# VINOD SETH v. DEVINDER BAJAJ AND ANR

- **Citation:** [2010] 7 S.C.R. 424
- **Court:** Supreme Court of India
- **Decided:** 2010-07-05
- **Case number:** Civil Appeal No. 4891 of 2010
- **Bench:** R.V. Raveendran, R.M. Lodha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vinod-seth-v-devinder-bajaj-and-anr-26910
- **Pages:** 41

## Headnote

Transfer of Property Act, 1882: s.52 - Suit for specific
performance of oral collaboration agreement for development
C of residential suit premises - No application by plaintiff for
interim relief - High Court directing plaintiff to furnish an
undertaking to pay Rs.25 lakhs to defendants in the event of
losing case observing that prima facie case not in favour of
plaintiff and due to heavy dockets in courts early disposal of
o suit was not possible - Propriety of - Held: There is no
provision in the Code or any substantive law which enable the
Court to issue a direction to a plaintiff in a suit to file an
undertaking that in the event of not succeeding in the suit, he
would pay damages to the defendant - Such power cannot
E be traced even in s. 151 - It is an order in terrorem - Order
punishing a litigant on the ground that the court is not able to
decide the case expeditiously is unwarranted, and beyond its
power -
In the facts and circumstances, suit property
exempted from the operation of s.52 and defendants granted
F liberty to deal with the property in any manner they may deem
fit, inspite of the pendency of the suit subject to their furnishing
security of Rs.3 lakhs - Doctrine of tis pendens - Specific
Relief Act, 1963 -
s.14(1)(b) and (d) -
Code of Civil
Procedure, 1908 - ss.35, 35A, 151, Order 25 r.1 - Damages
G - l!ndertaking - Judgment/Order - Order in terrorem.
Costs: Absence of effective provisions for costs - Need
for reform - The provision for costs as envisaged in ss.35,
35A, 358 have either become infructuous on account of
inflation or are seldom invoked - Lack of appropriate
H
424
VINOD SETH v. DEVINDER BAJAJ AND ANR.
425
provisions relating to costs result in increase in malicious,
A
vexatious and frivolous suits - Urgent need for the Legislature
and the law Commission of India to re-visit the provisions
relating to costs and compensatory costs contained in ss.35, ·
35A - Code of Civil Procedure, 1908 - ss. 35, 35A, 358 -
Legislation - Suggestion for.
B
Doctrines! Principles: Doctrine of /is pendens -
Applicability of.
The plaintiff-appellant claimed to be a builder-cumreal estate dealer. The defendants-respondents were the
C
owners in possession of the suit premises. According to
the plaintiff, an oral agreement for commercial
collaboraUon for development of residential suit premises
was purportedly entered bbtween him and the
defendants. In terms of the agreement, defendants were · D
required to convert the suit premises from leasehold to
freehold and then hand over vacant physical possession
to the plaintiff. Thereafter plaintiff was to demolish the
said property and reconstruct three storeyed building.
The plaintiff was to keep the ground floor with himself E
and handover first and second floors to the defendants
and also pay to them a sum of Rs.3.71 lacs. Pursuant to
the said terms of the agreement, a sum of Rs.51000 was
paid by the plaintiff to the first defendant who gave a
receipt. The plaintiff alleged that the defendants failed to
F
comply with the agreement and subsequently he also
came to know that the property stood in the name of the
second defendant and not the first defendant. The plaintiff
issued a notice dated 9.3.2007 calling upon the
defendants to comply with the legal formalities to facilitate
G
the collaboration agreement. Alleging that defendants
failed to comply, the appellant filed a suit on 30.6.2007 for
specific performance. The defendants denied the claim
in toto. When the case came up for framing issues, a
Single Judge of the High Court passed an interim order
H
426
SUPREME COURT REPORTS
[2010) 7 S.C.R.
A that the plaintiff instituted the suit without moving any
application for interim relief and the suit being in respect
to an immovable property,. even in the absence of any
interim order restraining the defendants from dealing with
the property, would adversely affect the right of
B defendants owing to tl)e pendency of the said suit. It
further held that the likelihood of the pl

## Text

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A
B
[2010] 7 S.C.R. 424
VINOD SETH
V.
DEVINDER BAJAJ AND ANR.
(Civil Appeal No. 4891 of 2010)
JULY 05, 2010
[R.V. RAVEENDRAN AND R.M. LODHA, JJ.]
Transfer of Property Act, 1882: s.52 - Suit for specific
performance of oral collaboration agreement for development
C of residential suit premises - No application by plaintiff for
interim relief - High Court directing plaintiff to furnish an
undertaking to pay Rs.25 lakhs to defendants in the event of
losing case observing that prima facie case not in favour of
plaintiff and due to heavy dockets in courts early disposal of
o suit was not possible - Propriety of - Held: There is no
provision in the Code or any substantive law which enable the
Court to issue a direction to a plaintiff in a suit to file an
undertaking that in the event of not succeeding in the suit, he
would pay damages to the defendant - Such power cannot
E be traced even in s. 151 - It is an order in terrorem - Order
punishing a litigant on the ground that the court is not able to
decide the case expeditiously is unwarranted, and beyond its
power -
In the facts and circumstances, suit property
exempted from the operation of s.52 and defendants granted
F liberty to deal with the property in any manner they may deem
fit, inspite of the pendency of the suit subject to their furnishing
security of Rs.3 lakhs - Doctrine of tis pendens - Specific
Relief Act, 1963 -
s.14(1)(b) and (d) -
Code of Civil
Procedure, 1908 - ss.35, 35A, 151, Order 25 r.1 - Damages
G - l!ndertaking - Judgment/Order - Order in terrorem.
Costs: Absence of effective provisions for costs - Need
for reform - The provision for costs as envisaged in ss.35,
35A, 358 have either become infructuous on account of
inflation or are seldom invoked - Lack of appropriate
H
424
VINOD SETH v. DEVINDER BAJAJ AND ANR.
425
provisions relating to costs result in increase in malicious,
A
vexatious and frivolous suits - Urgent need for the Legislature
and the law Commission of India to re-visit the provisions
relating to costs and compensatory costs contained in ss.35, ·
35A - Code of Civil Procedure, 1908 - ss. 35, 35A, 358 -
Legislation - Suggestion for.
B
Doctrines! Principles: Doctrine of /is pendens -
Applicability of.
The plaintiff-appellant claimed to be a builder-cumreal estate dealer. The defendants-respondents were the
C
owners in possession of the suit premises. According to
the plaintiff, an oral agreement for commercial
collaboraUon for development of residential suit premises
was purportedly entered bbtween him and the
defendants. In terms of the agreement, defendants were · D
required to convert the suit premises from leasehold to
freehold and then hand over vacant physical possession
to the plaintiff. Thereafter plaintiff was to demolish the
said property and reconstruct three storeyed building.
The plaintiff was to keep the ground floor with himself E
and handover first and second floors to the defendants
and also pay to them a sum of Rs.3.71 lacs. Pursuant to
the said terms of the agreement, a sum of Rs.51000 was
paid by the plaintiff to the first defendant who gave a
receipt. The plaintiff alleged that the defendants failed to
F
comply with the agreement and subsequently he also
came to know that the property stood in the name of the
second defendant and not the first defendant. The plaintiff
issued a notice dated 9.3.2007 calling upon the
defendants to comply with the legal formalities to facilitate
G
the collaboration agreement. Alleging that defendants
failed to comply, the appellant filed a suit on 30.6.2007 for
specific performance. The defendants denied the claim
in toto. When the case came up for framing issues, a
Single Judge of the High Court passed an interim order
H
426
SUPREME COURT REPORTS
[2010) 7 S.C.R.
A that the plaintiff instituted the suit without moving any
application for interim relief and the suit being in respect
to an immovable property,. even in the absence of any
interim order restraining the defendants from dealing with
the property, would adversely affect the right of
B defendants owing to tl)e pendency of the said suit. It
further held that the likelihood of the plaintiff succeeding
in the suit was remote as such agreements are not
concluded and enforceable till detailed writing is
executed. In the circumstances, the Single Judge
c directed the plaintiff to file an affidavit/undertaking that in
the event plaintiff did not succeed in the suit, he would
pay a sum of Rs. 25 lacs by way of damages to the
defendants. The said amount was arrived at because of
the averments in the plaint that the plaintiff was to spend
0 Rs. 20 lacs in development of the property and in lieu
thereof was to become the owner of the ground floor of
the newly constructed property. Plaintiff filed an intra.
court appeal. The Division Bench dismissed the appeal
holding that the cours~ adopted by the Single Judge was
not without sanction of law and there was merit in the
E said approach looking to the ground realities and heavy
dockets in the Courts. Aggrieved plaintiff filed the instant
appeal. ·
F
Partly allowing the appeal, the Court
HELD: 1.1. It is doubtful whether the collaboration
agreement, as alleged by the plaintiff-appellant, is
specifically enforceable, having regard to the prohibition
contained in section 14(1) (b) and (d) of the Specific Relief
G Act, 1963. The agreement propounded by the appellant
is not a usual agreement for sale/transfer, where the
contract is enforceable and if the defendant fails to
comply with the decree for specific performance, the
court can have the contract performed by appointing a
person to execute the deed of sale/transfer under Order
H
VINOD SETH v. DEVINDER BAJAJ AND ANR.
