1 nms3027-10 ttm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.3027 OF 2010 IN SUIT NO.2801 OF 2010 Saraswati House P.Ltd. .. Plaintiffs Vs. Dileep S. Nayak and Sandhya S. Nayak .. Defendants Mr.Chetan Kapadia i/b Mr.J.K.Mehta for the plaintiffs Mr.Shailesh Shah i/b Mr.M.J.Pabari for defendant nos.1 and 2 Mr.A.Y.Bookwala a/w Mr.Deepak Chitnis i/b M/s.D.C.Chiparikar and Co. for defendant no.3 CORAM : S.C.Dharmadhikari, J. DATE : December 15, 2010 P.C. : 1. This is a notice of motion in a suit filed for specific performance of an Agreement for sale dated 14.2.10. 2. The prayers in the suit are that this M.O.U. is valid, subsisting and binding on the defendant no.1 and 2 and that they be directed to specifically perform the same. That be done by the court after issuing a declaration that the purported termination of the same is illegal and bad in law. 2 nms3027-10 3. The suit property is plot no.18 Ramya Jeevan Co-op.Housing Society Ltd. situated at Village Mogra, Mahakali Caves Road, Andheri (East), Mumbai 400093 being larger part of the property being C.T.S No.13/12 and admeasuring 406.7 sq.yards and building structure standing thereon admeasuring about 850 sq.ft. (Carpet Area) or thereabouts together with the building and structures more particularly described at Annexure 'A'. 4. It is the case of the plaintiff that it is an educational company and engaged in the business of publishing educational books. Defendant nos.1 and 2 are owners of the plot / suit property and defendant no.3 claims to have purchased the same vide agreement of sale dt.30.8.10. 5. It is alleged that the M.O.U. between the plaintiff and defendant nos.1 and 2 had been executed and the consideration agreed between the parties was Rs.4,50,00,000/-. Rs.5.0 lacs were paid by cheque on 15.2.10 as a token money and it was agreed that Rs.4,45,00,000/- being the balance payment would be made on or before 15.5.10 and possession of the said plot would be given on the said date. This date was extended to 15.6.10 on 2.5.10 and to 30.7.10 on 18.6.10. After reproducing the terms and conditions of this M.O.U., it is stated that the representation of defendant nos.1 and 2 are that they are brothers and sisters and absolute owners of the suit property. It is stated that defendant nos.1 and 2 have absolute authority to deal with the property. On 2.5.10, the plaintiffs have stated in the plaint that there was a 3 nms3027-10 meeting wherein they requested defendant nos.1 and 2 to produce or provide the original documents of title. It is alleged in para 5.4 of the plaint that despite this what was produced for perusal of the plaintiffs and provided to them was a N.O.C. dt.26.4.10 issued by the Co-op.Housing Society. 6. At that time, a disclosure was made that the original documents relating to the suit property are in the custody of HDFC Bank from whom defendant nos.1 and 2 had taken a loan against the suit property. It is in such circumstances further part payment of Rs.35 lacs was made on 6.5.10. In para 5.5 this is what is alleged. "5.5 The plaintiffs thereafter once again approached the defendant no.1 and defendant no.2 for providing the Original documents, of the suit property, duly released from his Bank. The defendant nos.1 and 2 informed the plaintiffs that as they could not repay and clear the loan amount to the Bank, the documents were not released from the Bank. The defendant nos.1 and 2 further requested to the plaintiffs to make a further part payment of Rs.40,00,000/- (Rupees Forty Lakhs Only) of the Consideration amount to clear the loan and close Bank Loan account and get released the Original documents of the suit property. So on the request of the defendant nos.1 and 2, the plaintiffs made further part payment of Rs.40,00,000/- (Rupees Forty Lakhs Only) on 5.6.10 through RTGS in the Saving Account No.SB-21895 of the defendant no.1 with Sham Rao Vitthal Co-op.Bank, Andheri (E), Mumbai to clear their loan 4 nms3027-10 Account and OD Accounts with the HDFC Bank, so that Original documents of the suit property could be released and handed over to the plaintiffs. Exhibit 'F' Hereto annexed and marked Exhibit 'F' the acknowledgment of receipt of the part payment of Rs. 40,00,000/- dated 5.6.10 confirmed by the defendant no.1." 7. It is then alleged in 5.6 that after much persuasion by the plaintiffs, defendant nos. 1 and 2 agreed to produce and provide original documents relating to the suit property from the bank and further it was stated that the original documents would be returned only after 30.6.10. due to their half yearly heavy work load. It is in such circumstances that the date of completion was extended upto 30.7.10. 