1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. NOTICE OF MOTION NO.707 OF 2008 IN SUIT NO.240 OF 2007 Sagar P. Patel and another ..Plaintiffs. Vs. Abigare Jacob Pezarkar and another ..Defendants. .... Mr. D.H. Mehta with Mr. Dhaval Mehta i/b D.M. Legal Associates for the Plaintiffs. Mr. M.M. Vashi i/b M.P. Vashi & Associates for the Defendants. ..... CORAM: DR. D.Y. CHANDRACHUD, J. 28th March, 2008. P.C. : This order will dispose of a Notice of Motion taken out by the Plaintiffs in a suit for specific performance. With the consent of the learned counsel the Motion has been taken up for hearing and final disposal. 2. The dispute in the case relates to a plot of land at Mahim admeasuring 672 sq. yds. There are tenanted structures on the plot comprising of 42 tenants. Two rooms are with the First 2 Defendant who is the owner of the property. On 14th December, 2005 an agreement was entered into between the Plaintiffs and the First Defendant under which the First Defendant agreed to sell, transfer and assign the land to the Plaintiffs at and for a consideration of Rs.70 lacs. An amount of Rs.5 lacs was paid together with the execution of the agreement while the balance was to be paid on the Plaintiffs obtaining the sanctioned plan of the building in respect of the entire FSI available on the property and the commencement certificate in respect thereof and at the time when the owner would execute a conveyance in favour of the Plaintiffs. Clause 4 of the agreement provided that the First Defendant as owner agreed and undertook to be responsible exclusively for getting an agreement executed between the tenants and the developer at the cost of the developer. The developer was at liberty to finalize the terms with the existing tenants. On 3rd October, 2006 a letter was addressed on behalf of the Plaintiffs by their advocate to the tenants recording that while some of the tenants had come forward to give their consent to the reconstruction / redevelopment of the property, others had not 3 done so. The tenants were called upon to execute agreements with the Plaintiffs. On 22nd November, 2006 the agreement with the Plaintiffs was terminated by the First Defendant. The ground for termination was that the Plaintiffs had failed to “complete the deal” in a specified time as mentioned in the agreement and get the document properly stamped and registered. The earnest money of Rs.5 lacs paid by the Plaintiffs was forfeited. The Plaintiffs lodged a protest on 7th December, 2006 and instituted a suit for specific performance on 18th January, 2007. 3. On 29th January, 2007 a Memorandum of Understanding was entered into between the First Defendant and the Second Defendant. The recitals to the agreement more particularly Clause III shows that the Second Defendant had prior notice of the claim of the Plaintiffs. The recital is to the following effect : “III. Vendor by separate writing has agreed to sell, assign and transfer said property to one Mr. Sagar P. Patel and Mr. Piyush G. Babla for the consideration and upon terms and conditions mentioned therein. Said Sagar P. Patel and Mr. Piyush G. Babla could not complete the purchase and as such Vendor terminated the said Agreement by a letter in writing dated 22nd day of November, 2006.” 4 4. An application for ad interim relief was moved in the suit and on 7th March, 2007 ad interim relief was granted by a Learned Single Judge of this Court as against the First Defendant. On 17th September, 2007 an appeal that was filed by the First Defendant against the order of the Learned Single Judge came up for hearing before a Division Bench. The grievance before the Division Bench was that the Learned Single Judge had furnished no reasons for granting an ad interim injunction. While disposing of the appeal, the Division Bench observed that the merits of the contentions were not being gone into as during the course of the hearing, the learned counsel appearing on behalf of the parties jointly stated that the ad interim order may continue for a period of four weeks during which the Plaintiffs shall take out an application for impleading the third party in whose favour an interest had been created. The appeal was accordingly disposed of. During the course of hearing of the Motion, I had drawn the attention of the learned counsel to the fact that as I was a member of the Bench which disposed of the appeal, should the parties have any objection to this Court hearing the Motion that may be indicated. 5 Both the learned counsel have agreed that there was no objection to the Motion being heard and disposed of by this Court and accordingly the Motion has been heard finally. 5. In terms of the order passed by the Division Bench, a Chamber Summons was taken out by the Plaintiffs on 9th October, 2007 for impleading the Second Defendant. The Chamber Summons was allowed on 28th January, 2008 and thereupon a fresh Motion has been taken out on 15th February, 2008. 6. On behalf of the Plaintiffs it has been urged that there was a valid and subsisting agreement with the First Defendant and the reasons which have been furnished in the letter of termination are without any basis whatsoever since time was not the essence of the contract. Moreover, it has been submitted that the Second Defendant has entered into the agreement with notice of the pre- existing agreement with the Plaintiffs. 