SUSHIL KUMAR AGARWAL versus MEENAKSHI SADHU & ORS. on 9 October 2018

SUPREME COURT REPORTS[2018] 12 S.C.R. 756

[2018] 12 S.C.R.

SUSHIL KUMAR AGARWAL

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MEENAKSHI SADHU & ORS.

(Civil Appeal No. 1129 of 2012)

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OCTOBER 09, 2018

[A. M. KHANWILKAR AND DR. D. Y. CHANDRACHUD, JJ.]

Specific Relief Act, 1963 – s.14(3)(c)(i) and (ii) – Specificperformance of contract under – Appellant-developer andpredecessor-in-interest of the respondents entered into aCdevelopment agreement for construction of a building on the landof the respondents – Respondent denied execution of the agreement– Appellant filed for specific performance of the contract againstthe respondent – Held: The appellant-developer need to satisfy thetwo conditions laid out in sub clause (i) and (ii) of s.14(3)(c), forDthe suit for specific performance to be maintainable against theowner – The clauses 8, 13, 20 and 22 of the agreement had notclearly brought out, the exact extent of work to be carried out bythe developer and the obligation of the parties – Parties had notclearly defined, inter alia, the nature of material to be used, therequirements of quality, structure of building, sizes of flats andEobligations of the owner after the plan is sanctioned – Also, clause9 of the agreement stated that the owner shall pay the contractorcosts, expenses along with agreed remuneration only aftercompletion of the building on receiving the possession – However,exact amount of remuneration payable by the owner to the contractorFwas not found in the agreement – Agreement between the partieswas vague, so the first condition in s.14(3)(c)(i) was not fulfilled –Furthermore, the developer had incurred an expenditure ofRs.18,41,000/- towards clearing outstanding dues, security depositand development, incidental and miscellaneous expenses – Thealleged losses/damages incurred by the plaintiff could be quantifiedGand recompensed with – Thus, developer had failed to satisfy theconditions under sub-clause (i) and (ii) of s.14(3)(c) of the Act – Insuch a case, specific performance could not be granted.

Specific Relief Act, 1963 – s.14(3)(c)(iii) – Interpretation of– Held: Anomaly is created by the use of the words “the defendantHhas, by virtue of the agreement, obtained possession of the whole

or any part of the land” in s.14(3)(c)(iii) – Under a developmentagreement, an interest in the property may have been created infavour of the developer – If the developer is the plaintiff and thesuit is against the owner, strictly applied, clause(iii) would requirethat the defendant should have obtained the possession under theagreement, however, the owner is in possession of the land by virtueof the lawful title, the defendant-owner cannot be said to haveobtained possession of the land by way of the agreement – Thiswould lead to an anomalous situation where the condition ins.14(3)(c)(iii) would not be fulfilled in the case of a suit by adeveloper – Thus, purposive interpretation has to be given tos.14(3)(c)(iii), departing from the literal rule of interpretation – Bygiving a purposive interpretation to s.14(3)(c)(iii), the anomaly andabsurdity created by the third condition will have no applicabilityin a situation where the developer who has an interest in the property,brings a suit for specific performance against the owner – Thedeveloper will have to satisfy the two conditions laid out in subclause (i) and (ii) of Section 14(3)(c), for the suit for specificperformance to be maintainable against the owner – This will ensurethat both owners and developers can avail of the remedy of specificperformance under the Act – Interpretation of Statutes – Purposiverule of Interpretation.

Conclusion

Appellant and predecessor-in-interest of the respondentsentered into a development agreement for construction of abuilding on the land of the respondents. Respondent deniedexecution of the agreement. Appellant filed a suit against therespondent for specific performance of the contract. Trial Courtheld that sanctioned plans of the proposed building was notobtained by the appellant as per agreement and therefore, it couldnot be said that he had obtained possession of the land, as a resultsuit was barred by s.14(3)(c). Appeal was dismissed by the HighCourt. Thus, the present appeal.

Dismissing the appeal, the Court

HELD: 1. The issue before this Court is whether Section14(3)(c)(iii) of Specific Relief Act, 1963is a bar to a suit by adeveloper for specific performance of a development agreementbetween himself and the owner of the property. The conditionunder Section 14(3)(c)(iii)is that the defendant has, by virtue of AB

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Athe agreement, obtained possession of the whole or any part ofthe land on which the building is to be constructed or other workis to be executed. If the rule of literal interpretation is adoptedto interpret Section 14(3)(c)(iii), it would lead to a situation wherea suit for specific performance can only be instituted at the behestof the owner against a developer, denying the benefit of theBprovision to the developer despite an interest in the propertyhaving been created. This anomaly is created by the use of thewords “the defendant has, by virtue of the agreement, obtainedpossession of the whole or any part of the land” in Section14(3)(c)(iii). Under a development agreement, an interest in theCproperty may have been created in favour of the developer. Ifthe developer is the plaintiff and the suit is against the owner,strictly applied, clause (iii) would require that the defendant shouldhave obtained possession under the agreement. In such a case ifthe developer files a suit for specific performance against the owner, and the owner is in possession of the land by virtue of aDlawful title, the defendant (i.e. the owner) cannot be said to haveobtained possession of the land by way of the agreement. Thiswould lead to an anomalous situation where the condition inSection 14(3)(c)(iii) would not be fulfilled in the case of a suit by adeveloper. Application of the literal rule of interpretation toESection 14(3)(c)(iii), would lead to an absurdity and would beinconsistent with the intent of the Act. [Para 23] [775-C-H]

