Indemnity Bond for Income Tax Refund

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                               SUBJECT : AGREEMENT

                                 CS(OS) No.1599/1999

                             RESERVED ON: 11-07-2006

                          DATE OF DECISION:         21-08-2006

M/s. Sandvik Asia Pvt. Ltd.       .....Plaintiff
              Through : Ms.Harpreet Oberoi, Adv.


M/s. Vardhman Promoters Pvt. Ltd. ....Defendant
            Through: Mr. Sanjay Goswami, Adv.


1.      Suit seeks recovery of Rs.21,00,000/- (Rupees twenty one lacs only) which the
plaintiff paid to the defendant under an Agreement to Sell dated 19.11.1998 entered into
between the parties. As per the Agreement to Sell (hereinafter referred to as the
‘Agreement’), the plaintiff had agreed to purchase the entire third floor having a super
area of 3802 sq. ft. in the building constructed by the defendant on Plot No. 4, Block J,
Community Center, Rajouri Garden, New Delhi for a sale consideration of
Rs.84,82,262/-. It is alleged by the plaintiff that the amount of Rs.21,00,000/- was paid
as advance towards the sale consideration. Case of the defendant is that the sum received
was by way of earnest money and as plaintiff failed to perform its obligations to pay the
balance sum, the amount was forfeited.

2.      Under the terms of the agreement proved as Ex.D1, which is an admitted
document, the defendant was to obtain requisite no objection from the Income Tax
department under Section 249 UL (3) of the Income Tax Act in form 37-I and on receipt
of the no objection, the plaintiff was to be informed and thereupon the balance sum of
Rs.63,82,262/- (Rupees Sixty Three Lacs Eighty Two Thousand Two Hundred and Sixty
Two Only) had to be paid within 10 days. The agreement further stipulated that
simultaneously, on receipt of payment, the defendant was to execute an Irrevocable and
Registered general power of attorney, No objection affidavits for mutation in DDA, an
Indemnity bond for property tax and other encumbrances, and/or any other relevant
document requested for by the plaintiff. Clause 4 of the agreement stipulated that if the
vendee i.e. plaintiff fails to make the payment of the balance sale consideration within 10
days from the knowledge of the the permission having being obtained from the IT
department, the vendor i.e. defendant shall be entitled to send a notice calling upon the
vendee to make the payment within 10 days, failing which the said sum of Rs. 21 lacs
was to be forfeited by the vendor. Clause 5 of the agreement stipulated that if the
transaction is not completed within a period of 5 months, the vendor shall immediately
refund to the vendee the sum of Rs. 21 lacs, except where the same has been forfeited in
accordance with Clause 4. Under Clause 7 of the agreement, it was their duty of the
vendor to ensure that the property is free from all kinds of encumbrances and under
clause 9 of the Agreement the liability to pay house tax, Property tax, water and
electricity charges, lease money etc. was of the vendor up to the date of the agreement.

3.     On the pleadings of the parties, the following issues were framed on 8.1.2004 :-

“1. Whether the suit has been filed by a duly authorized and competent person? OPP

2. Whether the sum of Rs. 21 Lacs paid by the plaintiff under the Agreement to sell dated
19.11.1998 was an advance or earnest money? OP Parties

3. If the aforesaid issue is decided in favour of the plaintiff, holding the same to be an
advance money, could the same be forfeited bythedefendant? OPD

4. Whether the plaintiff was willing to fulfill the terms of Agreement to sell and was
ready and willing to perform the same? OPP

5. Whether the plaintiff is entitled to refund of Rs. 21 lac or any part thereof and if so at
whatinterest? OPP

6. Whether any damages have been suffered by the defendant by any breach of contract ,
if any committed by the plaintiff, and if so, whatamount? OPD

