1) The document discusses the enforceability of an allotment letter as a binding contract between a developer and buyer for a property. 2) It notes that an allotment letter contains the essential elements of a valid contract and a buyer can seek specific performance if deprived of what was promised in the allotment letter. 3) The case details a property dispute where the buyer made substantial payments as per the allotment letter and payment plan, but the developer later demanded additional amounts including interest without providing details of amounts or interest calculation.

1. NOTE ON ENFORCEABILITY OF ALLOTMENT LETTER:
UnderS.2 (h)of theIndianContractAct,‘a contractisanagreementenforceablebylaw’.Thus,
a contract is an agreement made between two or more parties which is enforceable in the law.
a) An agreement is enforceable u/s 10 if it is made by competent parties, out of their
free consent and for lawful object and consideration.
b) All agreements are contracts if they are made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.
c) Since, all essential constituents of a Contract are presentin an Allotment letter, the
same is considered as a binding Contract between the developer and the buyer.
d) Although the general impression is such that the sales agreement holds supreme
importance in property deals, the allotment letter comes in when the buyer is deprived of
what he was promised.
e) A buyer can thus seek Specific Performance u/s 15 of the Specific Relief Act.
f) The purpose of the allotment letter is to have an interim arrangement until a formal
contract is executed, stamped and registered.
 The Standard format of an Allotment letter used by L&T Realty Ltd (LTR) with its
purchaser /clients/ customers adheres to the terms and conditions as per the MOFA
(1963) mentioning a few as under;
a) Giving details if the Project is being developed in phase-wise manner.
b) Intimating and also taking the purchaser’s /clients/ customers’ consent on change
of plans, permissions, clearances being approved by the concerned authorities
with amendments and modifications thereto being approved from time to time.
c) The payment schedule of the purchaser /clients/ customer’s to the Project
milestones to be achieved by L&T.
d) In terms of the provisions of Section 4 of the MOFA, LTR accepts only 19% of the
total sale consideration as payment or deposit from a flat/unit from its purchaser
/clients/ customer’s till the time LTR enters into a definitive agreement with its
purchaser’s /clients/ customers’.
e) Allotmentletter includesall thedetails regardingthe flat,thepaymentoptionsand
any extra charges. It also includes the construction schedule, house plans, delivery
date and builder’s liability in case of late completion or problems after possession.

2. CASE LAWS : Delhi High Court
Shikha Birla vs Ambience Developers Pvt Ltd on 20 December, 2008
i. CS(OS) NO.50/2008
ii. REPORTABLE
IN THE HIGH COURT OF DELHI AT NEW DELHI
I.A. Nos. 418/2008, 4814-15/2008 AND 7834/2008 in CS(OS) No. 50/2008
Date of Decision : 20th December, 2008.
SHIKHA BIRLA .... Plaintiff.
VERSUS
AMBIENCE DEVELOPERS PVT. LTD. .... Defendant.
CORAM:
SANJIV KHANNA, J:
1. This Order will dispose of applications of the plaintiff filed under Order XII, Rule 6,
Order XXXIX, Rules 1 and 2 and applications of the defendant under Order XXXIX,
Rule 4 andOrderVII,Rule 11 ofthe Codeof Civil Procedure,1908 (hereinafterreferred
to as the Code, for short
2. Ms. Shikha Birla (hereinafter referred to as the plaintiff, for short)has filed the present
Suit against Ambience Developers Pvt. Ltd (hereinafter referred to as the defendant,
for short) for specific performance of the contract contained in the letter dated 8th
September, 2004 and as modified by the letter dated 29th October, 2005 and for
directionto thedefendanttohandoverpossession of ShopNo.G-76,(measuring717.55
sq. ft) on the ground floor of Ambience Mall, Plot No.2, Vasant Kunj Mall Area, New
Delhi. Certain other reliefs are also prayed for.
3. Before arguments were addressed on these applications, statement of Mr.Raj Singh
Gehlot, Principal Officer and Director of the defendant was recorded in the Court on
16th September, 2008.
4. The two letters dated 8th September, 2004 and 29th October, 2005 are admitted
documents. Mr. Raj Singh Gehlot has admitted the said documents in his statement
recorded on 16th September, 2008 and they have been given Mark "A" and "D".
5. By letter dated 8th September, 2004, plaintiff was informed by the defendant that they
were pleased to allot shop no.G-79, (measuring 65.31 mts super area) on the ground
floor under the installment payment plan. The allotment letter states as under:-