2. By giving a purposive interpretation to Section14(3)(c)(iii), the anomaly and absurdity created by the thirdcondition will have no applicability in a situation where theFdeveloper who has an interest in the property, brings a suit forspecific performance against the owner. The developer will haveto satisfy the two conditions laid out in sub clause (i) and (ii) ofSection 14(3)(c), for the suit for specific performance to bemaintainable against the owner. This will ensure that both ownersand developers can avail of the remedy of specific performanceGunder the Act. A suit for specific performance filed by thedeveloper would then be maintainable. Whether specificperformance should in the facts of a case be granted is a separatematter, bearing on the discretion of the court. [Para 24] [776-E-G]

3. It is necessary to determine whether, in the facts of theHpresent case, the agreement between the appellant and the

respondent is capable of specific performance. For this purpose,it would be necessary to consider the terms and conditions of theagreement between the parties. The condition underSection14(3)(c)(i) is that the building or other work described inthe contract is sufficiently precise to enable the court to determinethe exact nature of the building or work. Clause 8 of the agreementprovides that the building shall be constructed in accordance withapproved plans and built with “first class materials” with woodendoors, mosaic floor, basin and lavatories, tap water arrangementetc. Further, at clause 13 of the agreement, the parties have agreedthat the contractor would construct a building at the premisesconsisting of “residential apartments of various sizes anddenomination” in the said building complex in accordance withplans sanctioned by the Calcutta Municipal Corporation and theowner shall convey the proportionate share in the land to therespective buyers. Clause 22 of the agreement states that if forany reason after the plan is sanctioned or “for any act or omissionon the part of the owner” the building cannot be constructed; theowner shall refund to the contractor ¹ 4,00,000/- in addition to allcosts, charges and expenses incurred by the contractor. At clause20 of the agreement, the parties have agreed that the apartmentsof the owner shall be constructed and be made in “similarcondition” as that of the contractor with water connection,sewerage, electric wiring except “special fittings”.Use of suchvague terms in the agreement such as “first class materials”,“residential apartment of various sizes and denomination”, “etc.”,“similar condition”, and “special fittings”, while discussing thescope of work clearly shows that the exact extent of work to becarried out by the developer and the obligations of the parties,have not been clearly brought out. Parties have not clearly defined,inter alia, the nature of material to be used, the requirements ofquality, structure of the building, sizes of the flats and obligationsof the owner after the plan is sanctioned. Further, clause 9 of theagreement states that the owner shall pay the contractor costs,expenses along with agreed remuneration only after completionof the building on receiving the possession. However, the exactamount of remuneration payable by the owner to the contractoris not to be found in the agreement. The agreement between theparties is vague. The court cannot determine the exact nature of AB

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Athe building or work. The first condition in Section 14(3)(c)(i) isnot fulfilled. [Paras 25 and 26] [777-A-H; 778-A-B]

4. Another condition under Section 14(3)(c)(ii) is that theplaintiff has a substantial interest in the performance of thecontract and the interest is of such a nature that compensation inBmoney for non-performance of the contract is not an adequaterelief. The intent of the section is to make a distinction betweencases where a breach of an agreement can be remedied by meansof compensation in terms of money and those cases where noother remedy other than specific performance will afford adequaterelief. Therefore, before granting the remedy of specificCperformance, there is a need to analyze the extent of the allegedharm or injury suffered by the developer and whethercompensation in money will suffice in order to make good thelosses incurred due to the alleged breach of the agreement bythe owner. From the facts of the case, it is clear that the case ofDthe developer is that he incurred an expenditure of `18,41,000/-towards clearing outstanding dues, security deposit anddevelopment, incidental and miscellaneous expenses. The allegedlosses/damages incurred by the Plaintiff can be quantified. Theplaintiff can be provided recompense for the losses allegedlyincurred by payment of adequate compensation in the form ofEmoney. The developer has failed to satisfy the conditions undersub-clause (i) and (ii) of Section 14(3)(c) of the Act. In such a case,specific performance cannot be granted. [Para 27] [778-B-E]

Vipin Bhimani v. Smt Sunanda Das (2006) 2 CHN 396;B Gangadhar v BG Rajalingam(1995) 5 SCC 239;FSwadesh Ranjan Sinha v Haradeb Banerjee(1991)4SCC 572 : [1991] 1 Suppl. SCR 245 ;Chheda HousingDevelopment Corporation v Bibijan Shaikh Farid(2007) 3 Mah LJ 402;Della Developers Private Limitedv Noble Organics Private Limited (2010) 2 Bom CRG13;Ashok Kumar Jaiswal v Ashim Kumar Kar AIR2014 Cal 92;Her Highness Maharani ShantideviP Gaikwad v Savjibai Haribai Patel AIR 2001 SC1462 : [2001] 2 SCR590 ; Faqir Chand Gulati v UppalAgencies Private Limited (2008) 10 SCC 345 :[2008]10 SCR 697 – referred to.H

Wolverhampton Corporation v. Emmons [1901] 1 K. B.515;Carpenters Estate v. Davies(1940) Ch. D 160;Price v Strange[1978] 1 Ch. 337;Stock v Frank Jones(Tipton) Ltd.(1978) 1 WLR 231 – referred to.

Halsbury’s Laws of England, Fourth Edition, Volume44(1);Hudson’s Building and Engineering Contracts,Eleventh Edition, Volume 1;Principles of StatutoryInterpretation, 12[th] Edition - 2010, Lexis Nexis- page144 and Maxwell, Interpretation of Statutes, 11[th]Edition – referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1129of 2012

From the Judgment and Order dated 18.02.2009 of the HighCourt at Calcutta in F.A. No. 175 of 2007.

Rana Mukherjee, Sr. Adv., Ms. Daisy Hannah, Ms. Ekta Pradhan,Shekhar Kumar, Advs. for the appellant.

Bhaskar P. Gupta, Sr. Adv., Prateek Jalan, Rauf Rahim, RahulKripalani, Ankit Yadav, Advs. for the respondents.

