- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. APPEAL NO.1015 OF 2002 IN SUIT NO.988 OF 1988 ... Prabhakar mahadev Karhadkar and anr. ...Appellants v/s. Laxmibai Narayan Mahant & ors. ...Respondents ... Mr.P.K.Dhakephalkar i/b Mr.N.V.Gangal for the Appellants. Mr.P.A.Sawant i/b Kadam & Co. for Respondents Nos. 1 to 14. Mr.V.A.Thorat with Mr.Sanjay Kothari & Mr.S.John i/b M.P.Savla & Co. for Respondent No.15. Mr.P.Majbudar i/b R.N.Canha for Respondents Nos.17 & 18. - 2 - CORAM: D.K.DESHMUKH & A.A.SAYED, JJ. DATED: 17TH FEBRUARY, 2009 P.C.: 1. By this Appeal the Appellants, who are original Plaintiffs in Suit No.988 of 1988 challenge the judgment and decree dated 11/12/18-12-2001 passed by the learned single Judge of this court. 2. The Plaintiffs who are two in number filed a civil suit seeking a declaration that the agreement dated 12th May, 1981 varied by the writing dated 8th February, 1986 is valid, enforceable and binding on the Plaintiffs and Defendants: that the purported agreement for sale dated 8th January, 1983 entered into by Defendant No.3, 4, 6 and 8 with Defendant No.16 is illegal, null and void and not binding upon the Plaintiffs; for a declaration that the agreement for assignment dated 29th December, 1997 being executed inter-se between Defendants Nos.1 to 18 in respect of the suit property as invalid, - 3 - unenforceable, null and void ab-initio and not binding on the Plaintiffs in any manner whatsoever and that the same are of no effect or consequence of any nature whatsoever. In the suit, the Plaintiffs have also prayed for a decree directing the Defendants to perform specifically the said Agreement dated 12th May 1981 as varied by the said writing dated 8th February 1986 in favour of the Plaintiffs in respect of the suit property. The Plaintiffs have, in the alternative to prayer clause (b) above and in the event this court holding that the specific performance as prayed for cannot or ought not be granted, prayed that; (i) the Defendant No.15 be ordered and decreed to pay to the Plaintiffs the sum of Rs.4,51,292/- and further interest on Rs.2,40,000/- from the date of the suit till payment at the rate of 18 per cent per annum; (ii) the Defendants be ordered and decreed to pay to the Plaintiffs the sum of Rs.1,00,00,000/- as and by way of compensation or damages for non-performance of the said contract; - 4 - (iii) that it be declared that the immoveable property described in the Schedule stands validly charged in favour of the Plaintiffs to secure the payment of the amount mentioned in prayer (c)(i) and (c) (ii) above and the costs of the suit; (iv) that in the event of the Defendant No.15 failing to pay to the Plaintiffs the amounts decreed in prayers (c) (i) and (c)(ii) above and the costs of the suit, within such time, as may be nominated in that behalf by this Hon’ble Court the immovable property described in the Schedule be sold by and under the directions of this Hon’ble Court and the net sale proceeds thereof, be applied in or towards the satisfaction of the Plaintiffs’ claim and that the Plaintiffs may have liberty to a personal decree against the Defendants for the deficiency; (v) that for the purpose aforesaid, all directions be given, orders passed, enquiries made and accounts taken as may be necessary; - 5 - and for interim reliefs restraining Defendants Nos. 17 and 18 from creating any further rights in respect of the suit property; 3. The Plaintiffs had initially filed this suit against Defendants Nos. 1 to 15. Defendants Nos.16, 17 and 18 were subsequently added as party-Defendants to the suit. 4. The facts that are material and relevant are that in the plaint the Plaintiffs claim that the Plaintiffs were the promoters of the Co.operative Society, namely, Ketan Cooperative Housing Society (proposed) at Rao Chawl, room No.2, Bandrekarwadi, Jogeshwari (East) and building No.3 Room No.97, Second floor, Opp.Apna Bazar, Dhake Colony, Andheri (West), Bombay 400 058, (hereinafter referred to as "the said society"). The suit was initially filed by the Plaintiffs in their capacity as the promoters of the said society, but, subsequently by an amendment of 11th August, 1995, pursuant to the order dated 28th July, 1995, the Plaintiffs were described as representing the members of the said society in representative capacity as Developers and - 6 - contractors. In the suit as filed by the Plaintiffs as promoters, it is their case that there are 35 members in the said society promoted by the Plaintiffs who have from time to time contributed diverse sums of money for acquiring and developing the suit property. According to the Plaintiffs, the original Defendant No.1 was the widow of one Narayan Waman Mahant who died intestate at Bombay leaving her surviving Defendants Nos.2 to 14 as her only heir and legal representative under the Hindu Law, by which she was governed. Defendant No.2 being the eldest son of the late Narayan Waman Mahant is the karta of the joint undivided Hindu family consisting of himself, his mother original Defendant No.1, his wife-defendant No.3, his brothers-defendants Nos.4 and 6, his sisters-in-law-defendants Nos.5, 6 and 7 and his nephews-defendants Nos.9,10, 11 and 14 and nieces-defendants Nos.12 and 13. 