1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.92 OF 1986 M/s.Dhanlaxmi Construction Company ....plaintiffs versus M/s M.K. Natu and Company ....Respondents Mr.Nitin Pradhan for the plaintiffs. Mr.Sandesh Deshpande for Respondent Nos.1 to 3. CORAM : B.H. MARLAPALLE & S.J. VAZIFDAR, JJ. DATE : 20TH APRIL, 2009. JUDGMENT (PER S.J. VAZIFDAR, J.) : 1. The appellants are the plaintiffs and respondent nos.1 to 6 are the defendant nos.1 to 6. This appeal has been filed by the plaintiffs against the judgment and the decree of the Second Joint Civil Judge Senior Division Pune, dismissing their suit for specific performance of an alleged oral agreement dated 29.6.1981 and damages and decreeing the suit only in the sum of Rs. 500,000 with interest from 29.6.1981 till payment at the rate of 12% per annum. 2 2. We see no reason whatever to interfere with the detailed and, if we may say with respect, well considered judgment of the trial court dismissing the suit. The suit was a purely speculative litigation. 3. The second and third defendant's are the partners of the first defendant. One Mrs. Dhun F. Sethna was the owner of the suit property admeasuring about 1042.27 square meters of land in Pune. The original owner having expired in July 1983 defendant nos.4 and 5 namely one Mrs.Dhanjibai K. Sethna and Mrs. Goolbai were impleaded as her heirs. Defendant no. 6, one B.F.Bode, was impleaded as a trustee of a trust created by the original owner. 4. The plaintiffs and defendant nos.1 to 3 are the only contesting parties. The remaining parties have not contested this appeal. The plaintiff's case. 5. There is no dispute that an agreement dated 28.2.1980 was entered into between the original owner and defendant no. 1 for the sale of the said property by the original owner to defendant no. 1 on the terms and conditions contained therein. Under this agreement the property was agreed to be sold for a sum of Rs.700,000/-. The first defendant was to prepare plans for the 3 construction of a new building thereon by demolishing the existing structure; the first defendant was to obtain the approval/ sanction for the plans from the Cantonment Board and other authorities, and to get the old restrictive tenure of the suit land converted to freehold by securing orders to that effect from the Cantonment Board, the Ministry of Defence and the Union Government and the costs in connection therewith were to be borne by the first defendant. Upon conversion of the tenure as aforesaid or on 25.2.1982, which ever was earlier the first defendant was to pay a further sum of Rs.70,000/- to the original owner together with 50% of the costs of execution of the conveyance and its registration etc. The first defendant was to deliver on ownership basis to the original owner a new residential flat of her choice and upon the delivery of vacant possession thereof the first defendant was entitled to take physical possession of the suit property so as to enable the first defendant to proceed with the construction thereon after demolition of the existing structure. The first defendant was entitled to the title deeds from the original owner and was to accept the title as marketable within four months. The sale was to be completed by 25.2.1982 which was later extended to 15.6.1982. 4 6. According to the plaintiffs in May 1981 the first defendant disclosed to two of their partners, one Nanji Khimji Thakkar and Manginal Jawanmal the details of the above agreement with the original owner and represented that about 50,000 sq. ft. of FSI would be available for construction on the suit property. Defendant nos. 2 and 3 also disclosed a power of attorney dated 19.2.1980 executed by the original owner in their favour. At this time the plaintiffs were also furnished inspection of the said agreement dated 28.2.1980 on the basis whereof they became acquainted with the details thereof as stipulated above. 7. The plaintiffs further alleged that defendant nos. 2 and 3 made various representations including that they had prepared the plans for the construction on the suit property, deposited a sum of Rs.700,000/- with the solicitors of the original owner obtained the sanction and the approval from the Cantonment Board to the said plans, submitted the necessary application to the Competent Authority under the Urban Land Ceiling Act, approached the authorities for getting the restrictive tenure of the suit property converted to freehold tenure and value/consideration for the transfer which would be 5 required to be paid to the Military Estate Office, Pune circle, would be about Rs.400,000/-. They further represented that they had satisfied themselves about the marketable title of the property; arranged for the balance payment of Rs.70,000/- on 25.2.1982 or on receipt of the orders of converting the land to freehold, arranged for a residential flat for the original owner as required and that they could transfer the benefit under the agreement with the original owner on payment of the said sum of Rs.70,000/- and delivering to the original owners the said flat on ownership basis. 