The Judgment of the Court was delivered by DR. D. Y. CHANDRACHUD, J. 1. The present appeal[1] is fromthe judgment of a DivisionBench of the High Court of Calcutta[2]. The 1 Leave was granted on 12 January 2012.

2 The High Court delivered judgment on 18 February 2009.

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Aappellant, who is a builder, instituted a suit for specific performance of adevelopment agreement, against therespondents, who are owners of thepremises. The suit was dismissed by the City Civil Court. The HighCourt dismissed the first appeal.

2. The subject matter of the suit for specific performance is aBdevelopment agreement dated 14 April 1992, entered into by the appellantwith 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 – 700006.Theagreement recites that theownershad approached the appellant for construction of a building onthe land and that the following terms, interalia, were agreed upon byCand between the parties:

a)The appellant agreed to apply at his own costs and expenses forsanction of the plan of a proposed building complex on 14 cottahs5 chittacks and 40 square feet, to the Calcutta MunicipalCorporation(Clause-1 of the agreement);D

b)The plan of the building complex would be prepared and submittedby the appellant to the Calcutta Municipal Corporation, after theapproval of the respondent (Clause -2 of the agreement);

c)The appellant shall deposit with the respondent an amount of ¹E4,00,000/-without interest which shall be refundable upon thecompletion of the building (Clause-3of the agreement); d)If for any reason after the plan is sanctioned or for any act oromission on the part of the appellant, the construction cannottake place, the appellant shall refund the deposit in addition to allFcosts, charges and expenses incurred by the respondent(Clause-22of the agreement); e)The respondent shall retain 42% of the total constructed area as‘soleowned’ and the balance 58% of the total constructed areashall remain secured for due payment of the construction costs.The total construction cost shall not exceed the value of 58% ofGthe constructed area. The respondent agreed to pay the appellantthe costs and expenses along with agreed remuneration uponcompletion of the construction and if the respondent failed to 3 Late Kalidas Sadhu was the original respondent. Upon his death, by an order dated12 May 2018, the legal heirs of the original respondent were substituted as existingHrespondents.

pay, the appellant was entitled to realise its money by selling58% of the total constructed area (Clauses – 6, 10 and 11ofthe agreement); and f)The respondent was entitled to demand any loss and/or damagesuffered by him for any illegal activities of the appellant and theappellant was also entitled to recover damages from therespondent for lapse and negligence, in addition to the right ofthe parties to claim specific performance(Clause -24of theagreement).

3. The appellant alleged that upon the execution of the agreement,he found that the premises wereencumbered and that there were arrearsof municipal tax and electricity dues, besides which there were labourand industrial disputes and ‘factory closure problems’. The respondentis alleged to have requested the appellant to make payments and assuredthat he will reimburse him before the sanction of the building plan wasobtained. Accordingly, the appellant claims to have made a payment of ¹7,03,000/-.

4. On 18 March 2002, the respondent addressed a letter to theappellant and denied the execution of the agreement. The appellant, bya letter dated 4 April 2002 protested the denial and requested therespondent to give him the authority to obtain sanction of the buildingplans.Parties thereafter met and agreed to modify the terms of theagreement with revised terms under which (i) allocation of the ownerwould be 47% instead of 42%; and (ii) allocation of the developer wouldbe 53% instead of 58%.

5. On 26 May 2003, the appellant issued to the respondent anotice for payment of his share of the sanctioned fees. On 3 June 2003the owner wrote a letter to the appellant through his advocate, denyingthe contents of the notice on the ground that he had by a notice dated 19May 2003cancelled the agreement and requested the appellant to returnall documents and collect the deposit.

6. On 6 August 2003, the appellant instituted a suit[4] in the CityCivil Court seeking a declaration that the cancellation of the agreementby the respondent was invalid and a permanent injunction restraining therespondent from entering into any agreement with a third party for saleof the premises. On 28 September 2005 the City Civil Court allowed an 4 TS No.1150/03

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Aamendment of the plaint, by which a prayer for specific performancewas included.

7. On 28 February 2007, the City Civil Court dismissed the Suitwith the following observation:

“No tangible evidence is forthcoming in the instant suit by whichBit can be said that the plaintiff (developer) obtained possessionof the suit property i.e. the possession of the suit property is/hashanded over to him after the execution of the agreement inquestion.”

The City Civil Court relied on a judgment of a Division BenchofCthe High Court of Calcutta in Vipin BhimanivSmtSunanda Das[5], thata suit for specific performance of a development agreement at the instanceof a developer is barred by the provisions of Section 14(3)(c) of theSpecific Relief Act 1963 (“the Act”).Upon examining various clauses ofthe agreement, the City Civil Court concluded that the appellant hadDagreed to apply at his own cost and expense to the Calcutta MunicipalCorporation for getting the plansof the proposed building approved. TheCity Civil Court noted that it was an admitted fact that sanctionwasnotobtained by the appellant and therefore, it could not be said that he hadobtained possession.As a result, the suit at the instance of the appellantwas held to be barred by Section14(3)(c).E

8. Aggrieved by the judgment and order of the City Civil Court,the appellant preferred an appeal[6] before the High Court of Calcutta.On18 February 2009 the Division Bench of the High Court dismissed theappeal, on the ground that the suit was not maintainable under Section14(3)(c) of the Act.FThe High Court rejected the appellant’s argument that even if Section14(3)(c) stood in the way of getting a decree for specific performance,the Specific Relief Act not being exhaustive, there was no bar in grantinga decree. The High Court held:

“….if in the Act there is a clear prohibition in granting a decreeGfor specific performance in a given situation, such provision isexhaustive and cannot be made nugatory by contending that theAct is not exhaustive and thus, the Court can ignore such”provision.

