TaxTMI 
TaxTMI 
2010 (7) TMI 1181
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....e above property from leasehold to freehold and within 2-3 months the defendants will handover vacant physical possession of the above property to the plaintiff. b) The plaintiff will reconstruct the above property from his own money/funds with three storeys i.e. ground floor, first floor and second floor. c) Out of the said reconstructed three storeyed building, the plaintiff shall be entitled to own and possess the ground floor; and the first and second floors will be owned and possessed by the defendants. d) Besides bearing the expenses of construction and furnishing etc. of the proposed three storeyed building, the plaintiff shall also pay a sum of Rs. 3,71,000/- to the defendants at the time of handing over possession of the above house for reconstruction. e) Out of the agreed consideration of Rs. 3,71,000/-, a sum of Rs. 51,000/- was paid to the defendants in cash and the remaining consideration of Rs. 3,20,000/- was to be paid to the defendants at the time of handing over possession of the above house for reconstruction. In token of the same a Receipt for Rs. 51,000/- was duly executed by defendant No. 1. f) On getting conversion ....
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.... own money/funds within one year of handing over of possession by the defendants to the plaintiff and sanctioning of the building plan of the suit property. d) out of the said reconstructed three storeyed building the plaintiff shall be entitled to own and possess its ground floor only, and the first and second floors will be owned and possessed by the defendants. e) besides to bear the expenses of construction etc. of the proposed 3 storeyed complete building, the plaintiff shall also pay a sum of Rs. 3,20,000/- to the defendants at the time of handing over possession of the above house for reconstruction. f) the defendants will not transfer the title or possession of the suit property till execution of the collaboration Agreement but after its execution, the defendants would be within their full rights to enjoy lawfully the title and possession of the first floor and second floor of the building. g) the plaintiff will be fully entitled for the full title and possession of the ground floor of the building and the defendants would be left with no right, title or interest in the property of the ground floor of the building, however, he would not b....
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....rably merely owing to the pendency of the present suit. While nearly nothing of the plaintiff is at stake in pursuing the present suit, the defendants as aforesaid will be losers even if ultimately succeed. Courts cannot be silent spectators to the parties being put on such unequal footing. The remedy of defendants suing the plaintiffs for damages caused to them, after succeeding in the present suit is not efficacious. Affluent speculators in immovable properties cannot be permitted to misuse the process of the court to compel owners to transact with them only. In the circumstances, it is deemed expedient to direct the plaintiff to file an affidavit/undertaking to this Court to, in the event of not succeeding in the suit pay a sum of Rs. 25 lacs by way of damages to the defendants. If the plaintiff is reasonably confident of the genuineness of his case, the plaintiff ought not to suffer any harm by giving such undertaking. The said amount has been arrived at because of the averments in the plaint that the plaintiff was to spend Rs. 20 lacs in development of the property and in lieu thereof was to become the owner of the ground floor of the newly constructed property. The p....
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.... of issues, having prima facie found not much merit in the case of the appellant, considered it appropriate to impose certain terms and conditions. We may notice that the provisions of Order 39 of the said Code deals with temporary injunctions and interlocutory orders. Order 39 Rule 2(2) authorizes the court to grant injunction on such terms as deems proper including giving of security. Thus, when the prayer for interim relief has to be granted, provision has been specifically made authorizing the court to make orders for keeping accounts, giving security or otherwise as the court thinks fit. The appellant has conveniently not filed an interim application to avoid the rigour of such an order. Normally in a suit for specific performance and that too dealing with an immovable property, a party would seek interim protection. The appellant has not done so. It is an ingenious method of keeping a suit alive without claiming interlocutory relief and creating a cloud over a property in view of the provisions of Section 52 of Transfer of Property Act. We do think that the courts cannot look helplessly at such tactics and ignore the problem of huge docket, which ar....
