High Court of Delhi was dealing with the petition filed seeking specific performance of a Collaboration Agreement along with prayers for grant of permanent and mandatory injunction against the defendant. In the alternative, damages have been claimed against the defendant for attempting to cancel the said Collaboration Agreement.
Brief Facts:
The suit is in respect of property. The defendant is stated to be having 75% share in the said property and in actual, physical possession of his share, while his brother had 25% share in the said property, which the wife of the plaintiff claims to have purchased through an Agreement to Sell from him. Collaboration Agreement was entered into between the plaintiff and the defendant for re-development of the property. However, subsequently, he issued a Notice to the plaintiff stating that the Collaboration Agreement was an invalid document as it lacked in ‘consideration’ and had been forced upon the defendant, taking advantage of his age. There were WhatsApp communications and talks on the phone between the parties, but the defendant claimed he was being prevented from acting on the Collaboration Agreement by his son and daughter-in-law.
Petitioner’s Contention:
Learned counsel for the petitioner submitted that the cause of action to file the suit was clearly disclosed as the defendant in the telephonic conversations, as recorded and transcribed by the plaintiff and placed on the record, clearly affirms having entered into the Collaboration Agreement. He submitted that the plaintiff had suffered a loss due to the defendant’s non-performance as he had raised huge loans from the market and had purchased building materials too. He submitted that the Collaboration Agreement contained reciprocal promises. The plaintiff had undertaken to construct the property and the defendant did not have to spend any money. In return, the defendant had to transfer two floors and 25% of the stilt parking to the plaintiff. Thus, the consideration was the amount to be spent on construction. Since this promise of constructing two floors and handing over the same to the defendant was “valuable”, this satisfied the definition of ‘consideration’ under Section 2(d) of the Indian Contract Act, 1872.
HC’s Observations:
HC observed that the interpretation placed by the learned counsel for the plaintiff on the decision in Chidambara Iyer v. P.S. Renga Iyer & Ors., is somewhat misplaced. What the court held was that consideration must have some value and must be real and not illusory. It must also be adequate. It is not for the court to fix a value to what is offered as consideration and conclude that consideration had passed. It must appear to the court too that valuable consideration had passed.
The question before the Court was whether the Collaboration Agreement contains promises that are valid and are binding.
The Court noticed that that the Collaboration Agreement records that the defendant had requested the plaintiff to construct a new building in place of the existing structure where the defendant was residing. The plaintiff was to convert the property from lease-hold to free-hold at his expense. HC stated that the defendant would have “no liability for any expense on construction”. The responsibility of abiding with the regulations and payment of penalty and accidents, have also been set out. The Court found that there is no reference to the consideration being paid for the transfer of the property by the defendant to the plaintiff. Also, there is also no undertaking mentioned in the agreement as to the liability of the plaintiff to meet the construction cost.
The Court stated that “the importance of ‘consideration’ cannot be belittled. It is the consideration which puts enforceability in the agreements to make promises legally binding. Even where the ‘promisor’ intends to bind himself by the promise, ‘consideration’ is essential to make the promise binding and enforceable.”
HC relied upon the case of T. Arivandandam v. T.V. Satyapal, where SC held that “while considering an application under Order VII Rule 11 CPC, what is required to be decided is whether the plaint discloses a “real cause of action” or something “purely illusory”. If, on a meaningful and not a mere formal reading of the plaint, it appears to be manifestly vexatious and meritless and fails to disclose a clear right to sue, but through clever drafting creates an illusion of a cause of action, the court being guided by the mandatory provisions of Order VII Rule 11 CPC should not hesitate to exercise powers vested in it to “nip it in the bud”.”
HC Held:
After evaluating various case laws and submissions by both the parties the Court held that “the Agreement seems to be more in the nature of a note of assurances and not a ‘concluded’ contract. It could be said that the plaintiff assured the defendant that he would have no liability to meet the cost of construction, that the construction would be of good quality, that the construction would be carried out in accordance with the regulations and the construction would be completed within two years after the possession was handed over to the plaintiff, and that too only after the property was converted from lease-hold to free-hold. The clauses do not come forth as reciprocal promises, one being the consideration for the other.”
HC rejected the plaint under Order VII Rule 11 (a) CPC.
Bench: Hon'ble Ms. Justice Asha Menon
Case Title: Sameer Madan v. Ashok Kumar Kapoor
Case Details: CS(OS) 576/2021
Read Judgment;
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