5 (2006) 2 CHN 396H6 F.A. No. 175 of 2007

9. The High Court also rejected the argument of the appellantthat the agreement in question was not a contract for construction ofbuildingon the land in a real sense, as the respondent was not getting anyconsideration for building. The High Court held that the agreement wasin substance a contract of construction within the meaning of sub-section(3)(c) of Section 14 and the consideration was payable only upon thecompletion of the work.

10. The issue which has been raised before this Court is whetherSection 14(3)(c) of the Act is a bar to a suit by a developer for specificperformance of a development agreement between himself and the ownerof the property. In dealing with this issue, the court needs to assesswhether the word “defendant” in Section 14(3)(c)(iii) has the effect ofconfining the scope of the suit for specific performance only to a particularclass (consisting of owners) or whether a purposive interpretation to thelegislation would be required, so as to provide a broader set of remediesto both owners and developers. In deciding this issue the court will needto scrutinise the nature of a development agreement.

11. Section 14 provides thus:

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 compensationin money is an adequate relief; (b) a contract which runs into such minute or numerous detailsor which is so dependent on the personal qualifications or volitionof the parties, or otherwise from its nature is such, that the courtcannot 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 performanceof 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 arbitrationshall be specifically enforced; but if any person who has madesuch a contract (other than an arbitration agreement to whichthe provisions of the said Act apply) and has refused to perform A

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Ait, sues in respect of any subject which he has contracted torefer, the existence of such contract shall bar the suit.

(3) Notwithstanding anything contained in clause (a) or clause(c) or clause (d) of sub-section (1), the court may enforce specificperformance in the following cases—

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(a) where the suit is for the enforcement of a contract,-

(i) to execute a mortgage or furnish any other security for securingthe repayment of any loan which the borrower is not willing torepay at once:

CProvided that where only a part of the loan has been advancedthe lender is willing to advance the remaining part of the loan interms of the contract; or

(ii) to take up and pay for any debentures of a company; (b) where the suit is for- D(i) the execution of a formal deed of partnership, the partieshaving commenced to carry on the business of the partnership;or

(ii) the purchase of a share of a partner in a firm; E(c) where the suit is for the enforcement of contract for theconstruction of any building or the execution of any other workon land:

Provided that the following conditions are fulfilled, namely:-

(i) the building or other work is described in the contract in termsFsufficiently precise to enable the court to determine the exactnature of the building or work;

(ii) the plaintiff has a substantial interest in the performance ofthe contract and the interest is of such a nature that compensationin money for non-performance of the contract is not an adequateGrelief; and

(iii) the defendant has, in pursuance of the contract, obtainedpossession of the whole or any part of the land on which thebuilding is to be constructed or other work is to be executed.”

Section 14(1) provides categories of contracts which are not specificallyenforceable. Sub-section (3) of Section 14 is an exception to clauses(a),(c) and (d) of sub-section (1). Though the species of contract stipulatedin clauses (a), (c) and (d) of sub-section (1) cannot be specificallyenforced, a suit for specific performance of contracts of thatdescriptionwill be maintainable if the conditions set out in sub-clauses(i), (ii) and (iii) of clause (c) of Section 14(3) are satisfied.

12. The consistent position of the common law is that courts donot normally order specific performance of a contract to build orrepair.But this rule is subject to important exceptions, and a decree forspecific performance of a contract to build will be made only upon meetingthe requisite requirements under law. According to Halsbury’s Lawsof England[7],the discretion to grant specific performanceis not arbitraryor capricious; it is governed by principles developed in precedents. Thejudge must exercise the discretion in a judicious manner. Circumstancesbearing on the conduct of the plaintiff, such as delay, acquiescence andbreach or some other circumstances outside the contract, may render itinequitable to enforce it. The position as elucidated in Halsbury’s Lawsof England[8 ]is thus:

“… the court does not normally order specific performance of acontract to build or repair. However, this rule is subject toimportant exceptions, and a decree for specific performance ofa contract to build will be made if the following conditions arefulfilled: (1) that the building work is defined by the contractbetween the parties; (2) that the plaintiff has a substantial interestin the performance of the contract of such a nature that he cannotbe adequately be compensated in damages; (3) that the defendantis in possession of the land on which the work is contracted to bedone.”

13. This principle was followed by the Court of Appeal inWolverhampton Corporation v Emmons[9], where the plaintiff, theurban sanitary authority, in pursuance of a scheme of street improvement,sold and conveyed to the defendant a plot of land abutting a street, thedefendant covenanting with them that he would erect buildings within acertain time. Upon the defendant failing to perform the agreement, the 7 Halsbury’s Laws of England, Fourth Edition, Volume 44(1), para 801

8 Halsbury’s Laws of England, Fourth Edition, Volume 44(1), para 806

9 [1901] 1 K. B. 515

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Aplaintiffs brought asuit against him claiming specific performance. RomerL.J, held that a plaintiff can bring himself within the exception, if threethings are shown to exist: (i) the building work, the performance of whichthe plaintiff seeks to enforce, is defined by the contract allowing thecourt to know the exact nature and extent of work; (ii) the plaintiff musthave a substantial interest in having the contract performed and theBinterest must be of such a nature that damages will not be an adequatecompensation for the non-performance of the contract; and (iii) thedefendant has obtained from the plaintiff by means of the contract thepossession of the land on which the work is to be done. The case washeld to come within the class of cases which had been recognised asCforming an exception to the general rule that specific performance of abuilding contract will not be ordered.

