1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 4121 OF 2006 IN SUIT NO. 985 OF 2006 SANGAM (INDIA) LTD. & ANR. ... PLAINTIFFS. VS. BIREN NAVINCHANDRAN SHAH & ORS. ... DEFENDANTS. MR. PRAVIN SAMDANI I/BY V.V.KHEMKA FOR THE PLAINTIFFS. MR. Y.R.SHAH FOR DEFENDANT NO.2. CORAM : A.A. SAYED, J. DATE : JULY 2, 2009. P.C. : 1. The above Notice of Motion has been taken out by the plaintiffs for the following reliefs :- (a) Pending hearing and disposal of the suit, the Court Receiver, High Court Bombay or any other appropriate person be appointed as Court Receiver of the suit premises being Flat No. 1-A, 27th Floor, Prithvi Apartments situate at 21, Altamount Road, Mumbai alongwith five shares covered under Share Certificate No. 27, dated 22nd December, 1989, with all rights and powers under Order 40 Rule 1 of the Civil Procedure Code including the right to take possession of the suit premises and to protect, preserve and manage the same; (b) Pending hearing and disposal of the suit, the Defendants by themselves, heir servants and agents be restrained by an order and injunction of this Hon'ble Court from dealing with, disposing off, parting with possession and creating third party right or interest in whatsoever manner in the right, title and interest of the suit premises." 2 2. The suit is filed by the plaintiff essentially for specific performance of the Memorandum of Understanding dated 29th July, 2003 (hereinafter referred to the "MOU"). It is alternatively prayed in the suit that the defendant Nos. 2 and 3 be ordered to pay to the plaintiff a sum of Rs. 3,38,47,114/- alongwith interest @ 14% per annum as and by way of damages as per the particulars of claim, annexed as Exhibit "Y" to the plaint. There are also reliefs also sought in the suit. 3. It is the case of the plaintiff that there were some business dealings between the plaintiff and defendant No.1 and the defendant No. 1 had defaulted in making payment to them and he was liable to pay a sum of Rs. 1,24,19,639/- as on 25.07.2003 with interest to the plaintiffs. The defendant No.3 stood as guarantor to the dealings between the plaintiffs and the defendant No.1. As the defendant No.1 was incapable of making payment of the outstanding dues to the plaintiffs, the defendant No.1 and 2, who are real brothers and are the joint owners of the suit premises, agreed to sell the suit premises to the plaintiffs. The 'suit premises' comprises of Flat No. 1-A, 27th Floor, Prithvi Apartments situate at 21, Altamount Road, Mumbai 400 026 together with a garage and one car parking open space. Under the MOU the suit premises was agreed to be sold by the defendant No. 1 to the plaintiffs or their nominees for a total consideration of Rs. 2,50,00,000/-. 4. It is the case of the plaintiff that upon execution of the said MOU a sum of Rs. 57,00,000/- was adjusted which was receivable from defendant No.1 towards part payment of the consideration of the suit premises and after adjustment of the said sum, defendant No.1 was liable to make payment of another sum of Rs. 67,19,639/- to the plaintiff on the account of balance outstanding. The defendant No.1 agreed to make payment of Rs. 70,08,307/- including the above sum of Rs. 67,19,639/- and interest @ Rs. 14% per annum on the same from the date of the execution of the MOU till 15th November, 2003. Defendant No.1 also issued 3 30 post dated cheques for repayment of the above outstanding amount in 30 instalments, starting from 13.11.2003. However, when the above cheques were presented for encashment, the same were returned dishonoured by the bankers of the defendant No.1 and therefore the above sum of Rs. 67,19,639/- alongwith interest @ 14 % per annum is till date outstanding. 5. Upon execution of the MOU the plaintiffs paid a sum of Rs. 10 lacs to the defendant No.1 & 2 each. The plaintiffs also paid another sum of Rs. 3 lacs for and on behalf of defendant No.1 & 2, to the Society towards outstanding monthly outgoings, property taxes and charges etc. to enable the defendant No.1 and 2 to obtain No Objection letter for the sale and No Dues Certificate from the Society. Certified True Copy of the Share Certificate was deposited in the joint Escrow of Shri Haresh Mehta of M/s. Haresh Mehta & Company, Advocates and Solicitors and Shri S.R.Shukla of M/s. S.R.S Legal, Advocates, instead of depositing the original. Payments and adjustments made by the plaintiffs to the defendant No.1 & 2 are reflected in Exhibit "W" to the plaint. According to the plaintiffs, the defendant No.1 vide his letter dated 1-10-2003 informed the plaintiffs that the Society had approved the transfer of the Share Certificate in the name of defendant Nos. 1 and 2 by deleting the name of the mother of the defendant Nos. 1 and 2, who had expired, and that the Share Certificate would be delivered to the Escrow Agent by the Society after payment of necessary charges and also sought extension of time upto 5-11-2003 to complete the transaction. 