Contract between Delhi Development Authority and Kenneth Builders held to be frustrated by unanticipated change in status of project land

SupremeCourt of india

Supreme Court: While dealing with the question that whether the development agreement between the DDA and the developer Kenneth Builders was frustrated within the meaning of Section 56 of the Indian Contract Act, 1872 due to some intervening circumstances, the Court upheld the judgment of the Division Bench of the Delhi High Court, and concluded that the performance of the contract between the DDA and Kenneth Builders for development of project land for premium flats and resettlement houses was frustrated. This was through the refusal of the Delhi Pollution Control Committee (DPCC) and the Department of Forests, Government of the National Capital Territory of Delhi (GNCTD) to grant permission to the Respondents to construct upon land they deemed as falling within the Ridge. The Respondents were entitled to refund of deposit of bid money made to the DDA, with an interest of 6 % operating from date of final deposit, i.e. 11th September 2006.

The current project land was not technically demarcated as Ridge land, and the Delhi Development Authority had marked it out as ‘residential’. However, objections were raised by the Department of Forests of GNCTD.  Although the Ministry of Environment and Forestry had initially given clearance,  it had in a reference to it by the Additional Solicitor General during the pendency of the High Court proceedings, deemed the land to be Ridge land and recommended taking the opinion of the Central Empowered Committee set up in T.N. Godhavarman v. Union of India  (2013) 8 SCC 198. The CEC held that any non-forestry use of land falling in the Ridge was only permitted after clearance by the Ridge Management Board, and that the present land did indeed fall in the “extended ridge area”. The decision in W.P. (C) No. 3339 of 2011, decided 30th November 2011, required the clearance of the Ridge Management Board for development projects on land outside the notified Ridge Area, but possessing  morphological features conforming to the Ridge. The Respondents’ application to DPCC for “consent to establish” was denied in the absence of the ridge demarcation report (not provided by DDA) and forest clearance.

In light of the denial of permission to construct on the disputed land, the fact that Respondents had taken all steps to commence the required  construction and that neither party had contemplated the requirements that made performance impracticable, the Court held the contract to be frustrated under Section 56, Indian Contract Act, 1872. It mentioned in passing the dictum in Satyabrata v. Mugneeram Bangur and Co, (1954) S.C.R. 310, whereby impossibility was not merely literal or physical impossibility, but impracticability and uselessness of action for the object and purpose envisaged by parties at the time of formation of contract. [Delhi Development Authority v. Kenneth Builders and Developers and Ors., Civil Appeal No. 5370 of 2016 with Civil Appeal No. 5371 of 2016]

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