THE HON’BLE SRI JUSTICE K.C.BHANU CITY CIVIL COURT APPEAL No. 40 of 2006 & CROSS OBJECTIONS (SR) No. 4667 of 2010 JUDGMENT : 1. This appeal has been preferred challenging the judgment dated 14.11.2003 in Original Suit No.1209 of 1993 on the file of the II Senior Civil Judge, City Civil Court, Hyderabad. 2. The appellants herein are defendants 1 to 5 respectively, and the first respondent herein is the plaintiff, and the respondents 2 to 18 are the other defendants respectively, in the suit. For better appreciation of facts, the parties are hereinafter referred to, as they are arrayed before the trial Court. 3. The plaintiff filed the suit (a) for specific performance of agreement of sale dated 21.3.1982 directing the defendants 1 to 5 to execute sale deed in favour of the plaintiff after receiving Rs.5,24,125/-; (b) to direct the defendants 1 to 5 to take all necessary and appropriate steps for getting permission from the Government of Andhra Pradesh to enable them to execute regular sale deed or deeds in favour of plaintiff; (c) to grant perpetual injunction restraining the defendants from alienating suit schedule land in any manner whatsoever in favour of defendant no.6 or in favour of any third party except in favour of the plaintiff, and in the alternative, to direct the defendants 1 to 5 to refund a sum of Rs.2,90,000/- being the earnest money together with reasonable interest and damages of Rs.5,00,000/-. 4. (a) It is stated in the plaint that, the plaintiff is a co- operative society registered under the provisions of the Andhra Pradesh Co-operative Societies Act, 1964 (for short, ‘APCS Act, 1964’) with registration No.TAB 533, and its main object is to promote activity of house building and mainly providing suitable land to its members for construction of houses. The defendants 2 to 5 and father of the defendant no.1 are the absolute owners and possessors of the suit schedule property admeasuring Ac.13.10 guntas (-) Ac.0.29 guntas = Ac.12.21 guntas in survey no.222/4, Gaddimalkapur village, Golconda revenue mandal, Hyderabad, and they agreed to sell the suit schedule land to the plaintiff. The defendant no.5, on his behalf and on behalf of defendants 2 to 4 and father of defendant no.1 as general power of attorney holder, executed an agreement of sale on 21.3.1982 (Ex.A1), agreeing to sell the suit schedule land at Rs.65,000/- per acre and the plaintiff agreed to purchase the same from them at the same rate, and on the same day, the plaintiff paid an amount of Rs.1,00,000/- to the defendants 2 to 5 and father of defendant no.1. Since they owned other lands also, apart from the suit schedule land, the property fell under the purview of the Urban Land (Ceiling & Regulation) Act, 1976 (for short, ‘the Act, 1976’), under which they cannot alienate the said lands in any manner whatsoever except in favour of the registered co-operative societies in accordance with the provisions of the Act, 1976, Rules and administrative instructions issued by the State from time to time, and that is the reason why they chose to enter into the agreement of sale with the plaintiff. (b) It is further stated that, one of the covenants of Ex.A1 stipulates that the plaintiff should pay the balance of sale consideration for the entire suit schedule land admeasuring Ac.13.10 guntas, within three months from the date of receipt of permission from the Government under the Act, 1976, and the sale deed was to be executed by the defendants before the Sub Registrar. Another important covenant is initiating and taking appropriate measures for obtaining necessary permission and sanction from the State of Andhra Pradesh. In this regard, it is specifically agreed that the plaintiff and the defendants shall apply with all necessary papers to the Government of Andhra Pradesh and to Bhagyanagar Development Authority for exemption of the land agreed to be sold from the provisions of the Act, 1976, and the plaintiff, on its part, took number of steps for getting necessary exemption particularly under G.O. Ms. No.136, Revenue (UC-III) Department, dated 28.1.1981. The plaintiff also filed an application before the Hyderabad Urban Development Authority and also Government of Andhra Pradesh for getting the land use changed from recreational zone to residential zone, and the same was changed through G.O. Ms. No.263, Municipal Administration Department, dated 22.3.1983. The defendants had also taken steps for some time to get the land exempted from the provisions of the Act, 1976 and they have also filed Writ Petition No.1816 of 1983 before the High Court of Andhra Pradesh. The Government of Andhra Pradesh, vide G.O. Ms. No.964, Revenue (UC-II) Department, dated 27.6.1983 rejected all pending applications seeking the exemption, which led to filing of number of Writ Petitions before the High Court of Andhra Pradesh, and the defendants have also filed Writ Petition questioning the said Government Order. So, in spite of steps being taken up, the transaction could not be completed on account of intervention of the State. (c) It is further stated that, later, the defendants turned dishonest and were not willing to perform their part of contract under Ex.A1-agreement of sale. In spite of discussions and negotiations, the defendants without any reason or justification, adopted attitude of non-cooperation and were giving signals that they were not willing to honour the terms, conditions and covenants of Ex.A1- agreement of sale. The only part remained to be completed by the defendants for the purpose of getting necessary exemption under the Act, 1976, was to appear before the Special Officer and Competent Authority and also before the Government by filing necessary affidavits and giving details of the land held by them for getting the application processed, which they were postponing. (d) It is further stated that on 28.9.1992, the defendants got issued notice canceling and terminating Ex.A1-agreement of sale, offering to return Rs.2,90,000/- received by them under the agreement. The plaintiff got issued a reply on 28.10.1992. Thereafter, there was exchange of notices between them. The defendants sought to cancel Ex.A1-agreement of sale mainly on the ground that the transaction could not be completed within three months on account of failure on the part of the plaintiff to arrange for sale consideration. In fact, there was no delay on the part of the plaintiff in performing their part of contract, but the delay is only on account of defendants’ deliberate negligence and inaction in getting necessary permission from the relevant statutory authorities. The only obligation on the plaintiff is to pay the balance of sale consideration within three months from the date on which the defendants secure permission from the Government to sell the land. The plaintiff was and will be, ready and willing to perform its part of contract. The defendants referred to the Memorandum of Understanding dated 22.11.1990 entered into between the plaintiff and the defendants for the first time in the legal notice, and the said Memorandum of Understanding has no impact whatsoever on Ex.A1-agreement and it does not affect Ex.A1 in any manner. It was only meant to facilitate smooth transaction between the parties. The Memorandum of Understanding is illegal, void and unenforceable and not binding on the plaintiff, and its covenants are contrary to public policy and hit by Section 25 of the Indian Contract Act, 1872, and the defendants are not entitled to enforce the said Memorandum of Understanding. (e) It is further stated that by supplemental agreement for sale dated 22.3.1982, the sale consideration payable by the plaintiff was altered whereunder instead of Rs.65,000/- per acre, the plaintiff agreed to pay Rs.1,95,000/- per acre, and the plaintiff honours the supplemental agreement dated 22.3.1982, which will not alter in any manner whatsoever any of the covenants of Ex.A1 except variation in sale consideration and it is limited only to that extent. The defendants can never be allowed to cancel Ex.A1 and by exchange of notices, they revealed that they had already entered into an agreement of sale with defendant no.6. Claiming some title, the defendant no.6 was making efforts to trespass into the suit schedule land and trying to alter and change nature of the land. (f) It is further stated that the plaintiff is ready and willing to pay the balance of sale consideration at any point of time and even willing to deposit the same into the court, and the defendants, having received substantial amount of Rs.2,90,000/- are bound to perform their part of contract including taking necessary steps for getting permission from the Government including exemption under the provisions of the Act, 1976, and they cannot cancel Ex.A1. On account of flagrant violation and breach of contract on the part of the defendants, plaintiff suffered damages to the extent of Rs.5,00,000/-, and the plaintiff is entitled to recover the damages of Rs.5,00,000/- and earnest money of Rs.2,90,000/- together with reasonable interest thereon, in the alternative viz. if decree as prayed for is not granted. Hence, the suit. 5. (a) The defendants 1 to 4 filed written statement specifically denying the averments in the plaint and stating that plaintiff has not approached the court with clean hands and it has no locus standi to file the suit and the suit is time barred. Jashbai Shanker Bhai Patel, Nalin Bipinchandra Patel, Anil (Atul) Bipinchandra Patel, Natwarlal Mangaldas Patel and Manubhai Shankerbhai Patel are the joint pattedars, owners and possessors of