427
XXI Rule 32(5) CPC. The agreement alleged by the
A
appellant is termed by him as a commercial collaboration
agreement for development of a residential property of
the respondents. Under the alleged agreement, the
obligations of the respondents were limited, that is, to
apply to DOA for conversion of the property from
B
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 appellantlplaintiff has to perform
several c;>bligations when the property is· delivered, that c
is, to demolish the existing building, to construct a threestoreyed 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
Rs.3, 71,000/-. The performance of these obligations by 0
appellant was dependant upon his personal qualifications
and volition. If the court should decree the suit and direct
specific performance of the "collaboration agreement" by
respondents, it was not practical or possible for the court
to ensure that the appellant would perform his part of the
obligations, that is demolish the existing structure,
E
construct a three-storeyed building as per the agreed
specifications within one year, and deliver free of cost,
the two upper floors to the respondents. The alleged
agreement being vague and incomplete, required
consensus, decisions or further agreement on several
minute details. It would also involve performance of a
continuous duty by the appellant which the court could
F
not supervise. The performance of the obligations of a
developer/builder under a collaboration agreement
cannot be compared to the statutory liability of a landlord G
to reconstruct and deliver a shop premises to a tenant
under a rent control legislation, which is enforceable
under the statutory provisions of the special law. A
collaboration agreement of the nature alleged by the
appellant is not one that could be !ij)ecifically enforced.
H
428
SUPREME COURT REPORTS
[2010) 7 S.C.R.
A Further, as the appellant had not made an alternative
prayer for compensation for breach, there was also a bar
in regard to award of any compensation under section
21 of the Specific Relief Act. [Para 8.1) [446-F-H; 447-AH; 448-A-B]
B
Abdul Gafur v. State of Uttarakhand 2008 (10) SCC 97,
referred to.
1.2. The appellant claimed to be a builder and real
estate dealer. If the appellant entered into a collaboration
C agreement orally and could secure a receipt in writing for
Rs.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
D reason was forthcoming as to why that was not done.
[Para 8.2) [448-8-C]
1.3. The property stood in the name of second
defendant, but she did not sign the receipt. There was
E nothing to show that the second defendant participated
in the alleged negotiations or authorized her husbandthe first defendant to enter into any collaboration
agreement in respect of the suit property. The receipt
was not signed by the first defendant as Attorney Holder
or as the authorized representative of the owner of the
F property. From the plaint averments it is evident that
plaintiff did not even know who the owner was, at the
time of the alleged negotiations and erroneously
assumed that first defendant was the owner. The
execution of a receipt for Rs.51,000/- by the first
G defendant 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. The agreement is alleged to have been
entered on 10.6.2004. But the plaintiff issued the first
H notice calling upon defendants to perform, only on
VINOD SETH v. DEVINDER BAJAJ AND ANR.
429
9.3.2007 and filed the suit on 30.6.2007. There was no
A
correspondence or demand for performance, in writing,
prior to 9.3.2007, even though the alleged agreement was
a commercial transaction. [Paras 8.3, 8.4) (448-D-H]
2. Having regard to the doctrine of /is pendens
8
embodied in section 52 of the Transfer of Property Act,
1882, the pendency of the suit by the plaintiff would affect
the valuable right of the second defendant to deal with
the property in the manner she deemed fit, and restricted
her freedom to sell the property and secure a fair market C
price from a buyer of her choice. When a suit for specific
performance is filed alleging an oral agreement without
seeking any interim relief, the defendant,would not even
have an opportunity to seek a prima facie finding on the
validity of the claim. Filing such a suit is an ingenious
way of creating a cloud over the title to the suit property.
D
Such a suit is likely to be pending for a decade or more.
