1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 1512 OF 2006 IN SUIT NO.1298 OF 2006 1. Saleh Abdul Aziz Adhani ) Eurostar Properties ) A sole proprietorship company ) incorporated and registered by ) the Department of Economic ) Development having its registered ) office at P.O.Box No.523398, ) Dubai, United Arab Emirates. ) 2. Eurostar Techno Holdings Pvt. Ltd. ) a private company incorporated ) registered under the Companies ) Act, 1956 and having its registered ) Office at Suite A, Also Deer Park ) 108, Velacherry Road, Guindy, ) Chennai – 600 032. ) .....Plaintiffs. VERSUS 1. Swan Mills Ltd., a public limited ) company incorporated and ) registered under the Companies ) 2 Act, 1956 and having its office at ) Free Press House, 2nd Floor, ) 215, Nariman Point, Mumbai - ) 400 021 and also at 15 Tokersey ) Jivraj Road, Sewree, Mumbai ) 400 015. ) 2. Pirmal Holdings Ltd., ) a public limited company ) incorporated and registered under ) the Companies Act, 1956 and ) having its registered office at 106 ) Peninsula Centre, Dr. S. S. Rao ) Road, Parel, Mumbai – 400 012. ) 3. Essar Technology Park BKC Pvt. ) Ltd., A company incorporated ) under the Companies Act, 1956 ) and having its Regional Office at ) Essar House, 11, K.K. Marg, ) Mahalaxmi, Mumbai 400 034 ) through its Director Mr. D.L.Shetty.) ....Defendants. Mr.Milind Sathe, Sr. Advocate a/w. Mr. B.Saraf, Ms. Rajlakshmy i/b. ALMT Legal, Advocates for the Plaintiffs. Mr. Janak Dwarkadas, Sr.Counsel a/w. Mr. Dhond i/b. M/s.Federal and Rashmikant, Advocates for Defendant Nos. 1 & 2. Mr. D. D. Madon, Sr. Counsel a/w. Mr. N. Engineer i/b. RMG Law Associates, Advocates for Defendant No.3. 3 CORAM : R. V. MORE, J. DATE OF RESERVING THE JUDGMENT : 25TH FEBRUARY, 2010. DATE OF PRONOUNCEMENT : 30TH APRIL, 2010. JUDGMENT: The above notice of motion is taken out by the Plaintiffs in a suit for specific performance of a contract, restraining the Defendants and their servants, agents, assigns by an order of temporary injunction restraining them from in any manner alienating, encumbering, selling, transferring, parting with possession and/or creating third party right, title and interest in the suit property i.e. Building No.2 comprising ground plus 6 upper floors at Penninsula Techno Park situated at CTS No.83, 83/1 to 83/19, Lal Bahadur Shastri Marg, Kurla (West), Mumbai. 2. The brief facts giving rise to the above notice of motion are as follows: The Plaintiff No.1 is a sole proprietorship company as per laws in force in Dubai, U.A.E. and the Plaintiff No.2 is a private limited company incorporated and registered under the Companies Act, 1956. The 4 Defendants are public limited company also incorporated and registered under the Companies Act, 1956. The Defendant No.1 is the owner of plot of land bearing CTS No.83, 83/1 to 83/19, Lal Bahadur Shastri Marg, Kurla (West), Mumbai and Defendant No.2 was the Constituted Attorney of Defendant No.1. The subject matter of the suit is an office area comprising of seven floors admeasuring 1,47,747 sq.ft. with 150 car parking in the basement in Building No.2 which was being developed by Defendant No.2. It was the case of the Plaintiffs that in a meeting held in May, 2005, Defendant Nos.1 & 2 have offered the suit premises to the Plaintiffs. The Defendant No.2 thereafter, wrote a letter dated 3rd June, 2005 to the Plaintiffs giving offer for sale of Building No.2 of Peninsula Techno Park. The Plaintiff by letter dated 20th July, 2005 accepted the offer of the Defendants and forwarded its cheque of Rs.1 crore. The Defendants on 21st July, 2005 communicated the conclusion of the contract and crystallized the terms agreed between the parties for sale and purchase of the said Building No.2 in Peninsula Techno Park. The Plaintiff No.1 was called upon to sign on the duplicate copy of the letter as token of their confirmation. Under this letter, the total consideration of Rs.62 crores was agreed and recorded payment of Rs.1 crore which had already been paid by the Plaintiffs. Certain instalments were agreed upon, of which first 5 instalment was to be paid on execution of MOU or on 31st August, 2005 which ever was later. The Plaintiffs by letter dated 26th July, 2005 accepted the commercial terms and sent the signed copy thereof back to the Defendants. On 12th August, 2005, the Legal Officer of Defendant No.2 forwarded the draft Letter of Intent for discussion. On 20th August, 2005, the Law Officer of Defendants by email forwarded LOI and Indemnity to the Plaintiffs. On 13th September, 2005, the Plaintiffs forwarded the draft LOI received from Defendants with their suggestions for discussion. On 20th September, 2005, the Defendants responded by giving their comments on the draft LOI. On 3rd October, 2005, the Plaintiffs requested the Defendants to consider the manner of payment of instalment. Thereafter, discussion took place between the parties and the Defendants informed the Plaintiffs that a final clearance was also required from the Ministry of Environment and Forest and construction could commence only thereafter. It was also agreed that the Letter of Intent may be executed in the name of the Plaintiff No.2 as nominee of Plaintiff No.1. It was suggested by the Defendants