1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION L.C. SUIT NO. 1432 OF 1980 L.C. SUIT NO. 1432 OF 1980 L.C. SUIT NO. 1432 OF 1980 Ajeet Kumar C. Mudnaney of Bombay Indian Inhabitant residing at 4-C, Raghav Wadi, Fresh Bridgade, Bombay 400 007. ... Plaintiff Versus 1. Prithvi Construction Pvt. Ltd. a company incorporated under the Companies Act, and having its registered office at 501, Commerce House, 110, Medows Street, Fort Bombay. 2. M/s. Dhanlaxmi Trading Company, Care of Pruthvi Construction Pvt. Ltd. 501, Commerce House, 110, Medows Street, Fort, Bombay. 3. Ganeshchandra Kalicharan of Bombay Indian Inhabitant, residing at Flat No. A-1, 4th Floor, Prithvi Apartments, Altamound Road, Bombay. ... Defendants Mr. S.F. Rego i/by Mr. N.J. D’Monte for Plaintiff. Mr. M. Ghelani with Mr. Ali i/by Law Charter for Defendant No. 1. Mr. P.G. Sawant, A.G.P. for State. CORAM : F.I. REBELLO,J. CORAM : F.I. REBELLO,J. CORAM : F.I. REBELLO,J. DATED : 01ST SEPTEMBER, 2005 DATED : 01ST SEPTEMBER, 2005 DATED : 01ST SEPTEMBER, 2005 ORAL JUDGMENT : 2 . The Plaintiff has filed the present suit for declaration that there is valid subsisting and binding agreement for sale between Plaintiff and defendant No. 1 in respect of Flat No. A1, on the 4th Floor of Prithvi Apartment, Altamount Road, Bombay as pleaded in Paragraph 4 of the plaint. Various consequential reliefs have been prayed for including that Defendant No. 3 be ordered and decreed to hand over possession of Flat No. A-1, 4th Floor, Prithvi Apartment, Altamount Road, Bombay. In the alternative the Plaintiffs have prayed that the defendants be ordered to pay to the Plaintiffs a sum of Rs.80,000/- with further interest at the rate of 15% p.a. from the date of the suit till payment as also to pay to the Plaintiff a sum of Rs.4,02,504 or such other sum as damages together with interest at the rate of 6% p.a. from the date of the suit till payment. It is not necessary to advert to other reliefs. In Para No. 4A of the plaint which was brought by an amendment, the Plaintiff has set out his case based on the agreement. Plaintiff has pleaded that defendant No 1 had issued an advertisement in January, 1977 to the effect that flats on ownership 3 basis were available for sale by the 1st defendants in the said Prithvi Apartment. Plaintiff after coming to know of the same, contacted defendant No. 1. There were negotiations and Plaintiff agreed to purchase from first defendant on ownership basis, flat being flat No. A1 on the 4th Floor, at the rate of Rs.152 per sq. ft. On 6.1.1977 Plaintiff paid first defendant a sum of Rs.20,000/- by cheque towards earnest money and a further sum of Rs.20,000/- on 13.1.1977 by another cheque in favour of first defendants. Over and above, the aforesaid sum of Rs.40,000/-, Plaintiff had paid further sum of Rs.40,000/- in January, 1977 for which no receipt was passed. The first defendant handed over to the Plaintiff the usual printed copy of the agreement generally executed by the 1st defendants for sale of flats in Prithvi Apartments along with typical floor plan of Prithvi Apartments. However, no formal agreement was executed. By the amended Para 4A Plaintiffs has pleaded that the defendants were bound to execute and sign the formal agreement in terms of the printed copy and to have the same registered as per the provisions of law. The Plaintiff has submitted 4 that this Hon’ble Court would direct and or order the defendants to enter into and or sign the agreement as per the agreement, a copy of which was given to the Plaintiff and in the event of the defendants not doing so, to appoint an officer of this Hon’ble Court to sign, execute and to get the same registered as per the provisions of law. 2. The Plaintiff has then pleaded that as there was no progress in the construction of work during the year 1977-78 and during this period, the Plaintiff reminded the first defendant and in particular Manu Gala to execute the said formal agreement. The first defendant promised to do so stating that the Plaintiff was a professional man and that he should not worry. The Plaintiff’s case is that the Plaintiff even offered to pay the balance of the purchase price to the first defendant. The first defendant however, stated that they would take money from Plaintiff afterwards. Plaintiff states that Manu Gala became friendly and created a confidence in the Plaintiff and by reason thereof the Plaintiff relied on the representations made by the said Manu Gala and 5 assurances given by him on behalf of the 1st Defendant. The Plaintiff