IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION No. 3421 OF 2007 IN SUIT No. 2547 OF 2007 M/s. Tetambe Developers Pvt. Ltd. … Plaintiff Vs. Sushil Mohanlal Krishnani & Ors. … Defendants *** Mr. Arif Bookwala, Sr. counsel i/b M/s. Vyas & Bhalwal for the plaintiff. Mr. P. V. Nichani i/b M/s. Thakordas & Medgalekar, for the defendant Nos. 1, 2, 5 to 7, 10, 11. Mr. Sanjay Jain a/w Mr. Amit Divekar i/b M/s. H & M Legal Associates. Mr. Dilip Shukla, for defendant No. 4. Mr. Rajiv Narula a/w Mr. Anil Desai i/b M/s. Anil Desai & Co. for defendant Nos. 12 to 15. Mr. K. A. Suryanarayan a/w Ms. Suyoga Rajguru, for defendant No.16. *** CORAM : S. J. VAZIFDAR, J. DATE : OCTOBER 16, 2009 PC 1. This is a suit for specific performance of a Memorandum of Understanding dated 10th November 2004 and a Development Agreement dated 19th May 2006. The Notice of Motion is for the usual interlocutory reliefs for the appointment of a Court Receiver and an injunction in such a suit. Defendant nos. 1 to 15 are parties to the MOU and/or the Development Agreement. Defendant no.16 is the Canara Bank and defendant No. 17 is the CIDCO. For convenience I will refer to defendant nos. 1 to 15 as the defendants 2. A firm trading in the name and style of M/s. Jai Hind Mills Co. (Kerala) (hereinafter referred to as “the said firm”) applied to CIDCO, defendant No. 17 for allotment of a plot. CIDCO by a letter dated 11th December 1989 allotted the said plot on the terms and conditions contained therein. Pursuant thereto the said firm paid an aggregate sum of Rs.5,94,000/- to CIDCO towards the lease premium, a sum of Rs.1,46,000./- towards escalated lease premium along with delayed payment charges. 3. Disputes arose between the partners of the said firm which were referred to arbitration. By an award, the suit property came to the share of the DKK group. The award was confirmed by a decree dated 6th March 1992 passed by this Court. The other group namely the NKK group were declared as having retired from the partnership firm and the said property became the exclusive property of the DKK group who continued as partners of the said firm. The property thus now stands in the name of the said firm. 2 4. The MOU dated 10th November 2004 was entered into between defendant Nos. 1 to 15 and four other parties on the one hand and the plaintiff on the other. There is no explanation why the suit is not filed against these four other parties. Defendant Nos. 1 to 15 and the four other parties are referred to therein as the allottees . They agreed and undertook to perform various acts mentioned therein and made various representations. On the basis thereof, the plaintiff agreed to acquire the said property for a consideration of Rs. 76,00,000/-. The MOU records the claim of defendant No. 16 Canara Bank and that the Canara Bank had agreed to release its claim on the said property and grant its ‘no lien’ letter and NOC as may be required by CIDCO, provided a part payment of Rs.25,00,000/- was made to the Canara Bank. Pausing here for a moment, it is necessary to note that counsel appearing on behalf of the Canara Bank has stated that the claim of Canara Bank today is in the sum of about Rs.15 Crores and there is yet no settlement in respect thereof. I am not concerned in this suit with the claim of Canara Bank and the effect thereof on the transaction between the plaintiff and the other defendants. Needless to say that the same cannot affect the rights of 3 Canara Bank in any manner, whatsoever. I will note the relevant provisions of MOU while dealing with the submissions 5. The plaintiff by its advocate letter dated 24th January 2005 to Canara Bank stated that it had been agreed with the consent and permission of all the remaining partners of the said firm to obtain an assignment of the said property to be allotted to the firm upon such terms and conditions as mutually agreed between them and that the said plot was under the lien/ mortgage of the bank. The letter further stated that the plaintiff was furnishing fixed deposit receipts of Rs. 25,00,000/- to be held by the bank under a no lien account for a period of 60 days and that on the expiry of 60 days the plaintiff would have the right and authority to withdraw the said sum of Rs.25,00,000/- and that the bank would not claim any right in respect of the said amount. It was stated that the bank would be entitled to appropriate the said sum of Rs.25,00,000/- only upon granting its no lien letter in respect of the said property, relinquishing its right, title, interest and charge in respect thereof, the firm