7. Relief.”

4.     Several letters and communications have been exchanged between the parties.
These have been duly proved. Vide letter dated 31.3.1999 (Ex. D-1/12) defendant
informed the plaintiff of the IT clearance as provided for in Clause 2 of the agreement,
and requested it to make balance payment within 10 days. Plaintiff acknowledged receipt
of Ex. D-1/12 on 6.4.1999 and vide reply dated 7.4.1999 (Ex. PW 1/3) expressed its
willingness to complete transaction and requested for the execution of the following
       1.      Sale Deed
       2.      Power of Attorney
       3.      No Objection Affidavit
       4.      Indemnity Bond
       5.      Possession Letter
5.      Vide letter dated 9.4.199, Ex.D-4, defendant replied to Ex. PW-1/3 and informed
plaintiff that as per the agreement it had to pay balance sale consideration within 10 days
of receipt of no objection from the income tax authorities and therefore requested for
payment. Defendant offered possession and said that it would execute the necessary
document envisaged under the agreement. Vide letter dated 15.4.1999 (Ex. PW 1/5), the
defendant informed the plaintiff that in case they failed to make balance payment, the
amount of Rs. 21 lacs would be deemed to be forfeited without any further notice.
Furthermore, they would also be liable to pay damages due to the breach of the
agreement. Plaintiff replied vide letter dated 16.4.1999 (Ex. PW 1/16). Making a
reference to its earlier letter dated 7.4.1999, reiterating that the required documents had
not been executed and, in addition, various payments, taxes, bills have not been cleared,
plaintiff said that same be done and thereafter it would make payment. Vide its notice
dated 19.4.1999 (Ex. D-7), the defendant offered an extension by a period of 21 days for
plaintiff to make the balance payment and accept possession. The defendant reiterated its
willingness to execute the necessary documents, on getting balance sale consideration.
Vide Ex. PW-1/7, plaintiff served legal notice dated 23.4.1999 on the defendant, asking
for the refund of the advance money of Rs. 21 lacs within 21 days. Reply to the notice
was given vide letter dated 3.5.1999 (Ex. DW-1/21). Defendant stated that since plaintiff
had failed to pay the balance sum and since it was ready to hand over possession and give
possession letter and execute general power of attorney and other documents (except sale
deed), sum of Rs. 21 lacs was forfeited.

6.      Evidenced by the contents of the letters exchanged between the parties, the major
bone of contention between the parties was regarding the non-execution of the sale deed.
Whereas, the plaintiff insisted on execution of the sale deed in its favour, defendant stated
that sale deed was not to be executed and offered to execute a general power of attorney
and hand over possession.

7.      The plaintiff examined one witness, PW1, Sh. Sudhir Malik, Regional Sales
Manager, Coromat Division, Delhi, M/s. Sandvik Asia Limited. He deposed that M/s.
Sandvik Asia is a multinational company and that he is duly authorized to sign, verify,
file, present and prosecute the present suit on behalf of Sandvik Asia vide a Board
Resolution dated 13.5.1999 (Ex. PW 1/1). He deposed that the company wanted a
property with a clear and clean title and hence, it was agreed that the seller i.e. defendant
would take all requisite permissions, sanctions and would sell the property without any
charge, encumbrance, claims or demands to the buyer i.e. plaintiff. To quote in verbatim,
deposition of PW1 further records:-

“Being a multi-national company, the deponent was not interested in taking any property
solely on the basis of a power of attorney without the corresponding conveyance deed.
Defendant assured us a simultaneous request for execution of deed of apartment/sale
permission would be taken provided we give bulk payment (at least 25 %) in advance.
Since we had bona-fide intentions to purchase the same and believed the defendant to be
sincere, we agreed to all his conditions including that of payment of Rs 21,00,000/- as
advance money. It was also negotiated in such agreement to sell that upon the sale
permission been given by DDA, the defendant would execute sale deed in favour of the
deponent. Therefore, in Clause 3 of the agreement to sell it was added that the defendant
will execute “any document so requested by the deponent.””

8.      He deposed that when dispute surfaced it was orally conveyed to the plaintiff by
the defendant’s office that they shall not execute any document other than what was
expressly written in the agreement to sell even though they had promised to execute the
sale deed and had explicitly agreed to execute any other relevant documents requested
for. In his cross examination PW1 stated that the assurance was given to him verbally by
Mr. Jain, Director of defendant Company. On further cross examination, PW1 admitted
that plaintiff wrote to the defendant for the execution of the sale deed for the first time
vide their letter dated 7.4.1999.