5. According to the Plaintiffs, the deceased Narayan Waman Mahant was during his lifetime seized and possessed of or otherwise well and sufficiently entitled to an immovable property situate at village Bhandarsada Malad Taluka-Borivali, District- Bombay Suburban bearing survey No.454, hissa no.1/1 and also - 7 - bearing city survey No.954, 955 and 956 ademeasuring 2950 sq.yards equivalent to 3302.59 sq.meters or thereabouts. Said Narayan Waman Mahant died intestate on the 3rd December, 1952 and upon his death the joint undivided Hindu Family consisting of members/co-parceners referred to hereinabove became absolutely entitled to the suit property. 6. It is the case of the Plaintiffs that original Defendants Nos.1 to 14 had filed form No.1 under Section 6 of the Urban Land (Ceiling and Regulation) Act 1976 (hereinafter referred to as the said Act of 1976). By an order dated 11th June, 1981 passed under the provisions of Section 8(4) of the said Act of 1976, the draft statement declaring an area out of the said property ademasuring 3215.4 sq.meters as surplus vacant land was finalised. The said order was subsequently reversed. According to the Plaintiffs, the property under development plan was affected by a reservation for a primary school and also by development plan roads as is shown in the plan in green and yellow colour wash. According to the Plaintiffs, they were given to understand that subject to necessary orders being obtained under the provisions of the Act of 1976 out of the suit - 8 - property an area equivalent to 30,000 sq.ft. FSI would be available for development by construction of residential building thereon. 7. According to the Plaintiffs, in December 1980, the Plaintiffs were approached by Defendant No.15 with a scheme for housing for middle class people employed in several public institutions. The said proposal of Defendant No.15 was circulated by the Plaintiffs among their acquaintances and enrolled 35 persons as members of the proposed cooperative housing society, namely, Malad Ketan Cooperative Housing Society of which the Plaintiffs were the promoters. 8. After negotiations on or about 12th May 1981, an agreement was entered into between the Plaintiffs and Defendant No.15 who agreed to permit the Plaintiffs to develop the suit property and to assign in favour of the Plaintiffs the right, title and interest of Defendant No.15 in respect of the suit property as per the said agreement dated 15-5-1979 executed between original Defendants Nos.1 to 8 along with Ramakant Narayan Mahant for themselves and representing other Defendants, with Defendant No.15 - 9 - on the terms and conditions and for the consideration as set out in the said Agreement. 9. Under the said agreement, the scheme of construction of the houses was for members of the weaker sections of the society at their cost and the Plaintiffs were entitled to develop the land at their costs upon the scheme submitted to the competent authorities under Section 21 of the Act being sanctioned. The rate as recorded in the said agreement was Rs.20/- per square feet of the total buildable area that would be available in respect of the said land, at the time of the grant of approval to the said scheme by the competent authority under the said Act. If the buildable area was to vary, in that event, the total amount payable by the Plaintiffs to Defendant No.15 was also to vary proportionately at the rate of Rs.20/- per sq.ft. 10. As per the agreement, the Plaintiffs were to make to Defendant No.15 payment of Rs.40,000/- as and by way of earnest money on or before execution of the said agreement, Rs.1,00,000/- as and by way of part payment on or before execution of the said agreement, Rs.4,70,000/- upon the sanction of the said scheme - 10 - but not later than 30 days from the date of receiving written intimation from Defendant No.15 of the approval from the competent authority under Section 21(i) of the said Act of 1976, and Rs.16,700/- were to be paid upon execution of the conveyance of the sale of the property. 