{"id":258605,"date":"2021-12-16T16:00:33","date_gmt":"2021-12-16T10:30:33","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=258605"},"modified":"2021-12-24T10:30:11","modified_gmt":"2021-12-24T05:00:11","slug":"importance-of-consideration-cannot-be-belittled","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/12\/16\/importance-of-consideration-cannot-be-belittled\/","title":{"rendered":"Importance of \u2018consideration\u2019 cannot be belittled: Del HC explains the significance of consideration in enforceability of an \u2018Agreement\u2019"},"content":{"rendered":"

Delhi High Court: <\/strong>\u201cIt is the consideration which puts enforceability in the agreements to make promises legally binding\u201d<\/em>, Asha Menon, J., stated that the importance of \u2018consideration\u2019 cannot be belittled.<\/p>\n

Background<\/span><\/h4>\n

Instant suit was filed to seek specific performance of a Collaboration Agreement for granting of a permanent and mandatory injunction against the defendant. Damages to the tune of Rs 2,10,00,000 were claimed against the defendant for attempting to cancel the said Collaboration Agreement.<\/p>\n

Defendant was stated to be having 75% share in the said property and in actual, physical possession of his share, while his brother had 25% share in the said property, which the wife of the plaintiff claimed to have purchased through an Agreement to Sell from him for a sum of Rs 3,23,00,000, Rs 30,00,000 having been paid towards earnest money.<\/p>\n

Contentions<\/span><\/h4>\n

Kishore M. Gajaria, Plaintiff\u2019s counsel submitted that a Collaboration Agreement was entered into between the plaintiff and the defendant for re-development of the property and the same had been duly signed by the defendant. However, subsequently, a notice was issued to the plaintiff stating that the said agreement was an invalid document as it lacked in \u2018consideration\u2019 and had been forced upon the defendant, taking advantage of his age.<\/p>\n

There were WhatsApp communications and talks on the phone between the parties, but the defendant claimed he was being prevented from acting on the Collaboration Agreement by his son and daughter-in-law.<\/p>\n

Due to the defendant\u2019s conduct, plaintiff suffered a loss as he had raised huge loans from the market and had purchased building materials worth Rs 10,00,000 too.<\/p>\n

Further, the counsel submitted that the Collaboration Agreement contained reciprocal promises, plaintiff had undertaken to construct the property and the defendant did not have to spend any money, in return the defendant had to transfer two floors and 25% of the stilt parking to the plaintiff.<\/p>\n

Hence consideration was the amount to be spent on construction and each party\u2019s promise was the consideration for the reciprocal promise. Since the said promise of constructing two floors and handing over the same to the defendant was \u201cvaluable\u201d, it satisfied the definition of \u2018consideration\u2019 under Section 2(d) of the Indian Contract Act, 1872.<\/p>\n

Further, the counsel relied on the Supreme Court decisions in Union of India v. Chaman Lal Loona, <\/em>1957 SCR 1039<\/a> and Chidambara Iyer v. P.S. Renga Iyer, <\/em>(1966) 1 SCR 168<\/a>, and urged that what was \u201cvaluable\u201d was determinable also by the Court and therefore, this Court may accept that consideration had passed, even if not in money.<\/p>\n

Analysis, Law and Decision<\/span><\/h4>\n

High Court expressed that the reliance on Chidambara Iyer v. P.S. Renga Iyer, <\/em>(1966) 1 SCR 168<\/a> was misplaced.<\/p>\n

Question:<\/em><\/span><\/p>\n

Whether the Collaboration Agreement contains promises that are valid and are binding?<\/p>\n

Bench noted that there was no reference in the Collaboration Agreement to the consideration being paid for the transfer of the property by the defendant to the plaintiff, there was also no undertaking mentioned in the agreement as to the liability of the plaintiff to meet the construction cost and finally, not even an estimate of the construction cost was mentioned, though there was some reference to the quality of construction being \u2018good\u2019.<\/p>\n

What all reciprocal promises made, and constituted consideration were not revealed or explained.<\/p>\n

Bench also expressed that another significant fact was that the reply to the Legal Notice recorded that the conversion from leasehold to freehold did not take place. In fact, the said reply also revealed that the Agreement to Sell with the brother of the defendant was also dependent on the said conversion and as per the WhatsApp communication placed on record, the plaintiff\u2019s wife seemed to have called off that deal too.<\/p>\n

Court stated that in any event, payment of Rs 30,00,000 to the brother of the defendant can, by no means, be read as \u2018consideration\u2019 being paid to the defendant.<\/p>\n

