Bombay High Court
Chandulal K. Shah And Vaibhav C. ... vs Nisha Deepak Saraf & Anr on 4 September, 2017
Bench: K.R. Sriram
1 suit2543.12.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUIT NO.2543 OF 2012
1) Chandulal K.Shah )
Of Mumbai, Indian Inhabitant, residing at )
B-41, Bansi Nagar, Kulpwadi, Highway )
Milton Co-operative Housing Society Ltd. )
Borivali (East), Mumbai-400 066 )
2) Vaibhav C.Shah )
Of Mumbai, Indian Inhabitant, residing at )
B-41, Bansi Nagar, Kulpwadi, Highway )
Milton Co-operative Housing Society Ltd. )
Borivali (East), Mumbai-400 066 )....Plaintiffs
V/s.
1) Haridas Laxmidas Ashar (deleted) )
Of Mumbai, Indian inhabitant, having )
His address at Bansi Nagar, Kulupwadi )
Highway Milton Co-operative Housing )
Society Limited, Borivali (East), )
Mumbai-400 060 )
2) Nisha Deepak Saraf )
Of Mumbai, Indian inhabitant, having her )
Address at 501, Varsha Navyug Co-op. )
Housing Society Limited, Plot No.1, JVPD )
Scheme, Vile-Parle (East), Mumbai-400 065)
And presently residing at B-42, Bansi Nagar)
Kulpwadi, Highway Milton Co-operative )
Housing Society Limited, Borivali (East) )
Mumbai-400 066 )
(Also legal representative and heir of )
Defendant no.1) )
3) Deepak Saraf )
Of Mumbai, Indian Inhabitant, having her )
Address at 501, Varsha Navyug Co-op. )
Housing Society Limited, Plot No.1, JVPD )
Scheme, Vile-Parle (East), Mumbai-400 065)
And presently residing at B-42, Bansi )
Nagar, Kulpwadi, Highway Milton Co-op. )
KJ
::: Uploaded on - 06/09/2017 ::: Downloaded on - 07/09/2017 02:01:09 :::
2 suit2543.12.doc
Housing Society Limited, Borivali (East), )
Mumbai-400 066 )....Defendants
----
Mr.Aurup Dasgupta a/w Ms.Sheetal Shah i/by M/s.Mehta &
Girdharlal for plaintiffs.
Mr.Sandeep Parikh a/w Mr.Pranesh J.Gada i/by M/s.Dhanuka &
Partners for the defendants.
----
CORAM : K.R.SHRIRAM,J
RESERVED ON : 4.8.2017
PRONOUNCED ON : 4.9.2017
Judgment :-
1 The plaintiff no.1 and his son plaintiff no.2 have
approached this Court seeking specific performance of a
Memorandum of Understanding dated 22.1.2011 (Exh.B), whereby
the defendant nos.1 & 2 had agreed to sell to the plaintiffs a
residential apartment admeasuring 465 sq. feet being flat no.B-42, 4 th
floor, Highway Milton Co-operative Housing Society Limited, Borivali
(East), Mumbai-400 066 (the suit flat) for a lumpsum consideration of
Rs.36,00,000/-. Defendant no.1 and defendant no.2 were joint
members of the Highway Milton Co-operative Housing Society Ltd
and entitled to the suit flat. Defendant no.2 is the daughter of
defendant no.1. Defendant no.3 is the husband of defendant no.2.
Defendant no.1 has since expired, defendant nos.2 & 3 reside in the
suit flat.
KJ
3 suit2543.12.doc
2 The plaintiffs, in the alternative to decree of specific
performance, are seeking return of the advance of Rs.22,00,000/-
paid together with interest @ 18% p.a. from the date of filing of the
suit till payment/realization, a sum of Rs.51,00,000/- being the
difference in the value of the flat between the date of Memorandum
of Understanding and date of filing of the suit and further sum of
Rs.21,00,000/- as damages for loss suffered on account of anxieties,
deterioration of health, frustration, depression, costs of transportation
and other misc. expenses.
3 The defendants have filed written statement denying that
the plaintiffs are entitled to the relief sought alleging that :- (a)
Plaintiffs' intention was to grab the suit flat at throw away price which
was much lesser than the market value ; (b) the plaintiffs have failed
to show readiness and willingness to perform their obligations under
Memorandum of Understanding; (c) plaintiffs have themselves
violated an essential term of the Memorandum of Understanding and
acted in variance to the agreed terms and therefore, breached the
terms of the Memorandum of Understanding ; and (d) Suit is bad for
mis-joinder of parties as defendant no.3 is not a party to the
Memorandum of Understanding.
4 The following issues were framed on 30.6.2014 :-
KJ
4 suit2543.12.doc
(1) Whether the Defendants prove that the suit is barred for
misjoinder of parties?
(2) Whether the Plaintiffs prove that the Defendants
committed breach of their obligations under the MOU
dated 22.1.2011?
(3) Whether the Plaintiffs prove that the Plaintiffs have been
ready and willing to perform their part of the MOU dated
22.1.2011?
(4) Whether the Defendants prove that time is make the
balance payment was essence of the contract contained
in the MOU dated 22.1.2011?
(5) Whether the Defendants prove that the Plaintiffs
committed breach of their obligations under the MOU
dated 22.1.2011?
(6) Whether the Defendants prove that the MOU dated
22.1.2011 stood terminated as set out in paragraph 5(a)
of the Written Statement?