was therefore, surprised to receive a letter dated 5.8.1977 addressed by the first defendants whereby they purported to remind the Plaintiff to take back the deposit of Rs.40,000/-. In that letter the first defendant referred to an earlier letter dated 19.5.1977 which was according to Plaintiff was not received by the Plaintiff. In the letter of 5.8.1977, it was set out that in the event the Plaintiff did not collect the amount deposited, the same would be forefeited. The Plaintiff approached Manu Gala and explained the correct facts and reiterated that he was ready and willing to pay the balance amount against the possession of the said flat and execution of the formal agreement. Though Manu Gala pretended to be sympathetic towards the Plaintiff, on one pretext or the other the agreement was not entered into with. Plaintiff by letter dated 5.1.1978 expressed his surprise over the letter of 5.8.1977 and recorded that he had not received letter of 19.5.1997 and stated that Plaintiff was ready and willing to perform his part of the contract. Reference is then made to correspondence exchanged 6 between the parties. It is the case of the Plaintiffs that there is a subsisting contract for sale of the flat at the rate of 152 per sq. ft. by the first defendant in favour of the Plaintiff. Plaintiff intimated plaintiff’s readiness and willingness to perform his part of the agreement. The first defendant, it is contended have wrongfully failed to enter into the agreement and have failed and neglected to carry out and perform the said agreement. It is further set out that the first defendant wants to wrongfully back out of the agreement and the second defendants are nominees and benamidars of the first defendants. The second defendant, it is set out had notice of agreement between Plaintiff and 1st defendant in respect of the flat A-1, on 4th Floor of Prithvi Apartment and at any rate, would have come to know about such agreement. It is pleaded that there exists no standard for ascertaining damages or compensation for non performance by way of monetary compensation. Alternatively, it has been pleaded that if the court comes to the conclusion that relief for specific performance cannot be granted, then Plaintiffs should be paid back the sum of 7 Rs.80,000/- paid by the Plaintiff to first defendant as also a sum of Rs.4,02,504/- being the damages suffered by the Plaintiff as a result of breach of contract. By an amendment Para 6A has been introduced to challenge the agreement between Defendant No. 1 and 3. It is the contention of the Plaintiff that Defendant No. 3 is nominee and or benamidars of 1st defendant and is colluding with the first and defendant. Further third defendant had or deemed to have notice of the agreement entered into between 1st defendant and the Plaintiff. It may be mentioned that by an amendment Para 8A, was introduced whereby a declaration is sought that the Provisions of Section 4 of the Maharashtra Ownership Flats Regulation of the permission of construction Management and Transfer Act, 1963 is illegal null and void. It is not necessary to further deal with the other pleadings as no argument has been advanced at the bar on this issue nor any evidence led. . Plaintiffs have relied on various documents. 8 . Defendant Nos. 2 and 3 have not filed any written statement. Written Statement has been filed on behalf of Defendant No. 1. It is the case of Defendant No. 1 that some time in January, 1977, Plaintiff approached defendant and after making enquiry decided to purchase flat No. A-1 on the fourth floor of the proposed building under construction by the defendant known as Prithvi Apartment. Plaintiff was informed that the said flat was already agreed to be sold by one Manibai Parasmal. Plaintiff was however, informed that if he was interested in purchasing the flat, this defendant might be able to persuade said Manibai to cancel the agreement with her as regards the said flat and/or release the said flat so that the same can be sold to the Plaintiff. The defendant however, wanted some assurance from the Plaintiff about his bona fide interest in purchasing the said flat so that this Defendant may take the trouble and expenses of having the said agreement with the said Manibai cancelled. In order to show his bona fides the Plaintiff agreed to deposit with defendant a sum of Rs.50,000/- and requested the defendant to expeditiously proceed to negotiate for 9 that purpose with the said Manibai. It is further pleaded that Plaintiff further agreed that if the Plaintiff failed