11. It was also provided in the said agreement that upon receipt of the sanction of the said scheme by Defendant No.15 and upon Defendant No.15’s Advocate intimating of such sanction to the Plaintiffs’ Advocates, the Plaintiffs shall within 30 days thereafter to pay to Defendant No.15 the said sum of Rs.4,70,000/- as provided in clauses 3(ii) of the said agreement and Defendant No.15 shall simultaneously therewith put the Plaintiffs in vacant possession of the said land. It was also provided that if the Plaintiffs fail to make payment as provided in clause 3(iii) of the said agreement to Defendant No.15, in such event Defendant No.15 shall be entitled after giving 8 days notice in writing to forfeit the sum of Rs.40,000/- paid by the Plaintiffs. 12. According to the Plaintiffs, as per the - 11 - agreement dated 12th May, 1981 and as required under the terms of the said agreement, the Plaintiffs have paid to Defendant No.15 a sum of Rs.1,40,000/- out of the aggregate agreed consideration of Rs.2,26,700/- and the Defendant agreed to get the said scheme for developing the suit property sanctioned by the competent authority under the provisions of Section 21 of the said Act of 1976 and also executed power of attorney and obtained non-exclusive right of way or access to the suit property to the Plaintiffs. 13. According to the Plaintiffs, as the property was no longer affected by the provisions of the ULC Act and since by the order dated 31st January 1983 passed by competent authority the said land had been held to be within ceiling limits, the Plaintiffs caused the Defendants to submit building plans to the Municipal Corporation of Greater Bombay for issue of Intimation of approval of commencement certificate and for developing the suit property by constructing a residential building thereon for housing the members of the Plaintiffs’ proposed society as contemplated by the agreement dated 12th May 1981. It is also the case of the Plaintiffs that the Bombay Municipal Corporation refused permission vide its letter dated - 12 - 20-7-1983 to develop the suit property on the ground that the suit property had been reserved in the draft development plan for a public purpose, viz. housing for dishoused and formal refusal order was issued on 5th January 1984 under Section 45 of the Maharashtra Regional and Town Planning Act 1966 by the Municipal Corporation of Greater Bombay. 14. According to the Plaintiffs, by virtue of order dated 5-1-1984 issued by the Bombay Municipal Corporation refusing to sanction the building plans of the proposed residential building of the Plaintiffs, the Plaintiffs on or about 9th August, 1983 caused the Defendants to file an appeal under Section 47 of the Maharashtra Regional Town Planning Act, 1966 before the State Government against the said order. Subsequently on or about 6th September, 1985, Mr.Chandrakant Shah, a partner of Defendant No.15 acting as the constituted attorney of original Defendants Nos. 1 to 14, submitted to the State Government Supplementary grounds of appeal for quashing the refusal order issued by the Bombay Municipal Corporation and for getting the suit property released from the proposed reservation under the draft development plan. Letters were written by - 13 - Defendant No.15 and Plaintiffs objecting to the reservation of the suit property under the draft development plan. The Bombay Municipal Corporation by their letter dated 21st January 1986 invited objections and suggestions to the proposals of the draft development plans in respect of the reservations of the said property under the said plan. The Defendants informed the Plaintiffs that they would be objecting to the reservation of the said property on the ground that the same was to be developed for the proposed housing society promoted by the Plaintiffs of which the members were government employees or quasi government employees. The Defendants represented to the Plaintiffs that the suit property would be released from the reservation under the draft development plan on the condition that ten per cent of the tenements to be constructed on the said property would be reserved by the Municipal Corporation of Greater Bombay for housing dishoused persons. 