The Delhi High Court has affirmed that a party’s concealment of a second agreement to sell does not extinguish its right to recover advance payments made under a distinct agreement, provided the payment was made and admitted. The judgment clarifies that equitable relief in the form of interest on refunded sums is not forfeited merely because the claimant initially sought specific performance.
Background & Facts
The Dispute
The dispute arose from two purported Agreement to Sell dated 03.11.2009 between the Appellant, Manjit Singh, and the Respondent, M/s Capitol Estates Pvt. Ltd., concerning the sale of the entire first floor of a residential building on Plot No. H-31, Masjid Moth, Greater Kailash-II, New Delhi. The Respondent, a real estate investment company controlled by Mr. Deepak Manchanda and Mrs. Renu Manchanda, entered into the transaction for both rental income and eventual personal use.
Key Facts
- The first Agreement to Sell (Ex.PW-1/X1) stated a sale consideration of Rs. 1,70,00,000, with Rs. 5,00,000 paid as booking amount and Rs. 95,00,000 linked to construction milestones within 12 months.
- The remaining Rs. 70,00,000 was to be paid upon execution of the Sale Deed and physical possession.
- Clause 9 of this Agreement provided for interest at 24% per annum if possession and registration were delayed beyond 30.11.2010.
- The Respondent paid a total of Rs. 1,30,00,000 by 25.10.2011, exceeding the amount due under the first Agreement.
- A second Agreement to Sell (Ex.DW-1/X1), dated the same day, listed a consideration of Rs. 1,00,00,000, with different terms in Clause 2 and different witnesses.
- The existence of this second agreement was concealed by the Respondent in the Plaint.
- The Appellant admitted receiving Rs. 1,30,00,000 but claimed the total consideration was Rs. 2,70,00,000 across both agreements.
- On 21.11.2011, the Respondent issued a legal notice demanding performance or refund.
- On 05.12.2011, the Appellant executed a registered Gift Deed in favour of his daughter, transferring the property.
- The Respondent filed Suit CS No. 10563/2016 on 25.10.2016 seeking specific performance or, alternatively, refund of Rs. 1,30,00,000 with 24% interest.
Procedural History
- 03.11.2009: Execution of two Agreement to Sell between parties.
- 25.10.2011: Last payment of Rs. 1,30,00,000 made by Respondent.
- 21.11.2011: Legal notice issued by Respondent demanding performance or refund.
- 05.12.2011: Appellant executed registered Gift Deed transferring property to daughter.
- 25.10.2016: Suit filed by Respondent in District Court.
- 28.11.2011: Ex-parte ad-interim injunction granted by Trial Court, restraining Appellant from alienating the property.
- 03.09.2012: Local Commissioner’s report confirmed property was unoccupied.
- 19.09.2012: Trial Court ordered continued status quo, preventing Appellant from using the property.
- 09.04.2021: Trial Court decreed suit for refund of Rs. 1,30,00,000 with interest under Order XII Rule 6 CPC.
- 27.02.2026: Appeal heard and reserved.
- 05.05.2026: Judgment pronounced.
The Parties' Positions
The Respondent claimed the first Agreement was valid and binding, and that the second Agreement was a forgery or fabrication created by the Appellant to evade liability. It maintained that Rs. 1,30,00,000 was paid under the first Agreement and sought refund with interest.
The Appellant contended that two agreements existed, the total consideration was Rs. 2,70,00,000, and the Respondent had fraudulently concealed the second agreement to secure an ex-parte injunction and later manipulate the relief sought. He offered to refund Rs. 1,30,00,000 at the outset but claimed the Respondent refused to accept it to pursue specific performance.
Relief Sought
The Respondent sought:
- Specific performance of the Agreement to Sell dated 03.11.2009;
- Declaration that the second Agreement to Sell dated 03.11.2009 was null and void;
- Alternatively, refund of Rs. 1,30,00,000 with interest at 24% per annum from 25.10.2011;
- Damages equivalent to market value appreciation.
The Appellant sought dismissal of the suit, declaration that the Respondent had abused the process of court, and rejection of all interest claims.
The Legal Issue
Can a party recover advance payments with interest under an agreement to sell when it concealed the existence of a second agreement for the same property, and the other party had offered to refund the amount but the claimant pursued specific performance instead?
