ORDER
J.B. Goel, J.
1. The plaintiffs who are husband and wife have filed this suit seeking decree of (1) specific performance of the agreement to sell dated 6.6.1977 executed by defendant No.1 in their favour, (2) for possession (of ground floor part) and (3) for damages.
2. The case of the plaintiffs is that the defendant No. 1 had executed an agreement to sell dated 6.6.1977 of property No. 227 in Block E, Greater Kailash, New Delhi measuring 208 sq. yards in their favor for a consideration of Rs. 2 lakhs (Rupees Two lakhs) and in accordance with the agreed terms a sum of Rs. 1 lakh (Rs. 21,000/- as earnest money and Rs. 79,000/- as advance part payment) was paid by them to him on 9.6.1977 at the time of execution and presentation for registration of the said agreement before the Sub-Registrar, New Delhi when the defendant No. 1 had delivered vacant physical possession of the first and second floors of the said property to them. The sale was to be completed by the defendant within 81 days after obtaining No Objection Certificate from the competent authority under the Urban Land (Ceiling and Regulation) Act (for short 'ULCRA') and from the Income Tax authorities. This was not done by the defendant No. 1 and on 15.11.1977 sought extension of time for 90 days for completing the sale which was consented to by the plaintiffs vide their letter dated 19.11.1977, but still sale has not been completed.
3. He was to furnish the documents as required and agreed to the plaintiffs to enable them to raise loan from the Life Insurance Corporation of India (for short 'LIC') whom they had approached for raising loan of Rs. one lakh to pay the balance sale consideration. The defendant No. 1 had agreed to clear the water and electricity dues and property taxes and to convey to the plaintiffs a clear title free from encumbrance/liabilities whatsoever which also he has failed to discharge. The plaintiffs are and have always been ready and willing to perform their part of the obligations under the Agreement but the defendant No. 1 has failed to perform his part of the contract and execute the sale deed in spite of a notice dated 13.2.1979 and reminder dated 1.8.1979 sent by them calling upon the defendant No. 1 to complete the sale which were duly served on him. Besides claiming a decree for specific performance, plaintiffs have also claimed damages amounting to Rs. 34,000/- Rs. 3,000/- incurred in connection with their application made to LIC for raising loan, Rs. 10,000/- on account of Capital Gains Tax payable in respect of sale of their House No. 1157/15 & 16, Rohtas Nagar, Shahdara, Delhi which plaintiff had sold by two sale deeds in October and November, 1977 for Rs. 30,000/- each which amount could be paid towards the balance sale price of the suit property and Rs. 21,000/- on account of damages for loss of rent of the ground floor of which they were deprived. Hence this suit.
4. Defendants 1 & 2 have filed separate written statements. Defendant No. 2 in its written statement has pleaded that the Defendant No. 1 had created an equitable mortgage in their favor in respect of the suit property for certain credit facilities given to M/s. Anil Industries of which defendant No. 1 and his brother S.K. Sharma are two partners and there was an out-standing liability amounting to Rs. 12,95,889.02 as on 31.12.1979 towards that facility, that the suit is bad in law, plaintiffs have no locus standi to file the suit and the agreement was null and void and not binding being in violation of the mortgage created in favor of the bank.
5. Plaintiffs in their replication have denied factum and knowledge of such mortgage in favor of defendant No. 2 as the defendant No.1 had represented at the time of agreement that except Municipal dues and taxes the property was free from all sorts of encumbrances; that the plaintiffs are bona fide purchasers for valuable consideration without notice of such encumbrance and they are not bound by the alleged mortgage also that necessary particulars of such equitable mortgage have not been disclosed.
6. Defendant No. 1 in his written statement has disputed the claim made by the plaintiffs and has pleaded that: (1) the plaintiffs have no cause of action and are not entitled to claim specific performance as the No Objection Certificate required was not given and as such there is no failure on the part of defendant No. 1, (2) the defendant No. 1 had informed the plaintiffs at the time of execution and registration of the agreement to sell that there was an equitable mortgage on the property in favor of the Punjab National Bank in respect of credit facilities sanctioned/to be sanctioned to M/s. Anil Industries, (3) the defendant No.1 had also informed the plaintiff in March, 1978 that inspire of his best efforts and due to the circumstances beyond his control he could not get his title deeds of the property released from the bank and so was not in a position to convey the property free from encumbrances; and (4) that he had offered to the plaintiff return of the amount of Rs. 1.00 lakh taken by him as advance and earnest money, subject to their return of possession of first floor and second floor which they did not do. It is also alleged that the plaintiffs did not perform their part of obligations and were not ready and willing to perform their part of the obligation and in the circumstances, there is no subsisting agreement between the parties. They are thus not entitled to the relief of specific performance nor to any damages as claimed.
7. The defendant No. 1 has also made a counter claim for recovery of Rs. 79,750/- on account of damages for use and occupation of the first and second floors by the plaintiffs at the rate of Rs. 2250/- per month for the period up to 6.2.1980.