(7) Whether the Plaintiffs are entitled to specific performance
of the MOU dated 22.1.2011?
(8) If answer to issue No.7 is in the negative, whether the
Plaintiffs are entitled to damages and other amounts as
prayed for?
(9) Generally what order?
KJ
5 suit2543.12.doc
5 Plaintiffs led evidence of 1st plaintiff and defendants led
evidence of 3rd defendant. The documents of plaintiffs have been
marked as Exh.A to Exh.O and defendants' documents marked as
Exh.D1 to Exh.D4. Plaintiffs' witness was the person with whom
defendants had negotiated and he was the person who drafted the
Memorandum of Understanding.
6 Defendants' witness was not a signatory to the
Memorandum of Understanding but signed the Memorandum of
Understanding and the receipt (Exh.A) as witness. Though the
negotiations were between plaintiff no.1 and original defendant no.1
and original defendant no.1 was still alive it was defendant no.3 who
stepped into the witness box and gave evidence. Cross-examination
of defendant no.3 was held between 10.12.2015 to 16.12.2015 and
defendant no.1 died on 19.2.2016 well after defendants' evidence
was closed.
Issue nos.2 to 7 (all these can be dealt with together)
7 Plaintiffs and defendants were neighbors. Plaintiffs were
living in flat no.B-41 whereas the suit flat was B-42. As defendant
no.1 came to know that plaintiffs were looking for a small flat for
plaintiff no.2 in the neighborhood, sometime in the 2 nd week of
January-2011, defendant no.1 approached 1st plaintiff and offered to
sell to 1st plaintiff the suit flat. After some negotiations, it was agreed
KJ
6 suit2543.12.doc
that defendant nos.1 & 2 will sell the suit flat to plaintiffs for
consideration of Rs.36,00,000/- provided plaintiffs were agreeable to
pay sum of Rs.22,00,000/- prior to 27.1.2011 and the balance before
31.3.2011. Plaintiffs were also informed that the suit flat has been
mortgaged to Malad Sahakari Bank Limited (the Bank) for a facility
extended by the bank to defendant no.3. Defendant no.1 informed
plaintiff no.1 that amount of Rs.25,83,042/- was due and payable to
the bank and bank has commenced proceedings under
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act-2002 (SARFAESI) and if
plaintiffs could give at least Rs.22,00,000/- before 27.1.2011,
defendants would use that amount to pay off the liability to the Bank
so that the SARFAESI proceedings are halted. Plaintiffs agreed as
defendants were neighbors and had no cause to doubt defendants.
Plaintiffs and defendants entered into Memorandum of
Understanding dated 22.1.2011 whereby the defendant nos.1 & 2
agreed to sell the suit flat to plaintiffs. It will be useful to reproduce
the short Memorandum of Understanding. It is as under :-
"January 22-2011 M.O.U
To,
H.L.Ashar/Mrs.Nisha D.Saraf
B-42, Bansi Nagar, Kulupwadi,
Nr.National Park, Borivali (East),
Mumbai-400 066
KJ
7 suit2543.12.doc
Dear Sir,
We the undersigned Mr.Vaibhav C.Shah & Mr.Chandulal K.Shah herewith jointly
purchased above mentioned flat no.B-42,4th floor area 465 sq. ft. at Bansi Nagar,
at Highway Milton Co-op Hsg. Soct. Ltd. Borivali (E) Mumbai :400 066 at a lum
sum price of Rs.36,00,000/-.
We show our bonafide by giving you token amount of Rs.2,00,000/- in cash and a
cheque of Rs.1,00,000/- Ch. No.000013 dated 21.01.2011 drawn on Bank of
India, Borivali (East), Mumbai :400 066 and balance payment will be done on or
before 31.03.2011.
Please note that you have to clear your Bank Loan against mortgage of the above
flat, created by you before execution of sale agreement. Please confirm at the
bottom of this letter.
Thanking you,
Yours Sincerely,
sd/- sd/-
(Vaibhav Shah / C.K.Shah)
Purchasers
Mr.Vaibhav C.Shah/Mr.C.K.Shah We confirm : (Vendors)
B-41, BANSI NAGAR, KULUPWADI 1. Mr.H.L.Ashar..sd/-.
NR. NATIONAL PARK, BORIVALI 2. Mrs.Nisha D.Saraf sd/-
(EAST), MUMBAI : 400 066
Witnesses : 1.sd/- (K.C.Shah)
2.sd/- (Deepak Saraf)
8 Thereafter admittedly plaintiffs paid a further sum of
Rs.19,00,000/- to defendant nos.1 & 2 as per the receipt issued by
defendant nos.1 & 2 with defendant no.3 being the witness. It
should be noted, defendant no.3 was also the witness to the
Memorandum of Understanding. The receipt which forms part of
Exhibit-B reads as under :-
KJ
8 suit2543.12.doc
" January 25, 2011
RECEIPT
RECEIVED with thanks from MR.VAIBHAV CHANDULAL SHAH & CHANDULAL
KESHAVLAL SHAH a sum of Rs.22,00,000/- (RUPEES TWENTY TWO LAKHS
ONLY) towards sale of the Flat No.No.B/42, 4 th Floor, THE HIGHWAY MILTON
CO-OP.HSG. SOC. LTD., situated at Bansi Nagar, W.E. Highway, Borivali (East),
Mumbai-400 066 as part payment against sale priceof Rs.36,00,000/- upto 25 th
January 2011.
