Bombay High Court
Shri. Mohan Vishnu Satardekar ... vs The Life Insurance Corporation Of ... on 17 February, 2023
Bench: N. J. Jamadar
FA-777-2017.DOC
Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
VISHAL
SUBHASH FIRST APPEAL NO. 777 OF 2017
PAREKAR
Digitally signed by
WITH
VISHAL SUBHASH
PAREKAR CIVIL APPLICATION NO. 2371 OF 2017
WITH
Date: 2023.02.17
17:43:43 +0530
CROSS OBJECTION (ST) NO. 18630 0F 2018
Mohan Vishnu Satardekar (since deceased)
Through LRs Prashant Prabhkar
Satardekar and ors. ...Appellants
Versus
The Life Insurance Corporation of India and
anr. ...Respondents
Mr. Atul Damle, Senior Advocate, i/b Mr. Avinash Fatangare,
for the Appellants.
Mr. Harihar Bhate, a/w Mr. Rupa Bhave, Ms. Divya Menon,
i/b Bhave and Co., for Respondent No.1.
CORAM: N. J. JAMADAR, J.
RESERVED ON: 18th AUGUST, 2022
PRONOUNCED ON: 17th FEBRUARY, 2023
JUDGMENT:-
1. This appeal is directed against a decree passed by the
learned Judge, City Civil Court, Greater Mumbai in S.C. Suit No.
8228 of 1984 whereby and whereunder the suit for specific
performance instituted by the appellants came to be dismissed.
2. For the sake of convenience and clarity, the parties are
hereinafter referred to in the capacity in which they were arrayed
before the trial Court.
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3. The background facts leading to this appeal can be stated,
in brief, as under:-
(a) The plaintiff Nos.1 to 5 claimed to be the
tenants of the premises forming part of the chawls namely
Mandodari, Tara, Bangali, Sita, Ahilya and Draupadi and
corrugated tin sheds situated at New Badam Wadi, V.P.
Road, Mumbai standing on a free hold land admeasuring
about 3032 sq. mts. (hereinafter referred to as the 'suit
property'), owned by the defendant - the Life Insurance
Corporation of India, a Public Sector Corporation
established under the provisions of Life Insurance
Corporation Act, 1956.
(b) The defendant Corporation had floated tenders
for sale of the suit property. The plaintiff Nos.1 to 5
claimed to have formed Girgaum Griha Nirman Mandal,
an Association of tenants, and submitted an offer to
purchase the suit property for a consideration of
Rs.4,25,000/- vide letter dated 20th January, 1981. Along
with the said offer the plaintiff Nos. 1 to 5 deposited a
sum of Rs. 50,000/- with the defendant which was duly
acknowledged by defendant by passing a receipt dated
22nd January, 1981. The said offer was accepted by the
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defendant vide letter dated 27th February, 1981
incorporating therein the material terms and conditions
of sale.
(c) It was, inter alia, provided that the suit property
was to be purchased for a consideration of Rs.
4,25,000/- on "as is where is basis". A sum of Rs.
50,000/- was already deposited. The balance amount of
Rs. 3,75,000/- was to be paid within one month of the
said acceptance of the offer. The plaintiffs shall get the
proposed society registered within three months from
the date of the execution of the agreement for purchase
and complete the transaction within six months from
the date of the agreement for purchase. Conveyance was
to be executed in favour of the co-operative housing
society proposed to be formed by the sitting tenants in
the suit property. If the society could not be registered
for any reason, the sale transaction shall be completed,
notwithstanding the non-registration of the society, and
the plaintiff would be liable to take conveyance of the
property and complete the sale transaction within the
stipulated period of six months.
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(d) The plaintiffs averred, a lengthy
correspondence, thereafter, ensued. Vide letter dated 27 th
March, 1981 the plaintiff called upon the defendant to give
list of tenants and title documents. Simultaneously, the
plaintiffs delivered a demand draft for the balance
consideration of Rs. 3,75,000/-. By a further
communication dated 31st March, 1981 the plaintiffs made
it clear that they had agreed to purchase the suit property
on behalf of the tenants. However, at that stage, only the
plaintiff Nos. 1 to 5 had contributed for the consideration.
The defendant was further informed that the plaintiffs were
making an earnest endeavor to form a cooperative society of
the tenants.
(e) In the further correspondence, that ensued
between the plaintiff Nos. 1 to 5 and defendant, the
plaintiffs conveyed the difficulties in forming co-operative
society in accordance with the letter of acceptance dated
27th February, 1981. Repeated request of the plaintiffs to
share the draft conveyance in order to execute the Deed of
Conveyance did not elicit any response.
