1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. Notice of Motion No.1558 of 2007 In Suit No.1193 of 2007 Neeraj Maheshwari & anr. .. .. Plaintiffs v/s. Sunil Rebello .. .. Defendant Mr.Raju Moray with Mr.Santosh Shetty for Plffs. Mr.U.J . Makhija with Mr.Denzil D'Mello for Deft. ------ CORAM : SMT.ROSHAN DALVI, J. Dated : 24 th March 2009 P.C. : 1. The Plaintiffs have sued for specific performance of an oral agreement between the Plaintiffs and the Defendant to sell the flat of the Defendant to the Plaintiffs for Rs.1 Crore. The Defendant lives below the flat of Plaintiff No.2, the father of Plaintiff No.1. The Defendant lives in the U.S.A. with his wife and child. He visits India at intervals. The Plaintiff No.1 lives nearby. 2. The Defendant has denied the oral agreement. Mr.Makhija argued, in fact, that the trap has been laid by the Plaintiffs to show an agreement between the parties. But those are only unilateral acts of the Plaintiffs. 2 3. The Plaintiffs have shown various acts done by the Plaintiffs and the Defendants in pursuance of the oral agreement between the parties. 4. The position of the parties and the acts of the parties would show prima facie whether such an agreement was entered into or not. 5. Since Plaintiff No.1, the son of Plaintiff No.2 lived elsewhere but close by he would be interested in procuring the flat in the same building where his father lived. It would be feasible for Plaintiff No.1 to sell out his flat and to add certain further amount, if required, to obtain the flat in the same building where his father lives. 6. Since the Defendant was settled in the U.S.A. with his family, he would be a likely candidate to sell his flat. The parties being neighbours are likely to meet on occasions in the building. The negotiations and the resultant agreement between the Plaintiffs and the Defendant, under the circumstances, is not too far-fetched. 7. It is the Plaintiffs' case that this agreement was entered into on telephone between Mumbai and New York, U.S.A. Telephone talk is stated to have taken place on 30 th October 3 2003. The Plaintiffs offered to purchase the Defendant's flat for Rs.1 Crore. The Plaintiffs have explained in Para- 1 of the Plaint that the market value of the flat was Rs.90 Lakhs. The stamp duty ready reacknor value at that time was about Rs.64 Lakhs. The Plaintiffs offered a higher consideration and so the Defendant accepted. This agreement, if any, between the parties is only to sell the flat which was the known and identified property for the liquidated amount. The parties had to do nothing other than to settle the amount for the already known property. The telephone call is stated to have lasted 5 Minutes. The 5 Minutes telephone call even with the usual courtesies would be sufficient for the parties to offer a price and accept the same. 8. The parties would then have to undergo various formalities. The agreement between the parties would have to be incorporated in a written document. Legal formalities would have to be complied with. Certain incidental changes and alterations would be required to be made. This is, of course, upon the premise that basic agreement remains the same which could be enforceable in law. 9. The Plaintiffs have shown their acts and deeds after such oral agreement was entered into between the parties. Plaintiff No.1 sold his flat which would fetch him the major 4 consideration for purchase of the Defendant's flat. He received Rs.69,30,000/- . He invested the same in Debt Mutual Fund. He further transferred Rs.5,75,000 /- and Rs.11 Lacs in that fund. Plaintiff No.1 would have to invest these amounts in certain specified securities to avoid payment of capital gains tax. His funds would be allowed to remain in the mutual fund only for a short period of time. Plaintiff No.1 has produced the account statement of DSP Merril Lynch, Mutual Fund which is DSP Merril Lynch liquidated fund – Regular – Growth. The statement shows purchases, switch in and switch out transactions between December 2003 and February 2004. The transactions between the 17 th December 2003 and 4th February 2004 show the amount invested in the funds. The last switch out transaction shows the entire account statement being liquidated. Plaintiff No.1 would have required to invest the entire amount of the sale of his flat in specified government investments for the purpose of capital gains tax exemption. All those have transpired soon after the oral agreement stated to have been entered into by the Plaintiffs and the Defendant over the telephone before the Defendant could visit India again. 10. The Plaintiffs have averred in Para- 7 of the Plaint that the Plaintiffs kept aside the requisite amount of Rs.1 Crore in 5 Debt Mutual Fund and other readily encashable investments to the tune of Rs.25 Lakhs so that it could be paid over to the Defendant for performing his part of the reciprocal promises under the agreement. 11. The Defendant visited India in the 2nd week of January 2004. As per the Plaintiff's case the parties met to discuss the modalities. One Wilfred Mascarenas, the relative/family friend of the Defendant was present when the parties discussed their agreement for executing necessary documents. The transfer charges were discussed. The Defendant is stated to have handed over the share certificate and the Will of his mother to prepare the necessary documents. The Defendant had to give vacant possession of the flat and so “clear out various furniture, fixtures and items lying in his flat”. 12. It is an admitted position that the Defendant's wife was suffering from cancer and had to undergo certain procedures and treatment. The Defendant could not have expedited the transaction. The Plaintiffs waited and did not press for the transaction to be performed. 