complying with the procedure for assignment of the said plot in favour of the plaintiff and the CIDCO transferring the said plot in favour of the plaintiff and not otherwise. It was emphasized that these conditions were of the essence of the deposit. After the bank appropriated the said sum of Rs.25,00,000/- at the 4 request of the plaintiff, the bank should execute a tri-partite agreement confirming that the transfer and assignment of the plot is in favour of the plaintiff. It was provided however, that if CIDCO did not allot the plot to the allottees or did not transfer the plot in favour of the plaintiff, then notwithstanding anything contained in the letter, the no lien letter granted by the bank would be cancelled and the plaintiff would be entitled to withdraw the said sum of Rs.25,00,000/- together with interest thereon. 6. A copy of the above letter dated 24th January 2005 was forwarded by the defendants to the Canara Bank under cover of their letter dated 1st February 2005. The letter was in respect of an offer under the OTS (One Time Settlement) scheme as the subject thereof includes. It referred to the defendants’ offer to pay Rs.2,20,00,000/- in the manner stated therein. The said sum of Rs.25,00,000/- referred to earlier was to be treated as a down payment. It would be convenient to mention at this stage that the plaintiff had forwarded another sum of Rs.25,00,000/- in the same manner on account of a similar transaction in respect of another plot which is the subject matter of another suit. The letter recorded that the properties were held as security by the bank and would be released by CIDCO on procuring the NOC. That Canara Bank was requested to issue a provisional certificate to enable 5 the defendant to proceed with the formality, clarifying that the title to the properties would then be handed over to the proposed buyers i.e. the plaintiff as soon as the CIDCO formalities were completed. . It is important to note that the last paragraph of this letter records that “the plaintiff’s said letter dated 24th January 2005 was enclosed therewith”. Thus, Canara Bank was therefore aware of and had acquiesced in the deposit of Rs.25,00,000/- being made by the plaintiff on the terms and conditions mentioned therein. The importance is in view of a defense to the effect that the plaintiff had withdrawn the said amount subsequently, indicating the lack of readiness and willingness to perform this agreement. I will deal with this issue later. 7. By a letter dated 7th June 2005 addressed to defendant Nos. 13 and 15 defendant Nos. 1 to 11 (except defendant No.3) referred to the MOU in respect of both the plots including the suit plot and the deposit of the said sum of Rs.50,00,000/- by the plaintiff with the Canara Bank. Defendant Nos. 12 and 14 are the HUFs of defendant No. 13, 15. The letter stated that the plaintiff was pressing for the NOC and that all the defendants except defendant nos. 13 and 15 had signed the request letter to the NKK group for the issue of 6 NOC required by CIDCO. These defendants therefore requested defendant nos. 13 and 15 for their letter to the NKK group for their no objection being given to CIDCO to enable the plaintiff to obtain the transfer of the suit plots, failing which they were informed that legal steps in the matter may be taken by the plaintiff and that in that event defendant Nos. 13 and 15 would be responsible for the costs, charges, expenses and damages. These defendants noted that if any proceedings were adopted by the plaintiff, they would give their consent to such proceedings. . It is important to note the reference of the letter which is as follows :- “Re : Transaction of sale of two plots at New Bombay.” 8 (A) The plaintiff by a letter dated 13th June 2005 addressed to the Canara Bank referred to the deposit of said sum of Rs.25,00,000/- and requested the bank to convey its decision at the earliest. (B) By a letter 19th July 2005 addressed to the Canara Bank, the plaintiff once again referred to the said letter dated 24th January 2005 regarding the deposit of Rs.25,00,000/- and requested release of the fixed deposit and refund of the amount of Rs.25,00,000/- to it 7 together with interest as for the past six months there had been no progress in the matter. It is important to note however that the plaintiff assured Canara Bank that in the event of the bank agreeing to grant a no-lien letter as stated in the letter dated 24th January 2005 it would once again furnish the bank with fixed deposit receipt of Rs. 25,00,000/- within three days. 9. The defendants by their letter