DATE AMOUNT CHEQUE CASH DRAWN ON
19.01.2011 1,00,000/- .... CASH ....
21.01.2011 1,00,000/- .... CASH ....
21.01.2011 1,00,000/- 13 .... Bank of India(Borivali
E) Mumbai-66
22.01.2011 1,00,000/- 14 .... Bank of India (Borivali
E) Mumbai-66
25.01.2011 8,00,000/- 16 .... Bank of India (Borivali
E) Mumbai-66
25.01.2011 10,00,000 .... CASH ....
TOTAL 22,00,000/-
(RUPEES
TWENTY
TWO LAKHS
ONLY)
Subject to realization
WE SAY RECEIVED
sd/-
(MR.HARIDAS LAXMIDAS ASHER)
(MRS.NISHA DEEPAK SARAF)
THE SELLER
sd/-
N.D.Saraf
WITNESSES :
sd/-
Deepak Saraf.
KJ
9 suit2543.12.doc
9 Plaintiffs by 25.1.2011 had parted with Rs.22,00,000/-. As
per the Memorandum of Understanding, defendants were also
supposed to clear the bank loan against the mortgage of the suit flat
before execution of the sale agreement. Plaintiffs therefore, wrote a
letter dated 22 March 2011 (Exh.C) to the Building society stating
that they have agreed to purchase the suit flat and substantial
payments have already been made to defendant nos.1 & 2 and
balance payment was ready with plaintiffs to be paid to defendant
nos.1 & 2 subject to certain formalities to be completed by defendant
nos.1 & 2. Plaintiffs requested the society not to entertain any
application for transfer of the suit flat or any share certificate to
anyone else. The society vide its letter dated 27.3.2011 (part of
Exh.C colly) informed the plaintiffs that the society will require a letter
from defendant nos.1 & 2 that they are selling the suit flat to plaintiffs
and the society has not received any such letter from defendant
nos.1 & 2. The society also informed plaintiffs that as per the
society's record there is a lien on the suit flat raised by Malad
Sahakari Bank Ltd. and unless the society receives a clearance from
the bank, no steps to transfer the suit flat would be taken.
10 Thereafter plaintiffs approached the bank, got details of
the amount outstanding, approached defendants for completing the
KJ
10 suit2543.12.doc
transaction and as defendants did not take any steps, plaintiffs even
lodged complaint with the Borivali (East) Police station against
defendants. It is the case of plaintiffs that defendants wanted the
money desperately and plaintiffs parted with Rs.22,00,000/- without
any security on the hope that defendant nos.1 & 2 will sell the suit
flat to plaintiffs.
11 Defendants have not denied the execution of the
Memorandum of Understanding. Defendants have not denied that
they received Rs.22,00,000/- from plaintiffs. It is the case of
defendants that plaintiffs were not ready and willing to perform their
obligations of paying balance amount of Rs.14,00,000/- before
31.3.2011 and therefore, plaintiffs are not entitled to specific
performance.
12 Plaintiffs' stand is that the further amount of
Rs.19,00,000/- was paid by plaintiffs though plaintiffs had time till
31.3.2011 to make the full payment only because defendants wanted
to utilize that money to settle the bank's liability and get the mortgage
of the suit flat cancelled. But defendants despite having almost 2 ½
months to pay off the bank and get the mortgage cancelled did not do
so. Plaintiffs, therefore, did not pay the balance of Rs.14,00,000/-.
KJ
11 suit2543.12.doc
Plaintiffs also submitted that defendants had an obligation to get the
flat released from mortgage before plaintiffs paid the balance amount
of Rs.14,00,000/-, which plaintiffs were always ready and willing to
pay.
13 To a query raised by the Court that as to how specific
performance would be given for sale of a flat which was mortgaged
without discharge of the mortgage, counsel for plaintiffs submitted
that bank has been subsequently paid off by defendants and the suit
flat is released from mortgage.
14 Mr.Dasgupta further submitted that Section 13(1)(a) of the
Specific Relief Act states that where a person contracts to sell or let
certain immoveable property having no title or only imperfect title, the
Purchaser or Lessee has the following rights namely, if the vendor or
lessor has subsequently to the contract acquired any interest in the
property, the purchaser or the lessee may compel him to make good
the contract out of such interest. He submitted that on account of the
fact that defendants have, during the pendency of the suit, removed
the encumbrances of the bank from the title of the suit flat, plaintiffs
are entitled to specific performance of the Memorandum of
Understanding.
KJ
12 suit2543.12.doc
15 Shri Dasgupta relied upon 1Silla Chandra Sekharam Vs.
Ramchandra Sahu where it was held that even if the title is
perfected after the filing of the Suit, specific performance can be
granted. If the Vendor or Lessor has subsequently to the sale or
lease acquired any interest in the property, the Purchaser or Lessee
may compel him to make good the contract out of such interest.