8. On the pleadings of the parties the following issues were framed:
1. Whether the suit has not been properly valued for court fee and whether the court fee paid is not sufficient and proper?
2. Whether the agreement to sell dated 6.6.1977 had come to an end as alleged in paras Nos. 3-4 of the written statement of Defendant No. 1, if so to what effect?
3. Whether the defendant No. 1 had represented to the plaintiff that the property in suit was free from all sorts of encumbrances, liens and charges etc., if so, to what effect?
4. Whether the plaintiff has been ready and willing to perform his part of the agreement?
5. Whether the defendant No. 1 has been ready and willing to perform his part of the agreement ?
6. Whether defendant No. 1 is entitled to claim from the plain tiff the charges for use and occupation for the fist floor and 2nd floor of the suit property and if so at what rate and for what period?
7. Whether the defendant No.1 can claim the charges mentioned in issue No. 6 above without payment of Court fee, if so, to what effect?
8. Whether the plaintiff is entitled to claim for damages from defendant No. 1, if so, to what amount?
9. Whether the plaintiff has no locus standi to file the suit and the agreement in question in null and void as alleged by defendant No. 2 in preliminary objection No. 2 and paras 6 and 7 on merits of his written statement?
10. Whether the defendant No. 2 has first charge over the property in suit and what is the effect of the equitable mortgage?
11. To what relief is the plaintiff entitled?
9. Plaintiffs and defendant No. 1 have led oral and documentary evidence, plaintiffs examining 9 witnesses including plaintiff No. 1 as P.W. 9, and defendant No.1 examining 3 witnesses including him slef as D.W. 1. Defendant No. 2, Bank remained absent after filling the written statement and has not led any evidence nor cross-examined the witnesses.
10. I have heard the learned counsel for the parties including counsel for defendant No. 2, perused the pleadings, oral and documentary evidence and considered the submissions made by learned counsel. My findings issuewise are:-
11. To appreciate pleas taken and for the sake of convenience, it will be appropriate to reproduce the relevant terms of the agreement to sell dated 6.6.1977. The agreement is Ex. P-1. Its execution and correctness are not disputed. The relevant terms read as under:-
1. That the Purchasers will pay a sum of Rs. 21,000/- (Rupees twenty on thousand only) as earnest money to the seller at the time of execution of this Agreement and a further sum of Rs. 79,000/- (Rupees seventy nine thousand only) as a further advance payment at the time of presentation for registration of this Agreement in the Office of Sub-Registrar, Asaf Ali Road, New Delhi. In the form of collateral securities the Seller shall handover the vacant physical possession of the First and Second floors of the said building.
2. That the Seller shall obtain a No Objection from the Competent Authority set up under the Urban Land (Ceiling & Regulation) Act, 1976.
3. That the Seller shall also obtain the required Income-tax clearance Certificate vide Proforma 34-A under section 230A of the Income-tax Act.
4. That the Seller shall clear off all the dues and demands in respect of Electric and Water Charges, Fire & Scavenges tax, House-tax or any other Levy or Penalty pertaining to the said property and thus make the property absolutely free from all encumbrances, liens, claims, demands, dues, executions, mortgages, agreements to sell, prior sales, appurtenances, easements, privileges etc. etc.
5. That the Seller shall pay all the expenses in respect of this Deal, such as Stamp Paper, Corporation Duty, Stamps and any other incidental charges.
6. That the Purchasers will be entitled to do the renovation, painting & polishing in the premises handed over to them even during the tenure of this Agreement at their own will and cost.
7. That the Purchasers are likely to approach the Life Insurance Corporation of India for the grant of a loan against this property for the payment of balance amount of sale price to the seller and to make this loan feasible the seller shall handover all the original sale deeds and other relevant papers to the Purchasers at the time of grant of such loan by the Life Insurnce Corporation of India to the purchasers.
8. Should the Purchasers fail to pay the balance sale proceed within 21 days after the Seller's intimation to them about the receipt of No Objection and the Income-tax clearance Certificate the Seller reserves the right to forfeit the earnest money of Rs. 21,000/- and cancel the deal. But the amount of Rs. 79,000/- received by him as further advance along with the expenses in curred by the purchasers on renovation, painting & polishing, as agreed upon, shall be returned to the Purchasers forthwith
10. That the Seller shall keep the possession of the ground floor till the final sale deed is made but shall allow the purchasers or their authorized agents to do the work of renovation or painting & polishing at reasonable hours.
11. That the seller shall obtain the required No Objection and the I.T.C. within 75 days from the date of execution of this Agreement.
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13. That the Seller shall intimate the Purchasers about the receipt of No Objection and the Income-tax Clearance Certificate by him by a registered acknowledgment due letter and the Purchas ers shall be required to make the balance payment within 21 days from the receipt of such intimation.
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15. The stipulated period for the finalisation of the Sale Deed is eighty one days.