dated 13th February 2006 addressed to Canara Bank referred to both the MOUs. The defendants noted the reasons why according to them the plots were not fetching the optimum price and stated that if CIDCO was not paid in time, it would cancel the allotment which was the reason for their entering into the MOU urgently. With the amounts payable under two MOUs the defendant expected to clear the dues of CIDCO and pay the 30.89% of another group of partners viz. the Hemarajani Group, who had a stake in the property although he was not a partner. It is important to note the following statement in paragraph 2 of the letter which reads as under- “We have already entered into M.O.U. hence litigation against us cannot be ruled out if we do not keep up our commitment made in M.O.U. The bank is not a party to 8 the M.O.U. but out intention was to raise funds to pay the OTS amount as and when sanctioned. We were not aware that prices will go up sharply.” The defendants requested the bank to accept Rs.2,20,00,000/- payable within six months. . The letter indicates that the defendants considered the “transaction” between the plaintiff and themselves as valid and subsisting, despite the fact that the price had gone up sharply. 10. Before dealing with the development agreement, it is necessary to consider the legal effect of the M.O.U. The M.O.U. cannot be said to be a concluded agreement. It is but an agreement to enter into an agreement which is not enforceable in law. The mere fact that the plaintiff has been referred to therein as an intending acquirer is not conclusive of the matter. However, a reference to the plaintiff as an intending acquirer read with other terms establishes the same. For instance, the payment clause contains no particulars as regards the payment of more than 50% of the consideration. The payment clause stipulates the manner in which only a sum of Rs.30,00,000/- out of the total consideration of Rs.76,00,000/- is to be paid. The clause reads as under:- 9 “(xix) The price agreed to be paid by the Intending Acquirer to the Allottees is Rs. 76,00,000/- (Rupees Seventy Six Lacs Only) The following payments will be made in the man- ner following and as per the following sequence: (a) Rs. 1,50,000/- (Rupees One Lacs Fifty Thousand Only) as Earnest Money Deposit paid by the Intending Acquirer to the Allottees. (The payment and receipt whereof the Allottees doth hereby admit and acknowledge and release, acquit and discharge and Intending Acquirer from the receipt whereof and every part of) (b) Rs. 1,50,000/- (Rupees One Lacs Fifty Thousand Only) by way of deposits which shall be held by the solicitors of the DKK Group & the Intending Acquirer Advocate jointly in escrow. The said deposit shall be used to bear the legal expenses for obtaining the probate in respect of the three members of the D.K. K. group as stated hereinabove. (c) Rs. 25,00,000/- (approx) shall be paid to CIDCO Ltd. directly towards the outstanding installments and 10 interest payable by the DKK group as may be required by CIDCO Ltd. (d) Rs. 5,00,000/- (approx) towards the out of the Pocket expenses for obtaining the Allotment of the said property in the name of the Allottees herein. (e) Rs. …………./- being ………………% of the total consideration after deducting the total amounts paid under cl. Xix (a), (c), (d) hereinabove. (f) After the Agreement for Assignment and other papers required by CIDCO Ltd. for transfer of the said Plot is executed between the Allottees and the Intending Acquirer, the Intending Acquirer shall deposit Rs. ……….. (Rupees …………………………….) in a no lien on account held by the Advocates for the intending acquirers for the purpose of obtaining no lien letter from the Canara Bank in accordance with clause ………… hereof. (g) Balance Rs. ……….. shall be paid to the Allottees nos 1 to 15 within a period of seven days of CIDCO Ltd. 11 transferring the said Plot in favour of the intending acquirers and executing the Tripartite Agreement in favour of the intending acquirers and upon the Registration of the Tripartite Agreement with the concerned Sub Registrar of Assurances.” If merely the time for payment had not been ascertained it may have been possible to contend that the payment should be made within a reasonable time. The matter however does not rest there as regards the payment. The blanks in sub-clause (d), (e), (f) and (g) indicate that there was no agreement either as to the amounts payable upon the contingency mentioned therein or the conditions of deposit. The amounts payable upon each contingency is also not agreed upon. The absence of any agreement as to the quantum to be paid under sub- clauses (d) to (g) is of substance and does not pertain only to the time for payment. For instance if under sub-clause (d) a larger amount is to be deposited it would expose the purchaser to a higher risk in the event of the transaction not materializing. These were therefore material terms. The absence of any agreement regarding payment of the same renders the MOU a mere agreement to enter into an agreement. 