-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO. 384 OF 1999 with CIVIL APPLICATION NO. 1327 OF 2009 Sahebrao Gangadhar Kadam )... Appellant (Orig. Plaintiff) versus 1. Sou. Sitabai Shriram Chavan ) 2. Shri Mangal Builders, through ) T.C. Gupta, age major )..Respondents Mr. M.S. Karnik with Mr. Sachin Gite for the appellant. Mr. P.N. Joshi for respondent No.1. Mrs. Aarti Bhide for respondent No.2. CORAM: P.B. MAJMUDAR & R.V. MORE, JJ. DATE: JULY 23, 2009 ORAL JUDGMENT (Per P.B. Majmudar, J.) This appeal is directed against the judgment and decree dated 3rd March, 1999, passed by the Civil Judge,Senior Division, Nashik, in Special Civil Suit No. 619 of 1996, by which the learned trial Judge has partly allowed the suit of the appellant-plaintiff and passed an order of refund of earnest amount i.e. Rs. 1,00,000/- to the plaintiff. -2- 2. The appellant instituted the aforesaid suit seeking specific performance of the suit contract. It is the case of the plaintiff that the suit property described in paragraph 1 of the plaint is owned by defendant No.1 and as she wanted to sell away the suit property, she had put a Board proclaiming that the property was for sale. On the aforesaid Board, two telephone numbers were also mentioned. The plaintiff having come to know that defendant No.1 wanted to sell her property contacted her on telephone. The suit property was dealt with by one Dabhade, who is the brother of defendant No.1 and he informed the plaintiff that he would be dealing with the property on behalf of defendant No.1, who is his sister. Since the plaintiff wanted to purchase the property he asked for a meeting and defendant No.1 who was residing at Amalnger, Dist. Jalgaon remained present at the meeting which took place on 18th January, 1996. Pursuant to the talks, defendant No.1 executed an earnest deed (issar pavati) on 24th January 1996, which, according to the plaintiff, was got registered before the Notary. It is the case of the plaintiff that in the suit agreement, some basic terms and conditions were incorporated and the total consideration was fixed at Rs. 30,00,000/-, out of which the plaintiff paid an amount of Rs. 1,00,000/- by a demand draft dated 19th January, 1996. It is the case of the plaintiff that as per the terms and conditions prescribed in the agreement, defendant No.1 was to make the suit plot freehold by getting the name of society deleted from the 7/12 extract and the plaintiff was to bear the expenses for the said purpose. Defendant No.1 was also to obtain Income-tax -3- clearance certificate at the time of executing the final sale deed which was to take place on 30th October, 1996. As per the agreement, during the interregnum period, the amount was to be paid in the following manner. (i) On 20th February, 1996 he was to pay Rs. 5,00,000/- (ii)On 20th March, 1996 he was to pay Rs. 4,50,000/- (iii)On 30th April, 1996 he was to pay Rs. 4,50,000/- (iv)On 30th June, 1996 he was to pay Rs. 5,00,000/- (v) On 30th August, 1996 he was to pay Rs. 5,00,000/- (vi)On 30th October, 1996 he was to pay Rs. 5,00,000/-. 3. It is the case of the plaintiff that as per the agreement, the final conveyance was to be executed by 30th October, 1996 and after executing the sale deed, possession was to be handed over to the plaintiff. It is further the case of the plaintiff that defendant No.1 had not taken any concrete steps in this behalf and had not taken steps for getting the land freehold nor Income-tax clearance certificate was obtained and in view of that, plaintiff did not make any payment as per the dates prescribed in the agreement. It is the case of the plaintiff that he was always ready and willing to perform his part of the contract. 4. It is the case of the plaintiff that after the execution of the suit agreement, defendant No.1 started demanding some amounts but in view of -4- clause 10 of the suit agreement, it was obligatory on the part of defendant No.1 to first make the land freehold and inspite of contacting Mr. Dabhade asking him to take further steps in this behalf, no steps were taken by defendant No.1 and in view of the same the plaintiff withheld the payment of amount as per the agreement which he had promised to pay to defendant No.1 as per the schedule of payment. It is the case of the plaintiff that in the meanwhile he came to know about the mala fide intentions of defendant No.1 and it was found that defendant No.1 was not interested in the performance of the contract. The plaintiff, therefore, gave a notice dated 11th July, 1996 to defendant No.1 which was not replied to by defendant No.1. The plaintiff also published a public notice in daily newspaper on 1st July, 1996 by which the intending purchasers were cautioned to desist from dealing with the suit property on the ground that the plaintiff had a preferential right to purchase the same. The defendant No.1, inspite of the same, entered into an agreement for sale-cum-development with defendant No.2 and defendant No.2 in spite of the knowledge that a prior contract in respect of the suit property was subsisting between the plaintiff and defendant No.2, completed the said transaction. It is the case of the plaintiff that defendant No.2 is not a bona fide purchaser for value without due notice. The plaintiff ultimately filed the aforesaid suit that the transaction between defendant No.1 and defendant No.2 is not binding to the plaintiff. In the alternative, the plaintiff has prayed for damages to the tune of Rs. 10,00,000/-, in addition to the refund of earnest money of Rs. 1,00,000/- with interest -5- calculated at the rate of 18 per cent per annum. 