1 IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 289 OF 2007 IN NOTICE OF MOTION NO. 2059 OF 2005 IN SUIT NO. 1968 OF 2005 1. Parmanand T. Manwani 2. Tikamdas T. Manwani Both- Chief Promoters of Steelman Coop. Hsg. Soceity (proposed) 126, Gulmohar, 10th Road, J.V.P.D. Scheme, Vile Parle (W), Mumbai 400 009 .. Appellants Versus 1. Madan Devkishandas Bhatia 712, Nilanjana Building, Marve Road, Malad (West), Mumbai 400 064 2. Maharashtra Housing & Area Development Authority (MHADA) Griha Nirman Building, Kalanagar, Bandra (East) Mumbai, 400 051 3. Surendra Laxman Rawal Flat NO.5, Rawal Tower, Rawal Nagar, Mirara Road (E) Thane. .. Respondents Shri P. K. Samdhani- Senior Advocate with Shri Sanjay Jain i/by L. J. Law for the appellants, Shri V. R.Dhond /b Shri Kadar Wagale for respondent No.1 Shri G.W. Mattus, AGP for the respondent No.2 Ms. Rajani Iyer, Senior Advocate with Shri S.V. Kadam i/b Shri Y. D. Bandal for respondent No.3 2 CORAM: J. N. PATEL, & MRS. MRIDULA BHATKAR, JJ. RESERVED FOR JUDGEMENT ON 14/08/2009 JUDGEMENT PRONOUNCED ON 31/08/2009 J U D G E M E N T (Per Mridula Bhatkar, J.) 1. Heard learned counsel for the parties. 2. A suit for specific performance of Memorandum of Understanding (MOU) dated 26th July, 2002, for transfer of leasehold rights in the land bearing CTS No. 484-A/99, Plot No.46, ad- measuring 709 Square Yards in Juhu Vile Parle Development Scheme, Vile Parle, (W), Mumbai- 400 057, is filed by the appellants-Original Plaintiffs against respondent No.1. Notice of motion was taken out for seeking appointment of Court receiver and other reliefs in the matter of preserving status quo as prayed in Clause (b) and (c). On 22.7.2005 ad interim order was granted. Ad interim order of the Learned Single Judge dated 22/7/2005 granting relief in terms of prayer Clause (b), (c) of the Notice of Motion which came to be extended by order dated 4.8.2005 was vacated by the learned Single Judge vide its order dated 29th March, 2007, thereby dismissing the Notice of Motion of the original plaintiffs i.e. appellants. The said order is the subject matter 3 in this appeal. 3. Learned counsel appearing for the appellants has submitted that the appellants, being the purchaser of the leasehold rights and the developer of the said Plot, are supposed to make the payment of Rs. 91 lakhs to respondent No.1 Original defendant, within four months from the date of the contract dated 26th July, 2002. respondent No.1 has accepted Rs. 5 lakhs as an earnest money at the time of execution of the MOU. It is contended that after execution of MOU, the appellants gave public notice about the said transaction for the purpose of investigation of title and the brother of respondent No.1 claimed interest in the title of the property, therefore, the appellants sought clarification from respondent No.1. The appellants could not acquire NOC which was the condition of the contract from respondent NO.2, the owner of the land, due to pendancy of S.C. Suit No. 3736 of 2002 in City Civil Court filed by Mohanlal Devkisan Bhatia, other brother of respondent/defendant No. 1. The appellants also could not pay the amount within four months as per the terms and condition of the contract. It was argued that the appellants wrote a letter dated 22nd December, 2004 through respondent No.1 to the Chief Officer of MHADA for transfer of his right, title and interest in Plot No.46, in favour of the 4 proposed housing society namely Steelman cooperative Housing Society Ltd. In reply to the said letter, MHADA expressed willingness to give permission for the same on condition of payment of Rs.59,26,295/-. Pursuant to this, the appellants wrote a letter dated 15th July 2005 to the MHADA seeking permission to pay amount in installments and also requesting NOC for using TDR and to grant additional FSI of 0.50 from MHADA layout. However, in between the appellants, after having knowledge of possible transaction between respondent No.1 and respondent No.3 filed suit for specific performance on 19th July, 2005 in this Court. Thereafter, on 22nd July, 2005, respondent Nos. 1 and 3 entered into an agreement in respect of assignment of the suit property. It was further submitted that the learned Single Judge of this Court was pleased to grant an ad interim relief in terms of prayer clauses (b) and (c) subject to depositing payment of Rs. 81 lacs and Rs. 59,26,295/- in the Court by 25th July, 2005. However, respondent No.3 paid Rs.59,26,295/- to respondent No.1 and Rs.25 lacs cash to respondent No.1. It is also contended that the respondent No.3 has offered less amount to the respondent No.1 than the offer of the appellants. Under such circumstances, the said contract is enforceable and the appellants are entitled to get injunction in their favour. 