M/S Milky Investment And Trading Company vs M/S Collage Group Infrastructure Pvt. Ltd. & Ors.

The present suit has been instituted seeking specific performance of the Agreement of Sale dated 20.04.2015, vide which the Second Floor, Plot No. 3, Anand Lok, New Delhi – 110049 (hereinafter referred to as “Subject Property”) is to be transferred and handed over to the Plaintiff. The prayers made in the present Suit reads as under:

Shorn of unnecessary details, the facts of the case, as discernible from the Plaint, are as follows:-

a. A Development Agreement dated 01.06.2010 was entered into between Defendant No. 1, one Inder Mohan Khaneja and Defendants No. 2 & 3, who are the owners of the Subject Property, whereby the Subject Property was to be developed into independent floors i.e., consisting of ground, first, second and third floors. It is pertinent to mention that Defendant Nos. 2 & 3 are the Directors of Defendant No.1.

b. It is stated that the Plaintiff herein entered into a Memorandum of Understanding (hereinafter referred to as „the MoU‟) dated 08.11.2010 with Defendant No. 1, under which the Plaintiff advanced a loan of Rs.15 Crores to Defendant No. 1 at an agreed interest rate of 12% per annum. It is stated that under the said MoU, it was agreed that the loan was to be repaid by March 2013 and that in the event of default, Defendant No. 1 would allot three floors of the Subject Property to the Plaintiff. It is stated that this assertion was made on the basis that Defendant No. 1 had lawful authority to sell portions of the property under the Development Agreement dated 01.06.2010. Clause No. 7 of the said MoU reads as under:-

c. It is stated that by March 2013, Defendant No. 1 repaid only Rs.10 Crores to the Plaintiff, leaving an outstanding balance of Rs.5 Crores. Consequently, on 29.03.2013, an Addendum to the MoU dated 08.11.2010 was executed, whereby Defendant No. 1 was granted additional two years to repay the balance amount and it was specifically agreed that if the remaining loan amount was not repaid within the extended period, Defendant No. 1 would offer to sell the second floor of the Subject Property to the Plaintiff in lieu of the outstanding amount. Clause 2 of the said Addendum reads as under:-

d. It is stated that upon expiry of the extended period and its failure to repay the balance loan, Defendant No. 1 offered the second floor of the Subject Property to the Plaintiff. Accordingly, an Agreement to Sell (hereinafter referred to as „the ATS‟) dated 20.04.2015 was executed between Defendant No. 1 (as Developer), the Plaintiff (as Buyer), and Defendants No. 2 and 3 along with Inder Mohan Khaneja (as Confirming Parties). It is stated that under the said ATS, the second floor of the Subject Property was agreed to be sold to the Plaintiff herein for a total consideration of Rs.6.5 Crores, out of which Rs.5 Crores stood adjusted against the outstanding loan amount. Accordingly, an MoU dated 20.04.2015 was also executed between the Plaintiff and the Defendant No. 1, whereby it was agreed that the remaining payable amount of Rs.5 Crores in terms of the MoU dated 08.11.2010 and Addendum dated 29.03.2013 shall be adjusted against the sale consideration for the second floor of the Subject Property in terms of the Agreement to Sell of even date. The balance consideration of Rs.1.5 Crores was to be paid at the time of execution of the sale deed. Clause 10 of the ATS stipulated that possession would be handed over within 18 months, i.e., on or before 18.10.2016. Clause 10 of the ATS reads as under:

e. It is stated that after entering into an ATS, the Defendant No.1, on 16.02.2016, availed a term loan facility of Rs.90 Crores from Defendant No. 4, IL&FS Financial Services Ltd., by mortgaging the Subject Property. It is stated that the loan documents recorded that construction had already commenced on the Subject Property and that one floor had already been sold. It is stated that the Plaintiff was not informed of this mortgage at any point of time.

