: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.296 OF 1979 1 a) Smt.Shantibai K.Vardhan, 1 b) Shri Champalal K.Vardhan, 1 c) Shri Ummedraj K.Vardhan, 1 d) Smt.Anita Bharat Vardhan their address at 332, Commerce House, 140 Nagindas Master Road, Fort, Mumbai – 400 023. e) Smt.Anjana A.Gulati, resding at 1301/A, Surya Apartment, Bhulabhai Desai Road, Opp.Breach Candy Hospital, Mumbai. all of them being the heirs and legal representatives of the deceased original Plaintiff ...Plaintiffs Versus 1.Ms.Meera G.Patel, 2.Mr.Kiran G.Patel, All of Bombay and Ahmedabad, Indian Inhabitants, being the present Trustees under the Deed of Settlement dated 12th day of February 1957 created by the Settlor Chandulal Shivlal, all residing at C/o. Shiv Cinema Premises, Ashram Road, Ahmedabad – 9. ...Defendants ...... Mr.Sanjay Kothari with Mr.Mahesh Sowani i/b Vigil Juris for the Plaintiffs. Ms.Rajni Iyer, Sr.Counsel with Mr.Chirag Balsara, Mr.Mihir Mody & Mr.Rajesh Talekar i/b K.Ashar & Co. for Defendants. ...... : 2 : CORAM : A.M.KHANWILKAR, J. DATED : AUGUST 31, 2009. JUDGMENT : 1. This Suit for relief of specific performance was filed by the predecessor of the present Plaintiffs. According to the original Plaintiff, he had entered into a written agreement with the original Defendant No.1 dated 5th November 1977 to purchase plot bearing Cadastral Survey No.16/738 of Malbar Hill and Cumballa Hill Division situated at Tardeo, Mumbai – 400 034, admeasuring 4964 square yards equivalent to 4149 square meters or thereabouts together with the structure in the nature of dwelling units, shops and Dhobi Ghat standing thereon. According to the Plaintiff, besides executing the purported Agreement for Sale dated 5th November 1977, the original Plaintiff paid to the original Defendants and they in turn, received the amount of Rs.50,000/- (Rupees Fifty Thousand) from the original Plaintiff as and by way of earnest money. The said plot admittedly belonged to a private Trust, of which the original Defendant No.1 was one of the Trustee along with original Defendants 2 and 3. According to the Plaintiff, the original Defendant No.1, besides being trustee, was the beneficiary of the said Trust. However, in the correspondence, the original first Defendant took the stand that the writing dated 5th November 1977 was only a draft : 3 : and not a concluded agreement. Whereas, according to the Plaintiff, the writing dated 5th November 1977 was a concluded contract. It is the case of the Plaintiff that on account of disputes and differences between the original parties, a meeting was held in the office of the Advocates and Solicitors M/s.Gagrat & Company, Mumbai on 4th July 1978, when it was attended by: (1) Mr.J.R.Gagrat, Advocate and Solicitor, (2) Mr.A.R.Jani, Advocate & Solicitor (3) B.J.Dalal, Managing Clerk (4) Original Plaintiff himself, (5) the original first Defendant, (6) a Lady Miss Rita, and (7) Mr.Ashar, Advocate and Solicitor of Messrs.K.Ashar & Co., representing the original Defendants and (8) Mr.Bhupatrai Parikh, the broker. 2. According to the Plaintiff, after discussions between the persons present in the meeting, all the disputes and differences between the original Plaintiff and the original Defendants were fully discussed. As a result of the said discussion, it was finally agreed between the original Plaintiffs and the original Defendants that the original Defendants would sell to the original Plaintiff and the original Plaintiff would purchase from the original Defendants the above said property on “as is where is basis” on that date and subject to the reservation and the then tenements and occupiers at a lumpsum price of Rs.13,00,000/- (Rupees Thirteen Lakhs). It was further : 4 : agreed that the amount of Rs.50,000/- (Rupees Fifty Thousand) which was already paid by the original Plaintiff to the original Defendants on 5th November 1977 would be treated as having been received by the original Defendants as and by way of earnest money towards the new Agreement and in anticipation of the execution of the formal Agreement for Sale in respect of the said property. It was also agreed that the stamp duty and registration charges of and incidental to the sale of the said property would be borne and paid by the original Defendants and the original Plaintiff who were parties to the Agreement, in equal shares. It was further agreed that M/s.K.Ashar & Co., Advocates and Solicitors for the original Defendants would prepare a draft Agreement for Sale incorporating therein agreed terms and conditions and forward the same to the Advocates and Solicitors for the original Plaintiffs for their approval. However, later on, after exchange of correspondence between the parties and their Advocates, the Advocates for the original Defendants on 13th September 1978 raised false contentions and contended that the negotiations for an Agreement for Sale were