Holding

Purchasers are entitled to a statutory charge under Section 55(6)(b) of the Transfer of Property Act, to claim interest on the purchase money, and the limitation period for enforcing the charge is twelve years; the contractual clause excluding interest is ineffective due to the fraud finding.

Summary

The Delhi Development Authority (DDA) sold a plot to Skipper Construction Co., which defaulted on payments and subsequently sold space in the proposed building to far more buyers than the available units, many of whom paid large sums. DDA re‑entered the plot, sold it to a third party, and was ordered in 1996 to reimburse the buyers with interest. Subsequent petitions raised questions about whether the buyers had a statutory charge under Section 55(6)(b) of the Transfer of Property Act, their entitlement to interest, the applicable limitation period, and whether a contractual clause excluding interest could be invoked in view of a finding of fraud against Skipper. The Supreme Court examined the statutory provisions, the effect of fraud on contractual terms, and the conversion of the charged property into other forms. It held that the buyers possessed a statutory charge, were entitled to interest, the limitation period was twelve years, and the anti‑interest clause was ineffective due to fraud. The petition was dismissed, leaving the earlier reimbursement order intact.

Issues considered

Whether purchasers have a statutory charge under Section 55(6)(b) of the Transfer of Property Act against the vendor's interest in the property and against any substituted security.
Whether the purchasers are entitled to interest on the purchase money under the same provision despite a contractual term purporting to exclude interest.
Whether the period of limitation for enforcing the statutory charge is twelve years under the Limitation Act, 1963.
Whether the contractual clause excluding interest can be invoked when the statute provides a charge ‘in the absence of a contract to the contrary’.
Whether the finding of fraud against Skipper precludes reliance on the anti‑interest clause and sustains the claim for interest.

Legislation cited

Limitation Act, 1963s. Article 62
Transfer of Property Act, 1882s. 55(4)(b), s. 55(6)(b)

Subjects

Statutory chargeTransfer of Property ActInterest on purchase moneyLimitation periodFraudContract to contraryReal estate developmentRe‑entry and sale of propertyBuyer protectionDelhi Development Authority

Judgment

A DELHI DEVELOPMENT AUTHORITY
v.
SKIPPER CONSTRUCTlON CO. (P) LTD. AND ORS.

DECEMBER 17, 1999

B [M. JAGANNADHA RAO AND U.C. BANERJEE, JJ.]

Transfer of Property Act, 1882 :

C
Section 55(6) (b)-Purchasers under agreement in respect of immovable
property-whether they have statutory charge against interest of vendor in
..
property-Absence of contract to contrary and purchaser not declining to
accept delivery-Held, purchaser will have statutory charge insofar as
purchase money and interest on such amount are concerned-Charge
available against vendor and all persons claiming under him-Property
upon which charge created converted into another form-Effect of-Held,
D charge will fasten against substituted security-Period of limitation for
enforcing statutory charge-Held, twelve years from date when money becomes
due-Limitation Act, 1963-Article 62.

Interest-Term in agreement that builder not liable for in!~rest if
transaction fails-Finding of fraud against builder-Whether builder can
E invoke the term to deny payment of interest-Held, builder cannot rely upon
term and escape payment of interest-Once there is fraud, inducement for
payment cannot be traced to agreement.
Appellant S purchased land from Delhi Development Authority (D.D.A.)
in auction, and default in making balance payment resulted in litigation
F between them. S was allowed to raise constructions over the land subject to
certain conditions imposed by the court. S sold space in proposed building
to buyers in excess of units available despite order dated 29.1.1991 expressly
prohibiting creation of rights of third parties in the building. When S failed
to deposit amount in court, DDA re-entered plot and took physical possession
G alongwith building thereon and sold it for Rs. 70 crores with permission of
the court. Thereafter, this court directed D.D.A. to deposit Rs. 16.75 crores
and distributed it alongwith some other amount between pre and post 29.1.1991
buyers towards their principal amount deposited with S. This court vide
judgement dated 6.5.1996 held that pre 29.1.1991 and post 29.1.1991

H
purchasers had to be reimbursed in full including interest at appropriate
rate.
512
..
.'
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. 513
This judgement deals with claims of persons filed after delivery of A
'> judgement dated 6.5.1996 and issues remaining undecided or not decided
fmally in earlier orders of this court including whether D.D.A. should deposit
amount in excess of Rs. 16.75 crores in respect of disputed structure.