Even if a "defendant-owner asserts that his property is not
subject to any agreement and the said assertion is
ultimately found to be true, his freedom to deal with the
property as he likes or to realize its true market value by
E
sale or transfer is adversely affected during the pendency
of the suit. The ground reality is that no third party would
deal with a property in regard to which a suit for specific
performance is pending. This enables an unscrupulous
plaintiff to cajole and persuade a defendant to sell/give
F
the property on plaintiff's terms, or force the defendant
to agree for some kind of settlement. It was these
circumstances which persuaded the High Court to find
some way to do justice, leading to the impugned
direction. {Para 9) (449-A-F]
G
3. Order XXV Rule 1 CPC provides that at any stage
of a suit, the court may either on its own motion or on
the application of defendant, order the plaintiff for reasons
to b~ recorded, to give security for the payment of all
H
430
SUPREME COURT REPORTS
[20101 7 S.C.R.
A costs incurred or likely to be incurred by the defendant.
But the Code, nowhere authorizes or empowers the court
to issue a direction to a plaintiff to file an undertaking to
pay damages to the defendant in the event of being
unsuccessful in the suit. The Code also does not contain
B any provision to assess the damages payable by a
plaintiff to defendant, when the plaintiff's suit is still
pending, without any application by defendant, and
without a finding of any breach or wrongful act and
without an inquiry into the quantum of damages. There
c is also no contract between the parties whfch requires
the appellant to furnish such undertaking. None of the
provisions of either TP Act or Specific Relief Act or any
other substantive law enables the court to issue such an
interim direction to-a plaintiff to furnish an undertaking
0 to pay damages. In the absence of an enabling provision
in the contract or in the Code or in any substantive laws,
a court trying a civil suit, has no power or jurisdiction to
direct the plaintiff, to file an affidavit undertaking to pay
any specified sum to the defendant, by way of damages,
E if the plaintiff does not succeed in the suit. [Paras 11.2,
12) [451-C-H; 452-A]
4.1. 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
F 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
the court to make such orders as may be necessary for
G the ends of justice and to prevent abuse of the process
of the court. It cannot be invoked with reference to a
matt1~r 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
H to create or recognize rights, or to create liabilities and
VINOD SETH v. DEVINDER BAJAJ AND ANR.
431
obligations not contemplated by any law. [Para 13) [452A
B-E]
Padam Sen v. State of Uttar Pradesh AIR 1961 SC 218;
Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hirata/
AIR 1962 SC 527; Ram Chand and Sons Sugar Mills Pvt.
·Ltd. v. · Kanhayalal Bhargav AIR 1966 SC 1899; Nainsingh v.
Koonwarjee AIR 1970 SC 997, relied on.
4.2. A suit or proceeding initiated in accordance with
law, cannot be considered as an abuse of the process
B
of court, only on the ground that such suit or proceeding
C
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, a court 0
trying a civil suit, cannot, in exercise of inherent power
under section 151 CPC, make an interim order directing
the plaintiff to file an undertaking that he will pay a sum
directed by the court to the defendant as damages in case
he fails in the suit. [Para 13.4] [454-B•D]
E
5.1. The direction to the plaintiff to furnish an
undertaking to pay Rs.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. Such an order, punishing a litigant for
approaching the court, on the ground that the court is not
able to decide the .tase expeditiously, is unwarranted, G
unauthorized and beyond the power and jurisdiction of
the court in a civil suit governed by the Code. Such
orders are likely to
be
branded
a-s
judicial
highhandedness, or worse, judicial vigilantism. [Para 14)
[454-E-G]
F
H
432
SUPREME COURT REPORTS
[2010] 7 S.C.R.
A
5.2. Though the land-grabbers, speculators, false
claimants and adventurers in real estate are to be
discouraged from pressurizing hapless and innocent
property owners to part with their property against their
will, by filing suits which are vexatious, false or frivolous,
B but the method adopted by the High Court is wholly
outside law and cannot be approved. In a suit governed
by the Code, no court can, merely because it considers
it just and equitable, issue directions which are contrary
to or not authorized by law. The High Court can certainly
c innovate, to discipline those whom it considers to be
adventurers in litigation, but it has to do so within the four
corners of law. [Para 15] [454-H; 455-A-D]
Benjamin N. Cardozo in The Nature of the Judicial
Process (Yale University Press 1921 Edition Page 114),
D referred to.
