1 mst IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1642 OF 1984 Kanchan Gopal Rohira, R/o.F-144, Prem Nagar, Thane 400 063. Plaintiff VERSUS 1. Nirman Construction Pvt.Ltd., Haresh Chambers, 313/319, Samuel Street, Mumbai 400 003. 2. Girish Chiranjilal Jalan, Flat No.G-11/15, Rani Sati Nagar, S.V.Road, Malad (W), Mumbai-64. 3. M/s.Ravi Overseas Corporation, 76, Warden Road, Prabhat, Mumbai-400 026. 4. Suresh Bhagwandas Dhoot, Flat No.G-11/15, Rani Sati Nagar CHS Ltd; S.V.Road, Malad (W), Mumbai 400 064. Mr.Shailesh Shah a/w Ms.Mohana Nair a/w M.N.R.Jagtap i/by N.Jagtap & Co. for Plaintiff. Mr.Mihir Desai a/w Mr.Amit Shete a/w Mr.Amit Shastri for defendant no.4. CORAM : A.S.OKA, J. DATE OF RESERVING THE JUDGEMENT : 19th December 2009 DATE OF PRONOUNCING THE JUDGEMENT : 14th January 2010 JUDGEMENT :- 1. The plaintiff has filed the present suit, inter alia, praying that the 2 termination of the agreement for sale dated 9th January 1977 made by the first defendants is illegal, bad in law and not binding on the plaintiff. A declaration is also claimed that the said agreement is valid and subsisting. Apart from other prayers made, there is a prayer for decree for specific performance of the said agreement. 2. The first defendant company is a builder and developer. By an agreement dated 9th January 1977 (hereinafter referred to as `the suit agreement') executed by the first defendant and the plaintiff, the first defendant agreed to sell Flat No.15 on the fourth floor of building no.11 more particularly described in paragraph 2 of the plaint. The said flat is hereinafter referred to as `the suit flat'. Total consideration was agreed to be Rs.26,000/-. A sum of Rs.5,000/- was to be paid as earnest money on the date of execution of the suit agreement. The balance amount was to be paid by installments of Rs.5,500/-, Rs.5,000/-, Rs.5,000/- and Rs.500/- respectively. The second last installment of Rs.5,000/- was payable on or before 7th April 1977 and the last installment of Rs.500/- was payable against delivery of possession of the suit flat. According to the plaintiff, the suit agreement was lodged for registration on 14th March 1977. The possession was to be delivered on or before 30th May 1977. After execution of the suit agreement, on 10th June 1977 some of the share holders of the first defendant company filed a petition in this Court under sections 397, 398, 402 and 403 of the Companies Act, 1956. On 4th March 1980 consent terms were filed in the said company petition. A reference was made in the consent terms to the suit agreement as well as 3 to the other agreements executed by the first defendant in favour of the flat purchasers. In the consent terms, the agreed consideration was wrongly mentioned as Rs.31,000/- instead of Rs.26,000/-. The consent terms showed that sum of Rs.10,500/- has been paid by the plaintiff in respect of the suit flat. According to the case of the plaintiff, after the settlement, she inquired with the first defendant about the date on which possession will be handed over. At that time the first defendant wrongfully demanded from the plaintiff a sum of Rs.10,000/- out of which a sum of Rs.5,000/- was to be paid in cash to the first defendant. According to the plaintiff, the first defendant informed the plaintiff that unless the plaintiff pays a sum of Rs.5,000/- by cheque and a sum of Rs.5,000/- in cash over and above the agreed consideration of Rs.26,000/-, the first defendant would not accept any further amount from the plaintiff and would terminate the suit agreement. It is contended by the plaintiff that though she offered the balance consideration on several occasions to the first defendant, the same was not accepted on the ground that the payment should be made as suggested by the first defendant. 3. By letter dated 30th September 1981 the first defendant alleged that the plaintiff had failed and neglected to pay the balance purchase price and take possession of the suit flat. By the said letter the first defendant purported to terminate the suit agreement and to forfeit the sum of Rs.10,500/- paid by the plaintiff. The plaintiff replied to the said letter by her advocate's letter dated 18th November 1981. It was pointed out in the said reply that the first defendant had not made enough progress in the 4 construction and, therefore, question of making payment of full consideration did not arise. The plaintiff contended that the action of termination and forfeiture was illegal. The plaintiff forwarded a cheque of Rs.5,000/- towards purchase price of the suit flat along with the said reply. The first defendant responded by letter dated 26th November 1981 informing the plaintiff that the building in which the suit flat is situated was complete and possession of all other flats in the said building was handed over to the respective buyers. It was contended that the suit flat was already sold to another buyer. Along with the said letter, the first defendant returned the cheque of Rs.5,000/-. 