1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO.390 OF 2010 Shri Suhas Yashwant Chopde ] Age : 59 years, ] Appellant Occ.: Business, ] (Ori. Plaintiff) R/o : CTS No. 1359, Sadashiv Peth, ] Pune - 400 030. ] Vs. 1. Shri Suresh Gopal Kunte ] Age : 60 years, ] Occ.: Agriculturist & Service ] ] 2. Sou. Sumedha Suresh Kunte, ] Respondents Age : 58 years, ] (Ori. defendants) Occ.: Agriculturist & Service, ] R/o : 1/5 Raunak Residency, ] 134/4-B, Mayur Colony, Kothrud, ] Pune. ] Mr. Sanjay Kshirsagar, Advocate for appellant. Mr. J.S. Deo, Advocate for respondent no.1. Coram : A.P. Deshpande & Smt. R.P. SondurBaldota, JJ. Date : 21st April, 2010 JUDGMENT (Per A.P. Deshpande, J.) 1. By consent of the parties, the appeal is taken up for final hearing at the stage of admission. Heard at length. 2 2. This appeal questions the legality and validity of the judgment and decree passed by the trial Court dismissing the suit filed by the appellant-plaintiff seeking specific performance of contract. The dispute in this appeal arises in the following factual matrix. : The present appellant/original plaintiff entered into an agreement with the respondents- defendants for purchase of land gat No.398, area admeasuring 2 Hectare i.e. 5 acres, situate at village Aglambe, Tal. Haveli, District Pune. At the time of entering into an agreement dated 8th January 1998, a part of the suit property was mortgaged with Saraswat Co-operative Bank Limited, as the defendants had obtained loan from the bank against the said property. The bank had initiated recovery proceedings against the defendants and the defendants had admitted their liability to pay Rs. 11,61,000/- to the bank, which was to be paid in instalments. Thus, at the time of entering into an agreement, the defendants were in need of money for clearing dues of the bank, so also for educational expenses of their son, who was to travel to U.S.A. Under the agreement of sale, the agreed consideration was Rs.55.00 lacs, out of which a sum of Rs.10.00 lacs was paid on 8th January 1998 by the plaintiff to the defendants. Perusal of the important terms and conditions of the agreement would reveal that the defendants had 3 permitted the plaintiff to pay the entire due amount to the bank and after getting redemption of mortgage, the amount paid to the bank was to be deducted from the amount of consideration. The agreement also provided that after payment of dues of the bank by the plaintiff, the plaintiff would be entitled to the possession of the suit land. The sale-deed was to be executed within eight months from the date of agreement after obtaining necessary permission from the revenue department. A power of attorney was also executed in favour of the plaintiff, so that the plaintiff could deal with Saraswat Bank and could also obtain necessary permission from the Collector. One of the conditions stipulated in the agreement, pertains to refund of money paid by the plaintiff to the defendants together with interest @24% per annum, if the sale deed is not executed. According to the defendants, at the time of execution of agreement of sale the suit land was agricultural land, hence permission of the Collector was necessary. The period of performance of the contract came to be extended by further period of six months, however the contract was not performed. It is admitted position that in addition to sum of Rs. 10.00 lacs paid by the plaintiff at the time of execution of the agreement, an amount of Rs.3,65,000/- was also paid from time to time till August 1999. Despite expiry of extended term of six months 4 in March 1999, the sale-deed was not executed. According to the plaintiff, it was on account of non performance of the terms of the agreement by the defendants that the sale-deed could not be executed, whereas, according to the defendants on account of want of readiness and willingness on the part of the plaintiff to perform his part of contract, the sale-deed could not be executed. 3. Parties led evidence before the court below and on appreciation of the evidence on record, the trial court though dismissed the suit filed by the plaintiff for specific performance, it passed a decree in favour of the plaintiff in the sum of Rs.13,65,000/-, which was admittedly the amount paid by the plaintiff to the defendants, together with interest @24% per annum, which was agreed amount of damages stipulated under the agreement, in the alternative, if and in case the contract could not be specifically performed. 4. It is the case of the plaintiff that he did not pay the balance consideration as the title of the defendants to the property was under cloud, in as much as the defendants had entered into an agreement with one Dr. Sanjay Balwantrao Barle way back in the year 1985, which fact was not disclosed. It is the case of the plaintiff that the defendants mis-represented the plaintiff about their title to the property being perfect. However, the plaintiff discovered sometime 5 in April 1999 that the defendants had entered into an agreement with Dr. Barle to the extent of 1 H, 20R land from and out of the suit property. When the plaintiff questioned the defendants in that regard, the defendants assured the plaintiff that they would clear the property by cancelling the agreement with Dr. Barle. Per contra, according to the defendants, there was no charge or encumbrances over the suit property, on account of execution of the agreement with Dr. Barle. It is, then submitted that the plaintiff is a developer/ builder and he was not ready and willing to perform his part of contract as the real estate prices had come down from the year 1999 till 2006. According to the defendants, as it was not profitable for the plaintiff to purchase the suit property and utilise the same for business, he delayed the performance of his part of the contract. It is emphatically contended that letters were exchanged between the parties in the month of May and June 2004 followed by the legal notice from the defendants