
writ petition filed in the High Court of Gujarat. The said
writ petition has been withdrawn to this Court to be heard
and disposed of along with this appeal. The ULC Act has
since been repealed during the pendency of this appeal by
Repealing Act No.15 of 1999. The Repealing Act was passed
by the Parliament on 22nd March, 1999 and was adopted by a
Resolution passed by the legislature of State of Gujarat
under Clause (2) of Article 252 of the Constitution, on 30th
March, 1999. Reverting to facts, admittedly possession of
the land in question was with original defendant No.1 when
the suit was filed. It is not the case of the plaintiff
that the possession was delivered to him either when the
agreement was entered into or till date. The plaintiff is
not in possession of the land. Declaration under Section 21
of the ULC Act had not been made when the suit was filed.
It has been made after the passing of the impugned judgment
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and pursuant to directions contained therein. The said
declaration, as already stated, is the subject matter of
challenge in the transferred writ petition. One of the
questions which falls for our determination is as to what
rights the plaintiff is entitled to enforce prior to issue
of declaration under Section 21 of the ULC Act and before
the plaintiff is put into possession. Is the plaintiff
entitled to seek specific performance of the agreement or is
he entitled to sue for only damages? Now, with regard to
documents executed between the plaintiff and original
defendant No.1 the agreement and power of attorney were
executed on the same day, i.e., 24th March, 1977. The
affidavit-cum- declaration was executed by original
defendant No.1 on 10th February, 1978. The plaintiff was to
undertake the development of the property in the manner
provided in the agreement in conformity with Section 21 read
with rules and guidelines issued under the ULC Act. The
original defendant No.1, as stipulated in the agreement,
agreed that the plaintiff shall construct dwelling units for
the accommodation of the weaker sections of the society on
his land. The delivery of possession by original defendant
No.1 to the plaintiff is contemplated by clause (4). The
construction as per scheme is contemplated under clause
(13). Clause (17) deals with rescission of the agreement by
either party. The said three clauses read as under :
"(4) On the Competent Authority making a declaration
that the land of the said property is not in excess of the
Ceiling area and on his granting permission to the owner to
continue to hold the land of the said property for purpose
of the scheme above referred to be prepared by the Licensee
of the Second Part, the owner of the First Part shall
deliver possession of the said property to the Licensee of
the Second Part for the execution of the said scheme and
construction of the buildings under the said scheme.
xxx xxx xxx
(13) On the delivery of possession of the said property
to him as stated in clause (4) above, the Licensee of the
Second Part shall be entitled to construct dwelling units
and other building in accordance with the scheme.
(17) This agreement shall not be unilaterally rescinded
by either party after the Licensee of the Second Part has
been put in possession of the said property."
In S. Chattanatha Karayalar v. The Central Bank of
India & Ors. [(1965) 3 SCR 318], the observations of
Moulton, L.J. in Manks v. Whitley were quoted and are
relevant while dealing with the question of interpretation
of several deeds which form part of same transaction. The
observations read as follows :
"Where several deeds form part of one transaction and
are contemporaneously executed they have the same effect for
all purposes such as are relevant to this case as if they
were one deed. Each is executed on the faith of all the
others being executed also and is intended to speak only as
part of the one transaction, and if one is seeking to make
equities apply to the parties they must be equities arising
out of the transaction as a whole."
The agreement and power contemplate two stages for the
parties to take steps required of them. Certain steps are
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required to be taken by the plaintiff prior to the grant of
declaration under Section 21 and before he is put into
possession and certain steps after such grant and on being
put into possession. The plaintiff is required to prepare a
scheme in conformity with Section 21 at his cost and to file
on behalf of the owner a declaration in regard to the said
property before the competent authority within the
prescribed period. The original defendant No.1 is required
to sign relevant papers, applications, plans, drawings etc.
as and when required by the plaintiff for the purpose of
declaration and inquiries contemplated by Section 21(1) of
the ULC Act. On making of declaration, as per clause (4),
original defendant No.1 is required to deliver possession of
the land to the plaintiff for execution of the scheme and
construction in terms thereof. The plaintiff is authorised
to recover the price of the land as may be determined by the
competent authority and/or the State Government from their
prospective members in the scheme; and is also entitled to
receive deposits from the members and obtain loans from
banks and other financial institutions and/or individuals
for financing the scheme. Likewise, in the power of
attorney also, the plaintiff has been authorised to take
certain steps on behalf of the owner before the grant of
declaration under Section 21 and being put into possession
and certain steps after being put into possession. It is
correct, as contended by Mr. Dhanuka, that these documents
form part of same transaction. These documents have to be
read together with a view to find out the manifest intention
of the parties. It may, however, be noticed that
affidavit-cum-declaration dated 10th February, 1988 was
executed only by original defendant No.1 for the purpose of
filing it before the competent authority and it reiterates
the agreement and the power. By execution of this document
it was neither intended to confer any additional rights in
favour of the plaintiff nor to place any restriction on
original defendant no.1 which was not envisaged by the
agreement.
The disputes between the parties arose before the scheme
was sanctioned and the plaintiff was put into possession and
the agreement and the power were terminated in terms of
notice dated 23rd February, 1980 sent on behalf of original
defendant No.1. At this stage the suit was filed. In the
plaint, the plaintiff states that it is necessary for
protection and preservation of his rights that defendant
No.1 be restrained from parting with possession of the
property. The first prayer of the plaintiff is that it may
be declared that the Memorandum of agreement dated 24th
March, 1977, the irrevocable power of attorney dated 24th
March, 1977 and the affidavit-cum-declaration dated 10th
February, 1978 are valid, subsisting and binding on the
Defendant No.1. There is no prayer in the plaint seeking a
mandatory injunction against the authorities directing them
to sanction the scheme. It has not been and cannot be
disputed that in the event of non-grant of the scheme by the
authorities the agreement would have fallen through.