14. In a decision of the Chancery Division in Carpenters Estatev Davies[10], an owner of land sold a certain portion of it to the purchaserfor development, retaining land adjoining it, and agreed to lay roads andDprovide mains, sewers and drains on the land retained. The purchaserbrought a suit for specific performance against the owner for notperforming his obligations under the agreement. Farwell J., observedthat the plaintiff is required to establish that the defendant is in possessionof the land on which the work is contracted to be done. The facts of the case, indicated that the defendant was already in possession of the land,Eand there was no difficulty for her to carry out her obligations. Findingthat the plaintiff proved all three conditions as laid out in WolverhamptonCorporation (supra), the court granted specific performance to theplaintiff.

15. The requirements to be satisfied by the plaintiff bringing forthFa suit for specific performance have been analysed in Hudson’s Buildingand Engineering Contracts[11 ]and in Price v Strange[12], where therule has been settled that the court will order specific performance of anagreement to build if:

(i) the building work is sufficiently defined by the contract, forGexample by reference to detailed plans; 10 (1940) Ch. D 160

11 Hudson’s Building and Engineering Contracts, Eleventh Edition, Volume 1, page 677

12 [1978] 1 Ch. 337 at page 359

(ii) the plaintiff has a substantial interest in the performance of thecontract of such a nature that damages would not compensatehim for the defendant’s failure to build; and

(iii) the defendant is in possession of the land so that the plaintiffcannot employ another person to build without committing atrespass.

16. The expression “development agreement” has not been definedstatutorily. In a sense, it is a catch-all nomenclature which is used to bedescribe a wide range of agreements which an owner of a property mayenter into for development of immovable property. As real estatetransactions have grown in complexity, the nature of these agreementshas become increasingly intricate. Broadly speaking, (without intendingto be exhaustive), development agreements may be of various kinds:

(i) An agreement may envisage that the owner of the immovableproperty engages someone to carry out the work of constructionon the property for monetary consideration.This is a pureconstruction contract;

(ii) An agreement by which the owner or a person holding otherrights in an immovable property grants rights to a third party tocarry on development for a monetary consideration payable bythe developer to the other. In such a situation, the owner or rightholder may in effect create an interest in the property in favourof the developer for a monetary consideration;

(iii) An agreement where the owner or a person holding any otherrights in an immovable property grants rights to another personto carry out development. In consideration, the developer has tohand over a part of the constructed area to the owner. Thedeveloper is entitled to deal with the balance of the constructedarea. In some situations, a society or similar other association isformed and the land is conveyed or leased to the society orassociation;

(iv) A development agreement may be entered into in a situationwhere the immovable property is occupied by tenants or otherright holders. In some cases, the property may be encroachedupon. The developer may take on the entire responsibility to settlewith the occupants and to thereafter carry out construction; and A

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A(v)An owner may negotiate with a developer to develop a plot ofland which is occupied by slum dwellers and which has beendeclared as a slum. Alternately, there may be old and dilapidatedbuildings which are occupied by a number of occupants or tenants.The developer may undertake to rehabilitate the occupants or,as the case may be, the slum dwellers and thereafter share theBsaleable constructed area with the owner.

When a pure construction contact is entered into, the contractor has nointerest in either the land or the construction which is carried out. But invarious other categories of development agreements, the developer mayhave acquired a valuable right either in the property or in the constructedCarea. The terms of the agreement are crucial in determining whetherany interest has been created in the land or in respect of rights in theland in favour of the developer and if so, the nature and extent of therights.

17. In a construction contract, the contractor has no interest inDeither the land or the construction carried out on the land. But, inotherspecies of development agreements, the developer may haveacquired a valuable right either in the property or the constructed area.There are various incidents of ownership of in respect of an immovableproperty. Primarily, ownership imports the right of exclusive possessionEand the enjoyment of the thing owned. The owner in possession of thething 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 itsenjoyment, right to its access and to other beneficial enjoyments incidentaltoit. (B Gangadhar v BG Rajalingam[13]). Ownership denotes therelationshipbetween a person and an object forming the subject matterFof the ownership. It consists of a complex of rights, all of which arerights in rem, being good against the world and not merely against specificpersons. There are various rights or incidents of ownership all of whichneed not necessarily be present in every case. They may include a rightto possess, use and enjoy the thing owned; and a right to consume, destroyGor alienate it. (Swadesh Ranjan Sinha v Haradeb Banerjee[14]).Anessential incident of ownership of land is the right to exploit thedevelopment, potential to construct and to deal with the constructed area.In some situations, under a development agreement, an owner may part 13 (1995) 5 SCC 239 at para 6H14 (1991) 4 SCC 572

with such rights to a developer. This in is essence is a parting of some ofthe incidents of ownership of the immovable property. There could besituations where pursuant to the grant of such rights, the developer hasincurred a substantial investment, altered the state of the property andeven created third party rights in the property or the construction carriedout to be carried out. There could be situations where it is the developerwho by his efforts has rendered a property developable by taking stepsin law. In development agreements of this nature, where an interest iscreated in the land or in the development in favour of the developer, itmay be difficult to hold that the agreementis not capable of beingspecifically performed. For example, the developer may have evicted orsettled with occupants, got land which was agricultural converted intonon-agricultural use, carried out a partial development of the propertyand pursuant to the rights conferred under the agreement, created thirdparty rights in favour of flat purchasers in the proposed building. In sucha situation, if for no fault of the developer, the owner seeks to resile fromthe agreement and terminates the development agreement, it may bedifficult to hold that the developer is not entitled to enforce his rights.This of course is dependent on the terms of the agreement in each case.There cannot be a uniform formula for determining whether anagreement granting development rights can be specifically enforced andit would depend on the nature of the agreement in each case and therights created under it.

