IN THE HIGH COURT OF BOMBAY AT GOA. FIRST APPEAL NO. 248 OF 2002 WITH CROSS OBJECTIONS STAMP NO. 2312 OF 2002. FIRST APPEAL NO. 248 OF 2002. Smt. Regina G. Rebello (deceased by her L.Rs.) 1a. Floriano Constancio Rebello, b. Isabella Rebello, both r/at Rua John Issa, 206, Maputo, Mozambique. c. Victoria Colaco, d. Orlando Colaco, e. Victor Colaco, all r/at R. Herois de Ultramars No. 3, 2OD to 2575 Odivelas, Portugal. ... Appellants. Versus 1. Mr. Guido de Loyala Furtado, alias Jose Inacio Guido de Loyola Furtado, r/at Dr. Wolfango de Silva Road, Panaji. 2. Mrs. Marta Cota Loyola Furtado, r/at Dr. Wolfango de Silva Road, Panaji. ... Respondents. Mr. R.V. Kamat, Advocate for the Appellants. Mr. J.E. Coelho Pereira, Senior Advocate with Mr. V. Korgaonkar, Advocate for the Respondents. CROSS OBJECTION STAMP NO. 2312 OF 2002. 1. Mr. Guido de Loyala Furtado, alias Jose Inacio Guido de Loyola Furtado, r/at Dr. Wolfango de Silva Road, Panaji. 2. Mrs. Marta Cota Loyola Furtado, r/at Dr. Wolfango de Silva Road, Panaji. ... Appellants. Versus Smt. Regina G. Rebello (deceased by her L.Rs.) 1a. Floriano Constancio - 2 - Rebello, b. Isabella Rebello, both r/at Rua John Issa, 206, Maputo, Mozambique. c. Victoria Colaco, d. Orlando Colaco, e. Victor Colaco, all r/at R. Herois de Ultramars No. 3, 2OD to 2575 Odivelas, Portugal. ... Respondents. Mr. J.E. Coelho Pereira, Senior Advocate with Mr. V. Korgaonkar, Advocate for the Appellants. Mr. R.V. Kamat, Advocate for the Respondents. Coram : R.J. KOCHAR AND P.V. HARDAS, JJ. Date of reserving the Judgment : 25.8.2003. Date of pronouncing the Judgment : 29.9.2003. J U D G M E N T (PER HARDAS, J.) The appellants/original defendants, being aggrieved by the Judgment and Decree, passed by the Additional Civil Judge, Senior Division, Panaji, dated 10th May 2002, in Special Civil Suit No. 56/1987/B, have filed the present appeal. The cross objection has been filed by the original plaintiffs, whose claim for specific performance of the contract and for damages was negatived by the learned trial Court. 2. The facts in brief as are necessary for the decision of this appeal and the cross objection are stated hereunder:- The original defendant is an occupant of one - 3 - of the houses in the property known as "Sete Pedacos", situated along the 18th June Road, Panaji, described in the Land Registration Office under No. 17813 of Book B 47 (New) and surveyed under Chalta Nos. 82, 83, 84 and 85 of P.T. Sheet No. 62. The original plaintiff no. 1 entered into an agreement to purchase the property from the owners, namely, Dr. Bernardo Rigoberto Fonseca and his wife Maria Verediana Fonseca, in 1981. The agreement of purchase was for development of the property by constructing buildings thereon. The flats in the proposed buildings were meant for sale on ownership basis to the prospective purchasers. When the agreement with the owners was entered into, there were three structures on the suit property occupied by tenants. The three structures had about 10 tenants. The original plaintiff no. 1 negotiated with some of the tenants and, accordingly, succeeded in constructing one building comprising of a ground plus three floors. The project of development of the suit property contemplated construction of another building having ground plus five floors. The original defendant was a tenant staying in one of the structures in the suit property. The structure occupied by the tenant occupied 135 sq. metres in area. The structure occupied by the original defendant was situated on the area where the second building was proposed to be constructed. The original plaintiffs, accordingly, entered into an - 4 - agreement with the original defendant on 6th May 1985. The agreement is at Exhibit P.W.1/A. The said agreement acknowledged that the original defendant was residing and running a bar-cum-restaurant since last more than 40 years in the premises having plinth area of 135 square metres. The agreement further acknowledged that, at the request of the original plaintiff no. 1, the original defendant had agreed to quit, vacate and deliver quiet and vacant possession of the old structure to the original plaintiff no. 1 as representing the owners of the land, to enable the original plaintiff no. 1 to proceed with further construction on the said property. The agreement also acknowledged that, in consideration of the original defendant vacating the old structure, the original plaintiff no. 1 had agreed to assign, convey and transfer to her, without any consideration, the ground floor tenement, admeasuring 3.30 by 9.23 metres, bearing Shop No. 7, in the said building already