16 Shri Dasgupta for plaintiffs submitted that it is apparent
from take over notice dated 14.05.2011 (Exhibit D), take over notice
dated 23.07.2012 (Exhibit G), take over notice dated 27.08.2012
(Exhibit H) and Public Notice by Bank dated 5.09.2012 (Exhibit J
collectively), that defendants as on 31 st March 2011 were neither in
possession of the title deeds of the suit flat nor were they in a
position to convey the same to plaintiffs, since the mortgage was not
foreclosed. Plaintiffs were ready and willing to perform their part of
the contract at all time, but plaintiffs' performance was dependent
upon the reciprocal obligation to be performed by defendants and
the time for performance by plaintiffs would arise only after the
reciprocal obligation is performed by defendants. The fact that
defendants did not clear the bank dues and not having done so,
plaintiffs could not be called upon to perform their obligation of
making final payment, as defendants' title to the suit flat was not
1 (1964) & SCR 858 : AIR 1964 SC 1789
KJ
13 suit2543.12.doc
marketable as on 31st March 2011. It is only on 12th February 2014
that defendants agreed to make payment of the outstanding loan of
the Bank on or before 28th February 2014. However, in spite of
undertaking to the Hon'ble Court the defendants failed to make the
said payment. Therefore vide Order dated 5th March 2014,
defendants once again undertook to pay Rs.3,25,000/- on or before
10th March 2014 and this time the documents of title were directed to
be deposited in Court.
17 Mr.Dasgupta relied upon the following :-
(a) Nathulal Vs. Phool Chand where it was held in considering
whether a person is willing to perform his part of the contract the
sequence in which the obligation under a contract are to be
performed must be taken into account. One of the parties to the
contract cannot require compliance with the obligations by the other
party without in the first instance performing his own part of the
contract which in the sequence of obligations is performed by him
earlier. And therefore since defendants had not cleared their dues
on or before 31st March 2011 it must be held that plaintiffs were at all
relevant times willing to carry out their part of the contract and
therefore it was not necessary for the plaintiffs to actually produce the
money to prove their readiness and willingness.
2 (1969 (3) SCC 120)
KJ
14 suit2543.12.doc
(b) Bishambhar Nath Agarwal Vs. Kishan Chand
where it was held the essential precondition to competency of the
seller to transfer-permission should be obtained by him first before
payment of consideration amount by purchaser where the contract
stipulates mutual obligations to be performed as is in Memorandum
of Understanding dated 22.01.2011. A party is not entitled to
complain of non-performance, i.e.,defendant herein of later obligation
by the other party, i.e., plaintiffs, without performing their earlier
obligation.
(c)4Swarnam Ramachandran Vs. Aravacode
Chakungal Jayapalan where it was held that time is presumed not
to be the essence of a contract relating to an immoveable property. A
vendor has no right to make time the essence of the contract unless
he is ready and willing to proceed to completion. Admittedly there
was no Notice to make time the essence of the contract, therefore,
the Hon'ble Court has to examine the real intention of the parties.
The onus to plead and prove that time was the essence of the
contract was on defendants which they have failed to do.
(d) D.N.Dutt Vs. M.V.Gupta where it was held even if
time was the essence of the contract of sale, where the Vendor has
not perfected his title to the goods by the date when the contract has
3 (AIR 1998 Allahabad 195)
4 [(2004) 8 SCC 689]
5 (AIR 1958 Punjab 289)
KJ
15 suit2543.12.doc
to be completed, there is no breach on part of the Vendee, if he failed
to pay the consideration on that date and complete the contract.
(e) Laxman Tatyaba Kankate Vs. Taramati
Harischandra Dhatrak where it was held while granting specific
performance, being the discretion of the Hon'ble Court, the Court
would take into consideration the conduct of the parties, and their
respective interest under the contract.
18 Defendants' counsel submitted that (a) Plaintiffs have
incorrectly and falsely contended that the obligation of the 1st and 2nd
Defendants to make payment of the bank loan and clear the
mortgage on the suit flat is a reciprocal obligation which is required to
be performed prior to the reciprocal obligation of Plaintiffs to make
the balance payment of sale consideration on or before 31.3.2011 ;
(b) Plaintiffs have falsely and incorrectly stated that unless and until
1st and 2ndDefendants have performed their obligation of making
payment of bank loan and clearing the mortgage on the said flat,
Plaintiffs are not required to make payment of balance sale
consideration ; (c) The MOU dated 22.1.2011 does not contain any
express provision which sets out the sequence in which the alleged
reciprocal promises/ obligations are required to be performed ; (d)
the obligation of 1st and 2nd Defendants to make payment of the Bank
6 [(2010) 97 SCC 717]
KJ
16 suit2543.12.doc
loan and clear the mortgage on the suit flat is an obligation which is
independent of Plaintiffs' obligation to make payment of the balance
sale consideration on or before 31.3.2011; (e) The MOU does not
contain any provision whereby Plaintiffs' obligation to make payment
of balance sale consideration is contingent and/or conditional on 1 st
and 2nd Defendants performing their obligation to make payment of
the bank loan and clear the mortgage on the suit flat ; (f) the MOU
contained two different streams of provisions for performance which
are unrelated to each other ; and (g) in view of the afore-stated
position, the reliance placed by Plaintiffs on Section 52 of the Indian
Contract Act which relates to the order of performance of reciprocal
promises is inapplicable to the facts of the present case.
19 Counsel for defendants argued that time to make the
balance payment was the essence of the contract and that is obvious
from the Memorandum of Understanding. According to defendants
the balance of Rs.14,00,000/- was to be paid before 31.3.2011 and
the same is clear, unequivocal, unconditional and independent of
any other obligations or promise to be performed by defendant nos.1
& 2. According to Mr.Parekh the obligations of defendant nos.1 & 2
to make payment of the bank loan prior to execution of the loan, was
not inter dependent to making the balance payment by 31.3.2011.
