Mr. Abhimanyu Walia, Mr. Aryan Malik, Mr. Kamakshraj Singh, Mr. Adit S. Pujari, Ms v. AARTI SINGH & ORS

Judgment

1. Through the present Appeals filed under Section 96 of the Code of Civil Procedure, 1908 [hereinafter referred to as „CPC‟] read with Section 10 of the Delhi High Court Act, 1966, the Appellant assails the correctness of the judgment dated 02.12.2024 [hereinafter referred to as „Impugned Judgment‟] passed by the learned Single Judge.

2. Having regard to the fact that the two suits emanate from identical issues and in view of the consent expressed by learned counsel for the parties, the Appeals have been heard together and are being disposed of by this common judgment. BRIEF FACTUAL MATRIX:

3. In order to comprehend the issues involved in the present case, the relevant facts, in brief, are required to be noticed.

4. The Appellant was the owner of property bearing No.110, Jor Bagh, New Delhi, comprising the First and Second Floors [hereinafter referred to as the „Suit Property‟]. He entered into an Agreement to Sell dated 11.12.1996 [hereinafter referred to as „ATS-1‟] and a Supplementary Agreement to Sell dated 07.10.1997 [hereinafter collectively referred to as „S.ATS-1‟], in respect of the First Floor of the Suit Property, with Ms. Aarti Singh [hereinafter referred to as Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 2 of 30 „Respondent No.1‟]. The Respondent No.1 subsequently entered into possession of the First and Second Floors of the Suit Property.

5. Thereafter, she married Sh. Kanwar Raj Singh [hereinafter referred to as „Respondent No.2‟]. The relevant clauses of ATS-1 are extracted hereinunder: “iii) The party of the first part has agreed to sell the 1st floor of property No. 110, Jor Bagh, New Delhi and the party of the second part has agreed to purchase the said property for a sale consideration of Rs. 40 lakhs (Rupees forty lakhs only). iv) That the party of the second part has paid a sum of Rs. 5,00,000/- lakhs (Rupees five lakhs only). v) That the party of the 1st part do hereby acknowledge and confirms the receipt of Rs. 5,00,000/- (Rupees five lakhs only) for which a separate receipt has been executed. Details of payment made are given under: Cheque No. Date Amount 279562 9/12/96 Rs. 2,50,000/- 279582 9/12/96 Rs. 2,50,000/- 243065 9/12/96 Rs. 3,00,000/-” The relevant clauses of S.ATS-1 are extracted hereinunder: “1. That the sale consideration is agreed at Rs. 40,00,000 (Rupees Forty Lakhs) already paid and being paid by the Vendee to the Vendor as under:- (a) Rs. 8,00,000/- (Rupees Eight Lakhs) has been paid by the Vendee to the Vendor as under:- (i) By cheque No. 243065 dated 09.12.1996 on Central Bank of India, Jor Bagh, New Delhi for Rs. 3,00,000/- (ii) By cheque No. 279562 dated 09.12.1996 on Central Bank of India, Jor Bagh, New Delhi for Rs. 2,50,000/-. (iii) By cheque No. 279582 dated 09.12.1996 on Central Bank of India, Jor Bagh, New Delhi for Rs. 2,50,000/-. Receipt of which the Vendor hereby admit and acknowledge. ........................................... Signature Not Verified

Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 3 of 30 (b) Rs. 32,00,000/- (Rupees Thirty Two Lakhs) at the time of execution hereof by Cheque No. 279584 dated 07.10.1997 on Central Bank of India, Jor Bagh, New Delhi. No further payment of whatsoever nature is to be paid by the Vendee to the Vendor. Any conversion charges from lease hold to free hold shall be proportionality borne by the Vendee. ...............................................

4. That the Vendoor has handed over symbolic possession of the said flat/unit at the time of execution hereof, in part performance of the contract as contemplated under Section 53A of the Transfer of Property Act and authorized the Vendee to utilize the said unit in any manner it likes whether to keep it, construct the first floor of the servant quarter and exploit the same or re-construct the entire first floor and finish it and/or assign or nominate the rights in this Agreement.

