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Recently Hon`ble High court held, The development agreement is also an agreement for sale subject to certain conditions. In short, it is an agreement for conditional sale.

“(i) Whether the suit at the instance of a developer is not maintainable in view of Section 14 (3) (c) of the Specific Relief Act.

A contract between a developer and an owner would also consist of reciprocal rights and obligations. The developer and the owner would have rights against each other. In my view, it would be preposterous to say that only the owner can maintain a suit against the developer for enforcing his rights and not vice versa. If the developer has a right under the contract he must be having a remedy in the form of approaching a forum for appropriate redressal. This is not to say that the developer will necessarily succeed in such a legal action. A question of maintainability of a suit is completely different from the question of whether the suit will succeed or not on the facts of the case and in the light of the applicable law. Section 14 (3)(c) of the Specific Relief Act can in no manner be interpreted as debarring a developer from approaching the legal forum for redressal of his grievance. A suit at the instance of a developer (where the developer is the non-owner party to a development agreement of the kind that is referred to in this judgment) is not prohibited by Section 14(3)(c) of the Specific Relief Act.

(ii) Whether the power of attorney executed by the owner in favour of the developer for effectuating the terms and conditions of the development agreement comes as a bare agency to the developer without any interest in subject-matter or not.”

The developer performs on the basis of a power of attorney executed in such regard by the owner. Typically, the powers of attorney executed pursuant to a development agreement proclaim to be irrevocable.

Ordinarily, the position of a developer in the work undertaken pursuant to a development agreement has to be regarded as that of the conductor of an orchestra in the sense that he guides and controls the project and the owner’s concern is limited to the timeliness and the quality of the project. Generally, particularly as a class of developers or promoters has burgeoned, it would be the developer who would take all the responsibilities for liaising with divers authorities to obtain clearances and sanctions to undertake and complete the project; ideally, keeping the owner informed throughout the duration of project. It would thus be the developer, particularly the professional developer, who would be more adept at getting things done and it may be convenient for the owner to relieve himself of the everyday stresses and give authority to the developer to do all that an ordinary owner would do to construct upon his land. The consolation of the owner would be that in a development agreement the developer would also be interested in the success of the project, its timely completion and the quality thereof as the developer would be entitled to a part of the finished product.

Section 53A of the said Act would suggest, if a proposed transferee of an immovable property under an agreement for sale is put in possession and continues in possession in part performance of the contract and does some act in furtherance of the contract and is willing to perform the balance part, his possession would be protected and the transferor would be debarred from dispossessing him other than under a right expressly provided by the terms of the contract. The development agreement is also an agreement for sale subject to certain conditions. In short, it is an agreement for conditional sale. If we accept Vipin Bhimani judgment and deny a developer specific performance of such a contract where he was put into possession by the owner and he continued to act in furtherance of the contract, we would still not be in a possession to permit the plaintiff to dispossess him in view of the express provision of Section 53A of the said Act of 1882. At the end, if a developer files a suit for specific performance of a contract and the owner files a suit for recovery of possession we would have to dismiss both on different logic, this would create a ridiculous situation. Court of law is duty bound to resolve the controversy as far as practicable that is brought before it. The Court of law is not entitled to complicate the issue by making the controversy more complicated. On that analogy Vipin Bhimani must fail.

Further, If we look to 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. Section 203 would permit the principal to revoke the authority of his agent subject however; when the agent partly exercised his authority such revocation would not be permissible under Section 204. If we read these three provisions together and try to answer the second query made to us by His Lordship we would find, the Power of Attorney so revoked by the owner should not be looked at in an isolated manner. The Power of Attorney generally issued to the developer, was in continuation of the original agreement for development of the property meaning thereby, the developer who was entrusted to develop the property would be given authority to do further act as per the contract including dealing with the property to the extent permissible under the contract.

Hence, the Power of Attorney was nothing but an agency agreement executed in furtherance of the original contract. If the original contract creates an interest in favour of the developer even if the Power of Attorney is revoked such interest would not evaporate. 

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Rupesh Srivastava



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Rupesh Srivastava
Category Income Tax   Report

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