Arguments Presented
For the Appellant
The Appellant argued that the Respondent’s concealment of the second Agreement to Sell constituted suppression of material facts, rendering the suit liable to be dismissed under the doctrine of clean hands. He contended that the Respondent, a real estate broker, induced him to execute two agreements to avail tax benefits, and then manipulated the litigation by suppressing the second agreement. He further argued that since he had offered to refund Rs. 1,30,00,000 immediately upon disclosure of the second agreement, the Respondent’s refusal to accept the refund and insistence on specific performance barred any claim to interest. He relied on the fact that the property remained unoccupied due to the injunction obtained by the Respondent, and that he was deprived of the use of his own asset.
For the Respondent
The Respondent maintained that the first Agreement to Sell was genuine and binding, and that the second agreement was a forgery created by the Appellant to evade obligations. It argued that the payment of Rs. 1,30,00,000 was made under the first agreement, and the Appellant’s admission of receipt in the Written Statement entitled the Respondent to recovery. It further submitted that the right to seek specific performance is a statutory right under the Specific Relief Act, and the subsequent election of alternate relief does not negate the entitlement to interest for the period the money was retained. The Respondent emphasized that the Appellant had no legal impediment to deposit the amount in court and that his retention of funds for over a decade justified interest.
The Court's Analysis
The Court examined the twin issues of concealment and entitlement to interest. It acknowledged that the Respondent had not disclosed the existence of the second Agreement to Sell in the Plaint, but noted that the Appellant had produced it immediately in his Written Statement. The Court held that while concealment of material facts is a serious matter, it does not automatically vitiate a claim for recovery of admitted payments, particularly when the defendant admits receipt and offers no legal basis to retain the funds.
"The fact that the Plaintiff did not produce the second Agreement to Sell does not deny him the right to recover Rs. 1,30,00,000, which he had admittedly paid."
The Court rejected the Appellant’s argument that his offer to refund at the outset extinguished the Respondent’s right to interest. It observed that the Respondent was entitled to pursue any legal remedy available under the law, including specific performance, and that the election of alternate relief after prolonged litigation does not constitute bad faith. The Court emphasized that the Appellant had retained the funds for nearly 15 years, from the date of payment (25.10.2011) until judgment, and had derived benefit from their use.
"Having utilised this amount which rightfully has to be returned to the Respondent, he cannot claim that mere payment of interest for this period when the money was retained by him, is an onerous condition."
The Court also dismissed the Appellant’s contention that the injunction prevented him from using the property as a reason to deny interest. It held that the Appellant could have deposited the amount in court at any time during the pendency of the suit, and his failure to do so could not be used to avoid liability for interest. The Trial Court’s equitable apportionment of interest rates - 12% pre-suit, 6% pendente lite, and 9% post-decree - was upheld as reasonable and proportionate.
The Verdict
The appeal was dismissed. The Delhi High Court upheld the Trial Court’s decree granting the Respondent a refund of Rs. 1,30,00,000 with pre-suit interest at 12% per annum from 25.10.2011, pendente lite interest at 6% per annum until the decree date, and future interest at 9% per annum until realization. The Court directed that the Appellant shall pay the entire amount within 8 weeks from the date of judgment. Costs of Rs. 50,000 were awarded to the Respondent. The Appellant’s application under Section 340 Cr.P.C. for criminal prosecution remains pending.
What This Means For Similar Cases
Concealment Does Not Automatically Bar Recovery of Admitted Payments
- Practitioners must argue that suppression of material facts may attract dismissal under Order VII Rule 11 CPC, but does not automatically extinguish a claim for refund of admitted sums.
- Courts will distinguish between procedural irregularities and substantive rights - admission of receipt by the defendant is decisive.
- Where a defendant admits receipt of funds and offers no lawful justification for retention, recovery is enforceable even if the plaintiff concealed part of the transaction.
Interest Is Not Forfeited by Election of Alternate Relief
- A claimant’s initial pursuit of specific performance does not forfeit the right to interest on refund if the alternate relief is later elected.
- Interest accrues from the date of payment, not from the date of election of relief.
- Courts will apportion interest rates equitably based on stages of litigation (pre-suit, pendente lite, post-decree).
Deposit in Court Is the Safest Way to Avoid Interest Liability
- A defendant who wishes to avoid interest must deposit the disputed amount in court immediately upon admission of liability.
- Mere verbal offer to refund, without actual deposit, does not discharge liability for interest.
- Failure to deposit funds in court during litigation will be construed as unjust enrichment.