18. In Chheda Housing Development Corporation vBibijanShaikh Farid[15], a Division Bench of the Bombay High Court whiledealing with the question of whether specific performance should begranted of a development agreement held as follows:

“In our opinion from a conspectus of these judgments, what isrelevant would be the facts of each case and the agreementunder consideration. Agreements considering what is discussed,amongst others, could be:

(a) An Agreement only entrusting construction work to a partyfor consideration.

(b) An Agreement for entrusting the work of development to aparty with added rights to sell the constructed portion to flatpurchasers, who would be forming a Co-operative Housing A

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ASociety to which society, the owner of the land, is obliged toconvey the constructed portion as also the land beneathconstruction 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 asBcompensation in money is an adequate remedy. An Agreementof the third type would normally be specifically enforceable unlessthe contrary is proved. A mere agreement for development, whichcreates no interest in the land would not be specifically enforced.”

19. The judgement of the Bombay High Court in DellaCDevelopers Private Limited v Noble Organics Private Limited[16],deals with a case where a development agreement was executedbetween the petitioners and the respondents. A dispute arose betweenthe parties and arbitration proceedings were initiated. An order was passedby the Arbitrator under Section 17 of the Arbitration and ConciliationDAct 1996 against which an appeal was filed under Section 37. Beforethe High Court, the findings of the sole arbitrator under Section 17 werechallenged. Upon examining the agreement, the High Court held thatthe agreement created a right or interest in immovable property. On theissue of the maintainability of a proceeding initiated by the developeragainst the owner under Section 14(3)(c), the court reiterated theErequirement of fulfilling the three conditions under Section 14(3)(c).Hon’ble Mr. Justice AM Khanwilkar (as my learned Brother then was)held as follows:

“Insofar as present case is concerned, out of the three conditionsspecified in Section 14(3)(c), prima facie, from the terms of theFAgreement as executed between the parties, there is nothing toindicate that the Petitioner in pursuance of the contract, was putin possession of the whole or any part of the land on which thebuilding is to be constructed or other work is to be executed.”

20. InAshok Kumar Jaiswal vAshim Kumar Kar[17], a FullGBench of the Calcutta High Court held that a development agreementwith a clause for conditional sale of the premises in question will also bean agreement for sale subject to certain conditions. While decidingwhether a suit at the instance of a developer is maintainable in view of16 (2010) 2 Bom CR 13H17AIR 2014 Cal 92

Section 14(3)(c), the Court, inter alia, held that in the absence of adefinition of “developer” or “development agreement” the nature ofthe agreement which is the subject-matter of a suit must be consideredin order to determine whether it is an agreement to merely provideconstruction of a building or whether the developer has obtained a shareof, and interest in, the developed propertywhich is the outcome of theagreement, creating a contract for transfer of immovable property. TheFull Bench observed thus:

“An owner without any funds or the independent resources toconstruct a new building on such owner’s land may engage forsuch purpose with the consideration for the construction beingpaid by allocation of a part of the constructed area. There couldbe several variants of the same basic structure of a developmentagreement…..Such agreements are not merely for theconstruction of any building or for the mere execution of anyother work on the land. The developer is not merely a contractorengaged to undertake the construction; the developer is, underthe agreement with the owner, promised a part of the constructedpremises as owner thereof together with the proportionate areaof the land.”

The Full Bench held that a right to seek specific performanceof adevelopment agreement is not barred either expressly or bynecessaryimplication by the 1963 Act and a broadinterpretationshouldbe given to allow an adequate remedy:

“….it would be preposterous to say that only the owner canmaintain a suit against the developer for enforcing his rights andnot vice-versa. If the developer has a right under the contract hemust be having a remedy in the form of approaching a forum forappropriate redressal. A question of maintainability of a suit iscompletely different from the question of whether the suit willsucceed or not on the facts of the case and in the light of theapplicable law. Section 14 (3)(c) of the Act can in no mannerbe 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 appellantthe costs and expenses along with the agreed remuneration uponcompletion of the construction. If the respondent failed to pay, the appellant A

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Awas entitled to realise its money by selling 58% of the total constructedarea.Clauses 6, 10 and 11 of the agreement indicate that the respondentwould retain 42% of the total constructed area and the balance 58%would remain secured for due payment of the construction costs. It wasfurther agreed, that the total construction costs shall not exceed 58% ofthe constructed area. The intention of the parties is clear from theBagreement. This was an agreement to carry out the construction of thebuilding for which payment of the construction costs and agreedremuneration had to be made. The agreement did not create an interestin the land for the developer. If the payment due to the developer wasmade, there would arise no security interest. Moreover, the securityCinterest in respect of 42% of the constructed area would arise only if theconstruction came up and the payment due to the builder was not made.In present case, admittedly there is no construction at all.

22. Various High Courts have interpreted the requirements underSection 14(3)(c) of the Actand opined on the maintainability of a suit byDthe developer for specific performance against the owner of the propertyfor a breach in the conditions of the development agreement. A commonthread that runs through the analysis in decided cases is the following:

(i) The courts do not normally order specific performance of acontract to build or repair. But this rule is subject to importantEexceptions, and a decree for specific performance of a contractto build will be made only upon meeting the requirements underlaw;

(ii) The discretion to grant specific performance is not arbitrary orcapricious but judicious; it is to be exercised on settled principles;Fthe conduct of the plaintiff, such as delay, acquiescence, breachor some other circumstances outside the contract, may render itinequitable to enforce it;

(iii) In order to determine the exact nature of the agreement signedbetween the parties, the intent of the parties has to be construedGby reading the agreement as a whole in order to determinewhether it is an agreement simpliciter for construction or anagreement that also creates an interest for the builder in theproperty.Where under a development agreement, the developerhas an interest in land, it would be difficult to hold that such anagreement is not capable of being specifically enforced; andH

SUSHIL KUMAR AGARWAL v. MEENAKSHI SADHU & ORS.[DR. D. Y. CHANDRACHUD, J.]