9.      Defendant examined 4 witnesses. DW-1, Mr. Ashok Kumar Jain, Director, M/s.
Vardhman Promoters Pvt. Ltd., deposed that he never agreed to execute a sale deed in
favour of the plaintiff. He stated that what was agreed under the agreement to sell was
the execution of receipt, General power of attorney (GPA), Will, Indemnity or such
collateral documents as the plaintiff may require as the plaintiff at that point of time
required immediate possession of the premises, as it was required to vacate a tenanted
office in Connaught Place, New Delhi, and the formalities for execution of sale deed
required certain permissions to be obtained from the DDA on fulfillment of formalities
and payment of Rs. 100/- only. He deposed that it was therefore agreed that initially on
payment of sale consideration, only documents in the nature of agreement to sell and
other documents would be executed till the time the necessary sale permission was
obtained for the execution of a formal sale deed for which in any case, GPA would be
executed by the defendant in favour of the plaintiff. He further stated that as a result of
breach committed by the plaintiff, defendant suffered a loss of more than Rs.44 lacs due
to the reason that third floor was sold in different portions to 16 parties who paid to the
defendant the amounts as reflected in the flat buyer agreements, office copies whereof
were Ex.DW-1/22.

10.     Since it would be relevant, it may be noted here itself that DW-1 was not cross-
examined on the loss suffered by the defendant. No cross examination was conducted in
relation to Ex.DW-1/22 collectively. The documents were not challenged. Total amount
received by the defendant for sale of the entire third floor is Rs.25,31,385/-.

11.    DW-2, Shri A.K.Jain, Jr. Engineer (Bldg.) DDA proved the completion certificate
issued by DDA on 14.11.1996 as Ex.DW-1/3 and that as per record of DDA no
unauthorized construction was noted.

12.     DW-3, Shri Shiv Dayal, Asstt. Director, DDA (CL) stated that DDA charged a
token sum of Rs.100/- from the space buyers in case of first sale of a floor or a flat by the
original allottee and that only copy of agreement to sell was enough to do so. He stated
that relating to the suit property no intimation was received from the defendant pertaining
to the sale.
13.     DW-4, Shri D.D. Rana, Inspector from the Income Tax Department proved no
objection granted by the department in March 1999, being Ex.DW-4/1.

14.     On issue No.1, in view of deposition of PW-1 and proof of PW-1/1 being the
board resolution dated 13.5.1999, suit filed on behalf of the plaintiff by Shri Sudhir
Malik, Regional Sales Manager is held to be filed by a duly authorized person. It also
has to be held that the plaint has been signed and verified by a competent person. Indeed,
Shri Sanjay Goswami, learned counsel for the defendant did not dispute the authority and
competence of Shri Sudhir Malik to file the suit on behalf of the plaintiff as also to sign
and verify the pleadings.

15.    Before deciding issues 2, 3, 5 and 6 which I propose to decide together, issue
No.4 needs to be decided because decision on said issue would have a bearing on the
remaining issues and the relief.

16.    Ex. D-1 is the foundation of the dispute. A proper interpretation of the clauses of
the contract would lead us to the ultimate meaning and import of the contract.

17.      On the question of interpretation of contracts, Courts have time and again
reiterated the principle of harmonious construction of the terms of a contract. Chitty, in
Chitty on Contracts, Volume 1, (29th Edition) observes:-
“12-063 The whole contract is to be considered. Every contract is to be construed with
reference to its object and the whole of its terms [Throcmerton v Trucey (1585) 1 Plow.
145, 161] and accordingly, the whole context must be considered in endeavoring to
collect the intention of the parties, even though the immediate object of inquiry is the
meaning of an isolated word or clause. [International Fina Services AG v Katrina
Shipping Limited (1995) 2 Lloyd’s Rep. 344, 350]. It is true rule of construction that the
sense and meaning of the parties in any particular part of an instrument may be collected
ex antecedentibus et consequentibus; every part of it may be brought into action in order
to collect from the whole one uniform and consistent sense, if that may be done. [Coles v
Hulme (1828) 8 B. & C. 568] And so Lord Davey said in N.E. Railway v Hastings,
[(1900) A.C. 260, 267] quoting Lord Watsons. [Chamber Colliery v. Twyerould (1893)
reported [1915] 1 Ch. 268n., 272.]. “The deed must be read as a whole in order to
ascertain the true meaning of its several clauses, and the words of each clause should be
interpreted as to bring them into harmony with the other provisions of the deed if that
interpretation does no violence to the meaning of which they are naturally susceptible.”

