1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO: 1330 of 1980 Messrs G.B.Construction, A Partnership firm having its office at Ravi Ranjan, 2nd floor, Dawood Baug Lane, Andheri (West), Bombay 400 058. ... PLAINTIFFS -: Versus :- 1. Dwarkanath Anandrao Patil (Since deceased ) by his Legal Representative : Defendant Nos. 2 and 3) 2. Rajesh Dwarkanath Patil 3. Shubhangi Dwarkanath Patil All Indian Inhabitants residing at Rajesh Building 107 J P Road, Andheri (West), Bombay- 400 058. ... DEFENDANTS ---------------------------------------------------------------------------------------------------- Shailesh Shah with Ms.Naseem Patrawala i/b. P.Mehta & Mithi & Co. for the plaintiffs. V.Y.Murudkar for the defendants 2 CORAM : V.C.DAGA, J. DATED : 11th January 2008 ORAL JUDGMENT: 1. This is a suit wherein the plaintiff- partnership firm is claiming decree for specific performance of the alleged agreement dated 22nd November, 1977, on the facts, which are in narrow compass. THE FACTS : 2. The plaintiff-firm claimed that pursuant to the negotiations, writing was executed on 22nd November, 1977 whereby the plaintiff-firm addressed a letter to the defendants 1 to 3 incorporating terms and conditions for purchase of vacant plot of land admeasuring about 935.03 sq. yards (781.84 sq.mt) @ Rs.300/- per square yard ('suit property' for short). A cheque of Rs.10,001/- was paid by way of immediate earnest money. As per the terms set out, defendants were to show their marketable title to the suit property and formal agreement was to be drawn in consultation with the Legal Adviser. According to the plaintiff, the confirmation was sought from the defendants which was accorded by them by putting their signatures in confirmation and acceptance of the terms and conditions as set out in the said letter dated 22nd November, 1977. 3 3. The plaintiff further states in the plaint that the Plaintiff firm was not required to to do anything until defendants made out their marketable title to the suit property. According to the Plaintiff firm defendants was to apply for permission to sell the suit property as required under the provisions of the Urban Land (Ceiling & Regulation) Act, 1976 ('the ULC Act ' for short) and upon receipt of due permission formal agreement was to be executed. 4. The plaintiff has further stated that they were ready and willing to abide by the terms and conditions of the agreement dated 22.11.1977 and were willing to do everything to discharge all their legal obligations. According to plaintiff, the defendants did not discharge their obligation by making out a marketable title and failed to obtain permission from the Competent Authority under ULC Act and Income Tax Clearance Certificate under section 230A of the Income Tax Act, 1961. According to plaintiff, in the Urban ceiling proceedings, it was held that the defendants were not surplus holders, however this fact was suppressed by the defendants. Plaintiff has further stated in the plaint that the defendants have illegally terminated agreement dated 22nd November, 1977 by issuing letter dated 16th June, 1980 and wrongly returned an amount of earnest money paid by them. The Plaintiff issued notice to defendants expressing its readiness and willingness to abide by the terms of the agreement dated 22nd 4 November 1977 and called upon the defendants to execute the sale deed in their favour. Since the defendants failed to comply with the notice, plaintiff has filed this suit for specific performance of contract. 5. On being summoned, defendants appeared and filed their written statement. They denied claim set up by the plaintiff on various grounds, inter alia, contending that no regular formal agreement was executed between the parties; that the letter dated 22.11.1977 was not a concluded contract; that all title deeds were handed to the plaintiffs on 18.12.1977. The plaintiff did not make any grievance about non-receipt of the title deeds or with regard to the marketability of the title of the land and that after having waited for three years, defendants were justified in cancelling the deal and returning immediate earnest money received by them since plaintiff did not show any interest in completing the deal in question. ISSUES : 6. With the aforesaid rival pleadings, the issues were framed reading as under :- THE ISSUES FINDINGS 1) Whether Plaintiffs prove that the letter dated 22nd November 1977 i.e. Exh. B to the Plaint is an agreement between parties as alleged in para 3 of the Plaint? In negative 5 2) Whether Plaintiffs prove that they are registered under the Partnership Act, 1932? In affirmative 3) Whether defendants prove that the agreement has become frustrated or become impossible to perform as alleged by the Defendants? Issue became redundant 4) Whether defendants prove that proper court fee has not been paid? In negative 5) Whether Plaintiffs prove that they can be granted specific performance of the Agreement dated 22nd November, 1977? In negative 6) What relief? As per order. THE EVIDENCE: 7. With the aforesaid issues on record, parties were permitted to file their respective documents. Some of the documents were exhibited on admission; whereas some were proved by them. 8. The plaintiff examined one Shri Ganpati Bhate (PW-1); whereas Ms.Subhangi Navalkar was examined on behalf of defendants (D.W.1). Both witnesses were cross-examined by their respective opponents. With the aforesaid evidence on record, the parties were directed to circulate their written submission in advance and thereafter they were heard through their Advocates. 