Agreement does not contemplate that title in the land would
pass on to the plaintiff. Further even the title in the
superstructure, i.e., dwelling units to be constructed was
to remain with the plaintiff only till such time the same is
transferred by him in favour of the allottees or their
society. It is not disputed that the plaintiff could not
retain any dwelling unit for his own benefit.
It is common ground that the main purpose for which the
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agreement was entered into between the parties was the
construction of residential houses for the weaker sections
of the society in term of Section 21 of the ULC Act. Mr.
Nariman contended on behalf of the appellants that under the
applicable master plan the suit land is reserved for ‘open
space’ and residential houses cannot be constructed
thereupon and, therefore, the agreement is incapable of
specific performance. On the other hand, Mr. Dhanuka
contended that the applicable master plan is the one that
existed on the date when excess vacant land first acquired
the character of such land, i.e., on enforcement of the ULC
Act and according to the said master plan the land is
reserved for residential houses. Further contention of
learned counsel is that assuming modification of the master
plan is required to be considered, even then there is no
impediment in the implementation of the scheme inasmuch as
there does not exist absolute bar for construction of
residential houses. It is submitted that as a matter of
fact, the declaration dated 20th June, 1998 provides for
obtaining of all requisite permissions whatever, if any,
which may be required before commencing the actual
construction or work. Further, it is contended, in case of
inconsistencies, if any, between the provisions of Town
Planning laws and the ULC Act, provisions of the ULC Act
will prevail in view of overriding provisions as contained
in Section 42 of the ULC Act. In the draft development plan
dated 29th February, 1963 prepared under the Bombay Town
Planning Act, 1954, the entire area of Laxmi Vilas Palace
Estate (except the block of land along the river Vishwamitri
and on north and sough of the Zoo Road) was left
undesignated. This excepted part of block of land was
designated for agricultural use. The State Government on
21st September, 1976 issued a notification under Section
10(1) of the aforesaid Act sanctioning the draft development
plan subject to the modifications, inter alia, that the part
of the area of Laxmi Vilas Palace Compound which had been
left undesignated in the development plan shall be
designated for residential use under Section 7(a) of the
said Act and the block of land situated along the river
Vishwamitri and on north and south of the Zoo Road passing
through Laxmi Vilas Palace which had been designated for
agricultural use shall be released from the said designation
and the land so released shall be reserved for recreational
purposes under Section 7(b) of the Act. A further
notification dated 17th May, 1975 under Section 10A(1) of
the Act was issued by the Government of Gujarat proposing to
modify the development plan dated 21st September, 1970
providing that the lands of Laxmi Vilas Palace shown as
residential zone in the sanctioned development plan Vadodara
shall be released from the said use and the lands thus
released shall be reserved for open space under Section 7(b)
of the Act as shown in the plan. A notification dated 16th
January, 1978 issued by the Gujarat Government in exercise
of powers conferred under Section 10A of the Bombay Town
Planning Act, 1954 sanctioning the variations proposed by
the notification dated 17th May, 1975 to Final Development
Plan dated 21st September, 1970 notified 15th March, 1978 as
the date from which the variations would come into force.
By clause (23) of the Schedule appended to the said
notification, it was provided that the land of Laxmi Vilas
Palace shown as residential zone in the sanctioned
development plan of Vadodara shall be released from the said
use and the lands thus released shall be reserved for open
space under Section 7(b) of the said Act. Mr. Dhanuka is,
however, right in contending that the notification dated
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16th January, 1978 never became operative for the reason
that before the said notification came into force, the
Bombay Town Planning Act, 1954 was repealed w.e.f. 1st
February, 1978 and the said notification was not saved under
Section 124(2) of the Gujarat Town Planning and Urban
Development Act, 1976, which came into force w.e.f. 1st
February, 1978.
If the position had rested in terms of what has been
stated above, the consequences may have been different. It
was, however, not so. Under the aforesaid Gujarat Act, on
17th May, 1979, draft development plan under Section 13 was
published wherein the suit land was designated as ‘open
space, sport stadium, Bus terminus and court’. During the
pendency of the suit, on 25th January, 1984, the final
development plan prepared by the Vadodara Urban Development
Authority issued under the Gujarat Act came into effect. As
per the said final development plan, the land in question is
reserved for open space etc. as stated in draft development
plan dated 17th May, 1979.
The Government of Gujarat issued a circular dated 1st
April, 1978 regarding implementation of guidelines issued
under Section 21 of the Act and amended ULC Rules. One of
the salient feature of the said circular was that the scheme
shall be in consistence with the Master plan. It also
provided that the scheme submitted should adhere to the
prevailing municipal Regulations, Town Planning requirements
and other statutory requirements. If any development is
required as per these regulations, then the scheme should
include such development. It also provided that permissible
density and other regulations like minimum size, common
plot, minimum height, specification and construction of
stories etc. will also have to be adhered to. It further
provided that the permission to undertake the scheme will be
given only in residential zones as indicated in the
Development Plan.
The Gujarat Government in supersession of the earlier
circular dated 1st April, 1978 issued fresh guidelines on
22nd May, 1979 regarding the implementation of schemes under
Section 21 of the ULC Act. These guidelines, inter alia,
stipulated that the area of 50% of the total house shall not
increase 40 square meters and the plinth area and the
remaining building plinth area shall not exceed 80 square
meters. The construction work under the scheme should be in
consonance with the provisions of the Master plan and should
be over within 5 years from the date of the sanction under
Section 21(1) granted by the competent authority. The units
constructed under the scheme shall be allotted to the weaker
sections of the society by way of sale or hire-purchase or
on hire basis. It also provided that the construction shall
be made in accordance with the Town Planning Regulation,
Municipal Regulations, Building Regulations etc. The
competent officer shall grant the scheme subject to the
building regulation, margin of the municipal corporation,
panchayat etc. According to the guidelines, the specified
officer and the competent officer are required to ensure
that the conditions are complied with. The guidelines
stipulated the withdrawal of exemption in case of violation
of any of the conditions. It is of significance to note
that it was specifically provided that at the time of
sanctioning the scheme, the competent authority shall ensure
that the land in respect of which the scheme is submitted is
not placed in reservation. As already stated, the land in
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question is shown as open space in the draft development
plan of Vadodara.