5.That the Vendor shall have the lease hold rights converted into free hold and the charges for the same will be proportionate borne by the Vendee. Thereafter on the request of the Vendee, the Vendor shall apply for requisite permission, sanction and clearance within 30 days of the conversion from lease hold to free hold and complete the transaction by way of execution and registration of the Deed of Sale, failing which the Vendee shall have the right to specific performance of the contract.”

6. A separate Agreement to Sell, on the same date (i.e., dated

11.12.1996) [hereinafter referred to as „ATS-2‟], and a Supplementary Agreement to Sell dated 30.12.1997 [hereinafter referred to as „S.ATS-2‟], were executed by the Appellant in favour of Respondent No.2, in respect of the Second Floor of the Suit Property, as the earlier documents were stated to be untraceable. The relevant clauses of ATS-2 are extracted hereinbelow: “iii) The party of the first part has agreed to sell the 2nd floor of property No. 110, Jor Bagh, New Delhi and the party of the second part has agreed to purchase the said property for a sale consideration of Rs. 20 lakhs (Rupees twenty lakhs only). iv) That the party of the second part has paid a sum of Rs. 5,00,000/- lakhs (Rupees five lakhs only). Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 4 of 30 v) That the party of the 1st part do hereby acknowledge and confirms the receipt of Rs. 5,00,000/- (Rupees five lakhs only) for which a separate receipt has been executed. Details of payment made are given under: Cheque/DD No. Date Amount NIE 038899 9/12/96 Rs. 5,00,000/- The relevant clauses of S.ATS-2 are extracted hereinunder: AND WHEREAS the parties had further agreed that the balance sale consideration of Rs. 15 lacs shall be paid by the SECOND PARTY on or before 31st December 1997 and simultaneously the FIRST PARTY shall execute sale deed/ conveyance deed/set of documents to effectively and effectually convey the said property in favour of the FIRST PARTY; ………………………………… AND WHEREAS parties to this agreement have now agreed to execute supplementary Agreement to Sell whereby they wish to extend the period of completion of the sale transaction by three months i.e., up till 31st March 1998.” ………………………………… NOW THIS AGREEMENT WITNESSESTH AS UNDER:

1. ….That the SECOND PARTY, as mentioned above, had paid and the FIRST PARTY had received the part consideration amount of Rs. 5,00,000/- (Rupees Five lacs only) vide account payee Cheque, detailed in the earlier Agreement to Sell and Purchase. The balance sale consideration amount of Rs. 15,00,000/- (Rupees Fifteen lacs only) shall be paid by the SECOND PARTY to the FIRST PARTY on or before 31st March 1998.”

7. Subsequently, another Agreement to Sell dated 30.03.1998 [hereinafter referred to as „ATS-3‟] was executed by the Appellant in favour of Respondent No.2 on receipt of a cheque of Rs.15,00,000/- (Rupees Fifteen Lakhs only) towards full and final settlement of the consideration amount. The relevant clauses of ATS-3 are extracted hereinunder: “The first party had agreed to sell the entire second floor of the property in question with proportionate lease hold rights alongwith full terrace and roof rights (for short the ‘said property’) to the Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 5 of 30 second party, for a total consideration amount of Rs. 20,00,000/- (Rupees Twenty lacs only). The second party has already paid a sum of Rs. 5,00,000/- Rupees Five lacs only), vide Pay Order no. NIE 038899 DATED 9.12.96 issued by ANZ Grindlays Bank, Connought Place, New Delhi, as part consideration against the sale of said property, to the second property, the receipt and encashment whereof the first party hereby acknowledges.” NOW THIS AGREEMENT TO SELL WITNESSETH AS UNDER

1. That the Second Party has paid and the First Party has received the balance consideration amount of Rs. 15,00,000/- (Rupees Fifteen lacs only) vide cheque no. 732252 dated 27.3.98…….” (Emphasis Supplied)

8. On the basis of the aforesaid clauses of S.ATS-1, the Respondent No.1, on 07.10.1997, issued a further cheque amounting to Rs. 32,00,000/- (Rupees Thirty-Two Lakhs only) in favour of the Appellant.