D.D.A. contended that the issue had become final by judgement dated
6.5.1996 and could not be re-opened. S contended that interest was not payable B
to buyer in case transaction failed in view of stipulation to that effect in sale
agreement. Amicus Curiae contended that S could not rely on said clause
in view of earlier finding relating to fraud against S by this Court.

Disposing of the matter, the Court
c
HELD : 1.1. It is plain from the provisions in sub-clause 6 of Section
55 of the Transfer of Property Act that, in the absence of a contract to the
contrary, the buyer will have a charge on the seller's interest in the property
which is the subject matter of the sale agreement insofar as the purchase
money and interest on such amount are concerned, unless the buyer has D
improperly declined to accept delivery. The charge is available against the
seller and all persons claiming under him. This charge in favour of the
buyer is the converse of the seller's charge under Section 55 (4) (b). The
buyer's charge under this Section is a statutory charge and differs from a

-
contractual charge which a buyer may be entitled to claim under a separate
Contract. No charge is available unless the agreement is genuine. E
[523-A, BJ

Chettiar Firm v. Chettiar, AIR [1941] P.C. 47 and T.N. Hardas v. Babula/,
AIR [1973) SC 1363, relied on.

Mu/la's Commentary on Transfer of Property Act, 8th Ed. Page 411, F
referred to•
... 1.2. When the property upon the charge is created gets converted into
another form, the buyer will be entitled to proceed against the substituted
security. This is a general principle of law and the same principle applies G
to cases of statutory charge under Section 55(6) (b). If immovable property
is charged and is converted into another property or money, then the charge
will fasten on the property or money into which the subject matter of the
agreement is converted. [523-D, E, F)

Barham Dea Prasadv. Tara Chand, [1913] 41I.A.45 (P.C.), relied on . H
...
514 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R ..
'.•
1

' A Muniappa v. Subbaiah, AIR [1917] Mad. 880, approved.

1.3. Sub-section 6 of Section 55 of the Act also makes it clear that the
buyer is entitled to interest on the amount of purchase money paid. Interest
is payable from the date of payment of the purchase money to the seller till
date of delivery of property to the purchaser or till the execution of the sale
B deed, whichever is earlier. [523-G]

2. From Art~cle 62 of the Limitation Act, 1963, it is clear that the
·period of limitation for enforcement of the statutory charge created under
Section 55(6) (b) is 12 years from the date when it becomes due and not 3 ..
C years. The period remains the same even for enforcement of the charge on
the substituted security. Time runs from the date "when money becomes
due". [523-H; 524-A)

3. There is a clear finding of 'fraud' against S in the order of this
court dated 15.1.1995. This is because, when the available units of
D accommodation are said to be 870 or less, S had given bookings in favour
of 2700 buyers and collected huge sums. This was obviously, fraudulent.
Builders are not in law supposed to enter into agreement with more number
of buyers than there are flats-, unless each of the buyers in excess of.the
number of available units of accommodation is put on notice that his purchase
will depend upon the availability of units of accommodation. To say that these
E amounts paid by the buyer will not carry interest is wholly unconscionable.
S, therefore, cannot be allowed to relay upon the term relating to contract
to the contrary and escape the payment of interest. Once there is fraud, the
inducement for payment by the purchasers cannot be traced to the agreement.
[524-E, F, G, HJ
F Delhi Development Authority v. Skipper Construction Co. (P) Ltd,
[1996) 4 sec 622, relied on.

CIVIL APPELLATE JURISDICTION : Special Leave Petition (C)
No. 21000of1993.
G From the Judgment and Order dated 9 .12.1993 of the High Court of Delhi
at New Delhi in Suit No. 770/93.

