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PETITIONER:

DELHI DEVELOPMENT AUTHORITY

Vs.

RESPONDENT:

SKIPPER CONSTRUCTION CO.(P) LTD. & OTHERS

DATE OF JUDGMENT: 17/12/1999

BENCH:

U.C.Banerjee, M.J.Rao

JUDGMENT:

M.JAGANNADHA RAO,J.

On May 6th, 1996 this Court delivered judgment in

Delhi Development Authority Vs. Skipper Construction Co.(P)

Ltd. ( 1996 (4) SCC 622). Thereafter, various other issues

regarding the Skipper group of Companies continued to pose

serious issues of law and fact. Sometimes, it looked like a

maze which could baffle lawyers and courts alike. More

claims with regard to Jhandevalan property -which was the

subject matter of the above case, -of persons who claimed to

be purchasers of space proposed to be built at Jhandevalan

came before us. In addition, claims of similar purchasers

of property at Barakhamba Road and also in regard to

Technology Park, came before us. In this judgment, we

propose to deal with certain issues concerning the

Jhandevalan property which have remained undecided or not

decided finally in the earlier orders of this Court.

In order to understand how these issues arise, it is

necessary to go back (A) to the long history of events set

out in the above said judgment and (B) to the subsequent

events. In Part (C) we shall deal with four issues which

have crystallised. In the rest of this judgment Delhi

Development Authority is described as DDA and Skipper

Construction Company (P) Ltd is described as Skipper, for

convenience.

PART A

In October, 1980, Skipper became the highest bidder

for purchase of a plot of land at Jhandevalan in Delhi which

was advertised for sale for Rs. 9.82 crores and deposited

25% of the price. The balance was to be deposited as per

the tender schedule. Skipper defaulted in spite of seven

extensions during January 1981 to April 1982. When

proceedings for cancellation of the bid were in the offing,

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Skipper moved the Court and obtained a stay order on 29.5.82

and started making representations. DDA appointed a

Committee to work out a formula and pursuant to the

recommendations of the Committee, Skipper was asked to enter

into a revised agreement incorporating fresh terms. Skipper

raised objections to these proposals from 1984 till 1987 but

finally the agreement was entered into on 11.8.87. Even

before permission to enter was however granted under the

revised agreement, Skipper started selling the space to be

built in the proposed structure and started receiving

monies. Though Skipper paid the 1st instalment much beyond

the time, it did not pay the second instalment but furnished

Bank guarantees which were found to be defective. It

however made some token payments to DDA. Subsequently,

CWP.2371/1989 was filed for a direction to DDA to sanction

plans/permit construction at its risk. On 19.3.90, High

Court of Delhi permitted construction in accordance with

sanctioned plan subject to deposit of Rs. 20 lakhs in two

instalments and 1.94 crores in one month. DDA filed SLP(C)

6338/90 and 6339/90. Meanwhile, the Delhi High Court passed

an order in the WP.2371/89 on 21.12.90 directing payment of

Rs.8.12 crores approx. in 30 days and stopped further

construction w.e.f. 9.1.91 till payment and stated that in

default, the revised agreement dated 11.8.87 would stand

cancelled and DDA would be entitled to re-enter the plot.

Reasons for the order were given on 14.1.91, Skipper

defaulted but approached this Court on 29.1.91 in SLP(C)

186/91 when this Court passed an interim order for deposit

of Rs.2.5 crores in one month and Rs.2.5 crores before

8.4.91 and Skipper was expressly prohibited from inducting

any person in the building and from creating any rights in

favour of third parties. In spite of it, Skipper issued

advertisement on 4.2.91 and on latter dates in newspapers in

Delhi and invited further purchasers to purchase the space

in the proposed building. Sales agreements were entered

into by certain purchasers inspite of DDA's warning dated

13.2.91 published in newspapers. SLP(C) 186/91 was

dismissed on 25.1.93.

DDA re-entered the plot and took physical possession

on 10.2.93 along with the building thereon "free from all

encumbrances" in terms of the revised agreement/licence and

as provided in the orders of the Delhi High Court dated

21.12.90 and 14.1.91. It also "forfeited" the amounts paid

till then by Skipper in terms of the revised agreement dated

11.8.87 and the judgment of the Delhi High Court.

It is stated in DDA Vs. Skipper Construction Co.(P)

Ltd. ( 1996(4) SCC 622) that before 29.1.91 Skipper

collected about Rs.14 crores from various parties to sell

space in the proposed building. Even after 29.1.91, Skipper

collected various amounts, about Rs.11 crores. It appears

that the same space was sold to more than one person and

monies were collected.