at an end. 3. The original Plaintiff asserted that there was concluded oral Agreement for Sale arrived at between the parties and that the original : 5 : Plaintiff had performed his part of and has always been and is ready and willing to perform his part of the said Agreement for Sale and to complete the sale of the suit property. According to the original Plaintiff, since the said Agreement was valid and subsisting Agreement for Sale between the parties in respect of the suit property, the original Plaintiff was entitled for specific performance thereof. Without prejudice to the above claim, the original Plaintiff further, in the alternative, asserted that there was a concluded Agreement for Sale dated 5th November 1977 between the parties and the said Agreement continued to subsist until substituted by the proposed new Agreement to be executed as a consequence of oral agreement dated 4th July 1978. The original Plaintiff, therefore, asserted that in any case, since the Plaintiff was always ready and willing to perform his part of the contract, even under the Agreement for Sale dated 5th November 1977 was entitled to specific performance of the said Agreement for Sale dated 5th November 1977. In the alternative and without prejudice to the above claim, the original Plaintiff asserted that he would be entitled for claim of damages in the sum of Rs.13,00,000/- (Rupees Thirteen Lakhs) or such other sum as the Court may deem fit for the breach and repudiation of the Agreement for Sale together with interest thereon at the rate of 6% per annum from the date of the Suit. In the further alternative, the Plaintiff : 6 : asserted that in addition to awarding damages to the Plaintiff, the Plaintiff was entitled for recovery of Rs.50,000/- (Rupees Fifty Thousand) along with interest thereon at the rate of 15% per annum from the date of the Suit till Judgment and payment, which amount was paid as earnest money by the original Plaintiff to the original Defendants. 4. The Suit was resisted by the original Defendants. The Defendant No. 1 filed separate written statement. According to the said Defendant, prior to May 1975, the then trustees had negotiated with one Mr.G.K.Gowani (Plaintiff's son’s father-in-law) for sale of the suit property. The said Gowani was not interested in completing the transaction and agreed that Defendants should refund him the monies paid by him. The Defendants were required to pay Rs.40,000/- (Rupees Forty Thousand) to said Mr.G.K.Gowani being the balance of Rs.1,50,000/- (Rupees One Lakh Fifty Thousand) paid by him to the Defendants. Later on, the Defendants had negotiated with one S.K.Joshi for the sale of the said property after informing him about the previous transaction with G.K.Gowani. However, the said negotiations did not materialise. In the meantime, the original Plaintiff through his broker Bhupatrai R.Parikh approached the original Defendants for the purchase of the said property. The original first : 7 : Defendant stated that the Plaintiff was apprised about the prior transactions and/or negotiations. The original first Defendant further stated that the original Plaintiff was also informed that the Defendants were required to pay sum of Rs.8,000/- (Rupees Eight Thousand) to the mortgagees, from whom the monies were borrowed on the security of the property. It is specifically stated by original Defendant No.1 that a draft was prepared containing proposed terms and conditions for sale of the property by the original Defendants to the Plaintiff. That was done by the first Defendant as one of the trustees who in turn had to consult other trustees for the sale of the suit property to the Plaintiff. According to the original first Defendant it was abundantly made clear to the original Plaintiff that unless such consent was granted, no Agreement for Sale could be finalised or concluded. It is stated that the said discussion went on between the first Defendant’s Advocate friend one Mr.B.L.Rao and the original Plaintiff. According to the original first Defendant, the original Plaintiff was informed that if he was interested in continuing negotiations for purchase of the suit property, then to show his bonafides he should deposit Rs.50,000/- Rupees Fifty Thousand) with the first Defendant as a token deposit, whereafter, negotiations can be continued and the amount so deposited would remain with the first Defendant until all terms for sale were finalised by his : 8 : Advocates and the Advocates for the trustees whereafter, the regular Agreement could be signed. Besides, the original Plaintiff will have to pay further sum of Rs.2,50,000/- (Rupees Two Lakhs Fifty Thousand) as earnest money as soon as the terms were finalised and agreement was signed between the original Defendants and the original Plaintiff. It is the case of the original first Defendant that the original Plaintiff agreed to the said