agricultural land admeasuring Ac.13.10 guntas in survey no.222/4 in Guddimalkapur village, and they were cultivating the land without any interruption. On technical advice, they decided to raise grape garden in the agricultural lands and grew grape garden successfully. While so, one P.Narasimha Reddy and P.Nageswara Rao, local residents of Hyderabad actively involved in plot business, approached them falsely representing that they had all the influence and liaison with Urban Land Ceiling (ULC) authorities as well as officials in the Government, and they can get the agricultural land converted into non- agricultural land and get it exempted from the provisions of the Act, 1976 and that they were having a society under their control, if the owners simply enter into an agreement of sale with them in the name of a society under their alleged control. Since the owners were made to believe by them though the owners had no reason or necessity to sell their land, agreed to enter into sale agreement with the said persons, but in the name of plaintiff society. The Act, 1976 is not applicable to the agricultural lands, and any sale or sale agreement for house plots over agricultural lands is null and void and consequently unenforceable. Since the land is an agricultural land, it can be sold only as an agricultural land, but not otherwise, and therefore, the owners cannot and shall not enter into an agreement of sale for the sale of their agricultural lands for house plots. Therefore, Ex.A1-agreement of sale is null and void and not binding on defendants 1 to 4. Further, Ex.A1 is not signed by defendant no.5 and he is not arrayed as vendor in its recitals, and so, the agreement is not binding on 1/5th undivided share of the defendant no.5, and there is no privity of contract between defendant no.5 and the plaintiff. (b) It is further stated that, even assuming that Ex.A1 is valid in law, defendants 1 to 5 agreed to sell the land found surplus after exclusion of Ac.0.29 guntas acquired by the government. Therefore, from out of Ac.13.10 guntas of land, Ac.0.29 guntas and the 1/5th share of defendant no.5 has to be deleted first, and in the remaining land, the extent permitted to be retained under the ULC Authority has to be deleted and the remaining land along is covered by the agreement of sale. Unless the last balance land is identified and demarked, the plaintiff cannot seek the specific performance of the contract. So, the suit for specific performance is not maintainable as there is no meeting of minds between the parties and as there is no identification of the property. (c) It is further stated that as per the covenant in Ex.A1, the agreement can be enforced only three months from the date of the receipt of permission from the Government under the Act, 1976 and so the balance of sale consideration also shall be paid by the plaintiff at the time of execution and after measurement which shall again be within 3 months from the date of receipt of permission from the Government under the Act. Admittedly, at the time of filing of the suit or thereafter, the permission was not granted and the said fact has been specifically admitted in the plaint, and so no specific performance of the contract can be granted. Admittedly, the transaction could not be completed because of the provisions of the Act, 1976 and the Government policy, and it is also clear from the pleadings of the plaintiff that defendants are not at fault for execution of the agreement of sale since no such permission was obtained. So, the plaintiff is precluded from seeking the specific performance of the contract. (d) It is further stated that, mere filing of the declaration would not and cannot change nature of the land. Owners of the land are paying cist (land revenue) regularly, including in the month of March, 1995, and therefore, the extent of Ac.13.30 guntas continues to be agricultural land as mere conversion of the area as residential zone instead of recreational zone would not alter or change nature of land. (e) It is further stated that, admittedly cheque no.126895 for Rs.35,000/-, which was given to defendant no.5 who was acting as GPA holder for defendants 1 to 4, was dishonoured, and therefore, defendants 1 to 4 have received only Rs.65,000/-, but not Rs.1,00,000/- as alleged by the plaintiff. Even assuming that the said cheque was given to defendant no.5 and he received the same in his personal capacity as one of the share holders of the land, since the said cheque was dishonoured, there is no consideration whatsoever received by defendant no.5 and on this count also the suit fails as the other owners could not sell the land in view of the fact that there is no express consent by defendant no.5 for conversion of agricultural land into non-agricultural purpose. Even