completed by the original plaintiff no. 1 and situated at the extreme left hand side as one faces the building from the 18th June Road. The agreement further acknowledged that in further consideration of the original defendant vacating the structure in her occupation, the original plaintiff no. 1 had agreed to allot, assign, transfer and convey to her a self contained two bedroom flat with hall-cum-dining and kitchen on the first floor of the proposed construction - 5 - to be undertaken by the original plaintiff no. 1 and for a price of Rs. 2,35,000/-, out of which, the original plaintiff no. 1 had received a sum of Rs. 20,000/- as part payment of the said flat. It was also agreed by the original plaintiff no. 1 that the construction of the flat would be completed within a period of twenty four months from the execution of the agreement and that the original plaintiff no. 1 would deliver possession of the said flat to the original defendant within 15 days of obtaining occupancy certificate in respect of the flat. 3. The possession of the shop was handed over to the original defendant in April 1986. The original defendant shifted her business from the old premises to the shop so allotted to her. The original plaintiffs by the letter, dated 23rd April 1986, at Exhibit P.W.1/B, requested the original defendant to hand over the vacant possession of the old premises in terms of the agreement, dated 6th May 1985. The original plaintiffs by their letter, dated 30th June 1986, at Exhibit P.W.1/C, also requested the original defendant to hand over the vacant possession of the old premises in her occupation as they intended to start the construction of the building in which they had promised to sell to the original defendant a flat. The original plaintiffs by their letter, dated 11th September 1986, at Exhibit - 6 - P.W.1/D, reiterated that they had handed over the possession of shop no. 7 to the original defendant in terms of the agreement. They also reiterated that original defendant had agreed to hand over the possession of the old premises to enable the original plaintiffs to commence construction work of the proposed building. The letter pointed out that some belongings of the original defendant were still lying in the premises and, therefore, requested her to remove the said belongings as the original plaintiffs intended to start the work from 18th September 1986. The original plaintiffs also pointed out in the said letter that, as per the request of the original defendant, the electricity and water connection in respect of shop no. 7 would be changed to her name and necessary steps in that regard were being taken. The original plaintiffs again by their letter, dated 18th September 1986, at Exhibit P.W.1/E, requested the original defendant in response to her request to vacate the old structure by 25th September 1986 to remove her belongings and, if necessary, were willing to extend help in shifting her belongings. The original defendant by her letter, dated 23rd September 1986, at Exhibit P.W.1/F expressed her surprise at the statement in the letter, at Exhibit P.W.1/E that the original defendant had requested for time upto 25th September 1986 to vacate the premises in her occupation. She pointed out, in the said letter, - 7 - that by virtue of the agreement, dated 6th May 1985, the original plaintiffs had agreed to assign, convey and transfer in her favour, without any consideration, shop no. 7. She also pointed out that it was agreed by the original plaintiffs that the original plaintiffs shall put the original defendant in possession of the said shop and execute the requisite conveyance transferring the said shop in her favour on ownership basis, without any consideration, within a period of 6 months from the execution of the agreement. In paragraph 4 of the said letter, the original defendant pointed out that the plaintiffs had delivered the possession of the said shop to her in the month of April 1986, much beyond the period agreed to. She also stated that the original plaintiffs had neglected to execute the requisite conveyance transferring the said shop in her favour on ownership basis. She has further reiterated that vacating of the old premises was clearly conditional upon the original plaintiffs executing the necessary conveyance of the shop in her favour. She further pointed out that the original plaintiffs had been promising to execute the necessary conveyance. The original defendant expressed her apprehension that in case she vacated the premises, the premises would be demolished and she would be left with nothing at all. In paragraph 6 she has stated that she has every intention of honouring the agreement and requested the - 8 - original plaintiffs to execute the conveyance transferring the ownership of the said shop in her favour and she would then vacate the premises under her occupation. 