Delhi High Court Upholds Maintainability of Suit for Declaration and Cancellation of Sale Deed Without Possession: Affirms Jurisdictional Bar Under Section 50 of the Delhi Rent Control Act and Dismisses Second Appeal for Lack of Substantial Question of Law Under Section 100 CPC

Court’s Decision

The Delhi High Court dismissed the appeals filed by the appellant/defendant and upheld the judgment of the first appellate court. The court held that the suit for declaration and cancellation of the sale deed was maintainable without seeking the relief of possession, as the jurisdiction to entertain claims of possession was barred under Section 50 of the Delhi Rent Control Act, 1958 (RCA). Additionally, the court held that the appeals raised no substantial question of law as required under Section 100 of the CPC for second appeals.

Facts

1. Background of the Property: The dispute pertained to a property (the “suit property”) located in Karol Bagh, New Delhi. The property was owned by Shanti Devi and S. Sharam Singh in equal shares.
2. Tenancy and Agreements:
   • The property was leased to M/s Jainsons Westend through a registered lease deed in 1967.
   • A civil suit for rent and possession was filed by the original owners in 1989.
   • During the pendency of the civil suit, a compromise was reached, resulting in an Agreement to Sell (1995) between the respondents (owners) and five companies, including the appellant/defendant, for a 1/5th undivided share of the suit property.
   • The agreement stipulated that the property would first be converted from leasehold to freehold before the sale deed could be executed.
3. Dispute and Sale Deed:
   • The appellant/defendant executed a sale deed for 1/5th of the property in 2002 without fulfilling the precondition of converting the property to freehold.
   • The respondents filed a civil suit in 2005 seeking the cancellation and declaration of the sale deed as null and void, alleging that the precondition was not met.
4. Lower Court Findings:
   • Trial Court: Dismissed the suit, holding that the plaintiff (respondent) had failed to seek the relief of possession alongside the declaration.
   • First Appellate Court: Reversed the trial court’s judgment, ruling in favor of the respondent/plaintiff and holding that the suit was maintainable because the relief of possession was barred under the Delhi Rent Control Act.

Issues

1. Was the civil suit for declaration and cancellation of the sale deed without seeking possession maintainable under Section 34 of the Specific Relief Act (SRA)?
2. Did the jurisdiction of the Civil Court extend to granting possession in light of Section 50 of the Delhi Rent Control Act?
3. Did the appeals raise any substantial question of law justifying intervention under Section 100 CPC?

Petitioner’s Arguments (Appellant/Defendant)

1. Bar Under Section 34 SRA:
   • The suit was not maintainable as the plaintiff did not seek the consequential relief of possession.
   • Section 34 prohibits a mere declaratory suit without claiming all consequential reliefs.
2. Execution of Terms:
   • The appellant claimed that the Agreement to Sell was validly executed and the sale deed was lawful.
   • The appellant argued that they had fulfilled their obligations under the compromise, and possession was never handed back to the plaintiff.
3. Ownership Transfer:
   • The appellant contended that upon failure of the respondent to execute the sale deed, the appellant was deemed to have become the owner as per the terms of the agreement.

Respondent’s Arguments (Plaintiff)

1. Jurisdictional Bar:
   • The relief of possession was barred under Section 50 of the Delhi Rent Control Act because the rent for the property was ₹2,800/month, below the ₹3,500/month threshold under the Act.
   • Consequently, the civil suit could not seek possession, as only the Rent Controller had jurisdiction over possession claims.
2. Unfulfilled Condition Precedent:
   • The Agreement to Sell required the conversion of the property from leasehold to freehold before a sale deed could be executed. Since the conversion did not occur, the sale deed was void.
3. Maintaining Possession:
   • The respondent argued that possession was already with them following the compromise, and the appellant’s claims regarding possession were factually incorrect.

Analysis of the Law

1. Section 34 of the Specific Relief Act (SRA):
   • Section 34 mandates that a plaintiff seeking a declaration must also claim consequential relief, such as possession, to avoid multiplicity of proceedings.
   • The appellate court observed that this rule is procedural and must be assessed in the specific circumstances of the case.
   • In this case, possession could not have been sought as it was barred under Section 50 of the Delhi Rent Control Act. The procedural bar under Section 34 could not penalize the respondent for failing to claim a relief that was legally impermissible.
2. Delhi Rent Control Act, 1958:
   • Section 50 of the Act bars civil courts from entertaining claims related to possession of properties where the rent is below ₹3,500/month.
   • The appellate court correctly noted that the rent in the case was ₹2,800/month, bringing the property under the jurisdiction of the Rent Controller and not the Civil Court.
3. Principles of Substantial Justice:
   • The court emphasized that rules of procedure should not override substantive justice.
   • Fraud or failure to fulfill conditions precedent (such as conversion to freehold) can invalidate agreements or actions even if procedural objections exist.
4. Section 100 CPC and Substantial Question of Law:
   • A second appeal can only be entertained if it raises a “substantial question of law” – one that materially affects the rights of the parties and is not settled by existing precedent.
   • The court found that the issues raised by the appellant were factual and did not involve any unsettled legal principles.

Precedent Analysis

1. Suhrid Singh v. Randhir Singh (2010):
   • A declaratory suit is sufficient if the plaintiff is not the executant of the impugned document. Cancellation is not necessary.
2. Promila Bhagat v. Munni Lal Gupta (2024):
   • Procedural rules under Section 34 of SRA cannot prevent courts from addressing substantive issues, especially fraud.
3. Deo Kuer v. Sheoprasad Singh (1965):
   • Consequential relief of possession is required only if the defendant is in possession of the property.
4. Rajender Bansal v. Bhuru (2017):
   • Civil Court jurisdiction can only be ousted by explicit statutory provisions, such as those in the Rent Control Act.

Court’s Reasoning

1. Bar Under Rent Control Act:
   • The appellate court correctly found that the respondent/plaintiff could not have sought possession due to the statutory bar under Section 50 of the Delhi Rent Control Act.
2. Substantial Question of Law:
   • The issues raised were purely factual and had been adequately addressed by the lower courts. The case did not raise any new or unsettled questions of law.
3. Procedural Justice:
   • The High Court stressed that procedural requirements like those under Section 34 of the SRA cannot override the need to address substantive fraud or noncompliance with contractual conditions.

Conclusion

The High Court dismissed all appeals, finding no substantial question of law. It upheld the appellate court’s judgment that the suit for declaration and cancellation was maintainable and that possession claims were rightly excluded due to the jurisdictional bar under the Rent Control Act.

Implications

1. Reinforces the principle that procedural rules must yield to substantive justice in cases involving fraud or statutory bars.
2. Highlights the limited scope of second appeals under Section 100 CPC, emphasizing that factual findings by lower courts cannot be reexamined unless they involve a substantial question of law.

Also Read – Delhi High Court Reduces Compensation for Deceased Homemaker, Holds Major Sons Can Be Dependents for Gratuitous Services but Married Daughter Cannot, Modifies Loss of Dependency and Future Prospects Calculation