Skipper filed suit No. 770/93 against DDA seeking

injunction restraining DDA from interfering with its alleged

title and possession over the plot and sought a declaration

that the re-entry by DDA was illegal and sought a

declaration that it had validly paid all amounts due to DDA.

It obtained stay of re-auction. Against the order dated

9.12.93, DDA filed SLP.21000/93. This Court issued suo motu

contempt proceedings against Tejwant Singh and his wife (

Surinder Kaur), Directors of Skipper. This Court held them

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guilty of contempt and under Article 129 and Article 142,

sentenced them to imprisonment and fine of Rs.50,000 each.

Attachment orders were passed on 8.2.95 as follows:

accounts standing in the names of the contemners and

the Directors of M/s Skipper Construction Co.(P)Ltd. and

their wives, sons and unmarried daughters shall stand

attached."

Later on, the sentence was deferred subject to

condition of their furnishing bank guarantee for Rs.11

crores by 31.3.95 and a deposit of Rs.11 crores by 30.3.95.

It was also said:

"List of properties given by the contemners to be

taken on record. The contemners will also file a list of

properties held by their sons and unmarried daughters within

one week from today."

The Court also said:

"The attachment of the properties and the bank

accounts shall stand raised on the contemners furnishing the

bank guarantee as aforesaid."

The contemners deposited Rs. 2 crores but failed to

deposit the balance and also failed to furnish Bank

guarantee. They were committed to prison and they served

the sentence. DDA invited fresh tenders and sold the plot

with the 14th floor structure (incomplete) to M/s Banganga

Investments (Videocon) for Rs.70 crores. The sale was

accepted with permission of Court and the purchaser

deposited the consideration with DDA and the land and

structure stood transferred to the purchaser.

This Court felt concerned about the buyers to whom

space was sold before 29.1.91 and later. Claims of those

who purchased before 29.1.91 were estimated to amount Rs.14

crores. DDA was therefore directed to deposit Rs.16.75

crores in this Court.

This Court appointed Justice R.C.Lahoti Commission to

go into the claims of purchasers before 29.1.91 and a report

dated 2.2.96 was submitted by that Committee. A sum of Rs.

13.27 crores approx. was paid to about 700 persons.

This Court appointed Justice O. Chinnappa Reddy to

inquire into role of DDA officers and a Report was received

on 7.7.95. This Court appointed Justice Saharya Commission

to inquire into conduct of Bank officials. A Report was

submitted in that connection. The issues arising from the

said reports would be taken up later. Another order was

passed on 6.5.96 appointing Justice O. Chinnappa Reddy to

go into the post 29.1.91 sales and a Report was submitted.

In respect of these purchasers, the principal amount of

about Rs.6.50 crores held due to them has been paid from

funds lying in deposit in this Court.

The judgment of this Court in DDA Vs. Skipper

Construction Co. (P)Ltd. ( 1996 (4) SCC 622) shows that

DDA filed a list of properties held by Tejwant Singh, his

wife, Surinder Kaur and their sons and daughters which

properties, according to them, belonged to these persons.

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Question arose whether the various companies of which they

were directors were merely 'fronts' or "devices" to defraud

and defeat the claims of purchasers. Then this Court held

that (a) the contemners could not be allowed to enjoy or

retain the fruits of contempt; (b) the corporate veil could

be lifted and that the Court was not precluded from treating

the properties as "one entity belonging to Tejwant Singh and

family" (c) that the concept of resulting trust laid down in

Attorney General for India Vs. Amratlal Prajivandas (1994

(5) SCC 54), could be applied, (d) that Article 142 could be

applied, in the absence of statutory provision, and that

when:

"someone has acquired property by defrauding the

people and if it is from that the persons defrauded should

be restored to the position in which they would have been

but for the said fraud, the Court can make all necessary

orders."

In the judgment, this Court held ( see para 34) (1)

that pre 29.1.91 purchasers had to be re-imbursed in full,

"which means that they should also be paid interest at the

appropriate rate". (2) Secondly, the post 29.1.91

purchasers had also to be re-imbursed "in full". (3)

Ignoring the corporate veil, the property under lease to

Israel Embassy at No.3, Aurangjeb Road, could be sold. (4)

For that purpose it would stand attached - ( if not already

attached) and the said property would be sold if Tejwant

Singh and wife were not able to deposit Rs.10 crores by

6.7.96 (5) attachment of all properties was to continue

including the one on properties mentioned in IA.29/96 filed

by DDA. (Skipper failed to make the payment as directed

above).