4. Since the defendant was not honouring the terms of the agreement, the plaintiffs filed a suit for specific performance of the contract and prayed for directing the defendant to specifically perform the contract by handing over possession of the premises in her occupation to enable the plaintiffs to construct the second building. In the alternative it was prayed for a decree directing the defendant to hand over the possession of the shop to the plaintiffs. Alternatively it was also prayed by the plaintiffs that the defendant be directed to pay to the plaintiffs mesne profits at the rate of Rs. 7,500/- p.m. from April 1986 and until the date of effective delivery of possession of the suit shop. Alternatively also the plaintiffs claimed damages totalling Rs. 24,00,000/-. An injunction restraining the defendant from transferring and parting with the possession of the shop was also prayed. 5. The defendant filed her written statement, at Exhibit 3, and stated that the defendant was to vacate the old structure on the plaintiff no. 1 transferring, conveying and assigning to her the ground floor - 9 - tenement, namely, shop no. 7. The plaintiff no. 1 was required, as per the terms and conditions of the agreement, to execute the requisite conveyance transferring the shop on ownership basis within a period of 6 months from the execution of the agreement. It was only in April 1986 that the defendant was put in possession of the said shop. It is also stated by her in her written statement that the plaintiffs had committed a breach of the agreement, dated 6th May 1985, in not executing the conveyance of the said shop in favour of the defendant. In paragraph 12 of the written statement, the defendant submitted that she was ready and willing to perform her part of the contract, namely, to hand over vacant possession of the old premises, if a conveyance transferring the said shop in her favour was executed. 6. On the basis of the pleadings of the parties, the learned trial Court framed the following issues:- "1. Whether the plaintiffs prove that defendant has failed to hand over the possession of the old premises to the plaintiffs contrary to the undertaking given by her as stated in para 7 of the plaint? 2. Whether the plaintiffs prove that the plaintiffs are entitled for a decree for the specific performance of the contract directing the defendant to hand over the possession of the old premises as stated in para 12 of the plaint? - 10 - 3. Whether the plaintiffs prove that the plaintiffs are entitled for a judgment and decree directing the defendant to return back the possession of the shop in the same condition as it was handed over to the plaintiffs as stated in para 13 of the plaint? 4. Whether the plaintiffs prove that the defendant is liable to pay a compensation for the occupation of the suit shop @ Rs. 7,500/- per month from April 1986 till the date of delivery of the said shop? 5. Whether the plaintiffs are entitled to claim damages of Rs. 24,00,000/- from the defendant? 6. What relief? What order?" 7. The plaintiff no. 1 examined himself as P.W.1. The original defendant expired during the pendency of the suit and the legal heirs were brought on record. The defendants examined Floriano Coutinho as D.W.1. The learned trial Court answered issues nos. 1 and 3 in the affirmative and issues nos. 2 and 5 in the negative. In respect of issue no. 4, the learned trial Court held that the defendant was liable to pay compensation for the occupation of the suit shop at the rate of Rs. 3,750/- per month from 21st October 1986 till delivery of the shop. The trial Court decreed the suit by granting the prayer of possession of the suit shop and the prayer for mesne profits at the rate of Rs. 3,750/- per month. The original defendants have, thus, challenged the Judgment and Decree ordering them to hand over vacant possession of the suit shop and also the payment of mesne profits. The original plaintiffs have - 11 - filed the cross objection in respect of refusal of the trial Court to pass a decree for specific performance and for damages. 