12. Issue No.1
'Whether the suit has not been properly valued for court fee and whether the court fee paid is not sufficient and proper?'
13. Plaintiffs for the relief of specific performance have valued the suit at the amount of sale consideration of Rs. 2 lakhs and at Rs. 34,000/- for the relief of damages claimed and court fees have also been paid on these separate valuations. This is the proper valuation and there is no illegality nor any has been pointed out during arguments. This issue in fact was not pressed at the time of arguments. This issue is accordingly decided against defendant No.1 and in favor of the plaintiffs.
14. Issue No. 2
'Whether the agreement to sell dated 6.6.1977 had come to an end as alleged in paras Nos. 3-4 of the written statement of Defend ant No.1, if so to what effect
15. Defendant No. 1 in preliminary objections of his written statement has pleaded that: (1) the plaintiffs have no cause of action for decree for specific performance as 'No Objection' was not goven to their knowledge and thereforee, neither the seller has failed to complete the sale nor the plaintiffs got any right to get specific performance and (2) that at the time of execution and registration of the agreement to sell he had informed the plaintiffs that there was a subsisting equitable mortgage on the suit property in favor of the Punjab National Bank as collateral security for various credit facilities sanctioned or to be sanctioned by the Bank in favor of M/s. Anil Industries and also that at the time of the registration of the said agreement an officer of the said Bank had produced the title deeds of the property before the Registrar who had seen the same (obviously to impute knowledge of equitable mortgage).
16. In paras 3 and 4 of the preliminary objections of the written statement, he has pleaded as under:-
'3. That the answering defendant as far back as March, 1978 informed the plaintiff that inspire of his best efforts due to the circumstances beyond the control of the answering defendant, it would not be possible for him to get his title deeds of the suit property released from the Punjab National Bank and there-fore it would also not be possible for him to get the suit property free from all encumbrances, liens, claims, demands etc. as provided in clause 4 of the said agreement and in view of that difficulty, the answering defendant would not be able to sell the property as agreed to by him under the agreement dated 6th June, 1977 and offered to the plaintiff to pay back the advance of Rs. 79,000/- received by him and also the earnest money of Rs. 21,000/- as soon as the plaintiff is able to hand over the vacant physical possession of the first and second floors of the suit premises.
4. That in view of what is stated in the paras above, there was no subsisting agreement between the parties at the time of the filing of the above suit and, thereforee, the suit is liable to be dismissed on these preliminary grounds alone.'
17. Section 37 of the Contract Act casts an obligation on the parties to the contract to perform or to offer to perform their respective promises. Section 10 of the Contract Act provides what greements are contracts and enforceable in law.
18. It is not the case of the defendant that the contract was void or voidable at the time of execution of the agreement to sell at the instance of the defendant No. 1 for any of the grounds enumerated in the Contract Act.
19. The terms agreed upon also do not show that it was also a contingent contract giving the option to the seller to avoid the contract on the happening or non happening of any event. The conditions to be fulfillled by the defendant/seller are also not impossible of performance. As such the defendant could not avoid the agreement on his own ipsi dixit for non performance of the terms on his part as agreed for the alleged reasons.
20. In the agreement to sell defendant had agreed to do certain acts and things. There is mostly always an implied covenant on the part of the vendor to do all things necessary to give effect to the agreement, including the obtaining of the permission or clearances for the transfer of the property. The law is well settled that if the vendor agrees to sell the property which can be transferred only with the sanction of some Government authority, the court has jurisdiction to order the vendor to apply to such authority within specified period, and if the sanction is forthcoming to convey the property to the purchaser within a certain time. (See Motilal v. Nanhelal AIR 1937 PC 287: Mrs. Chandnee Widya Vati Madden Vs . Dr. C.L. Katial & Others : [1964]2SCR495 : and Rojasara Ramjibhai Dahyabhai v. Jani Narotamdas Lallubhai (dead by LRs.) and another AIR 1986 SC 1912).
21. It is not the case of the defendant that though he had applied for 'No Objection' and Income Tax Clearance but the same were disallowed/refused. Permission was applied under ULCRA which was granted on 2.5.1978 vide order Ex. P-4. This fact has inter alias been proved by the Competent Authority himself (Shri A.C. Kher as P.W.7 and the material on record shows that this was granted in the presence of the defendant who himself had collected it from there. Denial of knowledge even of this permission by defendant No. 1 is sneer concoction, falsehood and mala fide. If he did not know the fact of this permission, he would have pursued the matter further with the Competent Authority which obviously he did not do. Obviously, this is a false plea taken to avoid the agreement. Similarly the defendant had either obtained the Income Tax clearance or he had not applied for the same. It does not appear nor it is shown that there would have been any difficulty in obtaining this Income-Tax clearance if the defendant had made any attempt to obtain it. Again if there was mortgage on the property, it was within his power to discharge the same when he had undertaken to convey title to the plaintiff free from all sorts of encumbrances etc. One cannot be allowed to take benefit of his own faults and omissions. Contracts solemnly entered into cannot be avoided on the ipsi dixit of one of the party to the prejudice of the other. There will be no frustration of the contract when the parties are put to observe what they were required to do under the contract and which they do not want to perform.