otherwise also i.e. other owners can sell the land without consent of co-owners, the suit is liable to be dismissed against the defendant no.5. The allegation in the plaint that as the defendant no.5 requested the plaintiff to pay consideration in cash instead of cheque, is false. If really cash was paid to defendant no.5, the plaintiff would certainly have taken back the cheque at the time of payment of cash. The defendant no.5 neither signed Ex.A.1 nor received the price from the plaintiff. So, there is no consideration of Rs.1,00,000/- as stated in Ex.A1 and the alleged earnest money is not passed on to the defendants. (f) It is further stated that, in supercession of earlier guidelines issued for processing the exemption applications under Section 20 (1) (A) of the Act, 1976, the Government issued Ex.A30-G.O.Ms. No.136, dated 28.1.1981. As per Ex.A1, the plaintiff offered to purchase the land at reasonable price as per the provisions of Ex.A30-G.O. No.136, dated 28.1.1981 which the defendants agreed to sell to plaintiff. The conditions laid down under Ex.A30 are not satisfied by the plaintiff and some were not even existing at the time of execution of Ex.A1. Further more, as per para 3 in page 3 of Ex.A30- G.O.Ms. No.136, the concession made shall be operative for a period of one year from the date of issue of the order and no further extension would be given. The said period expired on 28.1.1982. So, as on the date of Ex.A1 i.e. 21.3.1982, the exemptions to the housing society given under Ex.A30-G.O.Ms.No.136, were not available to the plaintiff society. Hence, plaintiff committed fraud against defendants 1 to 4 within the meaning of Section 17 of the Indian Contract Act, 1872. Since the offer made by purchaser is a conditional offer, it gets extinguished when the conditions are not complied with or not existing or violated, and the same is void, illegal and unenforceable as it is impossible to get concession made under Ex.A30- G.O. Ms. No.136. There is no consensus ad idem and pari delicto, hence, the suit is liable to be dismissed. (g) It is further stated that, plaintiff did not comply with condition laid down in para 5 of page 3 of Ex.A30- G.O. Ms. No.136. Since the government issued another G.O. later on, wherein uniform policy decision was taken to the effect that the government will not entertain any applications under Section 21 (1) (A) of the Act, 1976. Therefore, Ex.A1-agreement has become frustrated, pari delicto, infructuous, void and unenforceable. Further, inspite of specific covenant that expenses for obtaining exemptions for the land agreed to be sold from the provisions of the Act, 1976 shall be borne by the purchaser alone, the plaintiff society never borne the expenses and thereby violated the said covenant and committed breach of contract. (h) It is further stated that time is the essence of the contract, as can be seen from para no.8 of Ex.A1- agreement, which stipulates that the sale transaction is to be completed within 9 months from the date of agreement or within 3 months from the date of granting permission by the State Government, whichever is earlier. The said time period expired long back and so the suit is not maintainable. Even assuming that memorandum of agreement dated 22.11.1990 and another agreement dated 23.11.1990 extended the time of 9 months calculated from 23.11.1990, the said period is also expired and so the plaintiff cannot seek specific performance of contract after expiry of the stipulated time as it is specifically stated in the agreement dated 23.11.1990 that except the price, in other respects, the earlier two agreements as well as the memorandum of understanding dated 22.11.1990 and the letter of societies dated 22.11.1990 shall stand. (i) It is further stated that, Ex.A1-agreement read with the memorandum of understanding dated 22.11.1990 would go to show that the land for sale is reduced to Ac.5.00 only in which Ac.1.00 has to be passed on to the members suggested by the land owners. It is clear that in addition to the sale price, the plaintiff shall pay a sum of Rs.70/- per square yard through demand draft in favour of the vendors. Since the plaintiff neither deposited nor shown any interest at any time to pay the said amount together with the remaining sale price, plaintiff is at fault for breach of contract. Hence, the agreement is not enforceable. Further, since the land agreed to be sold was confined to Ac.5.00. From the said extent, Ac.0.29 guntas for road; the land retained by the vendor permissible under the Act, 1976 and the land of defendant no.5, have to be deducted, and so, practically, the land available for sale is negligible. Since the plaintiff has not shown any interest after payment of paltry sum of consideration and has neither paid any amount till today