6 DETERMINATION OF ISSUES: Issue No.2: “Whether Plaintiffs prove that they are registered under the Partnership Act, 1932?” 9. Taking the second issue first, which revolves around the question of registration of the plaintiff firm under the provisions of the Indian Partnership Act, the plaintiff has filed a true certified extract issued under the Partnership Act showing registration of firm (Exh.P-2). This document leads me to record a finding that the plaintiff has proved that the partnership firm is registered under the provisions of the Indian Partnership Act. Hence this issue is answered in affirmative, i.e. in favour of the plaintiff. ISSUE NO.1: “Whether Plaintiffs prove that the letter dated 22 nd November 1977 i.e. Exh. B to the Plaint is an agreement between parties as alleged in para 3 of the Plaint?” 10. This issue relates to the interpretation of letter dated 22nd November, 1977 (Exh.P-3). According to the plaintiff, the said letter by itself constitutes a concluded agreement between the parties, which consist of an offer and acceptance thereof together with the quantum of the land to be purchased with price thereof. The plaintiff has, thus, submitted that this being a concluded contract between the parties, it is enforceable at law. 11. Per contra, defendants have contended contrary to what the plaintiff has contended. According to defendants, this letter dated 7 22nd November, 1977 cannot be said to be a concluded contract. According to them, letter itself provided execution of the further formal agreement by the parties. That the plaintiff was to pay 10% on the execution of the formal agreement earnest money calculated at the rate of 10% of the purchase price, which plaintiff failed to pay. That the said letter dated 22nd November, 1977 did not bear any stamp duty. Consequently, this was not an agreement in the eye of law warranting enforcement thereof. 12. Both the Advocates appearing for the parties to the suit have relied upon the recitals of the letter dated 22nd November, 1977 in support of their respective contentions and placed reliance on the judgments of the Privy Council in the case of Panna Lal and another v. Nihai Chand reported in AIR 1922 PC 47; followed in the case of Currimbhoy & Co. Ltd. v. L./A. Creet and others reported in AIR 1933 PC 29 and followed by the Apex Court in the case of Kollipara Sriramalu vs. T. Aswatha Narayana reported in AIR 1968 SC 1028, to buttress their submissions. 13. Having heard rival contentions and considering the reliance on the common judgments cited at the Bar, let me first turn to the text of the letter dated 22nd November 1977 so as to consider recitals thereof. The said letter reads as under :- 8 GB CONSTRUCTION Date: 22nd November, 1977 To 1.Shri D.A.Patil 2.Shri Rajesh D. Patil 3.Miss Subhangi D.Patil Rajesh Building 107 J.P.Road Andheri (West) Bombay 400 058. This is to confirm the agreement arrived at between us for purchase by us of your vacant plot of land situated at J.P.Road, Andheri (West) Bombay, being Plot No. 'B' with other F.S.I, under Pvt. road and set back if available as per the plans shown to us and admeasuring about 935.35 Sq.Yds. at the rate of Rs.300/- per Sq. Yd. We send herewith our cheque for Rs.10,001 drawn on central bank of India versova road branch being the immediate earnest payable to you. You will make out a marketable title and the formal agreement will be drawn up in consultation with out legal advisers. The formal agreement will be drawn within three months as soon as the marketable title is made available. At the time of execution of the formal agreement further amount to make up earnest calculated at the rate of 10% on the purchase price will be paid to you. Please sign the duplicate of this letter in confirmation of your having agreed to sell the plot to us. Yours faithfully, We confirm Witness Sd/- Sd/- D.A.Patil Sd/- (G.G.Bhatte) Sd/- S.D. Patil Advocate For M/s.G.B.CONSTRUCTION Sd/- R.Patil 22.11.77 part. .... 14. The dissection of the aforesaid letter goes to show the price of the property based on 9 per square yard was fixed. The area of the plot was determined. The payment of Rs.10,001/- by way of immediate earnest was made. Further recitals provided that in consultation with the Legal Advisers the formal agreement was to be drawn within three months as soon as marketable title was made out by the defendants. On execution of the formal agreement further amount by way of earnest was payable calculated at the rate of 10% on the purchase price. 