(f) Eventually, vide letter dated 25th September,
1981 the defendant took an unreasonable and unjustifiable
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stand that it had offered to sale the suit property only to
the sitting tenants in the suit property. Initial offer by the
plaintiff was for and on behalf of the tenants in the suit
property and the defendant had accepted the said offer. In
the meanwhile, the defendant had received a grievance
from some of the tenants that no efforts were made by the
plaintiffs to approach the sitting tenants and form a
cooperative society of the tenants. Therefore, the defendant
was not inclined to accede to the request of the plaintiff
Nos. 1 to 5 to execute conveyance.
(g) Since the further correspondence, which the
plaintiff Nos.1 to 5 had with defendant, did not yield any
positive result, the plaintiffs were constrained to institute
the suit for a decree for specific performance of the
agreement for sale of the suit property along with
consequential reliefs of obtaining Income Tax Certificate
under section 230A of the Income Tax Act, 1961 and
permission of the competent authority under the provisions
of the Urban Land (Ceiling and Regulation) Act, 1976 and,
thereafter, execution of conveyance and delivery of
possession.
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(h) The defendant resisted the suit by filing a
written statement. The substance of the resistance put
forth by the defendant was that the defendant had accepted
the offer of the plaintiff Nos.1 to 5 as it was made to believe
that the offer was made for and on behalf of the sitting
tenants in the suit property. There was an express
representation on the part of the plaintiff Nos.1 to 5 that
they would form a cooperative society of the sitting tenants.
It was only on the strength of the said representation, the
defendant had agreed to sale the suit property in
accordance with the terms and conditions incorporated in
the letter of acceptance dated 27th February, 1981.
(i) The defendant contended that, it transpired that
out of plaintiff Nos.1 to 5 only plaintiff Nos.1 - Prabhakar
Satardekar and 4 - Arvind Datta Naik were the tenants of
the tenements in the suit property. False representation
was thus made, purportedly on behalf of the tenants as a
body under the name and style of Girgaum Griha Nirman
Mandal. Adverting to the lengthy correspondence which
ensued between the plaintiff Nos.1 to 5 and defendant it
was contended that draft conveyance forwarded on behalf
of the plaintiff Nos.1 to 5 did not contain any recital to the
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effect that the suit property was to be purchased for and on
behalf of the sitting tenants in the suit property. On the
contrary, bifurcation of individual share of plaintiff Nos.1 to
5 in the consideration parted with, was provided therein.
The plaintiff Nos.1 to 5 thus professed to purchase the suit
property in their individual capacity. This betrayed a
dubious design on the part of the plaintiff Nos. 1 to 5 to
acquire the suit property under a subterfuge of
representing a body of tenants.
(j) The defendant further contended that vide letter
dated 13th Augsut, 1981 some of the sitting tenants in the
suit property apprised the defendant that the plaintiffs had
not approached any of the tenants for the purpose of
forming cooperative society of tenants and no efforts were
made in that direction. In view of the aforesaid
development, according to the defendant, it was justified in
conveying to the plaintiffs that the defendant cannot
execute conveyance in favour of the plaintiffs as the
consent of defendant was vitiated by a false representation.
The defendant further asserted that vide letter dated 8 th
/11th December, 1985 the Government of India had advised
the defendant to execute the conveyance only with the
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proposed cooperative society of the sitting tenants. In the
circumstances, the claim of the plaintiff Nos. 1 to 5 for
specific performance of the agreement for sale does not
deserve to be countenanced.
4. It would be contextually relevant to note that during the
pendency of the suit on 16 th January, 2006 the plaintiff No. 6
(original defendant No.2) - New Badam Wadi Rahivashi Seva
Sangh took out a Chamber Summons No. 48 of 2006 to implead
it as a party defendant to the suit. By an order dated 19 th
December, 2006 the Chamber Summons was allowed and
plaintiff No. 6 came to be impleaded as defendant No. 2. In the
written statement filed on behalf of defendant No. 2 (now plaintiff
No. 6), it was, inter alia, contended that defendant No. 2 was the
real society of the sitting tenants in the suit property. The claim
of the plaintiff Nos.1 to 5 was thus resisted by defendant No.2.
5. Subsequently, pursuant to a purported understanding
arrived at between the plaintiff Nos.1 to 5 and defendant No. 2,
Chamber Summons No. 2183 of 2014 was taken out to transpose
defendant No. 2 as plaintiff No.6. Pursuant to an order dated 3 rd
July, 2015 defendant No. 2 came to be transposed as plaintiff No.
6. Thereupon, the defendant No. 1 (now sole defendant) filed an
additional written statement.