The above is the long list of events and

orders/directions issued in DDA Vs. Skipper Construction

Co.(P)Ltd. ( 1996(4) SCC 622).

PART B

It will be useful to summarise the events subsequent

to May 6, 1996 briefly.

On 10.2.99, this Court directed Skipper to file a list

of all immovable properties held or owned by them either in

their own personal names or in the names of the companies of

which they were on the Board of Directors or in which they

were share-holders and similarly those in the names of their

sons or unmarried daughters.

On 15.3.1991, this Court referred to an earlier order

passed by this Court on 8.2.95 in SLP(C) 21000/93 attaching

"the bank accounts in the names of contemners and the

Directors of M/s Skipper Constructions Co.(P) Ltd. and

their wives, sons and unmarried daughters". This Court held

that by the judgment dated 6.5.96, properties of Technology

Park Ltd. also stood attached as that property was one

listed in IA.29/96 and therefore, the advertisement dated

22.1.99 for sale in regard to the said property issued by

Prabjot Singh, son of Tejwant Singh was in violation of

orders of this Court. Contempt notices were issued to Sri

Prabjot Singh and his wife Harpreet Kaur.

On 5.4.99, Ms. Harpreet Kaur appeared but not her

husband, Mr. Prabjot Singh. Directions were issued to the

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police to take steps for production of Prabjot Singh in this

Court. On the same day, it was contended by purchasers of

proposed construction at Barakhamba that the monies

collected from them by Skipper Towers Ltd. and Skipper

Sales Pvt. Ltd. were diverted for the construction of the

building at Jhandevalan which structure had gone back to DDA

and then got sold to the purchaser Banganga (Videocon).

On 3.5.99, Sri R.K. Jain, learned senior counsel

appeared for Sri Prabjot Singh. His client was arrested by

police. Counsel took time to come forward with a scheme.

Counsel for Mr. Tejwant Singh and his wife were also

directed to come forward with a scheme.

By affidavit dated 6.5.99, Mr. Prabjot Singh gave a

list of properties held by him, list of 'Skipper' properties

held by his father Tejwant Singh and by his brother Prabhjit

Singh. On 10.5.99, all these properties were attached,

without prejudice to any subsisting attachment orders passed

earlier. Prabjot Singh's undertaking was also recorded.

On 19.7.99, this Court observed that issues relating

to the further claims of Skipper against DDA would be

decided taking into account the contention of DDA that the

land and structure vested in DDA "free of all encumbrances"

and also the contention that these matters were already

concluded and became final on 6.5.96.

On 2.8.99, learned amicus curaie filed a list of

issues which by then crystalised for decision. The disputes

relate to (1) claims relating to Jhandevalan property (2)

22, Barakhamba, (3) Technology Park and (4) Symphony. This

Court indicated that a fresh reference would be made to

another Commission regarding the various claims of

purchasers which were not adjudicated by Justice R.C.

Lahoti and Justice O. Chinnappa Reddy Commissions. It was

pointed out that in relation to Barakhamba property, suits

were filed in the Delhi High Court for specific performance

and decreed and appeals were filed by both sides before the

Division Bench.

ON 2.8.99, this Court passed orders that a

comprehensive list of properties be prepared. Details of

winding up proceedings pending against Skipper Builders (P)

Ltd. in the Delhi High Court who were concerned with

Symphony were also to be furnished. Notice was given to

Ghaziabad Development Authority with regard to land of

Technology Park Ltd.It was made clear that claims rejected

on merits (i.e. otherwise than on limitation) by Justice

Lahoti and Justice Chinnappa Reddy would not be re-opened.

On 13.9.99, counsel were requested to prepare a final list

of issues presently arising and the matters were directed to

be listed for hearing on these issues.

On 28.10.99, this Court attached certain Bank Accounts

of Technology Park. On 2.11.99, a further list of Bank

accounts of Prabjot Singh was filed and those accounts were

also attached. Mr. Prabjot Singh was directed not to enter

into any real estate transactions without informing the

Court. This order was passed because of serious complaints

that Mr. Prabjot Singh was making sales even after

attachment orders. The Banks were directed to give a list

of transactions in the last 5 years. In regard to

attachment of Bank accounts of Sri Tejwant Singh, this Court

held that they were already attached before 6.5.96. A

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contention was raised by Sri M.L. Verma, learned senior

counsel appearing for Mr.Tejwant Singh that the attachment

of Bank accounts was not specifically confirmed in the order

of this Court dated 6.5.96 and must be deemed to have been

vacated. This Court held that that attachment was not

vacated by the final orders dated 6.5.96. This Court called

upon Shri Tejwant Singh to give a list of Bank accounts in

his name, sons and unmarried daughters and directed no

withdrawals be made and further directed that no real estate

transactions could be undertaken without permission of the

Court.