Counsel submitted that from Exh.A it was quite clear that there was
KJ
17 suit2543.12.doc
an outstanding liability to the bank and hence time to make balance
payment was the essence of the contract. Counsel submitted that
plaintiffs have paid only Rs.22,00,000/- on or before 31.3.2011 and
deliberately failed and neglected to pay balance of Rs.14,00,000/- on
or before 31.3.2011. Defendants relied upon a decision of the
Constitution Bench in the case of 7Smt.Chand Rani (dead) by LRs
Vs. Smt. Kamal Rani (dead) by LRs. to submit that the Supreme
Court after analysing various case laws, came to a conclusion that in
the case of sale of immovable property there is no presumption as to
time being the essence of the contract but the Court may infer that it
is to be performed in a reasonable time provided it is clear from the
express terms of the contract, the nature of the property and
surrounding circumstances, like object of making the contract.
20 Defendants also relied upon K.S.Vaidyanathan and
others Vs. Vairavan in which the Apex Court after referring to
Chand Rani (supra) has reiterated the views expressed in Chand
Rani. Counsel submitted that the Supreme Court held that rigour of
the rule evolved by Courts that time is not of the essence of the
contract in the case of immoveable properties- evolved in times when
the prices and values were stable and inflation was unknown-
7 AIR 1993 SC 1742
8 AIR 1997 SC 1751
KJ
18 suit2543.12.doc
requires to be relaxed, if not modified, particularly in the case of
urban immoveable properties.
Counsel Shri Parikh also submitted that the Supreme
Court has stated that fixation of a time period in the contract for the
purpose of performance of an obligation by the parties in a given
situation may not amount to making time the essence of the contract
but at the same time it must have some meaning. Counsel submitted
that parties could not have prescribed such a time limit of 31.3.2011
without any reason and the court while exercising its discretion would
also bear in mind that when the parties prescribed certain time limit
for taking steps by one or the other parties, it must have some
significance and that the said time limits cannot be ignored altogether
on the ground that time has not been made the essence of the
contract relating to immoveable properties.
21 On the same preposition defendants also relied upon the
judgment in the case of Mrs.Saradamani Kendappan Vs.
Mrs.S.Rajlaxmi and others. Relying on this, counsel Shri Parikh
submitted that the Supreme Court notes that the steep increase in
prices is the circumstance which makes it inequitable to grant relief of
specific performance where the purchaser does not take steps to
complete the sale within the agreed period and that such a purchaser
can no longer take shelter under the principle that time is not of the
9 AIR 2011 SC 3234
KJ
19 suit2543.12.doc
essence in performance of contract relating to immoveable property
to cover his delays and laches, breaches and 'non-readiness'.
22 Mr.Parikh submitted that every suit for specific
performance need not be decreed merely because it is filed within
limitation by ignoring the time limits prescribed in the agreement and
that also does not mean a purchaser can wait for 1 or 2 years and file
a suit. The purchaser should sue quickly and only in special cases,
where equity can shift in favour of the purchaser, can the court
entertain. He relied upon para 28 of Mrs.Saradamani Kendappan
(supra) which reads as under :-
"28. Till the issue is considered in an appropriate case, we can only
reiterate what has been suggested in K. S. Vidyanadam (AIR 1997
SC 1751 : 1997 AIR SCW 956) (supra) :
(i) Courts, while exercising discretion in suits for specific
performance, should bear in mind that when the parties
prescribe a time/period, for taking certain steps or for
completion of the transaction, that must have some
significance and, therefore, time/period prescribed cannot
be ignored.
(ii) Courts will apply greater scrutiny and strictness when
considering whether the purchaser was 'ready and willing'
to perform his part of the contract.
(iii) Every suit for specific performance need not be decreed
merely because it is filed within the period of limitation by
ignoring the time-limits stipulated in the agreement. Courts
will also 'frown' upon suits which are not filed immediately
after the breach/refusal. The fact that limitation is three
years does not mean a purchaser can wait for 1 or 2 years
to file a suit and obtain specific performance. The three
year period is intended to assist purchasers in special
cases, as for example, where the major part of the
consideration has been paid to the vendor and possession
has been delivered in part performance, where equity shifts
in favour of the purchaser."
KJ
20 suit2543.12.doc
23 It was also submitted by Mr.Parikh that in paragraphs 35
to 37 Mrs. Saradamani Kendappan (supra) the Hon'ble Supreme
Court has stated that the order of performance of promises should be
expressly stated or provided in the agreement and in the event that
the agreement is silent with regard to the sequence in which the
obligations are required to be performed, then a party cannot contend
anything contrary to the express terms of the contract and insist that
set of obligations must be performed first and only thereafter any
alleged reciprocal promises ought to be performed. Mr.Parikh
continued that applying the ratio in Mrs. Saradamani Kendappan
(supra) to the facts of the present case, it is evident that the MOU
dated 22.1.2011 does not expressly state or provide that only after
performance of obligations by 1st and 2nd Defendants of making
payment of the bank loan and clearing the mortgage on the suit flat,
that Plaintiffs will make the balance payment of the sale
consideration.