to enter into an agreement for the purchase of the said flat with Defendant No. 1, the defendant No. 1 would be entitled to forfeit the amount which the Plaintiff was to deposit with Defendant No. 1 as mentioned hereinabove as and by way of liquidated damages. The Plaintiff requested Defendant No. 1 to accept that the said sum of Rs.50,000/- in instalments which the Plaintiff agreed to pay to this Defendant upon the arrangements being made by the Plaintiff in this behalf. The defendants contends that Plaintiff in aggregate paid sum of Rs.40,000/- by two cheques of Rs.20,000/- each respectively dated 6th and 13th January, 1977. The Plaintiff however, failed and neglected to pay the balance deposit of Rs.10,000/- inspite of his assurance that he would pay the same. In the meanwhile and in anticipation of the Plaintiff making payment of the balance sum of Rs.10,000/- as per his assurance, Defendant No. 1 in good faith initiated negotiations with the said Manibai and obtained surrender of the said flat by her and/or cancellation of her agreement with 10 defendant in that behalf. The Plaintiff, however, failed to contact the defendant for the purpose of making any inquiries in respect of the said flat or the cancellation of the agreement with the said Manibai or to pay the balance sum of Rs.10,000/- as stated above. Defendant No. 1 thereupon became entitled to forfeit the deposit of Rs.40,000/-. Defendant No. 1 addressed to the Plaintiff a letter dated 19th May, 1977, recording that the Plaintiff had failed to deposit the balance sum of Rs.10,000/-, defendant requested the Plaintiff to collect a cheque for the said sum of Rs.40,000/-. The Plaintiff failed and neglected to reply to defendant’s letter dated 19th May, 1977 or to contact the defendant. In the circumstances, by a registered A.D. letter dated 5th August, 1977 the defendant once again reminded the Plaintiff to come and collect the deposit failing which the defendant informed the Plaintiff that the said amount would be forefeited. The defendant also pointed out in its letter dated 5th August, 1977 that this Defendant had already become entitled to forfeit the said amount but as a gesture of good will the defendant had made the said offer of refunding the 11 said sum of Rs.40,000/-. Plaintiff however, failed and neglected to reply to Defendant’s letter dated 5th August, 1977, untill 5th January, 1978. By that letter, addressed to this Defendant the Plaintiff falsely denied receipt of the Defendant’s letter dated 19th May, 1977 and purported to record that an oral agreement was already entered into between the Plaintiff and Defendant No. 1 for the sale of the said flat which was purported to be set out in the Plaintiffs letter dated 5th January, 1978. Correspondence thereupon ensued between the Advocates of the Plaintiff and Defendant No. 1 respectively on their behalf wherein defendant No. 1 recorded the facts of the case and denied any agreement having been entered into in respect of the said flat with the Plaintiff and, inter alia pointed out that the Plaintiff was not entitled to obtain any specific performance of the alleged agreement. The defendant states that after obtaining cancellation of agreement with the said Manibai and surrender of the said flat from her, the Defendant became entitled to dispose of the said flat. As the Plaintiff had not entered into any agreement with Defendant, and as the Plaintiff 12 failed and neglected to pay the balance sum of Rs.10,000/- and to contact Defendant for the purpose of entering into agreement in respect of the said flat, defendant entered into an agreement to sell the same to Velhari Trading Co. Pvt. Ltd. on or about 2nd June, 1977. On or about 14th October, 1977, Velhari Trading g Co. Pvt. Ltd. desired to purchase flat No. B2 on the 19th floor of the said Building in exchange for and in lieu of the said flat which request was acceded to by Defendant. On or about 11th October, 1978 one Ganeshchandra Kalicharan entered into an agreement with Defendant No. 1 for purchase of the said flat for a total consideration of Rs.2,32,220 and has already paid the full purchase price thereof. The said Ganeshchandra Kalicharan has been on or about 10th May, 1980 given possession of the said flat for the purpose of carrying out interior decoration and furnishing of the said flat. The defendant says and submits that the said Ganeshchandra Kalicharan is a bona fide purchaser for value without notice and this Defendant has entered into a valid, binding and subsisting agreement with him in