Construction Agreement - The Legal Chamber

The Supreme Court held that an agreement mandating construction violating building laws is void and unenforceable. The illegality rendered specific performance impossible under Section 12 of the Specific Relief Act, as the unlawful object was essential to the contract. The Court affirmed that contracts contravening statutory provisions cannot be severed to remove their core illegal purpose. Facts Of The Case: The appellant, Canara Bank, entered into an agreement with the respondent, K.L. Rajgarhia, on 27.12.1984 for the purchase of residential flats to be constructed on a plot in East of Kailash, Delhi. The total consideration was ₹32,07,500, of which approximately 90% (₹28,86,750) was paid upfront. The agreement stipulated the construction and delivery of eight flats and a basement with...

The Supreme Court held that an agreement to sell flats, which was contingent upon construction violating building bye-laws and the master plan, was unlawful and void under Section 23 of the Indian Contract Act. The Court ruled that specific performance cannot be granted for an illegal contract, and courts cannot rewrite or sever its essential, unlawful terms to make it enforceable. Facts Of The Case: In December 1984, Canara Bank entered into an agreement with K.L. Rajgarhia to purchase residential flats to be constructed on his plot in East of Kailash, Delhi, for ₹32,07,500. The bank paid approximately 90% of the consideration upfront. The agreement specified the construction and sale of eight flats and a basement, with completion required within 18 months. When the defendant failed to ...

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