3. 6. „....., we are pleased to allot you Retail Shop No.G-79, having approximately 65.31
sq.mtrs. (703.03 sq.ft) of Super Area of space on Ground Floor under Installment
Payment Plan as per enclosed Payment Plan. Kindly note that the above allotment
CS(OS) NO.50/2008 Page No.3 is subject to your execution of the Commercial Space
Buyers' Agreement on Company's standard format, contents of which have been
explainedandunderstoodby you andyourcomplianceof all theterms andconditions
as given in your application for allotment of space and due performance and
compliance of all you obligations as contained in the said Application Form and
Commercial Space Buyers‟ Agreement...."
7. Enclosed with the said letter was a chart specifying the amount and the stages on
which instalments were to be paid. The total amount payable was Rs.87,03,511/-.
8. Letter dated 29th October, 2005, an admitted document, is written by the defendant to
the plaintiff and is given mark “D”. By the said letter the defendant informed the
plaintiff that due to change in the lay out plan, the plaintiff had been allotted shop no.
G-76, measuring 715.55 sq.ft. instead of shop no.G-79. This letter by the defendant
states that upto 3rd October, 2005 an amount of Rs.63,75,548/- was due and payable
as pertheinstallmentpaymentplanenclosedwiththeletter dated8thSeptember,2004
but theplaintiffhadmadepaymentofRs.7,50,000/-leavinga balanceofRs.56,25,548/-
as due and payable on the said date. The letter further states:-
9. "......You are therefore requested to make the payment of the instalments due to us on
or before 10.11.2005 by way of Bank Draft of MICR cheque payable at New Delhi
favouring „Ambience Developers Private Limited.‟
10. We are enclosing herewith an updated payment plan of the abovesaid Retail Shop
No.G-76, which you are requested to follow to make the payment of the instalments
in future.
11. As already stated above, you have not made payment of instalments till date in time.
It may please be noted that timely payment of the instalments shall not only help us
in completing the proposed Mall in time but also save you from the penal action
including interest for late payment and/or cancellation of the registration/allotment
of abovesaid shop due to delay in making payment of instalments in time.
12. We are sure that you will be prompt enough in complying with the stated payment
plan and schedule in order to avoid penal action including cancellation of the
abovesaid shop."
13. Payment of Rs.56,25,548/- by the plaintiff by four different cheques dated 8th
November, 2005 for Rs. 17,00,145/-, 9th November, 2005 for Rs. 8,50,000/- and Rs.
17,00,146/- and 17th November, 2005 for Rs.13,75,183/- is not disputed. The said
cheques were accepted, encashed and the defendant had executed two receipts given
markG andH dated26thNovember,2005 forRs.25,50,219/-andRs.30,75,329/-.Even
if there was delay of 7 days in payment of Rs.17,00,145/-, the said payment was
accepted and receipt issued without protest or reservations. There is admittedly no
communication of the defendant for this delay of 7 days in payment or any letter
asking for interest. Thus there is no dispute about payment of Rs. 63,75,548/- out of
total payment of Rs.88,58,509/- .

4. 14. Along with the said letter dated 29th October, 2005, the defendant had enclosed an
updated payment plan, Mark „E‟ for further payments after the said date. As per the
said plan two instalments of Rs.6,37,555/- each were payable 3rd December, 2005 and
3rd March, 2005 and the third instalment of Rs.9,95,330/- was payable on 3rd June,
2006.Nodatewasfixedforpaymentofthelastandbalance instalmentofRs.2,12,518/-
plus registration charges but Mark E stipulated that this amount to equal 2.5% of the
price was payable on receipt of the occupation certificate.
15. As per the plaintiff she has made payment of the three instalments as per chart given
below (see paragraphs 11 to 13 of the plaint):-
Sr.No. Due date Date of Amount Delay
i. of payment Payment (Rs.)
1. 03.12.2005 17.01.2006 6,37,554 1 month, 4 days
2. 03.03.2006 08.03.2006 06,37,555 5 days
3. 03.06.2006 19.06.2006 09,95,330 16 days
16. Mr.Raj Singh Gehlot, Principal Officer and Director of the defendant-Company in his
statement recorded on 16th September, 2008 had stated that letter dated 8th March,
2006, Mark „I‟ written by the plaintiff enclosing therewith a cheque for Rs.6,37,555/-
might have been received in their office but he had not checked up whether the said
chequeof Rs.6,37,555/-asmentionedinthesaid letter hasbeen received andencashed
by the defendant.A similarreply wasgiven by Mr. Raj SinghGehlotin respectof letter
dated 22nd June, CS(OS) NO.50/2008 Page No.6 2006 (Mark „K‟) written by the
plaintiff enclosing therewith a cheque of Rs.9,95,330/-. It is unfortunate that the
DirectorandPrincipalOfficerofthedefendant-Companyhadgivenanevasiveanswer
in this regard in his statement recorded on 16th September, 2008. It is apparent that
Mr.Raj Singh Gehlot has deliberately and intentionally feigned ignorance on the
question whether cheques of Rs.6,37,555/- and Rs.9,95,330/- issued by the plaintiff to
the defendant were accepted by them and encashed. Mr. Raj Singh Gehlot, director
and principal officer of the defendant was asked about the said payments but he
avoided giving straight and clear answers. However in the written statement filed by
the defendant they have accepted and admitted three payments of Rs.6,37,555/-,
Rs.6,37,555/- and Rs.9,95,330/- in reply to paragraphs 11 to 13 of the plaint. Reply to
the said paragraphs in the written statement is identical and reads:-
17. "Para (11) of the plaint is substantially correct and needs no reply. It is submitted that
the plaintiff made the payment beyond the stipulated date and thus in terms of the
letter of allotment and the terms and conditions as contained in the application form,
became liable to pay interest"
18. The denial is not specific and in fact admits receipt and acceptance of payments. The
only plea and claim is for payment of interest for this (cumulative) delay of two
months and two days.