to the plaintiff dated 5th September 2004. Under the notice dated 5th September 2004, the defendants had informed the plaintiff that the agreement entered into by the defendants with Dr. Barle has been cancelled on 2nd June 2003. Copy of the deed of cancellation was also sent to the plaintiff. The defendants after informing the plaintiff about the title of the 6 defendants being perfect, called upon the plaintiff to get the sale- deed executed. No doubt, the defendants claimed damages from the plaintiff s on account of delay on the part of the plaintiff in having ’ the sale-deed executed. The plaintiff replied the notice on 23rd October 2004, wherein the plaintiff blamed the defendants for not performing their part of the contract and also intimated the defendants the fact that on account of recession in the real estate prices, the suit transaction is no longer profitable and that the plaintiff is not interested in buying the property. Hence, the plaintiff claimed refund of money paid by the plaintiff to the defendants together with interest @24% per annum as was agreed between the parties under the terms of the agreement dated 8th January 1998. 5. From the facts narrated herein above, the points for determination that arise in this appeal are as under : a) As to whether the plaintiff showed readiness and willingness to perform his part of contract right since the execution of the agreement till hearing of the suit? b) Whether the trial court has rightly held that the plaintiff has failed to prove his readiness and willingness to perform his part of the contract? 7 c) Whether the exercise of discretion by the trial court in declining the relief of specific performance and instead, passing a decree for an amount of refund of Rs. 13,65,000/- together with interest @24% per annum is just and proper and in tune with the agreement entered into between the parties? 6. From the pleadings and terms and conditions contained in the agreement dated 8th January 1998, a clear position emerges that the defendants were then in need of money for two purposes : (i) for repayment of loan to Saraswat Co-operative Bank Ltd., which was about 11.5 lacs. (ii) for the purpose of travelling and educational expenses of their son, who was to go to U.S.A. Thus the stipulation to complete the transaction in eight months finds place in clause (4) of the agreement. Clause (2) of the agreement further goes to indicate that the defendants were not in a position to clear the bank dues and hence the following stipulation was made in paragraph 2, which reads thus : 2. The Vendor shall continue to pay the monthly “ instalments of the dues of the Saraswat Co-operative Bank, however the purchaser shall be entitled to pay the entire dues of the Saraswat Co-operative Bank Ltd. and to get the mortgage redeemed and after payment of the dues of the said Bank, the amount so paid by the Purchaser to the said 8 Bank will be deducted from the purchaser price payable to the Vendor.” It thus appears to be implicit that the plaintiff would pay the bank dues and have deduction of the said amount from the total amount of consideration. The fact remains that the plaintiff did not pay a single pai towards repayment of bank dues and the entire loan amount outstanding was repaid by the defendants. According to the plaintiff, the plaintiff did not pay the balance consideration as the title of the defendants to the suit property was not clear and the defendants had entered into an agreement with the third party, which fact the defendants had suppressed from the plaintiff. It thus, appear that the defendants had suppressed the fact of entering into an agreement of sale in regard to the suit property with one Dr. Sanjay Barle. However, the apprehension of the plaintiff about the defect of the defendants title to the suit property would cease to exist, when the plaintiff issued legal notice dated 5th September 2004 and intimated the plaintiff about the cancellation of the agreement entered into with Dr. Barle. The defendants also supplied copy of the cancellation deed dated 2nd June 2003. The plaintiff thereafter issued a public notice inviting objections, if any, to the transaction in question, however, no one objected to the same. Thus, after 5th 9 September 2004, there was absolutely no impediment in the way of the plaintiff in paying the balance amount of consideration, which was in the sum of Rs.41,35,000/- to the defendants and have the sale- deed executed. However, the plaintiff did not take any step in that direction. The reply given by the plaintiff, to the defendants notice, dated 23rd October 2004 speaks voluminous about the readiness and willingness of the plaintiff to have the sale-deed executed. The stand of the plaintiff as is revealed from the reply notice dated 23rd October 2004 is to the effect that in preceding few years, the real estate prices have gone down and in this situation purchasing the suit property by the plaintiff would not be profitable to him. The notice is issued under the signature of an Advocate who states in paragraph 12 that on account of recession in the real estate market, it would not be profitable for his client, rather his client would incur losses, if the suit land is purchased at the price agreed in the year 1998. It also says that the plaintiff did demand the amount paid by the plaintiff to the defendants, however, the same was not paid. The stand of the plaintiff, which is set out in paragraph 12 of the reply notice is reiterated in paragraph 13, wherein the Advocate for the plaintiff informs the defendants that in today s context, performance and ’ completion of the contract would not be in the interest of the 10 plaintiff and hence the defendants should return an amount of Rs. 13,65,000/- received from the plaintiff by the defendants together with interest @24% per annum. Perusal of the reply notice sent by the plaintiff through his Advocate dated 23rd October 2004 leaves no room of doubt that the plaintiff