(iv) A decree for specific performance of a contract to build will bemade if the following conditions are fulfilled:

a)the work of construction should be described in the contract ina sufficiently precise manner in order for the court to determinethe exact nature of the building or work; b)the plaintiff must have a substantial interest in the performanceof the contract and the interest should be of such a nature thatcompensation in money for non-performance of the contractis not an adequate relief; and

c)the defendant should have, by virtue of the agreement, obtainedpossession of the whole or any part of the land on which thebuilding is to be constructed or other work is to be executed.

23. The issue before this Court is whetherSection 14(3)(c)(iii) isa bar to a suit by a developer for specific performance of a developmentagreement between himself and the owner of the property.The conditionunder Section 14(3)(c)(iii)is that the defendant has, by virtue of theagreement, obtained possession of the whole or any part of the land onwhich the building is to be constructed or other work is to be executed.If the rule of literal interpretation is adopted to interpret Section14(3)(c)(iii), it would lead to a situation where a suit for specificperformance can only be instituted at the behest of the owner against adeveloper, denying the benefit of the provision to the developer despitean interest in the property having been created. This anomaly is createdby the use of the words “the defendant has, by virtue of the agreement,obtained possession of the whole or any part of the land” in Section14(3)(c)(iii). Under a development agreement, an interest in the propertymay have been created in favour of the developer.If the developer is theplaintiff and the suit is against the owner, strictly applied, clause (iii)would require that the defendant should have obtained possession underthe agreement. In such a case if the developer files a suit for specificperformance against the owner, and the owner is in possession of theland by virtue of a lawful title, the defendant (i.e. the owner) cannot besaid to have obtained possession of the land by way of the agreement.This would lead to an anomalous situation where the condition in Section14(3)(c)(iii) would not be fulfilled in the case of a suit by a developer.Application of the literal rule of interpretation to Section 14(3)(c)(iii),would lead to an absurdity and would be inconsistent with the intent ofthe Act.

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A24. The conditions that should be present to justify a departurefrom the plain words of any statute, have been elucidated in Justice GPSingh’s treatise on Principles of Statutory Interpretation[18 ](whilediscussing the decision of the House of Lords in Stock v Frank Jones(Tipton) Ltd.[19]):B“...a court would only be justified in departing from the plainwords of the statute when it is satisfied that (1) there is clearand gross balance of anomaly; (2) Parliament, the legislativepromoters and the draftsman could not have envisaged suchanomaly and could not have been prepared to accept it in theinterest of a supervening legislative objective; (3) the anomalyCcan be obviated without detriment to such a legislative objective;and (4) the language of the statute is susceptible of themodification required to obviate the anomaly.”

The principle has been also adverted to in Maxwell on Interpretationof Statutes[20]:D

“Where the language of a statute, in its ordinary meaning andgrammatical construction, leads to a manifest contradiction ofthe apparent purpose of the enactment, or to some inconvenienceor absurdity, hardship or injustice, presumably not intended, aconstruction may be put upon it which modifies the meaning ofEthe words, and even the structure of the sentence.”

By giving a purposive interpretation to Section 14(3)(c)(iii), the anomalyand absurdity created by the third condition will have no applicability in asituation where the developer who has an interest in the property, bringsa suit for specific performance against the owner.The developer willFhave to satisfy the two conditions laid out in sub clause (i) and (ii) ofSection 14(3)(c), for the suit for specific performance to be maintainableagainst the owner. This will ensure that both owners and developers canavail ofthe remedy of specific performance under the Act. A suit forspecific performance filed by the developer would then be maintainable.GWhether specific performance should in the facts of a case be grantedis a separate matter, bearing on the discretion of the court.

18 Principles of Statutory Interpretation, 12th Edition - 2010, Lexis Nexis - page 14419 (1978) 1 WLR 231H20 Maxwell, Interpretation of Statutes, 11th Edition, page 221

25. Having dealt with the first aspect of the matter, it is nownecessary to determine whether, in the facts of the present case, theagreement between the appellant and the respondent is capable of specificperformance. For this purpose, it would be necessary to consider theterms and conditions of the agreement between the parties.

26. The condition under Section14(3)(c)(i) is that the building orother work described in the contract is sufficiently precise to enable thecourt to determine the exact nature of the building or work.To examinethe question as to whether the scope of the building or work described intheagreementissufficiently defined,the Court needs to determine the exactnature of the work by referring to the relevant clauses of the agreement.Clause 8 of the agreement provides that the building shall be constructedin accordance with approved plansand built with “first class materials”with wooden doors, mosaic floor, basin and lavatories, tap waterarrangement,masonry work, electric points, finished distemper and bathroom fittings of glazed tiles up to 6" height and lift,”etc.”Further, at clause13 of the agreement, the parties have agreed that the contractor wouldconstruct a building at the premises consisting of “residential apartmentsof various sizes and denomination” in the said building complex inaccordance with plans sanctioned by the Calcutta Municipal Corporationand the owner shall convey the proportionate share in the land to therespective buyers. Clause 22 of the agreement states that if for anyreason after the plan is sanctioned or “for any act or omission on thepart of the owner” the building cannot be constructed; the owner shallrefund to the contractor ¹ 4,00,000/- in addition to all costs, charges andexpenses incurred by the contractor. At clause 20 of the agreement, theparties have agreed that the apartments of the owner shall be constructedand be made in “similar condition”as that of the contractor with waterconnection, sewerage, electric wiring except “special fittings”.Use ofsuch vague terms in the agreement such as “first class materials”,“residential apartment of various sizes and denomination”, “etc.”,“similar condition”,and “special fittings”,while discussing the scopeof work clearlyshows that the exact extent of work to be carried out bythe developer and the obligations of the parties, have not been clearlybrought out. Parties have not clearly defined, inter alia, the nature ofmaterial to be used, the requirements of quality, structure of thebuilding,sizes of the flats and obligations of the owner after the plan issanctioned. Further, clause 9 of the agreement states that the ownershall pay the contractor costs, expenses along with agreed remuneration A