suggestion and deposited amount of Rs.50,000/- (Rupees Fifty Thousand). It is further stated by the original first Defendant that the original Plaintiff agreed to pay aggregate amount of Rs.3,00,000/- (Rupees Three Lakhs) as and when the Agreement for Sale was finalised and signed by the Trustees and the original Plaintiff. It is stated that the original Plaintiff, however, stipulated that the original first Defendant should pay off Rs.40,000/- (Rupees Forty Thousand) to G.K.Gowani and also clear all outstanding interest on mortgage debt out of Rs.50,000/- (Rupees Fifty Thousand) which he was to pay to the Defendants as token money. The original Plaintiff also desired that the Defendant should execute equitable mortgage of the property in his favour on payment of Rs.3,00,000/- (Rupees Three Lakhs) by the original Plaintiff to the Defendants, to which proposal, the original first Defendant did not agree. It is categorically asserted by the original first Defendant that the negotiations were conducted only on his : 9 : behalf; and original Defendants 2 and 3, the other trustees had neither participated in the negotiations or authorised either Mr.Rao or Mr.Parikh to represent them. The original first Defendant then states that a draft Agreement was prepared incorporating the terms and conditions for sale which was the first draft. The original Plaintiff offered Rs.50,000/- (Rupees Fifty Thousand) only as token money for continuing negotiations on clear understanding that he would pay further amount of Rs.2,50,000/- (Rupees Two Lakhs Fifty Thousand) only after the terms were finalised to the satisfaction of all the Defendants and the original Plaintiff as also their respective Advocates. In that backdrop, a meeting was fixed on 5th November 1977. That understanding was arrived at in the meeting dated 5th November 1977 held in the Office of the Advocates. In the said meeting, the original Defendants paid sum of Rs.50,000/- (Rupees Fifty Thousand) to the original Defendant No.1 which was acknowledged by the first Defendant at the foot of the draft in his handwriting. Besides, the terms referred to in the said first draft, the Advocate for the original Plaintiff also asked the first Defendant to consider the alternate term for outright sale of the said property. In substance, the case of the first Defendant is that the first draft was not the culmination of concluded contract but it was part of the process of negotiations between the parties and of an agreement to enter into an : 10 : Agreement for Sale. The first Defendant in his written statement has referred to the correspondence that ensued between the parties and their Advocates to emphasis the fact that the writing purported to be Agreement for Sale dated 5th November 1977 was not a concluded contract. 5. Insofar as the original Plaintiff’s claim regarding the oral Agreement dated 4th July 1978, the original first Defendant in his written statement has asserted that the said meeting was without prejudice meeting and there was no concluded contract between the parties in the said meeting. To buttress this stand, the original first Defendant has adverted to correspondence exchanged between the parties and their Advocates. The first Defendant has denied existence of a concluded contract between the parties either dated 5th November 1977 or dated 4th July 1978 as alleged by the original Plaintiff. The first Defendant has also denied that the original Plaintiff was always ready and willing to perform his part of the contract. He has also disputed his liability to pay any amount towards damages, much less, interest thereon. 6. The original Defendants 2 and 3 filed separate written statement. The said Defendants denied that they had participated in any negotiations or had : 11 : authorised the first Defendant or any Advocate to enter into any contract in relation to the suit property which is a private Trust property. The said Defendants questioned the authority of original first Defendant or for that matter, Mr.Rao or M/s.K.Ashar & Co., Advocates to act on their behalf in any manner so as to make any commitment in relation to the sale of the suit property. According to them, the understanding arrived at between the original Plaintiff and the original first Defendant was not binding on them. Even these Defendants asserted that there was no concluded and binding contract in respect of the suit property. Therefore, they opposed grant of any relief to the Plaintiff. 