4. By advocate's letter dated 3rd December 1981 the plaintiff pointed out that the first defendant cannot unilaterally terminate the suit agreement for sale. By the said letter the plaintiff called upon the first defendant to disclose the name and address of the alleged purchaser of the suit flat and also the consideration paid by the alleged purchaser. The plaintiff forwarded a cheque in the sum of Rs.15,500/- representing the balance purchase price in respect of the suit flat. The first defendant along with its advocate's letter dated 15th March 1982 returned the said cheque of Rs.15,500/- and reiterated that the suit flat has been sold to someone else. According to the plaintiff, the first defendant never informed the plaintiff about completion of the construction of the suit flat. It was alleged in the plaint that the first defendant has committed breach of the suit agreement. It was alleged that the second defendant was illegally and unlawfully residing in the suit flat as a representative of the 5 first defendant. It is alleged that inspection of the agreement between the first and second defendants was not given to the plaintiff. Therefore, a suit for specific performance was filed by the plaintiff. 5. During pendency of the suit, an amendment was carried out and third and fourth defendants were impleaded as parties. In the amendment it was stated that during pendency of the suit the first defendant informed the plaintiff that the suit flat has been sold by the said defendant to the third defendant by an agreement dated 18th November 1981 which has been duly registered. It is alleged that the third defendant was placed in possession of the suit flat. The plaintiff stated that the second defendant informed her that he was an employee of the third defendant. It is stated in the plaint that on 18th November 1981, the plaintiff's advocate addressed a letter to the first defendant enclosing a cheque for Rs.5,000/- and on the very day the first and third defendants have allegedly executed the agreement for sale. It is pointed out that though along with letter dated 26th November 1981 a cheque of Rs.5,000/- was returned by the first defendant, the execution of the agreement dated 18th November 1981 was not disclosed in the said letter by the first defendant. It was alleged in the plaint that the alleged agreement dated 18th November 1981 was in fact executed on or before 17th March 1982 and was immediately lodged for registration. It was alleged that no consideration has been passed between first defendant and the third defendant and the consideration amount mentioned in the said agreement was never received by the first defendant from the third defendant. It was contended 6 that the partners of third defendant firm are closely related to one of the directors of the first defendant and in fact the third defendant can be said to be a sister concern of the first defendant company. 6. After the first amendment was carried out, a Notice of Motion taken out by the plaintiff came up for hearing before this Court on 14th March 1986 in which the plaintiff had applied for appointment of Court Receiver in respect of the suit flat. On that day a query was made by this Court to the counsel appearing for the third defendant as to whether the said defendant was willing to give an undertaking that till final disposal of the Notice of Motion he will not deal with or dispose of the suit flat. The learned counsel expressed inability to give such an undertaking as no one on behalf of the third defendant was present. When Notice of Motion was came up on 5th September 1986 this Court suggested that parties should explore possibility of settlement and the Notice of Motion was adjourned to 11th September 1986. Before the next date of hearing , an affidavit of the third defendant was served to the advocate for the plaintiff stating that by an agreement for sale dated 12th May 1986 the suit flat has been sold to the fourth defendant. In the second amendment carried out thereafter in which it is contended that the transfer of the suit flat by the third defendant to fourth defendant is a sham and bogus transaction. It was contended that the fourth defendant was related to a partner of the third defendant. It is alleged by way of amendment that the third defendant had no title and, therefore, the said defendant had no right to transfer the suit flat. Apart from the reliefs which are pointed out earlier, there is a 7 declaration claimed as regards transactions between the first and third defendant and third defendant with fourth defendant. 