8. It is then alleged that in the last week of June and first week of July, the ‘ ’ plaintiffs made several attempts to contact defendant nos.1 and 2 on phone but they evaded and did not attend the calls. The Managing Director of the plaintiffs therefore, came down to Mumbai from Delhi and had a meeting with original defendant nos.1 and 2 on 11.7.10. It was informed that the plaintiffs were always and are still ready and willing to pay the balance consideration. Defendant nos. 1 and 2 assured to provide original documents to complete the deal by 30.7.10. This has been recorded by letter dt. 16.7.10 and the plaintiffs requested that date and time be fixed for execution of the sale deed. It is alleged that for the first time on 26.7.10 in reply of the above cited letter, the defendant nos.1 and 2 made false allegations that the 5 nms3027-10 plaintiffs had not made the 70% payment of the amount as per the oral agreement before 10.7.10 and that the housing loan outstanding against the property was already satisfied and that Rs.5 lacs was paid only as token money. However, it is alleged that the defendant nos.1 and 2 had made oral commitment for purchasing alternate accommodation and for that they had to arrange payment and on account of the delay by the plaintiffs, the said payment could not be made by defendant nos.1 and 2. 9. These allegations were denied on 28.7.10 and what has been alleged above is reproduced and is reiterated therein. It is in such circumstances that the termination of the agreement by defendant nos.1 and 2 has been challenged and this suit is instituted. 10. When the application for ad interim order was made before this court on 26.10.10, the learned advocate appearing for defendant nos. 1 and 2 made a statement that the suit property has already been sold by registered agreement of sale dated 30.8.10 to the defendant no.3. In the light thereof, advocate appearing for the plaintiffs sought time and the matter was adjourned. Thereafter, steps have been taken to implead the defendant no.3 and impugn that transaction as well. 11. After opportunity was given to file affidavits in reply, the same have been duly filed by all the defendants and there is a rejoinder thereto. In the affidavit in reply of defendant nos.1 and 2 what has been stated is that 6 nms3027-10 defendant no.1 is temporarily residing in the suit property. He is the brother of defendant no.2. In para 9 of this affidavit in reply it is stated that the agreed sale price under the MOU dt.14.2.10 is Rs.4,50,00,000/- and 70% advance money was to be paid on or before 10.7.10 and the MOU is extended by the parties but finally since full payment was not forthcoming till 30.7.10 that letter of 26.7.10 for cancellation of MOU came to be issued and even the refund of Rs.10.0 lacs has been made and the further sum of Rs.80.0 lacs will be refunded without any interest. 12. In para 12 of the affidavit in reply, it is stated that after cancellation of the agreement, property is sold to defendant no.3 by registered agreement for sale and possession of the same has been handed over. There is no question of any specific performance. It is stated that the defendant no.1 has booked one flat for Rs.1,75,00,000/- and he has paid Rs.20,00,000/- as advance token sum which is forwarded by the seller and that agreement cannot go through and therefore, counter claim will be filed in the suit. It is then alleged that entire sum was sought to be refunded but the cheques in that behalf have been arbitrarily refused. In para 19 this is what is stated. 19. “ I say that I have clear my lien before 15.6.2010 for specific performance on my part of contract and I have made commitment for purchase of new flat on believing the representation made by the plaintiff that he will made payment in time but he failed to make the payment in time and hence 7 nms3027-10 the contract were rightly cancelled by me and therefore I sold the flat and my intention is clear since date of inception to refund the advance money of Rs.80,00,000/-(Rupees Eighty Lacs Only) without any interest and right now also I am ready and willing to refund the token amount to the plaintiff. Hereto annexed and marked Exhibit I, II, 12, 13, 14, 15, 16, 17 is the document and receipts of foreclosure of mortgage.” 