that the payment of the 2nd instalment should be made relatable to the receipt of the final clearance of the Ministry of Environment and Forest. On 15th October, 2005, the Legal Officer of the Defendants forwarded a letter of intent with certain changes to the Plaintiffs. It was clearly stated that only portions marked in yellow were to be finalized. A meeting was held between the parties on 19th October, 2005 and terms 6 suggested in the email dated 15th October, 2005 were also agreed. Meanwhile, on 17th October, 2005, the High Court allowed Writ Petition (Public Interest Litigation) No.482 of 2005 which was filed challenging the amendment to the Development Control Regulations (DCR) 58 which pertained to the computation of area of open land which would be available to mill owners for redevelopment of the Textile Mill Land. The High Court set-aside the amendment to the Development Control Regulations (DCR) 58 thereby drastically reducing open space available with the mill lands for redevelopment. The Plaintiffs by an letter dated 24th October, 2005 called upon Defendants to fix a meeting to discuss and conclude the deal. The Plaintiffs thereafter, also repeatedly followed up about the signing up of the Letter of Intent and so by letter dated 17th November, 2005 the Defendants informed the Plaintiffs that the decision of Supreme Court in the Mill matter should be awaited. On 7th March, 2006, the Supreme Court ultimately decided in favour of the Defendants and other Mill Owners. The Plaintiffs thereafter wrote a letter on 27th March, 2006 to the Defendants recording the aforesaid course of events and requested that the meeting be held on 3rd April, 2006. By letter dated 31st March, 2006, the Defendants made mention of the suit filed by K.Raheja. It was also stated that the notice of motion taken out therein had been listed for hearing and the outcome of the application cannot be predicted. The letter also mentioned that Defendants had been served with an attachment order by the Income Tax Department 7 on 17th January, 2005 for a claim of Rs.30.00 crores and that the order also prohibited the Defendants from selling the land. In this letter, the Defendants wrongfully referred to the concluded contract as “proposed negotiations and purported to offer refund for Rs.1 Crore paid to the Defendants by the Plaintiffs. Several meetings were thereafter held between the parties between 4th and 7th April, 2006. The Defendants expressed that the Plaintiffs would not be able to get funding in light of the attachment. However, the Plaintiffs assured the Defendants that they were ready to fulfill their part of contract. By the letter dated 20th April, 2006, the Defendants informed the Plaintiffs that proposed transaction stood cancelled and purported to return the amount of Rs.1 Crore forwarded by the Plaintiffs as token amount to the Defendants for the suit property. On 21st April, 2006, the Plaintiffs returned the cheque on Rs.1 Crore and called upon the Defendants to perform the contract. The Plaintiffs ultimately on 2nd May, 2006 filed a suit for declaration that there is valid, subsisting and binding contract between the parties, whereby the Defendants have agreed to sell to the Plaintiffs’ the suit property as recorded and reflected in the letter dated 21st July, 2005 and further crystallized in the draft Letter of Intent forwarded with the e-mail dated 15th October, 2005. A decree of specific performance of contract as reflected and recorded in letter dated 21st July, 2005 and as further crystallized in the Letter of Intent forwarded with the e-mail on 15th October, 2005 was also claimed. During the 8 pendency of the suit, the Defendant Nos. 1 & 2 sold the said building to Defendant No.3 by registered agreement and this was informed to the Plaintiff only on 21st January, 2009 and on 13th April, 2009, the Court allowed the Plaintiffs’ application for amendment so as to add Defendant No.2 as party-Defendant. 3. On the basis of the above averments, it is the contention of the Plaintiffs that there exists valid, concluded and binding contract between the parties as recorded and reflected in the letter dated 21st July, 2005 and the termination of this contract by Defendants by their letters dated 31st March, 2006 and 20th April, 2006 is erroneous and unsustainable. It is also contended that the Plaintiffs are ready and willing to perform their part of contract and therefore, the Plaintiffs are entitled for decree for specific performance. A decree for specific performance can be passed against the Defendant No.3 in as much as the suit property is transferred in its favour during the pendency of the suit and registration of lis-pendens. In these facts and circumstances, the Plaintiffs claim that having proved prima-facie case and balance of convenience in their favour, they are entitled for relief claimed under the notice of motion. 