ash 1 fa-208.87.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELATE JURISDICTION FIRST APPEAL NO.208 OF 1987 1. Messers Shastri Constructions ) Private Limited, 1404 Shukrawar ) Peth, Pune its Director. ) 2. Shri Narayan Ramchandra Shastri, ) Aged about 47 yrs., Occ: Business, ) Residing at 1349 Sadashiv Peth, ) Pune – 411 030. ).. Appellants Vs 1. Shri Vasudeo Purushottam ) Patwardhan, ) ( Deleted ) ) 2. Shri Raghunath V. Patwardhan, ) Since deceased through legal heirs- ) a) Shri Anant R. Patwardhan, ) residing at 43/3, Karve Road, ) Pune – 411 004. ) b) Shri Vinayak R. Patwardhan, ) Residing at 43/3, Karve Road, ) Pune – 411 004. ) 3. Sou. Damyanti Trimbak Lagu, ) Since deceased through legal heirs- ) a) Smt. Vasanti Dilip Damale, ) Residing at Parag Apartment, ) H.T.P. College Road, Lane No.4,) Nashik. ) b) Mr. Jayant Trimbak Lagu, ) residing at 1460, Sadashiv Peth,) Pune – 411 030. ) 4. Sou. Pramila Shrinivas Thakar, ) Aged 45 yrs., residing at Satya No.1, ) Rasta No.17 Chembur, Bombay 71 ) ash 2 fa-208.87.sxw 5. Sou. Shashikala Chakrapani Joshi, ) Aged about 40 yrs, residing at 65/5, ) Erandawana, Pune 411004. ) 6. G.V. Patwardhan, aged about 38 Years) Municipal Office Co.Op.Hsg. Soc., ) B-35, 4th Floor, G-Shitala Kripa, ) L.J. Road, Mahim, Mumbai – 16. ).. Respondents -- Shri A.A. Kumbhakoni i/by Shri S.M. Oak for the Appellants. Shri N.V. Walawalkar, Senior Counsel i/by Shri Nitin Mulye for Respondent No.6. -- CORAM; A.S. OKA, J DATE ON WHICH SUBMISSIONS ARE HEARD: 13TH APRIL, 2011 DATE ON WHICH JUDGMENT IS PRONOUNCED: 14TH JUNE, 2011 JUDGMENT: . By this Appeal, the original Plaintiffs have taken an exception to the judgment and decree passed by the Trial Court on 10th March, 1987 in Special Civil Suit No.526 of 1982. By the impugned judgment and decree, the prayer made by the Appellants-Plaintiffs for specific performance of the agreement for sale dated 14th May, 1975 has been rejected. However, the claim made in the alternative has been decreed. ash 3 fa-208.87.sxw 2. The 1st Respondent who was the 1st Defendant in the suit died during pendency of the Appeal. The legal representatives of the 1st Respondent are the rest of Respondents. The 2nd Respondent who was the 2nd Defendant died during the pendency of the Appeal. The legal representatives of the said Respondent have been brought on record. The 3rd Respondent also died pending the Appeal and even her legal representatives have been brought on record. For the sake of convenience, the parties are hereinafter referred to with reference to their status before the Trial Court. 3. The subject matter of the suit is final Plot No.93A in Pune Town Planning Scheme No.1 admeasuring 1043.01 sq. meters together with structures thereon situated at Pune. The said property more particularly described in Paragraph 1 of the plaint is hereinafter referred to as the suit property. The case of the Plaintiff is that the suit property was the self-acquired property of the 1st Defendant who purchased it by a registered Sale Deed dated 14th April, 1937.The second to sixth Defendants are the son and the daughters respectively of the 1st Defendant. The first Plaintiff is a private limited company and the second Defendant is its Director. 4. According to the Plaintiffs, as the 1st Defendant had grown old, he was finding it difficult to stay in a single storied structure in the ash 4 fa-208.87.sxw suit property and to look after the suit property. Therefore, the 1st Defendant was intending to sell the suit property. The 1st Defendant agreed to sell the suit property at the price of Rs.90,000/-. Accordingly, an agreement for sale dated 14th May, 1975 (hereinafter referred to as “the suit agreement”) was executed by the 1st Defendant and his wife as the Vendors. The Plaintiffs are the purchasers under the suit agreement. The suit agreement provides that a flat(hereinafter referred to as the suit flat) admeasuring 471 sq. feet of a carpet area in a building of the Plaintiffs constructed in the property bearing House No.1467 at Sadashiv Peth, Pune was agreed to be sold by the Plaintiffs to the 1st Defendant on ownership basis. It was provided that the agreed market value of the said flat was Rs.45,000/-. The amount of Rs.45,000/- was to be treated as the amount paid by the Plaintiffs towards the consideration payable under the suit agreement to the 1st Defendant. It was provided that the Sale Deed was to be executed within a period of 12 months from the date of the suit agreement. The agreement provided that the balance consideration of Rs.45,000/- shall be paid by the Plaintiffs to the 1st Defendant in three installments of Rs. 15,000/- each. The first installment was to