The High Court by impugned judgment, as already noticed,
modified the decree of the trial court and directed that the
decree for specific performance shall be operative only if
declaration is issued under Section 21 of the ULC Act. On
the question whether construction of residential units on
the suit land was permissible or not, the High Court
following the decision of this Court in Atia Mohammadi Begum
(Smt.) v. State of U.P. & Ors. [(1993) 2 SCC 546] held
that the construction of residential units cannot be said to
be forbidden because of subsequent change in the master plan
and for considering whether residential units can be
constructed or not, the relevant master plan to be
considered is the one which was in existence on 17th
February, 1976, when the ULC Act was enforced. The High
Court has held that :
"...the construction of residential units on such land
cannot be said to be forbidden by any law merely because in
the subsequent master plan it has been shown to be open
space. The rights of the parties were crystallised on the
date of the commencement of the Act and such rights have to
remain unaffected by the subsequent events."
The High Court has further held :
"Atia Mohammadi begum (supra) cannot be ignored or
cannot be held to be inapplicable to the facts of the
present case on any of the grounds raised by the learned
counsel for the defendant appellant and the matter has to be
examined on the basis of the position as it was in existence
with reference to the master plan on the date when the
Ceiling Act came into force on 17th February, 1976, the date
on which the rights of the parties had become crystallised
and, therefore, at that time if the land in question could
be utilised for residential purposes, the mere change in the
development plans subsequently would not create any legal
impediment against the use of the same for the same land
purpose, which too is a public purpose and it would not
amount to any contravention of law, if such land is
permitted to be used for raising the construction of
dwelling units for the weaker sections of the society. In
the facts and circumstances of this case, therefore, it
cannot be said that, the MOA was no more capable of being
enforced and that the concerned authorities could not
sanction the scheme as such even if they wanted to sanction
and the plaintiff respondent could claim to enforce the
MOA."
The competent authority in the order dated 20th June,
1998 approving the scheme dated 29th January, 1979 for
construction of 4358 dwelling units says that the ULC Act
has superior powers over the concerned rules of the State
and, therefore, on the date the land was declared as vacant,
it was in residential zone and for the purposes of Section
21, it cannot be taken that the land is meant for open
space. The competent authority further says that the land
would permanently remain in the residential zone. In Atia
Begum’s case it was held :
"The ‘master plan’ defined in Section 2(h) and referred
in the definition of ‘urban land’ in Section 2(o), including
Explanation (C) therein, is obviously a master plan prepared
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and in existence at the time of commencement of the Act when
by virtue of Section 3 of the Act, right of the holder of
the land under the Act get crystallised and extinguish his
right to hold any vacant land in excess of the ceiling
limit. The proceedings for determining the vacant land in
excess of the ceiling limit according to the machinery
provisions in the Act is merely for quantification, and to
effectuate the rights and liabilities which have
crystallised at the time of commencement of the Act. The
contrary view taken on the construction made of these
provisions by the High Court cannot, therefore, be
accepted."
The facts of Atia Begum’s case show that it is a case
which relates to quantification of vacant land. The present
case is not of quantification of vacant land. Atia Begum
was not concerned with the question of Town Planning Laws
and the schemes under Section 21 of the ULC Act which is one
of the principle question with which we are concerned here.
It was not held in Atia Begum that planning and development
which is a state subject would stand frozen on 17th
February, 1976. The said decision cannot be read as laying
down the law that for all and every purpose, the master plan
as in existence on 17th February, 1976 will freeze. We
leave open the question whether even for the purpose of
quantification of vacant land that has become such after
17th February, 1976, would the position in regard to the
master plan as existing on 17th February, 1976 remain
unaltered or not. In the present case, on this aspect, it
is not necessary to examine the correctness of the decision
in Atia Begum’s case. It deserves to be emphasised that by
passing a resolution under clause (1) of Article 252, the
State Legislature only surrendered the right to legislate in
respect of laws relating to the imposition of a ceiling on
the holding of urban immovable property in excess of the
ceiling and all matters connected therewith or ancillary and
incidental thereto in favour of the Parliament by law. It
was only a limited surrender in terms of the said
resolution. The aspect of Town Planning and Development by
the State has not been surrendered. The imposition of
ceiling on urban immovable property is an independent
subject. The primary object of the Act, as already noticed,
was to prevent the concentration of urban land in the hands
of a few persons and speculation and profiteering therein,
and to bringing about an equitable distribution of land in
urban agglomerations to subserve the common good. Basically
one uniform policy is fully understandable on such a subject
and that is why on this aspect there was surrender by most
of states in favour of the Parliament. The town planning,
however, is altogether an independent and different subject.
It is a State subject. It differs from State to State. It
cannot be said that by surrendering its right to legislate
on the aspect of imposition of ceiling on urban immovable
property, the State Legislature also surrendered the right
of development and town planning. These are essentially the
rights within the purview of the State Government. The
object of the ULC Act is not to sanction or permit
development in the States contrary to their statutory town
planning laws. The development and the town planning is an
ongoing process. It goes on changing from time to time
depending upon the local needs. The definition of ‘master
plan’ contemplates the plan prepared under any law ‘for the
time being in force’ or ‘in pursuance of an order made by
the State Government for the development of such area or
part thereof and providing for the stages by which such
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development shall be carried out’. The definition does not
contemplate a static master plan. For claiming the benefit
of Section 21, the construction of the dwelling units for
the accommodation of the weaker sections of the society on
the land has to be if permissible as per relevant master
plan when the scheme is considered by the authorities for
sanction. If the land use requires the land to be used for
some other purpose, it cannot be said that to grant benefit
under Section 21, the land should be permitted to be used
for construction of residential units. It was not intended
and could never have been intended that Section 21 will take
away the State power of town planning or on coming into
force of the ULC Act, the Master Plan would freeze. The
Rules made under the ULC Act further make the position quite
clear. Rule 11-A was introduced and brought into force by
amendment of Urban Land (Ceiling and Regulation) Rules on
19th December, 1977. Rule 11-A reads as under : "11-A.
