1991 (4) TMI 458 - HC - Indian Laws

Court rules for plaintiff in contract dispute: no concluded contract, misrepresentation by defendant. Plaintiff awarded Rs. 1 lakh.

The court ruled in favor of the plaintiff in a case involving the institution and verification of the suit, existence of a concluded contract, nature of ... Concluded contract of lease - token payment pending execution of formal lease - misrepresentation as vitiating consent - occupancy certificate and effect on validity of lease agreement - agent's inability to recover damages suffered by principal - interest under the Interest Act - court-fee on counter-claim and set-offAuthority to institute suit - Plaintiff-company duly authorised person had signed, verified and instituted the suit. - HELD THAT: - The plaintiff produced the board resolution and power of attorney authorising the managing director to execute a power of attorney in favour of PW 1, who signed and verified the plaint. The court relied on the originals and held that the suit was instituted by a duly authorised person on behalf of the plaintiff-company. [Paras 7]Plaintiff entitled to maintain the suit; Issue decided in favour of the plaintiff.Concluded contract of lease - contract to enter into a contract - Letters and receipt exchanged between the parties did not constitute a concluded lease; execution of a lease deed was a condition precedent. - HELD THAT: - Although material terms were discussed, the receipt (Ex. P19) expressly stated the sum was received 'subject to finalisation of lease deed as per our terms and conditions'. The endorsement showed the defendant insisted on execution of a lease deed on its terms and negotiations were thus continuing. Applying the authorities on when a formal document is a condition of the bargain, the court concluded no binding lease contract had come into existence. [Paras 18]No concluded contract of lease came into existence; issue decided for the plaintiff.Token payment pending execution of formal lease - The sum of Rs. 1 lakh was paid as token money and not as advance rent or consideration for a concluded contract. - HELD THAT: - The receipt and contemporaneous correspondence show the payment was described and accepted as 'token money' and expressly conditional upon finalisation of the lease deed. Since no concluded lease existed, the payment could not be treated as advance rent or consideration for a binding contract. [Paras 19]Payment treated as token money; not advance rent.Misrepresentation as vitiating consent - Defendant misrepresented or concealed its capacity to let out the premises, and such misrepresentation vitiated any agreement reached. - HELD THAT: - The defendant did not disclose at the initial offer that it was not the owner and that its authority to let out the premises was unclear. The resolution from the owner, when later produced, did not clarify whether a sub-lease or an agency lease was intended. This concealment of a material fact induced the plaintiff to give the token money and issue Ex. P2. The court held that this lack of disclosure amounted to misrepresentation that would vitiate the agreement had a concluded contract existed. [Paras 23, 24, 26]Misrepresentation found; contract, if any, vitiated.Occupancy certificate and effect on validity of lease agreement - Absence of an occupancy/completion certificate does not by itself render an agreement to lease void. - HELD THAT: - The court reviewed the relevant bye-laws and earlier decisions and held that while occupation without an occupancy certificate may attract penalties, there is no statutory provision rendering an agreement to lease void for want of such certificate. The ability to occupy is distinct from the contract to take on lease; a prospective lessee should enquire about certificates before contracting, but lack of occupancy certificate does not automatically vitiate the lease. [Paras 24, 25]Absence of occupancy certificate does not void the lease agreement.Interest under the Interest Act - Plaintiff entitled to interest under the Interest Act from the date of service of notice; rate fixed at 12% per annum. - HELD THAT: - The plaintiff served a notice (Ex. P17/Ex. P6 series). Under the Interest Act the plaintiff is entitled to interest from the date of service of notice. The court, noting absence of evidence as to prevailing bank rate, awarded 12% per annum from the date of service of the notice mentioned in the record. [Paras 27, 34, 35]Interest granted at 12% p.a. from the notice date until realization.Agent's inability to recover damages suffered by principal - Defendant, being not the owner and acting as agent of the owner, was not entitled to recover damages for loss of rent; any loss belonged to the owner. - HELD THAT: - The defendant did not produce a lease from the owner in its favour and ultimately the building was let by the owner. The court found that any loss from non-letting was suffered by the owner and not by the defendant acting as agent. Consequently the defendant failed to establish entitlement to damages or consequential interest. [Paras 28]Defendant not entitled to damages or interest on damages.Appropriation and refund of token money - Defendant not entitled to retain or appropriate the token money; plaintiff entitled to refund. - HELD