13. There have been certain draft Memoranda of Understanding (MOUs) and Sale- deeds prepared by and between the parties. 6 It is the Plaintiffs' contention that these show the steps taken by the parties towards their oral agreement. The Defendant contends that these drafts show various aspects other than what is stated to form the part of the oral agreement and hence that would not be the agreement which would be specifically performable or enforceable by the Plaintiffs. Mr.Makhija took me through the drafts showing the differences claimed by the Defendant. The first draft of the MOU between the parties shows the price to be paid specified to be for the flat and the shares of the flat as well as for the stilt parking free from all encumbrances. The amount has to be paid by way of earnest amount and the balance amount in two parts. Time is made of the essence of the contract in Clause- 2 of that MOU. Public notice is to be invited as per Clause- 3 thereof. Various covenants, declarations and representations are stated in Clause- 4. The other clauses are the usual clauses including the clause of arbitration. 14. Mr.Makhija contends that the MOU does not reflect the oral agreement only; it contains much more. If the Defendant has to execute the MOU, he would not be only specifically performing the oral agreement. This contention is 7 misconceived. The price which is shown is stated to be bifurcated into the price for the suit flat and the shares as also the price for the stilt parking. The parking space would go along with the flat. There is nothing to show that consideration has changed or that an additional property is stated to have been a part of the transaction. It is only the amount actually agreed upon that is bifurcated and shown separately. Aside from the earnest, the entire other amount is the balance amount payable. This is because the parties have already agreed upon the total consideration. That total consideration is not shown to be altered. No further liability is imposed upon the Defendant. Mr.Makhija contended that price was to be paid in installments. That is incorrect. If a MOU has to be entered into, an earnest amount would have to be paid as is the usual practice in transaction of the mind. The balance amount was required to be paid only within few days from No Objection of the Society, the title of the flat being made out and the execution of the transfer deed and handing over vacant possession. Naturally bulk of the consideration would be paid only when the transferor performs those 3 conditions. So soon as they are performed, the vacant possession being the most material aspect, the entire consideration agreed between the parties would be paid. The fact that the MOU has to be executed would naturally mean that the rough edges of the agreement would 8 be polished and smoothened. That would be under legal advice. Hence by way of abundant caution and as per the usual practice, the legal advisor put in various clauses. That does not detract from the parties' agreement to transfer the identified flat for the liquidated consideration. 15. The further draft between the parties is of a sale- deed. A sale- deed also specifies the flat and the stilt parking space. The sale- deed shows the entire consideration having been paid. This is in terms with the consideration mentioned in the MOU which requires the earnest amount to be paid at the date of the execution of the MOU and the entire balance amount when the Deed of Transfer is executed. Hence Mr.Makhija's contention that the style of payment of consideration has changed is incorrect. Under the sale- deed, transfer fees, premium, etc. payable to the Society was to be paid by the parties equally. The stamp duty and registration charges were to be paid by the Plaintiffs alone. This is as per the usual practice. There is nothing in the Transfer- deed which might show or suggest that it goes against the oral agreement which the Plaintiffs seek to specifically enforce. The transfer deed, which would follow as a matter of course after the MOU is executed, is in line with the oral agreement between the parties. 9 16. The parties did not execute this draft document. The Plaintiffs have relied upon another draft MOU showing that it was made in September 2004 as a draft. That draft also shows the total price payable having been bifurcated and shows specifically that it was for the flat, shares and the stilt parking space. In that MOU, the transfer- fee of the Society is to be paid by the Plaintiffs. That is the only material alteration shown by Mr.Makhija. It would have to be seen whether such alteration militates against the Plaintiffs' case of oral agreement. As the parties go on, complying with formalities and requiring further payment to be made as per law or procedure, they may agree upon who would bear which liability. Such changed terms or circumstances would not militate against the basic oral agreement. In this case, the Plaintiffs were requiring the agreement to be performed expeditiously. Plaintiff No.1 wanted to move into the building where Plaintiff No.2 was residing. Plaintiff No.1 had already made arrangement for the consideration to be paid. The execution was delayed because the Defendant's wife was seriously ill. The fact of his wife was ill has not been disputed. She has expired since. It is very natural for the Defendant to require the Plaintiffs to pay the entire transfer fee of the Society also. Alteration of only that clause would not amount to any evidence to show that the oral agreement was not entered into. It would, at best, constitute the 10 novatio between the parties upon the MOU being executed. The Plaintiffs' liability would be specific and complete with regard to such transfer. 