1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NOTICE OF MOTION NO.2016 OF 2007 IN SUIT NO.1478 OF 2007 A.A. Estate Pvt. Ltd. …Plaintiffs Vs. Kamna Dilip Datwani & Ors. …Defendants Mr. C.U. Singh i/b. Paras Kuhad & Asso., for the Plaintiffs Mr. Rohit Kapadia i/b. S.K.Srivastav & Co. for Defendants CORAM: SMT. ROSHAN DALVI, J. DATED : 22 ND OCTOBER, 2008 P.C. 1. This suit is filed for specific performance of a Memorandum of Understanding (agreement) dated 3rd August, 2006 between the parties. 2. The Defendants are owners of the suit property being a plot admeasuring 8540 sq. ft. (carpet area) on which a building Govinda Towers was constructed. The building collapsed on 3 rd August, 1998 and the plot has since remained vacant. Precisely 8 years after the collapse of the building the aforesaid agreement has been executed. 3. Upon the collapse of the building a Writ Petition came to 2 be filed by one Manohar M. Gadalia, one of the tenants and occupants of Shop No.2 being one of the premises in the building, being Writ Petition No.1380 of 2001. Similarly, Defendant No.2 herein filed another Writ Petition being Writ Petition No.2037 of 2003. Both the Writ Petitions were filed for directions against various authorities in view of the collapse of the building. An order came to be passed disposing off the aforesaid Writ Petitions as per minutes of the order signed by the parties to those Petitions on 13th February, 2004. 4. Under such Consent Terms the Defendants herein had to re-develop and construct the collapsed building along with one Jairam Chawla. The Defendant herein was to bear 75% of the cost of construction; Jairam Chawla was to bear 25% of the cost of construction. They were entitled to utilize the TDR or buy TDR as required. They were to re-house the occupants in the same area that was in their occupation prior to collapse of the building. They were enjoined to construct and give the areas to the tenants /occupants of the building as mentioned in Annexure- A thereto. The tenants were to be given the re-constructed area free of cost. They undertook to extend full and complete co-operation in the work of re-development and construction. They agreed to contribute Rs.15 lakhs and Rs. 5 lakhs respectively. That 3 amount was to be invested in a Nationalised Bank. The building was to be completed within 24 months from the date of approval of plan and issue of CC. The residents were to give occupation before possession was taken by Defendant No.2 or Jairam Chawla. They were to pay all pending municipal and statutory dues. MHADA, BMC and all other authorities were directed to expeditiously grant and issue all necessary permissions, sanctions and NOCs as required for development and re-construction of the collapsed building in accordance with the Development Control Regulations (DCR) and the relevant laws. The BMC was to consider condonation of open space deficiency, give concession in payment of premium, permit utilization of maximum FSI and extend all co-operation for construction. The occupants and tenants agreed that upon being re-housed in the constructed building they would have no claims against any party including their heirs, successors and assignees. 5. The spirit of the Consent Terms was of getting ahead with life after the mishap. Both the parties - the owners and the tenants - agreed to resurrect the collapsed building in the easiest possible manner. The extent of construction cost and the contribution for such cost was specified. The entitlement to construct further by purchase of TDR was allowed and specified. The authorities were to co-operate in 4 that endavour. The tenants only required to be re-housed without any cost and allow the owners to utilize their property further as they desired. The only time limit was for construction and subject to any unavoidable circumstances it was to be completed within 24 months of the plans being sanctioned and the CC being issued, for which all the authorities including the BMC were specifically enjoined to co-operate. Such Consent Terms became an order of the Court which could be enforced by either party. The CC has not been obtained though IOD has been obtained. On that ground Defendants have not started construction. The building which collapsed has remained as such till now. 6. On 3 rd August, 2006 the parties herein entered into an agreement to transfer and assign to the Plaintiffs the right, title and interest in the carpet area of Rs.8540 sq, ft. of the building along with proportionate rights of balance potential of the plot by way of the transfer and assignment of the carpet area of the building. The construction which the Defendants had to put up was instead to be put up by the Plaintiffs. The transfer of the balance potential of the plot was in terms of the allowance made by the tenants /occupants to the Defendants by agreeing not to have claims against the successors of the owners. 