f. It is stated that on 18.02.2016, the Plaintiff addressed a letter to Defendant No. 3 seeking an update on construction, noting that approximately 77% of the sale consideration had already been paid. It is stated that the Defendant No.1, vide its reply dated 08.03.2016, assured the Plaintiff that construction on the Subject Property had commenced after resolving technical and contractor-related issues and that possession would be handed over within 16 months, i.e., by 08.07.2017. It is stated that despite the assurances, construction could not be completed within the stipulated time. It is stated that in September 2018, officials of the Plaintiff visited the site and discovered that no construction activity was going-on on the Subject Property. It is stated that the Plaintiff further discovered that Defendant No. 4 had taken physical possession of the entire Subject Property pursuant to a Possession Notice dated 22.09.2018 issued under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as „the SARFAESI Act‟).

g. It is stated that aggrieved by this the Plaintiff approached the Debt Recovery Tribunal (hereinafter referred to as „the DRT’), New Delhi, by filing Securitization Application No. 295/2018 on 15.10.2018, challenging the securitisation measures of Defendant No.4 and asserting that no valid mortgage could have been created over the second floor of the Subject Property. It is stated that Defendant No.1 filed a reply to the said Securitization Application on 16.03.2019 whereby the Defendant No.1 categorically admitted the existence of the ATS dated 20.04.2015 and confirmed that the second floor of the Subject Property was not part of the mortgage made in favour of Defendant No. 4. h. It is stated that on 25.02.2023, Defendants No. 2 and 3 initiated personal insolvency proceedings under Section 94 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as „the IBC’) before the NCLT, New Delhi, which resulted in an interim moratorium. It is stated that during the pendency of these proceedings, Defendant No. 4 was restrained from proceeding further against the Subject Property under the SARFAESI Act.

When the Suit came up for hearing on 22.04.2025, learned Counsel appearing for Defendant No.4 raised a preliminary objection to the maintainability of the suit on multiple grounds. This Court directed the learned Counsel for Defendant No.4 as well as the learned Counsel for the Plaintiff to file written note of arguments along with judgments and relevant orders of pending proceedings before the DRT and NCLT before the next date of hearing. On 09.05.2025, this Court directed the learned Counsel for the Plaintiff to file the original ATS dated 20.04.2015 before the next date of hearing, i.e. before 20.05.2025. However, the same was not filed on 20.05.2025. On 20.05.2025, one week’s time was further granted to the learned Counsel for the Plaintiff to file the original ATS dated 20.04.2015 on or before 31.07.2025. The Original ATS along with an affidavit of compliance was filed on 25.07.2025.

The principal contentions of Defendant No.4 are that the present Suit for specific performance of the Agreement to Sell dated 20.04.2015 is ex facie barred by limitation, and this bar is apparent from the Plaintiff’s own pleadings, documents, and admitted chronology. It is stated that the present suit is governed by Article 54 of the Limitation Act, 1963, which prescribes a period of three years either from the date fixed for performance or, where no such date is fixed, from the date when the performance is refused. It is stated that on a meaningful reading of the Plaint, it is clear that the suit fails under both limbs of Article 54 of the Limitation Act, 1963. It is stated that the Agreement to Sell dated 20.04.2015 expressly contemplated delivery of possession within 18 months, i.e. on or before 20.10.2016, and in any event, the subsequent assurance dated 08.03.2016 indicated completion and handing over within 16 months. It is stated that in any case, the outer timeline for performance expired between October 2016 and July 2017. Once such a determinable period exists, limitation does not remain open-ended and therefore, the cause of action for seeking specific performance crystallised, at the latest, by mid-2017, and the limitation period expired by mid-2020. It is stated that the present Suit was filed in 2025 which is far beyond the prescribed period of limitation.