7. On the basis of the pleadings between the parties, my predecessor vide order dated 20th August 2003 framed following issues : Issues Findings 1. Whether the Plaintiffs prove that there was a concluded oral Agreement for Sale as alleged in paragraphs 3, 4 and 10 of the Plaint? NO 2. In the event of issue No.1 being answered in the negative, whether the Plaintiffs prove that the Agreement dated 5th November 1977 is valid and subsisting as alleged in paragraph 12 of the Plaint? NO : 12 : 3. Whether the Plaintiffs prove that they were ready and willing to perform any of the alleged agreements for sale as contended by them in paragraph 12 of the Plaint? NO 4. Whether the Plaintiffs prove that they are entitled to specific performance of the alleged oral agreement for sale or the alleged Agreement dated 5th November 1977? NO 5. Whether the Plaintiffs prove that they have suffered damages to the extent of Rs.13,00,000/- as contended in Paragraph 13 of the Plaint? NO 6. Whether the Plaintiffs prove that they are entitled to Rs.50,000/- with interest as contended in YES, paragraph 14 of the Plaint? but interest @ 12% p.a. 7. What order?” As per final order below 8. Later on, additional issue was framed about the maintainability of the Suit on 15th January 2008 which reads thus: Issue Finding “Whether the Suit is maintainable in the facts and circumstances of the case?” YES [This issue is renumbered as Issue No.6(a)]. 9. It is noticed that the original Plaintiff died during the pendency of the Suit, as a result, the present Plaintiffs have been brought on record as the : 13 : heirs and legal representatives of the original Plaintiff. Similarly, during the pendency of the Suit, the original first Defendant expired. Moreover, the original Defendant Nos.2 and 3 retired as trustees and in their place new trustees were appointed. As a result, even the original Defendants were replaced by the new trustees who are the present Defendants. The newly added Defendants have filed their written statement on 2nd August 2003 reiterating the stand of the original Defendants that there was no concluded contract in respect of the said property and that the Plaintiffs are not entitled for any relief whatsoever. It is also noticed that the Plaintiffs moved Chamber Summons for amendment of plaint which was granted on 16th June 2007. In terms of the said order, the Plaintiffs have introduced paragraph 12-A in the Plaint, thereby asserting that by way of Indenture of Trust dated 12th February 1997, various properties were settled in Trust including the suit property. At all relevant times, the beneficiaries of the said Trust were the original Defendants 1 and 2 who were also the trustees at the relevant time when the suit agreements were executed. It is the case of the Plaintiffs that the Plaintiffs paid sum of Rs.50,000/- (Rupees Fifty Thousand) under the suit Agreements to the Trustees of the said Trust and the same were utilised by them for the benefit of the Trust and the said beneficiaries. The fact of utilisation of the said amount has been admitted : 14 : by the original first Defendant in his written statement. It is further stated that the original first Defendant had express authority on behalf of other trustees as well as the beneficiaries to enter into the suit agreements. Further, the fact that the amounts paid by the original Plaintiffs was utilised for the purpose of the trust property, clearly indicates that all the other trustees as well as the beneficiaries were aware that the said amount was made available to them under the suit Agreements and that they approved and sanctioned the act of the original first Defendant of entering into the suit Agreements. Therefore, the suit Agreements were binding on the trustees and the beneficiaries of the Trust. Besides, the above amendment, the Plaintiffs have further asserted by way of the same amendment as follows: “Without prejudice to the aforesaid it is submitted that he Defendants by their conduct and particularly their action in encashing the cheque for Rs.50,000/- sent to the trust by way of earnest money and utilizing the same for the purposes of interalia discharge of the mortgage-represented to the Plaintiffs that the Defendants have approved the transaction in respect of the said property. The Plaintiffs therefore say and submit that not only the present suit is maintainable against the Defendants but the Plaintiffs having altered their position to their detriment, the Defendants are estopped from contending that the suit is not maintainable.” : 15 : 10. Without prejudice, the Plaintiffs have submitted that the Defendants by their conduct and particularly their action in encashing the cheque of Rs. 50,000/- sent to the Trust by way of earnest money and utilising the same for the purpose of discharge of the mortgage, represented to the Plaintiffs that the Defendants have approved the transaction in respect of the said property. On this assertion, the Plaintiffs stated that Suit was maintainable against the Defendants and that the Plaintiffs having altered their position to their detriment, the Defendants were estopped from contending that the Suit is not maintainable. The Defendants filed additional written statement on 17th July 2007 disputing the stand taken by the Plaintiffs in Paragraph 12-A of the Plaint. On the basis of amended pleadings by order dated 14th March 2008, the Court was pleased to frame additional two issues which read thus: Issues Findings “1. Whether the plaintiffs prove that a sum of Partly YES Rs.50,000/- was paid by them under the (Amount was suit Agreements to the trustees of the said paid on account trust as that the same was utilized for the as token money benefit of the trust? and not as earnest money). 