5. 19. Along with the letter dated 29th October, 2005, the defendant had enclosed a Note
marked „F‟, again an admitted document, the relevant clause of which reads as
under:-
20. "3.Time for payment of instalments on respective due dates is essence of allotment.
Any delay in this respect besides making the allotment liable for cancellation shall
attracta penalinterestof18% p.a.forfirst 90 daysof delay and21% p.a.foranyfurther
delay as per terms of application for allotment and Space Buyers‟ Agreement."
21. Thus in case of belated payment, the plaintiff became liable to pay interest as
stipulated. In paragraph 20 of the plaint, the plaintiff has stated that she is ready to
pay interest as per letter of allotment.
22. The defendant has admitted that construction was delayed in view of the stay order
passed by the Supreme Court in 2006 and clearances required. In paragraph 4 of the
written statement on merits it is stated as under;-
23. "......The dates mentioned in the payment plan were merely tentative and for purpose
of payment of instalments."
24. Inspite of the admitted delay in the project, the plaintiff had been making payments of
substantial amounts from time to time. Total payments made are Rs.86,45,987/-.The
paymentshavebeen acceptedandchequesgiven encashed.Theonlybalancepayment
due is Rs.2,12,518/- or 2.5% of the total price plus registration charges for which no
specific date was fixed in the updated installment payment schedule Mark E but the
same is payable as per CS(OS) NO.50/2008 Page No.8 the schedule on receipt of
„occupation certificate‟. Written statement does not state the date on which
„occupation certificate‟ was issued. It is not stated or alleged that any letter was
written asking the plaintiff to make payment of Rs.2,12,518/- as „occupation
certificate‟ had been issued.
25. On10thJune,2006 thedefendant wrotea letter,mark„L‟,statingthattheplaintiffhad
to pay Rs.13,38,424.21/- including Rs.7,00,869.21/-towards interest and said payment
should be made by 25th June, 2006. No details of the principal amount, break up, rate
of interest and period of interest were given in the letter. Mr. Raj Singh Gehlot in his
statement recorded on 16th September, 2008 admitted this fact. He has further stated
that when he had signed the written statement he had not checked the period and the
rate of interest being charged. No details are given in the written statement also.
26. The plaintiffwroteletters dated24thJune,2006and5thOctober,2006 tothedefendant
specifying thatfinalinstalmentpaymentof Rs.9,95,330/-wasalreadymade,therewas
delay in theprojectandshewaswaitingfor possession. Inthe letter dated5thOctober,
2006 it was stated " if there is any amount due from our end we would like to clear it
as early as possible so that we will be first among the people to have the possession of
the premises". Letter dated 5th October, 2007 was again sent as a reminder on 25th
October, 2007.
27. Receipt of the said letters is admitted by the defendant in the written statement (see
reply to paras 14 and 16 on merits). Written reply was send by the defendant only on
2nd January, 2008 stating that time of payment was essence of allotment,
reminder/demand of Rs.13,38,424.21 was raised on 10th June, 2006 and payment of
Rs. 9,95,330/- was made on 19th June, 2006 leaving a balance of Rs. 3,43,094.21/-,

6. which stands increased to Rs.6,48,343/- on 2nd January, 2008. The allotment was
cancelled and after deducting earnest money from Rs.86,45,987/-, a cheque of
Rs.63,64,763/- was enclosed towards refund. The plaintiff has not encashed the said
cheque.
28. Mr. Raj Singh Gehlot in his statement recoded on 16th September,2008 has stated that
the defendant company may have written the said letter 2nd January, 2008, mark M
but he had not read and examined the said letter before signing the written statement.
29. The admitted facts are startling and are completely one sided in favour of the plaintiff.
The plaintiff has made payment of Rs.86,45,987/- to the defendant between the period
2004 to 19th June, 2006. Payments were accepted, received and used. Claim for
payment of Rs.13,38,424.21/- including interest of Rs. 7,00,869/- was made by the
defendant by letter dated 10th June, 2006.The plaintiff made payment of Rs.9,95,330/-
and wrote letters dated 24th June, 2006, 5th October, 2007 and 25th October, 2007 to
which there was CS(OS) NO.50/2008 Page No.10 no written response from the
defendant. There is no written communication by the defendant between 10th June,
2006 till 2nd January, 2008. By letter dated 2nd January, 2008 the defendant cancelled
the allotment for alleged non payment of Rs.3,43,094.21/- and after deducting earnest
money from Rs.86,45,987/-, a cheque of Rs.63,64,763/- was enclosed towards refund.
The plaintiff has not encashed the said cheque. These are not disputed facts but
admitted facts. The defendant has not given break up of this claim of Rs. 3,43,094.21/-
in the written statement nor is this amount explained in any letter/document. Mr. Raj
Singh Gehlot, principal officer and director of the defendantcompany who has signed
and verified the written statement on basis of his knowledge and has filed an affidavit
in support, stating on solemn oath that he was aware of facts and written statement
was filed on his instructions and forms part of the said affidavit, has expressed
complete ignorance about the claim for interest, the period and rate at which it was
claimed. At best cumulative delay is two months and two days for which the
defendant can charge interest @18% per annum as per clause 3 of note, mark “F”. The
said demand has not been raised and the allotment has been cancelled after receiving
97.5% paymentofRs.86,45,987/-andenjoyingthesame.Balance2.5% ispayablewhen
“occupation certificate” is obtained by the defendant, for which no demand has been
raised and payment demanded.
30. It is apparent that the defendant wants to take advantage of increase in prices. This
was admitted by Mr. Raj Singh Gehlot in his statement recorded on 16th September,
2008 when he admitted that the sale price of shops sold in 2005-2006 was more than
the sale price when the shop was sold to the plaintiff.
31. Facedwithoverwhelmingadmittedfacts,thedefendanthasresortedtotechnicalpleas
that allotment agreement is an agreement to enter into an agreement in form of
commercial space buyer’s agreement and therefore not enforceable and the allotment
agreement, it was agreed, cannot be legally or specifically enforced in a court of law.
32. Anunderstandingtoenterinto a legally binding agreementdoes notresult in a legally
enforceable contract but an understanding or a bargain is legally enforceable, if
execution of a further document is to effectuate the manner in which the transaction
already agreed upon by the parties is to be implemented. In the former case, execution

