( 1 ) IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO.245 OF 2006 NO.245 OF 2006 NO.245 OF 2006 IN IN IN SUIT SUIT SUIT NO.1414 OF 1979 NO.1414 OF 1979 NO.1414 OF 1979 1.New Era Fabrics Pvt. Ltd. A Company Registered under the Provisions of the Companies Act 1956, having it’s registered office at Moghul Lane, Tulsi Pipe Road, Matunga, Bombay 400 016. 2.Progressive Exports Pvt.Ltd. A Company registered under the provisions of the Companies Act, 1956 having it’s registered office at Bajaj Bhavan, Nariman Point, Bombay 400 020. .. Appellants V/s 1.Nandkishor Lalbhai Mehta of Bombay, Indian Inhabitant Residing at 301, Jupiter Apartment Cuffe Parade, Bombay 400 005. 2.Concord Motors Ltd. a Company registered under the Companies Act, having it’s registered office at "D" Block, Shivsagar Estate, Dr.Annie Besant Road, Worli, Bombay 400 018. .. Respondents Mr.M.M.Vashi with Mr.Sean Wasoodew for the Appellants. Mr.Hiralal Thakkar, Sr.Advocate with Ms.Mamta Sadh with Mr.F.Saiyed with Mr.D.Khanapurkar, i/b. M/s.Manilal Kher Ambalal & Co. for the Respondent. CORAM CORAM CORAM : DR. S. RADHAKRISHNAN & : DR. S. RADHAKRISHNAN & : DR. S. RADHAKRISHNAN & A. A. A. V. NIRGUDE, JJ. V. NIRGUDE, JJ. V. NIRGUDE, JJ. DATED DATED DATED : 6TH MAY, 2008. : 6TH MAY, 2008. : 6TH MAY, 2008. JUDGMENT JUDGMENT JUDGMENT : (Per A.V.Nirgude, J.) : : (Per A.V.Nirgude, J.) : : (Per A.V.Nirgude, J.) : 1. The original defendant Nos.1 and 2 filed this ( 2 ) appeal against the Judgment and Decree dated 12th December, 2005 passed by the learned Single Judge in Suit No.1414 of 1979 whereby the learned Single Judge decreed suit of the Respondent No.1 (original plaintiff) for specific performance. The Respondent No.2 is the original Defendant No.3, who is a formal party. 2. The suit property can be briefly described as a two adjoining plots of land with certain structures thereon situated at Mahim (West), Mumbai. The total area of the plots is approximately 11000 sq.meters and is used as a manufacturing and processing of Art Silk Fabric Unit. The case of the Respondent No.1 (original plaintiff) can be narrated in short as under: 3. One Ardeshir Baria and his wife Monika Baria originally owned this property. On 13th August, 1958 Ardeshir died leaving behind his wife Monika and one Smt.Piloo Antia as his only legal heirs and representatives. He left a Will which was probated in favour of Smt.Monika and Smt.Piloo Antia on 8th July, 1974. 4. On 3rd January, 1976, Monika Baria died leaving her last Will and Testament etc. appointing Smt.Piloo Antia to be the sole executrix of the Will. Piloo Antia thus became the owner of the entire property. ( 3 ) 5. During the life time of Ardeshir and Monika Baria they leased the property on 23rd December, 1938 to one M/s.Ratanchand Nanachand and Tarachand for a period of 999 years on certain terms and conditions set out on the lease deed. M/s.Tarachand Ratanchand on 6th February, 1941 granted lease of the property for 10 years to the one New Era Textiles Pvt. Ltd. on certain terms and conditions set out in the lease deed. On 29th November, 1951 Ratanchand granted another lease for a period of 15 years in favour of them. (While this lease was subsisting the Appellant No.1 was incorporated on 10th September, 1956). New Era Textiles Pvt. Ltd. then had sub-let the suit property to the Appellant No.1 on a monthly tenancy basis. 6. In the next few years, Ratanchand died. In 1968, the heirs and legal representatives brought a suit being Suit No.236 of 1968 against the Appellant No.1 seeking their eviction etc. On the other hand, the Appellant No.1 also filed a suit against heirs and legal representatives of Ratanchand Navalchand in the Court of Small Causes at Mumbai being Suit (Stamp) No.5474 of 1968 for a declaration that they were the lawful tenants with effect from 1st October, 1956. This litigation came to an end on 6th July, 1977. Both the suits came to an end with the parties filing appropriate consent terms, and obtaining a decree thereon. ( 4 ) 7. On 11th August, 1977 the above mentioned Piloo Antia the sole owner of the suit property agreed to sell the same to the Appellant No.2 the original Defendant No.2 subject to original lease dated 23rd December, 1938. A few days before 19th October, 1977 negotiations ensued between the appellants and th respondents whereby the appellants expressed their desire to sell the suit property to the Respondent No.1. An agreement was recorded on 19th October, 1977 and certain terms and conditions were recorded. 