Supreme Court Rejects Judgment on Admissions in Property Dispute: Hari Steel vs. Daljit Singh (2019)

Date of the Judgment: 24 April 2019

Citation: (2019) INSC 368

Judges: R. Banumathi, J., R. Subhash Reddy, J.

Can a court grant a judgment based on admissions when there are serious allegations of forgery and disputed facts? The Supreme Court of India recently addressed this critical question in a case involving a property sale agreement. The Court overturned a High Court decision that had decreed a suit for specific performance based on admissions, emphasizing that such judgments require clear and unequivocal admissions, especially when serious factual disputes exist. This judgment highlights the importance of a full trial when there are allegations of fraud and forgery.

Case Background

This case revolves around a dispute over an agreement to sell a property in New Delhi. The plaintiffs, Daljit Singh and others, sought specific performance of an agreement to sell against the defendants, Hari Steel and General Industries Ltd. and another. The plaintiffs claimed that a concluded agreement was reached on April 7, 2005, and further recorded on May 3, 2005, for the sale of property and the business of ‘South Delhi Toyota’ for a total consideration of ₹55.50 crores. According to the plaintiffs, they paid ₹2 crores as part consideration on April 7, 2005, and a further ₹3 crores on May 3, 2005.

The defendants, however, contested the agreement, claiming that the agreement dated May 3, 2005, was fabricated, with forged signatures on pages 3 and 4. They also disputed the receipt of ₹3 crores in cash, stating that they only received ₹2 crores by cheque. The defendants also raised objections regarding the maintainability of the suit and the lack of readiness and willingness on the part of the plaintiffs to perform the contract.

Timeline:

Course of Proceedings

The respondents-plaintiffs filed an application (I.A. No. 1557 of 2007) under Order XII Rule 6 of the Civil Procedure Code (CPC), seeking a judgment based on admissions allegedly made by the appellants. The Single Judge of the High Court dismissed this application, noting serious disputes regarding the payment of ₹5 crores and the alleged forgery of signatures on the agreement. The Single Judge held that these issues required a full trial for resolution.

On appeal, the Division Bench of the High Court reversed the Single Judge’s decision. The Division Bench held that the appellants had admitted to entering into the agreement and receiving ₹5 crores, based on the Director’s Report and balance sheets of the company. The Division Bench concluded that there were no genuine triable issues and decreed the suit for specific performance, directing the appellants to pay the balance amount and execute the sale deed.

Legal Framework

The case primarily revolves around the interpretation and application of two key legal provisions:

✓ Order XII Rule 6 of the Civil Procedure Code (CPC): This provision allows a court to pronounce judgment based on admissions made by a party, either in pleadings or otherwise, whether orally or in writing. The provision states:

“6. Judgment on admissions .-(1) Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.”

✓ Section 16 of the Specific Relief Act, 1963: This section mandates that a plaintiff seeking specific performance of a contract must demonstrate their readiness and willingness to perform the contract. Specifically, Section 16(c) states that specific performance of a contract cannot be enforced in favor of a person who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract.

Arguments

Appellants’ Arguments:

• The appellants argued that the High Court erred in granting judgment on admissions because there were no clear and unequivocal admissions. They contended that the suit was filed in 2006, and they had already filed a written statement raising serious disputes about the genuineness of the agreement and the payment of ₹5 crores.
• They claimed that the agreement dated May 3, 2005, was fabricated, with forged signatures on pages 3 and 4. They maintained that they only admitted to receiving ₹2 crores by cheque, not ₹5 crores as claimed by the plaintiffs.
• The appellants argued that observations made in criminal proceedings related to their bail application were misconstrued as admissions. They emphasized that a suit for specific performance requires a full trial, especially when there are contentious issues of fact.
• They relied on the judgments in S.M. Asif vs. Virender Kumar Bajaj [(2015) 9 SCC 287], Himani Alloys Limited vs. Tata Steel Limited [(2011) 15 SCC 273], and Balraj Taneja and another vs. Sunil Madan and another [(1999) 8 SCC 396] to support their claims that admissions must be clear and unconditional, and that readiness and willingness must be pleaded and proven in specific performance suits.
• The appellants further argued that inconsistent pleas are permissible in the written statement, relying on Baldev Singh and Ors. vs. Manohar Singh and another [(2006) 6 SCC 498] and Usha Balashaheb Swami and ors. vs. Kiran Appaso Swami and ors. [(2007) 5 SCC 602].