22. The plaintiffs had admittedly paid 50% of the sale consideration at the time of execution of the agreement and the balance 50% amount of Rs. 1.00 lakh was payable after the seller's intimation to them by registered post about the receipt of 'No Objection' and the Income Tax Clearance Certificate (ITC) under Clause B and such 'N0 Objection' and 'ITC' were to be obtained by the seller within 75 days from the date of execution of this agreement (Clause 11). Besides this the defendant had to pay off all the Municipal dues and taxes etc. and to convey a valid title free from all encumbrances whatsoever as provided in Clause 4. Under section 55(1)(g) of the Transfer of Property Act (for short 'TPA') also he was obliged to perform and discharge these obligations undertaken by him for which he had even sought time and which was granted by plaintiffs on 19.11.1977 (Ex. P3). It is not the case of the defendant nor shown that there was any breach on the part of the plaintiffs in this respect.
23. The agreement to sell in question thus did not come to an end as alleged in paras 3 and 4 of the written statement of the defendant No. 1. This issue is thus decided against defendant No.1.
24. Issue No. 3
'Whether the defendant No.1 had represented to the plaintiff that the property in suit was free from all sorts of encumbrances, leins and charges etc, if so, to what effect?'
25. Clause 4 of the agreement to sell enjoined on the seller to pay all Municipal dues and taxes and to make the property absolutely free from all encumbrances etc. to convey clear title to the purchaser. He had not apparently specifically disclosed by incorporating in the agreement to sell that the property was encumbranced by way of equitable mortgage with the Punjab National Bank. Obviously, he had concealed this material fact from the purchasers. And in view of provisions of Section 55(2) of the TPA, he is deemed to have contracted with the buyer that the interest which he had professed to transfer to the buyer subsisted.
26. Shri Om Prakash Soni, P.W. 5 was the property dealer in this transaction and the agreement to sell Ex. P-1 is signed by him. He has stated that at the time of entering into this bargain defendant No.1 had brought the original sale deed in his favour, two photostat copies of which were obtained, one to be filed along with the application to the Competent Authority for permission under ULCRA and had also produced it before the SubRegistrar at the time of registration of the agreement and again also before the Competent Authority at the time the permission was granted.
27. In cross examination he has denied the suggestion that the property was under mortgage with Punjab National Bank or that it was so disclosed at the time of entering into the agreement; that there were arrears of Water and Electricity charges and Property taxes which are mentioned in Clause 4 which where the encumbrances on the property. He has further stated that in case the original sale deeds were with the Punjab National Bank, in that case defendant No. 1 had manipulated with the said bank staff in so producing the same. He was a property dealer in this transaction and is an inde-pendent witness. It is not suggested that he has got any special interest to favor the plaintiffs or to disfavour the defendant. I do not find any reason to disbelieve him.
28. Plaintiff No. 1 as P.W.9 has also stated that at the time of entering into agreement to sell defendant No. 1 had not told him that the property was mortgaged with the Bank.
29. He has also stated that defendant No.1 had shown the original sale deed of the property to O.P. Soni (P.W. 5) who had got made two copies thereof. One of which was given to him, and he himself had seen it. He has further stated that the original sale deed was also produced by him before the Competent Authority on 27.4.1978 as required. He has denied the suggestion that at the time of entering into the agreement he was told by defendant No. 1 that the property was under mortgage with the Punjab National Bank.
30. Though defendant No.1 as D.W.1 has stated that he had taken loan from Punjab National Bank and the sale deeds were deposited there and that he had told the plaintiff at the time of entering into the agreement that the property stood mortgaged with that Bank but he has been challenged on this in his cross examination by the plaintiffs. He has stated that Mr. B.R. Kataria, an officer of the Punjab National Bank and on other officer of that Bank had appeared before the Sub-Registrar at the time of the registration of the agreement to sell with the original sale deed of the property. But neither the written request that would have been made to this effect to the Bank to produce the original nor Mr. Kataria or any other person from that Bank has been produced as witnesses to prove this fact. His self-serving statement in the absence of such corroborating evidence which could be produced, cannot be believed in preference to the statements of P.W. 5 and P.W. 9. Further his statement that he neither appeared before the Competent Authority nor produced before him, the original sale deed at the time of obtaining permission is not correct. Shri A.C. Kher, who was the Competent Authority and granted the permission (Ex. P. 4) has appeared as P.W. 7 and proved Ex.P-5, copy of order sheet dated 27.4.1978 wherein the fact of production of the original sale deed for his perusal is recorded. In his statement as P.W. 7 also he has so deposed which was the normal practice to see the original title deeds. He is a responsible senior Government Officer and is an independent witness. He has no interest to depose favoring one and disfavoring the other. There is no reason to disbelieve him. Moreover, there is no reason nor any Explanationn that if the property was subject to equitable mortgage, why it was not incorporated in the agreement itself.