8. The salient features of the said agreement are as under : (i). The appellants agreed to sell the property for a lump sum amount of Rs.78,06,600/-. Rs.11,50,000/- was to be paid as earnest money as under : (ii). Rs.7,50,000/- was to be paid on confirmation of the agreement dated 19th October, 1977 by the Appellants and the balance to be paid on or before 23rd October, 1977. A sum of Rs.7,50,000/- was to be utilised by the Appellant No.1 to secure the consent terms in the pending High Court Suit No.236 of 1968 and also consent terms were to be recorded in the suit pending in the Court ( 5 ) of Small Causes at Mumbai. (iii). 50% of the entire consideration would be paid after the appellants secure permissions under sections 22 and 27 of the Urban Land Ceiling and Regulation Act, 1876 (hereinafter referred to as "the said Act") and after having duly settled with the labour union and obtained labour authorities’ permission. Thereafter the possession of the property would be handed over to the Respondent No.1. (iv). Remaining 50% consideration would be paid by equal quarterly instalments within one year from the date of delivery of possession. (v). Sale of the property would be subject to permissions being obtained under sections 22 and 27 of the said Act. The sale was also subject to the appellant’s being able to settle with their labour and they agreeing for the sale of the said property. (vi). Necessary permission should be obtained for change of user from Industrial use to Residential use. ( 6 ) 9. If no objection certificate under the Act and change of user and permissions were not obtained within the period of 9 months from the date of the agreement and if the appellants were unable to settle with the labour and get their consent for sale, the Respondent No.1 purchaser would not be bound to complete the sale and the seller will be liable only to the extent of return of the earnest money which would be paid back on the expiry of 9 months with interest at the rate of 18% p.a. Until such an amount is paid back to Respondent No.1, the Appellants would not be entitled to alienate the property or create any third party rights. 10. In order to secure the repayment of the amount of Rs.11,50,000/- the Appellants would hypothecate the machineries installed at the suit property on 24th October, 1977 and after execution of the agreement and the amount of Rs.7,50,000/- was handed over. 11. The Appellants accordingly handed over this amount to the heirs and LRs of Tarachand Ratanchand and Navalchand. The Respondent No.1 thereafter on 24th October, 1977 handed over Rs.4,00,000/- to the Appellant. As stated above, the suits between the Appellant No.1 and heirs and LRs of Tarachand and Ratanchand were compromised by a consent decree on 7th November, 1977. ( 7 ) 12. On 16th November, 1977 the Respondent No.1’s advocate requested the Appellants to take further steps and forwarded required letters by the Authorities permitting change of user from industrial user to residential user. The Appellants through their advocates intimated Mill Mazdoor Sabha, the Labour Union working on the suit property and requested them to give their consent to sell the said suit property. On 5th December, 1977 Mill Mazdoor Sabha by their letter inter alia stated that they were not agreeable for the sale of the said property. 13. The Appellants thereafter intimated this fact to the Respondent No.1 vide letter dated 15th December, 1977 and stated that the agreement stood cancelled and they would return the amount of Rs.11,50,000/- with interest. The Respondent No.1 and his advocates immediately orally as well as through letters requested the Appellants to hold meetings of the parties to consider the effects of the letter, but the Appellants started taking steps for withdrawing their applications for change of user etc. 14. On the other hand, the Respondent No.1 and his advocate requested the Appellants to hold meeting with them. Despite requests of the Respondent No.1 and their advocate the Appellants continued their stand and stated that the agreement stood cancelled and they would return ( 8 ) the earnest amount. 15. On 9th February, 1978 the Appellant’s advocate sent a bank draft of Rs.1,00,000/- to the Respondent No.1 purporting to be part payment of the earnest amount. 16. The Respondent No.1 and his advocate sent reply on 10th February, 1978 pointing out that the agreement was valid and subsisting and the same was not cancelled and the same cannot be unilaterally cancelled. They thus sent a draft of Rs.1,00,000/- back to the advocates of the Appellants. In the meantime, Mill Mazdoor Sabha addressed another letter stating that their decision was final. The Respondent No.1 feeling aggrieved by this stand of the Appellants instructed their advocate to publish a public notice in the newspaper on 16th February, 1977 pointing out that the Appellants had agreed to sell the property and the agreement was valid and subsisting. 