be paid within a period of 6 months from the date of the Sale Deed. The second installment was to be paid within a period of 12 months from the date of the said Sale Deed and the third installment was to be paid within a period of 18 months from the date of the said Sale Deed. The suit agreement ash 5 fa-208.87.sxw contained a recital that the possession of the suit property was handed over to the Plaintiffs and that the 1st Defendant had vacated the premises in his possession. It is stated in the plaint that an endorsement was made on 10th May, 1976 on the suit agreement under the signature of the Plaintiffs and the 1st Defendant and his wife that the period of one year provided under the suit agreement to execute sale deed was extended till 31st December, 1976. Reliance is placed on further endorsement dated 18th September, 1976 signed by the 1st Defendant and his wife which records that a sum of Rs.30,000/- was received by the 1st Defendant by two demand drafts in the sum of Rs. 15,000/- each. The said endorsement records that in view of the coming into force of the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter referred to as the said Act of 1976), both the parties shall apply for grant of sale permission to the Competent Authority on or before 30th September, 1976. After receiving the sale permission, a balance sum of Rs.15,000/- shall be paid within a period of 15 days at the time of execution of the Sale Deed before the Sub-registrar. 5. It is alleged in the Plaint that the Plaintiffs obtained a building permission in the name of the 1st Defendant and issued an intimation of commencement of the construction. It is alleged that the Plaintiffs were required to obtain a loan from the Miraj State Bank Limited, Pune on the basis of the security of the suit property. ash 6 fa-208.87.sxw However, title of the suit property was not transferred to the Plaintiffs. By a letter dated 12th July, 1976, the 1st Defendant informed the said Bank in writing that he had no objection for giving consent for mortgaging the suit property to the said Bank. A permission of the Competent Authority under the said Act was obtained for mortgaging the suit property to the Bank. 6. The Plaintiffs relied upon the letter dated 6th June, 1978 issued by the 1st Defendant in his handwriting by which the 1st Defendant requested the Plaintiffs to get the sale deed executed immediately and showed willingness to extend the time provided under the suit agreement. The Plaintiffs by letter dated 31st July, 1978 called upon the 1st Defendant to comply with the requirement for obtaining permission of the Competent Authority for sale of the suit property. By letter dated 24th August, 1981 the 1st Defendant requested the Plaintiff to supply a copy of the draft of the Sale Deed. On 3rd September, 1981 the Plaintiffs replied to the 1st Defendant and informed that on 21st August, 1981 the Plaintiffs had already purchased the stamp papers of Rs.6,100/- required for execution of the Sale Deed. The Plaintiffs requested to the 1st Defendant to execute a Sale Deed at the earliest. 7. According to the case of the Plaintiffs, the 1st Defendant stated that if the Plaintiffs were willing to relieve the 1st Defendant from ash 7 fa-208.87.sxw his liability of repayment of loan to Miraj State Bank, he was willing to execute the sale deed. Accordingly, the Plaintiffs wrote to the said Bank requesting the Bank to discharge the 1st Defendant. It is alleged that on 6th August, 1982 the Bank passed a resolution accepting the request and by a draft letter dated 6th August, 1982, the said decision was communicated to the Plaintiffs. It was pointed out that the 1st Defendant through the Advocate issued notice dated 1st October, 1981 raising various false contentions including the contention that the period for executing the Sale Deed provided under the said Act was already over long back and the 1st Defendant declined to execute the sale deed in terms of the suit agreement. 8. It is pointed out in the Plaint that the 1st Defendant was already in possession of the said flat and that the 1st Defendant was using the said flat. It is alleged that though the 1st Defendant was under an obligation to execute the sale deed, since the market value of the property was substantially increased, the 1st Defendant was avoiding to execute the sale deed. Therefore, on 11th October, 1982 the aforesaid suit was filed for specific performance of the suit agreement and in the alternative for damages and refund of consideration. 