5 4. Per contra The learned counsel for Respondents Nos. 1, 2 and 3, while justifying the order passed by the learned Single Judge, have contended respondent No.3 has paid the due amount of Rs.59,26,295/- to MHADA and the MHADA has accepted the said money and at present, the respondent No.3 is in physical possession of the suit property. Learned Counsel for defendant No.1 has submitted that the appellants have no legal right to seek specific performance of the MOU as the said MOU is contingent contract Without Prejudice to the rights of the parties. He has “ ” submitted that the MOU which is at the volition of MHADA i.e. third party, no suit for specific performance can be instituted based on such MOU. Moreover, the appellants did not pay the amount within stipulated period and hence there is no intention and willingness to perform the contract and they have no right to claim specific performance. 5. Learned counsel appearing for defendant No.3 has submitted that while deciding this appeal unilateral view may not be taken by the Court but the fact that the property at present is in possession of defendant No.3 and considering the dilapidated condition of the property, not only it needs to be preserved but 6 also needs to be developed. The order passed by the single judge is just and legal. Learned Counsel has relied on the order passed by the division bench dated 26th April, 2007 in which the Division bench has allowed the MHADA to withdraw the money from the concerned person i.e. defendant No.3 and undertaking was given by the defendant No.3 that subject to the final decision of the Court the defendant will be allowed to develop the property and defendant No.3 will not create any third party right, interest in the suit property and will not claim equities if the suit is decreed. 6. The law recognizes suit for specific performance based on the contingent contract and also, the status of the party thereto. If the time is extended by mutual consent of the party, then the time cannot be considered as the essence of the contract. Under these circumstances, three basic principles for granting interim relief i.e. prima facie case, irreparable loss and balance of convenience stand in favour of the appellants. The learned Single Judge has dismissed the notice of motion on the ground that the MHADA has not given permission when the suit was filed, therefore, the plaintiff had no right to claim any such relief and the contract at the 7 volition of the third party cannot sustain as a legal ground in a suit for specific performance. The contingent contract under Section 31 of the Indian Contract Act, 1972, gives rise to the principal and subsidiary obligations. The principal obligations are those arising out of main contract containing the conditions and the subsidiary obligations having those relating to efforts for fulfillment of the conditions and those parties not to prevent the occurrence and to make reasonable efforts to bring about the event. Thus, the parties, in breach of subsidiary obligation ought to be as much liable as if the primary obligation has been breached. It is obligatory on both the parties not to do anything to prevent the occurrence of the event and this duty is implied in the contingent contract. A contract becomes void only if the contingency becomes impossible. In the present case, NOC of MHADA is the contingency. However, it was not impossible, especially when MHADA showed its willingness to give NOC subject to payment. However, the said contingency was deliberately frustrated by the act of respondent No.1. Prima facie respondent No.1 has committed breach of the contract. The MHADA has also acted arbitrarily in the present matter. Under these legal premises, the order passed by the learned Single Judge cannot be sustained as it merely proceeds on the basis that the plaintiff 8 having failed to make out a prima facie case as there can be no assignment by defendant No.1 of his leasehold rights without obtaining prior permission of defendant No.2 which is within the discretion of defendant No.2, it cannot be said with any degree of certainty, that the Court will make a decree of specific performance of such a contract, specifically when the grant of decree of specific performance is in the discretion of the Court and the Notice of motion came to be dismissed on 29.3.2007 without taking into consideration conduct of the parties. 