17. On the other hand, the Appellants also published notice in the newspaper stating that the agreement was cancelled. The Respondent No.1 said that during this period various attempts were made to amicably settle the matter but, they did not fructify. Nothing further could be done in the matter. ( 9 ) 18. On 19th April, 1978 the Respondent No.1 through his advocates letter stated that he would give up the benefit of stipulation under the agreement and expressed his willingness to complete the sale although the labour union did not agree for the said sale. But the appellants did not accept this. The Respondent No.1 asserted that he was ready and willing to perform his part of the agreement. He said that the Appellant ‘instigated’ the labour union not to give its permission to the sale and there was collusion between them and the appellants were trying to back out from the agreement on false pretext dishonestly and wrongfully. He demanded specific performance of the agreement by filing this suit. He also stated that due to the breach of the agreement he has suffered loss which he estimated at Rs.78,06,500/- and said that he is entitled to recover the amount as and by way of damages. 19. Following reliefs were sought in the suit : (a). Specific performance of the agreement with delivery of vacant possession etc. In the alternative and in the event in the Court not granting specific performance of the agreement, declaration that a sum of Rs.12,68,000/- is due and payable by the appellants with interest at the rate of 18% on Rs.11,50,000/- and for a further declaration ( 10 ) that the said amount is secured by charging on hypothecated machineries. In the event of default of payment, the hypothecated machineries be sold, monies be paid to Appellant and that there shall be a decree for recovery of Rs.78,06,600/- along with 6% interest. (b). The Appellant filed their written statement and took up the stand as under : 20. They admitted having agreed to sell the property to the Respondent No.1 but stated that the entire amount of Rs.11,50,000/- was handed over to only the Appellant No.1 and the Appellant No.2 did not receive any amount. As regards the allegation about collusion between the Appellant No.1 and the labour union, they stated as under : (a) On 19th October, 1997 when the agreement was arrived at, the Respondent No.1 was personally present, he was asked whether the Appellant No.1 should immediately start negotiations with the labour union for their consent for the sale. The Respondent No.1 stated in reply that he did not desire to start negotiations with the labour at that time. On 4th November, 1977 Respondent No.1 ( 11 ) met the Appellant’s Advocate and requested him to take up the question of settlement with the labour and obtain their consent. Thereupon the Appellant No.1 through their letter dated 8th November, 1977 requested the labour union to give its consent for the sale. The Assistant General Secretary of the labour union by his letter dated 19th November, 1977 requested the Appellant No.1 to furnish him copy of the agreement. Accordingly, such a copy was sent to the union. The representative of the union then requested the Appellant No.1 to fix a meeting for discussing the matter and such a meeting was held on 29th November, 1977 at 2 p.m. After the meeting, the representatives of the union sent a letter dated 5th December, 1977 informing the first Appellant that the labour union was not agreeable to the transaction of sale. 21. The Appellants in view of these steps sent their letter dated 15th December 1977 to the Respondent No.1 stating that the agreement was cancelled and they were willing to retain the earnest amount along with interest. They admitted that thereafter the Respondent No.1 and his advocate requested them to fix meeting of the parties. They said accordingly on 9th January, 1978 a meeting with the labour union was held. They said that the matter was discussed with the representatives of the union but, on 10th January, 1978 the labour union ( 12 ) recorded that they were not agreeable to the sale. They specifically mentioned that although the Respondent No.1 and his advocates were suggesting through their correspondence that negotiations between the parties was on, they stated that there were no negotiations going on between the parties and even with the labour union. They said that their advocate accordingly informed this fact to the Respondent No.1. They denied that the agreement was subsisting and cannot be unilaterally cancelled. They stated that since the agreement stood cancelled and terminated, there was no question of change of user of the suit property etc. They thus denied the allegation about dishonest manipulation and collusiveness. 