9. Thereafter, the suit [CS(OS) 1336/1998] is filed by the Appellant seeking, inter alia, a declaration that the General Power of Attorney [hereinafter referred to as „GPA‟], Special Powers of Attorney [hereinafter referred to as „SPA‟], Wills, Agreement to sell and any other related instruments executed in favour of the Respondents were operative only until 31.12.1999 and stood extinguished thereafter. The relief prayed by him is reproduced below: “In the premises it is, therefore, most respectfully prayed that this Hon'ble Court may graciously be pleased to:- a) pass a decree of declaration declaring that the General Power of Attorneys dated 06.12.1996, 07.10.1997 and 30.03.1998 in favour of Smt Aarti Singh [Defendant No. 1], the General Power of Attorney dated 06.12.1996 and Special Power of Attorneys [4 in number] all dated 30.03.1997 in favour of Sh. Kanwar Raj Singh [Defendant No. 2], the General Power of Attorney dated 07.10.1997 in favour of Sh. Kanwar Raj Singh [Defendant No. 2] and Smt Deepa Partap Dass [Defendant No.3], Agreements to Sell dated 6.12.1996, 07.10.1997 and 30.03.1998 in favour of Smt Aarti Singh [DefendantNo.1] and Sh. Kanwar Raj Singh [Defendant No.2] and any other related documents Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 6 of 30 in respect of property bearing No.110, Jor Bagh, New Delhi would not come into operation till 31.12.1999; and only in the event if the plaintiff does not return the due amounts; b) pass a decree of declaration declaring the blank signed papers and IOs given by the plaintiff to the defendants declaring them to be null and void ab-initio; c) pass a decree of permanent injunction restraining the Defendants from acting upon or using the General Power of Attorneys dated 06.12.1996, 07.10.1997 and 30.03.1998 in favour of Smt Aarti Singh [Defendant No. 1], the General Power of Attorney dated 06.12.1996 and Special Power of Attorneys [4 in number] all dated 30.03.1997 in favour of Sh. Kanwar Raj Singh [Defendant No. 2], the General Power of Attorney dated 07.10.1997 in favour of Sh. Kanwar Raj Singh [Defendant No.2] and Smt Deepa Partap Dass [Defendant No.3], Agreements to Sell dated 6.12.1996, 07.10.1997 and 30.03.1998 in favour of Smt Aarti Singh [Defendant No.1] and Sh. Kanwar Raj Singh [Defendant No.2] and any other related documents in respect of property bearing No.110, Jor Bagh, New Delhi; d) pass a decree of permanent injunction against the Defendants restraining them, their servants, assigns or anybody claiming under them from alienating, disposing off or creating any third party right, title or interest in the property bearing No.110, Jor Bagh, New Delhi; and e) pass such other/further order(s) as this Hon'ble Court may deem fit and proper in the interest of justice.”

10. The transactional chronology, as emerging from ATS-1, S.ATS-1, ATS-2, S.ATS-2 and ATS-3 respectively with respect to the Suit Property, is delineated in the following manner: DATE

09.12.1996 09/11.12.1996

07.10.1997 TRANSACTIONS MODE Cheque [Cheque No. 279562, 279582, 243065] Demand Draft [No. 038899] Cheque [Cheque No. 279584] PARTICULARS AMOUNT With respect to ATS-1 r/w S.ATS-1 8,00,000/- ATS-2 5,00,000/- With respect to S.ATS-1 32,00,000/- Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 7 of 30 27/30.03.1998 Cheque [Cheque No. 732252] With respect to ATS-3 15,00,000/- TOTAL: 60,00,000/- (Rupees Sixty Lakhs only)

11. The issues framed by this Court in the lead suit and the cross suit, respectively, are read hereunder: “Issues in CS (OS)l336/1998:

1. Were the agreements to sell, General Powers of Attorney, Special Powers of Attorney, Receipts. Wills, Declaration-cum-Undertaking and the affidavits were executed by the plaintiffs by way of security for a loan as alleged by the plaintiffs? If so to what effect?

2. Has the plaintiffs returned a sum of Rs.45 lakhs to defendant on 30.04.1998? If so to what effect?

3. Whether the suit is correctly valued for the purpose of court fee and jurisdiction?

4. Relief, (if any). Issues in CS No.2273/2000: “1. Is there an agreement to sell in respect of the suit property in favour of the plaintiffs?