Respondents’ Arguments:

• The respondents argued that the appellants had made multiple admissions regarding the agreement to sell and the receipt of ₹5 crores. They cited statements made during the bail application and entries in the company’s balance sheets and statutory filings as evidence of these admissions.
• They contended that the amendment to Order XII Rule 6 of the CPC in 1976 allows for a wide interpretation of admissions, including oral and written statements. They relied on Uttam Singh Duggal & Co. Ltd. vs. United Bank of India & Ors. [(2000) 7 SCC 120] and Karam Kapahi & Ors. vs. Lal Chand Public Charitable Trust & Anr. [(2010) 4 SCC 753] to support this interpretation.
• The respondents argued that entries in the balance sheet and Director’s report of the company should be construed as admissions, citing Usha Rectifier Corporation (India) Limited vs. Commissioner of Central Excise, New Delhi [(2011) 11 SCC 571].
• They also argued that an admission made by a party in a plaint can be used as evidence against them in other suits, relying on Basant Singh vs. Janki Singh & Ors. [AIR 1967 SC 341].

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in this judgment. However, the core issues that the Court addressed can be summarized as follows:

1. Whether the High Court was correct in granting judgment on admissions under Order XII Rule 6 of CPC, given the serious factual disputes and allegations of forgery.
2. Whether the admissions relied upon by the High Court were clear, unequivocal, and unconditional.
3. Whether the plaintiffs had sufficiently demonstrated their readiness and willingness to perform the contract.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

On the scope and application of Order XII Rule 6 of CPC:

• Himani Alloys Limited vs. Tata Steel Limited [(2011) 15 SCC 273] – Supreme Court of India: This case emphasized that admissions must be categorical, conscious, and deliberate, showing an intention to be bound. It also stated that the power under Order XII Rule 6 is discretionary and should be used only when there is a clear admission.
• S.M. Asif vs. Virender Kumar Bajaj [(2015) 9 SCC 287] – Supreme Court of India: This case held that the power under Order XII Rule 6 is discretionary and cannot be claimed as a matter of right. It also stated that if objections go to the root of the case, it is not appropriate to exercise discretion under this rule.
• Uttam Singh Duggal & Co. Ltd. vs. United Bank of India & Ors. [(2000) 7 SCC 120] – Supreme Court of India: This case held that when a statement of admission is brought before the Court, as long as the party making the statement is given sufficient opportunity to explain such admissions, judgment on admission can be delivered.
• Karam Kapahi & Ors. vs. Lal Chand Public Charitable Trust & Anr. [(2010) 4 SCC 753] – Supreme Court of India: This case interpreted the expression “otherwise” in Order XII Rule 6 of CPC, holding that the scope of this provision is wider than that of Order XII Rule 1 of CPC.
• Balraj Taneja and another vs. Sunil Madan and another [(1999) 8 SCC 396] – Supreme Court of India: This case held that the court should not act blindly upon admissions but must ensure that the admission is unequivocal, clear, and positive.

On the nature of entries in balance sheets:

• Usha Rectifier Corporation (India) Limited vs. Commissioner of Central Excise, New Delhi [(2011) 11 SCC 571] – Supreme Court of India: This case held that entries made in the balance sheets filed on behalf of the company are to be treated as admissions.

On the requirement of readiness and willingness in specific performance suits:

• Aniglase Yohannan vs. Ramlatha and Ors. [(2005) 7 SCC 534] – Supreme Court of India: This case held that a person seeking specific performance must demonstrate that their conduct has been blemishless and that they have always been ready and willing to perform their part of the contract.

On the permissibility of inconsistent pleas in written statements:

• Baldev Singh and Ors. vs. Manohar Singh and another [(2006) 6 SCC 498] – Supreme Court of India: This case held that inconsistent pleas are permissible in the written statement.
• Usha Balashaheb Swami and ors. vs. Kiran Appaso Swami and ors. [(2007) 5 SCC 602] – Supreme Court of India: This case also supported the principle that inconsistent pleas are permissible in written statements.

On the use of admissions in other suits:

• Basant Singh vs. Janki Singh & Ors. [AIR 1967 SC 341] – Supreme Court of India: This case held that an admission made by a party in a plaint can be used as evidence against them in other suits.