5. The defendants resisted the suit by filing their written statements. Defendant No.2 who has purchased the suit property filed his written statement, which is at Exhibit-33 and the written statement of defendant No. 1 is at Exhibit-34. Both the defendants denied the averments made in the plaint. It is the case of the defendants that the plaintiff himself has committed the breach of the agreement in question as he was not interested in performing his part of the suit transaction. It is the case of the defendants that since the plaintiff had no financial capacity to honor the suit transaction, he had not paid any instalments as per the agreement. It is the case of defendant No.1 that after paying her Rs. 1,00,000/- as an earnest money, the plaintiff had not paid any instalment as provided in the agreement. It is the further case of defendant No.1 that the first instalment of Rs. 5,00,000/- was due on 20th February, 1996 and the plaintiff has failed to make this payment. Defendant No.1 requested the plaintiff to pay the said amount but the plaintiff had not acceded to such request. Defendant No.1 thereafter issued a notice to the plaintiff asking him to explain as to why the earnest money is not forfeited for committing breach of the agreement. The said notice was not replied to by the plaintiff, even though the same was sent by Registered Post with acknowledgment. The said notice returned back and on 9th April, 1996 , defendant no.1 again published a public notice by which the plaintiff was informed that the agreement between defendant No.1 and the -6- plaintiff stood cancelled because of the breach committed by him. Inspite of the said public notice, the plaintiff made no attempt even to meet defendant No. 1 nor he made any payments as per the agreement. It is the case of defendant No.1 that the plaintiff very well knew about the transaction in question entered into between defendant No.1 and defendant No.2 and after cancelling the agreement entered into with the plaintiff that fresh transaction was entered into between defendant No.1 and defendant No.2. Even defendant No.2 was also informed about the earlier agreement between the plaintiff and defendant No.1 and defendant No.2 was ultimately satisfied that such agreement is cancelled. 6. Defendant No.2 also resisted the suit by filing his written statement taking the point that he is a bona fide purchaser for value without notice. It is his case that he was aware about the earlier transaction between the plaintiff and defendant No.1 but before entering into the transaction with defendant No. 1 he had taken all possible care and precaution and after having satisfied that the earlier transaction with the plaintiff was cancelled that he entered into the transaction with defendant No.1. It is the case of defendant No.2 that he had also issued a public notice dated 9th March, 1996 through his Advocate one Subodh Shaha and since nobody including the plaintiff came forward to raise any objection that defendant No.2 entered into an agreement with defendant No.1 on 15th October, 1996. It is the case of defendant No.2 that he has paid -7- the entire amount of sale consideration to defendant No.1 and he has also obtained possession and developed the suit property by making construction and purchasers are already put in possession of the respective flats. It is the case of defendant No.2 that the plaintiff is a builder and contractor by profession and he has tried to take a chance by filing a false suit to get some monetary benefit out of the transaction between defendant No.1 and defendant No.2. On this and other averments, the suit of the plaintiff was resisted by the defendants. 7. The learned trial Judge framed various issues arising out of the pleadings of the parties at Exh. 35. The learned trial Judge placed the burden of proof on defendant No.1 to prove that the payment scheme as per the agreement was the essence of the contract. The trial Court after recording the evidence gave finding in favour of defendant No.1 on this issue. The learned trial Judge also placed a burden on defendant No.1 to prove as to whether the plaintiff failed to pay the requisite amount as claimed by her. The learned trial Judge also framed an issue as to whether defendant No.1 was ready and willing to perform her part of the contract. The finding was given in the affirmative. The trial Court, after recording the evidence, held that the plaintiff by his conduct gave up his right of specific performance. The trial Court also found that the plaintiff has failed to prove that he is having sufficient funds for making payment to defendant No.1 as per the agreement. The trial Court held that the -8- plaintiff is not entitled to get decree for specific performance and, as stated above, passed decree for refund of earnest money of Rs. 1,00,000/-. 8. The aforesaid judgment and decree of the learned trial Court is impugned at the instance of the appellant, original plaintiff. 9. The learned counsel appearing for the appellant submitted that the trial court has not appreciated the evidence on record properly and has committed a serious error in coming to the conclusion that the plaintiff was not ready and willing to perform his part of the contract on the ground that the plaintiff was not having sufficient amount to fulfil the contractual obligation. Learned counsel for the appellant has submitted that as per the agreement, the plaintiff was required to pay the last instalment upto 30th October, 1996 and, therefore, till that date the agreement can be said to be in existence and alive and before that date it was not open for defendant No.1 to enter into another transaction with defendant No.2. Simply because plaintiff had not paid some instalments is no ground for coming to the conclusion that the plaintiff was not ready and willing to perform his part of the contract and that plaintiff had sufficient amount for making the necessary