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6. The defendant assailed the claim of plaintiff No.6 for
specific performance of the contract on the ground that there
was no privity of contract between plaintiff No.6 and the
defendant as plaintiff No.6 was never a party to the contract and,
therefore, cannot profess to enforce specific performance of the
said contract. The defendant also adverted to the written
statement filed on behalf of defendant No.2, before its
transposition as plaintiff No.6, whereby defendant No.2 had
specifically contended that plaintiff Nos.1 to 5 were not entitled to
seek specific performance of the contract and categorically
opposed the reliefs sought by plaintiff Nos.1 to 5. Defendant
No.2 had also questioned the locus of the plaintiffs by contending
that only two of the five plaintiffs were, in fact, the tenants of the
tenements in the suit property. In substance, the amended
claim for specific performance in favour of plaintiff Nos.1 to 5 and
6 was resisted on the ground of absence of privity of contract and
diametrically opposite stand of plaintiff No.2 (defendant No.2
before transposition).
7. In the wake of the aforesaid pleadings, the issues were
settled thrice. First, whilst the contest was between the plaintiffs
and the defendant. Second, post the impleadment of defendant
No.2 - Society and the written statement on behalf of defendant
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No.2. Third, after the transposition of defendant No.2 as the
plaintiff.
8. The trial court recorded the evidence of three witnesses for
the plaintiffs namely; Arvind Datta Naik (PW-1); plaintiff No.4,
Mr. Harbans Singh Kohli (PW-2) and Mr. Sunil Sitaram Newalkar
(PW-3); a committee member of plaintiff No.6. The defendant
also examined three witnesses namely Vinod L. Bhoyar (DW-1),
Gajanan Mahadev Patil (DW-2) and Mrs. Kavita Shridharan (DW-
3) the officers of the defendant. The parties tendered a number
of documents for the perusal of the Court.
9. After evaluation of evidence and appraisal of the documents
tendered for perusal, the learned Judge, City Civil Court, was
persuaded to dismiss the suit by judgment and decree dated 30 th
September, 2016. The learned Judge found that the existence of
the agreement for sale of the suit property in accordance with
the terms and conditions incorporated in the letter dated 27 th
February, 1981 (Exhibit-29) was an admitted fact. Passing of the
entire consideration of Rs.4,25,000/- was also not in contest.
The learned Judge also came to the conclusion that the plaintiffs
had succeeded in proving that they were and have always been
ready and willing to perform their part of the contract. The issue
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of termination of contract by the defendant was also answered in
negative.
10. The plaintiffs were, however, non-suited on the ground that
the defendant had agreed to sale the suit property to the
plaintiffs only upon formation of Co-operative Housing Society of
the tenants in the suit property and, so far as plaintiff No.6,
there was no privity of contract between plaintiff No.6 and the
defendant. Since specific performance is an equitable relief,
plaintiff Nos.1 to 5 being guilty of making a false representation
that they were the representatives of the sitting tenants in the
suit property, in the opinion of the learned Judge, plaintiffs were
not entitled to the relief of specific performance of the contract.
11. Being aggrieved and dissatisfied, the plaintiffs have
preferred this appeal. The primary challenge to the impugned
decree is that having entered findings on all material points in
favour of the plaintiffs, the learned Judge committed a manifest
error in declining to pass a decree for specific performance,
especially when it is incontestible that plaintiff No.6 is a co-
operative society formed by the sitting tenants and the defendant
has taken a consistent stand that they had always been ready to
execute the conveyance in favour of a Co-operative Society of the
sitting tenants.
FA-777-2017.DOC
12. The defendant has also preferred a cross-objection, taking
exception to few of the findings recorded by the trial Court. In
particular, the defendant assailed the finding that there was a
valid agreement to sale the suit property in favour of the
plaintiffs. According to the defendant, there was no concluded
contract. Nor the finding of the trial Court that the defendant
had agreed to sale the suit property upon formation of a co-
operative housing society of sitting tenants is borne out by the
evidence on record.
13. In the light of the aforesaid pleadings and evidence, I have
heard Mr. Damle, the learned Senior Counsel for the appellants -
plaintiff Nos.1 to 6 and Mr. Bhave, the learned Counsel for the
respondent - defendant, at some length. The learned Counsel
took the Court through the pleadings and evidence.
14. Mr. Damle, the learned Senior Counsel for the appellants,
submitted that the trial Court fell in error in not properly
construing the terms of the contract incorporated in the letter of
acceptance dated 27th February, 1981 (Exhibit-29). Formation of
a Co-operative Housing Society of the tenants was not a sine qua
non for execution of the conveyance. The parties had specifically
provided for a situation where the plaintiffs could not form a Co-
operative Society of the tenants, and decided that,
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notwithstanding the non-formation of the society, plaintiff Nos.1
to 5 shall purchase the suit property. In the backdrop of such a
stipulation when plaintiff Nos.1 to 5 had parted with the entire
consideration and there is voluminous evidence to show the
willingness on the part of plaintiff Nos.1 to 5 to obtain the
conveyance, the trial Court was not at all justified in non-suiting
the plaintiffs.