5 7. Accordingly under clause 3 of the agreement dated 3rd August, 2006, the Plaintiffs who were to bear liability of the 75% cost of construction of the building, arrived at an arrangement with Jairam Chawla (who was to bear 25% of the total cost and who had agreed to contribute Rs.5 lakhs for the re-construction), and pay the Defendants Rs.5.75 crores. 8. Under clauses 2 and 3 of the said agreement it was clarified that the Plaintiffs knew about the order dated 13th February, 2004 and agreed to abide by the same. 9. Under clause 2 of the said agreement the proposed transfer was to be subject to an appropriate order to be passed by this Court with consent of all the parties and if the Plaintiffs agreed to be joined as party Respondents to the aforesaid Writ Petitions, modified Consent Terms were to be filed and the additional FSI would become available on the suit property. 10. The said clause is not happily worded. However the specific wording can be essentially deciphered. It may be mentioned that the clause 2 shows that the proposed transfer which was to be subject to the order of the Court with the consent of the parties meant the parties to the Writ 6 Petition. The Plaintiffs had an option to be joined in the Writ Petitions; it was not a condition. The modified Consent Terms to be filed, was to be filed by the Defendants. The additional FSI which would become available on the property was to become available to the Plaintiffs. This can be deciphered upon reading the Consent Terms themselves. 11. The Consent Terms showed the enjoinment of payment of construction cost by the Defendants and Jairam Chawla. It showed the agreement to contribute specified amounts. It allowed the Defendants to utilize or buy TDR. It shows that the occupants have not claimed against the heirs, successors and assignees of the owners. Their only desire/request / agreement was to be given a re-constructed premises free of cost. There is no requirement for any heirs, successors or assignees to apply to Court. No modification of the Consent Terms was required. If another order had to be passed it could be passed only with consent of the parties to the Writ Petition. The purpose of such an order after the execution of the agreement dated 3rd August, 2006 would only enure for the benefit of the purchaser in that agreement, being the Plaintiffs in respect of the additional FSI since the Plaintiffs were to be transferred and assigned the balance potential of the plot. 7 12. Under clause 4 of the said agreement the Defendants were to produce their title documents even prior to obtaining such order from the Court. This also shows that the order, if any, from the Court to be obtained was to be by the Defendants alone. 13. Under clause 5 of the said agreement, if the Defendants or the Plaintiffs failed to obtain the Court order on or before 30 th September, 2006 the Plaintiffs were given the option to terminate the agreement. Even this clause is not happily worded. The prayer clauses 2 and 3 show the requirement of obtaining an order from the Court to be carried out only by the Defendants. Time was made the essence to obtain such order. The purchaser was given the option to terminate. Hence the words “and purchaser” appear to be out of place. 14. Under clause 6 of the said agreement it is shown that the part payment of Rs.51 lakhs was made from the total payment of 5.75 crores. 15. Under clause 7 of the said agreement the Plaintiffs were to pay 50% of the total consideration on filing of modified Consent Terms in the High Court. The remainder 50% was to be paid after CC was obtained from the BMC or Conveyance was obtained from MHADA whichever was 8 earlier. It can be seen that after the payment of earnest, the next liability for payment would arise or accrue only after the Consent Terms were filed for modification of the order passed on the Consent Terms dated 13 th February, 2004. Only the Defendants are seen to be enjoined to obtain such Consent Terms. The Defendants not having obtained the Consent Terms the Plaintiffs obligation to make payments of the remainder of the first half of the construction has not accrued due. 16. Under clause 8 of the said agreement on payment of the earnest, the parties were to execute a formal agreement for sale, which was to form a part of the modified Consent Terms. 51 lakhs were paid prior to the agreement dated 3rd August, 2006 itself. Hence, the requirement to execute formal agreement for sale had accrued on that date itself. 