Learned Counsel for the Defendant No.4 further stated that even if it is assumed that no specific date for performance of the ATS was fixed, the Plaintiff had clear notice that the ATS would not be performed when Defendant No. 4 took possession of the property under the SARFAESI Act on 22.09.2018. It is stated that when a secured creditor takes possession of the entire property, it amounts to a clear denial of the Plaintiff’s claim to seek conveyance or possession. It is further stated that the Plaintiff itself admits that it became aware of this action in September 2018 and thereafter filed a Securitisation Application No. 295/2018 before the DRT on 15.10.2018. It is stated that with the filing of the Securitisation Application, the Plaintiff had full knowledge that the ATS could not be performed and, therefore, at the latest, the limitation started running from October, 2018 and the same will be expiring by October 2021. It is, therefore, stated that the Suit, which was filed in 2025, is time-barred.

Learned Counsel for the Defendant No.4 further states that the Plaintiff cannot rely on the pendency of proceedings before the DRT to explain the delay. He states that the proceedings under the SARFAESI Act are limited to examining the legality of the bank’s actions and do not decide rights relating to specific performance of an Agreement to Sell. He states that there is no provision in law which stops or suspends limitation merely because such proceedings are pending and, therefore, limitation continues to run regardless of parallel proceedings before another forum.

Learned Counsel for the Defendant No.4 also stated that the Plaintiff’s reliance on the legal notice dated 23.12.2024 is misplaced. He states that by the time the said notice was sent, the limitation period had already expired, and no fresh cause of action could arise from such a notice. He states that once a claim has become time-barred, it cannot be revived by issuing a notice several years later.

Learned Counsel for Defendant No.4 has also drawn the attention of this Court regarding the veracity of the ATS which is filed on record. He states that in the ATS which was filed along with the Plaint, the date is mentioned whereas in the ATS which has been filed prior to the directions of this Court, no date is mentioned. He further points out that the ATS has been signed by different persons. It is stated that the ATS which has been filed prior to the directions of this Court was signed on behalf of the Plaintiff by Mr. Pankaj Bhardwaj, the Authorised Signatory of the Plaintiff, whereas the ATS which was filed along with the Plaint, was signed by Mr. Abhay Agarwal, Director of the Plaintiff. He, therefore, states that in the absence of the correct ATS, the present Suit cannot be entertained.

Per contra, learned Counsel for the Plaintiff contends that the Suit is not barred by limitation for the reason that under Article 54 of the Limitation Act, 1963, time begins to run from the date when Defendant No.1 refused to perform its obligation under the ATS, i.e. after 60 days from the service of the Legal Notice, which is on 23.02.2025. He contends that the fact that the possession has been taken over by Defendant No.4 cannot be implied as a refusal by Defendant Nos.1, 2 & 3. It is also stated that the fact that the Plaintiff has approached the forums under the SARFAESI Act challenging the steps taken by Defendant No.4 would also not mean that the Plaintiff cannot approach this Court seeking specific performance of the Agreement to Sell by Defendant No.1. It is stated that the principal relief is only against Defendant No.1 and the only relief against Defendant No.4 is for a direction to restrain Defendant No.4 from creating any third party rights in the Subject Property and that relief would be contingent on the Prayer Clause (a) which is for specific performance of the Agreement to Sell. It is, therefore, stated that the Defendant No.4 is only a proforma party and not a necessary party to the present Suit. He further states that the interim moratorium under Section 96 of the IBC in respect of Defendants No. 2 and 3 does not bar the present Suit, as the reliefs sought do not pertain to the recovery of any debt from them, but pertains to enforcement of contractual rights arising from the Agreement to Sell, to which they are confirming parties.

Heard the learned Counsels for the parties and perused the material on record.

It is well settled that limitation is a mixed question of law and facts and would depend on the interpretation of the clauses. The intention of the parties while executing clause 10 of the ATS would depend upon the evidence led by the parties and, therefore, it cannot be categorically said that the present Suit is barred by limitation.

The Clause 10 on which reliance has been placed by the Defendant No.4 does not categorically fix the outer date from which the limitation can be calculated. The said Clause states that the developer has to agree to hand over the vacant, actual, physical and peaceful possession of the premises to the purchaser i.e., the Plaintiff upon the execution and presentation of the sale deed before the Sub-Registrar after receiving the entire sale consideration, on or before the 18 months of the date of agreement. Not only does the Agreement indicate that within 18 months the constructions had to be completed and the sale deed ought to have been presented to the Sub-Registrar, but it also contains one more condition that the entire sale consideration had to be paid by the Plaintiff.