15. In any event, plaintiff No.6 - Society having been formed,
and joined plaintiff Nos.1 to 5 in seeking the specific performance
of the contract, the basis of the objection on behalf of the
defendant that it had agreed to sale the property only to the Co-
operative Society of the sitting tenants gets dismantled. Inviting
the attention of the Court to the manner in which DW Nos.1 to 3
fared in the cross-examination and conceded in no uncertain
terms that the defendant had agreed and shown willingness to
execute a conveyance in favour of the Co-operative Society of the
sitting tenants, Mr. Damle would urge that the refusal to exercise
the discretion to grant the specific performance by the learned
Judge is unsustainable, and, thus, requires to be corrected in
appeal.
16. In opposition to this, Mr. Bhave, the learned Counsel for
the respondents, submitted with tenacity that the fact that the
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transaction since its inception was tainted with fraud cannot be
lost sight of. Not only under the letter dated 27 th February, 1981
(Exhibit-29) the defendant had made it explicitly clear that the
property would be conveyed in favour of the Society of the sitting
tenants but also in the offers, which were made by plaintiff Nos.1
to 5, dated 17th January, 1981 and 20th January, 1981 (Exhibit-
22), the defendant was made to believe that the offers were for
and on behalf of the sitting tenants, who were represented to be
the members of Girgaum Griha Nirman Mandal. Mr. Bhave laid
emphasis on the fact that there are clear and categorical
admissions to the effect that only plaintiff Nos.1 and 3 were the
tenants of the tenements in the suit premises. Moreover,
contrary to representation, it has emerged that Girgaum Griha
Nirman Mandal was, in fact, a partnership firm and Mr. Harbans
Singh Kohli (PW-2) had a domineering role in the said firm.
17. In the backdrop of this nature of evidence, according to Mr.
Bhave, the fact that plaintiff Nos.1 to 5 deliberately made a
fraudulent representation can hardly be contested. An inference
that the fraud had vitiated the consent of the defendant is
inexorable, urged Mr. Bhave. The learned Judge, thus,
misdirected himself in recording the finding that there was a
valid contract to sale the suit property.
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18. Mr. Bhave further urged that the transposition of plaintiff
No.6 does more harm than good to the cause of plaintiff Nos.1 to
5. On the date of the transaction, evidenced by the letter dated
27th February, 1981 (Exhibit-29), plaintiff No.6 was not at all in
the frame. On the own showing of the plaintiffs, plaintiff No.6
was registered in the year 2005. There was simply no privity of
contract between plaintiff No.6 and the defendant. In the context
of the written statement of the defendant No.2, before it came to
be transposed, no decree for specific performance can be
claimed, much less, granted, submitted Mr. Bhave.
19. To start with few uncontroverted facts. First, indisputably,
the defendant is the owner and the landlord of the suit property.
Second, again indisputably, the defendant was intending to sale
the suit property and had invited offers. Third, offers were made
by few of the plaintiffs to purchase the suit property for the
consideration of Rs.4,25,000/-. Fourth, by letter dated 27 th
February, 1981 (Exhibit-29) the offer was accepted subject to the
terms and conditions incorporated therein. Fifth, indisputably
the entire consideration of Rs.4,25,000/- has been paid to the
defendant as evidenced by the receipts dated 22 nd January, 1981
(Exhibit-28) and 31st March, 1981 (Exhibit-32). The controversy
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between the parties essentially revolves around the entity in
whose favour the defendant had agreed to sale the suit property.
20. In the context of the aforesaid core controversy, to gather
the real intention of the parties, it would be necessary to extract
the material terms of the letter dated 27 th February, 1981
(Exhibit-29). Relevant part of the said letter reads as under:
"1. You are agreeable to purchase the above mentioned
property on 'as is where is' basis for Rs.4,25,000/-.
2. You have already deposited with us a sum of
Rs.50,000/- (Rupees fifty thousand only) vide our Misc.
Receipt No.2355 dated 22nd January ..... as earnest money
deposit. You are also agreeable to deposit with us the entire
balance purchase price viz., Rs.3,75,000/- (Rupees three
lakhs seventy five thousand only) within one month from
the date of this letter, time being the essence of the contract.
3. You shall enter into an agreement for purchase of the
abovementioned property with the Life Insurance
Corporation of India as per the draft agreement enclosed,
within one month from the date of the acceptance of this
letter.
........
7. You shall get the proposed society registered within 3
months from the date of execution of the agreement for
purchase and in any event complete the purchase at your
cost within 6 months from the date of the agreement for
purchase.
8. The conveyance deed in respect of the above
mentioned property shall be executed in favour of the co-
operative housing society proposed to be formed by the
sitting ... of the above property.
