1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.324 OF 2008 IN NOTICE OF MOTION NO.1610 OF 2008 IN SUIT NO.1272 OF 2008 WITH NOTICE OF MOTION NO.3166 OF 2008 IN APPEAL NO.324 OF 2008 M/s. Avdel Tools & Services, ) a Partnership Firm registered under ) the Indian Partnership Act, 1932 ) and having its registered Office at ) Raman House, 6th Floor, 169, ) Backbay Reclamation, ) Mumbai – 400 020. ) through its Partner Mr.Gobind G. ) Bulchandani. ).. Appellant Versus M/s. Trufit Fasteners Private Limited, ) A Company, registered under the ) provisions of the Companies Act, 1956, ) having its registered Office at 901, ) Dhavalgiri, Papanaswadi, ) Gowalia Tank Road, ) Mumbai – 400 036. ).. Respondent -- Shri M.S. Doctor i/by M/s.Bachubhai Munim & Co. for the Appellant. Shri Carl Shroff along with Shri Ferzana Behram Kamdin i/by M/s. FZB & Associates for the Respondent. -- 2 CORAM : SWATANTER KUMAR, C.J. & S.A. BOBDE, J JUDGMENT RESERVED ON : 29TH SEPTEMBER, 2008. JUDGMENT PRONOUNCED ON : 16TH OCTOBER, 2008. JUDMGNET : ( PER SWATANTER KUMAR, C.J. ) 1. The Memorandum of Understanding dated 24th September, 2007 was executed between M/s. Trufit Fasteners Private Limited, a Company duly incorporated under the Companies Act, 1956 as Vendor and M/s. Avdel Tools & Services, a Partnership Firm, registered under the Indian Partnership Act, 1932 as Purchaser, in relation to the Plot No. A-285, Thane Industrial Area, admeasuring 1265 sq. metres at Village Panchpakhadi, within the limits of Thane Municipal Council (hereinafter referred to as “the property in question”). The Maharashtra Industrial Development Corporation ( hereinafter referred to as “the MIDC” ) has executed a Lease Deed in relation to the property in question on 27th February, 1979. Vide the Memorandum of Understanding ( hereinafter referred to as “the 3 MOU”), the Vendor had agreed to sell, transfer, alienate and assign the rights, titles and interests, etc. in relation to the property in question in favour of the Purchaser for a total consideration of Rs.1,70,00,000/- ( Rupees One Crore Seventy Lakhs Only ). It was understood between the parties that there was no outstanding liabilities against the property in question and the total sale consideration agreed between the parties was to be paid in the following manner. “(a) Rs.20,00,000/- On or before the execution hereof. (b) Rs.30,00,000/- On receipt of clearance from MIDC for transfer and before payment of transfer fees by Purchaser to MIDC. (c ) Rs.1,20,00,000/- On or before 30.11.2007 against possession of the said premises by the Vendor to the Purchaser with ten days grace period to either party to honour respective obligation on their part but not beyond 10-12-2007.” 4 2. The sum of Rs.20 lakhs was paid by Cheque on 24th September, 2007. A Consent of MIDC was to be obtained by the parties and it was stipulated that if it is not received within a period of 45 days from the date of the application, the advance of Rs.20 lakhs shall be returned to the Purchaser without any interest within 7 days of the receipt of the denial from MIDC. The Vendor was to hand over vacant and peaceful possession of the property in question before the execution of the document. The MOU also provided for other terms and conditions for completion of transaction. According to the Vendor, the permission was not received within 45 days and thus they terminated the MOU vide letter dated 24th November, 2007 and returned the advance of Rs.20 lakhs by Cheque. However, according to the Purchaser, the contract was never terminated and a sum of Rs.20 lakhs was not paid to them as the parties had agreed to extend the period. There was some dispute between the parties in regard to the documents asked for and furnished by the Vendor as well as the Purchaser. The Vendor declined to fulfill its obligation under the MOU on the ground that the said MOU stood terminated. The Purchaser served a notice dated 12th February, 2008 and called upon the Vendor 5 to comply with the terms and conditions of the MOU and to furnish all necessary documents. The MOU was subsisting and binding and they made it clear that they would be compelled to take action in accordance with law in the event of non compliance, to which a reply dated 28th February, 2008 was sent by the Vendor reiterating the stand that the MOU was terminated and annexed the Cheque dated 24th November, 2007 of Rs.20 lakhs to it. By letter dated 31st March, 2008, the Purchaser sent a reply to the reply dated 28th February, 2008 and returned the cheque of Rs.20 lakhs and called upon Vendor to perform its part of the agreement in terms of the MOU dated 24th September, 2007. 3. As the Vendor failed to act in accordance with the notice, the Purchaser filed a suit bearing Suit No.1272 of 2008 for specific performance of the MOU dated 24th September, 2007. Along with the suit, a Notice of Motion No.1610 of 2008 was taken out by the present Appellant praying for an injunction restraining the Defendant from selling, transferring, alienating or parting with the possession of the property in question. After hearing the parties, the learned Single 6 Judge vide order dated 25th June, 2008 declined the relief of injunction and dismissed the Notice of Motion. Being aggrieved by the said order dated 25th June, 2008 passed by the learned Singe Judge, the Appellant has filed the present Appeal. It will be useful to refer to the findings recorded by the learned Single Judge while declining the relief of injunction to the Plaintiff/Appellant. It primarily refers to Clause 10 of the MOU. It held that the Respondent in the Appeal was entitled to terminate the MOU if the permission of MIDC for the transfer was not received within 45 days from