Terms and conditions subject to which a person may be
permitted to continue to hold excess vacant land under
sub-section (1) of Section 21.-The terms and conditions
subject to which the competent authority may permit a person
to continue to hold vacant land, in excess of the ceiling
limit, under sub-section (1) of Section 21, for the
construction of dwelling units for the accommodation of the
weaker sections of the society in accordance with any scheme
shall be the terms and conditions specified in Schedule
1-A."
Schedule 1-A sets out terms and conditions subject to
which a person may be permitted to continue to hold excess
vacant land under sub-section (1) of Section 21. The said
conditions also make it clear that the construction of
dwelling units has to be consistent with the master plan.
Condition No.1 of Schedule 1-A reads thus :
1. The construction of dwelling units for the
accommodation of the weaker sections of the society in the
vacant land, in relation to which the declaration of the
competent authority is sought or made under sub-section (1)
of Section 21 shall be consistent with the Master Plan, if
any, for the urban agglomeration or that part of the urban
agglomeration wherein such land is situated or, if there is
no Master Plan for the urban agglomeration or such part
thereof such directions as the State Government may give in
relation to land used in the urban agglomeration, or such
part have regard to the planned development of the urban
agglomeration or any part thereof."
Various guidelines issued from time to time also show
that the master plan to be considered is the one in
existence at the relevant time when the scheme under Section
21 is considered by the authorities. As already noticed,
the circular dated 22nd May, 1979 stipulates that at the
time of sanctioning the scheme, the competent authority
shall ensure that the land in respect of which the scheme is
permitted is not proposed to be acquired for any public
purpose or it is not placed in reservation and that the
construction under the sanctioned scheme shall be done in
accordance with town planning regulations etc.
In view of above position, the High Court erroneously
relying on Atia Begum held that the user as provided in the
master plan as in existence on 17th February, 1976 alone is
to be seen and the subsequent change in the master plan
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reserving the land for open space is of no consequence. The
view of the competent authority in the order dated 20th
June, 1998 that the land would permanently remain in
residential zone is also erroneous. Further, the competent
authority erroneously assumed, it seems, that the High Court
directed it to grant sanction under Section 21 of the ULC
Act. The High Court only directed the competent authority
to decide the matter according to law. Atia Begum’s case
cannot be held to have laid down a proposition that use as
provided in the master Plan as in existence on 17th
February, 1976 will remain unchanged. The relevant master
plan is the one which is prevalent when the scheme under
Section 21 is taken up for consideration by the authorities
and for this purpose neither the date of filing the scheme
nor the date of enforcement of the ULC Act is relevant. The
development will not freeze on the enforcement of the ULC
Act or presentation of the scheme.
In the present case, in the draft development plan of
1979 which was finalised during the pendency of the suit,
the land in question is reserved for open space etc. It
cannot be doubted that the agreement had been entered into
between the parties mainly and rather only with the object
of construction of residential houses under the scheme under
Section 21 of the ULC Act for accommodation of weaker
sections of the society. In May 1979, it became evident
that it will not be possible to construct residential houses
in view of what was provided in the master plan. There is
no substance in the contention that assuming the prescribed
land use is ‘open space’, still there will be no impediment
in the implementation of scheme in as much as there is no
absolute bar for construction of residential houses. This
is not the basis on which the competent authority had
considered the matter. The agreement is clearly incapable
of being specifically enforced. Under these circumstances,
there is no question of any inconsistency and thus Section
42 of the ULC Act cannot have any applicability. We may
also consider another contention urged on behalf of the
appellants which is based on repeal of the ULC Act. Section
3 of the repealing Act deals with the saving of certain acts
despite the repeal. That section reads as under :
"3.(1) The repeal of the principal Act shall not affect-
(a) the vesting of any vacant land under sub- section
(3) of section 10, possession of which has been taken over
by the State Government or any person duly authorised by the
State Government in this behalf, or by the competent
authority;
(b) the validity of any order granting exemption under
sub-section (1) of section 20 or any action taken
thereunder, notwithstanding any judgment of any court to the
contrary;
(c) any payment made to the Stage Government as a
condition for granting exemption under sub-section (1) of
Section 20.
(2) Where-
(a) any land is deemed to have vested in the State
Government under sub-section (3) of section 10 of the
principal Act but possession of which has not been taken
over by the Stage Government or any person duly authorised
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by the State Government in this behalf or by the competent
authority; and
(b) any amount has been paid by the State Government
with respect to such land, then, such land shall not be
restored unless the amount paid, if any, has been refunded
to the State Government."
A bare reading of the aforesaid provision shows that it
is not applicable to Section 21 of the ULC Act. Orders
sanctioning schemes under Section 21 have not been saved by
Section 3. The contention urged on behalf of the appellants
and also the State Government is that the schemes under
Section 21 are not saved by Section 3 of the ULC Act.
Admittedly, the land has not vested with the Government
under Section 10(3). Possession continues to be with the
appellants. Mr. Bhatt, learned counsel for the State
Government as well for the authorities has argued that the
necessary consequence of the repeal, on the facts of the
present case, is that the land would be free from any
constraints to which it may have been subjected under the
ULC Act. Mr. Dhanuka, however, contended that Section 3 of
the repealing Act is not exhaustive. Relying upon Section 6
of the General Clauses Act, learned counsel submits that the
repeal does not affect rights accrued in favour of the
plaintiff under the ULC Act. Section 6 of the General
Clauses Act, inter alia, provides that where any Central Act
repeals any enactment, unless a different intention appears,
the repeal shall not affect anything duly done or affect any
right, privilege, obligation or liability acquired, accrued
or incurred under any enactment so repealed.