9. The suit was contested by the 1st Defendant by filing a written statement. It was contended that there are other members of ash 8 fa-208.87.sxw the family who were having right, title and interest in the suit property and the 1st Defendant was not entitled to sell the suit property. It was contended that the alleged agreement was got executed by the Plaintiffs by taking undue disadvantage of the old age and consequent incapacity of the 1st Defendant like deafness, weak eye-sight, short memory, etc. It is contended that the suit agreement was hollow and bogus as the signature thereon was obtained by the Plaintiffs by practicing a fraud. 10. The 1st Defendant pointed out that Miraj State Bank obtained a decree against the Plaintiffs and the 1st Defendant in the sum of Rs.3,90,172/-. It is stated that though the loan has been taken by the Plaintiffs, the said defendant has been unnecessarily burdened with the liability of repayment of the said amount. It was pointed out that in fact the sum of Rs.30,000/- was paid by the 1st Plaintiff towards the consideration by utilizing the loan amount received by the Plaintiffs. It was alleged by the 1st Defendant that the said flat alleged to have been given to him by the Plaintiffs as part payment was not transferred in his name and the same had been mortgaged to Rupee co-operative Bank. It was contended that in fact the 1st Defendant was entitled to recover the amount of Rs.3,60,172/- from the Plaintiffs being the the decretal amount payable under the decree obtained by the Bank after deducting the sum of Rs.30,000/- paid by the Plaintiffs to him. Various other ash 9 fa-208.87.sxw allegations were made in the written statement such as the alleged fraud played by the Plaintiffs while obtaining the suit agreement. It was contended that the 1st Defendant has suffered huge loss because of the Plaintiffs. 11. The Trial Court framed various issues and recorded findings thereon. The issues and the findings recorded thereon read thus:- “ISSUES FINDINGS i) Whether the plaintiffs prove that the deft No.1 executed the agreement of sale as alleged ? Proved ii) Whether they further prove that they paid Rs.30,000/- and delivered the flat to deft. no.1 in part performance of the contract ? Proved iii) Whether the defendants prove that the agreement for sale was caused to be executed under undue influence fraud etc. as alleged in W.S. ? Not proved. iv) Whether plffs prove that the defts avoided specific performance ? Yes. v) Whether defts further prove that the suit contract is without consideration ? No. vi) Whether defts prove that the plffs wanted to develope the property for the benefit of deft. no.1 and his family ? No. ash 10 fa-208.87.sxw vii) Whether the plffs prove that the deft.no.1 delivered the possession of the suit property to him ? Symbolic possession was delivered. viii) Whether the defts prove that because of the transaction of the Miraj State Bank the consideration of agreement failed ? Yes. ix) Whether the defts prove that the amount of consideration for suit property was not adequate ? Not proved. x) Whether the plffs are entitled for the specific performance ? Plffs are not entitled If not to what damages, if any for decree of specific is entitled ? performance. Their suit is decreed alternatively. xi) Do defts prove that the suit land was purchased out of the nuleous of the joint Hindu family property of deft.no.1 and other ? Not proved. xii) If yes, is the suit had in law for non joinder of necessary party ? Does not arise for consideration. xiii) Whether there is novation of the --- contract ? xiv) What order and decree ? Suit for specific performance dismissed. Plff’s suit decreed alternatively.” 12. The operative part of the decree passed by the Trial Court reads thus:- ash 11 fa-208.87.sxw “The Plaintiffs’ suit for specific performance is hereby dismissed with costs. The plaintiffs’ suit is decreed alternatively. The defendant No.1 shall retransfer the flat in “Guruprasad Apartments” Sadashiv Peth, Pune in favour of the plaintiffs and delivered the vacant and peaceful possession to the Plaintiffs within three months from today. The defendant no.1 shall also pay the amount of Rs. 30,000/- (Rupees thirty thousand ) with interest at the rate of 6% per annum from the date of the suit till realisation of the amount within three months. If the defendant no.1 fails to transfer the said flat and give vacant possession and also fails to pay the amount of Rs.30,000/- (Rupees thirty thousand) within the stipulated period, the plffs. shall be entitled to recover the flat and the amount through Court of Law. The plaintiffs shall give the symbolic possession of the suit property to the defendant no.1 within three months. If the plffs. failed to give the symbolic possession to the defendant no.1 within the stipulated period then