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PETITIONER: MRS. MANJU BHATIA & ANR.

       Vs.

RESPONDENT: NEW DELHI MUNICIPAL COUNCIL & ANR.

DATE OF JUDGMENT:       06/05/1997

BENCH: K. RAMASWAMY, S. SAGHIRAHMAD, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:  O R D E R      Leave granted.      Wehave heard learned counsel on both sides.      The admitted  facts are  that thebuilderimpleaded as one  of the  respondents,  after  obtaining  the  requisite sanction,  built   8  floors  (including  ground  floor)  on November 22,1984  as per  the guidelines which permitted 150 F.A.R.with   the  height   restriction  of  80  feet. The construction ofthe building known as "White House". Came to be madeand thepossession of the flatswas delivered to the purchasers, the appellant being  one of  them.At  a  later stage,it  was foundthat  the  builder  constructed the building in  violation of the Regulations. Consequently, the flats of the top four floors were demolished. The demolition came to be challengedby wayof thewrit petition in the High Court.  The High  Court dismissedthe same.  Thusthis appeal by special leave.      Before wego intothe controversyinvolve, it would be appropriate and advantageous at  this stage  to  refer and discussthe  law of equity and its rolein the field oftort and equity.      InHanbury & Martin’s modern Equity ( 14th Edn.- 1993) by Jill E. Martin,  atpage  3it is stated onthe "General Principles of  Equity" that  "‘equity’ is  a word  withmany meanings. In  awide  sense, itmeans that which is fair and just, moral  and ethical,  but its  legal  meaning  ismuch narrower." "  Developedsystem law has ever been assisted by the introduction  of adiscretionary power to do justice in particular  cases  where  the  strict  rules  of  law  cause hardship.  Rules   formulated  to   deal   with  particular situations  may  subsequentlywork   unfairly as  society develops. Equity  is the  body of  rules  which evolved  to mitigate the  severity of  the rules  of  the  common  law." Principles of justice and conscience are the basis of equity jurisdiction but  it must  not be  thought thatthe contrast betweenlaw  and equity is one between a  system of strict rules and one of broad discretion. Equity has no monopoly of the pursuit  ofjustice. Equitable principles are rather too often bandied  about in commonlaw  courts  as though the Chancellor still  had only length of his own foot to measure

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when coming  toa  conclusion. " Lord Radcliffe, speaking of commonlaywers,   said thatequitylawyers were  "both surprised and  discomfited by the plentitude ofjurisdiction and theimprecision of rules that are attributed to ‘equity’ by their  more enthusiastic  colleagues." just as the common law has escaped from  its early formalism so over the years equity has  establishedstrictrules for the application of its principle.Indeed,at  onestage  the rules  became  so fixed that  a "rigor  aequitatis" developed;  equity  itself displayed the  very defect  which it was designed to remedy. We willsee that today some aspects of equity are strict and technical, while othersleave considerable discretion to the court.      "Hudson’sBuilding  and  Engineering  Contracts  [10th Edn.]  by   I.N.  Duncan   andWallace  defined  "building contract’ as  "an agreement  under which a person undertakes for reward  to carry  out,  for another  person,  variously referred to  asthe  building owner  oremployer, worksof a building or  civil engineeringcharacter." Inthe  typical case, the work will be carried out uponland ofthe employer or building  owner, though  in some special cases obligation to build  may arise  bycontract where that is not so, e.g., under buildingleases and  contracts for  the sale  ofland with ahouse in  the course oferection upon it. M.A. Sujan in "  Law Relating  to buildingContracts" (2NDEdn.) quotes in para 3.3 Keating’sdefinition of  ’building  contracts" according to  which they  include "  any contract  where one person agrees  for   valuable  consideration  to  carry out building or  engineering worksfor another". he also quotes Gajria’s definition  thus" "Building  contract is defined as contract containing  anexact  and minute description of the terms,account or  remuneration  of  particulars  for the contract containing  anexact  and minute description of the terms,account or  remuneration  of  particulars  for the construction of a building".  he further  quotes  thus:  "A building  or  engineering  contract  is a  legally  binding argument whichhas for its  subject  matter  or  principal subject matter,  the  conditions  intended  to govern the erection of a proposed buildingor the execution of works of engineering construction; and by which one person or body of persons,  undertakes,  for  a  consideration,  to  erect  or construct for  another,such  works inconformity with the design of  the proposed building to beerectedby one party on theland of the other and for the latter’sbenefit. The terms ‘contract’  and ‘agreement’  whenapplied to building and engineeringworks, have thesame legal significance. But in practice,  the terms‘building contract’ and‘engineering contracts’ areused in  reference  toworks to be done for the use and benefit  of the land-owner, whereas a ‘building agreement’ is  one whereby  a lease or other interest in the land is to beimmediately granted  to the  contractor  is liable to a third person in this way, the building owner may also  be  vicariously  liable  for  the builder’s  acts  or omissions, or,perhapsmore  correctly,  willbe  a  joint tortfeasor. Atpage  579,  under  Section  2  dealingwith "Damages",  he has  stated  that  "under  the complicated provisions of  many building contracts the possible breaches of contract by the contractor are numerous, andin eachcase the general  principlesset  out abovemust be applied  in order to  determine what,  if any, damage is recoverable for the breach  in question. Typical breaches of the less common kind are, for example, unauthorised sub-contracting, failure to insure  as required, failure to give notices, payment of unauthorised wages,  and  so  on  which,  depending  on the particular circumstances  of the  case,may or may not cause