nor offered to pay nor deposited the same into the court along with the plaint, it can be inferred that the plaintiff has no means to pay the price to the vendors and so the suit is frustrated and is liable to be dismissed. (j) It is further stated that as seen from memorandum of understanding dated 22.11.1990 entered into between plaintiff and the defendants 1 to 5, the plaintiff agreed that the vendors have no other responsibilities for transfer of land and expenses. So, the covenant that the vendors and purchasers shall apply with all necessary papers to the Government of Andhra Pradesh and to the Bhagyanagar Development Authority, etc, for exemption of the land agreed to be sold from the provisions of the Act, 1976, stands modified to the extent that it is the purchaser who shall take steps for obtaining permission at his expenses. Since the plaintiff failed to obtain permission from the ULC authority, he cannot ask for the specific performance of the contract and committed fraud and breach of contract within the meaning of Section 17 of the Indian Contract Act, 1872. Further more, the time of two months granted under the memorandum of understanding was also expired on 23.1.1991. Hence, the agreement is void, unenforceable, void and time barred. (k) It is further stated that the defendants specifically cancelled the contract duly returning the total amounts paid by the plaintiff and hence from that date onwards there is no relationship between the plaintiff and the defendants 1 to 4, and as there is no subsisting valid agreement as on the date of filing of the suit, the suit is not maintainable. The enforceability of Ex.A1 has become impracticable and impossible. (l) It is further stated that the President, who signed the plaint, has no authority to sign the pleadings. The reliefs (a) & (b) prayed in the plaint conflict with each other and conflict with other prayer (c). Hence, it is prayed to dismiss the suit with costs. 6. The defendant no.5 filed separate written statement denying the allegations in the plaint except those are specifically admitted therein, and stating that the plaintiff has not approached the court with clean hands, the suit is time barred and the plaintiff has no locus standi to file the suit. It is further stated that the defendant no.5 is equivalent undivided share holder of Ac.13.10 guntas having 1/5th share in it. The defendant no.5 has not signed Ex.A1-agreement. This defendant is not at all arrayed as vendor in Ex.A1. The cheque mentioned in Ex.A1 for Rs.35,000/- drawn in favour of the defendant no.5 was dishonoured. The defendant no.5 has not received the basic ingredient for any valid contract viz. ‘consideration’ and so it is not binding on the defendant no.5, and it is false that the plaintiff paid cash of Rs.35,000/- to this defendant. In all other respects, this defendant adopted the written statement of defendants 1 to 4 mutatis mutandis. 7. Basing on the above pleadings, the trial court framed the following issues for trial. 1) Whether the plaintiff is entitled to the specific performance of the contract of sale dated 21.3.82 ? 2) Whether the contract of sale dated 21.3.82 is true, valid and binding on the defendants ? 3) Whether any prior permission is necessary for the plaintiff society to enter into the contract ? 4) Whether the memorandum of understanding dated 22.11.90 is true, valid and binding ? 5) Whether the subsequent agreement dated 2.4.91 is true, valid and binding ? 6) Whether the time is the essence of contract dated 21.3.82 ? 7) Whether the agreement of sale dated 21.3.82 is frustrated and became unenforceable ? 8) Whether the plaintiff is entitled to refund of the amount paid by them ? 9) To what relief ? 8. During trial, P.W.1 was examined and Exs.A1 to A34 were marked, on behalf of the plaintiff, and D.W.1 was examined and Exs.B1 to B40 were marked, on behalf of the defendants. 9. The trial Court, upon appreciation of the evidence on record, held that Ex.A1-agreement of sale does not become frustrated and that it is true, correct and valid and the plaintiff is entitled to specific performance of contract of sale dated 21.3.1982, and that the plaintiff society was not at fault for not getting permission from ULC authorities, and that Exs.B4-memorandum of understanding and Ex.B5-memorandum of agreement bind the plaintiff society, and ultimately, decreed the suit with costs for specific performance of contract of sale dated 21.3.1982 directing the defendants 1 to 5 to execute registered sale deed in place of Ex.A1 subject to the result of the applications pending before the ULC authorities and pending before the Government of Andhra Pradesh, and that, in the event of parties able to secure ULC permission, then the plaintiff society’s obligation to pay the balance of sale