8. The plaintiffs further alleged that defendant nos. 1 to 3 represented that the project being a substantial one they were experiencing difficulties in executing the same on their own and would be happy if the said Nanji Khimji Thakkar and Manginal Jawanmal joined them in doing so as a joint-venture. The said Nanji Khimji Thakkar and Manginal Jawanmal were however not willing to execute the agreement as a joint-venture but desired to take over the project from defendant nos. 1 to 3. 9. Between 1.6.1981 and 28.6.1981 negotiations ensued between the parties. Ultimately according to the plaintiffs they arrived at the alleged oral agreement on 6 29.6.1981 of which specific performance has been sought in the suit. Paragraph 15, 16 and 17 of the plaint are of considerable importance as they contain the details of the alleged oral agreement. It is necessary therefore to set them out in extenso. They read as under :- "15. Ultimately the plaintiff and the defendant Nos. 1 to 3 arrived at a completed oral agreement to sale, on 29.6.1981. In respect of the said concluded oral contract the plaintiff made payment of Rs.500,000/- to the defendants Nos. 1 to 3 by a cheque drawn in favour of the defendant No.2 in the office of Mr. S.W. Oka, Advocate, and in his presence agreement was arrived at for a total consideration of Rs.55,00,000/- on the basis of the (a) Power of Attorney, (b) Agreement dated 28.2.1983, (c) Plans shown to the plaintiff's showing about 50,000 sq ft. of FSI being available for exploitation and the representations made by the defendants Nos. 1 to 3 from time to time, brief particulars whereof are reproduced in paragraph no. 10 above. 16. The plaintiff had thus under the said oral agreement agreed to pay Rs.55,00,000/- (Rs. fifty five lakhs only) to the defendants nos. 1 to 3 in full consideration of the defendant nos. 1 to 3 agreeing to transfer all the benefits under the agreement dated 28.1.1982 to the plaintiff and doing the following acts :- (i) Complying with their part of the agreement dated 28.2.1980 with the original owners; (ii) Getting the tenure converted to freehold at their cost; (iii) Paying Rs.70,000/- to the original owners as agreed; (iv) Making available 50,000 sq ft. of FSI; (v) Obtaining possession on giving a flat to the original owner as agreed and handing over the 7 possession to the plaintiffs, for commencing the work of construction; (vi) Getting executed in favour of the plaintiff or their nominees or nominee or a Cooperative Housing Society or Association of Apartment Owners, a Conveyance by joining the original owner and all the necessary parties of the suit property whenever called upon to do so by the plaintiff, without any encumbrances; (vii) It was agreed that the amount of Rs. 55,00,000/- was to be reduced proportionately if there was a shortfall in the agreed FSI of 50,000 square feet. 17. It was agreed that the amount of Rs. 55,00,000/- was to be paid as a stated below :- (a) Rs.5,00,000/- on the date of the oral agreement i.e. on 29th June 1981; (b) Rs.10,00,000/-- After getting the possession of the suit property for the purposes of the demolition of the old building and construction of the new building and getting clearance from all the authorities for executing the work as per the agreed plans; (c)Rs.35,00,000/- – By adjustment on delivering on the possession of the built-up area of 11, 666 .76 sq.ft calculated at the rate of Rs. 300 per sq. ft.; (d) Rs.5,00,000/- – At that time of execution of conveyance. --------------------------- Rs.55,00,000/- Total --------------------------- It was further agreed that the total consideration would be proportionately reduced, in case there was a shortfall in the total floor space index available for exploitation and in the same proportion the built-up area to be delivered to the defendants Nos.1 to 3, as per clause (c) above was also to be reduced." 8 10. According to the plaintiffs while the negotiations were still going on they formed a partnership with six others to execute the said then proposed agreement in the firm name and style of the plaintiffs. The partnership deed was allegedly executed on 1.6.1981. 