2006 (8) TMI 647 - SC - Indian Laws

Prayer for grant of specific performance of contract - piece of vacant land - application was filed u/s 10 - refund advance amount - damages together with interest - cancellation of the deed of sale in favour of the subsequent purchaser - High Court refusing to exercise their jurisdiction u/s 20 - HELD THAT - It is a well-settled principle of law that even a void order is required to be set aside by a competent court of law inasmuch as an order may be void in respect of one person but may be valid in respect of another. A void order is necessarily not non est. An order cannot be declared to be void in a collateral proceeding and that too in absence of the authorities who were the authors thereof. The order passed by the authorities were not found to be wholly without jurisdiction. They were not thus nullities. It was therefore not a case where the Trial Court found that the Defendant had committed a fraud on the statutory authorities or on the court. The expression fraud in our opinion was improperly used. It must be noticed that admittedly when the agreement was entered into the proceedings under the 1976 Act were pending. The parties might have proceeded under a misconception. It is also possible that the Defendant had made misrepresentation to the Plaintiff; but the question which was relevant for the purpose of determination of the dispute was as to whether having regard to the proceedings pending before the competent authority under the 1976 Act the Defendant could perform their part of the contract. The answer thereto having regard to the order of the competent authority dated 08.08.1980 must be rendered in negative. Our attention has rightly been drawn by Mr. Gupta to the deed of sale executed by the Defendant in favour of others. By the said deeds of sale all the six co-sharers have sold portions of their house properties and lands appurtenant thereto. The total land sold to the purchasers by all the six co- sharers was below 900 sq. metres. Furthermore Section 20 of the Specific Relief Act confers a discretionary jurisdiction upon the courts. Undoubtedly such a jurisdiction cannot be refused to be exercised on whims and caprice; but when with passage of time contract becomes frustrated or in some cases increase in the price of land takes place the same being relevant factors can be taken into consideration for the said purpose. While refusing to exercise its jurisdiction the courts are not precluded from taking into consideration the subsequent events. Only because the Plaintiff-Respondents are ready and willing to perform their part of contract and even assuming that the Defendant was not entirely vigilant in protecting their rights in the proceedings before the competent authority under the 1976 Act the same by itself would not mean that a decree for specific performance of contract would automatically be granted. On the face of such order which as noticed hereinbefore is required to be set aside by a court in accordance with law a decree for specific performance of contract could not have been granted. Thus the impugned judgment cannot be sustained which is set aside accordingly. The appeals are allowed. However in the facts and circumstances of the case the parties shall pay and bear their own costs.

Issues Involved:
1. Jurisdiction of the High Court in ignoring orders by the competent authority under the Urban Land (Ceiling & Regulation) Act, 1976.
2. Legality of the decree for specific performance granted by the Division Bench.
3. Interference by the Division Bench with the judgment of the learned Trial Judge and Single Judge under Section 20 of the Specific Relief Act, 1963.
4. Direction for cancellation of the deed of sale in favor of the subsequent purchaser.
5. Application of Section 26 of the 1976 Act and the implications of fraud and misrepresentation.

Issue-wise Detailed Analysis:

1. Jurisdiction of the High Court:
The appellants argued that the High Court acted illegally and without jurisdiction by ignoring the orders passed by the competent authority under the 1976 Act. The Supreme Court agreed, noting that the competent authority's orders could not be challenged in the specific performance suit, and their validity could not be questioned collaterally. The Division Bench's approach was deemed unsound as it delved into the legality of the competent authority's orders and made unwarranted comments about their involvement.

2. Legality of the Decree for Specific Performance:
The Division Bench's decree for specific performance was challenged as contrary to the statutory provisions of the 1976 Act. The Supreme Court held that the agreement was contingent on obtaining permission from the competent authority, which was expressly refused. Therefore, the decree for specific performance could not be granted as the competent authority's refusal to grant permission was a significant factor.

3. Interference by the Division Bench:
The Division Bench's interference with the judgments of the learned Trial Judge and Single Judge was questioned under Section 20 of the Specific Relief Act, 1963. The Supreme Court emphasized that discretionary jurisdiction should not be interfered with lightly. The learned Trial Judge's decision to award damages instead of specific performance was based on the fact that the contract had become frustrated over time, and the Division Bench's interference was unwarranted.

4. Direction for Cancellation of the Deed of Sale:
The appellants contended that the High Court could not direct the cancellation of the deed of sale in favor of the subsequent purchaser. The Supreme Court concurred, stating that the subsequent purchasers were not parties to the suit, and the competent authority's orders regarding their transactions were not challenged. Therefore, the Division Bench's direction for cancellation was beyond its jurisdiction.

5. Application of Section 26 of the 1976 Act and Implications of Fraud and Misrepresentation:
The respondents argued that the learned Trial Court erred in not granting specific performance despite finding the defendant guilty of fraud. The Supreme Court clarified that the term "fraud" was improperly used, as the issue was more about misrepresentation. The agreement was made with the knowledge of pending proceedings under the 1976 Act, and the competent authority's refusal to grant permission was a valid reason for not performing the contract. The court noted that the competent authority's refusal was based on the unavailability of 1000 sq. meters of vacant land, making the contract unenforceable.

Conclusion:
The Supreme Court set aside the impugned judgment of the Division Bench, reinstating the decisions of the learned Trial Judge and Single Judge. The appeals were allowed, and the parties were directed to bear their own costs.

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