2. Are the plaintiffs entitled to a decree of specific performance?

3. Has the defendant returned a sum of Rs.45 lakhs and, therefore, has no obligation under the alleged agreement to sell?"

12. Additionally, on 15.09.2011, this Court also framed an issue with respect to the transaction made by the Respondent No.2 in CS(OS) No. 2273/2000 filed by the Respondents in the amended plaint. The said framed issues reproduced as follows: “Whether the transaction in favour of plaintiff No. 2 is hit by Section 31 of the Foreign Exchange Regulation Act, 1973? OPP”

13. After appreciating the evidence led by the parties, this Court decreed CS(OS) No. 2273/2000 in favour of the Respondents with respect to the specific performance of the Agreement(s) to Sell and Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 8 of 30 Supplementary Agreement(s) to Sell and did not grant the relief of declaration or injunction as sought in CS (OS) 1336/1998 by the Appellant. SUBMISSIONS ON BEHALF OF THE APPELLANT:

14. Learned counsel for the Appellant has made the following submissions: i. The entire set of transactions between the parties was, in essence, a loan arrangement and not a sale transaction. The Appellant and the Respondents have been in long-standing fiduciary and family- like relations, under which the Respondents initially advanced a cash loan of Rs.1,50,000/- (Rupees One Lakh Fifty Thousand only). Subsequently, in order to expand his business, the Appellant availed further friendly the Respondents aggregating Rs.60,00,000/- (Rupees Sixty Lakhs only), out of which a sum of Rs.45,00,000/- (Rupees Forty-Five Lakhs only) has already been repaid, which repayment stands duly acknowledged by Respondents. It is further submitted that all instruments executed between the parties were only intended as security for the said loan transactions and were never intended to operate as conveyance so as to transfer any right, title, or interest in the Suit Property. In fact, a sum of Rs.45,00,000/- (Rupees Forty-Five Lakhs only) has already been repaid by the Appellant to the Respondents. ii. A bare perusal of the Agreement(s) to Sell and/or the Supplementary Agreement(s) to Sell clearly stipulates that the Appellant was required to effect conversion of the property from Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 9 of 30 leasehold to freehold and thereafter obtain all requisite permissions, sanctions, and clearances within thirty days of such conversion, so as to enable the execution and registration of the sale deed for completion of the transaction. However, the admitted position is that no such conversion has been carried out. Furthermore, there is nothing on record to demonstrate that the Respondents made any effort or initiated any step to approach the Appellant for facilitating such conversion or ensuring compliance with the said stipulations. Subsequently, the Appellant by way of Revocation Deeds dated