Mukul Rohtagi, ASG., Altaf Ahmad, ASG., Joseph Vellappally, (AC), F.S.
Nariman, K.T.S. Tulsi, R.K. Jain, M.L. Verma, P.P. Malhotra, Dr. V.N. Saraf,
Dayan Krishnan, Ms. Kamini Jaiswal, Mis. B.S. Nagar, Ashok Mathur, Shambhu
.H
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA RAO, J.] 515

.... Prasad Singh, Ms. Manjula Gupta, M/s.Ravikesh Sinha, Gopal Jain, Ms. Urmila A
Lamba, Ravinder Nath, Mis. Rajinder Narain & Co., Mis. Rishi Malhotra, Vikas
P~wa, Sultan Singh, Prem Malhotra, R.D. Kewalramani, Mis. V. Datta Makhija,
Sanjay Hegde, Subhash Shar, Mis. Arvind Kumar Sharma, S.U.K. Sagar, Jaideep
Gupta, H.S. Parihar, Kuldeep S. Parihar, Ms. Sushma Suri, Y.P. Mahajan, S.N.
Terdol, Ms. Monica Sharma for M/s.S.A. Shroff & Co., Sunil Dogra, Mis. G.M.
Kawoosa, Ashok Mathur, Manoj Goel, S. Roy, Ms. Abba R. Sharma, Rajiv K. B
Garg, Ms. Manisha, Ms. Bhavna, N.D. Garg, V.N. Koura, Ms. Paramjit Benipal,
A. Mariarputham, Ms. Aruna Mathur for Mis. Arputham, Aruna & Co.,
Ravindra Kumar, Rajesh Srivastava, H.K. Puri, S. Sukumaran for Mis. J.B.D.
• & Co., Y.P. Nantla, Anil K. Chopra, Ram Ekbal Roy, Ms. S. Janani, Ashwani
Bhardwaj, S.P. Sharma, Praveen Swarup, S. Shankar, Din Dayal Sharma, K.K. c
John, J.K. Das, Ms. Binu Tamta, R.C. Gubrele, V.K. Verma, S.K. Kulkarni, P.R.
Ramasesh, Mis. Janendra Lal & Co., C.N. Sree Kumar, S.K. Verma, Ms. Sumita
Mukherjee, Ms. Nanita Sharma, Jaswant Singh, Sanjay Parikh, Dr. Nafis A.
Siddiqui, Sandeep Narayan, Ms. Anjali, Pawan Verma, S.K. Garg, M/s. G.
Acharya, S. Pani and A.P. Medh for the appearing parties.
D
The Judgment of the Court was delivered by
M. JAGANNADHA RAO, J. On May 6th, 1996 this Court delivered ..

... judgment in Delhi Development Authority v. Skipper Construction Co.(P)
Ltd, [1996] 4 SCC 622. Thereafter, various other issues regarding the Skipper
group of Companies continued to pose serious issues of law and fact. E
Sometimes, it looked like a maze which could baffle lawyers and courts alike.
More claims with regard to Jhandevalan property-which was the subject
matter of the above case, -of persons who claimed to be purchasers of space
proposed to be built at Jhandevalan came before us. In addition, claims of
similar purchasers of property at Barakhamba Road and also in regard to
Technology Park, came before us. In this judgment, we propose to deal with F
certain issues concerning the Jhandevalan property which have remained
;_ undecided or not decided finally in the earlier orders of this Court.
In order to understand how these issues arise, it is necessary to go
back (A) to the long history of events set out in the above said judgment
and (B) to the subsequent events. In Part (C) we shall deal with four issues G
which have crystallised. In the rest of this judgment Delhi Development
Authority is described as ODA and Skipper Construction Company (P) Ltd
is described as Skipper, for convenience.
PART A
In October, 1980, Skipper became the highest bidder for purchase of a H
516 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A plot of land at Jhandevalan in Delhi which was advertised for sale for Rs. 9 .82
crores and deposited 25% of the price. The balance was to be deposited as
per the tender schedule. Skipper defaulted in spite of seven extensions during
January 1981 to April 1982. When proceedings for cancellation of the bid were
in the offing, Skipper moved the Court and obtained a stay order on 29.5.82
B and started making representations. DOA appointed a Committee to work out
a formula and pursuant to the recommendations of the Committee, Skipper
-'
was asked to enter into a revised agreement incorporating fresh terms. Skipper
raised objections to these proposals from 1984 till 1987 but finally the agreement
was entered into on 11.8.87. Even before permission to enter was however
granted under the revised agreement, Skipper started selling the spac~ to be
C built in the proposed structure and started receiving monies. Though Skipper
paid the l st instalment much beyond the time, it did not pay the second
instalment but furnished Bank guarantees which were found to. be defective.
It, however, made some token payments to DOA. Subsequently, CWP.2371/
1989 was filed for a direction to DDA to sanction plans/permit construction
at its risk. On 19.3 .90, High Court of Delhi permitted construction in accordance
D with sanctioned plan subject to deposit of Rs. 20 lakhs in two instalments and
1.94 crores in one month. DDA filed SLP (C) 6338/90 and 6339/90. Meanwhile,
the Delhi High Court passed an order in the WP.2371189 on 2l.12.90 directing
payment of Rs.8.12 crores approx. in 30 days and stopped further construction
w.e.f. 9.1.91 till payment and stated that. in default, the revised agreement
E dated 11.8.87 would stand cancelled and DOA would be entitled to re-enter
the plot. Reasons for the order were given on 14.1.91, Skipper defaulted but
approached this Court on 29.1.91 in SLP(C) 186/91 when this Court passed
an interim order for deposit of Rs.2.5 crores in one month and Rs.2.5 crores
before 8.4.91 and Skipper was expressly prohibited from inducting any person
in the building and from creating any rights in favour of third parties. In spite
F ofit, Skipper issued advertisement on 4.2.91 and on later dates in newspapers
in Delhi and invited further purchasers to purchase the space in the proposed
building. Sales agreements were entered into by certain purchasers inspite of l
DDA's warning dated 13.2.91 published in newspapers. SLP(C) 186/91 was
dismissed on 25.1.93.
G
DOA re-entered the plot and took physical possession on 10.2.93 .
along with the building thereon "free from all encumbrances" in terms of the
revised agreement/licence and as provided in the orders of the Delhi High
Court dated 21.12.90 and 14.1.91. It also ''forfeited' the amounts paid till then
by Skipper in terms of the revised agreement dated 11.8.87 and the judgment
H of the Delhi High Court.
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA RAO, J.] 517