11. The plaintiffs alleged that thereafter the second and third defendant's kept promising them that they were making progress in securing the change of tenure and that they were endeavoring to secure possession of the suit property but pleaded their inability to do so. Thereafter the plaintiffs partner one Ramesh Parmar, his acquaintances and the second defendant along with one of his associates visited New Delhi and after contacting "necessary officers succeeded in getting a promise of favourable orders. " The expenses with respect to all this were borne by the plaintiffs. 12. The original owner received a letter dated 27.8.1982 from the Military Estate Officer, Pune Circle informing her that the Government of India had granted sanction to the transfer of freehold rights of the said land to her on certain conditions including the payment of a sum of Rs.3,72,981/- on or before 27.9.1982 and the surrender of the land admeasuring 924.34 sq. ft. 9 13. Prior to the filing of the suit the plaintiffs noticed construction work on the suit plot and defendant nos. 1,2 and 3 on being contacted gave evasive replies. Thereafter on making enquiries the plaintiffs had learnt inter-alia that the original owner had expired; that the first defendant had deposited the said sum of Rs.3,72,981/- as per the letter dated 27.8.1982; that the original owner had been given possession of a flat and that the balance sum of Rs.70,000/- had been paid to her. 14. It is in these circumstances that the plaintiffs were constrained to file the present suit. The plaintiffs sought specific performance of the alleged oral contract dated 29.6.1981, reliefs consequential thereto and in the alternative a decree in the sum of Rs.500,000/- and interest thereon. In the further alternative to the above the plaintiffs have sought a decree for damages and compensation in the sum of Rs.45,00,000/-. The case of defendant nos. 1,2 and 3. 15. In their written statement these defendants denied the plaintiff's claim. They denied all the averments and submissions on facts as well. They denied in particular the alleged oral agreement and contended that there was no concluded agreement between the parties as 10 alleged or at all. They averred that the said sum of Rs.500,000/- was paid only as a loan in the circumstances we will refer to shortly. Their case is this. In May 1981 the said two partners of the plaintiffs were informed by them about the agreement with the original owner. These two partners of the plaintiffs evinced an interest in the project of construction on the suit property. Discussions ensued between them for settling the terms of a joint- venture. During the course of these negotiations these defendants furnished copies of the documents executed by and between these defendants and the original owner as well as copies of the sanctioned plans. In connection with the joint-venture defendant no. 2 insisted that the value of the suit property be treated as the capital of these defendants and be ascertained first. Defendant no. 2 insisted that for the purpose of the joint-venture the plot ought to be valued at Rs.65,00,000/-. While these negotiations were going on the defendants required finance of about Rs.600,000/- and requested the said partners of the plaintiffs for the same as a friendly loan. It was agreed that if the terms of the joint-venture were settled the said amount would be adjusted towards the contribution of these two partners 11 towards their capital in the joint-venture otherwise the same would be repaid with interest at 6% per annum. The defendants clarified that even if the loan was advanced by one of the firms of the said two partners such firm would not be given the benefit of the joint-venture if it was finalized in future. Hence the cheque was in fact drawn in the personal name of defendant no. 2 and not in the name of the first defendant firm. We will refer to the further rival contentions regarding the cheque later. After receipt of the letter dated 27.8.1982 from the Military Estate Officer these defendants informed the said partners of the plaintiffs about the same. They however stated that they were not interested in the joint- venture and demanded repayment of the said loan of Rs. 500,000/-. Further according to the defendants the said amount of Rs.500,000/- was not paid in the advocates office as contended by the plaintiffs but at the site office of one of the firms of a partner of the plaintiffs. The written statement contains various other submissions which we will deal with while considering the merits of the rival contentions. 16. By November 1983 these defendants had already spent Rs.15,00,000/- in connection with the construction on 12 the suit property. These defendants had denied almost every averment and submission contained in the plaint. It is therefore not necessary to set out these denials again in our judgment. 