7. of the agreement is a condition precedent. An agreementto enter into an agreement is
not executable but in the latter case execution of a formal document is not a condition
precedent and rights and obligations of the parties come into existence. The test is
whether an agreement is a complete bargain or mere intention or desire of the parties
to enter into a complete bargain without creating any permanentliabilities in present.
In Sobhag Narain Mathur CS(OS) NO.50/2008 versus Pragya Agrawal and others
reported in (141) 2007 DLT 356 the subject has been examined in depth and it was
observed as under:-
33. "18. Therefore, a mere reference to a future formal contract will not in law prevent a binding
bargain between the parties. The fact that the parties refer to the preparation of a formal
agreement by which the terms agreed upon are to be put in a more formal shape, does not
prevent the existence of a binding contract. The issue to be determined is whether it could be
said that the parties did not intend to be bound by the first agreement until a formal contract
was signed. This question is to be determined on the basis of the intention of the parties in the
light of the special circumstances of each particularcase.If the initial contract contemplates the
execution of a further contract between the parties, the Court would determine whether the
further contract is a condition or term of the bargain, or whether it is a mere expression of the
desire of the parties as to the manner in which the transaction already agreed upon would go
through. On a true construction of the first agreement, if it appears that the execution of a
further agreement is a condition or term of thebargain, then it is merely an agreement to enter
into another agreement, which is not enforceable, but if it appears that the requirement of
execution of a formal agreement is a mere desire of the parties as to the manner in which the
transaction already agreed upon will go through, the first agreement itself would constitute a
binding and enforceable agreement to sell."
34. Letter dated 8th September, 2004 (mark “A”) has been quoted above. The letter is
acceptance of the offer made to the plaintiff by the defendant. It refers to allotment of
a particular shop to the plaintiff, instalment plan for making payment by the plaintiff
and performance of obligations as contained in the application form and commercial
space buyers‟ agreement. The plaintiff and defendants were under an obligation to
comply with the terms contained in the application form and the commercial space
buyers‟ agreement. The letter further stipulates that the plaintiff would execute
Commercial Space Buyers‟ Agreement on company‟s standard format contents of
which had been explained to and understood by the plaintiff. Terms and conditions
were ascertained and certain.Nothing was left to be negotiated and settled for future.
Terms were agreed and Commercial Space Buyer‟s Agreement on a standard format
was read and understood. It was a certain and a concluded bargain. It is not a case
where the parties were entering into a temporary understanding, which may or may
not fructify in a binding bargain and execution of flat/Commercial Space Buyers‟
Agreement was a condition precedent for creating permanent obligations. A
concluded contract therefore had come into existence. The letters therefore cannot be
regarded as an understanding which do not create an enforceable agreement in law
but only an understanding between the parties to enter into an enforceable agreement
in future. The contentions of the plaintiff in this regard are specious and should be
rejected in view of their own admitted letter dated 8th September, 2004 (mark „A‟)
quoted above, letter dated 29th October, 2005 (mark „D‟) by which the defendant had

8. threatened to cancel allotment of the plaintiff for failure to pay instalments and
enclosing therewith a revised/updated instalments payment plan. The question of
cancellation of allotment will only arise if there is already an existing legally
enforceable contract/agreement between the parties and breach of obligations
stipulated therein.
35. The plaintiffhasmadepaymentofRs. 86,45,987/-onvariousdatesfrom 2004 onwards
till 24th June, 2006 for the shop. 97.5% of the total purchase consideration was paid by
the plaintiff and accepted by the defendant. These payments have been made in terms
of the installments payment plan (mark E). The defendanthas accepted and encashed
the cheques but is now alleging that the plaintiff has no right to enforce obligations of
the defendant without execution of the commercial space flat buyers agreementand it
is wish and desire and not a legal obligation of the defendant to execute commercial
space buyers agreement. This plea is not acceptable.
36. It is a matter of common knowledge that builders execute flat/Commercial Space
Buyers‟ Agreement with the buyers who have purchased flats/commercial space in
buildings. Registered sale deeds are not executed because of terms on which land is
allotted to the builders by Delhi Development Authority. The flat/Commercial Space
Buyers‟ Agreements are treated as documents of title and ownership. The Supreme
Court in the case of Commissioner of Income Tax versus PoddarCementPvt. Ltd. and
others, reported in (1997) 227 ITR 625, examined the flat/Commercial Space Buyers‟
Agreement and concept of ownership. It was observed that the said concept has to be
interpreted in a practical sense. The Supreme Court also referred to with approval the
need and requirement to continuously update and construe law in accordance with
changes, ground realities to make it a living enactment, in tune with the present state
of affairs. (See, pages 646 to 648 in the said citation). The contention of the defendant
that the present Suit for specific performance is liable to be dismissed, as no registered
transfer deed is envisaged or contemplated by the parties, but only another
unregistered document is to be executed is therefore liable to be rejected. The plea of
the defendant that the flat buyers and commercial space buyers are completely
remediless and at the mercy of the builders even after they have already received the
sale consideration but legally continue to be registered owners of land as they have
not executed registered transfer deeds or complied with the provisions of the Delhi
Apartments Ownership Act is liable to be rejected. In India, owner of land and owner
of building or part thereof may be different persons.
37. Reliance was placed on Modes Pvt. Ltd versus Shilpi Unitech reported in 70 (1997)
DLT 636. In the said case, it was held that a contract shall not be held to be concluded
and binding if the terms of the said contract are not certain. In this case there was a
memorandum of understanding. The document was purported to be a partnership,
but was not witnessed by anyone, the document only CS(OS) NO.50/2008 Page No.16
mentioned that the plaintiff was in possession of certain lands in Andhra Pradesh and
the two parties were to enter into the business of developing the said lands. The
document gave no details as to the location of the land i.e.; Khasra Nos. etc.,there was
also no specific details of the investments made by the two parties. Indeed the
contention of the defendant therein that a contractwith uncertain terms and condition