9 4. On the contrary, it is the case of Defendant Nos. 1 and 2 that the meetings, discussions and communications between the parties were discussions/negotiations envincing an interest in the project of Defendant No.1 that were ultimately abandoned by the Plaintiffs in/or about November, 2005. It is their specific case that no concluded agreement or contract was arrived at between the parties whether in July, 2005 or in October, 2005 or at all. It is also their case that, even assuming for the sake of arguments that the Term Sheet dated 21st July, 2005 is concluded agreement, the subsequent conduct of the Plaintiffs themselves establish that the Plaintiffs sought to resile from the Term Sheet dated 21st July, 2005 and/or did not perform or were not ready or willing to perform their obligations thereunder. It is the specific case of the Defendant Nos. 1 & 2 that the conduct of the parties during negotiations are required to be considered in the background of then existing uncertainties arising from the Public Interest Litigation and order passed therein. The Defendants contended that the letter dated 21st July, 2005 alongwith the LOI’s dated 20th August, 2005, 13th September, 2005, 20th September, 2005 and 15th October, 2005 if considered together, it is clear that the parties were discussing terms of the LOI. There was no consensus on the issues of instalments/interest/pending proceedings/litigations/options/liability for stamp duty and/or registration etc. and therefore, it is clear that the parties were negotiating the terms of LOIs’ and there was no concluded contract. 10 It is also a specific contention of the Defendant Nos. 1 & 2 that the Plaintiffs themselves resiled from the contract, in view of uncertainties arising out of the Public Interest Litigation and therefore, the suit having no merit, the Plaintiffs are not entitled for relief of temporary injunction as claimed under the notice of motion. 5. Mr. Sathe, learned Senior Counsel appearing for the Plaintiffs took me through the pleadings in the plaint and notice of motion alongwith annexures thereto and submitted that the document dated 21st July, 2005 concludes a contract for sale of suit property, in as much as area/description/rate and total consideration was agreed upon by the parties. He submitted that though negotiations thereafter were in progress till October, 2005, same were held to finalise the LOI which was also agreed upon on 19th October, 2005. He submits the execution of LOI was not a term of bargain but was in implementation of earlier agreement. He further submitted that the Plaintiffs were and are ready and willing to perform their part of contract and it is settled law that time is never the essence of the contract, so far as sale of immovable property is concerned. He submitted that the termination of the contract by the Defendants is erroneous and unsustainable. The Defendant No.3 has purchased the suit property during the pendency of the suit and after registration of 11 lis-pendens and therefore, relief can also be granted against Defendant No.3. He relied upon the Apex Court Judgments in Kollipara Sriramulu (Dead) by his legal Representative versus T.Ashatha Naryana (Dead) by his legal Representatives & Ors reported in AIR 1968 SC 1028, Trimex International FZE Ltd., Dubai Versus Vedanta Aluminium Ltd., India reported in 2010(1) SCALES 574, Govind Prasad Chaturvedi Versus Hari Dutt Shastri & Anr. Reported in AIR 1977 (2)SC 539, Chand Rani (Smt.) Dead by Lrs. Versus Kamal Rani (Smt.) Dead by Lrs. Reported in 1993 (1) SCC 519, Gourishankar Govardhandas Todi Versus Evershine Home Pvt. Ltd. reported in 2009 (3) Bom.C.R.330 and Amitkumar Shaw Versus Farida Khatoon reported in (2005) 11 SCC 403. 6. Mr.Dwarkadas, learned Senior Counsel appearing on behalf of Defendant Nos. 1 & 2 submitted that the negotiations between the parties are required to be construed in the background of then existing uncertainties arising out of Public Interest Litigation and order passed therein. He submitted that if the letter dated 21st July, 2005 alongwith various LOIs are taken into consideration, then it is clear that the parties were not ad idem to the terms, specially the issue of instalments/interest/pending proceedings/litigations/options/liability 12 for stamp duty and/or registration etc. and the parties were at negotiation stage only. He submitted that no concluded agreement or contract was arrived at between the parties either in July, 2005 or October, 2005 and in any case, the correspondence between the parties show that the Plaintiffs themselves resiled from the Term Sheet contained in letter dated 21st July, 2005. He submitted that the correspondence between the parties shows unequivocally the Plaintiffs were not ready and willing to perform their obligations under the letter dated 21st July, 2005. In the above circumstances, especially in the absence of concluded contract, the suit is without any merit and Plaintiffs are not entitled for relief as claimed under the notice of motion. Mr. Dwarkadas, learned Senior Counsel, in order to substantiate his contention relied upon the judgment in the case of Rickmers Verwaltung GMBH Versus Indian Oil Corporation Ltd. Reported in (1999) 1 Supreme Court Cases 1 and M/s. Bharat Barrel and Drum Mfg. Co.Pvt.Ltd. Versus Hindusthan Petroleum Corporation Ltd. & Ors. Reported in AIR 1989 Bombay 170. 