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damage.The  commonest breaches causing substatial  damage, and hence giving rise to litigaation, may be broadly divided into three  categories,namely, those involving abandonment or  total   failure  to  complete,  those  involving  delay completion, andthose involvingdefective work.At page580, the learned  author has stated thus:"  In  the  case  of defective workit should  alsobe remembered that the final certificate may, in theabsenceof an over-riding arbitrtion clause,bind  the employer  andprevent him  from  alleging defective workaltogether,  and  manycontracts  where  no architect is  use, particularly private-developer  sales(or sales of  houses "in the courseof erection") may, depending on  their   terms,  extinguish liability  upon  the  later conveyance under the caveat emptor Principle". The principle has been  dealtwith  at page  289 stating  as under : " The courts,in  their desire  to escape from the rule of fitness of habitation  upon the purchase of  a new  house  from  a builderif  thehouse  is  completed  at  the  time  of the contract of  sale, have been able  to justifya refusal to apply the  ruleof caveat emptor by finding that at thetime of sale the house  was"in  the course of  erection", and frequently apply  the implied  term asto  habitability  to houses which  are virtually  completed at the time of sale . Furthermore, while it might at first sight seemlogicalthat the warranty  of fitness  should extend only  to  thework uncompleted atthe time  of sale,  this difficulty hasbeen brushedaside,and, once  a building has been held to be in the course of erection,the warranty has been applied to the whole building including work already done.      InMcgregor  on Damages,  the Common  Law Library No. 9 (14th Edn. by Harvey Mcgregor at page 683. It is statedthat " (physical  damage toor destructionof goods  may result from alarge variety  of  very different  torts  of  which trespass is theoldest and negligence the most prolific, and which includestorts involving,  or borderingupon  strict liability, as  where the  damage or distructionresultsfrom nuisance, by reason of damagerous premises, goods or animals in thedefendant’s control,  from hisnon-natural user  of land under  therule  in Rylands V. Fletcher [ (1868) L.R. 3 H.L. 330],  or from  breach ofstatutory obligation  giving rise to an action  in tort.  Not only are mostof the cases actionsof  negligence but  most of those in which questions of the measure of damages have been worked out have involved damage to  or destruction  of ships  generally by collision. The principlesexpounded in  these  cases  are however  of universal application."Thereis  nospecial measure  of damagesapplicable  to a  ship," said  PickfordL.J.  in The Kingsway [(1918)  p. 344,  356 (C.A.)], different from the measureof  damages applicableto anyother  chattel. The nature of the thing damaged maygive rise to  more difficult questions in  the assessment  of damages  but  it  does not change the  assessment in  any way.  " The normal measure of damages, stated in para  998 at  page 684, is the amount by which the valueof the goods damaged has been diminished.      Inthe  Modern Law of Tort  by K.M.  Stanton [Sweet  & Maxwell] (1995Edn.)  at  pages  4-5,it  isstatedthat "(C)ontract and tort are  the two mainareas of the English law ofobligations. Contractual  duties  are  based  on  an agreement whereby  one person  is to  provide  benefits for anotherin return for some formof benefit, whether in money or otherwise.  Tort duties  areimposed by operation of law and may be owned  to a wide range  ofpersonwho  may  be affected by  actions. A question whichis commonly asked in this context  is whether  a plaintiff who is ina contactual relationship with  the defendant can invoke tort in order to