Reliance has been placed by the learned counsel on
decision in the case of Bansidhar & Ors. v. State of
Rajasthan & Ors. [(1989) 2 SCR 152] in support of the
contention that provision of Section 3 of the Repealing Act
is not exhaustive. Para 13 on which reliance has been
placed reads as under :
"A saving provision in a repealing statute is not
exhaustive of the rights and obligations so saved or the
rights that survive the repeal. It is observed by this
Court in I.T. Commissioner, U.P. v. Shah Sadiq & Sons,
AIR 1987 SC 1217 at 1221 :
"..... In other words whatever rights are expressly
saved by the ‘savings’ provisions stand saved. But, that
does not mean that rights which are not saved by the
‘savings’ provision are extinguished or stand ipso facto
terminated by the mere fact that a new statute repealing old
statute is enacted. Rights which have accrued are saved
unless they are taken away expressly. This is the principle
behind Section 10(22).6(c), General Clauses Act, 1897
.....".
We agree with the High Court that the scheme of the 1973
Act does not manifest an intention contrary to, and
inconsistent with, the saving of the repealed provisions of
sec.6(6A) and Chapter III-B of ‘1955 Act’ so far as pending
cases are concerned and that the rights accrued and
liabilities incurred under the old law are not effaced.
Appellant’s contention (a) is, in our opinion,
insubstantial."
We have no difficulty in accepting the contention that a
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repealing statute is not exhaustive and does not
automatically extinguish the accrued rights unless taken
away expressly. The question in the present case, however,
is whether any rights under the ULC Act had accrued in
favour of the plaintiff before its repeal. It is only then
the question of the saving of the said rights would arise.
To consider the aforesaid contention, it has again to be
kept in view that the sanction of the scheme for
construction of residential dwelling units was contrary to
the prescribed land use in the master plan which had
reserved the land for being used as open space. It cannot
be held, on the facts of the case, that any rights accrued
in favour of the plaintiff only on execution of the
agreement. Assuming any rights accrued in favour of the
plaintiff on passing of order dated 20th June, 1998, the
same would fall on our view that the said order dated 20th
June, 1998 was passed erroneously. There is no substance in
the contention that any rights had accrued in favour of the
plaintiff which have the protection of Section 6 of the
General Clauses Act.
We may consider another argument which is in respect of
construction of the clause (17) of the agreement. Mr.
Nariman contended that the agreement could be unilaterally
determined under that clause. The contention is that clause
(17) is to be read with clause (4) of the agreement and thus
read, there is clearly an express provision in the agreement
giving rights to parties to unilaterally terminate the
agreement and that it was terminated by original defendant
No.1 by serving notice dated 23rd February, 1980 on the
plaintiff. Further contention is that to such an agreement,
clause (c) of Section 14(1) of the Specific Relief Act, 1963
applies. A contract which is in its nature determinable
cannot be specifically enforced [Section 14(1)(c)]. Mr.
Dhanuka, on the other hand, contended that the contract is
not determinable and, therefore, Section 14(1) has no
relevance and also that to the agreement in question, clause
(c) of Section 14(3) is applicable and, therefore,
notwithstanding clause (c) of Section 14(1), contract is
specifically enforceable. Section 14(3), inter alia,
provides that notwithstanding clause (c) of sub-section (1),
the court may enforce specific performance where the suit is
for the enforcement of a contract for the construction of
any building or the execution of any work on land. A bare
reading of clause (c) of Section 14(3) shows that it has no
applicability. The building contract stipulated by clause
(c) of Section 14(3) is not the type of the contract with
which we are concerned in the present case. Now, let us
examine whether to the agreement in question, clause (c) of
sub-section (1) of Section 14 is applicable or not. Clause
(17) of the agreement states that the agreement shall not be
unilaterally rescinded by either party after the plaintiff
has been put in possession of the property. Clause (4)
stipulates the stage at which the plaintiff is required to
be put in possession. It is undisputed that the plaintiff
was never put into possession. In fact, that stage did not
arise because the scheme itself was sanctioned only after
the judgment under appeal and pursuant to directions
contained in the said judgment. In this appeal, an order of
stay was passed in favour of the appellant and consequently
the possession has remained with the appellants. The High
Court in the impugned judgment has, however, held that the
agreement could not be terminated as it constitutes a
contract of agency coupled with interest to which Section
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202 of the Indian Contract Act, 1872 applies. Mr. Nariman,
however, relying on clauses (17) and (4) of the agreement
and Section 9 of the Indian Contract Act, contended that
there is an express provision giving right to the parties to
terminate the agreement and that the said right was
exercised before delivery of possession to the plaintiff and
there is thus no question of applicability of Section 202 of
the Indian Contract Act. On the other the hand, the
contention of Mr. Dhanuka is that, at best, clause (17) can
be said to be silent on the question of termination of
agreement before delivery of possession. The contention of
learned counsel is that there is no positive term in the
agreement stipulating that before delivery of possession,
the agreement can be unilaterally terminated by the parties.
The agreement [clause (17)] is said to be in negative form.
The contention of learned counsel further is that it could
never have been intended that the original defendant No.1
can unilaterally terminate the agreement as the plaintiff
under the agreement had to take various steps and to spend
huge amounts for preparation of scheme and for pursuing the
same. Therefore, the plaintiff could have never agreed to a
term that such an agreement may be unilaterally terminated.
Learned counsel also relies upon Section 202 of the Indian
Contract Act and submits that it is a case of an agency in
favour of the plaintiff coupled with the subject matter of
agency, which in the present case, is the right to work out
the scheme and to construct the dwelling units irrespective
of the repeal or amendment of the ULC Act which aspect was
also duly taken note of in the agreement. The High Court
held that it was a case of agency coupled with interest to
which Section 202 applied and for its view the High Court
also sought support from clause (17) observing that express
clause to terminate the agreement was absent.