payment as per the agreement. Learned counsel further submitted that since defendant No.1 had not taken any steps for moving an appropriate application for getting the name of the society -9- deleted from the 7/12 extracts of suit property, the plaintiff was not obliged to make any payment till the name of the society is removed from the record and title clearance certificate is obtained. It is submitted that the plaintiff had not received any notices as mentioned by defendant No.2 in his written statement. Learned counsel further submitted that defendant No.1 with a view to fetch more price tried to commit breach of the agreement entered into with the plaintiff and it is proved subsequently that defendant No.1 received more price from defendant No.2 by way of entering into the transaction in question. Learned counsel further submitted that the plaintiff was always ready and willing to perform his part of the agreement but defendant No.1 with a view to get more money has tried to back out from the agreement. Learned counsel further submitted that defendant No.2 having purchased the property with full knowledge that there was a subsisting agreement in favour of the plaintiff now cannot take any advantage in this behalf and it cannot be said that he is a bona fide purchaser for value without notice as the factum about the agreement with the plaintiff was well within his knowledge. Learned counsel for the appellant has submitted that though it is true that now the construction is already made and third parties are also put into possession,the plaintiff is at least entitled to get appropriate compensation, which, according to the plaintiff, should be Rs. 10 lakhs as prayed for in the plaint. It is submitted that in case the Court finds it difficult to grant decree for specific performance in view of the fact that defendant No.2 has already constructed and sold away the property to various -10- persons, he should at least be granted adequate compensation. 10. Mr. Joshi, learned counsel appearing for respondent No.1, on the other hand submitted that from the evidence on record, it is clearly established that the plaintiff was never ready and willing to perform his part of the contract. He submitted that except paying the earnest money, the plaintiff has not paid any further payment as per the schedule of payment in the agreement. Defendant No.1 thereafter requested the plaintiff to make the necessary payment but no steps were taken to pay the same. It is submitted that the plaintiff with a view to extract money from the first defendant has filed a false suit as before filing of the suit a public notice was also published by which the plaintiff was informed that his agreement was cancelled as he had not fulfilled the commitment as per the agreement. Mr. Joshi further submitted that defendant No.1 had also given appropriate application to the society immediately after the agreement with the plaintiff and that the plaintiff is also residing in the same vicinity where the suit property is situated and it can be presumed that it was within his knowledge that defendant No.1 had already taken steps for deletion of the name of the society from the 7/12 extracts. It is further submitted that as per the agreement, the plaintiff was required to make necessary payment for effecting changes in the society’s records and since the plaintiff had not made any payment that defendant No.1 was required to make payment of Rs. 1,20,000/- to the society for transfer of the same and such -11- amount was paid by way of cheque. Mr. Joshi further submitted that even before giving public notice a personal notice was also sent to the plaintiff by registered post A.D. but deliberately plaintiff had refused to accept the said notice. It is submitted that in view of the conduct of the plaintiff, he is not entitled to any equitable relief. Even though the plaintiff knew very well that the contract was cancelled, the plaintiff had not taken any steps for a considerable period till the aforesaid suit was filed on 30th October, 1996. It is submitted by Mr. Joshi that the plaintiff had not made any attempt in between to perform his part of the agreement and has taken chance to extract money from the defendants as the plaintiff was not in a position at all to fulfil his obligation because of his difficult financial situation. Mr. Joshi submitted that it is really the plaintiff who committed the breach of the contract and in that view of the matter, the plaintiff was not entitled to get the earnest money paid to defendant No.1. Since there is nothing in the agreement that the earnest money is to be forfeited if the plaintiff fails to fulfil the obligation as per the agreement that ultimately the amount of earnest money has been deposited as per the decree. 11. Mrs. Bhide, learned counsel appearing for defendant No.2, submitted that defendant No.2 after taking due care and after having satisfied that the previous agreement is cancelled that ultimately defendant No.2 decided to purchase the property from defendant No.1. She has submitted that from the evidence on record, it is clear that plaintiff was never ready and -12- willing to perform his part of the contract and after the said contract was cancelled that defendant No.2 entered into an agreement with defendant No.1. It is submitted that Defendant No.2 also gave a public notice regarding purchasing the said property but the plaintiff had not lodged any objections in connection with the said public notice. It is submitted that after the cancellation of the contract and after defendant No.2 making substantial amount to defendant No.1 that the plaintiff has filed the above suit at a belated stage. It is further submitted that the plaintiff is a builder. The plaintiff was to take follow up action in the matter of payment of instalment as per the agreement. If the plaintiff had any desire to fulfil the transaction, he could have taken necessary steps. However, he had no desire to fulfil the contractual obligations and, therefore, he had not paid single pie towards the instalment and subsequently has filed the above frivolous suit which is rightly dismissed by the trial Court. It is submitted that the appeal is, therefore, required to be dismissed with compensatory costs to see that such frivolous proceedings are not filed. 