7. The fourth defendant filed a written statement. He claimed that he was a Chartered Accountant and was a Lecturer in a college of commerce in Mumbai for a period of twenty years. The contention in short is that he is a bona fide purchaser of the suit flat without notice of the suit agreement. He contended that he has purchased the suit flat from the third defendant under sale deed dated 12th May 1986 for valuable consideration of Rs.1.40 lakhs and he has paid the entire consideration by cheques in the amounts of Rs.1.30 lakhs and Rs.10,000/- respectively. His contention is that he filed Form No.37EE with the Income Tax Department along with a copy of agreement for sale. It is pointed out that the agreement was lodged for registration and after payment of additional stamp duty the same has been duly registered. It is pointed out that a co- operative society of the flat purchasers of the building has been formed and the society had issued a share certificate in the name of third defendant and after purchase by the fourth defendant, the share certificate has been transferred in his name. The fourth defendant submitted that the suit was barred by limitation. It was contended that the suit agreement between the plaintiff and the first defendant has been validly terminated by the first defendant. It is submitted that the suit has no merit and the same be dismissed. 8. On 4th December 2007 when the suit was set down on board for 8 settlement of issues, an application was made orally on behalf of first defendant for permission to file the written statement. The said application was rejected and this Court proceeded to settle the issues which read thus :- (1) Whether the Plaintiff proves that she was always ready and willing to perform her part of the obligations under the Agreement for Sale dated 9th January 1997? (2) Whether the Plaintiff proves that the notice of termination dated 30th September, 1981 is illegal and bad in law as alleged in para 13 of the Plaint? (3) Whether Defendant Nos.3 and 4 prove that they are bonafide purchasers without notic? (4) Whether Defendant No.4 proves that this Honourable Court has no jurisdiction for the reasons alleged in para 7 of his written statement? (5) Whether the suit agreement is registered as alleged in paragraph 2 of the Plaint? (6) What receipts is the Plaintiff entitled to? (7) What order? 9. Thereafter evidence of the plaintiff was recorded by the Court Commissioner. The fourth defendant also adduced evidence. The learned counsel for the plaintiff submitted that the execution of the suit agreement by the first defendant has been admitted. He pointed out that the suit agreement has been duly registered in the office of Sub Registrar on 15th December 1978. He invited my attention to the terms and conditions incorporated in the agreement. He pointed out that last installment of consideration was payable at the time of handing over possession of the suit flat and the possession was agreed to be handed 9 over on or before 30th May 1977. He submitted that in the company petition consent terms were filed on 4th March 1980. He pointed out that the annexure to the consent terms clearly shows that the suit agreement was valid and subsisting till that date and a sum of Rs.10,500/- was received by the first defendant. He pointed out that the total consideration was erroneously mentioned as Rs.31,000/-. He submitted that the fact that the said agreement was treated as subsisting on 4th March 1980 shows that time was never the essence of the contract. Inviting my attention to the letter dated 30th September 1981 he submitted that prior to issuing the said letter the first defendant never informed the plaintiff about progress of the construction and never called upon the plaintiff to pay the balance consideration. He submitted that the first defendant never made the time essence of the contract. He submitted that even in the said letter the first defendant has not stated that the suit flat was ready. He pointed out that the reply dated 18th November 1981 was sent by the advocate for the plaintiff to the first defendant enclosing therewith with a cheque in the sum of Rs.5,000/-. He pointed out that in letter dated 26th November 1981 sent by the first defendant to the advocate for the plaintiff, a vague statement was made that the suit flat has already been sold to another buyer. He pointed out that along with letter dated 3rd December 1981 sent by the advocate for the first defendant addressed to the first defendant a cheque in the sum of Rs.15,500/- representing the entire balance consideration was forwarded to the first defendant. He pointed out that though the plaintiff called upon the first defendant to disclose the name and other particulars of the buyer, in letter dated 15th 10 March 1982, the first defendant did not disclose even the name of the buyer and for the first time came out with a case that the construction of the building was complete and occupation certificate was granted on 22nd July 1981. 