We are unable to agree with the approach of the High
Court and find substance in the contention of Mr. Nariman.
Clause (17) is in the nature of express stipulation that
before delivery of possession, the contract could be
unilaterally terminated. When there is no ambiguity in the
clause, the question of intendment is immaterial. The fact
that the clause is couched in a negative form is of no
consequence. The intention is clear from the plain language
of clause (17) of the agreement. In the case in hand,
Section 202 has no applicability. It is not a case of
agency coupled with interest. No interest can be said to
have been created on account of plaintiff being permitted to
prepare the scheme and take ancillary steps. Plaintiff
could not get possession before declaration under Section 21
of the ULC Act. Mr. Dhanuka also contended that the
agreement is not determinable is clear from the conduct of
original defendant No.1 and also what he stated in the
affidavit-cum-declaration dated 10th February, 1978 about
agreement not being terminable. The contention of learned
counsel is that what original defendant No.1 has said in the
said document is his interpreting statement which is
admissible in law and this interpreting statement and also
his conduct, clearly shows that agreement was not terminable
by original defendant No.1. Strong reliance has been placed
on Godhra Electricity Co. Ltd. & Anr. v. The State of
Gujarat & Anr. [(1975) 2 SCR 42] in particular to the
following passage :
"In the process of interpretation of the terms of a
contract, the court can frequently get great assistance from
the interpreting statements made by the parties themselves
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or from their conduct in rendering or in receiving
performance under it. Parties can, by mutual agreement,
make their own contracts; they can also by mutual
agreement, remake them. The process of practical
interpretation and application, however, is not regarded by
the parties as a remaking of the contract; nor do the
courts so regard it. Instead, it is merely a further
expression by the parties of the meaning that they give and
have given to the terms of their contract previously made.
There is no good reason why the courts should not give great
weight to these further expressions by the parties, in view
of the fact that they still have the same freedom of
contract that they had originally. The American Courts
receive subsequent actions as admissible guides in
interpretation. It is true that one party cannot build up
his case by making an interpretation in his own favour. It
is the concurrence therein that such a party can use against
the other party. This concurrence may be evidenced by the
other party’s express assent thereto, performances that
indicate it, or by saying nothing when he knows that the
first party is acting on reliance upon the interpretation."
There is no merit in the contention of Mr. Dhanuka.
The decision relied upon by Mr. Dhanuka is not applicable
to unambiguous documents. That is clear from the decision
itself. In respect of unambiguous documents, Odgers’
Construction of Deeds and Statutes, 5th Edn. By G. Dworkin
at pages 118-119, has been quoted in the aforesaid decision
as under :
"The question involved is this : Is the fact that the
parties to a document, and particularly to a contract, have
interpreted its terms in a particular way and have been in
the habit of acting on the document in accordance with that
interpretation, any admissible guide to the construction of
the document? In the case of an unambiguous document, the
answer is ‘No’."
It has been held that "in the case of an ambiguous
instrument, there is no reason why subsequent interpreting
statement should be inadmissible". In the present case we
are concerned with an unambiguous document and, therefore,
we have to go by its plain meaning. Further,
affidavit-cum-declaration only reiterated what was contained
in the agreement. It did not enlarge the agreement. It did
not substitute any clause in the agreement. It was not a
document executed between the parties. It was a document
executed by original defendant No.1 alone for the purposes
of filing it before the competent authority. Clause 17 of
the agreement does not call for any other interpretation
except that the contract could be unilaterally rescinded
before delivery of possession.
Mr. Dhanuka also contended that if clause (17) is
construed to mean that power had been conferred on the
parties to cancel the contract unilaterally at their wish,
then such a power of termination has to be exercised for
good and reasonable cause otherwise unilateral power of
cancellation would have to be treated as void and
ineffective in law. Reliance has been placed by the learned
counsel on National Fertilizers v. Puran Chand Nangia
[(2000) 8 SCC 343 at 351 paragraph 23] which reads thus :
"23. We may also state that under the general law of
contracts, once the contract is entered into, any clause
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giving absolute power to one party to override or modify the
terms of the contract at his sweet will or to cancel the
contract - even if the opposite party is not in breach, will
amount to interfering with the integrity of the contract
(per Rajamanner, C.J. in Maddala Thathiah v. Union of
India [(AIR 1957 Mad 82]. On appeal to this Court, in that
case, in Union of India v. Maddala Thathaiah [((1964) 3 SCR
774] the conclusion was upheld on other grounds. The said
judgment of the Madras High Court was considered again in
Central Bank of India Ltd. v. Hartfort Fire Insurance Co.
Ltd. [(AIR 1965 SC 1288] but the principle enunciated by
Rajamanner C.J. was not differed from (See the discussion
on this aspect in Mulla’s Contract Act, (10th Edn.) pp
371-72, under Section 31 of the Indian Contract Act.)"
We have perused the decision of Madras High Court
referred to in the aforequoted passage as also the two
decisions of this Court and Mulla’s Contract Act. With
utmost respect, we are unable to agree with the broad
proposition that the absolute power of termination would be
void. Referring to Madras case and two cases of this Court,
Mulla says that correctness of Madras case was doubted. We
reproduce as to what has been stated in the Contract Act by
Mulla at pages 371-372. It reads :
"If two parties stipulate that the contract shall be
void upon the happening of an event over which neither party
shall have any contract then the contract is void on the
happening of that event. But where the contract is that the
contract shall be void on the happening of an event which
one or either of them can bring about then the blameworthy
party cannot take advantage of that stipulation because to
do so would be to permit him to take advantage of his own
wrong. This principle was accepted in Australia but with
this modification that in both cases the contract is
voidable and not void in one case and voidable in the other,
because the construction cannot differ according to events.