~ It is stated in DDA v. Skipper Construction Co.(P) Ltd, (1996] 4 SCC A
622) that before 29.1.91 Skipper collected about Rs.14 crores from various
parties to sell space in the proposed building. Even after 29.1.91, Skipper
collected various amounts, about Rs. I I crores. It appears that the same space
was soid to more than one person and monies were collected.

Skipper filed suit No. 770/93 against ODA seeking injunction restraining B
ODA from interfering with its alleged title and possession over the plot and
sought a declaration that the re-entry by DOA was illegal and sought a
declaration that it had validly paid all amounts due to DOA. It obtained stay
of re-auction. Against the order dated 9.12.93, ODA filed SLP.21000/93. This
Court issued suo motu contempt proceedings against Tejwant Singh and his C
wife ( Surinder Kaur), Directors of Skipper. This Court held them guilty of
contempt and under Article 129 and Article 142, sentenced them to imprisonment
and fine of Rs.50,000 each. Attachment orders were passed on 8.2.95 as
follows:

"All the properties and bank accounts standing in the names of the D
contemners and the Directors of Mis Skipper Construction Co.(P)Ltd.
and their wives, sons and unmarried daughters shall stand attached.

Later on, the sentence was deferred subject to condition of their
furnishing bank guarantee for Rs. I I crores by 31.3.95 and a deposit of Rs.11
crores by 30.3.95. It was also said: E
"List of properties given by the contemners to be taken on record.
The contemners will also file a list of properties held by their sons and
unmarried daughters within one week from today."

The Court also said: F
"The attachment of the properties and the bank accounts shall
stand raised on the contemners furnishing the bank guarantee as
aforesaid."

The contemners deposited Rs. 2 crores but failed to deposit the balance and G
also failed to furnish Bank guarantee. They were committed to prison and
they served the sentence: DOA invited fresh tenders and sold the plot with
the 14th floor structure (incomplete) to Mis Banganga Investments (Videocon)
for Rs. 70 crores. The sale was accepted with permission of ·court and the
purchaser deposited the consideration with DDA and the land and structure
stood transferred to the purchaser. H
518 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A This Court felt concerned about the buyers to whom space was sold
~
before 29.1.91 and later. Claims of those who purchased before 29.1.91 were
estimated to amount of Rs.14 crores. DDA was, therefore, directed to deposit
Rs.16.75 crores in this Court.