On 4.11.99, this Court heard counsel on various issues

(to which reference will be made in Part C) and reserved

judgment. This Court also issued notice to the Banganga

Company ( Videocon) which purchased Jhandevalan land and

structure from DDA. This Court proposed transfer of appeals

pending in Delhi High Court to this Court in relation to

Barakhamba property.

PART C

Having narrated the events which took place as above,

we shall now refer to some of the issues which have

crystallised. We have heard the submissions of the learned

Amicus Curaie Sri Joseph Vellapally and Sri Dayan Krishnan,

assisting the Amicus Curaie. We have heard Sri Mukul

Rohatgi, learned Additional Solicitor General and Ms.

Kamini Jaiswal for DDA, Sri M.L. Verma, Senior Advocate for

Skipper, Sri R.K. Jain, Senior Advocate for Mr. Prabjot

Singh, Lt. Col. Jaswant Singh (in person) and various

others. A question has arisen whether in respect of the

structure at Jhandevalan which vested in DDA and which DDA

sold to Banganga ( Videocon), DDA should be directed to

deposit something more in addition to Rs.16.75 crores

deposited by it. DDA says that that issue has become final

by judgment dated 6.5.96 and cannot be reopened. On the

other hand, it has come to light that the purchasers were

not eo-nominee parties to the suit by Skipper against DDA

which was transferred to this Court and was registered as

SLP(C) No.21000/93. For the present, we do not propose to

go into this question as to whether the judgment of this

Court dated 6.5.96 has become final or is not binding on

those who purchased from Skipper Construction Co. on the

ground of their not being parties to the above suit and

Special Leave petition. However, we shall take up this

question at a later point of time. Learned counsel made

submissions on the following issues:

(1) Whether the purchasers under agreements in respect

of Jhandevalan property have a statutory charge in view of

Section 55(6)(b) of the Transfer of Property Act -against

the vendor's interest in the property? Whether such charge

can be enforced against any substituted security? (2)

Whether the purchasers are entitled to interest under

Section 55(6)(b) of the Transfer of Property Act and also in

view of the observations made in the judgment of this Court

dated May 6, 1996? (3) Whether the period of limitation for

enforcing claims by the purchasers would be 12 years under

the Limitation Act?

(4) Whether in view of the words 'subject to a

contract to the contrary' used in Section 55(6)(b) of the

Transfer of Property Act and in view of the term in the

agreement of sale that Skipper will not be liable for

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interest, the purchasers cannot claim interest? (5) Whether

the purchasers can rely on the finding of 'fraud' given by

this Court in its order dated 15.1.1995 to contend that the

claim for interest is sustainable because of fraud by

Skipper on the purchasers? POINS 1 and 2: These points

depend upon the effect of the provisions in Sub-clause (6)

of Section 55 of the Transfer of Property Act. That Section

starts with the words "In the absence of a contract to the

contrary", and reads thus (insofar as it is material for our

purpose):

"Section 55 (6)(b): The buyer is entitled (a)

.................

(b) unless he has improperly declined to accept

delivery of the property, to a charge on the property, as

against the seller and all persons claiming under him, to

the extent of the seller's interest in the property, for the

amount of any purchase-money property paid by the buyer in

anticipation of the delivery and for interest on such

amount; and, when he properly declines to accept the

delivery, also for the earnest (if any) and for the costs

(if any) awarded to him of a suit to compel specific

performance of the contract or to obtain a decree for its

rescission".

It is plain from the above provision that, in the

absence of a contract to the contrary, the buyer will have a

charge on the seller's interest in the property which is the

subject matter of the sale agreement insofar as the purchase

money and interest on such amount are concerned, unless the

buyer has improperly declined to accept delivery. The

charge is available against the seller and all persons

claiming under him. This charge in favour of the buyer is

the converse of the seller's charge under Section 55(4)(b).

The buyer's charge under this Section is a statutory charge

and differs from a contractual charge which a buyer may be

entitled to claim under a separate contract (Chettiar Firm

Vs. Chettiar) ( AIR 1941 P.C. 47). No charge is available

unless the agreement is genuine. ( T.N. Hardas Vs.

