Sushil Kumar Agarwal vs Meenakshi Sadhu & Ors.

9 of the agreement stated that the owner shall pay the contractor costs, expenses along with agreed remuneration only after completion of the building on receiving the possession – However, exact amount of remuneration payable by the owner to the contractor was not found in the agreement – Agreement between the parties was vague, so the first condition in s.14(3)(c)(i) was not fulfilled – Furthermore, the developer had incurred an expenditure of Rs.18,41,000/- towards clearing outstanding dues, security deposit and development, incidental and miscellaneous expenses – The alleged losses/damages incurred by the plaintiff could be quantified and recompensed with – Thus, developer had failed to satisfy the conditions under sub-clause (i) and (ii) of s.14(3)(c) of the Act – In such a case, specific performance could not be granted. Specific Relief Act, 1963 – s.14(3)(c)(iii) – Interpretation of – Held: 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 s.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 the possession under the agreement, however, the owner is in possession of the land by virtue of the lawful title, the defendant-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 s.14(3)(c)(iii) would not be fulfilled in the case of a suit by a developer – Thus, purposive interpretation has to be given to s.14(3)(c)(iii), departing from the literal rule of interpretation – By giving a purposive interpretation to s.14(3)(c)(iii), the anomaly and absurdity created by the third condition will have no applicability in a situation where the developer who has an interest in the property, brings a suit for specific performance against the owner – The developer will have to satisfy the two conditions laid out in sub clause (i) and (ii) of Section 14(3)(c), for the suit for specific performance to be maintainable against the owner – This will ensure that both owners and developers can avail of the remedy of specific performance under the Act – Interpretation of Statutes – Purposive rule of Interpretation.

Appellant and predecessor-in-interest of the respondents entered into a development agreement for construction of a building on the land of the respondents. Respondent denied execution of the agreement. Appellant filed a suit against the respondent for specific performance of the contract. Trial Court held that sanctioned plans of the proposed building was not obtained by the appellant as per agreement and therefore, it could not be said that he had obtained possession of the land, as a result suit was barred by s.14(3)(c). Appeal was dismissed by the High Court. Thus, the present appeal.

Dismissing the appeal, the Court

HELD: 1. The issue before this Court is whether Section 14(3)(c)(iii) of Specific Relief Act, 1963 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. [Para 23] [775-C-H]

2. By giving a purposive interpretation to Section 14(3)(c)(iii), the anomaly and absurdity created by the third condition will have no applicability in a situation where the developer who has an interest in the property, brings a suit for specific performance against the owner. The developer will have to satisfy the two conditions laid out in sub clause (i) and (ii) of Section 14(3)(c), for the suit for specific performance to be maintainable against the owner. This will ensure that both owners and developers can avail of the remedy of specific performance under the Act. A suit for specific performance filed by the developer would then be maintainable. Whether specific performance should in the facts of a case be granted is a separate matter, bearing on the discretion of the court. [Para 24] [776-E-G]

3. It is necessary to determine whether, in the facts of the present case, the agreement between the appellant and the respondent is capable of specific performance. For this purpose, it would be necessary to consider the terms and conditions of the agreement between the parties. The condition under Section14(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. 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 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 ¹ 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”.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. [Paras 25 and 26] [777-A-H; 778-A-B]

4. 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, there is a need to analyze 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 14(3)(c) of the Act. In such a case, specific performance cannot be granted. [Para 27] [778-B-E] Vipin Bhimani v. Smt Sunanda Das (2006) 2 CHN 396; B Gangadhar v BG Rajalingam (1995) 5 SCC 239;

Swadesh Ranjan Sinha v Haradeb Banerjee (1991) 4 SCC 572 : [1991] 1 Suppl. SCR 245 ; Chheda Housing Development Corporation v Bibijan Shaikh Farid (2007) 3 Mah LJ 402; Della Developers Private Limited v Noble Organics Private Limited (2010) 2 Bom CR 13; Ashok Kumar Jaiswal v Ashim Kumar Kar AIR

2014 Cal 92; Her Highness Maharani Shantidevi

P Gaikwad v Savjibai Haribai Patel AIR 2001 SC 1462 : [2001] 2 SCR 590 ; Faqir Chand Gulati v Uppal Agencies Private Limited (2008) 10 SCC 345 : [2008]

10 SCR 697 – referred to.

Wolverhampton Corporation v. Emmons [1901] 1 K. B. 515; Carpenters Estate v. Davies (1940) Ch. D 160; Price v Strange [1978] 1 Ch. 337; Stock v Frank Jones (Tipton) Ltd. (1978) 1 WLR 231 – referred to.

Halsbury’s Laws of England, Fourth Edition, Volume 44(1); Hudson’s Building and Engineering Contracts, Eleventh Edition, Volume 1; Principles of Statutory Interpretation, 12th Edition - 2010, Lexis Nexis - page

144 and Maxwell, Interpretation of Statutes, 11 th Edition – referred to.