TMI Blog2018 (10) TMI 1822X X X X Extracts X X X X X X X X Extracts X X X X ..... n law is that courts do not normally order specific performance of a contract to build or repair. But this Rule is subject to important exceptions, and a decree for specific performance of a contract to build will be made only upon meeting the requisite requirements under law. In a construction contract, the contractor has no interest in either the land or the construction carried out on the land. But, in other species of development agreements, the developer may have acquired a valuable right either in the property or the constructed area. There are various incidents of ownership of in respect of an immovable property. Primarily, ownership imports the right of exclusive possession and the enjoyment of the thing owned. The owner in possession of the thing has the right to exclude all others from its possession and enjoyment. The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst appeal. 2. The subject matter of the suit for specific performance is a development agreement dated 14 April 1992, entered into by the Appellant with the predecessor-in- interest of the Respondents (Late Kalidas Sadhu) 3 in respect of premises situated at 243N, Acharya Prafulla Chandra Road, P.S. Burtolla, Kolkata - 700 006. The agreement recites that the owners had approached the Appellant for construction of a building on the land and that the following terms, inter alia, were agreed upon by and between the parties: a) The Appellant agreed to apply at his own costs and expenses for sanction of the plan of a proposed building complex on 14 cottahs 5 chittacks and 40 square feet, to the Calcutta Municipal Corporation (Clause-1 of the agreement); b) The plan of the building complex would be prepared and submitted by the Appellant to the Calcutta Municipal Corporation, after the approval of the Respondent (Clause -2 of the agreement); c) The Appellant shall deposit with the Respondent an amount of ' 4,00,000/- without interest which shall be refundable upon the completion of the building (Clause-3 of the agreement); d) If for any reason after the plan is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his advocate, denying the contents of the notice on the ground that he had by a notice dated 19 May 2003 cancelled the agreement and requested the Appellant to return all documents and collect the deposit. 6. On 6 August 2003, the Appellant instituted a suit 4 in the City Civil Court seeking a declaration that the cancellation of the agreement by the Respondent was invalid and a permanent injunction restraining the Respondent from entering into any agreement with a third party for sale of the premises. On 28 September 2005 the City Civil Court allowed an amendment of the plaint, by which a prayer for specific performance was included. 7. On 28 February 2007, the City Civil Court dismissed the Suit with the following observation: No tangible evidence is forthcoming in the instant suit by which it can be said that the Plaintiff (developer) obtained possession of the suit property i.e. the possession of the suit property is/has handed over to him after the execution of the agreement in question. The City Civil Court relied on a judgment of a Division Bench of the High Court of Calcutta in Vipin Bhimani v. Smt. Sunanda Das (2006) 2 CHN 396, that a suit for specific per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of owners) or whether a purposive interpretation to the legislation would be required, so as to provide a broader set of remedies to both owners and developers. In deciding this issue the court will need to scrutinise the nature of a development agreement. 11. Section 14 provides thus: 14. Contracts not specifically enforceable- (1) The following contracts cannot be specifically enforced, namely - (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms; (c) a contract which is in its nature determinable; (d) a contract the performance of which involves the performance of a continuous duty which the court cannot supervise. (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance of a contract to build or repair. But this Rule is subject to important exceptions, and a decree for specific performance of a contract to build will be made only upon meeting the requisite requirements under law. According to Halsbury's Laws of England 6 , the discretion to grant specific performance is not arbitrary or capricious; it is governed by principles developed in precedents. The judge must exercise the discretion in a judicious manner. Circumstances bearing on the conduct of the Plaintiff, such as delay, acquiescence and breach or some other circumstances outside the contract, may render it inequitable to enforce it. The position as elucidated in Halsbury's Laws of England 7 is thus: ... the court does not normally order specific performance of a contract to build or repair. However, this Rule is subject to important exceptions, and a decree for specific performance of a contract to build will be made if the following conditions are fulfilled: (1) that the building work is defined by the contract between the parties; (2) that the Plaintiff has a substantial interest in the performance of the contract of such a nature that he cannot be adequately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff bringing forth a suit for specific performance have been analysed in Hudson's Building and Engineering Contracts 8 and in Price v. Strange [1978] 1 Ch. 337 at page 359, where the Rule has been settled that the court will order specific performance of an agreement to build if: (i) the building work is sufficiently defined by the contract, for example by reference to detailed plans; (ii) the Plaintiff has a substantial interest in the performance of the contract of such a nature that damages would not compensate him for the Defendant's failure to build; and (iii) the Defendant is in possession of the land so that the Plaintiff cannot employ another person to build without committing a trespass. 