8. The plaintiff no. 1 in his evidence has referred to the agreement and the various letters at Exhibit P.W.1/A to P.W.1/F. The plaintiff no. 1 has further stated that he was unable to transfer the ownership of the shop within 6 months from the date of the agreement, dated 6th May 1985, because of a dispute which had cropped up between him and the original owners, which had resulted in filing a civil suit against the original owners. The copy of the plaint is at Exhibit P.W.1/G. According to the plaintiff no. 1, when the possession of the shop was handed over to the defendant, he had informed the defendant that he was unable to transfer the title of the shop in her name within 6 months, since there was a dispute with the original owners. He has produced his reply at Exhibit P.W.1/H, dated 21st October 1986, to the letter of the defendant, dated 23rd September 1986, at Exhibit P.W.1/F. In the said letter he has claimed occupation charges and requested the defendant to vacate the premises. The defendant, by her letter, dated 21st November 1986, at Exhibit P.W.1/I, reiterated her contention that as per the agreement the plaintiffs were to execute the conveyance deed and only upon the - 12 - execution of the conveyance deed would she hand over the vacant possession of the old premises. She has stated that the delay in completion of the project is solely attributable to the plaintiffs and not to her. The plaintiff no. 1 has further stated that he is unable to execute the conveyance of the shop in favour of the defendant, in view of the dispute with the original owners of the suit property, which is still pending in the Court. 9. In the cross-examination he has admitted that the owners of the property were supposed to transfer the land in his name after giving them possession of the third floor of the building. He has admitted that he had completed the third floor of the building but did not hand over its possession to the owners. The agreement with the owners of the year 1981 also covered the land where the suit house of the defendant was standing. He has further admitted in the cross-examination that he cannot execute the sale deed in respect of the suit shop in favour of the defendant since a case is pending in the Court. He has further admitted as true that as per Clause 5 of the agreement, at Exhibit P.W.1/A, he was bound to execute the conveyance of the shop within 6 months from the date of the agreement. He has admitted that when the defendant had orally assured him to vacate the premises by 25th - 13 - September 1986, there was no one else present in his Office at that time. 10. D.W.1 Floriano Coutinho the Power of Attorney Holder of the legal heirs of original defendant has stated that the original defendant was not aware about the dispute between the plaintiff no. 1 and the owners. The plaintiffs had not informed the original defendant about the dispute. D.W.1 Coutinho has further stated that the plaintiffs had never informed the original defendant that conveyance of the shop would be done after the dispute with the owners is settled. In the cross-examination he has admitted that he was not aware of what was agreed to in the agreement. D.W.1 has further admitted that the possession of the shop no. 7 had been given by the plaintiffs as per the agreement. He has denied the suggestion that the original defendant had accepted that it was not possible to execute the sale deed immediately and had, thereafter, taken possession of the shop. He has denied the suggestion that the original defendant had agreed that the sale deed could be executed after the dispute between the plaintiffs and the owners of the property was settled. 11. The learned trial Court, while answering issue no. 1, at paragraph 5 of the Judgment has held that neither in the recitals nor in the terms and conditions - 14 - of the agreement, at Exhibit P.W.1/A, is there any stipulation to the effect that the defendant would quit and vacate the house occupied by her after the deed of conveyance was executed in her favour in respect of shop no. 7. The learned trial Court further held that, as per Clause 3 of the agreement, the plaintiffs were required to complete the construction of the second building within 24 months of the date of agreement and it could, therefore, be safely concluded that the defendant had agreed to hand over the possession of the old house to the plaintiffs immediately on execution of the agreement. The learned trial Court further held that the defendant ought to have handed over possession of the house at least on transfer of the business to shop no. 7. The trial Court, therefore, answered issue no. 1 in the affirmative. In respect of issue no. 2, the learned trial Court recorded a finding that since the plaintiffs were unable to execute the title document of shop no. 7 in favour of the defendant, the plaintiffs were not entitled for a decree of specific performance by directing