15. With the aforesaid dissection of letter dated 22nd November, 1977, let me find out as to whether or not it constituted concluded contract between the parties. The legal scenario seems to be that mere reference to the future formal agreement does not prevent the binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. An answer to the question depends upon the intention of the parties and the special circumstances of each particular case. As observed by Lord Chancellor (Loard Cranworth) in Ridgway v. Wharton (1857) 6 HLC 238 at p.263, the fact of a subsequent agreement being prepared may be evidence that the previous negotiation, did not amount to a concluded agreement, but the mere fact that person wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von. Hatzfeldt -Wildenburg v. Alexander (1912) 1Ch.284 at P.288 it was stated 10 by Parker, J. as follows :- “It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract.” In Rossiter v. Miller, (1878) 3 AC 1124 Lord Cairns said : “ If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise, then in Currimbhoy and Co. Ltd. v. Creet, 60 Ind App 297 + (AIR 1933 PC 29), the Judicial committee expressed the view that the principle of English law which is summarised in the judgment of Parker, J. in (1912) 1 Ch 284 was applicable in India.” 11 16. The question in the present suit is whether the execution of the agreement was intended to be a condition of bargain dated 22nd November, 1977 or whether it was a mere expression of desire of the parties for a formal agreement which can be ignored. 17. The evidence adduced on behalf of the defendants and the terms of the document dated 22nd Nov. 1977 itself makes it clear that what was paid under the said writing was minimum earnest and not the full earnest money. The full earnest was to constitute 10 % of the purchase price payable on the execution of the formal agreement between the parties. The amount of 10 % earnest was never paid by the plaintiff. The payment of amount of 10 % by way of earnest money was to result in concluded contract between the parties backed by formal agreement. Earnest money is always treated as one of the vital terms of the contract in the land deals. It gives an assurance to the vendor that the agreement to sell would be acted upon by the vendee. At the same time vendor gets right to forfeit the amount of earnest money in the event of breach of the agreement. In my considered view, it was a condition or term of bargain and not a mere expression of desire. It is, therefore, not possible to accept the contention of the plaintiff that the writing dated 22nd November, 1977 was concluded contract between the parties in absence of formal agreement and payment of full earnest money. Issue No.1 is, thus, answered in negative i.e. against the plaintiff. 12 ISSUE NO.5: “Whether the Plaintiffs prove that they can be granted specific performance of the agreement dated 22 nd Nov. 1977 ?” 18. As a matter of fact, having recorded a finding that the writing dated 22nd November, 1977 was not a concluded contract, the present issue as to the readiness and willingness on the plaintiff to discharge its obligation becomes academic. However since the parties have led evidence and made their substantial submissions revolving around this issue, I propose to record my finding based on the evidence. 19. The Division Bench of this Court in in the case of Smt. Kamalabai Chinnaswami and others vs. M/.s D.Vira & Co. and others reported in 1996 (1) All MR 313 held that in a transaction of sale of immovable property time is never of an essence of contract and court has to scrutinize the conduct of the purchaser. The Hon'ble Supreme Court in the case of H.P. Pyarejann vs. Dasappa (Dead by LRs and others reported in (2006) 2 SCC 496 held that under section 16 of the Specific Relief Act, it is for the Plaintiffs to prove that he was and is always ready and willing to perform his part of the contract. The Hon'ble Supreme Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi and others, reported in AIR 1978 SC 537 held that if there is delay on the part of the Plaintiff to perform his part of contract in such case, Decree for Specific 13 performance has to be refused. In the case of His Holiness Acharya Swami Ganesh Dassji vs. Shri Sita Ram Thapar reported in AIR 1996 SC 2095 it is held that the ready and wiling to perform the contract has to be inferred from the conduct of the parties. In the case of N.P. Thirugnanam (Dead ) By LRs vs. Dr.R. Jagan Mohan Road and others reported in 1995 (5) SCC 115, it is held that the Plaintiff has to show his readiness and willingness to perform his part of the contract by evidence. If he failed to show that then the suit for specific performance of the contract cannot be decreed. This Court has in the case of Bhikaram s/o Nathuji Vanjari & others vs. Smt. Saraswatibai Zarkariya reported in 1996 (4) All MR 655 held that the Plaintiff must show his readiness and willingness to perform his part of the contract. Plaintiffs willingness means past willingness not present one. 20. With the aforesaid scenario, let me turn to the evidence on record. In the letter dated 9th August 1980 there is a reference of having handed over 12 documents to the defendants on 6.12.1977 i.e. within fifteen days of the execution of the letter dated 22nd November, 