9. If the society is not registered for any reason
whatsoever as provided in clause No. 7, the sale deed shall
be completed notwithstanding the non-registration of the
society and you shall be bound and liable to take the
conveyance of the property and complete the sale.... Within
the stipulated period of 6 months from the date of
agreement for purchase."
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21. It is trite that to gather the real intention of the parties to
the contract regard shall be had to the terms of the contract.
The contract shall be read as a whole is also well recognized. I
propose to ascertain the intent of the parties in the light of the
terms of the letter dated 27th February, 1981 (Exhibit-29) and the
attendant circumstances borne out by the record.
22. Mr. Bhave made an endeavour to urge that there was no
concluded contract. Support was sought to be drawn from
Clause 3 (extracted above) which provided for execution of an
agreement for purchase in accordance with the draft enclosed
with the letter dated 27th February, 1981 (Exhibit-29) within one
month of the acceptance thereof. Since no formal agreement for
purchase was executed, there was no concluded contract,
submitted Mr. Bhave.
23. I am afraid to accede to the aforesaid submission as the
letter dated 27th February, 1981 (Exhibit-27) incorporates all the
terms and conditions requisite to construe an agreement for sale.
It is well settled, a contract can be inferred from the terms of the
correspondence exchanged between the parties. In the case at
hand the acceptance of the offer by the plaintiffs is established
beyond the pale of controversy by payment of the entire balance
consideration of Rs.3,75,000/. Further correspondence
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exchanged between the parties unmistakably indicates that the
parties were ad idem as to the terms of the contract except the
entity in whose favour the conveyance was to be executed.
Hence, the submission on behalf of the respondents that there
was no concluded contract does not merit countenance.
24. Mr. Damle strenuously submitted that even the identity of
the purchaser was not in the arena of controversy. Comparing
and contrasting the stipulations 7, 8 and 9 (extracted above), Mr.
Damle would urge that the parties had factored in the possible
non-registration of the society of sitting tenants. Thus, the
defendant had stipulated in Clause 9 that if the Society is not
registered for any reason whatsoever the Sale Deed shall be
completed notwithstanding the non-registration of the society
and the plaintiff Nos.1 to 5 shall be bound and liable to take the
conveyance of the property and complete the sale transaction
within the stipulated period of six months from the date of
agreement for purchase. Non formation of the society of the
sitting tenants was thus a mere subterfuge to avoid the
obligation under the contract, urged Mr. Damle.
25. Mr. Bhave joined the issue by canvassing a submission that
Clause (9) cannot be read in isolation. It has to be read not only
in conjunction with the other stipulations in the letter dated 27 th
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February, 1981 (Exhibit-29) but also the correspondence which
preceded and succeeded the letter dated 27th February, 1981
(Exhibit-29) and the attendant circumstances.
26. The aforesaid submission of Mr. Bhave appears impeccable.
Upon a meaningful reading of the letter dated 27th February,
1981 (Exhibit-29), as a whole, the intent of the defendant to effect
the sale of the suit property in favour of the Society of the sitting
tenants becomes manifest. The opening part of the said letter
indicates in no uncertain terms that the defendant reckoned that
the offer was submitted on behalf of the sitting tenants vide letter
dated 20th January, 1981 (Exhibit-22). Clause 7 makes it further
clear that the defendant called upon the signatories to the said
letter dated 20th January, 1981 (Exhibit-22) to get a Society of the
tenants registered within three months from the date of the
execution of the agreement for purchase. In Clause 8, the
defendant made it abundantly clear that the conveyance will be
executed in favour of the Co-operative Housing Society proposed
to be formed by the sitting tenants in the suit property.
27. The letter which contained the offer, accepted by the
defendant vide letter dated 27th February, 1981 (Exhibit-29),
make the position absolutely clear. The letter dated 20 th January,
1981 (Exhibit-22) was addressed on the letter head of Girgaum
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Griha Nirman Mandal. It was signed by M. V. Satardekar,
Gajanan Vartak and Tejprakash Jaiswal - plaintiff No.5, for and
on behalf of Girgaum Griha Nirman Mandal. It expressly records
that the signatories were tenants of the buildings forming part of
the suit property and they proposed to purchase the suit
property on behalf of the tenants. It was reiterated that the
signatories desired to purchase the suit property for and on
behalf of the tenants thereof and sought preferential right to
purchase in the said capacity of the sitting tenants. It was this
offer, which was accepted by the defendant under letter dated
27th February, 1981 (Exhibit-29).