This Court appointed Justice R.C.Lahoti Commission to go into the ~
B claims of purchasers before 29.1.91 and a report dated 2.2.96 was submitted
by that Committee. A sum of Rs. 13 .27 crores approx. was paid to about 700
persons.

This Court appointed Justice 0. Chinnappa Reddy to inquire into role
of DDA officers and a Report was received on 7.7.95. This Court appointed "
c Justice Saharya Commission to inquire into conduct of Bank officials. A
Report was submitted in that connection. The issues arising from the said
reports would be taken up later.

Another order was passed on 6.5.96 appointing Justice 0. Chinnappa
Reddy to go into the post 29.1.91 sales and a Report was submitted. In
D respect of these purchasers, the principal amount of about Rs.6.50 crores held
due to them has been paid from funds lying in deposit in this Court.

The judgment of this Court in DDA v. Skipper Construction Co. (P)
Ltd, [1996] 4 SCC 622 shows that DDA filed a list of properties held by
'-
Tejwant Singh, his wife, Surinder Kaur and their sons and daughters which '
E properties, according to them, belonged to these persons. Question arose
whether the various companies of which they were Directors were merely
'fronts' or "devices" to defraud and defeat the claims of purchasers. Then
this Court held that (a) the contemners could not be allowed to enjoy or retain
the fruits of contempt; (b) the corporate veil could be lifted and that the Court
F was not precluded from treating the properties as "one entity belonging to
Tejwant Singh and family" (c) that the concept of resulting trust laid down
in Attorney Genera/for India v. Amratlal Prajivandas, [1994] 5 SCC 54, could
...,_
be applied, (d) that Article 142 could be applied, in the absence of statutory
provision, and that when:

G "someone has acquired property by defrauding the people and if
it is from that the persons defrauded should be restored to the position
in which they would have been but for the said fraud, the Court can
make all necessary orders."

In the judgment, this Court held (see para 34) (1) that pre 29.1.91
H purchasers had to be re-imbursed in full, "which means that they should also
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA R,\O, J.] 519

be paid interest at the appropriate rate". (2) Secondly, the post 29.1.91 A
~ purchasers had also to be re-imbursed "in full". (3) Ignoring the corporate
veil, the property under lease to Israel Embassy at No.3, Aurangjeb Road,
could be sold. (4) For that purpose it would stand attached-( if not already
attached) and the said property would be sold if Tejwant Singh and wife were
not able to deposit Rs.IO crores by 6.7.96 (5) attachment of all properties was
to continue including the one on properties mentioned in IA.29/96 filed by B
DDA. (Skipper failed to make the payment as directed above).

The above is the long list of events and orders/directions issued in
DDA v. Skipper Construction Co.(P) Ltd, [1996] 4 SCC 622.

PARTB c
It will be useful to summarise the events subsequent to May 6, 1996
briefly.

On 10.2.99, this Court directed Skipper to file a list of all immovable
properties held or owned by them either in their own personal names or in D
the names of the companies of which they were on the Board of Directors
or in which they were share-holders and similarly those in the names of their
sons or unmarried daughters.

On 15 .3 .1991, this Court referred to an earlier order passed by this Court
on 8.2.95 in SLP(C) 21000/93 attaching "the bank accounts in the names of E
contemners and the Directors of Mis Skipper Constructions Co.(P) Ltd. and
their wives, sons and unmarried daughters". This Court held that by the
judgment dated 6.5.96, properties of Technology Park Ltd. also stood attached
as that property was one listed in IA.29/96 and therefore, the advertisement
dated 22. l.99 for sale in regard to the said property issued by Prabjot Singh, p
son of Tejwant Singh was in violation of orders of this Court. Contempt
notices were issued to Sri Prabjot Singh and his wife Harpreet Kaur.

On 5.4.99, Ms. Harpreet Kaur appeared but not her husband, Mr. Prabjot
Singh. Directions were issued to the police to take steps for production of
Prabjot Singh in this Court. On the same day, it was contended by purchasers G
of proposed construction at Barakhamba that the monies collected from them
_ by Skipper Towers Ltd. and Skipper Sales Pvt. Ltd. were diverted for the
construction of the building at Jhandevalan which structure had gone back
to DDA and then got sold to the purchaser Banganga (Videocon).

