17 December 1999
Supreme Court
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DELHI DEVELOPMENT AUTHORITY Vs SKIPPER CONSTRUCTION

Bench: U.C.BANERJEE,M.J.RAO
Case number: SLP(C) No.-021000-021000 / 1993
Diary number: 60005 / 1993
Advocates: KAMINI JAISWAL Vs LEGAL OPTIONS


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PETITIONER: DELHI DEVELOPMENT AUTHORITY

       Vs.

RESPONDENT: SKIPPER CONSTRUCTION CO.(P) LTD.  & OTHERS

DATE OF JUDGMENT:       17/12/1999

BENCH: U.C.Banerjee, M.J.Rao

JUDGMENT:

     M.JAGANNADHA RAO,J.

     On  May  6th,  1996 this Court delivered  judgment  in Delhi Development Authority Vs.  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.  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   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  which have  crystallised.   In  the rest of  this  judgment  Delhi Development  Authority  is  described  as  DDA  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 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,

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Skipper moved the Court and obtained a stay order on 29.5.82 and  started  making  representations.    DDA  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 space to  be built  in  the  proposed  structure  and  started  receiving monies.   Though Skipper paid the 1st 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  DDA.   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  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.2371/89 on 21.12.90 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 dated 11.8.87  would  stand cancelled  and  DDA 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 of it,  Skipper  issued advertisement on 4.2.91 and on latter 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 DDA’s warning  dated 13.2.91   published  in  newspapers.    SLP(C)  186/91   was dismissed on 25.1.93.

     DDA  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 of the Delhi High Court.

     It  is stated in DDA Vs.  Skipper Construction  Co.(P) Ltd.   (  1996(4)  SCC  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.11 crores.  It  appears that  the  same space was sold to more than one  person  and monies were collected.

     Skipper  filed  suit No.  770/93 against  DDA  seeking injunction restraining DDA from interfering with its alleged title  and possession over the plot and sought a declaration that   the  re-entry  by  DDA   was  illegal  and  sought  a declaration that it had validly paid all amounts due to DDA. It  obtained  stay of re-auction.  Against the  order  dated 9.12.93, DDA filed SLP.21000/93.  This Court issued suo motu contempt  proceedings  against Tejwant Singh and his wife  ( Surinder  Kaur), Directors of Skipper.  This Court held them

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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:

     accounts  standing in the names of the contemners  and the  Directors  of M/s 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.11 crores  by 31.3.95 and a deposit of Rs.11 crores by 30.3.95. It was also said:

     "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:

     "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  also   failed  to  furnish  Bank guarantee.   They  were committed to prison and they  served the  sentence.  DDA invited fresh tenders and sold the  plot with  the 14th floor structure (incomplete) to M/s  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.

     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 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 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 O.  Chinnappa Reddy  to inquire  into role of DDA officers and a Report was received on  7.7.95.  This Court appointed 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 O.  Chinnappa Reddy  to go  into the post 29.1.91 sales and a Report was  submitted. In  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  Vs.   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 properties,  according  to them, belonged to these  persons.

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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 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  General for India Vs.  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:

     "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 purchasers had to be re-imbursed in  full, "which  means that they should also be paid interest at  the appropriate   rate".   (2)  Secondly,   the   post   29.1.91 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.10  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  DDA.   (Skipper failed to make the payment  as  directed above).

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

     PART B

     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 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  contemners  and  the Directors  of  M/s  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 22.1.99  for  sale in regard to the said property issued  by Prabjot  Singh,  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

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police to take steps for production of Prabjot Singh in this Court.   On the same day, it was contended by purchasers  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 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 by him, list of ’Skipper’ properties held by his father Tejwant Singh and by 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.

     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 of DDA 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 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 O.  Chinnappa Reddy Commissions.  It was pointed  out that in relation to Barakhamba property,  suits were  filed in the 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  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 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 was passed because of serious complaints that  Mr.   Prabjot  Singh  was   making  sales  even  after attachment  orders.  The Banks were directed to give a  list of  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

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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 vacated by the final orders dated 6.5.96.  This Court called upon  Shri Tejwant Singh to give a list of Bank accounts  in his  name,  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  reference will be made in Part C)  and  reserved judgment.   This  Court also issued notice to  the  Banganga Company  (  Videocon) 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.

     PART C

     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 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 which vested in DDA and which  DDA sold  to  Banganga  ( Videocon), DDA should be  directed  to deposit  something  more  in  addition  to  Rs.16.75  crores deposited  by it.  DDA 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  eo-nominee  parties to the suit by Skipper against  DDA which  was  transferred 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 ground  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.  Learned  counsel  made submissions on the following issues:

     (1) 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?   (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 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 55(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

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interest, the purchasers cannot claim interest?  (5) Whether the  purchasers can rely on the finding of ’fraud’ given  by this  Court in its order dated 15.1.1995 to contend that the claim  for  interest  is  sustainable because  of  fraud  by Skipper  on  the purchasers?  POINS 1 and 2:   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):

     "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 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 performance  of  the contract or to obtain a decree for  its rescission".

     It  is  plain  from the above provision 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  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 (Chettiar  Firm Vs.  Chettiar) ( AIR 1941 P.C.  47).  No charge is available unless  the  agreement  is  genuine.   (  T.N.   Hardas  Vs. Babulal)  (  AIR  1973 SC 1363) As pointed  out  in  Mulla’s Commentary  on  Transfer of Property Act, 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.  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 been applied  to enforce mortgage on substituted securities ( see Barham  Deo Prasad Vs.  Tara Chand ( 1913) 41 I.A.  45  (PC) and  Muniappa Vs.  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 of the  agreement  is converted.

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     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, whichever is earlier.  Points 1 and 2 are decided accordingly in favour of the buyers.

     POINT 3:

     Article  62  of  the  Limitation  Act,  1963  (  which corresponds  to  Article  132 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 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.

     POINT  4  and 5:  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 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 right  in his  submission  that  in  the order  of  this  Court  dated 15.1.1995,  there  is  a clear finding  of  ’fraud’  against 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 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.   Accepting  bookings from excess  number  of buyers  without adequate notice to them about the contingent nature of their contracts cannot be said to be fair dealing. On  top of that to say that these amounts paid by the  buyer will  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 purchasers cannot be traced to the agreement.  We may also  point out that in the judgment of this Court dated May 6th, 1996, this Court has already observed, that interest is payable  to  both pre 29.1.91 and post  29.1.91  purchasers. This  Court  held  in regard to pre  29.1.91  purchasers  as follows:  ( See p.  643 of SCC) .lm15

     "On  one hand, the position is that the  pre-29.1.1991 purchasers  have  to be reimbursed in full which means  that

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they should also be paid 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):  .lm15

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

     A  point was raised on behalf of DDA that inasmuch  as DDA  had  given  paper publication after  29.1.1991  warning purchasers,  it must be presumed that all the members of the public were put on notice and post 29.1.91 buyers should not be   allowed  to  claim  interest.    We  have   given   due consideration  to 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.

     We disposed of points 1 to 5 accordingly.