28. When plaintiff Nos.1 to 5 sought the execution of
instrument in their favour, the defendant, vide letter dated 4 th
March, 1981, made it's stand clear that the fact that the
consideration was contributed by plaintiff Nos.1 to 5 did not
entitle them to seek the execution of conveyance in their favour
as in accordance with the agreed term, the conveyance was to be
executed in favour of a Co-operative Housing Society. It would be
contextually relevant to note that in the draft conveyance shared
by plaintiff Nos.1 to 5 alongwith the letter dated 8th August, 1981
(Exhibit-67) the plaintiff Nos.1 to 5 professd to purchase the
property in the capacity of the individual purchasers and the
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specific shares of plaintiff Nos.1 to 5 in the corpus of
consideration were also provided.
29. It would be superfluous to refer to the further
correspondence exchanged between the parties except to note
that plaintiff Nos.1 to 5 could not succeed in forming a Co-
operative Housing Society of the sitting tenants and insisted on
execution of the conveyance in their individual names on the
strength of Clause 9 of the letter dated 27 th February, 1981
(Exhibit-29). It would be suffice to make a reference to the
communication dated 25th September, 1981 (Exhibit-34) in
response to the letter dated 5th September, 1981 (Exhibit-33),
emanating from the defendant to the effect that the defendant
had accepted the offer submitted by a group of tenants on behalf
of the sitting tenants and not on behalf of five persons whose
names were shown in the draft conveyance as purchasers of the
said property in their individual capacity.
30. The aforesaid documents, if construed in conjunction with
the terms of the letter dated 27 th February, 1981 (Exhibit-29),
make it explicitly clear that not only there was an offer on the
part of the signatories to the letter dated 20 th January, 1981
(Exhibit-22) that the suit property was to be purchased for and
on behalf of the sitting tenants but the defendant construed the
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same as an offer on behalf of the sitting tenants. From this
standpoint in Clause 9, banked upon by plaintiff Nos. 1 to 5
which stipulated that even in the event of non-formation of the
Co-operative Society of the sitting tenants, plaintiff Nos.1 to 5
shall purchase the property, cannot be construed torn out of
context.
31. What is of decisive significance is the representation which
was made by the signatories to the offer letters dated 17 th
January, 1981 and 20th January, 1981 (Exhibit-22). The
defendant was made to believe that the offer was for and on
behalf of the tenants. The defendant explicitly accepted the offer
made on behalf of the sitting tenants. Stipulations were,
therefore, made in the letter of acceptance dated 27 th February,
1981 (Exhibit-29). In this context, the trial Court, in my view,
committed no error in arriving at a finding that the defendant
had agreed to effect the sale in favour of the Co-operative Society
of the sitting tenants. This has also been the consistent stand of
the defendant. This stand is required to be appreciated in the
light of the character of the defendant as a public sector
enterprise. There was thus clear and explicit intent to convey the
property in favour of the tenants.
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32. Mr. Bhave made an endeavor to draw home the point that
the false representation made by plaintiff Nos.1 to 5 rendered the
agreement void. Mr. Bhave pressed into service the
circumstances which according to him indicate that plaintiff
Nos.1 to 5 had a design to indulge in profiteering by purchasing
the suit property in their individual names.
33. There is no evidence to indicate that Girgaum Griha
Nirman Mandal was registered as a society when the
representations were made by plaintiff Nos.1 to 5. Nor there is
evidence to demonstrate that at any subsequent point of time
Giragaon Grihanirman Mandal came to be registered as the Co-
operative Society of the sitting tenants in the suit property. In
contrast, the correspondence exchanged between the parties
shows that plaintiff Nos.1 to 5 claimed to have encountered
difficulties in forming the Co-operative Society of the sitting
tenants and, thus, instead sought the conveyance in their
individual names.
34. The matter does not rest at mere non-registration of the
society, when the offer was made, and subsequent failure to
register the Society. What impairs the plaintiffs case is the legal
character of Girgaum Griha Nirman Mandal, emerged from the
record. PW-2 asserted that Girgaum Griha Nirman Mandal came
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to be registered as a partnership firm under a Deed of
Partnership dated 7th March, 1983 executed by and between him
and plaintiff Nos.1, 2 to 4 and one Bhupindersing Shetty. The
said firm was carrying on the business of builders, contractors
and dealers and agents in real estate Mr. Harbans Singh Kohli
(PW-2) conceded in the cross-examination that Mr. R. M. Patel,
and Mr. Tejprakash Jaiswal, plaintiff Nos.3 and 5 were not the
tenants of any tenements in the suit property. Mr. Bhupinder
Shetty joined Girgaum Griha Nirman Mandal in the year 1982 in
place of Mr. Tejprakash Jaiswal - plaintiff No.5. Mr. Shetty took
over the rights of Mr. Jaiswal for consideration. Whereas he had
taken over the rights of Mr. R. M. Patel - plaintiff No.3.