7. There is merit in the contention which has been urged on 6 behalf of the Plaintiffs. The agreement between the Plaintiffs and the First Defendant provided that the payment of an amount of Rs.5 lacs was made while the balance was to be paid upon the plans being sanctioned, the commencement certificate being issued and the execution of a conveyance by the First Defendant in favour of the Plaintiffs or the co-operative society, as the case may be. Under Clause 4 the Plaintiffs and the First Defendant agreed that it was the exclusive responsibility of the First Defendant to get an agreement executed with the existing tenants at the cost of the Plaintiffs. At the same time the Plaintiff was at liberty to finalize the terms with existing tenants. The agreement was terminated by the First Defendant on 22nd November, 2006 and the ground which forms the basis of the termination was that the Plaintiffs had failed to complete the transaction within the specified time as mentioned in the agreement and to get the document stamped and registered. This ground is prima facie without any basis or foundation since the agreement did not spell out any time limit within which the transaction was to be completed. In fact, parties were conscious of the fact that there were existing tenants whose claims would have 7 to be settled by entering into agreements with them. Even otherwise it is a settled principle of law that the presumption is that time is not the essence of a contract, in an agreement to sell immovable property. The First Defendant entered into an agreement with the Second Defendant and it is ex facie evident from the Memorandum of Understanding dated 29th January, 2007 that the Second Defendant was on notice of the pre-existing claim of the Plaintiffs under the agreement that was entered into between the First Defendant and the Plaintiffs. In these circumstances, the right, if any, that has been conferred upon the Second Defendant by the First Defendant would have to be subject to the agreement with the Plaintiffs. The agreement between the First and Second Defendants purports to state that the Second Defendant has been placed in possession, but it is extremely material to note that out of the agreed consideration of Rs.95 lacs only an amount of Rs.1 lac has been paid. 8. On behalf of the First and Second Defendants it has been urged that there was a delay on the part of the Plaintiffs in 8 approaching the Court for interlocutory relief. This submission cannot be accepted. Upon termination on 24th November, 2006 the Plaintiffs lodged a protest on 7th December, 2006 and instituted a suit for specific performance on 18th January, 2007. The agreement between the First and Second Defendants took place on 29th January, 2007. After the ad interim order was passed on 7th January, 2007, that was the subject matter of an appeal. Upon the decision of the Division Bench in appeal on 17th September, 2007 the existing order of status quo was continued for a period of four weeks. Even prior to the expiry of the order, a Chamber Summons for the amendment of the Plaint was taken out and that Chamber Summons was allowed on 28th January, 2008. A fresh Notice of Motion was taken out on 15th February, 2008. It has then been urged on behalf of the Defendants that the Plaintiffs have been unable to settle with the tenants. Though during the course of the hearing reliance was sought to be placed on a power of attorney alleged to have been executed by the First Defendant in favour of the Plaintiffs, counsel appearing for the Defendants has fairly stated upon inspection that the power of attorney does not confer 9 any right upon the Plaintiffs to enter into agreements with the tenants. That apart, under Clause 4 of the agreement the exclusive responsibility to get the agreements executed was that of the First Defendant though, reading the clause as a whole it is evident that the cost of entering into such settlements was to be incurred by the Plaintiffs and the Plaintiffs also were at liberty to negotiate with the tenants. In the present case, the First Defendant has now stated before the Court that an amount of Rs.70 lacs has been received from the Second Defendant. Insofar as the First Defendant is concerned, she has therefore stepped out of the fray. The dispute now is between two developers. As between the Plaintiffs and the Second Defendant it is evident that the balance must weigh in favour of the former since the Second Defendant has entered into an agreement with notice of the pre-existing claim of the Plaintiffs under a prior agreement dated 14th December, 2005. 9. In these circumstances, a prima facie case has been made out for the grant of interim relief in the Motion. The Motion is 10 accordingly made absolute in terms of prayer clause (a), save and except for the words 'dealing with' and prayer clause ( c). 10. On the request of the learned counsel appearing for the parties, it is clarified that in the event that the Second Defendant pays the balance amount of Rs.25 lacs to the First Defendant in order to enable the First Defendant to vacate the premises, this shall be without prejudice to the rights and contentions of the parties in the suit. *****