respect of the said flat. The defendant has 13 denied that Plaintiff was ready and willing to perform his part of any alleged agreement. Defendant says that the question of the Plaintiff being ready or willing did not arise in view of the fact that there was no agreement. Various other pleadings by the Plaintiff have been denied. . In so far as receipt of Rs.80,000/- the same is denied. The defendant has admitted only receipt of Rs.40,000/- and the said amount has been properly and legally forefeited as set out in the defendant’s advocate letter dated 3.2.1978. The defendant has denied that Plaintiff suffered any damages. It is pointed out that the flat has been sold and consequently it is pointed out that the suit should be dismissed. 4. Based on the pleadings issues were framed on 17.1.2003 which are reproduced hereinbelow : ISSUES 1. Is the suit is bad for 14 non-joinder of necessary and/or proper parties? 2. Does the Plaintiff prove that valid, binding, concluded and enforceable contract was arrived at between the Plaintiff and 1st Defendant for sale of Flat No. A-1, 4th Floor, Prithvi Apartment, Altamount Road, Mumbai, as alleged in Para 4 of the Plaint? 3. Does the Plaintiff prove that the Plaintiff paid to the 1st Defendant a sum of Rs.80,000/- as alleged in Para 4 of the Plaint? 4. Does the Plaintiff prove that the alleged Agreement between 1st Defendant on the one hand and 2nd Defendant on the other is concocted and fabricated as alleged in Para 6 of the Plaint? 15 5. Does the Plaintiff prove that he was at all time ready and willing to perform his part of the alleged Agreement? 6. Does the Plaintiff prove that Section 4 of the Maharashtra Ownership Flats Act and more particularly Section 4 thereof is invalid and of no legal consequences as alleged in Para 8A of the plaint? 7. Does Defendant No. 1 prove that the suit is misconceived and discloses no cause of action as alleged in para 1 of the Written Statement of Defendant No. 1? 8. Does the Defendant prove that the Plaintiff is guilty of gross delay and serious latches as alleged in para 1 of the Written Statement of Defendant No. 1? 16 9. Does Defendant No. 1 prove that the sum of Rs.40,000/- was received as set out in Par 2 of the plaint? 10. Is Sureshchandra Kalicharan a bona fide purchaser for value without notice as stated in Para 2(c) of the Written Statement of Defendant No. 1? 11. Does the Plaintiff prove that he is entitled to specific performance of the agreement as alleged in Para 4 of the plaint? 12. Is the Plaintiff in the alternative entitled to be paid damages of Rs.80,000/- together with further interest thereon @ 15% p.a. or in the sum of Rs.4,02,504/- together with interest @ 6% p.a. as prayed? 13. Is the Plaintiff entitled to costs? 17 14. What reliefs? 5. No arguments have been advanced in so far as Issue Nos. 1 and 6 are concerned and therefore, these issues are not required to be answered. 6. In so far as Issue No. 7 is concerned, the fact that the issues have been framed and parties have led evidence, would itself indicate that there are triable issues and in that light of the matter, issue No. 7 has to be answered in the negative. 8. Considering that the suit is for specific performance and in the alternative for damages, all connected issues will have to be answered. As such Issue Nos. 2, 3, 4, 5, 8, 9, 10 and 11 will have to be answered together as those deal with the issue of specific performance of the contract. Issue No. 12 will have to be answered separately as that pertains to the relief of damages. . On behalf of the Plaintiff, Plaintiff has examined himself. On behalf of the defendants, Mr. 18 Jigar Shah, Director has been examined, as also Vasant Dharmaji Gada as P.W. No. 2. Both the parties have also led evidence by way of documentary evidence which has been marked and taken on record. 9. In order to succeed, Plaintiff must establish that there was a concluded agreement between the parties and terms of the agreement which were agreed to. Plaintiff also will have to prove that he was always ready and willing to perform the agreement which was entered into between the parties. Let us therefore, examine the evidence of the Plaintiff and defendant to find out if there was a concluded agreement between the parties for the sale of flat No. A1 on the fourth floor and the terms and conditions thereof were agreed. We have already noted the pleadings by the Plaintiff that what was agreed to be sold was flat No. A1 on the 4th Floor at the rate of Rs.152/- per sq. ft. By way of the pleadings, Plaintiff