7. In a decision rendered by the Supreme Court in the case of Mrs. Chandnee Widya Vati Madden Vs. Dr. C.L.Katial & Ors. reported in AIR 1964 Supreme Court 978 (V 51 C 125), it was held as under. The main ground of attack on this appeal is that the contract is not enforceable being of a contingent nature and the contingency not having been fulfilled. In our opinion, there is no substance in this contention. So far as the parties to the contract are concerned, they had agreed to bind themselves by the terms of the document executed between them. Under that document it was for the defendant-vendor to make the necessary application for the permission to the Chief Commissioner. She had as matter of fact made such an application but for reasons of her own decided to withdraw the same. On the findings that the plaintiffs have always been ready and willing to perform their part of the contract and that it was the defendant who willfully refused to perform her part of the 9 contract, and that time was not of the essence of the contract, the Court has got to enforce the terms of the contract and to enjoin upon the defendant-appellant to make the necessary application to the Chief Commissioner. It will be for the Chief Commissioner to decide whether or not to grant the necessary sanction. 8. The learned Single Judge ought to have considered that by act of writing letter to MHADA for NOC and for transfer of right, title and interest and to establish a Cooperative Housing Society, respondent No.1 has extended the time of the contract and willingness to perform the contract was shown by the acceptance of Rs.5 lakhs in March, 2005. The appellants also wanted to keep the promise. How and why MHADA has accepted the money from defendant No.3 when the willingness to give NOC for transfer of right, title was given to appellants Steelman Cooperative Housing – Society ? when MHADA has expressed willingness to accept the appellants as assignee then why MHADA suddenly decided to accept the money from respondent No.3 and gave approval to respondent No.3. 9. Further the learned Single Judge while disposing of the Notice of Motion overlooked certain crucial development brought on record, particularly the fact that respondent No.2 (original defendant No.2) in its affidavit in reply dated 19/8/2005 to the 10 Notice of Motion has categorically accepted the plaintiffs claim ’ under the MOU pursuant to which plaintiffs have deposited a sum of Rs.59,26,295/- in this Court and sought leave to withdraw the same with interest @ 13.5% from 15th March, 2005 on the said sum and stated that it would issue the NOC for registration of the said Society. It also came up with a specific case that it will not take cognizance of the MOU entered between defendant No.1 and defendant No.3 on 22nd July, 2005 that being the day when an order of restraint was passed against him by this Court and stated that the letter dated 30.6.2005 as well as sham transaction (MOU dated 22.7.2005) entered by defendant No.1 with Surendra Rawal (defendant No.3) is not acceptable to them on the other hand admitted that after receipt of payment due to it they will proceed to issue the NOC for registration of the proposed society i.e. Steelman Coop. Housing Society Ltd. of the (plaintiff) appellants. 10. Thus, undoubtedly the case of the appellants stand on sound and legal footings compared to the respondents. The appellants have established a strong prima facie case in their favour. Considering the conduct of the parties, the balance of convenience lies in favour of the appellants. If the property is developed by any other party, then the plaintiffs who have paid 11 Rs.10 lakhs till now to respondent No.1 and also deposited the balance amount in Court, shows readiness and willingness in performing the contract will suffer irreparable loss if its interest in the suit property is not protected and preserved till decision of the Suit. In such circumstances, we need to set aside the order passed by the Learned Single Judge and pass the following orders , disposing of the appeal. (i) The Order dated 29th March, 2007 passed by the learned Single Judge is set aside. Notice of Motion is made absolute in terms of prayer clause (b) and (c). (ii) Respondents original defendants 1 to 3 shall not carry out any development and will maintain status quo so as to preserve the same as on the date of filing of the suit. (iii) Respondents 1 and 3 to pay costs of the Appeal to appellants. (MRIDULA BHATKAR, J.) (J. N. PATEL, J.) jpc/-