the defendant to hand over the vacant possession of the old premises in her occupation. The learned trial Court, therefore, answered issue no. 2 in the negative. In paragraph 7 of the Judgment, in respect of issue no. 3, the learned trial Court held that the defendant had been put in possession of shop no. 7 pursuant to the agreement, at Exhibit P.W.1/A. - 15 - According to the learned trial Court, there was admittedly no intention of the plaintiffs to do any gratuitous act in delivering shop no. 7 to the defendant and, therefore, in view of the provisions of Section 70 of the Indian Contract Act, the defendant is bound to return the suit shop to the plaintiffs. The learned trial Court, thus, answered issue no. 3 in the affirmative. In paragraph 8 of the Judgment, in respect of issue no. 4, the learned trial Court came to the conclusion that since the defendant was in occupation of shop no. 7, she cannot be expected to enjoy the old house as well as shop no. 7, which was "delivered to her as part performance of the contract to be performed by the plaintiffs". According to the learned trial Court, since the defendant had taken possession of shop no. 7 and had failed to perform her part of the contract by delivering the possession of the old premises to the plaintiffs, the defendant was liable to pay mesne profits in respect of occupation of shop no. 7. The learned trial Court, therefore, assessed the mesne profits at the rate of Rs. 3,750/- per month and held the defendant liable for payment of the same from 21st October 1986, as the date on which the defendant came to know that the plaintiffs could not execute the deed of conveyance for want of marketable title till the date of actual handing over of shop no. 7 to the plaintiffs. The learned trial Court, thus, answered - 16 - issue no. 4 accordingly. In respect of issue no. 5, the learned trial Court, at paragraph 9 of the Judgment, has held that the defendant alone could not be blamed for non-delivery of the possession of the old premises, as the plaintiffs did not have a marketable title to be conveyed in respect of shop to the defendant. The learned trial Court, therefore, held that the plaintiffs were not entitled for the damages claimed by them. 12. Mr. Kamat, the learned counsel appearing on behalf of the appellants/defendants, has urged before us that reliance on Section 70 of the Indian Contract Act by the learned trial Court is wholly unjustified. According to him, the defendant was put in possession under a valid agreement towards the part performance of the contract. The said agreement is subsisting and has not been terminated by any of the parties. The plaintiffs had agreed to execute the sale deed within 6 months of the date of agreement. The defendant was to be forthwith put in possession of shop no. 7, which the plaintiffs could do only in April 1986. Thus, on the day on which the defendant was put in possession of shop no. 7, the defendant was entitled for a deed of conveyance and as the defendant had agreed to vacate the old premises on the consideration that shop no. 7 would be conveyed to her, the defendant was, thus, justified in contending that unless the sale deed in respect of - 17 - shop no. 7 was executed, she could not be called upon to deliver vacant possession of the old premises. The learned counsel for the appellants has further urged before us that the possession of the defendant of shop no. 7 cannot be termed as wrongful or illegal as the defendant was put in possession of the premises under the contract and, therefore, the decree of mesne profits ought not to have been granted. He has further urged before us that the learned trial Court was in error in directing the defendant to hand over vacant possession of shop no. 7 in the face of a subsisting and valid contract between the parties. 13. Mr. Coelho Pereira, the learned senior counsel appearing on behalf of the respondents/plaintiffs, has urged that the undertaking of the defendant to hand over the old premises on 25th September 1986 constitutes a fresh contract between the parties. Since the defendant had not performed her part of the contract in delivering vacant possession of the old premises, the plaintiffs were entitled for a decree of specific performance of the contract. He has further urged that Section 70 of the Indian Contract Act would squarely be applicable to the facts of the present case. In support of the cross objection, he has urged that the plaintiffs were entitled for damages as because of the act of the defendant in not handing over the possession - 18 - of the old premises, the construction of the second