9. was no contract at all and a party cannot be bound by the same, is correct and was
accepted, but in the present case the two letters which are in no way uncertain. The
letters clearly give the schedule of construction and payments, the shop allotted to the
plaintiffhasbeen identified alongwiththesize of theshop.True theletters do mention
that a "Commercial Space Buyer‟s Agreement" is to be executed, but the execution of
the said document was not uncertain rather it was a direct consequence of the
payments being made and the same being accepted. The "Commercial Space Buyer‟s
Agreement" was nothing but another name for the final deed. Just calling it an
agreement would not make it into a second agreement. The letter/agreement was in
every respect a complete binding contract. It has all the essential ingredients of a
concluded contract,viz.; promise, consideration for the promise, acceptance and even
performance of obligations by one of the parties and by the defendant also from 2004
till 2nd January, 2008. Further,a plain reading of the written statement submitted by
the defendant brings out the fallacy in the argument that the letter dated 29th October
2005 (Mark „D‟) is a binding agreement. The defendant has admittedly sought to
charge interest from the plaintiff for allegedly going against the terms of the said
agreement, which has been said to be binding. Particular reference can be made to
paragraph 19 of the written statement, the relevant reads as under:
"....She cannot seek the change or amendment of the terms and conditions of the
allotment of the said commercial space. This Hon‟ble Court would not rewrite the
agreement the agreement for her. The plaintiff is bound by the terms and conditions
of the allotment..."
38. An agreement has to be binding on both the parties to a contract. It would be odd for
a party to seek to bind a party to the terms of a contract, which is claimed by it to be a
"no contract". This contradiction after admission of the defendant goes against the
defendant.
39. Words of "Salient Terms and Conditions for Allotment" that "intending allottee shall
not be entitled to enforce the same in Court of Law" places an embargo and bar on the
plaintiffapproachingtheCourttoenforcehisrights, availableundertheLaw.Thesaid
Clause seeks to absolutely restrict the plaintiff from enforcing her legal rights and to
that extent is a covenant that seeks to restrain the plaintiff from initiating legal
proceedings. The Clause is void in view of Section 28 of the Contract Act, 1872. In this
regard, reference may be made to the following observations of the Supreme Court in
the case of Food Corporation of India versus New India Assurance Company Ltd and
others reported in AIR 1994 SC 1889 :
"Every agreement, by which any party thereto is restricted absolutely from enforcing
his rights under or in respect of any contract by the usual legal proceedings in the
ordinary tribunals, or which limits the time within which he may thus enforce this
rights, is void to that extent.
40. Thesection is a departurefromEnglish law asthereis no suchstatutorybarrestraining
parties from entering into such agreement. In Rehmatunnisa Begum versus Price, AIR
(1917) PC 116 it was observed as a general principle that, „no man can exclude himself
from the protection of the courts‟. The rationale obviously is to ensure protection
against fair dealing even between unequal bargaining parties. The intention and

10. objective being clear the courts‟ primary responsibility is to construe and interpret it
in a manner so as to advance the objective and protect the interest of the party who
might be frustrated by too technical and expensive approach in such matters. Further
it is trite saying that the courts should lean in favour of construction which keeps the
remedy alive, that is if two constructions are possible then the one favouring
continuance of the suit is to be preferred than the one barring the remedy."
41. Decree on basis of admissions is a matter of discretion but when facts are admitted in
the pleadings or in documents; judgment or relief can be granted. Facts of the case are
admittedby both parties.Thereis nodispute about letters writteninter-seetheparties.
Payments made by the plaintiff to the defendant of Rs. 86,45,987/- is accepted. In the
written statement no dispute about facts is raised. On the said facts only one
conclusion is possible. In Uttam Singh Duggal & Co. Ltd.versus United Bank of India,
reported in (2000) 7 SCC 120, it was observed :
42. "12. As to the object of Order 12 Rule 6, we need not say anything more than what the
legislature itself has said when the said provision came to be amended. In the Objects
and Reasons set out while amending the said Rule, it is stated that "where a claim is
admitted, the court has jurisdiction to enter a judgment for the plaintiff and to pass a
decree on admitted claim. The object of the Rule is to enable the party to obtain a
speedy judgmentatleast to the extentof therelief to whichaccordingtotheadmission
of the defendant, the plaintiff is entitled". We should not unduly narrow down the
meaning of this Rule as the object is to enable a party to obtain speedy judgment.
Where the other party has made a plain admission entitling the former to succeed, it
should apply and also wherever there is a clear admission of facts in the face of which
it is impossible for the party making such admission to succeed."
43. In view of the above findings, application I.A. No. 7834/2008 under Order XII, Rule 6
of the Code is allowed and a decree of specific performance is passed in favour of the
plaintiff with the direction to the defendant to execute the Commercial Space Buyers‟
Agreement in respect of shop no. G-76 (approx. 717.55 sq. Ft) on the ground floor in
Ambi Mall, Plot no. 2, Vasant Kunj,Mall Complex, New Delhi on payment of interest
@ 18% p.a. on the three belated payments of instalments as mentioned in para 10 in
terms of Agreementdated8th September,2004 asmodifiedby letter/agreementdated
9th October, 2004. Defendant will calculate the interest amount and communicate the
said amount by a registered letter to the plaintiff within six weeks. Application under
Order VII, Rule 11 of the Code is dismissed and other applications are rendered
infructuous.
44. Plaintiff will be also entitled to costs of the suit.
45. Plaintiff has not urged and prayed for execution of any document under the Delhi
Apartments Ownership Act, 1986. The said question is left open.
(SANJIV KHANNA) JUDGE DECEMBER 20, 2008.
Supreme Court of India
Hansa V.Gandhi vs Deep Shankar Roy & Ors on 18 April, 2013