31. In view of this discussion, I find and it is so held that defendant No. 1 had not disclosed to the plaintiffs at the time of entering into or execution and registration of the agreement to sell that the property in question was encumbranced by way of equitable mortgage with the Punjab National Bank. I also hold that defendant No. 1 had manipulated in collusion with the staff of the Punjab National Bank in surreptitiously obtaining from them if so deposited there and producing the original sale deeds of the property in question before the plaintiffs, the property dealer, the Sub-Registrar and before the Competent Authority. It is further held that he had represented to the plaintiffs that the Municipal dues and taxes were the only outstanding liability against this property. This issue is decided accordingly and in favor of the plaintiffs.
32. Issue No. 4
'Whether the plaintiff has been ready and willing to perform his part of the agreement?'
33. The agreement to sell (Ex.P-1) contains reciprocal promises. In pursuance of clause (1) the purchaser (plaintiffs) had paid to the defendant/vendor a sum of Rs. 1.00 lakh at the time of execution and registration before the Sub-Registrar on 9.6.1977. This fact is not disputed and the fact of these payments has also been endorsed on the agreement under the signatures of the Sub-Registrar. In pursuance of this agreement, defendant No. 1 had also delivered vacant possession of first and second floors of the property to the plaintiffs.
34. For completing the sale, inter alia, defendant No. 1 was to comply two conditions i.e. obtaining permission under ULCRA and the ITC within 75 days from the date of execution of the said agreement. The defendant did not fulfill these conditions within this period and even after extension of time by 90 days sought by him on 17.11.1997 (Ex. P-2) was allowed by the plaintiffs on 19.11.1977 (Ex. P-3). In letter Ex. P-2 defendant No. 1 has admitted that there has been delay on his part in obtaining the 'No Objection'. This is an admission on his part of not performing his part of the agree-ment.
35. The obligation of the purchaser to pay the balance sale consideration would arise on receipt of intimation of compliance of the conditions on the part of the defendant as agreed in Clause 13.
36. Section 16 of the Specific Relief Act in Clause (c) mandates that the person to be entitled to claim specific performance has 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 the terms the performance of which has been prevented or waived by the defendant.
37. This requirement of readiness and willingness to perform the essential terms of the contract was not found in the old Specific Relief Act, 1877 but it was held by the Privy Counsel in Ardeshir H. Mama v. Flora Sasson AIR 1928 PC 208 that it was a requirement contemplated under that Act as it was really a principle of equity jurisprudence and relief of specific performance is an equitable relief. This case has been referred to with approval in Prem Raj Vs . The D.L.F. Housing and Construction (Private) Ltd. and another : [1968]3SCR648 , and in Gomathinayagam Pillai and others Vs . Palaniswami Nadar : [1967]1SCR227 . Now this requirement has been specifically enacted in Section 16 of the new Act.
38. In order to prove himself to be ready and willing to perform his obligation under a contract of purchase, the purchaser has not to produce the money or to vouch a concluded scheme for financing the transaction (The Bank of India Ltd. and others v. Jamsetji A.H. Chinoy and Messrs. Chinoy and Co. AIR 1950 PC 90). In Sukhbir Singh & Ors. Vs . Brij Pal Singh & Ors. : AIR1996SC2510 also, it has been held that it is not a condition that the purchaser should have ready cash with him and it is sufficient for the purchaser to establish that he has the capacity to pay the sale consideration. It is not necessary that he should always carry the money with him till the date of the decree.
39. This requirement of readiness and willingness thus has to be viewed and determined in the facts and circumstances of each case. Such readiness and willingness of plaintiff must be in accordance with the terms and conditions of the contract. In this case the terms of the contract to be performed by the plaintiffs are of two kinds: (1) one that had to be performed before the other side could be called upon to fulfill his promise and (2) other which was to be performed after vendor had performed his part of the contract.
40. First condition was performed when they paid Rs.1.00 lakh in advance. The plaintiffs could be called upon to perform the other part only after defendant No. 1 had performed his part of the contract. Plaintiff at this stage has to show that he has been ready and willing to perform his remaining part of the contract according to its terms. In other words he should not have shown disinclination/repudiation to complete the sale.
41. If the buyer is in a position to borrow money and to perform the remaining contract it would be sufficient to fulfill the requirement of readiness to pay. It was in the knowledge of the defendant as was specifically agreed in the agreement Ex. P-1 (Clause 7) that the plaintiffs were to take loan fron LIC against this property for the payment of balance sale price and for that purpose the seller was to hand over the original sale deeds and other relevant papers at the time of grant of such loan by LIC. The plaintiffs had actually also approached the LIC for this purpose. Plaintiff No. 1 as P.W. 9 in in his statement has deposed as under:-
'On 2nd May, 1978 defendant No.1 collected the original permission document and gave a copy to me....