10. The learned counsel for the plaintiff stated that to the notice of motion filed by the plaintiff a reply was filed by the first defendant on 19th October 1984 contending that by agreement dated 18th November 1981 the first defendant agreed to sell the suit flat to the third defendant. The case of the first defendant is that the said agreement was lodged for registration on 17th March 1982. He submitted that significantly the date of the agreement and the name of the buyer has not been disclosed by the first defendant in its reply dated 26th November 1981 as well as 15th March 1982. He pointed out that the alleged agreement was lodged for registration on 17th March 1982 i.e. after the plaintiff forwarded a cheque in the sum of Rs.15,500/- to the first defendant along with letter dated 15th March 1982. He submitted that it is, therefore, obvious that the agreement dated 18th November 1981 has been created after receiving the letter dated 15th March 1982. He pointed out that after the aforesaid contention was raised by the first defendant, the plaintiff amended the plaint and impleaded third defendant as a party. He pointed out that thereafter the plaintiff had taken out a fresh notice of motion for interim relief. He stated that the notice of motion was adjourned from time to time at the instance of third defendant. He pointed out that adjournments were sought by the counsel for the third defendant on 14th March 1986 and 11 25th July 1986. He pointed out that on 5th September 1986 the notice of motion was adjourned for settlement. He stated that even on that day it was not pointed out that the third defendant had allegedly sold the suit flat to the fourth defendant on 12th May 1986. He stated that the said fact was disclosed in the reply filed by the third defendant to the notice of motion which was served to the plaintiff on 9th September 1986. 11. He submitted that in any event the alleged agreement between the first and third defendants is not proved. He submitted that the third defendant has not chosen to contest the suit. He pointed out that in any event, the fourth defendant has not proved that he is a bona fide purchaser without notice of the suit agreement. He submitted that the fourth defendant has admittedly not taken any search. He pointed out that the suit agreement was lodged for registration on 14th March 1977 and was registered on 15th December 1978. He submitted that the fourth defendant shall be deemed to have constructive notice of the suit agreement. He invited my attention to the cross examination of the fourth defendant and submitted that the cross examination shows that the fourth defendant is not a bona fide purchaser. He submitted that the fourth defendant has taken the suit flat during pendency of the suit. He submitted that the agreement dated 12th May 1986 allegedly executed in favour of the fourth defendant is naturally subject to the rights created in favour of the plaintiff under the suit agreement. He submitted that in view of section 19(b) of the Specific Relief Act, 1963 (hereinafter referred to as "the said Act"), the plaintiff is entitled to enforce the suit claim even 12 against the fourth defendant. He placed reliance on decisions of the Apex Court in case of Mademsetty Satyanarayana Vs. G. Yelloji Rao and others (AIR-1965-SC-1405) and Ramesh Chandra Chandiok and another Vs. Chuni Lal Sabharwal (dead) by his legal representatives and others (AIR-1971-SC-1238). He submitted that the plaintiff is entitled to a decree for specific performance of the suit agreement. 