17. The trial court framed the following issues and answered them as indicated below :- 1. Does the plaintiff prove that it is a registered partnership firm carrying on the business of builders and developers of immovable properties as alleged? Answer – Yes 2. Does the plaintiff prove that the Defendant No. 1 is a partnership firm of which the Defendant Nos. 2 and 3 are partners acquainted with the partners of the plaintiff as alleged? Answer – Yes 3. Does the plaintiff prove that Mrs.Dhun Sethna is the original owner of the suit property particularized in para No. 3 of the plaint as alleged? Answer – Yes. 4. Does the plaintiff proved that Mrs.Dhun Sethna died in July 1983 leaving behind the defendant nos. 4 and 5 as her heirs as alleged? Answer – Yes. 5. Does the plaintiff prove that Mrs.Dhun Sethna created a trust appointing the defendant No. 6 as a trustee as alleged? 13 Answer - Not proved. 6. Does the plaintiff prove that in May 1981 the defendant Nos. 2 and 3 disclosed to (1) Nanji (2) Mangilal that Mrs.Dhun Sethna is the owner of the suit property and was intending to dispose of the same as alleged? Answer – Yes. 7. Does the plaintiff prove that defendant nos. 2 and 3 also told Nanji and Mangilal that Mrs.Dhun Sethna had executed a Power of Attorney on 19th February 1980 in favour of the defendant no. 3 authorizing to do acts and particularized in para no. 6 of the plaint, as alleged? Answer – Yes. 8. Does the plaintiff prove that the defendants 2 and 3 represented that they entered into a written agreement to purchase the suit property from Mrs.Dhun Sethna on 28th February 1980 and showed the said agreement as particularized in para no. 8 as alleged? Answer – Yes. 9. Does the plaintiff prove that the defendant nos. 2 and 3 made representations to Nanji and Mangilal as particularized in para no. 10 of the plaint to join them in completing the project as joint-venture as alleged? Answer – Yes. 10. Does the plaintiff prove that Nanji and monthly all along with six other is formed a partnership firm in the name of the plaintiff on first of June 1981 for the purpose of developing the suit property as alleged? 14 Answer – Yes. 11. Does the plaintiff prove that on 29th of June 1981 the plaintiff and defendant nos. 1 to 3 arrived at an oral agreement to sell the suit property on the terms and conditions particularized in para nos. 15, 16 and 17 of the plaint as alleged? Answer - Not proved. 12. There is the plaintiff prove that the original owner Mrs. Dhun Sethna received a letter dated 27th of August 1982 about a grant of sanction for transfer of free or the rights of the suit land on condition mentioned in para no. 20 of the plaint as alleged? Answer - Not proved. 13. Does the plaintiff prove that the defendant nos. 1 two 3 represented to the plaintiff that the delay was being caused forget into possession of the suit land as the defendant's nos. 1 to 3 had not succeeded in getting a flat according to the choice of the original owner Mrs. Dhun Sethna as alleged? Answer - Not proved. 14. Does the plaintiff prove that subsequently the defendants nos. 1 to 3 took possession of the suit property from Mrs. Dhun Sethna and also commenced construction work ignoring the agreement dated 29th of June 1981 as alleged? Answer - Yes. But question of ignoring the agreement dt.29th June 1981 does not arise. 15. Whether there is a privity of contract between the plaintiff and the defendants? 15 Answer - Not proved. 16. Does the plaintiff prove that it has been ever ready and willing to perform its part of the contract but the defendants nos. 12 3 failed to perform their part of the contract and committed a breach as alleged? Answer - Does not arise. 17. Do the defendant nos. 12 3 prove that the defendant no. 2 was given a friendly loan of Rs.500,000/- as contended? Answer – Yes. 18. Whether the defendants nos. 4 two 6 be necessary parties to the suit? Answer – Yes. 19. Whether the plaintiff paid proper coffee on the plaint? Answer – Yes. 20. Whether the defendant nos. 1 to 3 are entitled for compensatory costs? Answer - The Defendants Nos.1 to 3 are entitled for compensatory costs. 21. To what relief the plaintiff is entitled? Answer - The Plaintiff is entitled for Rs.5,00,000/- with proportionate costs and interest from the Defendant No.2. 22. What order and decree? Answer - The suit is decreed as per order mentioned below. 16 18. The learned counsel appearing on behalf of the plaintiffs agreed that the main issue was issue no. 11. If issue no. 11 is decided against the plaintiffs the suit must fail irrespective of the findings on the other issues. 