35. The situation which thus obtains is that when the offer was
made the plaintiffs knew that all of them were not the tenants of
the tenements in the suit property. Secondly, they were aware
that Girgaum Griha Nirman Mandal was not a society, much less
of the sitting tenants in the suit property. Thirdly, it was a firm
engaged in the business of builders and contractors. Fourthly,
the entire consideration was contributed by plaintiff Nos.1 to 5 in
specific proportion, who also sought the conveyance of the
property with the rights corresponding to their share in the
consideration. All these factors lead to an inescapable inference
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that a facade of representing the sitting tenants in the suit
property was created and the defendant was made to believe and
accept the said offer.
36. The aforesaid inference, however, does not necessarily
render the agreement void, as was sought to be urged on behalf
of the defendant. There is an essential distinction between a
fraud or misrepresentation as to the character of the instrument
and contents thereof. In the case at hand, the defendant was
fully aware of the character of the transaction and the jural
relationship sought to be established thereunder. The defendant
knew that the property was to be conveyed. However, the
misrepresentation was as to the entity for whom the offer was
made and in whose favour the sale was to be effected.
37. A useful reference, in this context, can be made to the
judgment of the Supreme Court in the case of Ningawwa vs.
Byrappa Shiddappa Hireknrabar and others1. The relevant
paragraphs read as under:-
4] On behalf of the respondents Mr. Naunit Lal,
however, stressed the argument that the trial court
was wrong in holding that the gift deed was void on
account of the perpetration of fraud. It was
submitted that it was only a voidable transaction
and the suit for setting aside the gift deed would be
governed by Article 95 of the Indian Limitation Act.
In our opinion, the proposition contented for by Mr.
Naunit Lal must be accepted as correct. It is well-
1AIR 1968 SCC 956.
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established that a contract or other transaction
induced or ainted by fraud is not void, but only
voidable at the option of the arty defrauded. Until it
is avoided, the transaction is valid, so at third
parties without notice of the fraud may in the
meantime aquire rights and interests in the matter
which they may enforce against the party defrauded.
"The fact that the contract has been duced by
fraud does not make the contract void or prevent the
property from passing, but merely gives the party
defrauded a thoght on discovering the fraud to elect
whether he shall continue to treat the contract as
binding or disaffirm the contract and resume the
property, If it can be shown that the party defrauded
has at any time after knowledge of the fraud either
by express words or by unequivocal acts affirmed the
contract, his election determined for ever. The party
defrauded may keep the question open so long as he
does nothing to affirm the contact. Clough v. L. & N.
W. Ry., (1871) LR 7 Ex 26 at P.34.
5] The legal position will be different if there is a
fraudulent misrepresentation not merely as to the
contents of the document out as to its character. The
authorities make a clear distinction between
fraudulent misrepresentation as to the character of
the document and fraudulent misrepresentation as
to the contents Thereof. With reference to the former,
it has been held that the Transaction is void,.while
in the case of the latter, it is merely voidable. In
Foster v. Mackinon(2) the action was by the endorsee
of a bill of exchange. The defendant pleaded that he
endorsed the bill on a fraudulent representation by
the acceptor that he was signing a guarantee. In
holding that such a plea was admissible, the Court
observed :
"It (signature) is invalid not merely on the ground
of fraud, where fraud exists, but on the ground that
the mind of the signer did not accompany the
signature; in other words, that he never intended to
sign, and therefore in contemplation of law never did
sign, the contract to which his name is appended ....
The defendant never intended to sign that contract
or any such contract. He never intended to put his
name to any instrument that then was or thereafter
might become negotiable. He was deceived, not
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merely as to the legal effect, but as to the ,actual
contents' of the instrument."
This decision has been followed by the Indian
courts-Sanni Bibi v. Siddik Hossain, AIR 1919 Cal
728 and Brindaban v. Dhurba Charan, AIR 1929 Cal
606. It is not the contention of the appellant in the
present case that there was any fraudulent
misrepresentation as to the character of the gift deed
but Shiddappa fraudulently included in the gift deed
plots 91 and 92 of Lingadahalli village without her
knowledge. We are accordingly of the opinion that
the transaction of gift was voidable and not void and
the suit must be brought within the time prescribed
under Article 95 of the Limitation Act.
38. The aforesaid judgment was followed by the Supreme Court
in the case of Dularia Devi vs. Janardan Singh and Others2.
39. In the light of the aforesaid exposition of law, since the
misrepresentation, in the instant case, is not as regards the
character of the transaction, the agreement would not be void
and would be voidable at the option of the defendant.
40. An endeavour was made on behalf of the plaintiffs to draw
home the point that there was never a proper termination of the
contract nor there is material to indicate that the defendant
professed to avoid the contract. This submission is simply
against the weight of the record. The defendant asserted, time
and again, that it had never agreed to execute the conveyance in
favour of plaintiff Nos.1 to 5 and the agreed term was to effect the
sale in favour of a co-operative society of the sitting tenants. On
21990 (Supp) Supreme Court Cases 216.