6. The instant case reminds of the adage: "Hard
cases make bad law". The High Court should have
resisted fro'm laying down a 'bad law', which would be
E treated as a precedent and would result in similar
directions by courts, wherever they feel that suits are not
likely to succeed. It would encourage, in fact even force,
the· losing party to file an appeal or further appeal against
the final decision in the suit. This was because no plaintiff
F would like to undertake to pay a large sum as damages,
nor would a defendant like to miss a chance to receive a
large sum as damages. Such orders would also tempt
and instigate both the parties to make attempts to
succeed in the suit by hook or crook, by adopting means
fair or foul. If litigants are to be subjected to such
G directions in terrorem, the litigant public will be dissuaded
from approaching courts, even in regard to bona fide
claims. Such orders may lead to gradual loss of faith in
the judiciary and force litigants to think of extra-judicial
remedies by seeking the help of underworld elements or
H
VINOD SETH v. DEVINDER BAJAJ AND ANR.
433
police to settle/enforce their claims thereby leading to
A
break-down of rule of law. No order or direction of the
High Court, even if it is intended to deter vexatious and
frivolous litigation, should lead to obstruction of access
to courts. [Para 16] [455-F-H; 456-A-F]
Northern Securities Co. v. United States 193 (1903) US
197; Bellamy v. Sabine 1857 (1) De G & J 566, referred to.
Black's Law Dictionary, referred to.
B
7. It is well settled that the doctrine of tis pendens C
does not annul the conveyance by a party to the suit, but
only render it subservient to the rights of the other parties
to the litigation. The principle underlying section 52 of TP
Act is based on justice and equity. The operation of the
bar under section 52 is however subject to the power of o
the court to exempt the suit property from the operation
of section 52 subject to such conditions it may impose.
That means that the court in which the suit is pending,
has the power, in appropriate cases, to permit a party to
transfer the property which is the subject-matter of the
E
suit without being subjected to the rights of any party to
F
the suit, by imposing such terms as it deems fit. Having
regard to the facts and circumstances, this was 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 would have the liberty to deal with the
property in any manner they may deem fit, inspite of the
pendency of the suit. It is admitted by appellant-plaintiff
that under the collaboration agreement, he was required
to invest Rs. 20 lakhs in all, made up of Rs.16,29,000/- for G
construction and Rs.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
H
434
SUPREME COURT REPORTS
[2010] 7 S.C.R.
A proposed, which works out to Rs.3 lakhs. Thel'efore it
would be sufficient to direct the respondents to furnish
security for a sum of Rs. 3 lakhs to the satisfaction of the
court (Single Judge) as a condition for permitting the
defendants to deal with the property during the pendency
B of the suit, under Section 52 ofthe TP Act. [Paras 20, 21]
[458-E-H; 459-A-B]
Need for reform
8.1. High Court made the impugned order probably
C because it felt that in the absence of stringent and
effective provision for costs, on the dismissal of the suit,
it would not be able to compensate the defendants for the
losses/hardship suffered by them, by imposing costs. If
there was an effective provision for levy of realistic costs
D against the losing party, with reference to the conduct of
such party, the High Court, in all probability would not
have ventured upon the procedure it adopted. This draws
attention to the absence of an effective provision for
costs which has led to mushrooming of vexatious,
E frivolous and speculative civil litigation. [Para 22] [459-FH; 460-A]
Salem Advocate Bar Association v. Union of India 2005
(6) sec 344, relied on.
F
Manindra Chandra Nandi v. Aswini Kumar Acharaya ILR
(1921) 48 Cal. 427, approved
8.2. The provision for costs is necessary to achieve
the following goals : (a) It should act as a deterrent to
G vexatious, frivolous and speculative litigations or
defences . .The spectre of being made liable to pay actual
costs should be such, as to make every litigant think
twice bet.ore putting forth a vexatious, frivolous or
speculative claim or defence; (b) Costs should ensure
that the provisions of the Code, Evidence Act and other
H
VINOD SETH V. D6VINDER BAJAJ AND ANR.