On 3.5.99, Sri R.K. Jain, learned senior counsel appeared for Sri Prabjot H
520 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R. .

A Singh. His client was arrested by police. Counsel took time to come forward " '

with a scheme. Counsel for Mr. Tejwant Singh and his wife were also directed
to come forward with a scheme.

By affidavit dated 6;5.99, Mr. Prabjot Singh gave a list of properties held r
by him, list of 'Skipper' properties held by his father Tejwant Singh and by
B his brother Prabhjit Singh. On 10.5.99, all these properties were attached,
without prejudice to any subsisting attachment orders passed earlier. Prabjot
Singh's undertaking was also recorded.
<i
On 19.7.99, this Court observed that issues relating to the further claims
of Skipper against DDA would be decided taking into account the contention
c ofDDA that the land and structure vested in DDA "free of all encumbrances"
and also the contention that these matters were already concluded and became
final on 6.5.96.

On 2.8.99, learned amicus curaie filed a list of issues which by then
crystalised for decision. The disputes relate to (1) claims relating to Jhandevalan
D
property (2) 22, Barakhamba, (3) Technology Park and (4) Symphony. This
Court indicated that a fresh reference would be made to another Commission
regarding the various claims of purchasers which were not adjudicated by ...
Justice R.C. Lahoti and Justice 0. Chinnappa Reddy Commissions. It was ',
pointed out that in relation to Barakhamba property, suits were filed in the
E Delhi High Court for specific performance and decreed and appeals were filed
by both sides before the Division Bench.

On 2.8.99, this Court passed orders that a comprehensive list of properties
be prepared. Details of winding up proceedings pending against Skipper
Builders (P) Ltd. in the Delhi High Court who were concerned with Symphony
F were also to be furnished. Notice was given to Ghaziabad Development
Authority with regard to land of Technology Park Ltd.It was made clear that "'·
claims rejected on merits (i.e. otherwise than on limitation) by Justice Lahoti
and Justice Chinnappa Reddy would not be re-opened. On 13.9.99, counsel
were requested to prepare a final list of issues presently arising and the
G matters were directed to be listed for hearing on these issues.

On 28.10.99, this Court attached certain. Bank Accounts of Technology
Park. On 2.11.99, a further list of Bank accounts of Prabjot Singh was filed and
those accounts were also attached. Mr. Prabjot Singh was directed not to
enter into any real estate transactions without informing the Court. This order t1'
H was passed because cf 5t:rious complaints that Mr. Prabjot Singh was making
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA RAO, J.] 521
. )
sales even after attachment orders. The Banks were directed to give a list of A
transactions in the last 5 years. In regard to attachment of Bank accounts of
Sri Tejwant Singh, this Court held that they were already attached before
6.5.96. A contention was raised by Sri M.L. Verma, learned senior counsel
appearing for Mr.Tejwant Singh that the attachment of Bank accounts was not
specifically confirmed in the order of this Court dated 6.5.96 and must be
deemed to have been vacated. This Court held that that. attachment was not B
vacated by the final orders dated 6.5.96. This Court Ci!lled upon Shri Tejwant
Singh to give a list of Bank accounts in his nam~, sons and unmarried
daughters and directed no withdrawals be made and further directed that no
real estate transactions could be undertaken without permission of the Court.

On 4.11.99, this Court heard counsel on various issues (to which
c
reference will be made in Part C) and reserved judgment. This Court also
issued notice to the Banganga Company ( Videocori) which purchased
Jhandevalan land and structure from DDA. This Court proposed transfer of
appeals pending in Delhi High Court to this Court in relation to Barakhamba
property. D
PARTC

Having narrated the events which took place as above, we shall now
refer to some of the issues which have crystallised. We have heard the
submissions of the learned Amicus Curaie Sri Joseph Vellapally and Sri Dayan E
Krishnan, assisting the Amicus Curaie. We have heard Sri Mukul Rohatgi,
learned Additional Solicitor General and Ms. Kamini Jaiswal for DDA, Sri M.L.
Verma, Senior Advocate for Skipper, Sri R.K. Jain, Senior Advocate for Mr.
Prabjot Singh, Lt. Col. Jaswant Singh (in person) and various others.