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Aonly after completion of the building on receiving the possession. However,the exact amount of remuneration payable by the owner to the contractoris not to be found in the agreement. The agreement between the partiesis vague.The court cannot determine the exact nature of the building orwork. The first condition in Section 14(3)(c)(i) is not fulfilled.B27. Another condition under Section 14(3)(c)(ii) is that the plaintiffhas a substantial interest in the performance of the contract and theinterest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief. The intent of thesection is to make a distinction between cases where a breach of anagreement can be remedied by means of compensation in terms of moneyCand those cases where no other remedy other than specific performancewill afford adequate relief. Therefore, before granting the remedy ofspecific performance, we need to analyse the extent of the alleged harmor injury suffered by the developer and whether compensation in moneywill suffice in order to make good the losses incurred due to the alleged

Dbreach of the agreement by the owner. From the facts of the case, it isclear that the case of thedeveloper is thatheincurred an expenditure of` 18,41,000/- towards clearing outstanding dues, security deposit anddevelopment, incidental and miscellaneous expenses.The alleged losses/damages incurred by the Plaintiff can be quantified. The plaintiff can be provided recompense for the losses allegedly incurred by payment ofEadequate compensation in the form of money. The developer has failedto satisfy the conditions under sub-clause (i) and (ii) of Section 14(3)(c)of the Act. In such a case, specific performance cannot be granted.

28. By the Specific Relief (Amendment) Act 2018[21], Section 14has been amended to read as follows:F

“14. The following contracts cannot be specifically enforced,namely:—

(a) where a party to the contract has obtained substitutedperformance of contract in accordance with the provisions ofGsection 20;(b) a contract, the performance of which involves the performanceof a continuous duty which the court cannot supervise;

(c) a contract which is so dependent on the personal qualificationsof the parties that the court cannot enforce specific performanceof its material terms; and (d) a contract which is in its nature determinable.”

However, the amended section has been notified on 19 September 2018and the central government has appointed 1 October 2018 as the dateon which the provision of Act 18 of 2018 will come into force[22].However, in the present case, we are not called upon to examine theeffect of this amended provision. In any case, we have indicated thereasons why Section 14(3)(c) was not attracted.

29. The appellants have relied on the decision of this Court inHer Highness Maharani Shantidevi P Gaikwad v SavjibaiHaribaiPatel[23],where an agreement was entered into between the landownerand the developer for the purpose of construction of houses for theweaker sections on excess vacant land under a scheme sanctionedunder Section 21 of the Urban Land (Ceiling and Regulation) Act1976. This Courtreversed the decision of the High Court that grantedthe decree of specific performanceto the developer on the grounds thatit wasinequitable to enforce specific performancein view of a change inthe Master Plan. The court noted that a contract which involvedcontinuous supervision of the court, was not specifically enforceable.Further, in the opinion of the court, at best the plaintiff - builder couldclaim damages and the expenditure incurred by him for the implementationof the terms of the agreement. The above case has no applicability tothe facts of the present caseand is of no relevance as the issue in relationto the maintainability of a suit for specific performance by the builderagainst the owner has not been discussed.

30. The appellant has also placed reliance on the decision in FaqirChand Gulati v Uppal Agencies Private Limited[24], where the issuebefore this Court was whether a landowner, who enters into an agreementwith the builder, for construction of an apartment building is a “consumer”entitled to maintain a complaint against the builder as a service providerunder the Consumer Protection Act, 1986. The Court held:

22 S.O.4888(E) dated 19.09.2018

23AIR 2001 SC 1462

24 (2008) 10 SCC 345

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A“We may notice here that if there is a breach by the landownerof his obligations, the builder will have to approach a civil courtas the landowner is not providing any service to the builder butmerely undertakes certain obligations towards the builder, breachof which would furnish a cause of action for specific performanceand/or damages. On the other hand, where the builder commitsBbreach of his obligations, the owner has two options. He has theright to enforce specific performance and/or claim damages byapproaching the civil court. Or he can approach the Forumunder Consumer Protection Act, 1986 for relief as consumer,against the builder as a service- provider.”

CThe issue involved before this Court was in relation to the interpretationof the Consumer Protection Act, 1986 and not on the maintainability of asuit filed by the developer against the owner for specific performance inview of Section 14(3)(c) of the Act. Therefore, the decision cannot berelied upon in relation to the issue before us.

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31. Ordinarily, if there was an alternative plea for damages ormonetary relief, we would have remanded the case to the High Courtfor consideration of the prayer. However, in the impugned judgment, theDivision Bench has observed thus:

“Although we find no merit in this appeal, we wanted to giveEliberty to the plaintiff for amendment of the plaint for the purposeof getting alternative relief by way of return of security of moneyand damages, if at all suffered, in terms of Section 22 of theSpecific Relief Act; but Mr. Das, the learned Advocate appearingon behalf of the appellant after taking instruction from his clientsubmitted before us that his client did not want to avail of suchFremedy and wanted to challenge our decision by preferring anappeal if we decided to refuse the prayer for specific performanceof the contract. “

The same statement has been made before this Court, as was madeGbefore the High Court. In the absence of any plea for damages ormonetary relief by the respondents, there is no reason to remit the appealback to the High Court.

32. For the above reasons we find no merit in this appeal. Theappeal stands dismissed. There shall be no order as to costs.

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Ankit Gyan Appeal dismissed.