the date of application, and the Respondent had to return the advance of Rs.20 lakhs received by it to the Appellant within seven days of the receipt of denial from the MIDC. The learned Single Judge did notice that the contention of this nature was raised before the Court but recorded no finding if there was actual valid termination of the MOU. However, it will be useful to refer to portion of the judgment for which injunction has been declined. “6. Paragraph no.5 of the MOU states that plaintiff had paid to the defendant Rs.20,00,000/- on execution of the agreement and was to pay Rs.30 lakhs more on receipt of clearance from MIDC and further sum of 7 Rs.1,20,00,000/- on or before 30th November 2007 against possession or in any event on or before 10th December 2007. Plaintiff was therefore required to have with him Rs.1,50,00,000/- in addition to earnest of Rs.20,00,000/-. On the first occasion when the mater came up before me I orally directed the plaintiff to produce the material on record to show that it had the money of Rs.1,50,00,000/-was able to procure it. No such material has been produced. Learned counsel for the plaintiff submits that it is irrelevant to show that the plaintiff had the money or could have procured the same. Counsel submitted that that was irrelevant and the plaintiff was not obliged to plead and prove that he had or could have procured the money. I am unable to agree. Section 16(c) of the Specific Relief Act, plaintiff requires the plaintiff to aver and prove his continuous readiness and willingness to perform his part of the contract. The only part which was required to be performed by the plaintiff, apart from obtaining the permission from MIDC, was to pay Rs.1,50,00,000/-. In any view, therefore it was necessary on the pat of the plaintiff to show that he had Rs.1,50,00,000/- or was in a position to procure the money on the relevant date. This has not been done. In my view, therefore plaintiff has failed to prove his readiness and willingness which he was required to aver and prove under section 16(c) of the Specific Relief Act. Plaintiff is therefore not entitled to relief of injunction. Motion is dismissed.” 4. The learned Counsel appearing for the Appellant contended that it was not expected of the Appellant to demonstrate the money to show his readiness and willingness to perform his part 8 of the contract. It was sufficient for the Appellant to bring to the notice of the Court that the Appellant possessed and/or could arrange for a fund for the purposes of making the payment to fulfill his obligations under the terms of the contract. Furthermore, these are the matters of evidence and the chance to prove that they were possessed of sufficient means to fulfill their obligations as per the terms of the MOU should have been given to appellant. In this regard, the learned Counsel placed reliance on the judgment of the Supreme Court in the case of Nathulal vs Phoolchand, 1969(3) SCC 120. 5. It is a settled principle of law that the Court at this stage of the proceedings while considering application for interlocutory orders is to form a prima facie view and while considering various aspects for grant or decline of injunction the Court has to balance the equity between the parties. In a Suit for specific performance, the Court is vested with wide discretionary powers in terms of Section 20 of the Specific Relief Act. This discretion has to be exercised in accordance with the settled precepts governing the subject and cannot be 9 exercised arbitrarily. This principle would also be of help to the Court while deciding an interlocutory application for grant of injunction. No doubt readiness and willingness of the purchaser is a condition precedent to the grant of relief at final stage or even for that matter at interlocutory stage. Readiness and willingness must exist at all relevant times. But `readiness and willingness' is a term which has to be construed with certain clarity and has to be given a meaning relatable to the facts and circumstances of a given case. It has been repeatedly held by the Courts that readiness and willingness essentially does not mean exhibition of money by the purchaser. This attains significance and relevance for the reason that grant or refusal of injunction in a Suit for specific performance would essentially depend upon prima facie satisfaction of the ingredients essential for decree for specific performance. 6. Specific performance is equitable relief and is in contrast with remedy by way of damages for breach of contract. The jurisdiction of English Court of Chancery to decree specific performance of contracts was founded on the want of an adequate 10 remedy in law. In the Specific Relief Act of 1877, there was no express provision that averment of readiness and willingness was necessary to enforce suit for specific performance, but this was followed as a law. By the introduction of Section 16(c) of the newly introduced Act, the Specific Relief Act, 1963, it was expected of a plaintiff to make such a statement in the plaint itself. The words `ready and willing' imply that the plaintiff was prepared to carry out those parts of the contract to their logical end so far as they depend upon his performance. These acts may be of the nature which are to be performed before other side can be called upon to fulfil their promise while others may be to be performed subsequent thereto. Such averment was required to be made in the plaint and was not necessarily to be stated in the notice if at all served by the plaintiff on the defendant. The various Courts have even taken the view that readiness and willingness of a person seeking specific performance in a case where time is provided for