12 11. In the circumstances, according to me the plaintiff would not be entitled to specific performance of the M.O.U. 12. However, thereafter a development agreement was executed by and between the plaintiff on the one hand and defendant Nos. 1, 2 and 5 to 11 and the Rooplal Chetandas Hemrajani (HUF) on the other. Through oversight the Rooplal Chetandas Hemrajani (HUF) has not been impleaded as a defendant. It may be noted at this stage that a deed of confirmation dated 25th May 2006 was also executed not merely by the plaintiff and defendant Nos. 1, 2 and 5 to 11 but also by defendant Nos. 3 as the constituted attorney of defendant no. 4 and as the executor of the will of one Shyamlal Devandas Krishnani, the beneficiary thereof being two allottees. In effect therefore, the development agreement, which I will now refer to was entered into between the plaintiff on the one hand and defendant Nos. 1 to 11 and the said HUF on the other. I will refer to the relevant clauses while dealing with each of the submissions. It is sufficient at this stage to refer to clauses 1(a) and 1(b) to indicate the nature of the development agreement. The same read as under- “1. The Allottees/ Licensees have agreed to handover all the development rights to the extent of 86.178 share for the 13 said plot to the Developers and the Developers have agreed to acquire all the development rights of the said plot No. 51, Sector 19, Vashi, Navi Mumbai, admeasuring 1996.75 sq.mtrs., at the cost of the Developer for a consideration of Rs. 1,52,00,000/- (Rupees One Crore Fifty two Lakhs Only) calculated at the rate of around Rs. 7,612.37/- (Rupees Seven Thousand Six Hundred Twelve and Thirty Seven paise only) per Sq.mtrs. as per the allotment letter dated 7th October 1984 and 11th December 1989 and as per plan to be duly approved by NMMC to be paid by the Developer to the Allottees/ Licensees mentioned hereinafter: (a) Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand Only) paid by the Developer to the Allottees/ Licensees on execution of MOU on dated 10th day of November 2004, a receipt of the same is admitted and acknowledged by the Allottees/ Licensees in the said MOU. (b)Rs. 50,000/- (Rupees Fifty Thousand Only) paid by the Developer on 3rd February 2006 Cheque No. 038977 directly to Canara Bank under OTS Scheme on behalf of the Allottees/ Licensees.” 13. Mr. Jain, the learned counsel appearing on behalf of defendant Nos. 8 and 9 submitted that after 19th May 2006 nothing was done for one year till the plaintiff addressed its advocate’s letter 14 dated 31st July 2007 to defendant Nos. 1 to 15. According to him, therefore, the plaintiff had abandoned the agreement. 14. The submission is not well founded. There is nothing during this period of one year which establishes an abandonment or even a disinterest in the transaction on the plaintiff’s part. There were several things to be done both under the MOU and the development agreement which remained to be done by the defendants. There is not a single circumstance during this period by which the defendants indicated that they had considered the plaintiff as having abandoned the agreement either. The cause for writing the letter dated 31st July 2007 as stated in paragraph 2 thereof is that the plaintiff had come to know that the defendants were trying to negotiate and were intending to sell the property to a third party without disclosing the transaction between them. 15. Mr. Jain then submitted that the plaint is confused and in fact indicates a refusal on the plaintiffs part to perform the agreements as per the terms thereof. Considerable emphasis was placed by Mr. Jain as well as Mr. Narulla and Mr. Nichani on the prayers themselves. It is necessary therefore, to set out the prayers which read as under- 15 “(a) That this Hon’ble Court may declare that the Development Agreement in respect of Plot No.51, Sector 19, Vashi, Navi Mumbai dated 19th May 2006 alongwith MOU dated 10th November 2004 and Deed of Confirmation dated 25th May 2006 being Exhibit “E”, “G” and “I” is valid, binding and enforceable against defendant Nos. 1 to 