435
B
laws governing procedure are scrupulously and strictly
A
complied with and that parties do not adopt delaying
tactics or mislead the court; (c) Costs should provide
adequate indemnity to the successful litigant for the
expenditure incurred by him for the litigation. This
necessitates the award of actual costs of litigation as
contrasted from nominal or fixed or unrealistic costs; (d)
The provision for costs should be an incentive for each
litigant to adopt alternative dispute resolution (ADR)
processes and arrive at a settlement before the trial
commences in most of the cases. In many other c
. jurisdictions, in view of the existence of appropriate and
adequate provisions for costs, the litigants are persuaded
to settle nearly 90% of the c1vil suits before they come
up to trial; (e) The provisions relating to costs should not
however obstruct access to courts and justice. Under no 0
circumstances the costs should be a deterrent, to a
citizen with a genuine or bonafide claim, or to any person
belonging to the. weaker sections whose rights have
been affected, from approaching the courts. [Para 23]
[461-E-H; 462-A-D]
E
8.3. At present these goals are sought to be achieved
mainly by sections 35, 35A and 358 read with the relevant
civil rules of practice relating to taxing of costs. Section
35 CPC vests the discretion to award costs in the courts.
It provides that normally the costs should follow the
F
event and court shall have full power to determine by
whom or out of what property, and to what extent such
costs are to be paid. Most of the costs taxing rules,
including the rules in force in Delhi provide that each
party should file a bill of cost immediately after the
G
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 .. In Delhi, the advocate's fee in regard to
436
SUPREME COURT REPORTS
[2010) 7 S.C.R.
A suits the value of which exceeds Rs.5 lakhs is: Rs.14,500/
- plus 1% of the amount in excess of Rs.5 lakhs subject
to a ceiling of Rs. 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
B compensate nor indemnify the litigant fully in regard to
the expenses incurred by him. [Para 24) (462-E-H; 463A]
8.4. The provision relating to compensatory costs
(Section 35A CPC) in respect of false or vexatious claims
C or defences has become virtually infructuous and
ineffective, on account of inflation. Under the said
section, award of compensatory costs in false and
vexatious litigation, is subject to a ceiling of Rs.3,000/-.
This requires a realistic revision. Section 358 providing
D for costs for causing delay is seldom invoked. It should
be regularly employed, to reduce delay. [Para 26) [463-GH; 464-A]
8.5. The lack of appropriate provisions relating to
E costs has resulted in a steady increase in malicious,
vexatious, false, frivolous and speculative suits, apart
from rendering Section 89 CPC ineffective. Any attempt
to reduce the pendency or encourage alternative dispute
resolution processes or to streamline the civil justice
sy\5tem will fail in the absence of appropriate provisions
F 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 CPC. The order of the
Division Bench and Single Judge directing the plaintiffG appellant to file an affidavit undertaking to pay Rs. 25
lakhs to defendants-respondents in the event of failure
in the suit is set aside. Instead, the defendantsrespondents are permitted under section 52 of TP Act, to
deal with or dispose of the suit property in the manner
H they deem fit, inspite of the pendency of the suit by the
VINOD SETH v. DEVINDER BAJAJ AND ANR.
437
plaintiff, subject to their furnishing security to an extent
A
of Rs. Three lakhs to the satisfaction of the Single Judge.
[Paras 27, 28] [464-B-E]
Case law reference:
2008 (1 O) sec 97
referred to
Para 5
AIR 1961 SC 218
relied on
Para 13.1
AIR 1962 SC 527
relied on
Para 13.2
AIR 1966 SC 1899
relied on
Para 13.3
AIR 1970 SC 997
relied on
Para 13.3
193 (1903) us 197
referred to
Para 16
1857 (1) De G & J 566 referred to
Para 20
ILR (1921) 48 Cal. 427 approved
Para 23
2005 (6) sec 344
relied on
Para 23
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4891 of 2010.
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From the Judgment & Order dated 27.1.2009 of the High
Court of Delhi at New Delhi in FAO (OS) No. 19 of 2009.
Dr. Kailash Chand for the Appellant.
The Judgment of the Court was delivered by
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R.V.RAVEENDRAN, J. 1. Leave granted. Heard. The·
validity of a novel and innovative direction by the High Court,
purportedly issued to discourage frivolous and speculative
litigation is under challenge in this appeal. To understand the
issue, it is necessary to set out the facts and also extract
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relevant portions of the plaint and the impugned orders of the
High Court.
2. The appellant claims to be a builder-cum-real estate
dealer. He filed a suit for specific performance of an oral
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[2010] 7 S.C.R
A agreement for "commercial collaboration for business benefits"
allegedly entered by the respondents as the owners in
possession of premises No.A-1/365, Paschim Vihar, New
Delhi, with him. He alleged in the plaint, that the following terms
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and conditions were orally agreed between the parties:
"(a) The defendants will apply to the ODA for conversion
of the above property from leasehold to freehold and within
2-3 months the defendants will handover vacant physical
possession of the above property to the plaintiff.