A question has arisen whether in respect of the structure at Jhandevalan F
which vested in DDA and which DDA sold to Banganga ( Videocon), DOA
should be directed to deposit something more in addition to Rs.16. 75 crores
deposited by it. DOA says that that issue has become final by judgment
dated 6.5.96 and cannot be reopened. On the other hand, it has come to light
that the purchasers were not co-:nominee parties to the suit by Skipper against G
DDA which was trans(erred to this Court and was registered as SLP(C)
No.21000/93. For the present, we do not propose to go into this question as
to whether the judgment of this Court dated 6.5 .96 has become final or is not
binding on those who purchased from Skipper Construction Co. on the
~r~und of their not being parties to the above suit and Special Leave petition.
However, we shall take up this question at a later point of time. H
522 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.
( .
A Learned counsel made submissions on the following issues:

(I) Whether the purchasers under agreements in respect of Jhandevalan '
property have a statutory charge in view of Section 55(6)(b) of the Transfer
of Property Act -against the vendor's interest in the property? Whether such
charge can be enforced against any substituted security?
B
(2) Whether the purchasers are entitled to interest under Section 55(6)(b)
of the Transfer of Property Act and also in view of the observations made
in the judgment of this Court dated May 6, 1996?
..
(3) Whether the period of limitation for enforcing claims by the purchasers
C would be 12 years under the Limitation Act?

(4) Whether in view of the words 'subject to a contract to the contrary'
used in Section :S5(6)(b) of the Transfer of Property Act and in view of the
term in the agreement of sale that Skipper will not be liable for interest, the
purchasers cannot claim interest?
D
-• (5) Whether the purchasers can rely on the finding of 'fraud' given by
this Court in its order dated 15.l.1995 to contend that the claim for interest
is sustainable because of fraud by Skipper on the purchasers?

PO/NS I and 2:
E
These points depend upon the effect of the provisions in Sub-clause
(6) of Section 55 of the Transfer of Property Act. That Section starts with the
words "In the absence of a contract to the_ contrary", and reads thus (insofar
as it is material for our purpose):

p- "Section 55 (6)(b): The buyer is entitled

(a) ................ .

(b) unless he has improperly declined to accept delivery of the property,
to a charge on the property, as against the seller and all persons
G claiming under him, to the extent of the seller's interest in the property,
for the amount of any purchase-money property paid by the buyer in
anticipation of the delivery and for interest on such amount; and,
when he properly declines to accept the delivery, also for the earnest
(if any) and for the costs (if any) awarded to him of a suit to compel -,
specific perfoi"rlance of the contract or to obtain a decree for jts
H rescission".
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA RAO, J.] 523

It is plain from the above provision that, in the absence of a contract A
to the contrary, the buyer will have a charge on the seller's interest in the
property which is the subject matter of the sale agreement insofar as the
purchase money and interest on such amount are concerned, unless the
buyer has improperly declined to accept delivery. The charge is available
against the seller and all persons claiming under him. This charge in favour
of the buyer is the converse of the seller's charge under Section 55(4)(b). The B
buyer's charge under this Section is a statutory charge and differs from a
contractual charge which a buyer may be entitled to claim under a separate
contract (Chettiar Firm Vs. Chettiar) (AIR 1941P.C.47). No charge is available
unless the agreement is genuine. ( T.N. Hardas Vs. Babula!) (AIR 1973 SC
1363). As pointed out in Mulla's Commentary on Transfer of Property Act, C
8th Ed. (P.411), the charge on the property under Section 55(6)(b) is enforceable
not only against the seller but against all persons claiming under him. Before
the amending Act of 1929, the words 'with notice of payment' occurred after
the words "all the persons claiming under him". These words were omitted
as they allowed a transferee without notice to escape. After the Amendment
of 1929, notice to the purchaser has now become irrelevant. D
When the property upon which the charge is created gets converted
into another form, the buyer will be entitled to proceed against the substituted
security. This is a general principle of law and Section 73 of the Transfer of
Property Act is only an example of the said principle. The above principle has E
been applied to enforce mortgage on substituted securities (see Barham Deo
Prasad v. Tara Chand ( 1913) 41 LA. 45 (PC) and Muniappa v. Subbaiah,
AIR 1917 Mad. 880. The same principle which is applicable to mortgages
applies to cases of statutory charge under Section 55(6)(b). If immovable
property is charged and is converted into another property or money, then
the charge will fasten on the property or money into which the subject matter F
of the agreement is converted.