17. Under clause 9 of the said agreement, the Plaintiffs were to be entitled to negotiate with “other member” without varying the terms of the said agreement. This was also only an entitlement and not covenant on the part of the Plaintiffs. 18. Under clause 10 of the said agreement the Plaintiffs could investigate the title of the Defendants and give public notice for such purpose. Under that clause the Defendants 9 informed the Plaintiffs about the legal position of the property; that the taxes were paid, there were no claims or acquisition notice or encumbrance on the property, that they would execute the required documents in favour of the Plaintiffs including a Power of Attorney, that the plans were not sanctioned, that the Plaintiffs would pay the stamp duty and registration charges in respect of the said agreement, the Deed of Assignment to be executed in pursuance thereof, and that both the parties would bear their respective legal costs. The defendants covenated that they would not create any sale, tenancy, sub- tenancy, mortgage, assignment, lease or license or induct any 3rd party in the said property and hold it only for the benefit of the Plaintiffs. 19. The Plaintiffs claim specific performance of that agreement. To that end they claim that the Defendants make out their title and that the Defendants obtain an appropriate order from this Court for modification of the Consent Terms as required to allow the Plaintiffs to construct and to utilize balance potential of the plot by way of TDR. A reading of the agreement shows that the Plaintiffs had to do nothing until these 2 things were done by the Defendants. The title documents had to be produced even before the modification of the Consent Terms. Upon the order of the Court as per the modified Consent Terms in the 10 Writ Petition, the Plaintiffs would be required to perform their part of the reciprocal promises. It is now more than 2 years after the execution of the said agreement. The title documents have been given save and accept that the heirs of one owner who has died have not been shown. No application is made to the Court in the Writ Petition by the tenants. 20. The Plaintiffs have averred their readiness and willingness to perform their part of the contract though the Defendants have not performed their initial part. Mr. Singh on behalf of the Plaintiffs made a statement to Court that the Plaintiffs are ready with the amount payable on filing of the modified Consent Terms. 21. It can be seen that the Plaintiffs have been provided the safety of the modified Consent Terms in the agreement itself. Hence application in that behalf has been made a condition precedent for receipt of 50% of the amount of consideration. It is not known why the Defendants have not applied for such modified Consent Terms to clarify the Plaintiff’s rights and entitlement to take over the obligation of construction which is on the Defendants and to utilize the TDR as the Defendants’ successors and assignees. In the normal circumstances the Defendants would have no difficulty in 11 obtaining such modified Consent Terms to comply with the condition that they are required to perform since the Consent Terms allows the Defendants to buy and utilize the TDR and specifically states that the tenants /occupants would not have any claim against their successors and assignees. It is important to note that the agreement dated 3 rd August, 2006 is inter alia signed by the Petitioner in Writ Petition No.1380 of 2001 being the occupant of shop No.2. However under the Consent Terms the Defendants have undertaken to contribute the cost of construction. That contribution is to be along with Jairam Chawla. The Consent Terms would only require to show the transfer and assignment of the obligations of the Defendants to the Plaintiffs. 22. It is seen that in the Agreement dated 3rd August, 2006 though time has not been made essence for obtaining the TDR, constructing the building by the Plaintiffs or even for payment of the balance 50% of the amount which is to be passed “after” obtaining the CC or the Conveyance, time is made of the essence only in respect of obtaining the order of the Court as per the modified Consent Terms. Under the clause making the time of the essence, only the Plaintiffs have the right to terminate the MOU. 12 23. The Plaintiffs have, therefore, sought to play safe. They have paid the earnest of Rs.51 lakhs. They have thereafter to investigate the title of the Defendants. The Defendants have to make out their marketable title. Thereafter they were to obtain the modified Consent Terms by 30th September, 2006. Though the Defendants have themselves not performed their part of the agreement dated 3rd August, 2006, they have sought to terminate the contract by the termination notice dated 2nd May, 2001. 