Sh. Arun Jaitly vs M/S. Ishwar Industries & Ors.
2009 Latest Caselaw 2809 Del

*           HIGH COURT OF DELHI AT NEW DELHI

+                 CS (OS) No. 3276/1989


                           Date of decision : July 24, 2009


#     SH. ARUN JAITLY                      ..... PLAINTIFF
!               Through : Mr. Ravi Sikri, Advocate with
                          Mr. Saket Sikri, Advocate


                          Versus


$     M/S. ISHWAR INDUSTRIES & ORS. ......DEFENDANTS
^              Through : Mr. N.K. Kantawala, Advocate
                         with Mr. Sanjay K. Shandilya,
                         Adv. for D-1.
                         Mr. J.M. Bari, Advocate for D-2.

%
      CORAM:
      HON'BLE MS. JUSTICE ARUNA SURESH

     (1) Whether reporters of local paper may be
         allowed to see the judgment?

     (2) To be referred to the reporter or not?        Yes

     (3) Whether the judgment should be reported       Yes
         in the Digest ?

                        JUDGMENT

ARUNA SURESH, J.

1. Plaintiff filed this suit under Order 37 of the Civil

Procedure Code (hereinafter referred to as CPC) for

recovery of Rs.28,30,000/- against the defendants

along with interest @18% per annum from the date

of institution of the suit till realisation. Defendant

No.3 being a bank was a proforma party and its

name was deleted from the array of parties vide

order dated 6.9.1990 and this Court ordered the

registration of the suit under Order 37 CPC.

Summons in the prescribed proforma were duly

served upon the defendants. Both the defendants

filed their application for leave to defend. The

defendants were granted unconditional leave to

defend the present suit.

2. Briefly narrated, the case of the plaintiff is that he is

an architect and developer by profession.

Defendant No.1 engaged professional services of

the plaintiff. An agreement dated 8.1.1985 was

executed between defendant No.1 and Sh. R.C.

Goenka for the development of Tribhuvan Industrial

Cum Commercial Complex with approval from the

Bank of India vide their letter dated 23.4.1985 so as

to complete flatted factories/commercial buildings

etc. Vide letter dated 29.5.1985, R.C. Goenka

permitted defendant No.1 to engage the services of

any other party or builder for development of the

said land. The same was confirmed by defendant

No.1 on 29.5.1985 itself.

3. Thereafter an agreement dated 20.8.1985 was

executed between the plaintiff and defendant No.1

for the said work of additions, alterations and

renovation as per specifications and plans mutually

agreed at a cost of Rs.4 lacs to be borne by the

plaintiff. As against the deposit of Rs.10 lacs

security, plaintiff deposited Rs. 5 lacs and remaining

Rs.5 lacs were to be deposited by him on receipt of

approval from Bank of India in his name for

redevelopment of the property and the possession

of the site was to be given to the plaintiff on

20.8.1985.

4. Defendant No.1 entered into an agreement with

defendant No.2 on 4.2.1986 without the knowledge

of the plaintiff for the development of the same

block and the name of the plaintiff featured in sub-

clause 8 of the said agreement to the effect that

plaintiff would be consulted as an architect from

time to time.

5. On 12.7.1986 defendant No.1 made a proposal to

the plaintiff and on 14.7.1986 he gave in writing

that out of the total sum of Rs.15 lacs agreed to be

paid, Rs.5 lacs to 8 lacs would be paid by 17.8.1986

and balance amount would be paid by December

1986 and further area of 1275 square feet would be

retained by the plaintiff in the proposed complex

against security deposit of Rs. 5 lacs.

6. Plaintiff sent a letter on 17.12.1986 to defendant

No.1 asking him not to disturb the possession of the

structure since defendant No.1 had failed to make

any payment till that date. A memorandum of

understanding was executed inter se the parties on

18.12.1986 and it was agreed that Rs.15 lacs would

be paid by defendant No.1 or by defendant No.2 in

the following manner:

(a) Rs. 3 lakhs by cheque/cash on or before 22.12.1986;

(b) Rs. 2 lakhs by cheque/cash on or before 31.12.1986;

(c) Rs.2.5 lakhs by cheque/cash by 31st January 1987.