Elaborating further, WhatsApp communication addressed to the brother of the defendant which was sent by the plaintiff and his wife affirmed the position and because of the inability to convert the property, had requested that the Agreement to Sell between them be treated as cancelled. Hence, the refund of entire amount paid to him was also called for.<\/p>\n

\n

\u201cImportance of \u2018consideration\u2019 cannot be belittled.\u201d\u00a0<\/span><\/p>\n

\u201cEven where the \u2018promisor\u2019 intends to bind himself by the promise, \u2018consideration\u2019 is essential to make the promise binding and enforceable.\u201d<\/span><\/p>\n<\/blockquote>\n

Bench held that the agreement was completely silent on the value of the property, now belonging to the defendant, and the estimated cost of construction.<\/p>\n

The Court opined that the \u2018Agreement\u2019 seemed to be more in the nature of a note of assurances and not a \u2018concluded\u2019 contract.<\/p>\n

Further, the averments in the plaint and the documents filed by the plaintiff did not disclose any cause of action. Supreme Court in T. Arivandandam v. T.V. Satyapal<\/em>, (1977) 4 SCC 467<\/a> has held that<\/p>\n

while considering an application under Order VII Rule 11 CPC, what is required to be decided is whether the plaint discloses a \u201creal cause of action\u201d or something \u201cpurely illusory\u201d. If, on a meaningful and not a mere formal reading of the plaint, it appears to be manifestly vexatious and meritless and fails to disclose a clear right to sue, but through clever drafting creates an illusion of a cause of action, the court being guided by the mandatory provisions of Order VII Rule 11 CPC should not hesitate to exercise powers vested in it to \u201cnip it in the bud\u201d.<\/em><\/p>\n

In view of the above discussion, the plaint was rejected under Order VII Rule 11 (a) CPC. [Sameer Madan v. Ashok Kumar Kapoor, 2021 SCC OnLine Del 5290<\/b><\/a>, decided on 15-12-2021]<\/p>\n

\n

Advocates before the Court:<\/strong><\/p>\n

For the plaintiff: Kishore M. Gajaria and Aayush Paranjpe, Advocates<\/p>\n","protected":false},"excerpt":{"rendered":"

Delhi High Court: \u201cIt is the consideration which puts enforceability in the agreements to make promises legally binding\u201d, Asha Menon, J., stated <\/p>\n","protected":false},"author":8808,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[2998,40056,3174,9292,2543,29785,42834,35599,46564,30392],"class_list":["post-258605","post","type-post","status-publish","format-standard","hentry","category-casebriefs","category-highcourts","tag-Agreement","tag-consideration","tag-contract","tag-contract-act","tag-Delhi_High_Court","tag-law","tag-legal-news","tag-money","tag-promise","tag-property-suit"],"yoast_head":"\nImportance of \u2018consideration\u2019 cannot be belittled: Del HC explains the significance of consideration in enforceability of an \u2018Agreement\u2019 | SCC Times<\/title>\n<meta name=\"description\" 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The appeal arose out of a judgment in a suit for recovery of possession and injunction. Trial Court had decreed the suit on contest and dismissed the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/06\/calcutta-court.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":327091,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/07\/22\/19b-sra-decree-specific-performance-subsequent-purchaser-directed-execute-sale-deed-with-original-vendor-sc\/","url_meta":{"origin":258605,"position":4},"title":"Not mandatory for plaintiff in specific performance suit to seek cancellation of subsequent sale deed executed by seller in favour of informed third party: SC","author":"Editor","date":"July 22, 2024","format":false,"excerpt":"Section 19(b) provides that a specific performance of a contract may be enforced against any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"S. 19(b) Specific Relief Act","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/07\/sale-2.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/07\/sale-2.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/07\/sale-2.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/07\/sale-2.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":354466,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/24\/del-hc-monthly-rent-payment-not-sale-consideration\/","url_meta":{"origin":258605,"position":5},"title":"Monthly rent payment cannot be accepted as sale consideration, without proper justification: Delhi High Court","author":"Editor","date":"July 24, 2025","format":false,"excerpt":"The Court presumed that the absence of a reason for not disclosing the higher amount in the Agreement to Sell (\u2018ATS\u2019), and the lack of explanation for payment of sale consideration disguised as rent is likely to evade taxes. This suppression made the 1982 ATS illegal, and against the public\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"rent payment not sale consideration","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/rent-payment-not-sale-consideration.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/rent-payment-not-sale-consideration.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/rent-payment-not-sale-consideration.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/rent-payment-not-sale-consideration.webp?resize=700%2C400&ssl=1 2x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/258605","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/8808"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=258605"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/258605\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=258605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=258605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=258605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}