The above sub-section of Section 55 also makes it clear that the buyer
is entitled to interest on the amount of purchase money paid. Interest is
payable from the date of payment of the purchase money to the seller till date
of delivery of property to the purchaser or till the execution of the sale deed, G
whichever is earlier. Points I and 2 are decided accordingly in favour of the
buyers.

POINT3:
Article 62 of the Limitation Act, 1963 (which corresponds to Article 132 H
524 SUPREME COURT REPORTS (1999] SUPP. 5 S.C.R.

A of the Limitation Act 1908) provides a period of 12 years "to enforce payment
of money secured by a mortgagee or otherwise charged upon immovable
property". Time runs from the date "when money becomes due".

From the above Article, it is clear that the period of limitation for
enforcement of the statutory charge created under Section 55(6)(b) is 12 years
B from the date when becomes due and not 3 years. The period remains the
same even for enforcement of the charge on the substituted security. Point
3 is decided accordingly.

POINTS 4 and 5:
.
c Learned senior counsel for Skipper, Sri M.L. Verma contended that there
is a stipulation in the agreement of sale that interest will not be payable to
the buyer in case the transaction fails for any reason.

On the other hand, Sri Dayan Krishan for the learned Amicus Curiae
D submitted that in view of the earlier finding of this Court relating to 'fraud'
on the part of Skipper, it is not permissible for Skipper to rely on the above
clause in the agreement.

In our view, learned Amicus Curiae is tight in his submission that in the
order of this Court dated 15. l.1995, there is a clear finding of 'fraud' against
E Skipper. This is because, when the available units of accommodation are said
to be 870 or less, Skipper had given bookings in favour of 2700 buyers and
collected huge sums. This was obviously fraudulent.

In our view, builders are not in law supposed to enter into agreements
with more number of buyers than there are flats, unless each of the buyers
F in excess of the riumber of available units of accommodation is put on notice
that his purchase will depend upon the availability of units of accommodation.
Accepting bookings from excess number of buyers without adequate notice
to them about the contingent nature of their contracts cannot be said to ~e
fair dealing. On top of that to say, that these amounts paid by the buyer will
G not carry interest, is wholly unconscionable. In this case, Skipper entered into
a large number of bookings, nearly three times the available units of
accommodation and collected monies. This was fraudulent, as per the earlier
finding of this Court dated 15.1.95. Skipper, therefore, cannot be allowed to
rely upon the term relating to 'contract to the contrary' and escape the
payment of interest. Once there is fraud, the inducement for payment by the
H purchasers cannot be traced to the agreement.
D.D.A. v. SKIPPER CONSTRUCTION CO. (P) LTD. [M. JAGANNADHA RAO, J.] 525

We may also point out that in the judgment of this Court dated May A
6th, 1996, this Court has already observed, that interest is payable to both
pre 29.l.91 and post 29.1.91 purchasers. This Court held in regard to pre
29.l.91 purchasers as follows: (Seep. 643 ofSCC).

"On one hand, the position is that the pre-29.1.1991 purchasers have
to be reimbursed in full which means that they should also be paid B
interest at the appropriate rate on the amounts advanced by them to
skipper... "

In regard to post 29.1.1991 also, it has been stated (p.644 of SCC).

"Secondly, the post 29.1.1991 purchaser, have also to be reimbursed C
in full."

A point was raised on behalf of DDA that inasmuch as DDA had given
paper publication after 29. l.1991 warning purchasers, it must be presumed
that all the members of the public were put on notice and post 29.l.91 buyers
should not be allowed to claim interest. We have given due consideration to D
this contention. As to what extent any of these buyers had notice of the
paper publication, is a matter on which it is difficult to get evidence. We are,
therefore, not inclined to reconsider the decision of this Court dated May 6th,
1996 in regard to the right of the post 29 .1.1991 purchasers to get interest.
Points 4 and 5 are decided against Skipper.
E
We disposed of points 1 to 5 accordingly.

A.K.T. Petition disposed of.