Copy which was given to me was filed by me in the office of the LIC for the purposes of obtaining the loan. I had applied for a loan of Rs. 1.00 lakh for the purpose of payment to defendant No.1. All the formalities in respect of grant of loan were com pleted but only thing for which payment was held up was the production of original sale deed in favor of defendant No. 1. Defendant No. 1 did not give original sale deed and thereforee, loan was not released. I had sold house at Shahdara in two parts in the year 1978. One portion was sold to Mr. Praveen Kumar Gupta for a sum of Rs. 30,000/- and other portion was sold to Mrs. Usha Khanna for a sum of Rs. 30,000/-. Both of them appeared as my witnesses (P.W. 4 and P.W. 3 respectively). I had made arrangement for the payment of balance of sale price and I could get money from Shri D.R. Gupta who appeared as a witness (P.W. 8). Shri D.R. Gupta has very sound financial position and he could lend me Rs. 1 lakh at any time. I was always ready and willing to ay the balance price and get the sale deed registered. I do not know, if defendant applied for Income Tax Clearance Certificate or not but he did not give to me although I required for loan purpose from the LIC. I gave notices to Defendant No. 1 for executing sale deed through Shri P.D. Gupta. Copies of notices are Exs. P-18 and P-19, postal receipts are Exs. P-20 and P-21 while A.D. receipts are Exs. P-22 and P-23.)
42. This witness was not cross examined about the fact that he had applied to the LIC for raising the loan. P.W. 6 Shri M.L. Ahuja from the concerned branch of LIC has corroborated P.W. 9 that plaintiff had applied for a loan of Rs.1 lakh for the purchase of this property and intimation of sanction of loan was sent and original title deeds were called from him which were not submitted. He has proved relevant correspondence Ex. P-9 to P-15 exchanged between LIC and the plaintiff. Obviously the loan could not be released because the title deeds and other relevant documents required were not made available by the defendant and so could not be submitted to the LIC. This clearly shows readiness, willingness and bona fides of the plaintiffs. P.W. 4 and P.W. 3 have also corroborated P.W. 9 that the latter had sold his house at Rohtas Nagar, Shahdara for a total consideration of Rs. 60,000/- in October and November, 1978. PW-9 was not cross-examined to show that he had spent that amount elsewhere.
43. P.W. 8, Shri D.R. Gupta has also corroborated him that plaintiff had approached him for a loan in case LIC did not give it and he had agreed to pay this amount to the plaintiff. He is a builder and promoter having two LIC's of Rs. 1 lakh each; he is one of two partners of the firm and his firm had bank balances of Rs. 7 lakhs in the banks. There is no reason to doubt his good financial status, capacity and agreeing to pay to plaintiffs Rs. 1 lakh in case need arose.
44. The defendant had approached the plaintiff on 17.11.1977 for extension of time which was agreed vide letter dated 19.11.1977. inspire of extension of time granted by the plaintiff, defendant No. 1 did not fulfill his part of the agreement and then the plaintiff had served on him two notices on 13.2.1979 and 1.8.1979 to which no reply was sent by the defendant No. 1.
45. The case of the defendant in his pleading is not that the plaintiffs were not ready and willing to perform their part of the agreement. There the plea taken is that he (defendant No. 1) could not obtain 'No Objection' certificate and further that inspire of his best efforts he could not get back the title deeds of the property released from the Punjab National Bank and as such he could not get the property free from encumbrances as provided in Clause 4 of the agreement. This is clear admission on his part that the deal could not go through because of non fulfilllment of the agreement by the defendant and not for any fault or omission on the part of the plaintiffs. In cross-examination of PW.9, it was elicited that he was not willing to accept the sale with the encumbrance of mortgage and on this it is contended that the plaintiffs were not ready and willing to perform their part. This plea has no substance. The plaintiffs are not bound to accept encumbered property when there was no such agreement with them. It is also contended that the plaintiffs were aware of the mortgage and so they cannot refuse sale with encumbrance. As already held, the plaintiffs were not told about the mortgage at the time of agreement. PW-9 has deposed that he would not have entered into this agreement if he was told about the mortgage. The agreement does not provide that the property was agreed to be sold with mortgage. Even otherwise, the mere fact that the vendee was aware of the existence of an encumbrance does not relieve the vendor of the statutory liability under Section 55(1)(g) of the TPA to get the emcumber-ance discharged in view of the contract between the parties to the contrary. It has thus been proved that plaintiffs have been ready and willing to perform their part of the agreement. This issue is decided in favor of the plaintiffs.
46. Issue No.5
Whether the defendant No.1 has been ready and willing to perform his part of the agreement?.