22. In view of these rival pleadings, issues were framed and the parties then exchanged the documents. The learned Single Judge then recorded the oral evidence and gave his findings that the Respondent No.1 purchaser was entitled to waive the condition of settlement with the labour and obtain their consent for sale and that condition was to the benefit of the purchaser. He also found that the Appellant No.1 and the labour union had collusion and thereby the Appellant No.1 found a false pretext to back out of the agreement and thereby committed breach of the agreement. 23. The learned Judge decreed the suit in terms of ( 13 ) prayer (a) and thereby directed the Appellants to specifically perform the agreement and to execute the conveyance etc. The learned Judge further directed the Appellants for securing permission under sections 21 and 22 of the Ceiling Act and also for getting permission for conversion from commercial use to residential use of the suit property within 8 weeks from the date of the judgment. The learned Judge further contemplated that in the event anyone of the permissions not being granted, the Appellants shall pay Rs.12,67,100/- alongwith interest at 18% on Rs.11,50,000/- to the Respondent No.1 and shall also pay a sum of Rs.78,06,600/- alongwith interest at 6%. 24. Having heard both the learned Counsel for the parties, the following points arise for our consideration: (i) Did the Respondent No.1 prove that with the collusive help of the labour union, the Appellant No.1 malafide engineered the objection of the labour union for the sale? (ii) Whether the Respondent No.1 was entitled to rely on the circumstances, facts and documents which are not part of the pleadings? (iii) Was it possible for the Respondent No.1 to ( 14 ) waive the condition of settlement with the union and its consent etc. for the sale? (iv) Whether it is a fit case for grant of specific performance? 25. From the tenor of the pleadings especially the pleadings of the Respondent No.1, it is seen that the grievance was in respect of the Appellants hasty decision to back out of the agreement and it is suggested that probably the labour union did not refuse to give its permission for the sale transaction and that there was probably collusion between the Appellant No.1 and the labour union. As against this, the Appellants in their pleadings stated that the Respondent No.1 initially was not keen to start negotiations with the labour union for obtaining their consent. 26. They further took up a stand that they made several attempts to negotiate with the labour union but the union refused to give their consent. 27. At the pleadings level, the Respondent No.1 did not say that he or his advocate or representative made any attempt to meet the representative of the labour union and to deal with them directly for obtaining their consent. Although there is an indication that there were meetings between the representatives of the labour ( 15 ) union and the representatives of the Appellant No.1 it is no one’s case in the pleadings that the Respondent No.1 was present in such a meeting. 28. In this factual background of the pleadings, it was quite a task for the Respondent No.1 to prove that there was collusion between the Appellant No.1 and the labour union and that the Appellant No.1 procured false documents indicating that the union did not give consent for the sale. 29. With this background in mind one has to read and appreciate the evidence of the Respondent No.1. The Respondent No.1 took a very peculiar stand when he filed his affidavit of documents firstly only 18th February, 1988 and secondly on 28th July 1999 and this stand is reflected in his oral evidence also. As stated above, the Respondent No.1 had a lurking doubt about the refusal of the labour union. He said so in Paragraph 38 of his deposition. But, what he added in Paragraph Nos.43 to 48 gives a completely different picture than what is stated in the pleading. He stated that after filing of the suit in 1987 Mr.M.P.Agarwal who was the director of the Appellant No.1 came to his house and had a talk with him. From this talk, he said, he realised that Mr.Agarwal had a dispute with the other director of the Appellant No.1. He said Mr.Agarwal handed over to him a file of documents which contained the ( 16 ) correspondence between the Appellant No.1 and the labour union. He stated that he then realised that the Appellant