has set out that the agreement was to be in terms of the draft agreement, a copy of which was given to the Plaintiff. Therefore, what emerges from this 19 pleadings is that the flat to be purchased was identified. The rate per sq. ft. was settled and the agreement was to be in terms of the copy which was given to the Plaintiff. Plaintiff also gave Rs.40,000/- as earnest money by two cheques dated 6.1.1977 and 13.1.1977 and according to the Plaintiff an additional amount of Rs.40,000/- for which no receipt was passed. In his evidence on affidavit Plaintiff has deposed that the flat to be purchased was Flat No. A1 on the 4th Floor at the rate of Rs.152/- per sq. ft. and that he paid Rs.40,000/- by two cheques one of 6.1.1977 and other of 13.1.1977. One such receipt is produced as Exh. P2 which shows that defendant No. 1 has received a sum of Rs.20,000/- against Flat No. A-1, 4th Floor in Prithvi Apartment, at Altamount Road. He has also deposed that he has paid additional Rs.40,000/- in cash for which no receipt was issued. It has also come in the evidence of the Plaintiff that first defendant gave usual printed agreement which is executed by the first defendant for the sale of flats in Prithvi Apartment and defendants are bound to execute and sign the agreement. In his cross examination, 20 Plaintiff has deposed that the price settled was Rs.152/- per sq. ft. and that was to be reflected in the agreement. He has also deposed that the defendant No. 1 was directed to pay in cash certain amount which was not to be reflected in the agreement and that was to be over and above Rs.152/-. The witness stated that he was to pay Rs.40,000/- in cash over and above Rs.152/- per sq. ft. The amount was to be paid at the time of execution of the agreement being earnest money. The earnest money was to be paid first and at the time of execution of agreement Rs.40,000/- was to be paid. The witness has deposed that the earnest money was fixed at Rs.20,000/- and after that Rs.20,000/- was to be paid within a week. Thereafter, within one week Rs.40,000/- was to be paid in cash. Defendant No. 1 also informed Plaintiff, that they will inform him about the progress of the construction and that he should make payment slabwise. The witness has deposed that defendant had not asked him to make payment as per Clause 4 of Exh. P9. Exh. P9 is an unsigned agreement for sale and Clause 4 provides the manner in which the amount was to be paid. The witness 21 states that he was not required to make further payments untill he was called upon by the defendants in writing to pay the amounts. He was not called upon to make payment. The witness is not able to recollect when he has paid Rs.40,000/- cash but he contends that it must be within 7 to 10 days from the second payment. The amount of Rs.40,000/- was paid from accounted sources. The witness further deposed that his arrangement with Mr. Gala was otherwise than on the basis of Exh. P-9. The agreement was to be executed within 15 to 20 days after making two payments of Rs.20,000/- and cash of Rs.40,000/-. The witness’s attention was invited to Exh. P3 which is letter dated 5.8.1977 by the first defendant. The Plaintiff stated that he never objected to the contents of Exh. P3. After receipt of letter at Exh. P3, in Mid August, 1977, he met Mr. Gala. The witness has further deposed that in August, 1977 the said flat was available with defendant No. 1 for giving it to him. The witnesses denied that in or about January, 1977 the said flat was allotted to Manibai. The witness also denied that Mr. Gala had told him that Manibai is willing to dispose of 22 the said flat. The witness volunteered that no such talks took place with Mr. Gala. The witness also denied that Mr. Gala had told him that if the witness is interested, he would find out from Manibai whether she is ready to dispose of the flat and that Mr. Gala told him that before approaching Manibai to show his bona fide, he should deposit Rs.50,000/-. The witness stated that it is not true that after depositing Rs.40,000/- the witness did not deposit the balance of Rs.10,000/-. The witness volunteered that there was no such agreement for payment of Rs.50,000/-. The witness denied the suggestion that he had not paid Rs.40,000/- to Manu Gala in cash and that two cheques given for Rs.20,000/- were not towards earnest money or part payment but were towards the deposit to show his bona fides. . Mr. Jigar Shah, Director of Defendant NO. 1 tendered his evidence by way of examination in chief on affidavit. Under Exh. D-9