18.    The principle Ex antecedentibus et consequentibus fit optima interpretatio (the
whole of the agreement) is also referred to by Mulla in Indian Contract and Specific
Relief Acts , 12th Edition, at Pg. 267:-

“The deed must be read as a whole in order to ascertain the true meaning of its several
clauses, and the words of each clause should be interpreted so as to bring them into
harmony with the other provisions of the deed if that interpretation does no violence to
the meaning of which they are naturally susceptible. [North Eastern Rail Co. v Lord
Hastings [1900] AC 260, at 267 per Lord Davey at 267 [1900-3] All ER Rep 199,
quoting Lord Watson in Chamber Colliery Co. Twyerould (supra)] The document must
be construed as a whole in order to ascertain the meaning of several clauses. [Thakkar
Hemraj Keshavji v Shah Haridas Jethabhai [1964] 3 SCR 686, AIR 1964 SC 1526;
Navnit Lal & Co. v Kishan Chand & Co. AIR 1956 Bom 151; State of WB v Narendra
Nath Roy AIR 1958 Cal 21; Gulabchand Gambhirlal v. Kudilal Govindram AIR 1959
MP 151 (FB); Soundararajan and Co. Ltd. v. KPAT Annamali Nadar AIR 1960 Mad 480;
Ram Lal Jagan Nath v. Punjab State AIR 1966 Punj 436 (FB); Abdul Kader Laskar v.
State of WB AIR 1967 Cal 99; UNIDROIT Principles, art 4.4]. All terms in the contract
must be given effect rather than deprive some of them of the effect. [M Arul Jothi v.
Lajja Bal (2000) 3 SCC 723.]”

19.     This principle is further substantiated by Kim Lewison, Q.C., in his book The
Interpretation of Contracts, 2nd Edition:-

“6.02 In order to arrive at the true interpretation of a document, a clause must not be
considered in isolation, but must be considered in the context of the whole of the

       In Chamber Colliery Ltd v. Twyerould (supra), Lord Watson said:

“I find nothing in this case to oust the application of the well known rule that a deed
ought to be read as a whole, in order to ascertain the true meaning of its several clauses;
and that the words of each clause should be so interpreted as to bring them into harmony
with the other provisions of the deed, if that interpretation does no violence to the
meaning of which they are naturally susceptible.”

The expression of this principle of construction is no more than an enlargement of the
general proposition that an individual word takes its meaning from the context in which it
is found. So too anindividual clause takes its meaning from the context of the
        document in which it is found. Thus, in Batron v. FitzGerald,     [(1812)      15
East. 530] Lord Ellenborough C.J. said:

“It is a true rule of construction that the sense and meaning of the parties in any particular
part of an instrument may be collected ex antecedentibus et consequentibus; every part
of it may be brouight into sence, if that may be done.”

In Re Strang Music Hall Co. Ltd., Lord Romilly M.R. [ (1865) 35 Beav. 153.] said:

“The proper mode of construing any written instrument is, to give effect to every part
of it, if this be possible, and not to strike out or nullify one clause in a deed, unless it be
impossible to reconcile it with another and more express clause in the same deed.”

20.    A plethora of cases have upheld and applied this principle in interpreting terms of
a contract. In the report published as Bihar S.E.B. v. Green Rubber Industries (1990) 1
SCC 731, at 740 it was observed:-
“Every contract is to be considered with reference to its object and the whole of its terms
and accordingly the whole contract must be considered in endeavoring to collect the
intention of the parties, even thought he immediate object of enquiry is the meaning of an
isolated clause.”