Some Indian courts held that a clause in a contract giving
one of the parties the option to cancel the contract for any
reason whether adequate and valid or not confers an absolute
and arbitrary power on one of the parties to a contract and
is, therefore, void and unenforceable. Therefore, a clause
in a contract of supply of goods to the Railway
Administration conferring on the Railway Administration the
right to cancel the contract "at any stage during the tenure
of the contract without calling upon the outstandings on the
unexpired portion of the contract" was held to be a clause
under which it was open to one of the parties, without
assigning any reason valid or otherwise, to say that it was
not enforceable. It conferred an absolute and arbitrary
power on one of the parties to cancel the contract.
On appeal against the Madras High Court decision, the
Supreme Court upheld the order passed but held that the
clause authorising cancellation applied only where a formal
order had not been placed for supply of the goods contracted
for at which stage no legal contract can be said to have
been made and so the cancellation made in the Railway case
could not be said to have been covered by the clause. The
Madras & Bombay cases were reviewed by the Supreme Court in
a subsequent judgment and distinguished and the correctness
of the Madras case also doubted. And the Supreme Court held
that where the language of a clause in a contract is clear
it must be interpreted according to its language. In that
case, a clause in a insurance policy authorising both
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parties to cancel the policy at will was upheld. It is
submitted that the two Supreme Court judgments show that
such clauses are valid and enforceable except where, as in
the Madras Railway case, the contract is an executed
contract in that as formal order of supply had already been
made."
In our view, the aforesaid passage has been misread in
National Fertilizer’s case. Further in The Central Bank of
India Ltd., Amritsar v. The Hartford Fire Insurance Co.
Ltd. [AIR 1965 SC 1288], decisions of Madras High Court and
of this Court {Union of India v. Maddala Thathaiah [((1964)
3 SCR 774]} were considered. The question in that case was
whether the insurance policy had been terminated. This
Court was concerned with a clause in an insurance policy
which, inter alia, provided that the Policy can be
terminated at the option of the Insurance Company. The
contention of the respondent-Insurance company was that it
had power under the said clause to terminate the contract at
will and it had duly exercised that power. The appellant’s
contention was that it was implied in the clause that
termination could only be for a reasonable cause which did
not exist in that case. It was further contended that if
this interpretation of implied term is not accepted, the
clause giving such right to terminate at will without
reasonable cause must be treated as void and ignored. This
Court said :
"The contention of the appellant is based on the
interpretation of clause 10. Now it is commonplace that it
is the court’s duty to give effect to the bargain of the
parties according to their intention and when that bargain
is in writing the intention is to be looked for in the words
used unless they are such that one may suspect that they do
not convey the intention correctly. If those words are
clear, there is very little that the court has to do. The
court must give effect to the plain meaning of the words
however it may dislike the result. We have earlier set out
clause 10 and we find no difficulty or doubt as to the
meaning of the language there used. Indeed the language is
the plainest. The clause says "This insurance may be
terminated at any time at the request of the Insured", and
"The Insurance may also at any time be terminated at the
instance of the Company". There are all the words of the
clause that matter for the present purpose. The words "at
any time" can only mean "at any time the party concerned
likes". Shortly put clause 10 says "Either party may at its
will terminate the policy". No other meaning of the words
used is conceivable."
Regarding validity of the clause which gave power as
aforesaid, this Court held : "The next argument was that
clause 10 was bad as it gave more option to the insurer than
to the assured. We express no opinion as to whether the
clause would be bad if it did so, for we are clear in our
mind that it did not. The argument that it did was based on
the use of the word ‘request’ in the case of a termination
by the assured and ‘option’ in the case of a termination by
the insurer. It was said that the word ‘request’ implied
that the request had to be accepted by the insurer before
there was a termination whereas the word ‘option’ indicated
that the termination would be by an act of the insurer
alone. We are unable to agree that such is the meaning of
the word ‘request’. In our view, the clause means that the
intimation by the assured to terminate the policy would
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bring it to an end without more, for the clause does not say
that the termination shall take effect only when the
assured’s request has been accepted by the insurer.
Lastly, it was said that the termination of the contract
by the letter of August 7, 1947 was a conditional
termination and as the condition was impossible of
performance in the circumstances prevailing, there was in
fact no termination. That condition, it was said, was the
removal of the goods from Bakarwana Bazar, Amritsar to a
safer locality. We have nothing to show that the condition,
if it was such, was impossible of performance. However,
that may be, there is no question of any condition. The
letter clearly terminated the policy. It gave an option to
the assured to keep the policy on its feet if it did
something. Further we do not think that it can be said that
if a party has a right at will to terminate a contract, the
imposition by him of a condition, however hard, on failure
to fulfil which the termination was to take effect, would
make the termination illegal, for the party affected was not
entitled even to the benefit of a difficult condition. The
agreement was that the power to terminate could be exercised
without more and that is what we think was done in this
case."
(Emphasis has been supplied by us)
From the aforesaid, it is clear that this court did not
accept the contention that the clause in the insurance
policy which gave absolute right to the insurance company
was void and had to be ignored. The termination as per the
term in the insurance policy was upheld. Under general law
of contracts any clause giving absolute power to one party
to cancel the contract does not amount to interfering with
the integrity of the contract. The acceptance of the
argument regarding invalidity of contract on the ground that
it gives absolute power to the parties to terminate the
agreement would also amount to interfering with the rights
of the parties to freely enter into the contracts. A
contract cannot be held to be void only on this ground.
Such a broad proposition of law that a term in a contract
giving absolute right to the parties to cancel the contract,
is itself enough to void it cannot be accepted. In view of
above discussion, we find force in the contention that the
agreement in question was terminable before delivery of
possession; it was so determined and to the agreement
clause (c) of Section 14(1) of the Specific Relief Act, 1963
applies. Therefore, agreement cannot be specifically be
enforced.
