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TMI Blog2010 (7) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... etails as set out in the plaint (extracted in Para (2) above) and could secure a receipt in writing for ₹ 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. 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 collaboration agreement in respect of the suit property. The receipt is not signed by the first respondent as Attorney Holder or as the authorized representative of the owner of the property. From the plaint averments it is evident that appellant did not even know who the owner was, at the time of the alleged negotiations and erroneously assumed that first respondent was the owner. The execution of a receipt for ₹ 51,000/- by the first respondent even if proved, may at best make out a tentative token payment pending negotiations and finalization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saving the inherent power of the court to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the court. It cannot be invoked with reference to a matter which is covered by a specific provision in the Code. It cannot be exercised in conflict with the general scheme and intent of the Code. It cannot be used either to create or recognize rights, or to create liabilities and obligations not contemplated by any law. The direction to the plaintiff to furnish an undertaking to pay ₹ 25 lakhs to defendants in the event of losing the case, is an order in terrorem. It is made not because the plaintiff committed any default, nor because he tried to delay the proceedings, nor because he filed any frivolous applications, but because the court is unable to find the time to decide the case in view of the huge pendency. We appreciate the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate provisions relating to costs has resulted in a steady increase in malicious, vexatious, false, frivolous and speculative suits, apart from rendering Section 89 of the Code ineffective. Any attempt to reduce the pendency or encourage alternative dispute resolution processes or to streamline the civil justice system will fail in the absence of appropriate provisions relating to costs. There is therefore an urgent need for the legislature and the Law Commission of India to re-visit the provisions relating to costs and compensatory costs contained in Section 35 and 35A of the Code. In the result, we allow this appeal in part, set aside the order of the Division Bench and Learned Single Judge directing the plaintiff-appellant to file an affidavit undertaking to pay ₹ 25 lakhs to defendants-respondents in the event of failure in the suit. Instead, we permit the defendants-respondents u/s 52 of TP Act, to deal with or dispose of the suit property in the manner they deem fit, in spite of the pendency of the suit by the plaintiff, subject to their furnishing security to an extent of Rs. Three lakhs to the satisfaction of the learned Single Judge. - R.V. Raveendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Understanding to be duly executed by the parties i.e. the builder and the owners of the above property. The appellant further alleged that in pursuance of the above, he paid a sum of ₹ 51,000/- to first respondent in the presence of second respondent and two witnesses (Sanjay Kumar Puri and M.R.Arora) and that the first respondent executed the following receipt acknowledging the payment: RECEIPT/PART PAYMENT Received a sum of ₹ 51,000/- (Fifty one thousand only) By Cash/Cheque Cash From Sh. Vinod Seth S/o Sh. Sohan Seth R/o M-231 First Floor, Guru Harikishan Nagar Against Collaboration of Property No. A-1/365 Paschim Vihar Signature (Devinder Bajaj)/10-6-04 3. The appellant alleged that the respondents failed to comply with the agreement and lingered over the matter on one pretext or the other; that the appellant came to know subsequently that the property stood in the name of the second respondent and not the first respondent; and that the appellant therefore issued a notice dated 9.3.2007 calling upon the respondents to comply with the legal formalities to facilitate the collaboration agreement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fendants. 4. The respondents contested the said suit and filed a written statement denying the claim in toto. When the case came up for framing issues, a learned Single Judge of the High Court on perusal of the pleadings passed an interim order dated 2.12.2008, relevant portion of which is extracted below: The agreement of such a nature, in common parlance known as collaboration agreement, requires detailed terms and conditions to be settled between the parties as to the quality of construction, time period, alternate accommodation, sharing of the expenses and space in the newly constructed building, etc. and ordinarily specific performance of such agreements is difficult for the Court to supervise. In the present case all the terms of the agreement will have to be established by evidence, there being no document recording the same. The plaintiff instituted the suit without any application for interim relief and notice was issued of the suit by the Joint Registrar and the suit has come up before the Court for the first time. The suit being with respect to an immovable property, even in the absence of any interim order restraining the defendants f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contending that every person has an inherent right to bring a suit of civil nature and there was no provision in law which enabled the Trial Court to impose such a condition on a plaintiff requiring an undertaking to pay ₹ 25 lakhs by way of damages to defendants in the event of failing in the suit. He relied upon the following observations of this Court in Abdul Gafur v. State of Uttarakhand 2008 (10) SCC 97: Section 9 of the Code provides that the civil court shall have jurisdiction to try all suits of a civil nature excepting the suits of which their cognizance is either expressly or impliedly barred. To put it differently, as per Section 9 of the Code, in all types of civil disputes, the civil courts have inherent jurisdiction unless a part of that jurisdiction is carved out from such jurisdiction, expressly or by necessary implication by any statutory provision and conferred on other tribunal or authority. Thus, the law confers on every person an inherent right to bring a suit of civil