Chiranji Lal Garg vs Mohan Singh Chopra

Devinder Gupta, J.—The plaintiffs in a suit for specific performance of agreement to sell dated 4-10-1993 have in this application, filed under Order 39 Rules 1 and 2 of the CPC prayed for an order of injunction restraining defendant Nos. 1 and 2 from entering into agreement of sale, parting with possession or creating third party''s interest in respect of property No. B-7/5, Safdarjung Enclave, New Delhi. In addition, the plaintiffs have also prayed for restraining defendant No. 3 from selling by way of auction or otherwise the said property for recovery of the amount due from defendant No. 1. An ad interim ex parte order of injunction, as prayed, was granted on 14-3-1995 against defendant Nos. 1 and 2. Insofar as defendant No. 3 is concerned, the order, as prayed, was passed subject to plaintiffs depositing a sum of Rs. 50 lakhs in the Registry of this Court by 20-3-1995.

That on 31-7-1995, it was stated at the bar that plaintiff had not deposited the said amount of Rs. 50 lakhs, as per order dated 14-3-1995. It was observed that since the amount had not been deposited, the order passed on 14-3-1995, as against defendant No. 3 had become inoperative. The fact that amount of Rs. 50 lakhs was not deposited was also confirmed by the learned counsel for the plaintiff on 14-3-1995.

Plaintiff''s case is that the suit property is owned by defendant No. 1, which has been constructed upon a plot of land granted by virtue of lease deed executed in his favour by President of India through Delhi Development Authority on 27-7-1967. Defendant No. 2 is the attorney for defendant No. 1. In 1993, defendant No. 1 through defendant No. 2 approached the plaintiff and offered to sell the property. Plaintiff was given to understand that the ground floor of the said property was in occupation of an Indonesian National since 1989 as a tenant and the first floor was in occupation of defendant No. 2 as a licensee. Because of the hindrances on the property, namely, occupation in the ground floor by a tenant and that defendant No. 1 was not in a position to pay income tax/wealth-tax dues, plaintiff was approached with an offer to sell the property. As per the understanding, the plaintiff was required to get the said property vacated from the occupants and also to clear dues of the income tax Department. After long negotiations, agreement to sell in writing was entered into on 4-10-1993. The property was agreed to be sold for a total consideration of Rs. 77 lakhs, out of which Rs. 5 lakhs was paid. As per the agreement, power to deal with income tax Department, inasmuch as in obtaining the ''no objection certificate'' under the provisions of section 269UD of the income tax Act, 1961, obtaining transfer certificate and completion of other formalities were the responsibility of the plaintiff. It is alleged that time was made the essence of the agreement. Plaintiff applied for requisite certificate and the same was granted on 27-12-1993. The plaintiff was informed that there was huge outstanding demands from income tax Department, which were to be realised from defendant No. 1, for which the property stood attached. Plaintiff informed defendant No. 2 of the department''s claim against defendant No. 1. Plaintiff thereafter came in contact with defendant No. 1 through defendant No. 2 to comply with the agreement and to execute the sale deed. It is alleged that defendants failed to abide by the terms of the agreement and cause thereafter arose to the plaintiff for filing the suit for specific performance.