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benefithis  case whenthere has  beena  breach  order  to benefithis  case whenthere has been a breachof contract. There are  a  number  of  reasons  relting  todamages and limitation of  actions which  may makeit  advantageous  to switch a claim out of contract and intotort". at page 9, it is stated  under the  heading "breach  of  trust  and  other equitable obligations"that "(R)emedies for breach of trust or other  equitable obligations, even though they may result in purely  financial awards,  are excluded  from the  law of tort. The  reason for  this isbasically  historical:tort derivesfrom the work of commonlaw courts whereas the court of  Chancery,developed   completely separte   equitable principles. " At page 334, it is statedby the author that " the issue  of the recovery of pure economic loss also raises fundamental questions  concerning the  relationship  Between contract and  tort   and, in  particular, the  forms ofloss which ate  recoverable in the differentkinds of action. The centralquestion  in this  debate is  whether  the  tort  of negligence  has  the  capacity to  provide  a remedy for defective quality in the case of buildings and chattels. The traditional view is that it cannot because defects affecting the quality  ofan  them can  only giverise toa negligence action in  tort if  persons  have  been  injured  or  other property damaged  thereby. Damages can only be climed in the tort of negligence for lossesinflicted  on the  person or other propertyand  not  for  defectsaffecting  theitem itself."      In"Winfield  and Jolowiczon Tort" (14th 1994 Edn.) By W.V.H. Rogers, at page 4, it isstated under the "Definition of tortious  liability"that  "(T)ortious  liability  arises from the  breach of a duty primarily fixed by law; thisduty is towards  persons generally  and its breach is redressible by an  action for  unliquidateddamges".  It  must  also  be emphasised that the number  ofcases  in which it will  be essential  toclassify  the  plaintiff’s  claim  as  tort, contract, trust etc., will  becomparatively small. A cause of action  in modern  law is  merely a factual situation the existence of  which enables theplaintiff to obtain a remedy from the  courtand he is not required to head his statement of claim  with a  description of  the branch  of the  law on which  he  relies,  still  less with  a  description  of  a particular  category   (e.g.,  negligence,  trespass,  sale) within that  branch. But  statutes andrules  of  procedure sometimes distinguish  between,say,  contract and tortwith reference to  matters such as limitation of actions, service of process, jurisdiction and costs and the court cannotthen avoid the task of classification. On "contract and tort", it is stated  at page  5 that  "(I)t is unlikely that any legal systemcan   ever  cut  loose fromgeneral  conceptual classifications such  as  "contract"  and  "tort"  but the studentwill  quickly come  to recognise  that the  boundary must sometimesbe crossed  in the solution of a problem. It has long  been trite  law thata defendant maybe liable on the  same   facts  in  contract to  Aand  in tort  to  B (notwithstanding privity  of contract); it isalso clearly established (though  with qualifications  the boundaries  of which are  rather uncertain  that there may  be  concurrent contractual and tortious liability  tothe  same plaintiff, though he  may not  of course,recoverdamages twice over. Winfield,  therefore,  considered  that tortious  liability could for  thisreasonbe  distinguished  from contractual liability and  from liability  on bailment, neither of which can exist  independently of  the parties’ or atleast of the defendant’s agreement  or  consent.  The  liability  of the occupier of  premises to  his visitor, for example, which is