(b) The plaintiff will reconstruct the above property from his
own money/funds with three storeys i.e. ground floor, first
floor and second floor.
(c) Out of the said reconstructed three storeyed building,
the plaintiff shall be entitl.ed to own and possess the ground
floor; and the first and second floors will be owned and
possessed by the defehdants.
(d} Besides bearing the expenses of construction and
furnishing etc. of the proposed three storeyed building, the
plaintiff shall also pay a sum of Rs. 3,71,000/- to the
defendants at the time of handing over possession of the
above house for reconstruction.
(e) Out of the agreed consideration of Rs.3,71,000/-, a
sum of Rs.51,000/- was paid to the defendants in cash and
the remaining consideration of Rs.3,20,000/- was to be
paid to the defendants at the time of handing over
possession of the above house for reconstruction. In token
of the same a Receipt for Rs.51,000/- was duly executed
by defendant No.1.
(f) On getting conversion of the above property from
leasehold to freehold, the above agreement/proposed
collaboration of the property bearing No. A-1/365, Paschim
Vihar, New Delhi and the above terms and conditions were
to be reduced into writing vide an appropriate
VINOD SETH v. DEVINDER BAJAJ AND ANR.
439
[R.V. RAVEENDRAN, J.]
Memorandum Of Understanding to be duly executed by the
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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 Rs.51,000/- to first respondent in the presence
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of second respondent and two witnesses (Sanjay Kumar Puri
ahd M.R.Arora) and that the first respondent executed the
following receipt acknowledging the payment:
"RECEIPT/PART PAYMENT
Received a sum of Rs.51,000/- (Fifty one thousand only)
By Cash/Cheque Cash
From Sh. Vined Seth S/o Sh. Schan Seth R/o M-231 First
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Floor,
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Guru Harikishan Nagar
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Against Collaboration of Property No. A-1/365 Paschim
Vihar
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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 F
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. Alleging that respondents failed to G
comply, the appellant filed a suit on 30.6.2007 for specific
performance. We extract below the relevant portion of the
prayer:
" ...... to pass a decree of specific performance of
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Collaboration Agreement entered in between the parties
on 10-6-2004, as per its terms and conditions in favour of
plaintiff and against defendants specifying that :
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(a)
the defendants to apply immediately with the ODA
for conversion of the above property from leasehold
to freehold and immediately after such conversion,
the defendants will handover vacant physical
possession of the suit property i.e. House No.A-1/
365 Paschim Vihar Delhi to the plaintiff.
(b)
that the defendants to immediately apply by
submitting building plan as per Annexure P-3 with
the Authorities for sanction of the building plan.
(c)
the plaintiff will reconstruct the above property as
three storeyed building as per site/building plan
from his own money/funds within one year of
handing over of possession by the defendants to
the plaintiff and sanctioning of the building plan of
the suit property.
(d)
out of the said reconstructed three storeyed building
the plaintiff shall be entitled to own and possess its
ground floor only, and the first and second floors will
be owned and possessed by the defendants.
(e)
besides to bear the expenses of construction etc.
of the proposed 3 storeyed complete building, the
plaintiff shall also pay a sum of Rs.3,20,000/- to the
defendants at the time of handing over possession
of the above house for reconstruction.
(f)
the defendants will not transfer the title or
possession of the suit property till execution of the
collaboration Agreement but after its execution, the
defendants would be within their full rights to enjoy
lawfully the title and possession of the first floor and
second floor of the building.
VINOD SETH v. DEVINDER BAJAJ AND ANR.
441
[R.V. RAVEENDRAN, J.]
(g)
the plaintiff will be fully entitled for the full title and
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possession of the ground floor of the building and
the defendants would be left with no right, title or
interest in the property of the ground floor of the
building, however, he would not be entitled for any
exclusi\le rights in the property of ground floor till the
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first and second floor of the building are duly
constructed, as per the specifications and quality
as that of the ground floor, and handed over to the
defendants.
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
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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
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newly constructed building, etc. and ordinarily specific
performance of such agreements is difficult for the Court
to supervise. Jn the present case all the terms of the
agreement will have to be established by evidence, there
being no document recording the same.
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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 from dealing with the property, attracts Section
52 of the Transfer of Property Act and the pendency of
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the suit itself has a tendency of interference with the
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(2010] 7 S.C.R.
defendants' dealing with their own property and if at all
the defendants are compelled to deal with the same, the
defendants are likely to realize much less than the
market value of the property, owing to the pendency of
the said suit.