47. In the agreement to sell Ex.P-1, defendant No.1, inter alia, had undertaken to do: (1) to obtain : No Objection' certificate from competent authority under ULCRA, (2) Income Tax Clearance Certificate, (3) to intimate the plaintiffs about compliance of both these conditions by means of registered letter, (4) (a) to clear all the dues and demands in respect of Electrical and Water charges and Property tax or any other levy and penalty thereon, (4)(b) to make the property absolutely free from all sorts of encumbrances and (5) to enable the plaintiff to obtain loan of balance amount of Rs. 1 lakh from LIC to hand over to him 'all the original sale deeds and other relevant papers' at the time of grant of loan.
48. The defendant No. 1 did not complete his part of the obligations. If the property was under equitable mortgage with Punjab National Bank, that was his liability and has not been cleared and obviously defendant is not in a position to convey clear title free from liabilities and encumbrances as agreed. As already noticed he has admitted in his written statement that he could not get the title deeds and convey title free from encumbrances as agreed in Clause 4. Two notices sent by the plaintiff also had no effect on him. He thus on his own showing was not ready and willing to perform his obligations under the agreement. This issue is thus decided against defendant No. 1.
49. Issue No. 6 :
'Whether defendant No. 1 is entitled to claim from the plaintiff the charges for use and occupation for the 1st Floor and 2nd Floor of the suit property and if so, at what rate and for what period?'
50. As held above, the plaintiff has been ready and willing to perform his part of the contract and defendant No.1 has neither performed nor has been ready and willing to perform his part of the agreement and has thereby committed breach of the agreement. The plaintiffs are in lawful occupation of the premises on first and second floors of the suit property in pursuance of the agreement to sell in their favour. Defendant No. 1 cannot take benefit of his own wrong and breaches and is not entitled to claim any amount on account of use and occupation charges of the premises. This issue is also decided against defendant No. 1.
51. Issue No. 7:
'Whether the defendant No. 1 can claim the charges mentioned in issue No. 6 above without payment of court fee, if so, to what effect?'
52. The defendant No.1 was allowed to pay court fee on his counter claim after this issue was framed and court fee has since been paid. This issue has become redundant.
53. Issue No. 8:
'Whether the plaintiff is entitled to claim for damages from defendant No.1, if so, to what amount?'
54. Plaintiff has claimed damages for loss of rent of ground floor due to on-performance of the agreement by the defendant No.1.
55. The principle and standard of damages is Section 73 of the Indian Contract Act as provided under Section 21(4) of the Act.
56. Under Section 73of the Contract Act, the measure of damages in contract is compensation for the consequences which follow as a natural and probable consequences of the breach or in other words which could reasonably be foreseen.
57. The plaintiffs have claimed damages under three heads:- (1) Rs. 3,000/- on account of expenses paid for securing loan form the LIC, (2) Rs. 10,000/- payable on account of Capital Gains Tax in respect of his proper-ties sold by him which perhaps he could have invested in the purchase of the suit property and (3) Rs. 21,000/- on account of loss of rent for being deprived the possession of ground floor from 19.2.1978 till the date of the suit assessed at the rental value of the promises at Rs. 1,500/- per month less Rs. 500/- per month on account of interest value at the rate of 6% p.a. on balance sale consideration of Rs.1.00 lakh not paid.
58. Expenses at item No. 1 are alleged to have been incurred by the plaintiffs for raising the loan from the LIC. This expenditure was incurred as part of his obligation and was to be borne by the plaintiffs.
59. The defendant No. 1 is not liable for it. Moreover, this has also not been proved by any cogent evidence.
60. Loss at item No. 2. has also been caused to the plaintiff as a natural and probable consequence of the breach by the defendant. Defendant No. 1 is not liable for this claim also. In fact during the arguments this part of the claim was not pressed by the plaintiffs.
61. Regarding damages at item No. 3 the plaintiffs were entitled to get vacant possession of the ground floor on payment of balance sale consideration of Rs. 1.00 lakh on completion of sale. Mere agreement to sell in favor of the plaintiffs does not create any right or interest in the property in their favor as provided under Section 54 of the Transfer of Property Act. There is no evidence on record to show that the loss caused to the plaintiffs for being deprived of ground floor was more than the benefit derived by them out of Rs.1.00 lakh which remained unpaid. In the circumstances, in my view it is not proved that the plaintiffs are entitled to damages on this ground for the period as claimed. This issue is decided against the plaintiffs.
62. Issue No. 9:
'Whether the plaintiff has no locus standi to file the suit and the agreement in question in null and void as alleged by defend ant No. 2 in preliminary objection No. 2 in and paras 6 and 7 on merits of his written statement?'
63. Assuming tha00000000000000000000000000000000000000000000000000t an equitable mortgage had been created by defendant No. 1 in favor of defendant No. 2 as alleged. Equitable mortgage had not extinguished the rights of defendant No.1 in the property. He had still interest and could sell the property with or without encumbrance. In this case he had agreed to transfer it without any encumbrance. The agreement to sell for this reason is not null and void. The plaintiffs being the purchasers for valuable consideration under the agreement to sell have right to claim specific performance and as such have locus standi to file the present suit. This issue is decided against defendants.