12. The learned counsel for the fourth defendant submitted that the plaintiff had never shown her readiness and willingness to comply with the terms and conditions of the agreement. He pointed out that as per the terms and conditions of the suit agreement the plaintiff has paid consideration of Rs.10,500/- and has thereafter not paid the installments payable on 7th February 1977, 7th March 1977 and 7th April 1977. He submitted that after receiving the notice of termination, the plaintiff forwarded a cheque only in the sum of Rs.5,000/- along with the reply dated 18th November 1981. He submitted that this itself proves that the plaintiff was not ready and willing to pay the balance consideration even in November 1981. He pointed out that the entire balance consideration was offered by the plaintiff on 3rd December 1981. He pointed out that there is no correspondence made by the plaintiff at any stage after the date of execution of the suit agreement calling upon the first defendant to comply with the terms and conditions of the agreement. He submitted that the plaintiff has slept over the matter. He submitted that the plaintiff has not adduced any evidence to show that any time prior to 30th September 1981 the plaintiff had offered the balance consideration to the 13 first defendant. Inviting my attention to the evidence of the plaintiff and in particular her cross examination he submitted that the plaintiff could not establish that any attempt was made by her to tender the balance consideration as per the terms and conditions of the suit agreement. He pointed out that the fourth defendant has acquired the suit premises for valuable consideration of Rs.1.30 lakhs. He stated that stamp duty of Rs. 14,000/- has been paid by the fourth defendant. He submitted that the fact that the aforesaid amounts were paid by the fourth defendant has been duly established by various documents produced by the fourth defendant. He submitted that the amount of Rs.1.30 lakh was paid by three cheques to the third defendant as evidenced by the certificate issued by State Bank of Indore which is at Exhibit-D-3. He submitted that the agreement dated 18th November 1981 executed by the first defendant in favour of third defendant has been duly registered. He pointed out that the same was lodged for registration on 17th March 1982. He pointed out that even the share certificate has been transferred by the society in favour of the fourth defendant. He stated that the fourth defendant has produced voluminous record to show that the fourth defendant is actually residing in the suit premises from May 1986. He submitted that the documents prove that on 22nd June 1986 he started residing in the suit flat. 13. He submitted that apart from the fact that the plaintiff has not shown readiness and willingness to comply with his part of suit agreement, it will be unjust to the fourth defendant if at this stage in the 14 year 2009 a decree for specific performance is passed in favour of the plaintiff. He submitted that this is a fit case where discretion under section 20 of the said Act of 1963 has to be exercised against the plaintiff considering the conduct of the plaintiff. He placed reliance on decision of this Court in the case of Smt.Shyamabai w/o. Shriram Sharma (deceased through LRs.) Vs. Ramkisan s/o Prabhatilal Mittal (2008(3)-ALL M.R.-189). He relied upon a decision of the Apex Court in the case of His Holiness Acharya Swami Ganesh Dassji Vs. Sita Ram Thapar [(1996)4- SCC-526]. He relied upon a decision of the Apex Court in case of Umabai and another Vs. Nilkanth Dhondiba Chavan (dead) by LRs and another [(2005)6-SCC-243]. Lastly he placed reliance on the decision of the Apex Court in case of Manjunath Anandappa URF Shivappa Hanasi Vs. Tammanasa and others [(2003)10-SCC-390]. Lastly he submitted that in view of the decision of the Apex Court in the case of N.P.Thirugnanam (dead) by LRs. Vs. Dr.R.Jagan Mohan Rao and others [(1995)5- SCC-115], the plaintiff was required to show readiness and willingness till the date of passing a decree and such readiness and willingness has not been shown by the plaintiff. He, therefore, submitted that the suit deserves to be dismissed. 14. The learned counsel for the plaintiff submitted that the submissions made by the fourth defendant are not open to the fourth defendant inasmuch as the fourth defendant is claiming through the first defendant and the fourth defendant has not established that he was a bona fide purchaser of the suit flat without notice of the suit agreement. 15 15. I have given careful consideration to the submissions. As far as execution of the suit agreement is concerned, there is no dispute about execution thereof. The first issue framed is on the readiness and willingness of the plaintiff to comply with her obligations under the suit agreement. In view of section 16(c) of the said Act of 1963, the plaintiff is required to aver and prove that he has been ready and willing to comply with his part of suit agreement and he continues to be ready and willing to do so. 16. On this aspect it will be necessary to consider the terms and conditions incorporated in the suit agreement. Out of the total agreed consideration of Rs.26,000/-- the plaintiff had already paid a sum of Rs. 10,500/- at