the defendant no.1 shall be entitled to obtain the possession through Court of Law.” 13. The learned Trial Judge held that the Plaintiffs obtained a loan of Rs.2,50,000/- from Miraj State Bank to which 1st Defendant was a guarantor and that out of the said loan amount, the Plaintiffs paid a consideration of Rs.30,000/- to the 1st Defendant. The learned Trial Judge held that the amount of Rs.30,000/- was not paid by the Plaintiffs from their pocket but was paid by them to the 1st Defendant from the loan amount which was obtained by mortgaging the suit ash 12 fa-208.87.sxw property. The learned Trial Judge recorded a finding that the Plaintiffs might have misrepresented the 1st Defendant while obtaining his signature on the documents for the purposes of obtaining loan from Miraj State Bank. The learned Judge found that when the application was made by the Plaintiffs to the Miraj State Bank for discharge of the loan, a suit for recovery of the amount was already filed by the said Bank against the Plaintiffs and the 1st Defendant. The learned Trial Judge observed that though the Bank declined to absolve the 1st Defendant from the said liability, the Plaintiffs produced a draft letter allegedly prepared by the Bank recording the acceptance of the request made by the Plaintiffs. The learned Trial Judge recorded a finding that the Bank never absolved the 1st Defendant from the said liability. The learned Trial Judge found that the 1st Defendant who was a simpleton man and was intending to spend his remaining life peacefully was unnecessarily got burdened with the liability of the Bank. The learned Trial Judge held that the Plaintiffs obtained the undue and unfair advantage of a simpleton nature of the 1st Defendant. The learned Judge held that the 1st Defendant must not have foreseen his liability of repayment of huge amount of the said Bank. The Trial Court held that the Plaintiffs took undue advantage of the simpleton nature of the first Defendant. The learned Trial Court held that as the grant of decree for specific performance will cause excessive hardship to the 1st Defendant, which he could not have anticipated. ash 13 fa-208.87.sxw 14. Learned counsel appearing for the Appellants/Plaintiffs submitted that admittedly the 1st Defendant was highly educated and his educational qualifications were M.A and LL.B. He submitted that the 1st Defendant was working as a Professor in a college at Pune, and therefore, the finding that the 1st Defendant being a man of simpleton nature is factually incorrect. He submitted that apart from the recitals in the suit agreement, there is an admission by the 2nd witness examined by the 1st Defendant that the Plaintiffs were placed in possession of the suit property. He invited the attention of the Court to various endorsements made on the suit agreement. He pointed out that a part consideration of Rs.45,000/- was paid to the 1st Defendant in the form of a flat and the balance consideration of Rs.45,000/- was in fact payable after the execution of the Sale Deed. He submitted that admittedly a further amount of Rs.30,000/- was paid by the Plaintiffs to the 1st Defendant. He pointed out that the evidence on record clearly shows that the said amount was not paid from the loan amount advanced by Miraj State Bank to the Plaintiffs. He submitted that even the deed of mortgage executed by the 1st Defendant shows that the Bank agreed to discharge the 1st Defendant from the said liability on the 1st Defendant executing a Conveyance in respect of the suit property in favour of the Plaintiffs. He submitted that the liability was incurred by the 1st Defendant only because he failed to execute the Sale Deed. He ash 14 fa-208.87.sxw submitted that the transaction with the Bank is not a ground to deny relief of specific performance. He submitted that the Bank filed a suit against the 1st Defendant and obtained a decree only because the 1st Defendant failed to execute the Conveyance. He submitted that as per the condition of mortgage, the 1st Defendant by executing a conveyance could have obtained discharge from his liability to the Bank, but for reasons best known to him, he avoided to execute a sale deed. He submitted that the Plaintiffs had purchased the stamp papers for execution of the conveyance and even a draft of conveyance was forwarded to the 1st Defendant. He submitted that the evidence on record shows that the 1st Defendant did not execute an affidavit in support of the application for obtaining sale permission from the authorities under the said Act of 1976 and only due to non-cooperation of the 1st Defendant, a permission could not be obtained. He submitted that looking to the written statement of the 1st Defendant, it is apparent that the 1st Defendant had scant regard for the truth. He submitted that the 1st Defendant has admittedly received as a part consideration a self-contained flat on ownership basis and after taking into consideration the sum of Rs.30,000/- admittedly paid by the Plaintiffs, the 1st Defendant received 85% of the total consideration. He submitted that after recording the findings on all the issues except Issue No.8 against the Defendants, the relief of specific performance has been illegally denied to the Plaintiffs. He submitted that the discretion ash 15 fa-208.87.sxw has been exercised by the Trial Court in a perverse manner. 