13. Affidavit in reply of defendant no.3 states that he is a bonafide purchaser for value without notice. Defendant no.3 interestingly states that he and his father and brothers are carrying on business as builder and developers in the city of Mumbai. They had carried out constructions of various buildings consisting of residential and commercial complexes at Andheri (E), Mumbai 400 093. They have been carrying on the business in the name of M/s.Timmy Builders . They were interested in locating a permanent “ ” residence and therefore, plot of land being Plot no.4 in the Ramya Jeevan Co-op.Housing Society Ltd at Mulgaon Village, Andheri (E) in which the suit property is situated was purchased and bungalow was constructed. He is residing along with his family members. His brother Charanjeet got married and therefore, father decided to purchase independent plot of land and construct a bungalow thereon. Accordingly flat no.19 was purchased by the brother of the deponent on 15.7.10 from Mr.A.R.Narayanan. The details thereof are set out in para 9 and in para 10 of the affidavit in reply, it is stated that defendant no.1 approached defendant no.3 in the last week of July 2010 for purchase of two adjoining flats in the building known as Timmy Residency which has been constructed by defendant no.3. Purchase 8 nms3027-10 price was agreed as Rs.2 crores. Flat numbers and the area have been set out in the affidavit and it is stated that defendant nos.1 and 2 informed defendant no.3 that presently, they do not have any money to purchase these flats and therefore, it was stated by defendant no.1 that since defendant nos.1 and 2 are their neighbours in plot no.18 of the subject Co- op.Housing Society, some adjustment be given in the purchase price. Therefore, defendant nos.1 and 2 were informed by defendant no.3 and requested to provide relevant documents of title of the suit plot. Therefore, xerox copies of the share certificate, allotment letter, agreement and public notice etc. were provided. These documents were verified and being satisfied that defendant nos.1 and 2 are the owners and in possession of the plot that the defendant no.3 showed interest in purchasing the said plots with the bungalow for Rs.4,50,00,000/- and this is the negotiated price as stated in para 14. However, it is then alleged that out of the purchase price Rs.2,00,00,000/- for sale of two flats, a sum of Rs.1.40 crores should be adjusted from the consideration payable and that is how and on assurance that balance sum of Rs.60.0 lacs will be paid for the flats as per the progress of the construction, that in the month of August 2010, the agreements were sought to be entered into. The para nos.15 and 16 refer to the agreement in relation to the two flats which defendant no.3 agreed to sell to defendant nos.1 and 2. It is in these circumstances that the defendant no3. states that it was decided that the bungalow and the property which is subject matter of this suit will be transferred for Rs. 3,10,00,000/-, as Rs.10.0 lacs were paid on 28.7.10 and the balance sum of 9 nms3027-10 Rs.3 crores was to be paid on execution of deed of transfer and on obtaining NOC from Co-op.Housing Society and also on transfer of the plot with the bungalow standing thereon which is the clear assertion in para 18 of the plaint. It was necessary for me to refer to all these aspects in great details including the statements made on oath before this court because during the course of arguments somewhat contradictory stand appears to have been taken by these defendants. 14. While refuting all these allegations and statements in the affidavit in reply, plaintiff asserted in rejoinder that the agreement for sale between defendant nos.1 and 2 and defendant no.3 is not genuine but got up and back dated transaction which is entered into merely to defeat the claim of the plaintiffs. The plaintiffs have asserted that the affidavit in reply dt.26.10.10 is silent on most material aspects of the transaction and rather admits the same but faults the plaintiffs for being unready and unwilling to perform his obligation therein. 15. It is on the above material that I have heard both sides and since detailed affidavits have been filed annexing therewith all documents, I am of the view that the motion can be disposed of finally. 16. Mr.Kapadia, learned counsel for the plaintiffs submitted that this is a suit for specific performance of an agreement for sale. The agreement has been illegally terminated. While it may be true that time was sought to be made 10 nms3027-10 essence of the contract yet, it is submitted by Mr.Kapadia that mutually the same was extended. Thus, time for performance came to be extended by consent of the parties and before the extended date all that is required to be done by the plaintiffs had been done. The amount was kept ready. There were meetings held and since the original documents in relation to the property were not being produced but the defendants stating that they are lying with HDFC Bank, that as a private limited Company, the plaintiffs took precautionary steps. That does not by any stretch of imagination mean that they were not ready and willing to perform their part of the ‘ ’ contract. 