nature of one's choice, at one's peril, howsoever frivolous the claim may be, unless it is barred by a statute. (vide Abdul Gafur v. State of Uttarakhand 2008 (10) SCC 97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot ignore the ground realities of the market which would persuade third parties to eschew dealing with such a property over which there is a cloud during the pendency of the suit. It is this cloud of which the appellant can take advantage of to extract some money in case the relief is frivolous. We also find that the appellant really cannot have any grievance since a condition has not been imposed to deposit any amount which would make the appellant be out of pocket. The condition is of a much lesser level of only an undertaking to compensate the respondent in case of failure in the suit and as the learned Single Judge has rightly observed that a party coming to court should reasonably be confident of the genuineness of its case. The figure of ₹ 20 lakhs is based on the claim of the appellant as noticed by learned Single Judge. We may also add that Order XXV Rule 1 of the CPC gives power to the Court including suo moto power for the plaintiff to give security for payment of all costs incurred and likely to be incurred by the defendant. However, reasons for such an order are to be recorded. The costs include not only what is spent in the litigation but also the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement for development of a residential property of the respondents. Under the alleged agreement, the obligations of the respondents are limited, that is, to apply to DDA for conversion of the property from leasehold to freehold, to submit the construction plan to the concerned authority for sanction, and to deliver vacant possession of the suit property to the appellant for development. But the appellant/plaintiff has several obligations to perform when the property is delivered, that is, to demolish the existing building, to construct a three-storeyed building within one year in accordance with the agreed plan, deliver the first and second floors to the respondents and also pay a token cash consideration of ₹ 3,71,000/-. The performance of these obligations by appellant is dependant upon his personal qualifications and volition. If the court should decree the suit as prayed by the appellant (the detailed prayer is extracted in para 3 above) and direct specific performance of the collaboration agreement by respondents, it will not be practical or possible for the court to ensure that the appellant will perform his part of the obligations, that is demolish the existing stru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the authorized representative of the owner of the property. From the plaint averments it is evident that appellant did not even know who the owner was, at the time of the alleged negotiations and erroneously assumed that first respondent was the owner. The execution of a receipt for ₹ 51,000/- by the first respondent even if proved, may at best make out a tentative token payment pending negotiations and finalization of the terms of an agreement for development of the property. 8.4 The agreement is alleged to have been entered on 10.6.2004. But the plaintiff issued the first notice calling upon defendants to perform, only on 9.3.2007 and filed the suit on 30.6.2007. There was no correspondence or demand for performance, in writing, prior to 9.3.2007, even though the alleged agreement was a commercial transaction. 9. We also agree with the High Court that having regard to the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act, 1882 ('TP Act' for short), the pendency of the suit by the appellant shackled the suit property, affected the valuable right of the second defendant to deal with the property in the manner she deems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt or that the suit is vexatious. The court can secure the evidence (examination-in-chief) of witnesses by way of affidavits and where necessary, appoint a commissioner for recording the cross examination so that it can dispose of the suit expeditiously. The court can punish an erring plaintiff adopting delaying tactics, by levying costs under Section 35B or taking action under Order 17 Rules 2 and 3 of the Code. Apart from recourse to these provisions in the Code, an aggrieved defendant can also sue the plaintiff for damages, if the suit is found to be based on a forged or false document, or if the suit was vexatious or frivolous. 11. There are also two other significant provisions in the Code having a bearing on the issue. We may refer to them: 11.1 Section 95 provides that where in any suit in which an arrest or attachment has been affected or a temporary injunction granted, the suit of the plaintiff ultimately fails and it appears to the court that there was no reasonable or probable ground for instituting the suit, and the court may upon an application by the defendant, award against the plaintiff, such amount not exceeding ₹ 50,000/- as it deems a reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the plaintiff, to file an affidavit undertaking to pay any specified sum to the defendant, by way of damages, if the plaintiff does not succeed in the suit. In short, law does not contemplate a plaintiff indemnifying a defendant for all or any losses sustained by the defendant on account of the litigation, by giving an undertaking at the time of filing a suit or before trial, to pay damages to the defendants in the event of not succeeding in the case. 13. We will next examine whether the power to make such an order can be traced to Section 151 of the Code, which reads: Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court. As the provisions of the Code are not exhaustive, Section 151 is intended to apply where the Code does not cover any particular procedural aspect, and interests of justice require the exercise of power to cover a particular situation. Section 151 is not a provision of law conferring power to grant any kind of substantive relief. It is a procedural provision saving the inherent power of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Nainsingh v. Koonwarjee AIR 1970 SC 997, this Court observed: Under the inherent power of Courts recognized by Section 151 CPC, a Court has no power to do that which is prohibited by the Code. Inherent jurisdiction of the Court must be exercised