15. Thereafter, according to the Plaintiffs, on 14th October 1987 they noticed a public notice issued by the Advocates for Defendant No.15 in the issue of "Loksatta" dated 14th October 1987 to the effect that - 14 - members of the public had been warned by Advocates for Defendant No.15 from dealing with original Defendants Nos. 1 to 14 in respect of the said property. Thereafter on 20th January, 1988 the Plaintiffs were surprised to read a notice inserted in the issue of "Loksatta" dated 20th January 1988 to the effect that Defendants Nos.2, 4, 6 and 8 had allegedly entered into an agreement for sale of the suit property with the clients of Advocate Mr.Sanjay Kadam and that objections had been invited by the clients of said Advocate Mr.Sanjay Kadam prior to completion of a purported agreement for sale in favour of his clients. The Plaintiffs immediately by their Advocates’ letter dated 23rd January 1988 addressed to said Mr.Sanjay Kadam, Advocate, recorded their objections to the purported sale by Defendants Nos.2, 4, 6 and 8 in favour of the clients of said Advocate Mr.Sanjay Kadam and informed him that Defendants Nos. 2, 4, 6 and 8 had no right of any nature whatsoever to enter into any agreement for sale and/or transfer of the said property and any agreement for sale thereof to his client would be void ab-initio. By the said letter, the Plaintiffs also called upon the said Advocate to forthwith furnish to the Plaintiffs the names and addresses of - 15 - his clients. Though Advocate Mr.Kadam duly received the said letter of Plaintiffs, neither Advocate Shri Kadam nor his clients have cared to reply to the Plaintiffs’ said letter dated 23rd January, 1988. The Plaintiffs were, therefore, required to file this suit as according to the Plaintiffs, there was a valid, binding and enforceable agreement between them and Defendant No.15. The Plaintiffs have, therefore, filed this suit for specific performance and in the event the Defendants failing to specifically perform their part of the agreement, the Plaintiffs claimed for return of the money deposited by them and for damages. 16. Thereafter, it transpires that so far as this suit is concerned, the same was dismissed and during the interregnum, an agreement was entered into between Defendants Nos. 1 to 15, 16, 17 and 18 by which the suit property was transferred in favour of Defendants Nos. 17 and 18. The Plaintiffs were, therefore, required to amend the pleadings, join Defendants Nos. 17 and 18 as party-defendants; to the suit and also apply for necessary interim reliefs. So far as the Defendants are concerned, written statements have been filed on behalf of - 16 - Defendants Nos.3 to 14, Defendant No.15, Defendant No.16 and Defendants Nos.17 and 18. 17. So far as Defendants Nos. 3 to 14 are concerned, it is their case that the Plaint does not disclose any cause of action against them; that they had not entered into any contract with the Plaintiffs; the Plaintiffs have not come to the Court with clean hands and, therefore, no reliefs can be granted against these Defendants as they were not party to the agreement between the Plaintiffs and Defendant No.15. 18. It is the case of the Defendants Nos. 17 and 18 that they have acquired rights of Defendant No.16 in respect of the suit property who has no privity of contract with the Plaintiffs and consequently the suit against these Defendants deserves to be dismissed. According to Defendants Nos. 17 and 18 the suit was dismissed for default on 10-11-1997, application for restoration was made in February 1998, suit was restored by Appeal Court on 19-3-1998 and these Defendants entered into Agreement for purchase of suit property on 29-12-1997 i.e. prior to restoration of the suit and as such, the suit as - 17 - against these Defendants is liable to be dismissed with costs. Therefore, according to Defendants Nos.17 and 18, they have a valid right, title and interest in the suit property and the Plaintiffs are not entitled to any relief. These Defendants have denied the case of Plaintiffs to the extent that the Plaintiffs have made any payment or they have any right to the suit property under the agreement between the Plaintiffs and Defendant No.15. These Defendants have denied the fact that the agreement between Defendants Nos. 1 to 16 and Defendants Nos. 17 and 18 is invalid, unenforceable, null and void or that the same is liable to be declared invalid and set aside as alleged by the Plaintiffs. On the contrary, it is the case of these Defendants that the Plaintiffs are not entitled to any relief and that the agreement with these Defendants was entered into after the dismissal of the suit. 19. On the basis of the rival pleadings, following issues were framed by the learned single Judge. I S S U E S 1. Whether the Plaintiffs are not entitled - 18 - to maintain the suit under Order 1 Rule 8 of the Code of Civil Procedure 1908 for an on behalf of the parties referred to in the list annexed and marked Exhibit "A" to the plaint? 2. Whether the suit is barred by law of limitation as alleged by the Defendants? 3. Whether Defendants Nos.1 to 8 on their behalf and on behalf of Defendants Nos.9 to 14 had entered into an agreement dated 15th May, 1979 with Defendant No.15 to develop the suit property described in the schedule annexed and marked Exhibit "B" and "B-1" to the plaint and had put Defendant No.15 in possession of the suit property as recorded vide letter dated 16th December, 1980? 