12. We have heard the learned counsel appearing for the parties. We have considered the oral and documentary evidence on record. We have gone through the judgment of the trial Court and have also gone through the record and proceedings of the case which are available for our perusal. -13- 13. The point which is required to be determined in this First Appeal is as to whether the Plaintiff was ready and willing to perform his part of the contract and whether the transaction entered into between defendant No.1 and defendant No.2 is required to be set aside on the ground that defendant No.2 purchased the suit property during the subsistence of an earlier agreement between the plaintiff and defendant No.1 in connection with the suit property. In order to appreciate the controversy raised in this appeal, it is necessary to consider the oral evidence adduced by the parties in this appeal. 14. On behalf of the plaintiff, the plaintiff was examined at Exhibit-40. In his evidence, he has stated that he is in the business of building and development of plots. In paragraph 2 of his examination-in-chief, he has stated that the suit property is an open plot and it was mentioned in the Board which was displayed at the site that the plot was for sale. On the said Board, two telephone numbers were given. On that basis he contacted one Dabhade, brother of defendant No.1 and subsequently after the meeting with defendant No.1 and Dabhade that he had agreed to purchase the property as per the agreement at Exh. 42. It is the say of the plaintiff that at the time of executing Issar Pavti (earnest money) he had paid Rs. 1,00,000/- by demand draft and the agreement was executed on 24th January, 1996. He has stated that the name of society was to be deleted from revenue record i.e. 7/12 extract and defendant No. 1 was also to obtain Income-tax clearance certificate under -14- Section 230-A of the Income-tax Act . Defendant No.1 was also to obtain permission from the Urban Land Ceiling Authority. In his examination in chief he has stated that defendant No.1 did not get the land freehold during the prescribed period and as per para 10 of the agreement at Exh. 42 certain amount was required to be paid and first instalment of Rs. 5,00,000/- was to be paid on 20th February, 1996. He has stated in his evidence that defendant No.1 had not approached him before the said date for such payment. He has also stated in the evidence that defendant No.1 had not taken any steps to get the land freehold and in that view of the matter he contacted Mr. Dabhade. He was assured that appropriate steps would be taken to get the land freehold. In his evidence, the plaintiff has stated that subsequently he made an enquiry with the society for ascertaining as to whether any steps were taken by defendant No.1 for getting the land freehold. At that time he came to know that defendant No.1 was reluctant to take steps as she had a greed of getting more amount. In his evidence the plaintiff has stated that after learning this aspect, he issued a notice to defendant No.1 through his counsel at Exh. 43. (the date of the said notice is 11th July, 1996). The plaintiff has stated in his evidence that by the said notice he demanded that defendant No.1 should complete the transaction as per terms of Exh. 42. The plaintiff has also stated that he has informed defendant No.1 that he had kept the amount ready and that she should not enter into any other transactions with other persons. The plaintiff has given public notice in the newspaper “Dashdoot” on 13th July, 1996 which is at Exh. 44 of the record. -15- The plaintiff has stated that he came to know in the first week of August that defendant No.1 had entered into transaction in respect of the suit land with defendant No.2 and, therefore, immediately filed the present suit. In his examination in chief he has stated that he was ready and willing to perform his part of the contract and that he has kept the entire consideration ready. 15. In his oral evidence, the plaintiff has also stated that on enquiry he came to know that defendant No.1 had already made an application to the society on 22nd February, 1996 for getting the land freehold. The plaintiff has also stated that he is having Bank account with Nasik Peoples’ Co-operative Bank and he was also having arrangement with Fixophotos, which is a financial Company and that Company has given a letter about sanctioning loan of Rs. 33 lakhs which letter is placed on record. He has denied the suggestion that he had received notice from defendant No.1 or that he was aware about the newspaper report. In the examination in chief, he has stated that he did not come across any public notice issued by Advocate Subhodh Shah in daily newspaper dated 9th March, 1996 which is on record at Exh. 49 nor he had come across any public notice given by defendant No.1 dated 9th April, 1996 at Exh. 50. He has admitted the fact in para 11 that as per agreement Exh. 42 and as per clause 10, a schedule of payment is prescribed. He has admitted that he did not send or made arrangement for payment of Rs. 1,20,000/- before 20th February, 1996 as, according to the plaintiff, the procedure had not started by defendant No.1. He -16- has stated