It was further contended by Mr. Nariman that the
agreement is not specifically enforceable also in view of
clause (d) of sub- section (1) of Section 14 of the Specific
Relief Act, 1963. This provision provides that a contract
the performance of which involves the performance of a
continuous duty which the Court cannot supervise, is not
specifically enforceable. There is considerable force in
the submission of learned counsel. Even the High Court had
substantially proceeded on the basis that the implementation
of the scheme may require supervision but held that it can
be supervised by the competent authority. Having regard to
the nature of the scheme and the facts and circumstances of
the case, to our mind it is clear that the performance of
the contract involves continuous supervision which is not
possible for the court. After repeal, such continuous
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supervision cannot be directed to be undertaken by the
competent authority as such an authority is now
non-existent.
The grant of decree for specific performance is a matter
of discretion under Section 20 of the Specific Relief Act,
1963. The court is not bound to grant such relief merely
because it is lawful to do so but the discretion is not
required to be exercised arbitrarily. It is to be exercised
on sound and settled judicial princples. One of the grounds
on which the Court may decline to decree specific
performance is where it would be inequitable to enforce
specific performance. The present is clearly such a case.
It would be wholly inequitable to enforce specific
performance for (i) residential houses for weaker sections
of the society cannot be constructed in view of the existing
master plan and, thus, no benefit can be given to the said
section of the society; (ii) In any case, it is extremely
difficult, if not impossible, to continuously supervise and
monitor the construction and thereafter allotment of such
houses; (iii) the decree is likely to result in uncalled
for bonanza to the plaintiff; (iv) patent illegality of
order dated 20th June, 1998; (v) absence of law or any
authority to determine excess vacant land after construction
of 4356 dwelling units; and (vi) agreement does not
contemplate the transfer of nearly 600 acres of land in
favour of the plaintiff for construction of 4356 units for
which land required is about 65 acres. The object of the
act was to prevent concentration of urban land in hands of
few and also to prevent speculation and profiteering
therein. The object of Section 21 is to benefit weaker
sections of the society and not the owners. If none of
these objects can be achieved, which is the factual
position, it would be inequitable to still maintain decree
for specific performance.
The contentions urged on behalf of the plaintiff by
their learned counsel that in view of clauses (6) and (7) of
the agreement, despite repeal of the ULC Act, plaintiff
would be entitled to specifically enforce the agreement has
also no merit. The acceptance of the contention will mean
that original defendant No.1 before delivery of possession
had no right to terminate the agreement. This contention
placed on behalf of the plaintiff has already been rejected
by us. Reading clauses (6) and (7) harmoniously with
clauses (4) and (17), the contention of learned counsel
cannot be accepted. In view of these conclusions, the
contention of Mr. Dhanuka that reputation of the plaintiff
as a builder would be adversely affect if houses are not
built is hardly of any relevance. In any case, in this
regard we may refer to the decision of this Court in K.
Narendra v. Riviera Apartments (P) Ltd. [(1999) 5 SCC 77],
a case in which this Court examined an agreement which
contemplated several sanctions and clearances that were not
within the power of the parties. The result was that the
feasibility of a multi-storeyed complex as proposed and
planned became impracticable. In that case too the seller
continued to remain in possession. Under these
circumstances, it was held that the contract though valid at
the time when it was entered, is engrossed in such
circumstances that the performance thereof cannot be secured
with precision and that the discretionary jurisdiction to
decree the specific performance ought not to be exercised.
Dealing with the question of reputation of the purchaser as
a builder being at stake, this Court held that ‘this is
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hardly a consideration which can weight against the several
circumstances.... If a multi- storeyed complex cannot come
up on the suit property, the respondent’s plans are going to
fail in any case’. The position in the present case is
quite similar. Under the scheme as postulated by the ULC
Act, it is not permissible to construct dwelling units for
the residence of the weaker sections of the society.
It also deserves to be noticed that, strictly speaking,
it is not a contract for transfer of the property but is a
contract to carry out the scheme which is incapable of being
carried out at this stage on account of reservation in the
Master plan and also repeal of the ULC Act. It was not and
cannot be the case of the plaintiff that in case the scheme
had been carried out, he would have enjoyed the property.
He would have only enjoyed the specified profits. At best
the plaintiff could pray for damages. In the plaint, it was
asserted that Rs.16,75,000/- were spent on execution and/or
implementation of the scheme. The plaintiff, for reasons
best known to him, has not sought a decree for any damages,
even as an alternate relief.
Before concluding, we may place on record that during
the course of hearing, a statement was made by the
appellants that in the event of the appeal and the
transferred writ petition being allowed, they will
unconditionally offer in writing 66 acres of land to the
Government of Gujarat. The said statement reads as under:
1. The Appellant through his counsel states : that
even in the event of this Hon’ble Court allowing the appeal
and Transferred Writ Petition:
(a) the Appellant will unconditionally offer in writing
66 acres of land (unenroached and unencumbered earmarked in
the plan attached) to the Government of Gujarat by way of
gift or for acquisition (on a compensation of Rs.1) for the
specific purpose of constructing residential dwelling units
(permissible under VUDA or LIG Schemes of the Gujarat
Housing Board) at the cost of Government for low-income
groups.
(b) if such offer is not accepted within a period of
four months from the date of offer the appellant will
undertake the responsibility of utilising the said land
(i.e. to say approximately 65.95 acres) of land for
constructing thereon dwelling units (if permitted under the
relevant Town Planning Laws) for housing persons in the
low-income group and letting or selling the same to such
persons in low income group on no profit no loss basis :
the total cost of such a project will be got certified by a
reputed Chartered Accountant."
The appellant would be bound by the aforesaid
undertaking which we accept.
Before parting, we wish to express, to put it mildly,
our deep anguish on the manner in which the specified
authority, competent authority and the State of Gujarat has
been conducting itself before the trial Court, High Court
and this Court. Different stands at different points of
time have been taken sometimes supporting the plaintiff and
sometimes the defendants.
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For the aforesaid reasons, we allow the appeal, set
aside the impugned judgment and dismiss the suit of the
plaintiff. Transfer Case (C) No.64 of 1998 and SLP (C)
No.1692 of 1999 are also disposed of in terms of this
judgment. Parties to bear their own costs.