1 MNM IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 2973 OF 2008 IN SUIT NO. 982 OF 2008 Jatin Mannubhai Sheth ...Plaintiff Vs. Arvind Pandurang Nagvekar & Ors. ...Defendants Mr. A.Y. Sakhare, Sr. Counsel a/w. Ram Laxmipalli, for Plaintiff Mr. A. Palekar with Mr. P.K.Deshmukh for Defendant No.1 Mr. Pradeep Thorat, Advocate for Defendant Nos.2 and 3 Mr. P.N. Patil for proposed Defendant Nos.4 to 6 CORAM : SMT. ROSHAN DALVI, J. DATED : 25TH MARCH, 2010 P.C. : 1. The Plaintiff, as the purchaser of the property of Defendants 1,2 and 3, has entered into Memorandum of Understanding (MOU) with Defendants 1,2 and 3 on 17th March 2005, which execution is admitted. Under the MOU the Plaintiff was to develop the properties of the Defendants mentioned in Clause 4 for the aggregate consideration mentioned in Clause 9 of the MOU. The Plaintiff was also to obtain surrender of the tenancy of the 2 tenanted premises in possession of the Mumbai Municipal Corporation (MMC) upon payment of Rs.1.3 Crores to the M.M.C on behalf of the owners. There is a dispute with regard to that clause, which is clause No.6. It would be proper to set out and interpret clause 6. Clause 6 runs thus: “6. The Owners declare that the M.M.C has by a letter dated 21/05/2003 agreed to surrender the possession of the rented property situated on First, Second and rear side third floors to the Owners on payment of a sum of Rs.1,30,00,000/- (Rupees One Crore Thirty Lacs Only).” 2. Under clause 9 it was the obligation and liability of the Plaintiff to make payment of Rs.1.3 Crores. Under clause (6) it is not specified that the Plaintiff has to make payment to Defendants 1, 2 and 3 as the owners. The payment is required to be made to the tenants to obtain the surrender of the premises from the tenants. The surrender would be to the owners by the tenant. Consequently, the Plaintiff would have to make payment on behalf of the owners and the surrender, if any, to the owners would have to be accepted by the owners on behalf of the Plaintiff. Ultimately the relevant obligation is of making payment to the tenant and of obtaining possession from the tenants of those tenanted premises. This is clarified in clause 7. Clause 7 runs thus:- “7. The Purchaser hereby agrees and declares to pay a sum of Rs. 1,30,00,000/- (Rupees One Crore Thirty Lacs Only) the Owners hereby authorize the purchaser to obtain surrender of possession of 3 the M.M.C property situated on the first, second and rear side floor of the said building known as “Saroj-Nalini Niwas” and the said sum of Rs.1,30,00,000/- (Rupees One Crore Thirty Lacs Only). However, the said sum of Rs.1,30,00,000/- (Rupees One Crore Thirty Lacs Only) will be deducted from above referred lump-sum consideration of Rs.2,60,00,000/- (Rupees Two Crore Sixty Lacs Only).” 3. Consequently, the Plaintiff had to pay Rs.1.3 Crores. The Defendants 1,2 and 3 authorize the Plaintiff to obtain the surrender of the tenanted premises. This would be a part of the total consideration of Rs.2.60 Crores payable for the properties mentioned in paragraph 4 to Defendants 1,2 and 3. 4. Under clause 9 the earnest amount was Rs.40 lakhs payable on the execution of the MOU. Rs.40 lakhs is paid upon execution. The receipt is issued by Defendants 1,2 and 3. A Power of Attorney is also executed in terms of clause 13 by Defendants 1, 2 and 3. 5. The execution of the MOU is, therefore, not only admitted, but also acted upon. It is accepted by performance. 6. The Defendant No.1 has abided by the agreement. Defendants 2 and 3 have sought to terminate the agreement. The main reason for termination is that the Plaintiff could not have made payment of Rs.1.3 Crores to the M.M.C who are the tenants of Defendants 1,2 and 3. The Plaintiff is prepared to make payment not on his own account, but on behalf of the 4 owners. There is more than sufficient compliance of clauses 6 and 7 by the Plaintiff upon such offer to make payment. 7. The Plaintiff shall forthwith make payment as agreed to the M.M.C on behalf of the owners Defendants 1, 2 and 3 and obtain surrender of possession from the M.M.C as authorized by the owners. 8. The remainder of the payments under clause 9 is to be made on specified events, none of which have happened. The first of such payments is to be made upon obtaining the tenant’s agreements. The Defendants 1, 2 and 3 as owners were to obtain the agreements for alternate accommodation for the tenants within 3 months of the MOU. That has not been done and hence no further payment is at present required to be made by the Plaintiff as a Purchaser. 9. The parties were to enter into a detailed agreement in terms of this Memorandum of Understanding after the premises of M.M.C was surrendered. 10.The Plaintiff sent the draft agreement to the Defendants on 11th June 2005. The Defendants replied on 12th June 2005 that the agreements were not pursuant to their instructions and that the draft agreements would be furnished to the Plaintiff with required changes. This letter of the Defendants signed by all the 3 Defendants shows not only the admission of the MOU, but also the offer to act upon the MOU albeit with certain changes. Which are the changes have not been specified till date. 5 11.In the meantime the Defendants have issued the notice of termination on 15th November 2006. The termination notice essentially raises the dispute with regard to the payment of Rs.1.3 Crores to the M.M.C. The Plaintiff abides by the obligation to make the payment. That would have to be made on behalf of the owners Defendants 1, 2 and 3, which also the Plaintiff accepts. The surrender of course would have to be made to the Plaintiff as per Clause 7 of the MOU. In the long letter of termination there is no other essential dispute. 12.Mr. Thorat was asked to tell the Court what were the other reasons for terminating the MOU. Going through the notice he stated that the further amounts which are paid by the Plaintiff to the Defendant No.1 were not on behalf of all the others. 13.The notice of termination does not show any bonafide cause after executing the MOU, partly acting upon a MOU and offering to send the draft agreement as agreed in the MOU albeit with certain changes. 14.Of course, if there are certain changes, there would be a novatio between the parties to that extent. However, since no changes are shown, and the execution of the MOU is admitted and partly acted upon, the case of the Plaintiff of obtaining specific performance of the agreement upon the reciprocal obligations of the parties is prima facie made out. Defendants 1, 2 and 3 have not performed their next reciprocal promise which is obtaining agreements from the tenants for alternate accommodation and 6 which was to be done within 3 months of the execution of the MOU in March 2005. 15.Consequently, the Defendants are injuncted from dealing with, disposing off, alienating, encumbering, parting with possession, transferring or creating any 3rd party rights in the suit premises pending the Suit. 16.The Plaintiff, ofcourse, shall be entitled to pay the consideration to the M.M.C for surrender of the premises which shall be on behalf of the Defendants 1, 2 and 3. The Plaintiff shall also be entitled to obtain possession of such surrendered premises. 17.The Notice of Motion is disposed off accordingly. (SMT. ROSHAN DALVI, J.)