16. The expression development agreement has not been defined statutorily. In a sense, it is a catch-all nomenclature which is used to be describe a wide range of agreements which an owner of a property may enter into for development of immovable property. As real estate transactions have grown in complexity, the nature of these agreements has become increasingly intricate. Broadly speaking, (without intending to be exhaustive), development agreements may be of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st in either the land or the construction carried out on the land. But, in other species of development agreements, the developer may have acquired a valuable right either in the property or the constructed area. There are various incidents of ownership of in respect of an immovable property. Primarily, ownership imports the right of exclusive possession and the enjoyment of the thing owned. The owner in possession of the thing has the right to exclude all others from its possession and enjoyment. The right to ownership of a property carries with it the right to its enjoyment, right to its access and to other beneficial enjoyments incidental to it. (B. Gangadhar v. BG Rajalingam (1995) 5 SCC 239 at para 6). Ownership denotes the relationship between a person and an object forming the subject matter of the ownership. It consists of a complex of rights, all of which are rights in rem, being good against the world and not merely against specific persons. There are various rights or incidents of ownership all of which need not necessarily be present in every case. They may include a right to possess, use and enjoy the thing owned; and a right to consume, destroy or alienate it. (Swades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work to a party for consideration. (b) An Agreement for entrusting the work of development to a party with added rights to sell the constructed portion to flat purchasers, who would be forming a Co-operative Housing Society to which society, the owner of the land, is obliged to convey the constructed portion as also the land beneath construction on account of statutory requirements. (c) A normal agreement for sale of an immovable property. An Agreement of the first type normally is not enforceable as compensation in money is an adequate remedy. An Agreement of the third type would normally be specifically enforceable unless the contrary is proved. A mere agreement for development, which creates no interest in the land would not be specifically enforced. 19. The judgment of the Bombay High Court in Della Developers Private Limited v. Noble Organics Private Limited (2010) 2 Bom CR 13, deals with a case where a development agreement was executed between the Petitioners and the Respondents. A dispute arose between the parties and arbitration proceedings were initiated. An order was passed by the Arbitrator Under Section 17 of the Arbitration and Conciliation Act 1996 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, under the agreement with the owner, promised a part of the constructed premises as owner thereof together with the proportionate area of the land. The Full Bench held that a right to seek specific performance of a development agreement is not barred either expressly or by necessary implication by the 1963 Act and a broad interpretation should be given to allow an adequate remedy: ...it would be preposterous to say that only the owner can maintain a suit against the developer for enforcing his rights and not vice-versa. If the developer has a right under the contract he must be having a remedy in the form of approaching a forum for appropriate redressal. A question of maintainability of a suit is completely different from the question of whether the suit will succeed or not on the facts of the case and in the light of the applicable law. Section 14(3)(c) of the Act can in no manner be interpreted as debarring a developer from approaching the legal forum for redressal of his grievance. 21. In the present case, the Respondent agreed to pay the Appellant the costs and expenses along with the agreed remuneration upon completion of the construction. If the Respondent fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apable of being specifically enforced; and (iv) A decree for specific performance of a contract to build will be made if the following conditions are fulfilled: a) the work of construction should be described in the contract in a sufficiently precise manner in order for the court to determine the exact nature of the building or work; b) the Plaintiff must have a substantial interest in the performance of the contract and the interest should be of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and c) the Defendant should have, 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. 23. The issue before this Court is whether Section 14(3)(c)(iii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. 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. 25. Having dealt with the first aspect of the matter, it is now necessary to determine wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, 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. 27. 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 gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt that granted the decree of specific performance to the developer on the grounds that it was inequitable to enforce specific performance in view of a change in the Master Plan. The court noted that a contract which involved continuous supervision of the court, was not specifically enforceable. Further, in the opinion of the court, at best the Plaintiff - builder could claim damages and the expenditure incurred by him for the implementation of the terms of the agreement. The above case has no applicability to the facts of the present case and is of no relevance as the issue in relation to the maintainability of a suit for specific performance by the builder against the owner has not been discussed. 30. The Appellant has also placed reliance on the decision in Faqir Chand Gulati v. Uppal Agencies Private Limited (2008) 10 SCC 345, where the issue before this Court was whether a landowner, who enters into an agreement with the builder, for construction of an apartment building is a consumer entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act, 1986. The Court held: We may notice here that if there is a breach by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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