6. According to the plaintiffs they were shocked and surprised when the defendant Nos. 1 and 2 informed them in second week of December, 2003 that the transaction could not be completed as the suit flat has been attached by the Income Tax Department much prior to the execution of the MOU. Pursuant to the order passed by Commissioner of Income Tax, the defendant No.1 was liable to pay an amount of Rs. 16 lacs to the Income Tax Department and the defendant No. 1 was informed that the attachment would be lifted on making payment of 4 the said dues to the Income Tax Department. The defendant No. 1 by letter dated 18.12.2004, requested the defendant No.3 to make payment of the abovesaid amount to him as he was unable to make the payment of dues from his own resources. Accordingly, defendant No. 3 paid a sum of Rs. 16 lacs to the defendant No.1. The defendant No. 3 is the party of the 4th part, to the MOU. 7. It is further the case of the plaintiffs that as a matter of good gesture, they honoured the claim of Rs. 16 lacs and made payment of that amount to the defendant No.3 for and on behalf of defendant No.1 and accordingly, the balance outstanding of the consideration value towards the MOU due to the defendant No. 1 stood at Rs. 39 lacs only. The attachment on the suit flat of the Income Tax Department was thereafter lifted on or about 25th January, 2005. 8. The defendant Nos. 1 & 2 thereafter vide their letter dated 8th February, 2005 (wrongly typed as 8th February, 2004) informed the defendant No. 4, who is a nominee of the plaintiff to purchase the suit premises, that the transfer could not be completed because the defendant Nos. 1 & 2 were unable to pay the dues of the building repairing funds of the Housing Society and they requested the defendant No. 4 to make payment thereof and to deduct the same from the sale proceeds. Defendant No.1 & 2 also informed that upon payment of the above dues the Society would consider the transfer of shares. Pursuant thereto, the defendant No. 4 made payment of the Society dues vide two cheques, one for Rs. 1,12,619/- and another of Rs. 1,10,160/-, both dated 8.2.2005. Thereafter defendant No.1 forwarded letter dated 23.05.2005 alongwith draft copy of the Agreement to the plaintiffs and requested a further payment of Rs. 8 lacs to be adjusted against the consideration of the suit premises to enable him to pay deposit of the new alternate accommodation. The said payment of Rs. 8 lacs was accordingly paid by defendant No.4 to defendant No.1 and the defendant No.1 agreed to complete the transaction and handover possession of the suit premises between 10th to 15th June, 2005. 5 9. The Escrow Agents, namely Advocate Haresh Mehta and S.R.Shukla through their joint letter dated 22.2.2005 addressed to the Chairman/Honorary Secretary of the Housing Society, informed the Society about execution of the MOU and further requested the Society to handover the transferred Share Certificate to them to be deposited in Joint Escrow. However, the duly transfered Share Certificate was not deposited with the said Joint Escrow Agents. It is the further case of the plaintiffs that since the defendant No.1 & 2 committed breach of their obligations and further failed and neglected to complete the said transaction, they addressed letter dated 23rd September, 2005 and informed defendant No.1 & 2 that in case the transaction is not completed by them in favour of their nominee, the defendant No.4, they would adopt legal action in the matter and also seek specific performance of the MOU. 10. Defendant No, 2, however, in his reply to the said letter through his Advocate's letter dated 5th October, 2005, sought to terminate the MOU and to forfeit amount of Rs. 10 lacs which was paid to him, falsely alleging that he was ready and wiling to hand over the possession of his part of the suit premises against his share of consideration amount but that the plaintiffs did not accept the said proposal and alleged that the plaintiffs have committed default. Plaintiffs have further stated that to their surprise, the defendant No.1, through his Advocate's letter dated 24th January, 2006 informed the plaintiff No.1 that the suit premises was attached by the Recovery Officer, DRT-II, Mumbai vide an order dated 27th December, 2005 in Recovery Proceeding No. 67 of 2005 filed by Shamrao Vithal Co-op. Bank Ltd. and that the said order was passed against defendant No.1 in his capacity as the guarantor to the money borrowed by a 3rd party one M/s Interworld Furnishing (India) Ltd. 11. The plaintiffs' further case is that they have paid a sum of Rs. 1,06,22,780/- to the defendant No.1 & 2. According to the plaintiffs the MOU is in two parts. In 6 one part of the said MOU, defendant Nos. 1 & 2 have agreed to sell the suit premises to the plaintiffs. Under the 2nd part of the said MOU, defendant No.1 had agreed to make payment of a sum of Rs. 67,19,639/- alongwith interest @ 14% per annum from the date of the execution of the MOU till payment and that the defendant No.3 had guaranteed repayment of the said amount. The plaintiffs have thus filed the above suit interalia for specific performance of the MOU and also alternatively prayed for damages for Rs. 3,38,47,114/- along with interest @ 14% per annum from the date of filing of the suit till payment. 