17. Mr.Kapadia has taken me through the annexures to the plaint and particularly, the correspondence and has submitted that in the correspondence what has been pointed out very clearly is that the housing loan with HDFC was a pending issue and secondly, defendant nos. 1 and 2 had to procure NOC from the society and immediately thereafter, the plaintiffs handed over draft of the agreement which was completed on or before 30.7.10. On 11.7.10 the plaintiffs Managing Director, Mr.Atul Gupta and Mr.Anuj Gupta met the defendant no.1 personally and requested him to fix a date for execution of the documents but excuses were made that the communication in that behalf will be issued on 26.7.10. What the plaintiff requested was that they are ready and willing to perform their obligation but requested to fix time and date for execution and mode of balance payment to Rs.3.7crores. In fact, the plaintiff have gone to the extent of 11 nms3027-10 stating in their letter dt.16.7.10 that the defendant nos.1 and 2 must indicate the mode of payment namely whether by pay orders, or by any other mode. If by pay orders, whether they desire a single pay order or different pay orders so that they can be drawn in the name of defendant nos.1 and 2. 18. Mr.Kapadia submits that surprisingly response to this letter is that Mr.Atul Gupta had agreed with defendant no1 and given assurance of complying with the various terms and conditions agreed orally apart from the conditions mentioned in the MOU, including mode and period of payment of balance consideration agreed in the MOU. Inviting my attention to Annexure H at page 51 and 52 of the paper book, Mr.Kapadia submits that ‘ ’ what is sought to be pleaded and argued today with regard to the alleged unwillingness of the plaintiff is based upon this oral argument. 19. However, at no stage, any submission was made that the MOU dt.14.2.10 is not an agreement for sale of the property but an agreement to execute an agreement in future. Further, there was no argument that the consideration was not fixed and certain. Mr.Kapadia submits that now by back dated documents, the whole claim of the plaintiffs is sought to be defeated and the property which is agreed to be sold to the plaintiffs for Rs.4,50,00,000/- has been sold for Rs.3,10,00,000/- purportedly to defendant no.3. 20. For all these reasons, he submits that until court scrutinizes and probes the matter, the subject matter of this litigation must be preserved and protected. 12 nms3027-10 Mr.Kapadia submits that the submission now made that defendant nos.1 and 2 are in possession of only two rooms of the subject bungalow and that to temporarily whereas possession has been handed over to the rest of the suit property, then, strong prima facie case is made out. He submits that Court Receiver should be appointed in such facts and circumstances, and particularly when the court had noticed the nature of the statements made and the contradiction therein. 21. On the other hand, Mr.Shah and Mr.Bookwala, learned counsel appearing on behalf of defendant nos.1 and 2 and defendant no.3 submit that firstly, this is not a case where specific performance can be granted because what is relied upon is not an agreement for sale but tentative and adhoc agreement between parties. The nature of the document is that it is just an understanding reduced into writing, and based upon this understanding in future, an agreement for sale was to be entered into. The terms of the same would show that the parties deliberately used the word agreement and not a deal or transfer. In such circumstances, such an agreement or understanding is not capable of being specifically enforced. 22. Mr.Shah appearing on behalf of defendant nos.1 and 2 stated that the plaintiff was never ready and willing to perform the agreement inasmuch as he had no money to pay and that is how a bogey of the original documents being not handed over has been raised. If they were ready and willing to perform their part then, at no stage, they would have stated that by July 13 nms3027-10 2010 an agreement of 14.2.10 cannot be performed and for valid reasons. There is absolutely no reason for not paying the money, save and except, that the plaintiffs were short of funds. They were inventing excuses and that is how the correspondence must be read. 23. Mr.Bookwala submits that the issue of readiness and willingness of the plaintiffs can be raised even by a subsequent purchaser. He went on to argue that the consideration also has never been agreed between defendant nos.1 and 2 although that does not appear to be the stand of the vendor defendant no.1. In these circumstances, and when the agreement has been concluded so also possession has been handed over to defendant no.3, they would urge that no prima facie case is made out and this court should therefore dismiss the Notice of Motion. 