24 On this Mr.Parikh concluded, in the light of the ratio laid
down by the Hon'ble Supreme Court, applying the same to the facts
of the present case, that (i) from the express terms of the MOU
dated 22.1.2011 it is evident that the balance payment was required
to be made by Plaintiffs on or before 31.3.2011; (ii) that the suit
property was mortgaged to the bank; and (iii) that there was a notice
KJ
21 suit2543.12.doc
dated 12.1.2011 issued by the Bank for the purpose of taking
possession of the suit flat in view of the failure of Defendants to make
payment of outstanding liability of Rs.25,83,042/-. Therefore, as the
time was the essence of the contract, it was incumbent on Plaintiffs
to make the balance payment of Rs.14 lakhs on or before 31.3.2011
and in view of Plaintiffs' failure to make payment of the balance
amount on or before 31.3.2011, the same constituted a breach of the
MOU by Plaintiffs. In view of the breach committed by Plaintiffs in
making the balance payment on or before 31.3.2011, it must be held
that Plaintiffs were not ready and willing to perform their obligations
under the MOU.
25 After hearing Shri Parikh's elaborate submissions, I find
rather strange that defendants in their written statement have stated
that in or about January-2011 the Uncle of defendant no.3 on behalf
of defendants met the ex-chairman of the bank proposing one time
settlement for settling the loan account of defendants and the bank
agreed for a one time settlement in the sum of Rs.19,00,000/-.
Defendants paid Rs.10,00,000/- to the bank but the bank did not
close the loan account because defendants did not pay the balance
amount of Rs.9,00,000/- since plaintiffs did not pay the amount of
Rs.14,00,000/- on or before 31.3.2011 as set out in the Memorandum
of Understanding and the plaintiffs did not have the monies to pay to
KJ
22 suit2543.12.doc
defendant nos.1 & 2. It is rather strange because plaintiffs have by
25.1.2011 paid over to defendant nos.1 & 2 sum of Rs.22,00,000/-
and there is no explanation in the written statement as to why when
defendants have received Rs.22,00,000/- from plaintiffs, that amount
was not used to pay entire one time settlement of Rs.19,00,000/-
which would have still left defendants with Rs.3,00,000/- surplus.
When defendants had paid Rs.10,00,000/- on 3.2.2011, defendants
could have certainly paid balance of Rs.9,00,000/- by 3.2.2011, got
the loan account closed and get the suit flat released from mortgage.
There is no explanation whatsoever in the written statement. It is
also not the case of defendants that amount of Rs.22,00,000/- was
given by plaintiffs as loan. Defendants do agree that in the
Memorandum of Understanding defendants have agreed to sell suit
flat to plaintiffs but go on to state that because plaintiffs did not pay
balance amount of Rs.14,00,000/- , specific performance was not
permissible.
26 In the cross-examination of defendant no.3 to a question
as to why the defendants then did not return Rs.22,00,000/- to
plaintiffs, and it should be noted that Rs.22,00,000/- is still with the
defendants even after almost 7 years have passed, the answer was
plaintiffs never asked for the money back, so we did not give. The
conduct of defendants smacks of utter dishonesty and it is quite
KJ
23 suit2543.12.doc
obvious that the intention of defendants was to cheat plaintiffs.
27 Defendant no.3 has in his cross examination stated that
he did not return the money since plaintiff no.1 did not ask for it
(Answer to question no.102 in cross-examination of DW-1.
Defendants have retained Rs.22,00,000/- (61% of consideration of
Rs.36 lakhs) paid by plaintiffs under the Memorandum of
Understanding for over six years and have also enjoyed the fruits of
property, while contending that the Memorandum of Understanding
stood terminated. It is an admitted position no notice of termination
was issued to plaintiffs by defendants ( cross-examination of DW-1,
question 100) despite averring in the written statement that the
Memorandum of Understanding stood terminated on account of the
plaintiffs' alleged breach and admitting that there was no forfeiture
clause in the Memorandum of Understanding (cross-examination of
DW-1, question 101). Defendants have failed to return the amount of
Rs.22,00,000/- paid by plaintiffs to defendants. Not a single letter
has been produced by defendants averring to repay the amount of
Rs.22,00,000/- , however in cross-examination the defendants no.3
as set out above, has stated that the money was not returned, as the
plaintiff no.1 has not made any request in writing or verbally to return
the said money (cross-examination of DW-1, question 102).
The fact that plaintiffs paid over 60% of the considerations
and never asked for the return of money is also an indicator that
KJ
24 suit2543.12.doc
plaintiffs were always ready and willing to perform their obligations
under the Memorandum of Understanding.
28 Another point that was raised by defendants was that the
Memorandum of Understanding did not contain any provisions for
paying the monthly maintenance charges which were in arrears for
more than a year to the society and who would pay the stamp duty
and registration charges on the execution of the agreement of the
suit flat. Hence, in the absence of agreement on these two crucial
elements, plaintiffs are disentitled to any specific performance.
Mr.Parikh submitted that during the course of his cross-examination,
plaintiff no.1 has admitted that there was no agreement between the
parties regarding these crucial elements and in view of this admitted
position, plaintiffs are not entitled to specific performance.
29 In the cross-examination of PW-1 question nos.65, 66, 70,
71, 72, 75 & 76 and the answers thereto are relevant and the same
are reproduced hereunder :-
Q.65 : Therefore, there was no agreement between the parties with
regard to the payment of stamp duty on the sale of the suit flat ?
Ans. : Actually, this was the fraud committed by the defendants. They
have not given any documents and papers from bank because they
want to cheat me.