64. Issue No.10:
'Whether the defendant No. 2 has first charge over the property in suit and what is the effect of the equitable mortgage?'
65. After filing the written statement defendant No.2 remained ex parte and has not led any evidence to support their case. There is is no evidence to show when and on what terms and conditions the equitable mortgage, if any, had been created and what is the outstanding burden of it on the property. As held earlier, neither the defendant No.1 had disclosed, if there was any equitable mortgage in favor of the Bank nor the plaintiffs were aware of such equitable mortgage when they entered into the agreement to sell and paid part purchase price. They are bona fide purchasers for consideration and without notice of the claim of the Bank. As held earlier the Bank Staff had colluded with defendant No. 1 when they parted with the documents of title of the property and gave to defendant No.1 surreptitiously enabling him to enter into an agreement to sell with the plaintiffs concealing the encumbrance on the property. As such the bank is estopped in law from enforcing their claim, if any, due from the defendant No.1 to the prejudice of plaintiffs on the basis of this alleged equitable mortgage on this property. This issue is decided against the defendant No. 2.
66. Issue No. 11
'To what relief is the plaintiff entitled?'
67. The ordinary rule is to grant specific performance. It ought to be denied only when equitable consideration point to its refusal and the circumstances show that damage would constitute an adequate relief (Prakash Chandra v. Angadlal & Ors. : AIR1979SC1241 ).
68. There is nothing to show that the plaintiffs had acted unfairly at any time. There is also nothing to show that by any act of commission or omission, they had shown their unwillingness or unpreparedness or prevented the defendant from fulfillling his obligation. In other words, the conduct of the plaintiffs has not been such as to disentitle them to the equitable relief of specific performance. There is also nothing to prove that the performance of the contract would involve the defendant in some hardship which he did not foresee.
69. Learned counsel for the defendant has contended that both the parties were under mistake of facts regarding the mortgage. This has no substance. The defendant had agreed and the plaintiffs had accepted that the property shall be conveyed to the plaintiffs free from all sorts of encumbrances whatsoever.
70. Then it is contended that it would be harsh to defendant to pay Bank dues which exceed Rs. 15.00 lakhs and also to part with the property. When the mortgage may have been created, the worth of the property would not have been more than Rs. 2.00 lakh. So, it cannot be said that it was intended to secure the present liability of Rs. 15.00 lakh. Moreover, this was not something which the defendant did not know at the time of the agreement to sell. He cannot wriggle out of his obligations by his own fraudulent acts and conduct.
71. It was then contended that the possession of the part of the property as admitted by the plaintiffs was given by way of collateral security and not in part performance of the agreement. The contention seems to be that it was given as a security for refund of the part payment made by the plaintiffs. The part payment and the delivery of part possession of the premises took place simultaneously and in compliance of the stipulations agreed between the parties in the agreement to sell. Neither the amount was given as loan nor the possession was given as security for its repayment. Obviously, both these were in Part performance towards the agreement of sale. This contention also has no substance.
72. The result is that the contract of sale between the parties is lawful, has been partially and substantially performed and acted upon by both the parties and possession of substantial part of the property was delivered to the plaintiffs who are since then in occupation and enjoyment thereof. The contract is capable of specific performance. There is no valid ground or justification why this Court ought not to pass a decree for specific per-formance of this contract in favor of the plaintiffs.
73. The suit of the plaintiffs for specific performance of the agreement Ex. P-1 is accordingly decreed and it is ordered as under:-
1.(a)The defendant No.1 shall execute a proper sale deed in favor of the plaintiffs after obtaining permission/clear- ances from any authority or authorities concerned as may be required within two months in accordance with terms of agreement Ex. P-1, conveying the title in the property free from all sorts of liabilities and encumbrances whatsoever on the property.
(b) A decree for possession against the defendants in respect of remaining portion of the property is also passed in favor of the plaintiffs.
(c) Defendant No. 2 shall join the defendant No. 1 in completing the sale by defendant No. 1 in favor of the plaintiffs free from all sorts of encumbrances.
(d) Defendants shall deposit in this Court within two weeks all the documents of title or other documents relating to the property as may be in their possession and power.
(e) The plaintiffs shall deposit in this court within one month hereafter the balance sale consideration of Rs. 1.00 lakh.
(f) If the defendants fail to so execute the sale deed and complete the sale, plaintiffs will be entitled to approach this court to complete the sale on behalf of the defendants through the agency of the Court after two months.
2. If the plaintiffs fail to deposit in this Court the balance sale price of Rs.1.00 lakh, the suit for specific performance shall be deemed to have been dismissed.
3. The suit for damages of the plaintiffs is dismissed.
4. Plaintiffs shall also get proportionate cost of the suit so far as the suit is decreed.