21.     The above-stated principle has been referred to and applied in the report published
as (2006)2 SCC 628 Shin Satellite Public Co. Ltd. Vs. Jain Studios Ltd..
22.     Therefore, in light of the above stated principles, a harmonious construction of the
clauses of the agreement in question has to be done. The relevant clauses in question are
Clause 3,4, and 5. The same read as under:-
“3.     That within 10 days from the knowledge of the date of receipt of permission from
the appropriate authorities in form 37-I, u/s 269 UL (3) of Income Tax Act 1961 the
Vendee will pay to the Vendor the balance consideration amount of Rs.63,82,262/-
(Rupees Sixty Three lacs Eighty Two thousand Two hundred Sixty Two only). At the
same time Vendor will execute an irrevocable and registered General Power of Attorney,
no objection affidavits for mutation in DDA and Indemnity Bond for property tax water
electricity or other encumbrances and/or any other relevant document requested by
Vendee in favour of the Vendee, failing to which Vendee shall be entitled to get
transaction enforced through the Court of Law by Specific Performance of the Contract
or enforce any other appropriate legal remedy at the Cost and expense of the Vendor.

4.      It is also agreed that in case the Vendee fails to make the payment within 10 days
from the knowledge of the receipt of aforesaid permission from Income Tax Department,
the Vendor shall be entitled to send a notice under Registered AD and U.P.C. at the
registered office and Delhi office (M/s. Sandvik Asia Ltd., Indra Palace, Connaught
Place, New Delhi-110001) of the Vendee as aforesaid mentioned, demanding from the
Vendee to make the balance payment within 10 days. Even after the expiry of 10 days
from the receipt of the notice, if the Vendee fails to pay the balance consideration, the
advance money amounting to Rs.21,00,000/- (Rupees Twenty One lacs only) will be
forfeited by Vendor.

5.      Except when the advance money of the Vendee has been forfeited in accordance
with paragraph 4 above, if the parties, for whatsoever reasons or even for any reasons
attributed to any of the parties, fail to sign and execute the irrevocable and registered
power of attorney within a period of 5 months of signing of this Agreement to sell, the
Vendor shall immediately refund the Vendee of its advance of Rs.21,00,000/- without
any interest for the period of 5 months. However, in case of any further delay beyond 5
months, the advance of Rs.21,00,000/- shall carry a penal interest of 24% per annum till
its refund and/or recovery. The refund of the said advance shall be without prejudice and
in addition to the right of the Vendee to have the specific performance of this Agreement
enforced through the court of law or any other appropriate legal remedy.”

23.    Clause 3 contemplates the execution of the following documents:-
1.     An Irrevocable and Registered General Power of Attorney.

2.     No Objection affidavits for mutation in DDA
3.     Indemnity bond for property tax, water, electricity and other encumbrances.

4.     And/or any other relevant documents, requested by the vendee.

24.     He who reads clause 3 may infer that the vendee may request for any other
relevant document to be executed, along with those provided for. But when clause 3 is
read along with clause 5, the position changes and this inference falters. Clause 6
provides that if the parties fail to sign and execute the Irrevocable and Registered General
Power of Attorney within a period of 5 months of the signing of the Agreement (i.e. till
18.4.1999), then the vendor shall refund the vendee advance of Rs. 21 lacs without any
interest for the 5 month period. On harmoniously construing these two clauses, the
logical conclusion which flows out is that it was only the irrevocable and Registered
General Power of Attorney, the execution of which, would have satisfied Clause 3. In
other words, completed the transaction. It is true that on perusal of only clause 3, it
would seem that the vendee can ask for the execution of a sale deed, but reading the
agreement as a whole, i.e. Clause 3 together with Clause 5, would make it crystal clear
that the Power of Attorney was the document which was of consequence. The sale deed
was not a requirement, but just an ancillary document, if a request had been made.
Though it may have been requested for, its non-execution would not be fatal to the

25.    Sale by way of Power of Attorney is not uncommon in Delhi. The issue of a
power of attorney sale was gone into depth by this Court in the decision reported as
Kuldeep Singh Suri Vs. Surinder Singh Kalra [76 (1998) DLT 232], wherein Anil Dev
Singh, J. opined:-

“35. The instant case is not an isolated case of power of attorney sale. The power of
attorney sales are a reality which cannot be wished away. The practice of disposal of
plots by executing various documents short of sale deeds is clearly reflected by the
decision of this Court in Usha Malhotra v. G.S. Uppal, 1991 Rajdhani Law Reporter 223,
wherein this Court noticed the practice of entering into construction agreement to use it
as a camouflage for an agreement to sell. This was a case where along with a
construction agreement the sub-lessee of the plot, executed inter alia, the following
documents in favour of the purchaser.