subject to the rule that if the Code does contain specific provisions which would meet the necessities of the case, such provisions should be followed and inherent jurisdiction should not be invoked. In other words the court cannot make use of the special provisions of Section 151 of the Code where a party had his remedy provided elsewhere in the Code.... 13.4 A suit or proceeding initiated in accordance with law, cannot be considered as an abuse of the process of court, only on the ground that such suit or proceeding is likely to cause hardship or is likely to be rejected ultimately. As there are specific provisions in the Code, relating to costs, security for costs and damages, the court cannot invoke Section 151 on the ground that the same is necessary for ends of justice. Therefore, we are of the view that a court trying a civil suit, cannot, in exercise of inherent power under Section 151 of the Code, make an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The High Court can certainly innovate, to discipline those whom it considers to be adventurers in litigation, but it has to do so within the four corners of law. 16. This case reminds us of the adage: Hard cases make bad law . Black's Law Dictionary defines a 'hard case' thus: A law suit involving equities that tempt a judge to stretch or even disregard a principle of law at issue --- hence the expression Hard cases make bad law . Justice Holmes explained and extended the adage thus: (See his dissenting opinion in Northern Securities Co. v. United States 193 (1903) US 197): Great cases, like hard cases make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment. These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend. This is certainly a hard case. The High Court should have resisted from laying down a 'bad law', which will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit under Order 7 Rule 11 of the Code holding that the plaint did not disclose the cause of action for grant of the relief sought or that the prayer was barred by section 14(1)(b) and (d) of the Specific Relief Act. Alternatively, the court could have framed issues and heard the issue relating to maintainability as a preliminary issue and dismiss the suit if it was of the view that it had no jurisdiction to grant specific performance as sought, in view of the bar contained in Section 14(1)(b) and (d) of the Specific Relief Act. If it was of the prima facie view that the suit was a vexatious one, it could have expedited the trial and dismissed the suit by awarding appropriate costs under Section 35 of the Code and compensatory costs under Section 35A of the Code. Be that as it may. 20. Having found that the direction of the High Court is unsustainable, let us next examine whether we can give any relief to defendants within the four corners of law. The reason for the High Court directing the plaintiff to furnish an undertaking to pay damages in the event of failure in the suit, is that Section 52 of the Transfer of Property Act would apply to the suit property and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances, we are of the view that this is a fit case where the suit property should be exempted from the operation of Section 52 of the TP Act, subject to a condition relating to reasonable security, so that the defendants will have the liberty to deal with the property in any manner they may deem fit, inspite of the pendency of the suit. The appellant-plaintiff has alleged that he is a builder and real estate dealer. It is admitted by him that he has entered into the transaction as a commercial collaboration agreement for business benefits. The appellant has further stated in the plaint, that under the collaboration agreement, he is required to invest ₹ 20 lakhs in all, made up of ₹ 16,29,000/- for construction and ₹ 3,71,000/- as cash consideration and that in lieu of it he will be entitled to ground floor of the new building to be constructed by him at his own cost. Treating it as a business venture, a reasonable profit from such a venture can be taken as 15% of the investment proposed, which works out to ₹ 3 lakhs. Therefore it would be sufficient to direct the respondents to furnish security for a sum of ₹ 3 lakhs to the satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lem Advocate Bar Association v. Union of India 2005 (6) SCC 344 this after noticing that the award of costs is in the discretion of the court and that there is no upper limit in respect of the costs awardable under Section 35 of the Code, observed thus: Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded against the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In a large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages the filing of frivolous suits. It also leads to the taking up of frivolous defences. Further, wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that the costs have to be those which are reasonably incurred by a successful party except in those cases where the court in its discretion may direct otherwise by recording reasons therefor. The costs have to be actual reasonable costs including the cost of the time spent by the succes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid. Most of the costs taxing rules, including the rules in force in Delhi provide each party should file a bill of cost immediately after the judgment is delivered setting out: (a) the court fee paid; (b) process fee spent; (c) expenses of witnesses; (d) advocate's fee; and (e) such other amount as may be allowable under the rules or as may be directed by the court as costs. We are informed that in Delhi, the advocate's fee in regard to suits the value of which exceeds ₹ 5 lakhs is: ₹ 14,500/- plus 1% of the amount in excess of ₹ 5 lakhs subject to a ceiling of ₹ 50,000/-. The prevalent view among litigants and members of the bar is that the costs provided for in the Code and awarded by courts neither compensate nor indemnify the litigant fully in regard to the expenses incurred by him. 25. The English civil procedure rules provide that a court in deciding what order, if any, to make in exercising its discretion about costs should have regard to the following circumstances: (a) the conduct of all the parties; (b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (c) any payment made into c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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