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now governed bythe occupiers’ Liability Act, 1957, is based upon breach  ofa  dutyof  care ownedby theoccupier  to personswhom  he has  permittedto  enter upon his premises. The duty  ownedto  trespassers,  i.e., persons  who  enter withouthis consent, isnot thesame.      Inthe  "words and Phrases" (Permanent  Edition),Vol. 5A, atpage  309,  "breach  of trust" is  stated  to be, "violation by  trustee of any duty which as trustee he ownes to beneficiary".  The disclosure  by an employee  of  trade secretsand other confidential information obained by him in the course  of his  employment is  a "breach  of  trust".  A "breachof  trust" is aviolation by the trustee of anyduty which as  trustee he owes to the beneficiary. In JarvisV/s. Moy. Davies,  Smith, Vanbdervell  & Company [(1936) 1 OB 399 at  404],  thefacts  were  that  theplaintiff  sued the defendants, a  firm ofstockbrokers, claimingdamages for breach of  his instructions  asto  thepurchase  of certain shares whereby he sustained loss. At the trial,judgment was given in  favour of  the plaintiff  andit was held by Greer L.J. that  where the breach of duty complained of arises out of theobligations undertakenby a contract, the action is foundedon  contract: but  where that which is complained of arises out  of a  liability independently  of  the  personal obligation undertaken  by a  contract, and action brought in respectof  this is  founded on tort and  thisis  soeven though there may be a contract between the parties.      Inthis  backdrop,it  would  be  seen  that  thetort liability arising  out of contract and tort, equity steps in and tort takes over andimposesliability upon the defendant for unquantified damages for the breachof the duty owned by the defendant to the plaintiff.Equity steps inand relieves the hardships  of the  plaintiff in  a common law action for damagesand  enjoins upon  the defendant to make the damages suffered by  the plaintiff  on accountof the negligence in the  case   ofthe  duties  or breach of  the  obligation undertaken or  failure to  truthfully inform the warranty of title and  other allied circumstances.In  this case, it is found that  four floors were unauthorisedly constructed and came tobe demolished by the New Delhi Municipal Council. It dows not  appear that  the owners of the flats were informed of thedefective or  illegal construction and they were not given notice  of caveatemptor.Resultantly, they are put to loss oflacs ofrupees they have invested and      The question  arising for consideration is: whether the appellants should be re-compensated forthe loss suffered by them? The  HighCourt  in the impugned judgmenthas directed the return of the amount plus the escalation charges. We are informed that  the escalated  price as on the date is around 1.5  crores   per  flat.  In  this  situation,takinginto consideration the  totality ofthe facts and circumstances, we think  that the builder-respondent should pay Rs. 60lacs including the  amount paid by the allottees, within a period of six months from today. In case thereis any difficulty in making the  said payment  within the  said period to each of the flat owners, the builder-respondentis given another six monthsper-emptorilyfor  which,  however,  the  builder- respondent willhave topay interest @ 21 per cent per annum on thesaid amount from the expiry of first six monthstill the date of payment.      The  builder   implead,  suo   motu,  asone  of the respondents, is also directedto obtain the certifiedcopy of thetitle deeds  and secure the loan, if he so desires. After the payment is somade, the appellants are directed to deliverthe  original title  deeds taken custody of on March 1,1994.It  appears that  with regard to the payment ofRs.1

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crore as the price of the flats, property and money arekept under attachment. The attachment will continue till thesaid amount is paid over.      The appeal is accordinglydisposed of. Nocosts.