2. Whether the plaintiffs prove that the defendants approved the transactions claimed by the plaintiffs in respect of the suit properties alleged in paragraph 12A of the plaint?” NO [These Issues are renumbered as Issues Nos.2(a) and 2(b)]. : 16 : 11. The Plaintiffs examined Plaintiff No.1(c) as their sole witness. He filed affidavit in lieu of examination-in-chief on 25th September 2003 and offered himself for cross-examination on commission. During the recording of evidence on commission, objections were raised with regard to exhibiting certain documents as also to some of the questions put to the witness during cross-examination. Those matters have been answered by me on 17th December 2008 by a speaking order. The Plaintiff's witness in his evidence has referred to documents, compilation whereof was produced. The documents have been directed to be exhibited as Exhibits P-1 to P-62 in terms of order dated 17th December 2008. The Defendants, on the other hand, examined Defendant No.2 Kiran G.Patel. His evidence was recorded before the Court on 20th October 2008. The Plaintiffs consented for exhibiting documents produced by the Defendants which were marked as Exhibits D-1 and D-2. In the evidence, the Defendants' witness proved five other documents which have been marked as Exhibits D-3 to D-7. Indeed, the parties have produced other documents but only the above mentioned documents have been ordered to be marked as Exhibits as per the speaking order passed by the Court. 12. For the sake of convenience, additional issues framed on 15th : 17 : January 2008 regarding maintainability of the Suit is numbered as issue Nos.6(a) and two additional issues framed in terms of order dated 14th March 2008 are numbered as issue Nos.2(a) and 2(b) respectively. 13. ISSUE NO.1 : The averments with regard to Issue No.1 are found in Paragraphs 3, 4 and 10 of the Plaint. In Paragraph 3 of the Plaint, it is averred that after the written agreement dated 5th November 1977, there were disputes and differences between the original parties thereto. In view thereof, a meeting was held in the office of the original Plaintiff’s Advocates and Solicitors M/s.Gagrat and Company, Mumbai on 4th July 1978. The subject meeting was attended by the eight named persons. In the said meeting, discussions were held between the said persons when all the points of disputes and differences between the original Plaintiff and the original Defendants were fully discussed and it was finally agreed between them that the original Defendants would sell to the original Plaintiff and the original Plaintiff would purchase from the original Defendants the suit property on as is where is basis, as on the date of the agreement for lumpsum consideration of Rs.13,00,000/- (Rupees Thirteen Lakhs) subject to agreed terms. It was also agreed that the amount of Rs.50,000/- (Rupees Fifty Thousand) which was already paid by the original Plaintiff on 5th : 18 : November 1977 would be treated as having been received by original Defendants by way of earnest money towards the new Agreement for Sale and in anticipation of execution of the formal Agreement for Sale in respect of the said property. That the stamp and registration charges of and incidental to the sale of the suit property would be borne and paid by the original Defendants and the original Plaintiff in equal shares. It was further agreed that M/s.K.Ashar & Co., Advocates and Solicitors for the original Defendants would prepare a draft Agreement for Sale incorporating the agreed terms and forward the same to the Advocates and Solicitors for the original Plaintiff for their approval. In Paragraph 4, it is stated that on 4th July 1978, a concluded Agreement for Sale was arrived at between the original Plaintiff and the original Defendants on the terms and conditions referred to hereinbefore, the preparation, approval and execution of an usual formal Agreement for Sale being the matters of mere formalities between the original parties, as no time limit was fixed by the original parties in that behalf. Indeed, original Defendants 2 and 3 have disputed the factum of concluded contract. They have asserted that although the suit property belonged to private Trust, of which they were the trustees, they had not participated in the negotiations nor had authorised any one to contract on their behalf. They have asserted that the so-called agreement was not : 19 : binding on them and the