15. Learned senior counsel appearing for the Respondent no.6 submitted that in terms of the suit agreement, the Plaintiffs and the 1st Defendant were to jointly apply in 1976 for grant of permission. He submitted that the Plaintiffs insisted upon the 1st Defendant to make such an application. He submitted that only on the basis of the representation made by the Plaintiffs, the 1st Defendant agreed to mortgage the suit property so as to enable the Appellants to obtain a loan of Rs.2,50,000/- from Miraj State Bank and only on the basis of the said representation, he agreed to sign documents as a guarantor. He submitted though the Bank did not grant request of the Plaintiffs to discharge the 1st Defendant, the Plaintiffs came out with a false case that the Bank had agreed to do so. He submitted that as a result of the default committed by the Plaintiffs, the Bank filed a suit against the Plaintiffs and the 1st Defendant, and obtained a money decree in the sum of Rs.3,90,000/- and more against the 1st Defendant. He submitted that the conduct of the Plaintiffs has been considered by the Trial Court and has rightly declined to exercise discretion under Section 20 of the said Act in favour of the Plaintiffs. 16. He submitted that the finding recorded by the Trial Court on the issue of readiness and willingness of the Plaintiffs is erroneous. ash 16 fa-208.87.sxw He submitted that the Plaintiffs have failed to plead and prove readiness and willingness in terms of Section 16(c) of the Specific Reliefs Act, 1963 (hereinafter referred to as “the said Act of 1963”). He submitted that only on this ground, the Plaintiffs are disentitled to relief of specific performance. He submitted that there is evidence on record to show that the Bank obtained a preliminary decree in the suit and in the final decree proceedings, the Bank applied for sale of suit property He submitted that as per the endorsement made below the suit agreement, both the parties were to apply up to 30th September, 1976 to the Competent Authority under the said Act of 1976 for grant of permission. However, there is nothing on record to show that the Plaintiffs made any effort to file joint application and in fact the Plaintiffs tried to shift the entire burden of obtaining permission on the 1st Defendant. He submitted that the Plaintiffs have not shown readiness and willingness apart from their failure to plead readiness and willingness in the plaint. 17. He pointed out that the suit agreement dated 14th May, 1975 was sought to be belatedly enforced by filing a suit on 11th October, 1982. He submitted that time to execute the Sale Deed expired way back in 1976. He submitted that the suit suffers from delay and latches. He submitted that now the decree for specific performance cannot be passed in the year 2011. He submitted that this ash 17 fa-208.87.sxw was a fit case where discretion under Section 20 of the said Act of 1976 ought to be exercised against the Plaintiffs. 18. Learned counsel appearing for the Appellants/ Plaintiffs by way of rejoinder submitted that the Appellants were not supposed to pay balance consideration of Rs.45,000/- before execution of the Sale Deed but out of the said balance consideration, a sum of Rs.30,000/- was paid by them. He submitted that the Appellants were placed in possession of the suit property in part performance of the suit agreement and 85% of the consideration has been received by the 1st Defendant. He submitted that the 1st Defendant enjoyed the said flat on ownership basis which was given to him by way of a part consideration. He submitted that the decree obtained by the Bank cannot go against the Appellants inasmuch as the 1st Defendant has signed all the documents in favour of the Bank voluntarily. He submitted that a plea regarding the fraud and mis-representation has not been specifically pleaded in the written statement and in any case, looking to the oral evidence of the 1st Defendant, the plea of fraud has not been canvassed during the course