The suit is vehemently opposed by the defendants. It has been pleaded that plaintiff No. 2 is a builder and has commercial motive to make speculative gains. He had agreed to purchase the property on ''as is where is'' basis. Out of the sale consideration plaintiff No. 2 had agreed to make payment directly to income tax authorities, since he was aware of the fact that property was under attachment for the income tax dues. Defendant has given the background and the circumstances under which agreement dated 4-10-1993 came into being reflecting therein the earlier advance payment of Rs. 2 lakhs received by defendant No. 1 from plaintiff No. 2. It is also pleaded that income tax/wealth-tax dues in or around October 1993 were to the tune of Rs. 36,35,96,000 plus interest, as per certificate dated 27-11-1993. Tax demands were disputed and appeals were pending. In terms of the undertaking, the tax dues could have been adjusted out of the balance sale consideration payable to the defendant, since no objection had also been received from the income tax authorities. Since plaintiff No. 2 had entered into the transaction for a speculative purpose and did not have money to make the payment, it is the plaintiff who failed to perform his part of the contract, since it provided payment on or before 31-12-1993 and, thus, it is alleged that the plaintiff is not entitled to the decree of specific performance. It is also pleaded that plaintiff No. 2 assigned the personal obligations as regards payment under the agreement to sell in favour of plaintiff No. 1 without the consent of defendants, therefore, contract stood revoked which otherwise is invalid and unenforceable. Obligation to pay the balance consideration of Rs. 72 lakhs was personal to plaintiff No. 2, more particularly liability to pay off the income- tax demands, which were subsisting against defendant No. 1, for which property in question had been attached was personal, which could not have been assigned without defendants concurrence. In nutshell, defendants case is that it was plaintiff No. 2, who had not been ready and willing to perform his part of the contract. Number of circumstances have been pleaded that defendant No. 2 had been making regular visits to Delhi to impress upon plaintiff No. 2 to perform his part of the contract but they were not ready and willing to perform their part of the contract. It was due to the fault of the plaintiffs that tax liability has now increased many fold and now it was over Rs. 80 lakhs. Defendant No. 3 (income tax Department) has also filed separate written statement. I have heard the learned counsel for the parties. For deciding the application, it is necessary to take into account the plaintiffs conduct at least to come to a prima facie conclusion as to whether there is a good ground made out for grant of injunction. It is plaintiffs own case that as per the understanding plaintiff No. 2 had to clear the dues of the income tax Department. The total sale consideration agreed was Rs. 77 lakhs, out of which Rs. 5 lakhs had been paid. It is also plaintiffs case that requisite ''no objection certificate'' had been issued by the authorities on 27-12-1993. Readiness and willingness to perform the contract is sine qua non for grant of a decree for specific performance of contract. Assuming that plaintiff was ready and willing to perform his part of the contract as on the date of agreement, it has to be shown that thereafter also till the filing of the suit and as, of today plaintiff has been ready and willing to perform his part of the contract. On record there is hardly any material, even to come to a prima facie conclusion about the fact of readiness and willingness to perform his part of the contract on the part of plaintiff No. 2 in clearing off the income tax dues of defendant No. 1. This inference can be drawn from the circumstance that when on 14-3-1995, an order restraining defendant No. 3 from selling or auctioning the property for recovering the tax dues of defendant No. 1 was passed subject to plaintiff''s depositing a sum of Rs. 50 lakhs in the Registry of this Court by 20-3-1995, till date the amount has not been deposited and there is no explanation forthcoming as to why the amount has not been deposited. Not only prima facie case but also balance of convenience is one of the circumstance which will have to be taken into consideration as to whether the same is in favour of grant of injunction. The present position is that the income tax authorities have now again advertised the property for being auctioned for non-payment of the income tax dues, which have now gone beyond Rs. 80 lakhs. In case property is allowed to be auctioned, plaintiffs will not be entitled to have their contract specifically enforced and will not be entitled to have the property conveyed in their favour. In case injunction is refused, it might enable defendant No. 1 to enter into profitable negotiations now for sale of the property, because of rise in prices of the property and paying off the income tax/wealth-tax dues. Allowing the injunction to continue against defendant Nos. 1 and 2, thus is likely to result in more loss and harm to defendant Nos. 1 and 2 which it will not be possible to compensate by awarding damages, whereas loss or injury, if any, likely to be suffered by the plaintiffs can very well be compensated in terms of money. Loss or harm, if any, likely to be occasioned due to grant of injunction to defendant Nos. 1 and 2 would be more than what it would be in case injunction is not granted. Applying the ratio of the decision of the Supreme Court in Gujarat Bottling Co. Ltd. v. Coca Cola Co. 1995 JT (6) SC 3, it is a fit case for not granting ad interim injunction and injunction granted earlier deserved to be vacated by dismissing plaintiff''s application. Accordingly, the application is dismissed. Ex parte order of injunction is hereby vacated.