11. Bench: R.M. Lodha, Anil R. Dave, Ranjan Gogoi
1. NON-REPORTABLE
ii. IN THE SUPREME COURT OF INDIA
iii. CIVIL APPELLATE JURISDICTION
iv. CIVIL APPEAL NO. 4509 OF 2007
HANSA V. GANDHI …APPELLANT
VERSUS
DEEP SHANKAR ROY & ORS. ....RESPONDENTS
WITH
CIVIL APPEAL NO. 4510 OF 2007AND
CIVIL APPEAL NO. 4511 OF 2007
v. J U D G M E N T
ANIL R. DAVE, J.
1. Being aggrieved by a common judgment delivered in First Appeal Nos.492, 493 and
499 of 2002,dated 24th August,2005 by the High Court of Judicature at Bombay, these
appeals have been filed by the original plaintiffs, who had filed the suits for specific
performance.
2. As the facts involved in all these three appeals are similar in nature, all these appeals
are being decided by this common judgment. For the purpose of clarity, we are
referring to all the parties by their description as it was before the trial court. The
Developer of the property, original Defendant No.1 is now respondentNo. 2 in all the
appeals whereas respondent no.1 is a subsequent buyer of the property in question.
M/s. O.P. Co-operative Housing Society (hereinafter referred to as ‘the Society’) was
the owner of the land which was being developed by the Developer.
3. The Developer had entered into an agreement to develop the property i.e. land owned
by the Society and thereafter to sell the flats constructed on the land in question to the
intending purchasers in accordance with the terms and conditions of the agreement
dated 17th April, 1992.
4. Each plaintiff wanted to purchase one flat to be constructed by the Developer on the
land belonging to the Society, so they had negotiated deals with the Developer. As per
the understanding arrived at between each plaintiff and the Developer, the plaintiffs
had to pay a total consideration of Rs.4,40,000/- in respect of each flat in certain
installments.Accordingly,eachplaintiffhadstartedmakingpaymenttotheDeveloper
as per the amount of installments determined by the Developer. The Developer had
executed a letter of intent dated 29th September, 1992, whereby the Developer had
agreed to reserve a flat for each plaintiff . Reservation of the flat was subject to bye-

12. laws of the Society. Moreover, the reservation made by the Developer for the flats was
also subject to the terms and conditions which had been incorporated in the letter of
intent. Initially each plaintiff had given a sum of Rs. 88,000/- to the Developer and a
receipt had been executed by the Developer in respect of the said amount. Clause No.
3 of the said letter of intent dated 29.9.1992,written by the Developer and addressed
to the plaintiffs is as under :
“Clause 3 : We acknowledge and admit the receipt of Rs.88,000/-(Rupees Eighty Eight
Thousand only) from you, which amount you have paid to us in view of our reserving
the above mentioned flat in our proposed building on the basis of the plans shown to
you, with a view to securing that on compliance of all the terms and conditions of
Agreement to Lease executed between the Society and the Corporation, you shall
purchase the said flat and enter into ‘Agreement to Sale’ with us.” Thus, upon
compliance of certain terms and conditions referred to in the aforestated clause and in
the letter of intent, the Developer had agreed to sell the flats to the plaintiffs.
5. It was also provided in the letter of intent that the plaintiffs had to bear expenses in
relation to registration of the document, stamp duty and certain other expenditure to
be incurred for getting motor and electric connection etc. and it was also provided in
theletter of intentthatdelayed paymentofthe installmentwouldattractinterestatthe
rate of 21% p.a. and if two or more installments remained unpaid, the reservation
made in respect of the flat would stand cancelled.
6. In pursuance of the execution of the aforestated letter of intent, the plaintiffs had
started paying installments to the Developer. It may also be noted here that due to
some litigation which had taken place between some persons and the Society before
the High Court, the High Court had ordered an enquiry. The said litigation went on
till the end of 1996, due to which the Developer could not continue his construction
activity and that resulted into delay in the construction work. According to the
Developer, the said delay had resulted into increase in the cost of construction and
therefore, it was constrained to increase the price of the flats and as a result thereof,
the amount of installment was also increased from Rs.22,000/- to Rs. 38,500/-. The
increase in the price of the flats and the amount of installments had been opposed by
the plaintiffs and they had refused to pay the installments on the ground that the
increase in the price as well as installments was not justified. The plaintiffs had paid
about ten installments till 10th January, 1997.In view of the factthat the entire amount
payable as per the letter of intent and the understanding arrived at among the
plaintiffs and the Developer had not been paid, the Developer did not allot or sell any
flat to the plaintiffs and therefore, a Civil Suit No. 149 of 1998 had been filed by Mrs.
Hansa V. Gandhi (who has filed Civil Appeal No. 4509 of 2007 herein) with a prayer
for specific performance of the agreement for sale of the flat or in the alternative, to
refund the price already paid to the Developer along with damages, which according
to the plaintiff was Rs.10,00,000/-. Similarly, other plaintiffs had also filed suits for
specific performance/damages.
7. It is important to note that when the plaintiffs had stopped paying installments to the
Developer, the Developer had entered into another agreement with the present