Prima facie, the likelihood of the plaintiff succeeding in the
suit appears to be remote. Such agreements are not
concluded and enforceable till detailed writing as aforesaid
is executed. Even if the averment of the plaintiff of having
paid Rs. 51,000/- to the defendants is established, the
same would still not establish a concluded enforceable
agreement. The suit cannot be dismissed at the threshold.
The counsel for the plaintiff has also contended that in law
it is permissible to have such an oral agreement. However,
the defendants are likely to suffer considerably merely
owing to the pendency of the present suit. While nearly
nothing of the plaintiff is at stake in pursuing the present
suit, the defendants as aforesaid will be losers even if
ultimately succeed. Courts cannot be silent spectators to
the parties being put on such unequal footing. The
remedy of defendants suing the plaintiffs for damages
caused to them, after succeeding in the present suit is not
efficacious. Affluent speculators in immovable properties
cannot be permitted to misuse the process of the court
to compel owners to transact with them only. In the
circumstances, it is deemed expedient to direct the
plaintiff to file an affidavit/undertaking to this Court
to, in the event of not succeeding in the suit pay a
sum of Rs. 25 lacs by way of damages to the
defendants. If the plaintiff is reasonably confident of the
genuineness of his case, the plaintiff ought not to suffer any
harm by giving such undertaking. The said amount has
been arrived at because of the averments in the plaint that
the plaintiff was to spend Rs. 20 lacs in development of
the property and in lieu thereof was to become the owner
of the ground floor of the newly constructed property.
VINOD SETH v. OEVINDER BAJAJ AND ANR.
443
[R.V. RAVEENDRAN, J.] S
The plaintiff to file the affidavit in terms of above within four
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weeks from today.
List ·on 27th January, 2009 for
framing of issues."
(emphasis supplied)
q. The appellant filed an intra-court appeal contending that
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every perso11 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 Rs.25 lakhs py way of damages to
defendants in the event of failing in the syit. He relied upon the
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following observations of this Court in Abdul Gafi.Jr 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
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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 civ.il disputes, the civil courts have
inherent jurisdiction unless a part of that jurisdiction is
carved out from such jurisdiction, expressly or by
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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
~iyil 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
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97]. In Ganga Bai v. Vijay Kumar [1974 (2) SCC 393] this
Court had observed as under: ''. . .' ... There is an inherent
right in every person to bring a suit of a civil nature and
unless the suit is barred by statute one may, at one's peril,
t:>ring a suit of one!s choice. It is no answer to a suit,
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howsoever frivolous to claim, that the law confers no such
right to sue. A suit, for its maintainability requires no
authority of law and it is enough that no statute bars the
suit."
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6. The Division Bench dismissed the appeal by the
appellant, holding that the order of the learned Single Judge
did not in any way contravene the said decision, on the following
reasoning:
"We see no contradiction in the aforesaid judgment and
the impugned order. The learned Single Judge has not
dismissed the suit. We also note the observations of the
Supreme Court that even a frivolous suit can be bought
before the court "at one's peril". All that the learned Single
Judge has done at the stage of framing of issues, having
prima facie found not much merit in the case of the
appellant, considered it appropriate to impose certain
terms and conditions.
We may notice that the provisions of Order 39 of the said
Code deals with temporary injunctions and interlocutory
orders. Order 39 Rule 2(2) authorizes the court to grant
injunction on such terms as deems proper including giving
of security. Thus, when the prayer for interim relief has to
be granted, provision has been specifically made
authorizing the court to make orders for keeping accounts,
giving security or otherwise as the court thinks fit.
The appellant has conveniently not filed an interim
application to avoid the rigour of such an order. Normally
in a suit for specific performance and that too dealing with
an immovable property, a party would seek interim
protection. The appellant has not done so. It is an ingenious
method of keeping a suit alive without claiming
interlocutory relief and creating a cloud over a property in
view of the provisions of Section 52 of Transfer of Property
Act.
We do think that the courts cannot look helplessly at such
tactics and ignore the problem of huge docket, which
arises on account of meritless claims being filed. The
heavy docket does not permit early disposal of suits and
VINOD SETH v. DEVINDER BAJAJ AND ANR.
445
[R.V. RAVEENDRAN, J.]
thus. parties may, take advantage of keeping frivolous
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claims alive. We also 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
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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
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out of pocket.