15. (b) That this Hon’ble Court may direct defendant Nos. 1 to 15 to specifically perform Development Agreement dated 19th May 2006 along with MOU dated 10th November 2004 and Deed of Confirmation dated 25th May 2006 being Exhibit “E”, “G” and “I” hereto with further direction directing the Defendants to sell, transfer and assign the said Plot No. 51 situated at Sector-19, (Group of Oil Plot) admeasuring 1996.75 sq. mtrs., Vashi, Navi Mumbai to the plaintiff only.” 16. I do appreciate that the plaint has not been drafted artistically. To put it mildly, it is confused and lacks clarity, I hesitate however, at least at this stage, to non-suit the plaintiff if a case can otherwise be made out. The defects, if any, may well be rectified by 16 an appropriate amendment. I have read the plaint liberally in the plaintiff’s favour. 17. It was submitted that specific performance of the development agreement along with the MOU can never be granted as the terms and conditions of the MOU and the development agreements are in material respects different. I agree. 18. Although it is not expressly pleaded, it does not appear to have been the intention of the draftsman to seek specific performance of the MOU and the development agreement against each of defendant nos. 1 to 15. The intention appears to have been to seek specific performance of the MOU against defendant Nos. 1 to 15 and specific performance of the development agreement against defendant Nos. 1 to 11. . In the circumstances, I am not inclined to dismiss the Notice of Motion on this submission. I however, hasten to add that this is only a prima-facie approach and the effect of the pleadings will be considered at the hearing of the suit. 19. Mr. Bookwala submitted that prayer (a) of the plaint could possibly be explained in view of one of the recitals and clause 1(h) of the development agreement which read as under :- 17 “AND WHEREAS the MOU dated 10th November 2004 executed between the party of the First Part and (Srichand) hereinafter referred to as Srichand group representing M/s. D.K.K. Group agreed to assign the said plot to the developers at and for a consideration mentioned therein. A copy of the said MOU dated 10th November 2004 is annexed hereto as annexure 4 herein.” And “1(h) That the Allottees/Licensees hereby agree and undertake to attain full cooperation of the Srichand Group so that the said plot is duly assigned and transferred to the Developers, failing which the Developers will hold back their share to the extent of 13.822% out of the above consideration.” 20. Prayer (a) cannot be explained in this manner. Clause 1(h) prima-facie at least does not indicate the parties having contemplated that defendant Nos. 1 to 11 would obtain the cooperation of defendant Nos. 12 to 15 to implement the MOU. 18 Clause 1(h) is regarding their obtaining the cooperation of defendant Nos. 12 to 15 in respect of the development agreement and not the MOU. The reference to the MOU in the recitals does not indicate otherwise. The consideration under the development agreement of Rs. 1,52,00,000/- included the 13.822% share of the Srichand Group from “out of the above consideration” meaning thereby the consideration of Rs,1,52,000/-. If it was the consideration under the MOU which was only Rs.76,00,000/-, clause 1H would have provided for holding back their share not from out of the above consideration namely the consideration under the development agreement but from out of the consideration stipulated in the MOU. 21. Mr. Jain submitted that it is the plaintiff’s obligation and responsibility to obtain clearance from CIDCO and not the defendants. Mr. Jain contended that whereas under the MOU it was the defendants’ obligation to obtain inter alia the clearance from CIDCO, there is no such obligation upon them under the Development Agreement. . In this regard he relied upon the MOU to show that it was the responsibility of the defendants to obtain the clearance from the CIDCO and for that purpose to do all things necessary including 19 making payment obtaining the NOC from the NKK group, and furnishing all papers and documents, affidavit and declarations as required by CIDCO. However, he submitted that under the Development Agreement there was no such obligation on the defendants. To establish the same, he relied upon the following recital in the development agreement: “AND WHEREAS the party of the First Part and Srichand group were to perform various acts, deeds as stated in para (a) to (e) of the said MOU dated 10th November 2004. No lien letter from Canara Bank under OTS Scheme of