Babulal) ( AIR 1973 SC 1363) As pointed out in Mulla's

Commentary on Transfer of Property Act, 8th Ed. (P.411),

the charge on the property under Section 55(6)(b) is

enforceable not only against the seller but against all

persons claiming under him. Before the amending Act of

1929, the words 'with notice of payment' occurred after the

words "all the persons claiming under him". These words

were omitted as they allowed a transferee without notice to

escape. After the Amendment of 1929, notice to the

purchaser has now become irrelevant. When the property upon

which the charge is created gets converted into another

form, the buyer will be entitled to proceed against the

substituted security. This is a general principle of law

and Section 73 of the Transfer of Property Act is only an

example of the said principle. The above principle has been

applied to enforce mortgage on substituted securities ( see

Barham Deo Prasad Vs. Tara Chand ( 1913) 41 I.A. 45 (PC)

and Muniappa Vs. Subbaiah ( AIR 1917 Mad.880)). The same

principle which is applicable to mortgages applies to cases

of statutory charge under Section 55(6)(b). If immovable

property is charged and is converted into another property

or money, then the charge will fasten on the property or

money into which the subject matter of the agreement is

converted.

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The above sub-section of Section 55 also makes it

clear that the buyer is entitled to interest on the amount

of purchase money paid. Interest is payable from the date

of payment of the purchase money to the seller till date of

delivery of property to the purchaser or till the execution

of the sale deed, whichever is earlier. Points 1 and 2 are

decided accordingly in favour of the buyers.

POINT 3:

Article 62 of the Limitation Act, 1963 ( which

corresponds to Article 132 of the Limitation Act 1908)

provides a period of 12 years "to enforce payment of money

secured by a mortgagee or otherwise charged upon immovable

property". Time runs from the date "when money becomes

due". From the above Article, it is clear that the period

of limitation for enforcement of the statutory charge

created under Section 55(6)(b) is 12 years from the date

when becomes due and not 3 years. The period remains the

same even for enforcement of the charge on the substituted

security. Point 3 is decided accordingly.

POINT 4 and 5: Learned senior counsel for Skipper,

Sri M.L. Verma contended that there is a stipulation in the

agreement of sale that interest will not be payable to the

buyer in case the transaction fails for any reason. On the

other hand, Sri Dayan Krishan for the learned Amicus Curiae

submitted that in view of the earlier finding of this Court

relating to 'fraud' on the part of Skipper, it is not

permissible for Skipper to rely on the above clause in the

agreement. In our view, learned Amicus Curiae is right in

his submission that in the order of this Court dated

15.1.1995, there is a clear finding of 'fraud' against

Skipper. This is because, when the available units of

accommodation are said to be 870 or less, Skipper had given

bookings in favour of 2700 buyers and collected huge sums.

This was obviously, fraudulent.

In our view, builders are not in law supposed to enter

into agreements with more number of buyers than there are

flats, unless each of the buyers in excess of the number of

available units of accommodation is put on notice that his

purchase will depend upon the availability of units of

accommodation. Accepting bookings from excess number of

buyers without adequate notice to them about the contingent

nature of their contracts cannot be said to be fair dealing.

On top of that to say that these amounts paid by the buyer

will not carry interest is wholly unconscionable. In this

case, Skipper entered into a large number of bookings,

nearly three times the available units of accommodation and

collected monies. This was fraudulent, as per the earlier

finding of this Court dated 15.1.95. Skipper, therefore,

cannot be allowed to rely upon the term relating to

'contract to the contrary' and escape the payment of

interest. Once there is fraud, the inducement for payment

by the purchasers cannot be traced to the agreement. We may

also point out that in the judgment of this Court dated May

6th, 1996, this Court has already observed, that interest is

payable to both pre 29.1.91 and post 29.1.91 purchasers.

This Court held in regard to pre 29.1.91 purchasers as

follows: ( See p. 643 of SCC) .lm15

"On one hand, the position is that the pre-29.1.1991

purchasers have to be reimbursed in full which means that

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they should also be paid interest at the appropriate rate on

the amounts advanced by them to skipper..."

In regard to post 29.1.1991 also, it has been

stated(p.644 of SCC): .lm15

"Secondly, the post 29.1.1991 purchaser, have also to

be reimbursed in full."

A point was raised on behalf of DDA that inasmuch as

DDA had given paper publication after 29.1.1991 warning

purchasers, it must be presumed that all the members of the

public were put on notice and post 29.1.91 buyers should not

be allowed to claim interest. We have given due

consideration to this contention. As to what extent any of

these buyers had notice of the paper publication, is a

matter on which it is difficult to get evidence. We are,

therefore, not inclined to reconsider the decision of this

Court dated May 6th, 1996 in regard to the right of the post

29.1.1991 purchasers to get interest. Points 4 and 5 are

decided against Skipper.

We disposed of points 1 to 5 accordingly.