Nribhay Estates P. Ltd. vs DLF Universal Ltd.

P.K. Bhasin, J.—The present three appeals have been filed by the appellants against the common judgment dated 15th January, 2005 passed by the Additional District Judge, Delhi vide which he has dismissed their three suits for recovery of money filed against the respondents herein.

The appellants/plaintiffs filed three suits against M/s DLF Universal Ltd., respondent herein, alleging that they had booked two plots and one Villa for purchase from the respondent-defendant by depositing 20% of the sale price. The balance sale consideration was payable in installments. In the agreements executed between the parties there was a clause that 20% of the sale consideration was to be ''earnest money'' which was liable to be forfeited in case of breach of the terms of the contract by the appellant-plaintiff. The respondent-defendant claimed that the appellant-plaintiff had committed default in payment of the due installments and so it cancelled the contract and forfeited the amount of 20% of the sale consideration amount out of the amount paid by the appellant-defendant from time to time and returned the balance amount to the appellant-plaintiff. The appellant-plaintiff claimed the amount of money forfeited by the respondent-defendant and since it did not get it, suits for recovery were filed. The plaintiff claimed that forfeiture was illegal as the amount forfeited was not paid to the defendant as earnest money even though that was described in the agreement as such. It was also claimed that the clause of forfeiture of the earnest money was in any way oppressive, illegal, against public policy and unenforceable.

The respondent-defendant had filed written statements in the three suits in which it claimed, interalia, that the plaintiff was not entitled to any relief since the suit amount had been rightly forfeited.

On the pleadings of the parties following issues were framed by the learned trial Court:

1) Whether the plaint has been signed, verified and suit instituted by an authorized person on behalf of the plaintiff?

2) Whether the defendant has validly cancelled the contract?

3) Whether the defendant could forfeit the sum of Rs. 5,11,613/- representing 20% of the consideration amount in terms of the agreement? If so, to what effect?

4) Whether by the acceptance of the balance amount, the plaintiff is stopped from filing the present suit for refund of the sum of Rs. 5,11,613/-?

5) To what amount, if any, is the plaintiff entitled?

6) Whether the plaintiff is entitled to interest? If so, at what rate and for what period?

7) Relief.

The learned trial Court tried the three suits together and dismissed all the three by a common judgment holding that the plaintiff had committed breach of contract by not making timely payments of sale consideration to the defendant. The aggrieved plaintiff then filed these three appeals.

After having heard the counsel for the parties and perused the trial Court record I am of the view that the learned trial Court had failed to frame and decide certain material points of dispute between the parties which this Court feels were essential to the right decision of the suits and therefore, the matter deserves to be remanded back to the trial Court after framing the issues which should have been framed with a direction for giving the findings on those issues. As noticed already, it was the case of the plaintiff that even though in the agreements between the parties in respect of two plots and one Villa, there was a clause that 20% of the sale consideration was to be treated as ''earnest money'' but actually the amount paid by the plaintiff to the defendant from time to time as per the schedule of payment annexed with the agreement was towards the sale consideration and did not constitute any earnest money. The defendant had in its written statements refuted this claim of the plaintiff and had taken the stand that 20% of the sale price of the plots/Villas was to constitute the earnest money which could be forfeited in the event of breach of the contract by the plaintiff. There was, thus, a dispute between the parties as to whether 20% of the sale consideration in respect of the two plots and one Villa booked by the plaintiff was actually earnest money or not and that dispute was required to be resolved by the trial Court. However, the learned trial Judge did not even frame any issue in respect of that dispute between the parties. The plaintiff had also claimed that since time was not of essence of the contract between the parties and the schedule of payment of installments annexed with the three agreements executed between the parties provided for payment of interest in case of any delay in payment of any installment the contracts could not be cancelled by the defendant and no amount could be forfeited by it on the ground of alleged delay in payment of installments. The defendant in its written statement had claimed that time was of the essence of the contract. On this disputed question also the learned trial Court did not frame any issue and without framing any issue and giving an opportunity to the parties to adduce evidence observed in the impugned judgment that time was of the essence of the contract. Another plea raised by the plaintiff was that the forfeiture clause in the agreements providing for forfeiture of the 20% of the total sale consideration was in any case unenforceable being oppressive, illegal and against the public policy. The learned trial Court did not frame any issue in respect of this plea also raised by the plaintiff.

When during the course of hearing of the appeal the non-framing of these material issues was put by this Court to Mr. H.L. Tikku, the learned senior counsel for the respondent-defendant, his response was that the appellant-plaintiff never asked for framing of these issues before the trial Court and even in the grounds of appeal no such prayer had been made and so this Court should dispose of these appeals on the basis of issues already framed by the trial Court and the evidence adduced by the parties. Mr. Tikku also submitted that if this Court is of the view that additional issues need to be framed then an opportunity should be given to the respondent-defendant to adduce evidence on the fresh issues. Mr. B. Mohan, learned Counsel for the appellant also submitted that in case this Court decides to frame additional issues even the appellant-plaintiff would like to adduce evidence on those issues since it was not adduced before the trial Court as issues to that effect had not been framed.

I am of the view that just because the appellant-plaintiff did not insist for framing of aforesaid issues before the trial Court and even in these appeals no grievance was made regarding the absence of these issues the same are required to be framed by this Court in exercise of the powers conferred upon an Appellate Court under Order XLI Rule 25 CPC since the same are essential for a right decision of the three suits. I, therefore, frame the following additional issues to be decided by the trial Court:

Whether the money paid by the plaintiff to the extent of 20 per cent of the total sale consideration of the property in dispute pursuant to the agreement between the parties did not constitute ''earnest money''? If so, to what effect. OPP.

Whether the clause of forfeiture of the amount of money paid by the plaintiff to the defendant describing in the agreements as ''earnest money'' is unenforceable being oppressive, illegal, against the public policy, as is being claimed by the plaintiff? If so, to what effect. OPP.

Whether the time was of the essence of the contract in view of the schedule of payment of installments annexed with the agreements between the parties? If so, to what effect. OPD.

This matter is now remanded back to the trial Court for giving its decision on these fresh issues after giving opportunity to both the parties to adduce further evidence, oral and documentary, and with a direction to return the findings to this Court. The decision should be taken within a period of six months from 25th October, 2010, on which date, the case shall be taken up by the trial Court at 2.00 p.m. and parties shall appear there on that date without any further notice. The registry shall ensure that the trial Court record goes back before that date and the same should be returned back to this Court by the trial Court alongwith its finding on the additional issues. Counsel for both the parties state that this case would now fall within the jurisdiction of New Delhi Courts at Patiala House. Therefore, the matter shall be assigned by the District Judge, Patiala House Courts to any of the Additional District Judges posted there.