19. As we noted at the outset, the judgment of the trial court warrants no interference. We confirm the findings and the reasoning furnished by the trial court and would only amplify some of the aspects in this regard. 20. We have set out the pleadings of the plaintiffs in extenso to indicate the inherent improbability of the plaintiffs case regarding the alleged oral agreement. This was not a case where only a few essential terms of the bargain between the parties were agreed to such as the price, the identity of the property and the time for performance leaving the other terms to follow as a consequence of legal presumptions or statutory provisions/ consequences in the absence of an agreement such as the liability to pay stamp duty and registration charges. It is difficult to accept that an agreement with such intricate provisions and complexities would not have been reduced to writing in some form or the other, at some time or the other or even referred to in any document or communication prior to the filing of the suit. This was not 17 a simple agreement for the sale and purchase of an apartment. The property involved was substantial. The mode of working out the alleged arrangement was complex and involved. The consideration today may not seem substantial considering the nature of the property. However there is no dispute that the consideration was substantial, indeed enormous, in June 1981 when the alleged agreement is stated to have been entered into. These factors taken together indicate strongly if not establish conclusively the inherent improbability of the alleged oral agreement ever having been entered into between the parties. 21. The alleged oral agreement contained various other essential terms which cannot by any stretch of imagination be termed as usual terms in an agreement of sale or an agreement to sell. For instance it is alleged that it was the responsibility of defendant nos. 1 to 3 to get the tenure converted to freehold at their cost; to make available 50,000 sq. ft. of FSI and to get executed in favour of the plaintiffs or their nominee or nominees a co- operative Housing Society or Association of apartment owners. Even the terms as to consideration were not simple. As alleged in paragraph 17 the consideration of 18 Rs.55,00,000/- was to be paid subject to certain rather involved conditions and contingencies. 22. What makes the plaintiffs' case regarding the oral agreement even less believable is the fact that the terms and conditions thereof were not even mentioned in the advocates notice dated 13.9.1983 demanding performance. PW 1, a partner of the plaintiffs in his cross-examination was unable to assign any reason for the same. Worse still for the plaintiffs' is that this witness stated that he had not even noted down the terms and conditions anywhere. It is difficult if not impossible for us to believe that such terms and conditions were trusted by the parties to to their respective memories. 23. There was no attempt on behalf of the plaintiffs' to even speculate, leave alone furnish any reasons for the agreement not having been reduced to writing. Even before us there was no suggestion as to the possible reason for the parties not having reduced the terms of the alleged agreement to writing in some form or the other, at some stage or the other. It was not suggested that there were any possible disadvantages to the alleged oral agreement being reduced to writing. Nor was there any suggestion 19 that there were any advantages in not reducing the terms and conditions of the oral agreement to writing. 24. In support of the oral agreement the learned counsel appearing on behalf of the plaintiffs' relied essentially upon the evidence of the plaintiffs' advocate who was examined on their behalf. We do not see how this evidence is of any assistance to the plaintiffs. Indeed we find that the advocates evidence conclusively destroys the plaintiffs' case regarding the alleged oral agreement. 25. We have earlier set out paragraph 15 of the plaint where it is expressly stated that the oral agreement was arrived at on 29.6.1981 in the presence of the said advocate. If we read paragraph 15 as a whole it is clear that this was not a mere typographical or an inadvertent error. The allegation regarding the oral agreement having been arrived at in the presence of the advocate is deliberate and consciously made. This case is demonstrably false. The advocate himself who was examined by the plaintiffs did not depose to this case at all. The plaintiffs' partners in his oral evidence, which we will deal with a little later, abandoned this case. 20 26. The advocate knew both the parties. His examination in