1.       Two Wills, one by himself and the other by his wife bequeathing the property to
the purchase.
2.       General Power of attorney appointing husband of the purchaser as the lawful
attorney of the sub-lessee.
3.       Agreement to sell stating that since the sub-lessee was not able to construct a
building on the plot therefore she agreed to sell the same to the purchaser...
Under the scheme whereby DDA has given the liberty to the plot holders obtain free hold
title, the position of purchases by sale on power of attorney has been recognized
notwithstanding the fact that such a sale could not be considered to be a sale of the
property in the eye of law under Transfer of Property Act.”...
38.     It is a matter of common knowledge that in all sub-leases executed on behalf of
the President of India such like restrictive clauses have been incorporated. It is also a
matter of common knowledge that due to such like restrictions the power of attorney
sales in thousands have been effected. If the instant transaction is held to be illegal then
in that eventuality thousands of such transactions on the same token would have to be
declared to as illegal.”

26.     The plaintiff asserts that it had asked for the execution of a sale deed, which was
not done by the defendant, and hence it did not pay the balance consideration. Its witness
deposed to the effect that being a multinational company and wanting a clear title,
plaintiff necessarily wanted a sale deed to be executed for the property. PW-1 deposed
that the part “… and / or any other relevant documents requested by the vendee” was
specifically added in clause 3 because plaintiff wanted a sale deed for the property.
However, in his cross examination he admitted that the alleged assurance by the
defendant that a sale deed would be executed had verbally been given by the defendant.
He also admitted that a written request for the execution of the sale deed was made for
the first time vide plaintiff's letter dated 7.4.1999 i.e. barely eleven days before the
transaction was to be completed as per the agreement.

27.    I fail to appreciate the plaintiff’s stand, because if it was so adamant on the
execution of a sale deed, what prevented it from specifically recording in the agreement
that a sale deed would be executed. Surely, when three documents were specifically
mentioned, when agreement was drawn, as to be executed when balance sale
consideration was to be paid, the fourth i.e. Sale deed could also have been mentioned,
more so if the same was supposedly of utmost importance.

28.    Evidence led by the defendant to show that the defendant did not execute the sale
deed for any of its other buyers, and that they had been given oral assurance etc., are
wholly immaterial as it is a settled principle of law that once the parties reduce their
dealing into the form of a contract, the intention of the parties is to be construed from the
contract itself and nothing else. Similarly, the fact that the plaintiff is a multi-national
company and therefore obviously wanted a clear title in the property as stated by its
witness is of no consequence.

29.    Chitty in his book on contracts (supra) says:

        “12.043- Intention of parties. The task of ascertaining the intention of    the
parties must be approached objectively; the question is not what on or other of the parties
meant or understood by the words used, but ‘the meaning which the document would
convey to a reasonable person having all the background knowledge which would
reasonably have been available to the parties in the situation in which they were at the
time of the contract.” The cardinal presumption is that the parties have intended what
they have in fact said, so that their words must be construed as they stand. That is to say
the meaning of the document or of a particular part of it is to be    sought     in     the
document itself. “One must consider the meaning of             the words used, not what one
may guess to be the intention of the parties. [Smith v Lucas (1881) 18 Ch. D. 531, 542.
See   also Prenn v Simmonds [1971] 1 W.L.R. 1381, 1385].”