Authority Analysis

Judgment

The Supreme Court overturned the High Court’s judgment, holding that the High Court had erred in decreeing the suit based on admissions. The Court emphasized that the admissions relied upon were not clear and unconditional, and there were serious factual disputes that required a full trial.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The authorities cited by the appellants, such as Himani Alloys Limited vs. Tata Steel Limited [(2011) 15 SCC 273] and S.M. Asif vs. Virender Kumar Bajaj [(2015) 9 SCC 287], were followed to support the view that admissions must be clear, unequivocal, and unconditional for a judgment on admissions.
• The Court discussed the authorities cited by the respondents, such as Uttam Singh Duggal & Co. Ltd. vs. United Bank of India & Ors. [(2000) 7 SCC 120] and Karam Kapahi & Ors. vs. Lal Chand Public Charitable Trust & Anr. [(2010) 4 SCC 753], acknowledging the broader scope of Order XII Rule 6 but emphasizing that the admissions must still be clear and within the framework of the rule.
• The Court noted that while entries in balance sheets are generally treated as admissions, as per Usha Rectifier Corporation (India) Limited vs. Commissioner of Central Excise, New Delhi [(2011) 11 SCC 571], the specific circumstances of the case required a trial.
• The Court also followed Aniglase Yohannan vs. Ramlatha and Ors. [(2005) 7 SCC 534] to emphasize the need for readiness and willingness in specific performance suits.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Disputed Facts: The Court emphasized that there were serious factual disputes regarding the genuineness of the agreement and the payment of ₹5 crores. The appellants’ claim of forgery and fabrication of the agreement could not be ignored.
• Lack of Clear Admissions: The Court held that the admissions relied upon by the High Court were not clear, unequivocal, or unconditional. The appellants had consistently disputed the payment of ₹5 crores and the validity of the agreement.
• Discretionary Nature of Order XII Rule 6: The Court reiterated that the power under Order XII Rule 6 is discretionary and should not be exercised when there are serious factual disputes.
• Need for Full Trial: The Court emphasized that the issues raised by the appellants required a full trial where evidence could be presented and the truth could be ascertained.
• Readiness and Willingness: The Court noted that the plaintiffs had not sufficiently demonstrated their readiness and willingness to perform the contract, which is a necessary condition for specific performance.

The Court’s reasoning was heavily influenced by the factual disputes and the lack of clear admissions, indicating a high emphasis on the factual aspects of the case.

Logical Reasoning:

The Court considered alternative interpretations of the admissions and the documents presented but rejected them because of the serious factual disputes and the lack of clear and unequivocal admissions. The Court also noted that the plaintiffs had not sufficiently demonstrated their readiness and willingness to perform the contract.

The Supreme Court’s decision was based on the principle that a judgment on admissions should not be granted when there are serious factual disputes and allegations of forgery. The Court emphasized the need for a full trial to ascertain the truth.

“It is true that a judgment can be given on an “admission” contained in the minutes of a meeting. But the admission should be categorical. It should be a conscious and deliberate act of the party making it, showing an intention to be bound by it.”

“The words in Order 12 Rule 6 CPC “may” and “make such order …” show that the power under Order 12 Rule 6 CPC is discretionary and cannot be claimed as a matter of right.”

“Under this rule, the court can, at an interlocutory stage of the proceedings, pass a judgment on the basis of admissions made by the defendant. But before the court can act upon the admission, it has to be shown that the admission is unequivocal, clear and positive.”

The Court, therefore, set aside the High Court’s judgment and restored the Single Judge’s order, dismissing the application for judgment on admissions.

Key Takeaways

• Clear Admissions Required: Judgments on admissions under Order XII Rule 6 of CPC require clear, unequivocal, and unconditional admissions.
• Discretionary Power:The power under Order XII Rule 6 is discretionary and should not be exercised when there are serious factual disputes.
• Need for Full Trial: When there are allegations of forgery and disputed facts, a full trial is necessary to ascertain the truth.
• Readiness and Willingness: In specific performance suits, the plaintiff must demonstrate readiness and willingness to perform the contract.
• Inconsistent Pleas: Inconsistent pleas are permissible in written statements, allowing defendants to raise multiple defenses.
• Balance Sheet Entries: While entries in balance sheets can be treated as admissions, they are not conclusive and must be considered in the context of the case.

This judgment serves as a reminder that judgments on admissions should not be granted lightly, especially in cases where there are serious factual disputes and allegations of fraud. It emphasizes the importance of a full trial to ensure that justice is served.

Conclusion

The Supreme Court’s decision in Hari Steel and General Industries Ltd. & Anr. vs. Daljit Singh & Ors. (2019) is a significant ruling that clarifies the scope and application of Order XII Rule 6 of the Civil Procedure Code. The Court emphasized that the power to grant judgment on admissions is discretionary and should only be exercised when the admissions are clear, unequivocal, and unconditional. The judgment underscores the importance of a full trial when there are serious factual disputes and allegations of forgery, particularly in specific performance suits. This case serves as a crucial precedent for future cases involving similar issues, ensuring that the courts do not bypass the due process of law by granting judgments on admissions without a thorough examination of the facts.