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....x parte. On the submissions of the appellant, the following question arises for our consideration: (i) Whether a court has the power to pass an order directing a plaintiff in a suit for specific performance (or any other suit), to file an undertaking that in the event of not succeeding in the suit, he shall pay Rs. 25 lakhs (or any other sum) by way of damages to the defendant? 8. We are broadly in agreement with the High Court that on the material presently on record, the likelihood of appellant succeeding in the suit or securing any interim relief against the defendants is remote. We may briefly set out the reasons therefor. 8.1 It is doubtful whether the collaboration agreement, as alleged by the appellant, is specifically enforceable, having regard to the prohibition contained in Section 14(1)(b) and (d) of the Specific Relief Act, 1963. The agreement propounded by the appellant is not an usual agreement for sale/transfer, where the contract is enforceable and if the defendant fails to comply with the decree for specific performance, the court can have the contract performed by appointing a person to execute the deed of sale/transfer under Order XXI Rule 32(5) of....
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.... a rent control legislation, which is enforceable under the statutory provisions of the special law. A collaboration agreement of the nature alleged by the appellant is not one that could be specifically enforced. Further, as the appellant has not made an alternative prayer for compensation for breach, there is also a bar in regard to award of any compensation under Section 21 of the Specific Relief Act. 8.2 The appellant claims to be a builder and real estate dealer. If the appellant entered into a collaboration agreement orally with numerous details as set out in the plaint (extracted in Para (2) above) and could secure a receipt in writing for Rs. 51,000/-, nothing prevented him from reducing the said terms of the alleged collaboration agreement in the form of an agreement or Memorandum of Understanding and have it signed by the owners of the property. No reason is forthcoming as to why that was not done. 8.3 The property stands in the name of second respondent (Defendant No. 2), but she did not sign the receipt. There is nothing to show that the second respondent participated in the alleged negotiations or authorized her husband-the first respondent to enter into any coll....
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....ndant to agree for some kind of settlement. It is these circumstances which persuaded the High Court to find some way to do justice, leading to the impugned direction. Having broadly agreed with the High Court in regard to the factual position and the adverse consequences of the suit, the question that remains is whether in such a situation, the High Court could have issued the impugned interim direction. 10. Every person has a right to approach a court of law if he has a grievance for which law provides a remedy. Certain safeguards are built into the Code to prevent and discourage frivolous, speculative and vexatious suits. Section 35 of the Code provides for levy of costs. Section 35A of the Code provides for levy of compensatory costs in respect of any false or vexatious claim. Order 7 Rule 11 of the Code provides for rejection of plaint, if the plaint does not disclose a cause of action or is barred by any law. Order 14 Rule 2 of the Code enables the court to dispose of a suit by hearing any issue of law relating to jurisdiction or bar created by any law, as a preliminary issue. Even if a case has to be decided on all issues, the court has the inherent power to expedite the ....
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....e suit. 11.2 Order XXV Rule 1 of Code provides that at any stage of a suit, the court may either on its own motion or on the application of any defendant order the plaintiff for reasons to be recorded, to give security for the payment of all costs incurred or likely to be incurred by the defendant. 12. But the Code, nowhere authorizes or empowers the court to issue a direction to a plaintiff to file an undertaking to pay damages to the defendant in the event of being unsuccessful in the suit. The Code also does not contain any provision to assess the damages payable by a plaintiff to defendant, when the plaintiff's suit is still pending, without any application by defendant, and without a finding of any breach or wrongful act and without an inquiry into the quantum of damages. There is also no contract between the parties which requires the appellant to furnish such undertaking. None of the provisions of either TP Act or Specific Relief Act or any other substantive law enables the court to issue such an interim direction to a plaintiff to furnish an undertaking to pay damages. In the absence of an enabling provision in the contract or in the Code or in any substantive law....
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.... in deciding the cause before it. These powers are not powers over the substantive rights which any litigant possesses. Specific powers have to be conferred on the courts for passing such orders which would affect such rights of a party. (emphasis supplied) 13.2 In Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal AIR 1962 SC 527, this Court held: ...that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in Section 151 itself. But those powers are not to be exercised when their exercised may be in conflict with what had been expressly provided in the Code or against the intentions of the legislature. 13.3 In Ram Chand and Sons Sugar Mills Pvt. Ltd. v. Kanhayalal Bhargav AIR 1966 SC 1899 this Court reiterated that the inherent power of the court is in addition to and complementary to the powers expressly conferred under the Code but that power will not be exercised if its exercise is inconsistent with, or comes into conflict with any of the powers expressly or by necessary implication conferred by the other provisions of the Code. Section 151 however is not intended to create a new procedure or any....