performance, means that the person claiming performance has kept the contract subsisting with preparedness to fulfil his obligation and accept performance when the time for performance arrives. However, it may not necessarily mean 11 that he had command of the necessary money throughout the existence of the contract. A purchaser to succeed in a suit for specific performance, need not show that he had the consideration money with him or he had arrangements for it, but he was ready and willing to go through with the contract. This is a question one of fact. The Courts have also taken the view that actual tender of money is not a condition precedent for specific performance unless the contract to the contrary specifically states so. Even a Bench of this Court in the case of Bharat Barrel and Drum Mfg Co Pvt Ltd vs Hindustan Petroleum Corpn Ltd, AIR 1989 Bom 170, took the view that where there might be a dispute as to the true construction of the contract in such a case the plaintiff must aver that he is ready and willing to perform the contract as construed by the Court. It will be relevant to refer to the following dictum stated by the Allahabad High Court in the case of Ganesh Prasad vs Saraswati Devi, AIR 1982 All 47 as under :- “The plaintiff does not have to go about jingling money to demonstrate his capacity to pay the purchase price.” 12 [Reference : Pollock & Mulla – Indian Contract and Specific Relief Acts, Thirteenth Edition]. 7. In fact, in face of Explanation I to Section 16 of the Act, there is hardly any doubt as to the true meaning and application of the expression `readiness and willingness' in cases relating to specific performance. It is not essential for the plaintiff to actually tender to the defendant or to deposit in Court any money except when so directed by the Court. The purpose of this expression obviously is to ensure that the plaintiff is capable of performing the terms which he was expected to do so under the terms of the contract or even under the orders of the Court. The Supreme Court in the case of Nathulal (supra), where breach of contract was pleaded in a suit for possession relating to performance of the contract and capacity to pay, held as under :- “6. Phoolchand could be called upon to pay the balance of the price only after Nathulal performed his part of the contract. Phoolchand had an outstanding arrangement with his Banker to enable him to draw the amount needed by him for payment to Nathulal. To prove himself ready and willing a purchaser has not 13 necessarily to produce the money or to vouch a concluded scheme for financing the transaction : Bank of India Ltd, and Others v. Jamsetji A. H. Chinoy and Messrs. Chinoy and Company, LR 77 IA 76, 91. 11. Nathulal had expressly undertaken to have the revenue records rectified by securing the deletion of Chittarmal's name, and it was an implied condition of the contract that Nathulal will secure the sanction of the collector to the transfer under Section 70(4) of the Madhya Bharat Land Revenue and Tenancy Act 66 of 1950. The first condition was not fulfilled till October 6, 1952, and the second condition was never fulfilled. We are unable to agree with Mr Shroff that the repeal of the Madhya Bharat Act 66 of 1950 by the Madhya Pradesh Land Revenue Code, 1959, has retrospective operation. 12. In considering whether a person is willing to perform his part of the contract the sequence in which the obligations under a contract are to be performed must be taken into account. The argument raised by Mr. Shroff that Nathulal was bound to perform the two conditions only after the amount of Rs.21,000/- was paid is plainly contrary to the terms of the agreement. By virtue of Section 4 of the Transfer of Property Act the chapters and sections of the Transfer of Property Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872. If, therefore, under the terms of the contract the obligations of the parties have to be performed in a certain sequence, one of the parties to the contract cannot require compliance with the obligations by the other party without in the first instance performing his own part of the contract which in the sequence of obligations is performable by him earlier.” 14 8. In the case of His Holiness Acharya Swami Ganesh Dassji vs Sita Ram Thapar, (1996) 4 SCC 526, the Supreme Court clearly stated the distinction between readiness and willingness to perform the contract. Readiness may be meant to be the capacity of the plaintiff to perform the contract which includes his financial position to pay the purchase price. For determining whether purchaser is ready and willing to perform his part of the contract, this conduct has to be properly scrutinized. The factum of readiness and willingness to perform plaintiff's part of the contract has to be judged with reference to the conduct of the party and the attending circumstances. The Court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract. 9. The true nature of the transaction must be examined and determined having regard to the intention of the parties as well as the circumstances attending thereto as also wording used in the documents in question. (Refer : Umabai and another vs Nilkanth Dhondiba Chavan, (2005) 6 SCC 243). Readiness and willingness, 15 therefore, is a matter of fact to be gathered from the pleadings of the parties and from the evidence led at final stage. At this stage of the proceedings, where the Court has to form a tentative view primarily the averments made in the plaint need to be noticed. The Plaintiff/Appellant, after referring to the facts in a great detail in paragraph 26 of the Plaint, has specifically averred that the Plaintiff has at all material times been ready and willing and