No.1 had cheated him because the market value of the property had gone up. He also learnt from the documents that the Appellant No.1 were planning to shift the factory outside Mumbai and thereby providing alternative employment to the workers. He said that there was also occasion for the Appellant No.1 to pay the full legal dues to the workmen who did not want to shift to the alternate work place. He said that he was also shocked to find out that some of the letters addressed by the labour union to the Appellant No.1 were doctored and altered before the same were forwarded to him. He asserted that two letters of the union dated 5.12.1977 and 10.1.1978 were doctored and altered. So saying he produced these two letters which he received from Mr.M.P.Agarwal. He also mentioned that there was a letter of the labour union dt. 27.5.1982 in which the union has clearly stated that they had no objection for sale of the suit premises. He said that vide his letter dated 11.11.2002 he called upon the President/General Secretary of the labour union to verify the correctness of the signature of Mr.D.G.Phatak on various letters which he signed as Assistant General Secretary of the labour union. Pursuant to his request Mr.Vasant Gupte President, Krishna Tulpule and others visited his office on 25.4.2002. He then showed the original letters dated 10.1.1978, 27.5.1982 and 10.6.1982 to them. He said ( 17 ) after perusal of the letters, Mr.Gupte stated to him that the letters were genuine and bore the signatures of late Mr.G.K.Phatak. He said that Mr.Vasant Gupte then recorded this fact by his letter dt.26.11.2002. He produced the said letter on record also. It is very vital to note that none of the above facts were pleaded in the plaint, by amending the plaint. 30. We should first deal with the second point for consideration mentioned above as to whether the learned Judge was in error in recording this part of the evidence, taking the documents on record and reading these documents as proved documents. 31. What happened after filing of the suit and the parties completed their pleadings should generally be kept out of the record of a suit. It is the case of the Respondent No.1 that in 1987 precisely in May 1987 one Mr.M.P.Agarwal one of the Directors of the Appellant No.1 Company came to him and handed him over certain documents. These documents according to the Respondent No.1 were original correspondence, letters of the labour union received by the Respondent No.1 at the relevant time. Comparing these documents with the copies of some of the documents which the Appellant No.1’s Advocate sent to the Respondent No.1’s advocate before filing of the suit, it was noticed that copies of the letters were incomplete and misleading. For the purpose of this ( 18 ) discussion, we would assume that there is substance in this allegation and we would also assume that the newly discovered documents would strengthen the case of the Respondent No.1 on facts. The question is whether these documents and the new fact that Mr.M.P.Agarwal had handed over the file of documents to the Respondent No.1 after filing of the suit etc. should be allowed to go on record in evidence. The answer appears to be in the negative. It was necessary for the Respondent No.1 to mention these facts first in his pleadings. He should have placed raliance on the relevant newly discovered document only after an amendment to the pleadings could have been allowed. This means that the new factual angle of the Respondent No.1’s case which began in May 1987 with te meeting between the Respondent No.1 and Mr.M.P.Agarwal should have been properly pleaded and thereby informed to the Appellant. Had that been part of the Respondent No.1’s pleading they would have certainly got an opportunity to deal with this part of the case. They could have denied or they could have offered their explanation to these facts. They could have improved their written statement to that extent. 32. It cannot be said that this factual aspect of the Respondent No.1’s case is only an elaboration of his original case. 33. What is surprising is further part of the ( 19 ) Respodnent No.1 case. He said that after taking the documents in his control he then contacted the office bearers of the labour union in 1987 as late as in June 1987 and in return the labour union also send their letter to him clearly stating that they had consented for closure of the factory etc. provided the workers were paid their legal dues etc. and he then placed reliance on his letter dated 9th June 1987 and the labour union’s original letter dated 10th June, 1987. 34. What happened between the Respondent No.1 on one