Q.66 : Therefore, it is also correct to say that there is no agreement
between the parties with regard to the payment of transfer charges to
Highway Milton Co-operative Housing Society Ltd. with regard to the
transfer of the Share Certificate ?
Ans. : As the defendants did not have any intention to sell the property
to me and they wanted to sell it to other party after taking money from
KJ
25 suit2543.12.doc
me, hence, the defendants did not prepare any documents. Hence,
there is no question of payment of any stamp duty or society transfer
charges. Witness adds : I was ready with the money.
Q.70 : According to you, what would be the approximate stamp duty
and registration charges required to be paid on the Agreement for Sale
of the suit flat ?
Ans. : Approximately at that time Rs.1 lac and slightly more amount.
Q.71 : According to you, what was the amount of transfer charges to be
paid to the Highway Milton Co-operative Housing Society Ltd. For the
suit flat ?
Ans. : It will be between Rs.20,000/- to Rs.25,000/- which will be shared
by both the parties equally.
Q.72 : According to you, were the Defendants regularly paying the
maintenance charges for the suit flat to the Highway Milton Co-operative
Housing Society Ltd. ?
Ans. : No.
Q.75 : What is the amount of monthly maintenance paid by you for your
present flat at that time ?
Ans. : At that time, I do not remember, presently I am paying
approximately Rs.5000/- quarterly.
Q.76 : Would it be correct to say that there was no agreement between
the parties with regard to the payment of the arrears of maintenance
charges for the suit flat at the time of the MOU ?
Ans. : Before the MOU, the Defendant No.1 informed me that they will
clear all the dues before the Sale Agreement.
30 In answer to question no.76, PW-1 has expressly stated
that defendant no.1 informed him that all the arrears of maintenance
charges of the suit flat payable to the society will be paid by
defendant no.1. No evidence to counter this statement of plaintiffs
has been put forth by defendants. Defendant no.1 though he was
alive, was not called to give evidence in the matter to controvert what
plaintiff has stated. Therefore, for defendants now to say that there
was no agreement on payment of arrears to the society and
KJ
26 suit2543.12.doc
therefore, specific performance cannot be granted, cannot be
accepted.
31 So far as stamp duty and transfer charges are concerned,
question no.66 in cross-examination of PW-1 and the answer thereto
is relevant. It should be noted that the witness has stated "I was
ready with the money". Therefore, plaintiffs were ready to make the
payment of transfer charges and stamp duty. Therefore, the
submissions of defendants that these factors were not agreed upon
and therefore, specific performance cannot be granted, cannot be
accepted.
32 Considering the documents exhibited and the evidence, in
my view, plaintiffs were always ready and willing to perform their
obligations. Paragraph-3 of the Memorandum of Understanding has
not been inserted without any purpose. Plaintiffs paid Rs.22,00,000/-
by 25.1.2017 though as per the Memorandum of Understanding had
time to make payment of balance Rs.33,00,000/- by 31.3.2011.
Plaintiffs having parted with Rs.22,00,000/- by 25.1.2011, it is quite
ob vious that amount was paid over to defendant no.1 to pay off the
liability of the bank and get the flat released from mortgage. It is
defendants' case in the written statement that defendants had
entered into a one time settlement of Rs.19,00,000/- but paid only
KJ
27 suit2543.12.doc
Rs.10,00,000/- out of Rs.22,00,000/- received. Defendants are
totally silent as to why entire Rs.19,00,000/- was not paid off so that
the bank's liability is settled and the flat is released from mortgage.
Therefore, the sequence of events which can be culled out in the
facts and circumstances is (a) plaintiff paid Rs.22,00,000/- first ; (b)
defendants should use that money to pay off the bank's liability and
get the suit flat released from mortgage and (c) plaintiffs will pay the
balance amount of Rs.14,00,000/- while executing the sale
agreement and all these to happen on or before 31.3.2011. As held
in Nathulal (supra) one of the parties to the contract cannot require
compliance with the obligation by the other party without performing
his obligations. Defendants not only failed to pay the bank, they did
not even write to the society about their intention to sell the flat to
plaintiffs. Defendants cannot raise any grievance that plaintiffs did
not pay balance of Rs.14,00,000/- before 31.3.2011.
33 Plaintiffs' readiness and willingness to perform their
obligation under the MOU can also be seen from various documents.
Plaintiffs had informed the society (Exh.C colly) that substantial
payments have been made to defendants and the balance amount
payable is also ready with plaintiffs. Plaintiffs have also filed their
income-tax returns to which are annexed the demat statements
(Exh.M colly) of plaintiffs, in which as on 31.3.2011 plaintiffs had
KJ
28 suit2543.12.doc
shares worth Rs.16,16,427/-. It is the case of plaintiffs that they
would have sold the shares and paid balance of Rs.14,00,000/- if
only defendants had got the suit flat released from mortgage.
34 In Rajinder Pershad V Darshana Devi it was held in
the absence of cross examination of the statement made in
examination in chief, it is an age old rule that if you dispute the
correctness of the statement of a witness, you must give him an
opportunity to explain his statement, otherwise you cannot impeach
it. Admittedly Defendants have not questioned the correctness that
Plaintiffs had a demat account which had shares valued at more than
the balance consideration of Rs.14,00,000/-payable. In fact in cross-
examination PW-1 has stated that the balance amount of Rs. 14
Lakhs was also available to Plaintiffs, as Plaintiffs had sold certain
shares and the money was lying in the bank account jointly held by
his son, Plaintiff No. 2 and his wife (question 87 to 90 and annexures
thereto in cross-examination of PW-1). Defendants have not
rebutted the positive statement made by PW-1 and have not even
called upon PW-1 to produce such account statement nor was a
question asked to PW-1 as to whether the said statements have
been produced by Plaintiffs.