is still ready and willing to further perform all its obligations under the said MOU. It is also averred that the Defendant had accepted from the Plaintiff part consideration in respect of the premises and thereafter has attempted to wriggle out of its obligations and it was only due to the failure or neglect on the part of the Defendant, the part of contract could not be concluded. It is also averred that because of the rise in the price of the property in question, the Defendant is trying to wriggle out of the obligations placed upon it under the MOU dated 24th September, 2007. Even in the Notice dated 12th February, 2008, Exhibit-J to the Plaint, the Plaintiff had averred that it is ready and willing to comply with its obligations. In this notice, a reference was even made to the increased demand raised by the Defendant’s representatives in the 16 meeting. These averments had also been made in the affidavit in support of the Notice of Motion. In our considered view, it could be determined only after taking the evidence as to whether the Plaintiff was ready and willing to perform its obligations or not against the MOU. As far as capacity of the Plaintiff for discharging material obligations in regard to the payment or amount is concerned, it was not expected of the Appellant to demonstrate by actual deposit of money and/or show that it had means by which it could pay amounts payable under the MOU. That in fact may amount to prejudging the issue which is bound to be framed in the suit ultimately. However, in the present Appeal, the Notice of Motion No.3166 of 2008 has been taken out to which an affidavit has been filed and even the copies of the documents have been annexed thereto to show that the partner of the Partnership concerned of the Appellant and in fact who has signed the Plaint and the affidavit is possessed of more than the required sum. Shri Govind G. Bulchandani is stated to be the owner of the Equity Funds viz. SBI-MSFU-Contra-F-dr and RL-Division Power Sector F-dr, both to the extent of Rs.2,48,09,080/-. Besides this, Advocates statement of Reliance Mutual Fund has been placed 17 on record showing the current cost of Rs.12,033,239.76 ps. It is averred by the Appellant that these funds are available to the Appellant for payment in the event it was called upon to pay consideration of the property in question. The Defendant in the reply to the Notice of Motion had specifically stated “In view thereof, the Defendants state that the enhanced price would be Rs.2,31,00,000/- being the discounted price of the then prevailing market price being offered by another party to the Defendants.” 10. In light of these circumstances, it cannot be said that the Appellant was not possessed of sufficient means or was incapable of discharging its obligations for performing its part of the contract. We have already referred to the various judgments indicating the interpretation which need to be given to the term readiness and willingness. We may also refer to the judgment of the Delhi High Court in the case of Sh. Raj Kumar Sharma vs. Smt. Pushpa Jaggi and Others, [2006(128) DLT 96], where the Court held as under: “Ready and willingness are to be gathered from the evidence of the parties and the capacity to pay. PW-1 has 18 specifically stated in his statement that he had a part of the money in his different bank accounts and the balance he would arrange within no time. PW-1 is a property dealer and thus would be fully aware of such dealings. Plaintiff claiming the relief of specific performance, is not required to exhibit the currency notes to show his ready and willingness. He should be capable and should have the capacity to pay on demand the sale consideration whether from his account or after arranging the same from reliable sources. The law does not impose an obligation on a party requiring it to exhibit its mean by physical demonstration. Suffices it to say for a party that it possess and/or is capable of gathering sufficient means to perform its part of the contract by paying the balance sale consideration. Readiness and willingness have various ingredients and one of them is that party to an agreement should be able to fulfill its obligations in regard to payment of the sale consideration. The purchaser need not establish that he had the required money with him or arrangements have been made for financing the transactions. What is required of him is to show that the was ready and willing to fulfill his terms of the agreement. A party would be well within its rights to say that he was in a position to arrange the payment of the requisite amount within the prescribed time. Demonstrable possession of means is no sine qua non to satisfy the principle of ready and willingness. Every action follows its prescribed course and so does a buyer should be able to show before the Court that he either possesses or can arrange the requisite funds for payment of the balance sale consideration within the stipulated period. Obviously the fruits of this act fall in favour of the party only on completion of the act in accordance with the directions of the Court founded on the agreement between the parties. Fleri non debuit sed factum valet would normally apply to this aspect of ready and willingness on the part of the claiming party. In the case of Mulla Badruddin Vs. Master Rufail Ahmed, 1963 MP 31, the Court held as under: - 19 “In the case reported in Bank of India v. J.A. H. Chinoy, AIR 1950 PC 90, in the context of the plaintiff being ready and willing to perform his part of the contract though it was stated by plaintiff No.1 that he was buying for himself and that he had no sufficient ready money to meet the price and that no arrangements had been made