7. Mr.Madon, learned Senior Counsel appearing for Defendant No.3 invited my attention to prayer clauses of the suit and submitted that there is no relief claimed by the Plaintiffs against Defendant No.3 and in the absence thereof, no relief in the nature of interim injunction can be granted 13 against Defendant No.3. In this regard, he invited my attention to the provisions of section 52, 31 and 34 of the Specific Relief Act, 1963. He also submitted that the document dated 21st July, 2005 cannot be taken into consideration for want of payment of stamp-duty. He submitted that LOI dated 15th October, 2005 cannot be received in evidence as same was sent by Defendant Nos.1 & 2 to the Plaintiff “without prejudice”. In order to substantiate his contention, he relied upon the Apex Court judgment in Cotton Corporation India Limited Versus United Industrial Bank reported in 1982 SC 1272 and judgment of Queens Bench Division in Walker Vs.Wilsher reported in 1989 Volume XXIII page no.335. 8. Having gone through the pleadings and annexures thereof and having considered the submissions of the learned Counsel for the respective parties, I find there is no dispute about the following documents: 1. Letter dated 3rd June, 2005 issued by Defendant No.2 to the Plaintiffs, giving offer for sale of Building No.2 in Peninsula Techno Park. 2. Letter dated 20th July, 2005 from the Plaintiffs to Defendant Nos.1 & 2 accepting the offer of Defendants and forwarding its cheque of Rs.1 Crore. 14 3. Letter dated 21st July, 2005 by the Defendant No.2 to Plaintiffs agreeing the broad commercial terms. 4. Letter dated 26th July, 2005 by the Plaintiffs accepting the commercial terms. 5. Draft LOI dated 20th August, 2005 by Defendants to the Plaintiffs. 6. Draft LOI dated 13th August, 2005 from Plaintiffs to Defendants with their suggestion for discussion. 7. Draft LOI dated 20th September, 2005 by Defendants to the Plaintiffs giving their comments and LOI dated 15th October, 2005 by Defendants to the Plaintiffs. 8. Letter dated 24th October, 2005 from Plaintiffs to the Defendants. 9. Letter dated 17th November, 2005 from the Defendants to the Plaintiffs. 9. The contentious issue between the parties is whether there exists binding contract or parties were at negotiation stage only. According to the Plaintiffs, the document dated 21st July, 2005 concludes a contract for sale 15 of the suit property. The Defendants on the contrary, claims that the subsequent correspondence, if taken into consideration alongwith document dated 21st July, 2005, then it is clear, that parties were not ad idem and they were at negotiation stage only. The correspondence between the parties is required to be construed in proper perspective to gather the intention of the parties. In this regard, observations of the Supreme Court in the case of Kollipara Sriramulu (Dead) by his legal Representative versus T.Ashatha Naryana (Dead) by his legal Representatives & Ors reported in AIR 1968 SC 1028 are relevant. Paragraph nos. 3 & 4 of the said judgment reads thus: “3. We proceed to consider the next question raised in these appeals, namely, whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well established that a mere reference to a future formal 16 contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgyway v. Wharton 2, the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von Hatzfeldt- Wildenburg V. Alexander 3 it was stated by Parker, J. as follows : 17 “ It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contact is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.” 4. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal 18 agreement is not approved and signed there is no concluded contract. In Rossiter v. Miller 4 Lord Cairns said : “If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract.” In Currimbhoy and Company Ltd. v. Creet 5 the Judicial Committee expressed the view that the principal of the English law which is summarised in the judgement of Parker, J. In von Hatzfeldt- Wildenburg v. Alexander 3 was applicable in India. The question in the present appeals is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of Respondent 1 does not show that the drawing up of a written agreement was a 19 pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr Gokhale is unable to make good his argument on this aspect of the case.” Perusal of the above observations, makes it clear that mere reference of the future formal contract or the fact that the parties referred to the preparation of an agreement, by which terms agreed upon are to be put in a more formal shapes does not prevent existence of a binding contract and the question of binding contract depends upon the intention of 20 the parties and special circumstances of each particular case. The Supreme Court made it clear that where an execution of the further contract is a condition or term of bargain, in that case, there is no enforceable contract either because the condition is unfulfilled or because law does not recognize a contract to enter into contract. However, in case it is mere expression or a desire of the parties as to the manner in which the transaction already agreed to, will in fact go through as there exists binding contract and reference to the more formal documents may be ignored. It is further cleared that mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price, area or the time for completion of the sale