24. At the outset, it must be observed that what has been argued by defendant nos.1 and 2 orally before me is not their stand in the affidavit in reply. In the affidavit in reply filed on 26.10.10 it is stated very clearly by them in para 7, that it is admitted fact that MOU was executed between plaintiffs and defendant and certain terms and conditions were fixed while executing the agreement and time is the essence of MOU. This is not in tune with the oral argument canvassed that there was no agreement for sale of the immovable property. It is then stated that it is an admitted fact that the agreed sale price is Rs.4,50,00,000/-. It is then agreed between plaintiffs and defendants that 70% advance money will be paid on or before 10.7.10 and 14 nms3027-10 MOU is extended by parties from time to time and it is finally decided that plaintiffs will make full payment till 30.7.10. This is the reason for justifying the termination of this agreement by letter dt.26.7.10, it is even pleaded that entire sum received from plaintiff no.1 is sought to be refunded but at the same time, property is no longer available as it is agreed to be sold to the defendant no.3 on 30.8.10. 25. Surprisingly, when this affidavit is filed on 26.10.10 defendant no.1 does not deem it fit to disclose to the court that he has already received the consideration under the agreement dt.30.8.10 from defendant no.3 and he was put in physical possession thereof on 26.9.10. All this surfaces in the affidavit of defendant no.3. Defendant no.3 proceeds to plead the understanding as recorded by me above in regard to sale of two flats to defendant nos.1 and 2 and adjustment of the total consideration of Rs. 4,50,00,000/-. However, the vendor-defendant nos.1 and 2 does not plead any adjustment in the price of the deal in respect of the two flats. He does not make any reference to the documents produced by defendant no.3. Prima facie, therefore, there is substance in the contention of Mr.Kapadia that the property with a bungalow has been agreed to be sold to the plaintiff for Rs. 4,50,00,000/- could not have been sold for Rs.3,10,00,000/- and therefore, to make up for the balance sum of Rs.1,40,00,000/-, that the purported deal of sale of two flats to defendant nos.1 and 2 has been referred to in the affidavit of defendant no.3. 15 nms3027-10 26. My attention is also invited by Mr.Kapadia and rightly to the contradiction in the version of the defendants. Whilst it is confirmed by Mr.Shah that the possession receipt demonstrates handing over possession of the entire bungalow and the property / land below it on 26.7.10 but since defendant no.3 in this affidavit has referred to the part occupation of the bungalow by defendant nos.1 and 2, Mr.Shah agreed with defendant no.3 that the possession is of only two rooms and not entire bungalow. When the attention of the counsel appearing for the defendants was invited to the possession receipt, copy of which is at pg 254 of the paper book and MOU dt.2.8.10 between defendant no.1 and 2 and defendant no.3 it is conceded that there is no reference therein to the part occupation of the bungalow by the defendant nos.1 and 2. Further, it is stated that the version of defendant no.3 discloses that the Society has no lien or charge on the property or that the bank which had given some facilities to the defendant no.3 had already intimated the defendant no.3 that the entire loan has been repaid and it has therefore, no claim on the subject property. On the attention being invited to the contradiction between pg 254 which is the receipt of consideration of Rs.3 crores, the possession letter at pg 255 and contents of the documents at Ex.14 to the affidavit in reply of defendant no.3, it was argued that these are all blanks in a Form which are required to be filled and are necessary to enable transfer of the property in favour of defendant no.3 and nothing need be read into the same. However, it is a clear assertion by defendant nos.1 and 2 on 5.10.10 that on acceptance of their resignation, members of Co-op.Housing Society will surrender the share