24. A reading of the contract shows that the termination is clearly without any cause and hence prima- facie void. Consequently the Plaintiff’s claim for specific performance is seen to be prima- facie validly made. 25. It is contended on behalf of the Defendants that the MOU is only an assignment and that the agreement is only a MOU to enter into a further agreement for sale and hence not specifically enforceable. The contention is misconceived. 26. The agreement is to be read as a whole. Under the agreement dated 3rd August, 2006 the Defendants agreed and undertook to transfer and assign not only the right, title and interest in the area of the building, but also the TDR obtainable thereon. They have not agreed to only allow the 13 Plaintiffs to construct. Of course the Plaintiffs will have to put up the construction on the vacant plot where the building once stood. However, the Plaintiffs are not only allowed to construct thereupon as the Contractors of the Defendants. A reading of the agreement shows that the Defendants desired to assign their obligations to the Plaintiffs together with the TDR. Hence there is in terms an agreement for sale of the plot of the Defendants with the TDR. The Defendants are enjoined to further obtain the modified Consent Terms by consent of the parties so that later, the Plaintiffs have no interference or obstruction by any of the occupants or tenants in putting up the construction initially of the building as it was and further construction to the extent of TDR brought on the suit plot. 27. A reading of the agreement shows that it is not only an agreement to enter into an agreement for sale. It is in terms of an agreement for sale itself. It contains all of the covenants that are expected to be made by a Vendor. It requires all of the obligations to be performed by a Vendor in view of the peculiar circumstances of the suit plot. 28. It further requires the obligations by the Plaintiffs also to be performed as are usually to be performed by the purchasers. That consists essentially in making payment of 14 earnest at the time of the execution of the agreement and the balance in 2 equal installments conditional upon specified events, for the first of which time is made the essence. Hence a mere redundant clause specifying that parties will enter into “formal” agreement for sale would not alter the position in law and the rights and obligations of the parties to the agreement. 29. It is further seen that the agreement dated 3rd August, 2006 itself is required to be registered and adequately stamped by the purchaser ; an agreement to enter into an agreement for sale would not require such registration or payment of stamp duty. 30. The agreement requires the Defendants to execute the power of attorney for the development of the property. The grant of an order of specific performance would include a direction in that behalf to allow the Defendants to commence the development. 31. The agreement further itself grants the restraint upon the Defendants from creating any further rights in the suit property. Nothing further need be executed despite clause 8 of the agreement. Of course the Plaintiffs would require to pay stamp duty to get the agreement registered to obtain the 15 final reliefs in the suit basing their claim upon the agreement dated 3rd August, 2006. 32. A prima- facie case for grant of relief of injunction as specified in the last clause of the agreement requires to be granted. 33. Mr. Kapadia argued that the balance of convenience is in favour of the Defendants, because the Defendants have to perform their obligation under the Consent Terms dated 13 th February, 2004. These Consent Terms have been filed 4 ½ years ago. The Defendants have not even commenced construction. They have not exerted to obtain the CC and this is despite the agreement between the parties, which became an order of the Court, requiring the BMC to co- operate inter alia in that behalf. In fact allowing the Plaintiffs the right to construct as granted under the agreement dated 3rd August, 2006 would bring that stalemate to an end. It would, therefore, enure for the benefit of not only the parties to the agreement - the Plaintiff being able to utilize the TDR and the Defendants being able to be relieved of their obligation to construct and to obtain the agreed consideration under the agreement - but also for the tenants and occupants who would have a renewed hope of getting their collapsed premises re-constructed free of 16 cost. 34. A case for grant of injunction is made out. Notice of Motion is made absolute in terms of prayer clause (a). The Defendants shall not create any 3rd party rights by way of sale, transfer, lease or release or in any other manner in respect of the suit plot of land. (SMT. ROSHAN DALVI,J.)