10 (2001) 7 SCC 69
KJ
29 suit2543.12.doc
35 It is also pertinent to note that defendants even as on 27th
March 2011, (as per the letter of the Society dated 27.3.2011
addressed to the plaintiffs at Exhibit `C' colly) had not even made an
application to the Society intimating the Society of their intention to
transfer the said flat and apply for NOC for sale of the suit flat to
plaintiffs.
36 While considering a matter of this nature and while
exercising its discretion, the court also keeps in mind the conduct of
the parties. The conduct of defendants is despicable. It is true that
in every suit filed for specific performance decree for specific
performance need not be granted. But where equity shifts in favour
of the purchaser the Court can entertain. Here is a case where
plaintiffs had paid 61% of the consideration. Defendants had to pay
off the bank liability before the plaintiffs paid the balance amount of
Rs.14,00,000/-. The defendants do not even write to the society of
their intentions to sell. Though one time settlement in the sum of
Rs.19 lakhs was agreed with the Bank and defendants had received
Rs.22 lakhs from plaintiffs, defendants paid only Rs.10 lakhs to the
bank. There is no explanation as to why defendants did not
discharge the bank's liability in toto. Defendants also retained the
amount of Rs.22 lakhs for almost 7 years and according to
defendants they did not return the money because plaintiffs did not
KJ
30 suit2543.12.doc
ask for it. This is the conduct of defendants. In my view equity is
certainly in favour of plaintiffs.
37 It is therefore, in my view, lawful and equitable that a
decree of specific performance be granted since defendants have
utilized the entire amount of Rs.22,00,000/- paid, denied sale,
capitalized situation and enjoyed possession of the property.
Defendants are not entitled to take advantage of pendency of
proceedings to demand more consideration equivalent to the market
value.
38 Issue no.1 :-
It is the case of defendants that defendant no.3 was not a
signatory to the Memorandum of Understanding but has only signed
as a witness and therefore, was not a necessary party.
Under Order 1 Rule 9 of the Code of Civil Procedure 1908,
a suit cannot be dismissed for mis-joinder of party. In any event,
defendant no.3 was the person for whose loan/facility, the suit flat
was mortgaged with Malad Sahakari Bank Ltd. Defendant no.3 has
also signed as a witness to the Memorandum of Understanding.
Though it is stated entire negotiations and discussions happened
between plaintiff no.1 and defendant no.1, defendant no.3 is the only
one who stepped into box and gave evidence on behalf of
KJ
31 suit2543.12.doc
defendants. Defendant no.1 was alive at that time. In my view,
Defendant no.3 has been an integral part of the entire transaction. At
the same time a decree of specific performance cannot be passed
against a person who was not a party to the agreement. Therefore,
decree of specific performance cannot be passed against defendant
no.3, who in effect is defendant no.2 now, defendant no.1 having
expired.
39 In the circumstances, issues are answered as under :-
No. Issues Findings
1 Whether the Defendants prove that the suit is No
barred for misjoinder of parties ?
2 Whether the plaintiffs prove that the Defendants Yes
committed breach of their obligations under the
MOU dated 22.1.2011 ?
3 Whether the plaintiffs prove that the plaintiffs have Yes
been ready and willing to perform their part of the
MOU dated 22.1.2011 ?
4 Whether the Defendants prove that time to make No
the balance payment was essence of the contract
contained in the MOU dated 22.1.2011 ?
5 Whether the Defendants prove that the plaintiffs NO
committed breach of their obligations under the
MOU dated 22.1.2011 ?
6 Whether the Defendants prove that the MOU No
dated 22.1.2011 stood terminated as set out in
KJ
32 suit2543.12.doc
paragraph 5(a) of the Written Statement ?
7 Whether the plaintiffs are entitled to specific Yes. *
performance of the MOU dated 22.1.2011 ?
8 If answer to issue no.7 is in the negative, whether Does not
the plaintiffs are entitled to damages and other arise.
amounts as prayed for ?
*Against defendant no.2 (now 1) Mrs.Nisha Deepak Saraf only.
Unless the shares of defendant no.1 in the suit flat has been
transferred to defendant no.2, in view of demise of Mr.Haridas
Laxmidas Ashar, original defendant no.1, the Prothonotary & Senior
Master to sign the sale deed on behalf of original defendant no.1.
The plaintiffs shall deposit the balance amount of Rs.14 lakhs with
the Prothonotary & Senior Master within 30 days from today but
before execution of the sale deed. Upon the sale deed being
executed by original defendant no.2 the entire amount of Rs.14
lakhs to be paid over to defendant no.2 Mrs.Nisha Deepak Saraf as
she claims to be the sole legal heir of late Mr.Haridas Laxmidas
Ashar, against indemnity and undertaking in the usual format.
40 In view of the specific performance being granted, I am not
going into alternative plea for damages.
41 Suit stands decreed and disposed accordingly.
(K.R.SHRIRAM,J)
KJ
