1 MNM IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 116 OF 2008 IN SUIT NO. 101 OF 2008 Mrs. Shaila Ulhas Kandalgaonkar & Ors. ...Plaintiffs Vs. Hemlata Gangadhar Khedekar & Ors. ...Defendants Mr.Mangal Bhandari a/w Mr. N.M.Shah for Plaintiffs Mr. A.G. Damle for Defendants CORAM : SMT. ROSHAN DALVI, J. DATED : 29TH MARCH, 2010 P.C. : 1. The suit is for specific performance of the MOU dated 1 st January 2003 executed between the parties. The MOU was for development of the property of the defendants/tenants/occupants. Under clause 2 of the said Agreement the defendants as the owners were required to have the entire property vacated by their tenants/occupants and also to hand over vacant possession of the premises in their own occupation to the plaintiff as the developer. The list of tenants marked Annexure-B to the plaint shows 15 persons required to be vacated in addition to the owners’ premises itself. For getting them vacated the defendants as the owners had to enter into 2 registered agreements with each tenant/occupant, obtain their consent in writing, incorporate them in the registered agreements to be executed with the tenants/occupants and get a letter of consent of the tenants/occupants approved by the Plaintiffs as the developers. 2. This was the prime mandatory obligation of the owners. The owners have not got any tenant/occupant vacated. The owners themselves also have not vacated their own premises and handed it over to the plaintiffs. The owners have breached the most essential obligation under the MOU. 3. The owners were to procure the vacant possession of the property within 2 months of the execution of the MOU under clause 18 of the agreement. If the owners breached that obligation the MOU could be terminated only at the plaintiffs’ option. The owners were not, therefore, entitled to terminate the agreement and that was naturally so because it was upon their own breach. 4. The MOU was the concluded contract between the parties as expressly stated in clause 16. 5. The consideration under the MOU was essential to be paid in kind as shown in clause 6. That was by way of 3 flats of specified dimensions to be given to the owners. The plaintiffs as the developers were to make a refundable deposit of Rs.40 lakhs. 1 lakh of which was paid as the earnest amount at the time of the execution of the MOU which has been receipted and acknowledged. The parties were to enter into a development 3 agreement. On the execution of the development agreement a further amount of Rs.39 lakhs as refundable deposit was to be paid. 6. Under clause 16 was itself treated as a concluded agreement and not as an executory agreement merely because the parties could finalise certain other particulars at the time of execution of development agreement. 7. The plaintiffs as the developers were to pay stamp duty. 8. Such is the agreement between the parties. Under the agreement the obligation of the developer was to make payment in kind and pay refundable deposit. The obligation of the owners was to obtain the vacant possession of the premises of the tenants/occupants and themselves. This was to be done within 2 months. None of these premises have been vacated or given to the developer. There is a complete breach of the agreement. 9. It is argued on behalf of the defendants that that the agreement was contingent upon the defendants surrendering their premises and consenting to enter into registered agreements and handing over vacant possession of the suit premises which could have been given to the developers. It is argued on their behalf that if the tenants do not hand over possession of their premises, the owner would not be able to perform the obligation under clause 2 of the agreement. The agreement would be rendered impossible of performance and would accordingly become void. 4 10.This argument proceeds on a footing that the agreement is a contingent agreement. A contingent contract under Section 31 of the Indian Contract Act is a contract to do or not do something, if some event, collateral to such contract, does or does not happen. The contract is, therefore, other than what may or may not happen. The contract between the parties is to obtain vacant possession and to claim the consideration in kind by way of 3 flats in the redeveloped building. Performing of the obligation of the defendants by vacating the tenants is not an event collateral to the contract. It is a prime obligation of the defendants. It was not contingent, upon the fact of the tenants agreeing or not agreeing to hand over vacant possession. Clause 2 of the MOU in specific express terms sets out the obligation of the owners by the term “shall” in each of the sentences constituting the entire of the obligations of the owners. Clause 2 runs thus: 1. 2. “Prior to the execution of the said Development Agreement, the Owner shall get the entire property vacated by the tenants/occupants occupying the said existing building and the said structures and shall hand over vacant possession thereof to the Developers at the time of the execution of the said Development Agreement and also simultaneously therewith remove herself along with the First Confirming Party from the tenement in their occupation in the existing building. The Owner shall enter into registered agreements with each tenant/occupant to provide them permanent alternative accommodation in the proposed new building. The Owner 5 shall procure consent in writing of all the Tenants/Occupants for the demolition of the existing building and structures and for construction of proposed new building in place and stead thereof. The said consent shall be incorporated in the said registered agreements as also by way of separate writing from each tenant/occupant. The said agreement will also provide for payment of share application money and payment of stamp duty and registration charges in respect thereof by each Tenant/Occupant. The Owner shall get the draft of the proposed agreement with each tenant/occupant and the letter of consent approved by th e Developers prior to execution thereof by the Tenants/Occupants.” 11.The mandatory requirement of the owner was, therefore, to get the entire property vacated, handover vacant possession to the developers, remove themselves, enter into registered agreements with the tenants, procure the consent in writing of the tenants, incorporate it into the registered agreements with the tenants and get the draft of the proposed agreement and the letter of consent of the tenants approved by the developers prior to the execution of the registered agreements. None of these obligations shows that it is dependent upon the tenants agreeing or actually consenting. The MOU is, therefore, not a contingent contract. The defence cannot be accepted. 12.The MOU forms a binding agreement between the parties. Upon the breach by the owners the developer alone is entitled to terminate it. The 6 developer has not terminated the agreement. He has in fact sought to specifically enforce the agreement. Prima facie ease is made out. The developer would be entitled to enforce the MOU and failing which would be entitled to obtain damages at the final hearing of the suit. The developer would, therefore, be entitled to an order of injunction restraining the owners from dealing with, disposing off, alienating, encumbering, parting with possession, transferring or creating any 3 rd party rights in the suit premises pending the Suit. 13.However, the developer is required to pay stamp duty under the development agreement. The development agreement is not yet entered into though a concluded agreement is arrived at under the MOU between the parties. To be granted any relief of injunction upon seeking prima facie the execution of a binding agreement, which the developer seek to enforce, the developers must pay adequate stamp duty upon the consideration as shown in clauses 6 and 10 of the agreement. Hence the following order:- ORDER 1. The Defendants shall not sell, deal with, dispose off, alienate, encumber, parting with possession, transfer or create any 3 rd party rights in the suit premises pending the Suit. 2. The Plaintiffs shall pay stamp duty as required by law upon the consideration reflected in clauses 6 and 10 of the MOU within 4 weeks from today. The Plaintiffs shall forthwith apply for 7 adjudication of Stamp duty payable. 3. The Notice of Motion is disposed off accordingly. 4. Written Statement is filed. 5. The execution of the MOU dated 1 st January 2003 is admitted. 6. The correspondence between that parties that ensued thereafter is also admitted. 7. The rights of the parties shall have to be determined upon interpretation of the MOU and such correspondence. 8. The following issues are framed. I S S U E S 1. Whether the suit is barred by the law of limitation. 2. Whether the Defendants are bound and liable to perform their obligations under Clause 2 and 18 of the MOU dated 1 st January 2003. 3. Whether the MOU between the parties is a contingent contract which has become impossible of performance by the contingency. 4. What relief, if any, is the Plaintiffs entitled to. 8 9. The issue of limitation shall be decided as a preliminary issue under the provisions of Order 14 Rule 2 of the C.P.C. 10.The Suit is adjourned to 8 th June 2010 for determination of preliminary issue. (SMT. ROSHAN DALVI, J.)