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the said count, the defendant declined to execute the conveyance
in favour of plaintiff Nos.1 to 5. This constitutes a clear
manifestation of intent to avoid the contract. The learned Judge,
City Civil Court, did not advert to this aspect of the matter and
went on to record a finding that the defendant did not terminate
the contract. To this extent, the learned Judge was clearly in
error.
41. Mr. Damle attempted to salvage the position by urging, with
a degree of vehemence that, with the incorporation of plaintiff
No.6 society which is admitted to be formed by the sitting
tenants in the suit property, the defendant, can still be called
upon to perform its obligation. Mr. Damle would further urge
that it has been the consistent stand of the defendant, as
conceded to by the witnesses examined on behalf of the
defendant, that the defendant was willing to execute the
conveyance in favour of the society of the sitting tenants.
Therefore, according to Mr. Damle, there is no impeadment in
passing a decree for specific performance.
42. I find it rather difficult to accede to this submission which
seeks to over-simplify the matter. First and foremost, there was
no privity of contract between plaintiff No.6 and the defendant.
Secondly, plaintiff No.6 was not incorporated on the date the
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defendant accepted the offer by letter dated 27 th February, 1981
(Exhibit-29). Thirdly, it is not the case that the contract was
executed by the promoters for and on behalf of plaintiff No.6 and,
therefore, now plaintiff No.6 can seek enforcement of the
contract. Fourthly, plaintiff No.6 came to be registered as a
society after almost 25 years of the acceptance of the offer i.e. on
4th October, 2005. Post incorporation plaintiff No.6 initially
sought to resist the plaintiff Nos.1 to 5s prayers for specific
performance of the contract. Fifthly, it is the case of plaintiff
No.6 that a society namely Panchkanya Co-operative Housing
Society was proposed to be formed and, as conceded by Mr. Sunil
Newalkar (PW-3), a letter (Exhibit-56) was addressed on 11 th
October, 2010 proposing new terms and conditions for the
transfer of the suit property.
43. The aforesaid factors cumulatively lead to no other
inference than that of complete absence of privity of contract
between plaintiff No.6 and the defendant. Nor there is a case of
novation of contract. In the circumstances, the endeavour on the
part of the plaintiffs to now seek the specific performance of the
contract for the reason that the defendant had agreed to convey
the suit property in favour of a society of the sitting tenants does
not merit acceptance.
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44. The upshot of the aforesaid consideration is that the
defendant was within its rights in avoiding the agreement as its
consent was vitiated by misrepresentation. Consequently, it
would be unwarranted to delve into the considerations which are
germane for determining the exercise of discretion to grant the
specific performance of a contract.
45. One aspect which warrants consideration is the
indisputable fact of parting of entire consideration by plaintiff
Nos.1 to 5. In the plaint, the plaintiffs have not sought the relief
of refund of the consideration. Nonetheless, in my view, the
Court is not precluded from ordering the refund of the
consideration. Absence of prayer does not constitute an
impeadment for granting said relief for a substantive reason.
46. Under Section 64 of the Indian Contract Act, when a
person at whose option a contract is voidable rescinds it, he is
under an obligation to restore the benefit derived under the said
contract. The defendant is therefore liable to refund the amount
of consideration to plaintiff Nos.1 to 5 which it had indubitably
received under the agreement. I am also of the considered view
that the defendant should pay interest on the said amount at a
reasonable rate.
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47. I must note that the defendant had made an endeavour to
demonstrate that the amount was received under a
miscellaneous head and had not been appropriated. In my view,
the question as to how the defendant had dealt with the said
amount ought not preclude the Court from awarding interest. It
is more so for the status of the defendant as a public sector
enterprise. To this extent, the appeal deserves to be allowed.
Resultantly, the decree is required to be modified.
Hence, the following order:
:ORDER:
(i) The appeal stands partly allowed.
(ii) The suit stands partly decreed.
(iii) The defendant shall refund the amount of
Rs.4,25,000/- to plaintiff Nos.1 to 5 alongwith simple
interest at the rate of 6% p.a. within a period of six
weeks from the date of this order.
(iv) The aforesaid amount be deposited in the trial Court.
(v) If the aforesaid amount alongwith interest is not
deposited within the stipulated period, the amount
shall carry interest at the rate of 9% p.a. till payment
and/or realization.
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(vi) The decree stands modified to the aforesaid extent.
(vii) The cross-objection stands dismissed.
(viii) The parties shall bear their respective costs
throughout.
(xi) Decree be drawn accordingly.
(x) Interim application(s), if any, stand(s) disposed.
[N. J. JAMADAR, J.]