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....anxiety shown by the High Court to discourage land-grabbers, speculators, false claimants and adventurers in real estate from pressurizing hapless and innocent property owners to part with their property against their will, by filing suits which are vexatious, false or frivolous. But we cannot approve the method adopted by the High Court which is wholly outside law. In a suit governed by the Code, no court can, merely because it considers it just and equitable, issue directions which are contrary to or not authorized by law. Courts will do well to keep in mind the warning given by Benjamin N. Cardozo in The Nature of the Judicial Process: (Yale University Press -1921 Edition Page 114): The Judge even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to "the primordial necessity of order in social li....
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....court insist upon the plaintiff to give an undertaking to pay compensation to defendant on the event of dismissal of the suit, irrespective of the reasons for the dismissal of the suit? If the plaintiff furnishes such an undertaking and proceeds with the suit and is able to establish the oral agreement as pleaded by him, but the court dismisses the suit either because it holds that the prayer is barred under Section 14(1)(b) and (d) of the Specific Relief Act, or because it decides not to exercise discretion to grant specific performance under Section 20(2) of the Specific Relief Act, should the plaintiff be made liable to pay Rs. 25 lakhs as compensation to the defendants? 18. The attempt of the Division Bench to support the order of the learned Single Judge with reference to Order XXV Rule 1 of the Code is clearly erroneous. The said provision, as noticed above, only enables the court to require the plaintiff to furnish security for payment of costs incurred or likely to be incurred by the defendant. 19. If the High Court felt that the prayer in the suit was vexatious or not maintainable, it could have considered whether it could reject the suit under Order 7 Rule 11 of the....
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....the doctrine of lis pendens does not annul the conveyance by a party to the suit, but only renders it subservient to the rights of the other parties to the litigation. Section 52 will not therefore render a transaction relating to the suit property during the pendency of the suit void but render the transfer inoperative insofar as the other parties to the suit. Transfer of any right, title or interest in the suit property or the consequential acquisition of any right, title or interest, during the pendency of the suit will be subject to the decision in the suit. 21. The principle underlying Section 52 of TP Act is based on justice and equity. The operation of the bar under Section 52 is however subject to the power of the court to exempt the suit property from the operation of section 52 subject to such conditions it may impose. That means that the court in which the suit is pending, has the power, in appropriate cases, to permit a party to transfer the property which is the subject-matter of the suit without being subjected to the rights of any part to the suit, by imposing such terms as it deems fit. Having regard to the facts and circumstances, we are of the view that this is....
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.... not as a punishment of the defeated party but as a recompense to the successful party for the expenses to which he had been subjected, or, as Lord Coke puts it, for whatever appears to the Court to be the legal expenses incurred by the party in prosecuting his suit or his defence. The theory on which costs are now awarded to a plaintiff is that default of the defendant made it necessary to sue him, and to a defendant is that the plaintiff sued him without cause; costs are thus in the nature of incidental damages allowed to indemnify a party against the expense of successfully vindicating his rights in court and consequently the party to blame pays costs to the party without fault. These principles apply, not merely in the award of costs, but also in the award of extra allowance or special costs. Courts are authorized to allow such special allowances, not to inflict a penalty on the un-successful party, but to indemnify the successful litigant for actual expenses necessarily or reasonably incurred in what are designated as important cases or difficult and extraordinary cases. In Salem Advocate Bar Association v. Union of India 2005 (6) SCC 344 this after noticing that the award ....
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....e for each litigant to adopt alternative dispute resolution (ADR) processes and arrive at a settlement before the trial commences in most of the cases. In many other jurisdictions, in view of the existence of appropriate and adequate provisions for costs, the litigants are persuaded to settle nearly 90% of the civil suits before they come up to trial. (e) The provisions relating to costs should not however obstruct access to courts and justice. Under no circumstances the costs should be a deterrent, to a citizen with a genuine or bonafide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts. 24. At present these goals are sought to be achieved mainly by sections 35, 35A and 35B read with the relevant civil rules of practice relating to taxing of costs. Section 35 of the Code vests the discretion to award costs in the courts. It provides that normally the costs should follow the event and court shall have full power to determine by whom or out of what property, and to what extent such costs are to be paid. Most of the costs taxing rules, including the rules in force in Delhi provide each party should file a....