was not only not ready and willing to perform his part of contract, but rather he was reluctant to go ahead with the purchase of the suit property, for the reason that the real estate prices had gone down considerably in preceding few years. This stand of the plaintiff that because of fall in the prices of the land, he does not want to complete the performance of his part of contract, is further established and brought on record from the evidence of the plaintiff himself. In paragraph 26 of the cross- examination of the plaintiff, the plaintiff has accepted the suggestion made to him and stated thus : It is true that from 1999 to 2006, the prices of lands “ were low, however thereafter the prices of lands were raised very high.” 7. It will not be out of place to mention at this juncture that after exchange of notices in September and October 2004, the plaintiff did not institute the suit for the period of about two years and the suit for specific performance came to be filed only after the land prices started escalating in the year 2006. Perusal of the stand of the 11 plaintiff as is reflected in paragraph 12 and 13 of the reply notice dated 23rd October 2004, coupled with the evidence of the plaintiff, would clearly go to suggest that the plaintiff was not willing to go ahead with the transaction of purchase of the suit land, as there was fall in real estate prices. It was only when the prices of the lands started reviving and escalating that the suit has been filed. 8. Hence, we are of the considered view that the plaintiff was not ready and willing to perform his part of the contract, for the reason that the prices of real estate had receded from the year 1999-2006. The plaintiff being a builder/ developer, would be reluctant to finalise the deal and complete the same when the market conditions are not favourable, rather this was the reason spelt out by the plaintiff in the reply notice. Out of total consideration of Rs.55.00 lacs, despite passage of eight years time, the plaintiff did not pay a substantial part in as much as only Rs.13.5 lacs came to be paid till the year 1999 and the balance amount Rs.41.5 lacs remained unpaid throughout. 9. The trial Court has also rightly appreciated the circumstance that the plaintiff did not obtain any permission from the Collector as required for purchase of agricultural land by a non agriculturist. Though the plaintiff had procured a power of attorney and had 12 undertaken the obligation to seek permission of the Collector, by obtaining N.A. permission, the same was never obtained. Other relevant circumstances are also rightly relied upon by the court below, to reach the conclusion that the plaintiff was not ready and willing to perform his part of contract. We agree with the view taken by the court below in recording the finding about the plaintiff not being ready and willing to perform his part of the contract. The conduct of the defendants in not disclosing the agreement entered into by them with Dr. Barle would be a non existent circumstance, after cancellation of the said agreement by the defendants and its communication to the plaintiff in the year 2004 along with copy of the cancellation of the agreement. Thus, we are of the clear view that there was absolutely no impediment in the way of the plaintiff to perform his part of contract atleast after 5th September 2004 till the date of filing of the suit in the year 2006. Hence, we answer point no.1 in the negative and point no.2 in the affirmative. 10. The agreement itself provides that if and in case the sale-deed is not executed within a period of eight months (which period came to be extended by further period of six months), the plaintiff shall be entitled to refund of money paid to the defendants together with interest @24% per annum. The damages by way of higher rate of 13 interest having been stipulated in the agreement itself, the trial court has passed a decree granting alternative prayer made by the plaintiff for refund of amount together with interest @24% per annum. By awarding the interest at higher rate, the trial court has honoured the terms in the agreement and thereby compensated the plaintiff as well. Having regard to the facts of the present case, the trial Court has rightly exercised discretion in refusing specific performance of the contract, relief of specific performance of contract being a discretionary relief. In our view, the exercise of discretion by the trial Judge is in consonance with the settle legal principles, which emerge from the various judgments of the Apex court, one of which being in case of Pukhraj D. Jain and others vs. G. Gopalakrishna, reported in (2004) 7 Supreme Court Cases 251. The Apex Court have made following observations in paragraph 6. 6. Section 16(c) of the Specific Relief Act lays down that “ specific performance of a contract cannot be enforced in favour of a person who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. Explanation (ii) to this sub-section provides that the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction. The requirement of this provision is that the plaintiff must aver that he has always been ready and willing to perform the essential terms of the 14 contract. Therefore, not only should there be such an averment in the plaint but the surrounding circumstances must also indicate that the readiness and willingness continue from the date of the contract till the hearing of the suit .” 11. In the result, there being no merit in the appeal, the same is dismissed. 12. At this stage, learned counsel for the appellant seeks direction to restrain the respondents from creating any third party interest in the suit property. As the appellant has failed in the trial court and as this appeal as well is dismissed, we do not see any justification in granting the said prayer. There was no interim order operating during pendency of the appeal in this court. Hence, the prayer is rejected. (Smt.R.P. SondurBaldota,J) (A.P. Deshpande, J.)