4. Whether Defendant Nos. 1 to 8 for and on their behalf and on behalf of Defendants Nos. 9 to 14 executed an irrevocable power of attorney dated 16th December 1981 in favour of Defendant No.15 to develop the suit property? - 19 - 5. Whether by an agreement in writing namely Exhibit "D" to the plaint dated 12th May 1981, Defendant No.15 agreed to let and permit the Plaintiffs as promoters of a proposed Co.operative society comprising of 35 persons named in the list annexed and marked Exhibit "A" hereto to develop the suit property on the terms and conditions mentioned therein? 6. Whether the Plaintiffs on their behalf and on behalf of the aforesaid 35 persons paid to Defendant No.15 Rs.1,40,000/- in terms of the said agreement Exhibit "D" to the plaint? 7. Whether by a supplementary agreement dated 2nd March 1982 between Defendants Nos. 1 to 14 as the owners of the suit property and Defendant No.15 the said agreement dated 15th May, 1979 was converted into an agreement to sale of the said property in favour of Defendant No.15? 8. Whether by a letter dated 6th September, - 20 - 1985, Defendants Nos.1 to 14 on one hand and Defendant No.15 on the other confirmed the validity and subsistence of the said agreement dated 12th May 1981 being Exhibit "D" to the plaint? 9. Whether the said agreement dated 12th May 1981 being Exhibit "D" to the plaint was varied between the Plaintiffs and Defendant No.15 by a writing dated 8th February 1986 being Exhibit "I" to the plaint for the reasons set out in paragraph 18 of the plaint? 10. Whether the purported agreement entered into between Defendants Nos.2,4, 6 and 8 with Defendants No.16 dated 8th January 1988 is valid and binding upon the Plaintiffs? 11. Whether the said agreement dated 15th May 1979 entered into between Defendant No.1 to 8 and Defendant No.15 was terminated by Defendants Nos. 1 to 8 by their letter dated 18th January, 1983 as alleged? - 21 - 12. If so, whether the same is binding upon the Plaintiffs as alleged? 13. Whether Defendant No.16 is bound by the agreement for sale of the suit property entered into between the Plaintiffs and Defendant No.15 for the reasons set out in paragraph 23 to 23F? 14. Whether the Plaintiffs prove that the agreement dated 12th May 1981 entered into by and between the Plaintiffs and the Defendant No.15 was varied by a writing dated 8th February, 1986 is valid, subsisting, enforceable in law and binding on the Plaintiffs and the Defendants? 15. Whether the Plaintiffs were at all material times and are still ready and willing to perform their part of the said agreement dated 12th May, 1981 as varied by a writing dated 8th February, 1986? 16. Whether the Defendants are bound and liable to perform specifically agreement - 22 - dated 12th May 1981 as varied by a writing dated 8th February, 1986 in favour of the Plaintiffs? 17. Whether the alleged agreements dated 8th January 1988 allegedly entered into by and between Defendants Nos.2, 4, 6 and 8 with Defendant No.16 is illegal, null and void and not binding on the Plaintiffs? 18. In the event it being held that the Plaintiffs are not entitled to the specific performance of the agreement dated 12th May 1981 as varied by a writing dated 8th February, 1986, whether the Plaintiffs are entitled to the refund of Rs.2,40,000/- from the (Defendants) with interest at the rate of 18% per annum on Rs.2,11,292/- with further interest at the rate of 18% per annum till payment and also to damages in the sum of Rs.1 crore as per the particulars of claim annexed and marked Exhibit "N" to the plaint? 19. Whether the aforesaid claims validly and properly stand charged on the suit property - 23 - for securing the repayment thereof? 20. Whether in the event of the Defendants failing to pay to the Plaintiffs the suit claims, whether the suit property be sold by and under the supervision of this Hon’ble Court and the sale proceeds thereof be paid over to the Plaintiffs subject to the Plaintiffs’ right to proceed against the Defendants personally in the event of the said sale proceeds falling short of the decretal dues? 21. Whether the newly added Defendants Nos. 17 and 18 prove that the purported deeds of assignment dated 29th December 1997 entered into between Defendant No.16 and Defendant No.17 and 18 in respect of the suit property are valid and binding on the Plaintiffs? 22. Whether the Plaintiffs prove that the purported deeds of assignment entered into between Defendants Nos.15 and 16 and Defendants Nos. 17 and 18 in respect of the suit property are not valid and illegal? - 24 - 23. What reliefs the Plaintiffs are entitled to? 20. The Plaintiffs examined two witnesses in