13. respondent No.1 in each appeal for sale of the flats with increased price, which were
to be constructed and allotted to the plaintiffs. All these buyers are described
hereinafter as ‘Subsequent Buyers’, who were defendant No.3 in the suits.
8. The Developer had filed written statements before the trial court denying its liability
on the ground that by virtue of letter dated 19th December, 1997, it had cancelled the
reservationof flatsin question madefortheplaintiffs.Thus,the understandingarrived
atamongthe Developer andtheplaintiffs in pursuanceoftheletter of intenthadcome
to an end and as there was no subsisting agreement with regard to sale of the flats in
question withanyoftheplaintiffs,therewasnoquestionof eitherspecific performance
of the contract or about breach of the contract resulting into payment of damages by
the Developer.
9. It was contended on behalf of the Subsequent Buyers, who had purchased the flats
from the Developer that they were bonafide purchasers for consideration without
notice. It was specifically stated by them that they had no notice with regard to the
earlier transactions which the plaintiffs had entered into with the Developer. It was
also submitted that the agreement between each plaintiff and the Developer, if any,
had never been registered as required under the provisions of the Maharashtra
Ownership of Flats (Regulation of Promotion of Construction, Sale, Management
and Transfer) Act, 1963 (hereinafter referred to as ‘the Act’) and therefore, it cannotbe
presumed that the Subsequent Buyers had any notice with regard to the earlier
transactions, especially when they were never informed about the earlier transactions
either by the Developer or by the original plaintiffs. It was further submitted on behalf
of the Subsequent Buyers that they had paid the entire amount of consideration of Rs.
6,37,000/- and they were also put in possession of their respective flats and therefore,
they were bonafide purchasers for consideration. Thus, the agreement with regard to
sale of the flats, by the Developer to the Subsequent Buyers could not have been
questioned and they had legal and legitimate right to have occupation of their
respective flats.
10. After framing necessary issues and upon considering the evidence led before the trial
court, the trial court decreed the suits whereby the Developer was directed to
specifically perform the contract with regard to sale of the flats in favour of the
plaintiffs upon payment of unpaid amount of consideration by them.
11. Being aggrieved by the judgment and decree of the trial court, the Subsequent Buyers
filed the First Appeals, referred to hereinabove, before the High Court. As the facts in
respect of each First appeal were quite similar, the High Court thought it proper to
decide all the three First Appeals by a common judgment, which was delivered on
24thAugust, 2005andvalidityofthe saidjudgmentis challengedinthese civil appeals
filed before this Court.
12. After hearing the concerned parties and looking at the facts of the case and after
considering the judgment delivered by the trial court, the High Court allowed the
appeals. The judgments and decrees which had been passed in favour of the plaintiffs
by the trial court had been set aside and it was directed by the High Court that the
plaintiffs would be entitled to get refund of the amount paid by them to the Developer
with interest at the rate of 9% per annum from the date on which the letter of

14. termination of the agreement was sent by the Developer to the plaintiffs till the date
of payment of the said amount.
13. The learned counsel appearing for the appellants i.e. the original plaintiffs mainly
submitted that the Subsequent Buyers were not bonafide purchasers without notice
because they did not make sufficient enquiry with regard to the earlier transactions
which had been entered into by the Developer with the plaintiffs. According to the
learned counsel, had the Subsequent Buyers made detailed enquiry with regard to the
records of the Developer, they would have surely ascertained the facts with regard to
the letters of intent sent to the plaintiffs by the Developer but by not doing so, the
Subsequent Buyers had shown gross negligence and therefore, it cannot be said that
the Subsequent Buyers were bonafide purchasers without any notice with regard to
earlier transactions entered into between the Developer and the plaintiffs. The counsel
further submitted that the burden of establishing the bonafides of the Subsequent
Buyers was on them and the said burden had not been discharged by them and
therefore, the High Court was in error while observing that the Subsequent Buyers
were bonafide purchasers without any notice.
14. It was also submitted by the learned counsel that the Subsequent Buyers had not
adduced any evidence with regard to payment of purchase price to the Developer and
therefore, it could not have been said that the Subsequent Buyers were buyers in good
faith for valuable consideration.
15. On the other hand, it had been submitted on behalf of the Subsequent Buyers i.e.
respondent no. 1 in each appeal that the plaintiffs never averred in their respective
plaints that the Subsequent Buyers were not bonafide purchasers having no notice
with regard to the earlier transactions. In absence of such pleadings before the trial
court, the plaintiffs could not have advanced any argument with regard to bonafides
of the Subsequent Buyers. To substantiate the aforestated submission, the learned
counselhadrelied upona judgmentdelivered in thecaseof RamSwarupGupta (dead)
through LRs. Vs. Bishun Narain Inter College and Ors. [(1987)2 SCC 555] to the effect
that in absence of pleadings, the court would not deal with the matter not pleaded or
the concerned party would not be permitted to make out a case beyond its pleadings.
Some other judgments were also cited to substantiate the aforestated submissions.
16. It was mainly submitted by the learned counsel appearing for the Subsequent Buyers
thatinabsenceof anyregistrationof theagreement,enteredinto betweentheplaintiffs
and the Developer, the Subsequent Buyers could not have got any opportunity to find
out existence of the letter of intent or an agreement, if any, entered into between the
plaintiffs and the Developer. According to the learned counsel, registration of a
document is a notice to all concerned persons and in absence of registration of the so
called agreement, it cannot be presumed that the Subsequent Buyers had any
knowledge with regard to the earlier transactions. The burden of proof would be on
the plaintiffs to establish that the Subsequent Buyers had knowledge about the earlier
transactions entered into by the Developer with the plaintiffs.
17. Thecounsel appearingfortheSubsequentBuyersfurthersubmittedthat Section4(1)of
the Act makes it mandatory to get the agreement, between the purchaser of the flat
and the Developer, registered but in the instant case there was no registration as