12 The learned Sr. Counsel for the plaintiffs took me through the various clauses of the MOU and in particular clause 5 of the MOU and submitted that the defendant No. 1 and 2 have failed to perform their obligations under the MOU, and they failed to get the Share Certificates transferred in their name and failed to obtain the No Objection in respect of the transfer of the suit premises and No Dues Certificate from the Society, though at the request of defendant No. 1 & 2, the plaintiffs have paid the Society dues to them, by cheques, as evidenced by letter dated 8th February, 2005. and also made further payments. Learned Sr. Counsel pointed out that as stated in the MOU, it was agreed that in case of the default of the obligations on the part of the defendants, plaintiffs had a right to seek specific performance of the MOU or the option to terminate the MOU. The learned Sr. Counsel further pointed out that at one time the suit flat was under the attachment of the Income Tax Department. Thereafter, the suit flat was also attached by the DRT. However, both attachments now stand raised. Learned Sr. Counsel submitted that the defendant No.1 & 2 failed and neglected to perform their part of the contract and are not willing and ready to perform their part of the contract and, therefore, he urged that considering the facts and circumstances of the case and the conduct of the defendant Nos.1 & 2, who are brothers and are acting in collusion with each other, the Court Receiver ought to be appointed in respect of the suit premises. 7 13 The Defendant No.2 has filed a reply to the Notice of Motion. Pertinently, the reply is filed after this court had partly heard the arguments of the plaintiffs. No reply has been filed by defendant No.1. In his reply, defendant No.2 stated that as set out in the letter dated 5-10-2005 of the defendant No.2, he was ready and willing to perform his part of the contract and he was ready to release his portion of the flat and accordingly requested the plaintiffs to take possession of his portion of the flat. However, the plaintiffs did not take any steps in that regard as they did not have sufficient funds. It is further averred in the reply by the defendant No.2 that he had on two occasions paid Earnest money for the acquisition of a flat, however since the plaintiff did not pay his share of consideration, the owners had forfeited the earnest money and he suffered losses thereby. Therefore, it was the plaintiffs who were not ready and willing to perform their part of the contract. 14 It is further stated in the reply of defendant No. 2 that after the building was repaired in the year 2003, the area of the flat was increased by 200 sq.ft. and therefore the amount of consideration was also required to be increased accordingly. However, the plaintiffs did not agree to the same. In the reply, reference is also made of the proceedings before the DRT. It is stated that Shamrao Vithal Co-op. Bank Ltd. had filed proceedings before the DRT and the Recovery Officer had sought to auction 50% of defendant No.1's share. It is stated that the plaintiffs have not joined the said Bank as party to the present suit, though the flat is attached by the Bank and that in the said proceedings plaintiffs have applied for joining themselves as party. It is further stated that the MOU, not been properly stamped, is not capable of being used in evidence. Defendant No.2 further stated that he was not aware of the attachment by the Income Tax Authority in respect of the dues payable by the defendant No.1. It is further stated that the defendant No. 2 should not be held liable for any act done by defendant No.1. It is further stated that the said Bank in the proceedings before the DRT sought auction of 50% share of the defendant No.1 and the Recovery Officer had 8 on the application of defendant No.2 passed an order dated 22nd November, 2006 exempting 50% share of the defendant No.2 in the suit premises from attachment. The Recovery Proceedings are till date pending before the DRT. Defendant No.2 further stated that the document in question is merely a MOU and there was no final and binding agreement executed by the parties and hence, no reliefs can be granted to the plaintiffs. 15. The Learned Counsel for defendant No.2 submitted that defendant No. 2 was ready and willing to perform his part of the contract and even offered to handover his portion of the suit premises to the plaintiffs on plaintiffs executing a sale deed and on payment of his share of the consideration. However, it was the plaintiffs who did not take any steps and the plaintiffs were therefore in default. Learned Counsel for the defendant No. 2 also pointed out that the area of the suit flat has increased by 200 sq.ft. after the building was repaired and correspondingly the consideration was demanded by defendant No.2 to be increased, however, the plaintiffs did not accept the same. He submitted that the defendant No. 2 has terminated the MOU by his Advocate's letter dated 5th October, 2005 (Exh. Q to the plaint) and forfeited the amount of Rs. 10 lacs and plaintiffs cannot be granted any reliefs on the basis of MOU, which is neither stamped nor is a valid agreement and urged that the Notice of Motion be dismissed. 16 I have heard the Ld. Counsel for the parties and perused the material on record. 