30.     Kim Lewison in his book on Interpretation of Contracts (supra) has taken the
similar view. He propounds that the intention of the parties must be ascertained from the
language they have used, considered in the light of the surrounding circumstances and the
object of the contract, in so far as that has been agreed or proved.
31.     In Delta International Ltd. v. Shyam Sunder Ganeriwalla AIR 1999 SC 260, the
Hon’ble Supreme Court held:

“15. (2) The intention of the parties is to be gathered from the document itself.
        Mainly, intention is to be gathered from the meaning and the        words used in
the     document except where it is alleged and proved that           the document is a
If the dispute arises between the very parties to the written instrument,   the intention is
to be gathered from the read as a whole.”

32.   The Hon'ble Supreme Court took note of the following extract from Kim
Lewisons book:

“1.03 For the purpose of the construction of the contracts, the intention of the parties is
the meaning if the words they have used. There is no intention independent of that

33.    In addition to the above, the court also placed reliance on Fausset v. Carpenter,
(1831) 2 Dow & CI 232, wherein the House of Lords accepted the submission of the
council that the court:

“…… judging of the design and object of a deed, will not presume that a party
executing the deed meant to do and did what he was wrong in doing, when a construction
may be put on the instrument perfectly consistent with his doing only what he had right
to do.”

34.    Similarly, in Oil and Natural Corpn. Ltd. v. SAW Pipes Ltd. AIR 2003 SC 2629,
the Hon’ble Supreme Court held:

“It cannot be disputed that for construction of the contract, it is settled law that the
intention of the parties is to be gathered from the words used in the agreement. If words
are unambiguous and are used after full understanding of their meaning by experts. It
would be difficult to gather their intention different from the language used in the
agreement. If upon a reading of the document as a whole, it can fairly be deducted from
the words actually used therein that the parties had agreed on a particular term, there is
nothing in law which prevents them from setting up that term Re : Modi and Co. v. Union
of India, (1968) 2 SCR 565. Further in construing a contract, the Court must look at the
words used in the contract unless they are such that one may suspect that they do not
convey the intention, correctly. If the words are clear, there is very little the Court can do
about it. Re : Provash Chandra Dalui and another v. Biswanath Bannerjee and another,
1989 Supp. (1) SCC 487.”

35.      Also worth a mention in this regard is Section 91 and 92 of the Evidence Act. The
courts have propounded that where the terms have been reduced to writing, section 91
excludes oral evidence of the agreement as well as of what took place when the
agreement was made. Therefore, the decisive consideration is the intention of the parties,
as it flows from the contract between them. And this intention has to be ascertained on a
consideration of all the relevant provisions in the agreement.

36.     The defendant did not resile from its obligation under the contract to execute the
documents which were enunciated in the agreement. This stand of the defendant was
reiterated time and again as can be gathered from Ex. PW1/ 4, Ex. PW 1/ 5 and Ex. D 7.

37.     I accordingly decide issue No.4 holding that the plaintiff was insisting on the
defendant executing a document which was not agreed to between the parties and
defendant was prepared to execute the required documents and hand over possession.
Since plaintiff did not tender balance sale consideration within the agreed period, I hold
against the plaintiff and in favour of the defendant on issue No.4.

38.     As noted above, testimony of DW-1 pertaining to sale of the third floor to third
parties and amount realised has not been challenged by the plaintiff. Total sale
consideration between the parties was Rs.84,82,262/- out of which defendant received
Rs.21 lacs when agreement was entered into. Balance amount receivable was
Rs.63,82,262/-. From third parties defendant realised a sum of Rs.25,31,385/-. It is
obvious that the defendant suffered a loss as a result of breach by the plaintiff. The loss
is more than Rs.21 lacs paid by the plaintiff to the defendant. But, there is no counter
claim. Since loss suffered by the defendant is more than Rs.21 lacs no useful purpose
would be served in discussing issues No.2 and 3 for the reason whatever be the nature of
the payment of Rs.21 lacs paid at the time of execution of the agreement, since damages
in excess have been established the amount was liable to be forfeited as per the
agreement. I accordingly hold on issue No.5 that the plaintiff is not entitled to a refund
of Rs.21 lacs.

39.    The suit fails. It stands dismissed.

40.    However, on the facts and circumstances there shall be no order as to costs.

                                                     PRADEEP NANDRAJOG, J.

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