15. required under Section 4(1) of the Act,the plaintiffs could not have acquired any right
in the flats.
18. Thus, the sum and substance of the submissions made on behalf of the Subsequent
Buyers was that being bonafide purchasers for consideration, they had a better right
in respect of the flats in question, especially when the plaintiffs had stopped paying
installments which were due and payable by them to the Developer and in view of the
letter of cancellation written by the Developer to the plaintiffs. If there was any
agreement or if the plaintiffs had any right to purchase the flats in question, by virtue
of the letter dated 19th December, 1997, cancelling the allotment, the so called right
had come to an end and thereafter the plaintiffs did not have any enforceable right in
respect of the flats in question.
19. We have heard the learned counsel for the parties at length and have perused the
judgments of the courts below and the judgments referred to by the learned counsel.
20. Upon thoughtful consideration, we are of the view that the High Court was not in
error while allowing the First Appeals filed by the Subsequent Buyers for the reasons
stated by it in the impugned judgment.
21. It is not in dispute that the letter of intent was issued by the Developer to the plaintiffs
wherein certain conditions had been incorporated and upon fulfillment of those
conditions, agreements for sale of the flats were to be executed. Upon perusal of the
letter of intent closely, one would find that certain conditions had been incorporated
in the letter of intent. The said conditions clearly imposed a duty on the part of the
intended purchasers to make payment of all the installments payable in respect of the
purchase price of the flat. It is also not in dispute that it was open to the Developer to
vary the price or the area to be covered by a flat in certain cases. It is not in dispute
that the Developer had raised the price because of the delay caused on account of the
litigation faced by the Society. On account of the delay caused in construction of the
flats, the cost had gone up and therefore, the Developer had asked for a rise in the
price which was approved by the majority of the intended purchasers of the flats.
Accordingly, all the other purchasers had started paying the increased price of
installments but the plaintiffs had refused to the same and in fact they had stopped
paying the installments which were becoming due and payable after the price had
been increased. It is also worth noticing that the plaintiffs did not make payment even
asper therateprescribedundertheletterof intentandthetermsandconditionsagreed
upon by them with the Developer.
22. It is a fact that the plaintiffs had notentered into any formal agreement with regard to
the purchase of the flats with the Developer. The mere letter of intent, which was
subject to several conditions, would not give any right to the plaintiffs for purchase of
the flats in question till all the conditions incorporated in the letter of intent were
fulfilled by the plaintiffs i.e. the proposed purchasers. It is also a fact that all the
conditions, which were to be fulfilled, had not been fulfilled by the plaintiffs.
23. According to the provisions of Section 4 (1) of the Act, the agreement, if any, executed
between the plaintiffs on one hand and the developer on the another, ought to have
been registered with the sub- Registrar.

16. 24. In absence of such a registered document, the plaintiffs would not get any right in
respect of the flats, which they intended to purchase. Moreover, in absence of the
registration, the Subsequent Buyers could not have got an opportunity to inspect the
agreement and there could not be any presumption that the Subsequent Buyers knew
about the agreement.
25. The letter of intent cannot be said to be an agreement to sell for the simple reason that
according to the contents of the letter of intent, only upon payment of the entire
purchase price, the Developer and the plaintiffs were to enter into an agreement with
regard to sale of the flats. This fact clearly denotes that no agreement to sell had been
entered into between the plaintiffs and the Developer and in absence of such
agreements, in our opinion, there cannot be any right in favour of the plaintiffs with
regard to specific performance of any contract. Thus, in our opinion, the High Court
did not commit any error while coming to the conclusion that there was no binding
contract or agreement in existence between the plaintiffs and the Developer and
therefore, the trial court could not have decreed the suit for specific performance.
26. As no averment was made by the plaintiffs in their plaints that the Subsequent Buyers
werenotbonafidepurchasersforconsideration,theSubsequentBuyerscould nothave
adduced any evidence to show that they were bonafide purchasers for consideration.
Had sucha plea been raised by the plaintiffsin their pleadings,theSubsequent Buyers
could have adduced necessary evidence to prove their cases. In such cases, normally
the burden of proof would lie on the plaintiffs unless there is a registered document
so as to raise a presumption that the Subsequent Buyers had knowledge with regard
to the earlier transaction. Such a burden of proof was not discharged by the plaintiffs
and therefore, we are also of the view that the Subsequent Buyers were bonafide
buyers for consideration.
27. The learned counsel for the Subsequent Buyers relied upon several judgments and the
propositions laid down in the said judgments are clear to the effect that if the
contention of the plaintiffs is that the Subsequent Buyers are not bonafide purchasers,
the plaintiffs must have pleading to that effect.
28. In view of the above circumstances, in our opinion, the High Court was right in
allowingtheappealsanddirectingthe Developerto return theamountof thepurchase
price received by it from the plaintiffs with interest at the rate of 9% p.a.from the date
when the letter of cancellation was written by the Developer to the plaintiffs. In our
opinion, the said direction is just and proper however, looking to the rising price and
inflationarytrendinthecountry,wepartlymodify thejudgmentby increasingtherate
of interest from 9% p.a. to 12% p.a. The said amount shall be paid to the plaintiffs by
the Developer within two months from today.
29. Looking into the aforestated facts, we are of the view that the High Court did not
commit any error while allowing the appeals. Subject to aforestated modification with
regard to the rate of interest, the appeals are dismissed with no order as to costs.