17. A further draft of another sale- deed of 2005 in the form of a draft is also shown. Even in that draft, the consideration has remained the same. The earnest amount is shown to be Rs.10 Lakhs. The balance amount is shown to be Rs.90 Lakhs. 18. Of course, the Defendant is not shown to have undertaken any overt act upon the oral agreement. The Plaintiffs have shown certain letters sent to the Defendant in the U.S.A. with regard to the execution of the formalities upon their basic oral agreement. The Defendant's Permanent Account Number (PAN) card, etc. would have to be made out and sent. The letters are sent by ordinary Post. At present, their contents cannot be taken to be specifically accepted or denied. The oral evidence of the parties would only ultimately show the correspondence, if any, entered into and acted upon by the parties. The Plaintiffs have relied upon certain transcripts of telephone calls aside from the correspondence. They would also be required to be considered in the oral evidence. 11 19. The Defendant's wife expired in February 2006. The Plaintiffs had waited for the execution of the contract between the parties. The Defendant thereafter visited India. The Defendant did not want to execute the MOU or the sale- deed. It appears that the parties came to a head. The Plaintiffs claim to have recorded the conversation between the parties. It is contended that it shows certain abuses. This aspect also would be required to be considered as a natural human conduct upon the evidence of the parties. 20. It is seen that the parties were in a position to enter into kind of agreement that is stated to have been entered into between them. It is also seen that the Defendant was not required to do almost anything other than obtain his PAN card and make out a marketable title. It is the Plaintiffs' case that marketable title was to be made out by the Defendant handing over copy of the share certificate and the copy of his mother's Will and the agreement of the builder with the mother. It is the Plaintiffs' case that these documents were handed over by the Defendant to the Plaintiffs. It is the Defendant's case that the Plaintiffs took these documents from the Society records. The Defendant claims that Plaintiff No.1 was the Secretary. Plaintiff No.1 has disputed this aspect. 12 21. Whether or not Plaintiff No.1 was a Secretary of the Society and during which period and whether or not the Society already had the aforesaid documents in its records would also be better understood upon the evidence of the parties. 22. This is not a case in which the Plaintiffs cannot be granted the relief of injunction sought merely upon the Defendant's denial. The agreement was most likely. The agreement has been entered into in 2003. The prices have escalated. Since then until very recently the Defendant would be interested in denying the transaction. The circumstances of the Defendant more specially the fact of his wife being very ill lends itself to the delay in transaction. The Defendant would take advantage of that delay to the detriment of the Plaintiffs. The Plaintiffs would, therefore, be constrained to sue. Under these circumstances, the Court would require to protect the right of the Plaintiffs by an equitable order. A prima facie case is made made out. The Plaintiffs would be entitled to the reliefs sought. However since this is a Suit for specific performance of the oral agreement to sell the Defendant's flat to the Plaintiffs on a specified consideration, the Plaintiffs must deposit the entire consideration in Court to show their readiness and willingness which is statutorily required to be shown. Hence the following order:- 13 ORDER The ad- interim order shall continue for a period of 2 weeks. The Plaintiffs shall deposit the entire consideration amount of Rs.1 Crore with the Prothonotary and Senior Master within 2 weeks. The Plaintiffs shall inform the Defendant of the deposit made. The Prothonotary and Senior Master shall invest the amount deposited in Court in any Nationalized Bank initially for a period of 37 months. The Notice of Motion in terms of prayer (b) is granted upon such deposit, excluding the words “dealing with”. Hence the Defendant shall not dispose of, alienate, encumber, part with possession or create any third party rights in the suit premises and the shares of the suit flat upon the Plaintiffs depositing Rs.1 Crore in this Court informing the Defendant in that behalf. No order as to costs. 22. The Written Statement is filed. The Suit needs to be expedited as the Plaintiffs would require to prove the oral agreement upon evidence. The Advocates agree that only issue between the parties would be the issue relating to the execution of the oral agreement as averred by the Plaintiffs. The followings issues are framed:- ISSUE (1)Whether the Plaintiffs and the Defendant entered into an oral agreement for the sale of the suit flat of the Defendant 14 being Flat No.5, Nav Bahar, 123, Carter Road, Bandra, Mumbai 400 050 for Rs.1 Crore. (2)What reliefs, if any, the Plaintiffs are entitled to ? 23. Mr.D'Mello states that the documents of the Plaintiffs are inspected by the Defendant. None of the documents is admitted. The Plaintiffs shall file their Affidavit of examination- in-chief within 6 weeks. The Plaintiffs shall file their Affidavit of documents and bring all the documents for considering their admissibility. 24. Suit is adjourned to 8th June 2009 for considering the admissibility of the Plaintiffs' documents and for receiving the Plaintiffs' Affidavit of examination- in-chief, if any. (SMT.ROSHAN DALVI, J.)