1977. To this letter dated 9th August 1980, there is no reply from the plaintiff denying assertion made in the said letter. This factual aspect makes it clear that so far as the relevant documents demonstrating marketability are concerned, they were already handed over by the defendants to the plaintiff. With this documentary evidence 14 on record, if one turns to oral evidence Shri Bhate in the cross-examination, he has admitted that after execution of the letter dated 22nd November, 1977, no formal agreement was drawn. He has also admitted that after the letter dated 22nd November, 1977, he had not written any letter to the defendants . He has also admitted that the plaintiff had agreed that the necessary agreement will be executed within three months with the help of Legal Advisers and that since this event did not take place; with the result 10 % of the purchase price could not be paid to the defendants by way of full earnest money. 21. According to the defendants for want of agreement and payment of 10 % purchase price, there was no concluded agreement between the parties. The amount of Rs. 10,001/- was paid by way of minimum earnest but it did not constitute complete earnest money. The earnest amount was to be calculated @ 10 percent of the total purchase price of the plot of land. The defendants, therefore, rightly contended that this was not a concluded agreement between the parties and went on to urge that the plaintiffs were not ready and willing to perform their part of the obligation. It is further submitted that though the negotiations had taken place in the month of November, 1977 the plaintiff has filed the suit somewhere in the month of August, 1980, practically at the end of three years from the date of agreement and that till date the earnest money was retained and used by the 15 plaintiff, as such, it could not be said that the plaintiff was ready and willing to discharge its obligation. 22. It is also clear from the evidence on the record that the documents of title were handed over to the plaintiff by the defendants on 6th December, 1977 which was sufficient for the plaintiff to draw a formal agreement between the parties and to make payment of earnest 10% of the plot value. At most for nearly three years Plaintiff neither took any action nor wrote a single letter to the Defendants asking them to take further necessary steps in the matter of execution of agreement. It is, thus, clearly established that plaintiff was unwilling to perform its part of obligation. Mere order dated 24th January 1984 was passed by the Competent Authority under ULC Act cannot be a ground to such specific performance of the writing dated 22nd November 1977. It is to be noted that after executing the alleged letter dated 22nd November, 1977 till the filing of the suit, Plaintiff failed to show by leading positive evidence that during the said period of three years, plaintiff has taken any positive step towards completion of the said deal in terms of the said letter. 23. It is pertinent to note that the word “ready” and “willing” have not been defined in the Act. However, according to the Shorter Oxford English Dictionary, Third Edition, the word “ready” has been defined as “prepared”, 16 or having all preparations made, to do something” and the word “willing” as “having a ready will”. The same view is taken in Smt. Raj Rani Bhasin v. S.Kartar Singh Mehta, (AIR 1996 SC 2510) It was, thus, incumbent upon the Plaintiff to show that by their conduct that they were ready and willing to perform their part of obligation. The said important fact has not been proved by the plaintiff. 24. It is pertinent to note that while taking the decision on the point of whether the relief of specific performance of the contract of sale should be granted to the Plaintiffs, the Court has also to take into consideration the question of delay on the part of the Plaintiff in approaching Court. No satisfactory reasons are given in the plaint, though in Para 9 of the plaint, Plaintiff pleaded that they were ready and willing to perform their part of contract/ obligation but no positive evidence in this behalf has been brought on record. Thus, this issue is answered in negative i.e. against plaintiff. ISSUE NO.3 : “Whether the Defendants prove that agreement has become frustrated or become impossible to perform as alleged by Defendants?” 25. In view of the findings recorded in the aforesaid issues, this issue has become academic. It is, therefore, not necessary to record any finding on this issue. Thus, in view of the earlier findings, this issue does not survive. 17 ISSUE NO.4 :”Whether defendants prove that proper court fee has not been paid? 26. None of the parties have seriously canvassed their rival contentions on the said issue. Thus, the issue is answered in favour of the Plaintiff. 27. Having taken the survey of all the issues based on the evidence and rival submissions, I am constrained to hold that the Plaintiff is not entitled for specific performance of the contract. The suit is, therefore, liable to be dismissed. In the result, suit is dismissed with costs. Decree be drawn accordingly. JUDGE