17. The execution of the MOU dated 29-07-03 is not disputed. Under the MOU, the plaintiffs have paid certain amounts and also adjusted certain amounts which were receivable by them totaling Rs. 1,06,22,780/-, which amount and the break up thereof is more particularly set out in Ex “W” to the plaint. The fact that a sum of Rs. 1,06,22,780/- was paid and/or adjusted under the MOU has not been 9 controverted by the defendant No. 2 in his reply. No reply has been filed by defendant No.1 to the Notice of Motion. Hence, insofar as defendant No.1 is concerned the case of the plaintiffs in the Notice of Motion is deemed to have been accepted by him. 18 The MOU is dated 29-07-03. As late as on 8th February, 2005, (Ex “L” to the plaint), the defendant Nos. 1 & 2 jointly by their letter had requested the defendant No. 4, who is the nominee of the Plaintiffs to pay the Society dues in respect of the suit premises to the Society on their behalf. Perusal of the said Exhibit “L” shows the accordingly two cheques one for Rs. 1,23,659/- and another cheque for a sum of Rs. 1,10,160/- both dated 8-02-2005 in favour of the Society, were handed over to the defendant No. 2, who has made an endorsement on the said letter and has signed the same in acknowledgment of the receipt of the two cheques. Pertinently, in this letter dated 8th February, 2005 of the defendant Nos. 1 and 2 there is no mention of any increase in area of the suit flat or that the consideration amount ought to be increased proportionately because of the repairs which were carried out to the building in 2003/2004. Assuming that the defendant No.2 had infact offered to handover his part of the suit flat on the plaintiffs completing the transaction as contended by him, the plaintiffs would be within their rights to refuse to take possession of only a part of the suit flat in which both defendant Nos. 1 and 2 had equal undivided right. These contentions of the defendant no. 2 are therefore devoid of merit and without substance. No particulars are stated in the reply about acquisition of the flats in respect of which the defendant No.2 has alleged to have paid Earnest Money as suggested in the reply. 19 Prima facie, the plaintiffs would be right in contending that the defendants have committed default and failed to comply with their obligations contained in the MOU and in particular clause 5 of the MOU whereby they were required to 10 obtain the No objection certificate from the Society in respect of the transfer of the suit premises to the plaintiffs. The defendant Nos. 1 and 2 have also failed to deposit the original share certificate duly transferred to their name after deleting the name of their deceased mother, to the Joint Escrow Agents, as set out in the MOU . 20. The Notice of Motion was pending since the year 2006. It was only when the motion was partly heard that the defendant No. 2 has come forward and filed his reply. Insofar as the defendant No. 1 is concerned, as stated above no reply is filed by him to the Notice of Motion. 21 Considering the facts and circumstances of the case, in my view, the plaintiffs have made out a prima facie case, and balance of convenience is in their favour and irreparable injury would be caused to them if no reliefs are granted to them. The plaintiffs rights are therefore, required to be protected. 22 By the ad-interim order dated 27th November 2006, the plaintiffs were granted reliefs in terms of prayer clause (b) except the words bracketed in red (viz.- dealing with). It was further ordered that the defendant Nos. 1 and 2 shall give notice of every application that may be made before any Court or other authority concerning the suit flat in any manner whatsoever before such application is made by or against them. I see no reason not to continue the ad- interim order until the final hearing of the suit. I am however, not inclined to appoint a Court Receiver in respect of the suit premises. However, considering the fact that the suit flat was in the past subjected to attachment pursuant to action initiated by Income Tax Department and also by Shamrao Vithal Co- operative Bank Ltd. in DRT (which I am informed is pending) I deem it fit to direct the defendant Nos. 1 and 2 to deposit the original Share Certificate of the 11 suit flat in this Court. On a query by this Court as to in whose possession is the original Share Certificate, the learned Counsel for the defendant No. 2 stated that the original Share Certificate is still lying with the Society. 23 Taking an overall view of the matter, in my opinion the following order would meet the ends of justice: (i) The ad interim order dated 20th February 2006 is confirmed and the notice of motion is accordingly made absolute in terms of prayer clause (b) except the bracketed portion in red (viz: the words "dealing with"); (ii) The defendant Nos. 1 and 2 are directed to give notice of every application that may be made before any Court or other authority concerning the suit flat in any manner whatsoever before such application is made by or against them. (iii) The defendant Nos. 1 and 2 are directed to deposit the original Share Certificate of the suit flat with the Ld. Prothonotary and Senior Master of this Court within 3 months from today. The original Share Certificate shall remain in the custody of the Ld. Prothonotary and Senior Master till the hearing and final disposal of the suit; (iv) In the event the original Share Certificate is not deposited within the stipulated period as directed above, liberty is granted to the plaintiffs to apply for appointment of Court Receiver in respect of the suit premises. (v) It is clarified that this order shall not preclude Shamrao Vithal Co-operative Bank Ltd. from applying for modification of this order in accordance with law in the event of any change in circumstances; 24 Notice of motion is accordingly made absolute to the aforesaid extent. [A.A.SAYED, J.] 12