Material on record, as placed in the plaint, does not disclose that the construction had indeed been completed. Material on record does indicate that a Communication dated 08.03.2016 from Defendant No.1 assuring the Plaintiff that the construction on the Subject Property had commenced after resolving technical and contractual related issues and that the possession will be handed over within 16 months. However, there is nothing on record to show that the Plaintiff was informed that the construction indeed had been completed. In the absence of anything in the plaint or any other documents showing that the construction had been completed, it cannot be said that the limitation period had commenced. Further, there is no communication from the Defendants asking for the payment, in fact, the material on record indicates that even in September, 2018 when the Plaintiff visited the site, he discovered that the construction activities was going on. It, therefore, cannot be stated with certainty that the construction had been completed which would raise a cause of action.

The primary contention of the learned Counsel for the Defendant No.4 that when the Plaintiff discovered that Defendant No.4 had taken the possession of the Subject Property, the limitation would start running again does not merit acceptance. Article 54 of the Limitation Act, 1963 states that the limitation would start running from the date fixed for performance or if no such date is fixed, then when the Plaintiff has noticed the performance is refused. The fact that the Defendant No.4 has taken possession of the premises, does not indicate that Defendant Nos.1 to 3 have refused performance and, therefore, the fact that the Defendant No.4 has taken the possession again will not start the clock running. In view of the above, the plaint cannot be rejected at this stage on the ground of limitation.

The second argument of learned Counsel for the Defendant No.4 is that there are discrepancies in the Agreement and more particularly, in the ATS which has been filed pursuant to the direction of the Court also will not result in rejection of the plaint at this juncture. It is the case of Defendant No. 4 that no ATS was entered into by the Plaintiff and the Defendants. However, the veracity of the ATS and the effect thereof on the suit will be decided at the time of trial.

Further, the fact the Plaintiff had also approached the DRT for a relief, again would not take away the right of the Plaintiff to approach this Court to file the present suit for ATS. The proceedings before the DRT were to take the Subject Property out of the provisions of the SARFAESI Act contending that the ATS entered into between the Plaintiff and Defendant Nos. 1 to 3 is prior to the mortgage.

The moratorium under Section 14 of the IBC which would apply against the Defendant No. 1 would also not be a bar for the present suit being proceeded against the Defendant No. 2 and 3 who are the confirming parties to ATS. Moreover, the question as to what is the effect of Section 14 of the IBC on the instant suit would be again a matter to be seen at the later stage and cannot be the reason to reject the plaint at this juncture.

Since summons are yet to be issued, let the present Plaint be registered as a Suit.

The objections raised by the Defendant No. 4 at this juncture will not come within the parameters of the Order VII Rule 11 or under Order XII Rule 6 or under Order XV Rule 1 of the CPC.

Issue summons to the Defendants through all permissible modes, including Dasti.

Learned Counsel for the Defendant No.4 accepts summons.

The summons to the Defendants shall indicate that the Written Statement(s) to the Plaint shall be positively filed within a period of 30 days from the date of receipt of summons. Along with the Written Statement(s), the Defendants shall also file the affidavit(s) of admission/denial of the documents of the Plaintiff, without which the Written Statement(s) shall not be taken on record.

It is made clear that the limitation period for the purpose of filing Written Statement would start from the date of this Order.

Liberty is given to the Plaintiff to file the Replication within a period of 15 days of the receipt of the Written Statement(s). Along with the Replication, if any, filed by the Plaintiff, the affidavit(s) of admission/denial of documents of the defendant(s) shall be filed by the Plaintiff, without which the Replication(s) shall not be taken on record.

If any of the parties wish to seek inspection of any documents, the same shall be sought and given within the timelines.

List before the Joint Registrar on 06.04.2026.

List before the Court on 15.07.2026.