T NAGAPPA Vs. ADARSHA ASSOCIATES

JUDGEMENT

(1.) LEGALITY and correctness of the judgment and decree passed by XXVI Addl. City Civil Judge, Bangalore dated 23.2.2004 in O.S. No.15290/2001 is called in question in this appeal by the appellants. Appellants were the defendants and respondent was the plaintiff before the trial Court.

(2.) FACTS leading to this case are as hereunder : Plaintiff is a registered firm carrying on its business as a developer developing properties in constructing apartments and carrying 6n allied real estate activities. According to the plaint averments, defendants are the owners of 1-12 acres and 2-20 acres of land, in all 3-32 acres in Sy. Nos.42 & 32/2 of Nayanappashetty Palya, Bannerghatta Road, Begur Hobli, Bangalore and the aforesaid land was offered by the defendants to the plaintiff to develop the same under the joint venture scheme. It was agreed that after the completion of the project plaintiff was entitled for 50% of the built up area and the defendants being the land owners were entitled to remaining 50% in the built up area. Accordingly, parties entered into an agreement on 16.3.1995. On the date of the agreement both the lands were notified for acquisition for the formation of layout by the BDA and the defendants undertook to get the lands de-notified from acquisition and thereafter plaintiff was required to complete the project by getting the land converted from agriculture to non-agricultural purpose and complete the project within a period of sixty months from the date of sanctioning plan and obtaining license to construct the project. It was also agreed between the parties that plaintiff was required to pay Rs.1crore as security deposit in a phased manner, which amount shall be refundable to the plaintiff by the defendants at the time of handing over possession of the defendants share in the project. A sum of Rs.1 lac was paid as security deposit on the date of entering into an agreement and the remaining amount of Rs.99 lacs was required to pay in different stages. It is the case of the plaintiff that even before certain obligations were required to be performed by the defendants, a further sum of Rs.20 lacs by means of cheque bearing No. 119926 dated 8.3.1996 and Rs.19 lacs by way of cheque bearing No. 119927 dated 15.3.1996 drawn on Vijaya Bank, Malleshwaram, Bangalore. Thus in all a sum of Rs.40 lacs was paid by the plaintiff to the defendants as security deposit out of Rs.1 crore payable by it in terms of the agreement dated 16.3.1995. It is the case of the plaintiff that defendants were required to obtain an order of de-notification from the Government at an earliest point of time, defendants did not take necessary steps to obtain de-notification of the land from the acquisition proceedings and also did not co-operate with the plaintiff to complete the construction. It is the case of the plaintiff that plaintiff approached the defendants on several time, but they went on postponing to complete their part of obligation in terms of the agreement dated 16.3.1995. In the circumstances plaintiff got issued a legal notice calling upon the defendants to refund a sum of Rs.40 lacs which was paid by the plaintiff to the defendants as security deposit on account of the lapses committed by the defendants with interest at 18% p.a. from the date of payment till the date of suit and also for costs and future interest. Thus in all, suit was filed for recovery of Rs.61,05,000/- with Court fee and current interest on Rs.40 lacs at 18% p.a. from the date of suit till the date of payment. Defendants appeared before the Court on service of summons. They contested the suit. It is the case of the defendants that plaintiff approached the defendants to permit the plaintiff to develop the property and that the proposal to develop the land was putforth by the plaintiff and not by the defendants. However, they admit that in terms of the agreement dated 16.3.1995 they agreed to allow the plaintiff to develop and complete the project of construction of a residential apartments subject to the defendants obtaining order from the Government getting land de-notified. According to them, they approached the Government and they were successful in getting the land de- notified as per Gazette Notification dated 3.3.1998 and immediately thereafter copy of the Gazette Notification de-notifying the land was handed over to the plaintiff and the plaintiff was requested by the defendants to complete the project in terms of the- agreement dated 16.3.1995. They also admit receipt of Rs.40 lacs paid by the plaintiff as security deposit out of Rs. 1 crore payable by the plaintiff. They also admit that on completion of the project defendants were required to refund security deposit payable/paid by the plaintiff. But it is their specific case that after getting the land de-notified by them, plaintiff did not pay the balance security deposit of Rs.60 lacs in terms of the agreement dated 16.3.1995 and the plaintiff did not evince any interest to take steps to get the land converted from agriculture to non-agricultural purpose and also did not obtain license and plan from the planning authority and even did not commence construction inspite of several requests made by them. Defendants also contended that after getting the land de-notified, they got issued a legal notice on 30.10.1998 calling upon the plaintiff to complete the project in terms of the agreement dated 16.3.1995. It was also informed through legal notice that the amount of security deposit would be forfeited if the project is not completed by the plaintiff. Though the said notice was received by the plaintiff, plaintiff did not evince any interest and as a last resort notice was got issued by the plaintiff making allegations against the defendants as if they were not ready and willing to perform their part of the contract and that the plaintiff was not informed about the de- notification order and called upon the defendants to refund the security deposit of Rs.40 lacs with interest as per legal notice dated 12.2.2001. It is the case of the defendants that a reply was sent to the legal notice dated 12.2.2001 calling upon the plaintiff to complete the project and it was categorically stated that security deposit has been forfeited since plaintiff did not perform its part of the contract and that the defendants were entitled to forfeit the security deposit on account of the loss sustained by them due to non-commencement of the project by the plaintiff right from 1998. It was also contended that the suit filed by the plaintiff was barred by limitation. Based on the above pleadings, following issues were framed by the Court below:

(3.) WHETHER the defendants prove that it was understanding at the time of agreement that in the event of contract was performed the earnest deposit shall be returned and if the contract was not performed by payer, it shall remain on the property of the payee?