Specific performance of Development Agreement

It is in common practice that land owners enter into agreements with developers for development
of the property1. The development agreement is also an agreement for sale subject to certain
conditions. In short, it is an agreement for conditional sale.

In case of development agreements, there is no transfer of legal rights in the land from the owner
to the developer at the stage of entering into the agreement. Accordingly, the development
agreement does not confer any legal right to the developer and there is no registration of the
agreement providing such rights to the developer. Development agreement can be regarded only
as an agreement to sell. The rights in the property would pass on to the developer or to the future
buyers in the land only at the stage when the building is constructed and proportionate
constructed building is handed over to the land owner and necessary documents are executed by
the land owner in favour of the developer or to the future buyers. Hence, there is no transfer at
the stage of entering into the agreement with the developer of land rights from the land owner to
the developer in terms of Transfer of Property Act.

The Hon’ble Supreme Court in the case of Sardar Govindrao Mahadik and Anr. v. Devi Sahai
and Ors. AIR 1982 SC 989, 1982(1) SCALE 191, (1982) 1 SCC 237, [1982] 2 SCR 186 has
analyzed the concept of part performance under section 53A of Transfer of Property Act and
after analyzing and referring to various case laws.

Whether suit for specific performance of development agreement is maintainable? Yes Ashok
Kumar Jaiswal Vs. Respondent: Ashim Kumar Kar

OPINION

In Ashok Kumar Jaiswal Vs. Ashim Kumar Kar a judgment delivered by Calcutta high court in
2014 the court has held by applying the golden rule of interpretation that the developer is not
barred from filing the suit for specific performance.

But the major problem is that no work started and till now possession has not been transferred of
the disputed property. Hence it is difficult to get the exemption of part performance of contract.

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But we can surely convince the court on basis of contract that a irreparable damage will me met
to plaintiff if specific performance is not allowed as we can say that the suit property is important
because of its position. And along with the suit we can file application for permanent and
mandatory injunction under order 39 rule 1 and 2 CPC.

Further it is pertinent to mention here that land owner is consumer and builder is service
provider as held by the supreme court of India Decided On: 10.07.2008
Appellants: Faqir Chand Gulati Vs. Respondent: Uppal Agencies Pvt. Ltd. and Anr.

Ratio Decidendi: "Where the builder commits breach of his obligations, the owner has the right
to enforce specific performance and/or claim damages by approaching the civil Court or he can
approach the Forum under Consumer Protection Act, for relief as consumer, against the builder
as a service-provider."

But as the agreement is duly signed and in written form in which it is stated that the dispute can
be resolved through arbitration proceedings so we can refer the matter for arbitration.

OPERATING LAWS

Section 14 in The Specific Relief Act, 1963

14. Contracts not specifically enforceable.—

(1) The following contracts cannot be specifically enforced, namely:—
(a) a contract for the non-performance of which compensation in money is an adequate relief;
(b) a contract which runs into such minute or numerous details or which is so dependent on the
personal qualifications or volition of the parties, or otherwise from its nature is such, that the
court cannot enforce specific performance of its material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the performance of a continuous duty which the
court cannot supervise.
(2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or
future differences to arbitration shall be specifically enforced; but if any person who has made
such a contract (other than an arbitration agreement to which the provisions of the said Act
apply) and has refused to perform it, sues in respect of any subject which he has contracted to
refer, the existence of such contract shall bar the suit.
(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-section
(1), the court may enforce specific performance in the following cases:—
(a) where the suit is for the enforcement of a contract,—
(i) to execute a mortgage or furnish any other security for securing the repayment of any loan
which the borrower is not willing to repay at once: Provided that where only a part of the loan
has been advanced the lendor is willing to advance the remaining part of the loan in terms of the
contract; or
(ii) to take up and pay for any debentures of a company;
(b) where the suit is for,—
(i) the execution of a formal deed of partnership, the parties having commenced to carry on the
business of the partnership; or
(ii) the purchase of a share of a partner in a firm;
(c) where the suit is for the enforcement of a contract for the construction of any building or the
execution of any other work on land: Provided that the following conditions are fulfilled,
namely:—
(i) the building or other work is described in the contract in terms sufficiently precise to enable
the court to determine the exact nature of the building or work;
(ii) the plaintiff has a substantial interest in the performance of the contract and the interest is of
such a nature that compensation in money for non-performance of the contract is not an adequate
relief; and
(iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part
of the land on which the building is to be constructed or other work is to be executed.

Section 202 of the Indian Contract Act 1872, we would find, when the agent had interest in the
property under the agency agreement in absence of an express provision the contract could not
be terminated to the prejudice of such interest.

INJUNCTION MATTERS Suits for permanent injunction and mandatory injuction can be filed
before Senior Civil Judge/District Judge as per the monetary jurisdiction. The applications for
interim injunction can also be moved praying for relief during the pendency of the suit.
Appropriate Court fee is payable. Minimum court fee is Rs.13/- for each prayer of injunction in
main suit. For interim injunctions Court fee of Rs.1.25 is payable.
 COURT FEES

For suits beyond Rs.4.00 Lacs, the Court Fee Note for Rs.4.00 Lac plus Rs.48.50 p for every
Rs.5,000/- is payable. And as the valuation of the property is not available it is very difficult to
find the court fees.

Formula = Cost of propery-4,00,000/5,000 X 49.8