THAT: - Because no concluded contract existed (and alternatively because any contract would be vitiated by misrepresentation), the defendant could not legitimately appropriate the Rs. 1 lakh. Upon plaintiff's demand and legal notice, the defendant was bound to refund the token money. [Paras 29, 34, 35]Plaintiff entitled to refund of Rs. 1 lakh; defendant not entitled to retain it.Court-fee on counter-claim and set-off - Court-fee was payable by the defendant on the counter-claim including the amount set off; defendant directed to furnish proper court-fee. - HELD THAT: - The defendant adjusted Rs. 1 lakh against its claimed damages and paid court-fee only on the balance. The court analysed authorities distinguishing adjustment/set-off and counter-claim and held that the defendant's pleadings required payment of court-fee on the full claim; the defendant was directed to furnish the deficiency in court-fee within two weeks. [Paras 30, 31, 32]Defendant to pay proper court-fee on counter-claim; direction to furnish within two weeks.Final Conclusion: Suit decreed: plaintiff entitled to refund of the token money with interest at 12% per annum from the date of service of the notice until realization; costs awarded to plaintiff; defendant's counter-claim dismissed. Issues Involved:1. Institution, signing, and verification of the suit.2. Existence of a concluded contract.3. Nature of the payment (advance rent or token money).4. Misrepresentation by the defendant.5. Defects in the defendant's title to the premises.6. Entitlement to interest.7. Entitlement to damages by the defendant.8. Validity and legality of the appropriation of Rs. 1 lakh by the defendant.9. Payment of proper court fee by the defendant on the counter-claim.10. Entitlement of the defendant to claim interest.Issue-wise Detailed Analysis:Issue No. 1:The plaintiff's representative, PW I, presented the original power of attorney and minutes book, proving the resolution authorizing him to sign and verify the plaint and institute the suit. The court held that the suit was properly instituted, signed, and verified by a duly authorized person. The issue was decided in favor of the plaintiff.Issue No. 2:The court examined the documents exchanged between the parties to determine if a concluded contract existed. The plaintiff's letter dated August 5, 1983, and the defendant's receipt of Rs. 1 lakh as token money indicated that the lease deed was subject to finalization. The court concluded that the execution of the lease deed was a condition precedent for the contract, and no concluded contract existed between the parties. This issue was decided in favor of the plaintiff.Issue No. 3:The court found that the Rs. 1 lakh was paid as token money and not as advance rent. This amount was to be adjusted against the total advance only if the lease deed was executed. Since no concluded contract existed, the Rs. 1 lakh could not be considered advance rent. The issue was decided against the defendant.Issue No. 4:The court determined that the defendant misrepresented its authority to lease the premises. The defendant failed to disclose its capacity to lease the premises until after receiving the token money. This misrepresentation invalidated any potential contract, allowing the plaintiff to avoid the agreement. The issue was decided in favor of the plaintiff.Issue No. 5:The court noted that the defendant did not have a valid occupancy certificate from the DDA, which was necessary for occupying the premises. However, the absence of an occupancy certificate did not void the contract under the law. Nonetheless, the misrepresentation regarding the defendant's authority to lease the premises vitiated the contract. The issue was decided in favor of the plaintiff.Issue No. 6:The plaintiff was entitled to interest under the Interest Act from the date of the notice (November 17/18, 1983). The court awarded interest at 12% per annum from the date of the notice until realization. The issue was decided in favor of the plaintiff.Issue No. 7:The court found that the defendant did not suffer damages as it was not the owner of the property. The owner, M/s. Pawan Builders Private Limited, suffered any potential damages. Therefore, the defendant was not entitled to recover damages from the plaintiff. The issue was decided against the defendant.Issue No. 8:Since no concluded contract existed, the plaintiff was entitled to recover Rs. 1 lakh, and the defendant was not entitled to retain it. The defendant was bound to refund the amount upon the plaintiff's demand. The issue was decided against the defendant.Issue No. 9:The court held that the defendant was required to pay court fees on the entire counter-claim amount, including the Rs. 1 lakh claimed as adjusted. The defendant was instructed to furnish the court fee within two weeks. The issue was decided against the defendant.Issue No. 10:As the defendant was not entitled to recover damages, it was also not entitled to claim interest. The issue was decided against the defendant.Relief:The court decreed the suit in favor of the plaintiff, awarding Rs. 1 lakh with interest at 12% per annum from September 20, 1983, until realization. The plaintiff was also awarded the costs of the suit. The defendant's counter-claim was dismissed. Suit decreed.