23.06.1998, formally revoked the GPA, SPA and other related documents that had been executed between them. In this regard, the Appellant relied upon Suraj Lamp & Industries (P) Ltd. v. State of Haryana1, wherein it has been held that to circumvent DDA‟s requirement of permission and payment of unearned increase, a practice developed whereby, in addition to an agreement to sell and a will, the vendor executed an irrevocable general power of attorney in favour of the purchaser. Such General Power of Attorney expressly authorized the purchaser to manage, deal with and dispose of the property independently, without reference to the vendor. iii. The execution of the GPA and the SPA was only to secure repayment of loan. The said instruments, though allegedly executed by the Appellant, have never been acted upon by the Respondents, inasmuch as they have neither sought a declaration as to their validity nor chosen to rely upon or perform acts in accordance with their contents. Instead, the Respondents have sought to shift the entire burden of securing conversion of the Suit Property from leasehold to 1(2009) 7 SCC 363. Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 10 of 30 freehold upon the Appellant, despite the said instruments themselves conferring authority to effect such conversion. By declining to exercise the very powers conferred under the said GPA and SPA, the Respondents have demonstrated that they were neither ready nor willing to act in terms of the documents propounded by them. It is pertinently contended that Respondent No.2 had admittedly purchased two floors of the Suit Property and in such circumstances, it is highly improbable that he would not have immediately applied for conversion and thereafter secured registration of the sale deed to perfect his title. These circumstances clearly establish that the parties were ad idem that the aforesaid security documentation was never intended to convey any right, title, or interest in the Suit Property. iv. The Respondents tried to evade the statutory requirements of Income Tax Clearance under Section 269UC of The Income-tax Act, 1961 [hereinafter referred to as “ITA”]. Hence, agreements and supplementary agreements have become redundant and unenforceable and no reliance can now be placed upon it. In this regard, the Respondents claim that they purchased two separate floors, First Floor for Rs. 40 lakh and Second Floor for Rs. 20 lakhs. The claimed bifurcation of the transaction is bad in law. The Supreme Court in Appropriate Authority & CIT v. Varshaben Bharat Bhai Shah2 held that Section 269UC of the ITA imposed restrictions on transfer of immovable property. v. The Appellant further contends that the Second Floor did not exist during the period 1997–98 and what was described as the 2(2001) 4 SCC 1. Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 11 of 30 “Second Floor” was merely a barsati, being an ancillary structure appurtenant to the First Floor, incapable of independent alienation. It is thus submitted that any purported ATS-1 and S.ATS-1 in respect of such non-existent or non-transferable property is void ab initio, being hit by the provisions of Section 23 of the Indian Contract Act, 1872 [hereinafter referred to as “ICA”] and Section 6 of the Transfer of Property Act, 1882 [hereinafter referred to as “TPA”]. vi. It is further pertinently contended that Respondent No.2 had acquired citizenship of the United States in 1993 without disclosing this material fact to the Appellant, his landlord, despite continuing in occupation of the property as a tenant from 1991 to 1996. Reliance is placed upon the provisions of the Foreigners Act, 1946 [hereinafter referred to as “Foreigners Act”] and the Registration of Foreigners Rules, 1939 [hereinafter referred to as “Foreigners Rules”], which impose a statutory obligation on every foreign national residing in India to register with the Foreigners Regional Registration Office and to update particulars upon any change in nationality, ordinarily within fourteen days. Arguendo, the cumulative operation of all relevant statutory frameworks, namely, the Foreigners Act, the Foreigners Rules, the Foreign Exchange Regulation Act, 1973 [hereinafter referred to as “FERA”] and the Reserve Bank of India [hereinafter referred to as “RBI”] Notification dated 26.05.1993 (Notification No. F.E.R.A. 152/93-RB) [hereinafter referred to as “RBI Notification”], leads to the inescapable conclusion that the impugned transaction stands vitiated, being void and tainted with illegality at its very inception, and is consequently incapable of judicial enforcement. For this, reliance was placed upon Asha John Divianathan v. Vikram Signature Not Verified Signed By:SAVITA PASRICHA Signing Date:28.10.2025 14:52:02 RFA(OS) 13/2025 and connected matter Page 12 of 30 Malhotra3, wherein it has been held that it is a settled principle that when a statute attaches a penalty, the act becomes prohibited and any contract in contravention thereof is void, even if not expressly declared so. Section 31 of the FERA, when read with Sections 47, 50 and 63, though framed in terms of “previous permission,” is in substance prohibitory in nature. The requirement of prior permission is therefore mandatory, being grounded in statutory prohibition and public policy. Further, it was held that under Section 31 of the FERA, obtaining previous general or special permission of the RBI is mandatory and any sale or transfer of property in India by a foreigner without such permission is unenforceable in law. vii. In continuation of the arguments, reliance was also placed upon N.P. Thirugnanamv. R. Jagan Mohan Rao (Dr.)4 and Kamal Kumar v. Premlata Joshi5, wherein it has been held that relief of specific performance is discretionary and can be granted only if the plaintiff satisfies Section 16(c) of the Specific Relief Act, 1963 [hereinafter referred to as “SRA”] by pleading and proving continuous readiness and willingness to perform his part of the contract. Such readiness must be shown from the date of agreement till the decree, demonstrated through conduct, availability of consideration and surrounding circumstances. Failure to aver or prove the same is fatal to the claim. Likewise, since the relief of specific performance being equitable, the Court must examine whether a valid contract exists, whether the plaintiff has been and continues to be ready and willing to perform his part, and whether such performance accords with the contractual terms.