(d) Thereafter further monthly installment of Rs.1.5 lakhs is to be paid on or before the end of each month commencing from February 1987 to June 1987.

7. Plaintiff received only a sum of Rs.3 lacs from

defendant No.2 in part compliance of the

memorandum of understanding and thereafter he

did not receive any amount from the defendants.

Plaintiff wrote a letter dated 9.7.1987 and another

letter dated 10.7.1989 calling upon the defendants

to make the payment as per MoU. He also wrote a

letter dated 28.10.1988 to defendant No.1 asking

him to mark the area of the flat which would be

allotted to him in the new complex under

construction. Thereafter plaintiff sent a legal

notice dated 12.11.1989 to the defendants asking

them to make payments along with possession of

1275 square feet in Tribhuvan Complex within

seven days of receipt of notice which was duly

received by the defendants on 15.11.1989. Since

defendants failed to honour the MoU, plaintiff filed

the present suit for recovery of money.

8. Defendant No.2 sent a letter to the plaintiff on

20.7.1989 admitting that possession of the office

block Phase-I was taken over from the plaintiff with

his consent along with defendant No.1 in terms of

the MoU and he also admitted his liability to pay

Rs.25 lacs to the plaintiff out of the money

recovered from the sale of owners allocation and

also confirmed the payment of Rs.3 lacs to the

plaintiff.

9. Defendant No.1 has contested the suit of the

plaintiff contending inter alia that the suit is not

maintainable as there is no privity of contract

between the plaintiff and defendant No.1 in respect

of the subject matter of the suit as it is based on the

memorandum of understanding, fulfillment of which

is based on the conditions that it would be reduced

to a written regular agreement and that no such

written agreement was executed, that without

execution of the regular agreement as stipulated in

the MoU and in the absence of a resolution of the

company authorizing such execution it is not bound

to transfer the property, that the said memorandum

of understanding in the absence of an agreement

and resolution is not enforceable against it, that the

alleged memorandum of understanding is without

any consideration, vague, uncertain, unfair and

unconscionable being against public policy, being

illegal and void is not enforceable in law, that it is

defendant No.2 who is solely liable to the plaintiff

under the memorandum of understanding dated

18.12.1986, that defendant no.2 admitted his

liability in reply to the notice received from plaintiff

and part payment was also received by the plaintiff

from defendant No.2, that therefore it stood

released of its liability in regard to the alleged debt,

that the suit is barred by period of limitation.

10. The defendant No.1 had obtained necessary

sanction from the Bank of India on 14.9.1985 but

plaintiff failed to pay the security amount of Rs.5

lacs as per the agreement, though the demand for

deposit of security was made vide letter dated

13.9.1985. Plaintiff never carried out any work at

Sahibabad property from his own money totalling

Rs.4 lacs. The work at Sahibabad was carried out in

the premises of another company namely M/s Allied

Fiber Glass Products Pvt. Ltd. by Sh. Navin Jaitly

under the name and style Jaitly Construction,

Engineers and Contractors. The plaintiff therefore,

had no connection with the said transaction at

Sahibabad.

11. On approval granted by the Bank of India for

development of the property an agreement dated

4.2.1986 was entered into between defendant No.1

company and R.C. Goenka in supersession of the

earlier agreement dated 5.1.1985. Plaintiff never

performed his part of the contract dated 20.8.1985.

A fresh contract was entered into between plaintiff

and defendant No.1 on 12.7.1986 whereby the

parties gave up their rights under the previous

agreement dated 20.8.1985 and Rs.5 lacs deposited

earlier were to be treated as consideration for sale

by way of allotment of area of 1250 sq. ft. in the

Delhi property developed in terms of the

agreement. The plaintiff also agreed to forego the

interest as defendant company had confirmed

allotment of the said land to the plaintiff. In the

meantime, construction as per agreement dated

4.2.1986 had started but due to circumstances

beyond control, the same got delayed. Agreement

dated 12.7.1986 still continued as it was neither

revoked nor cancelled. Therefore, both the parties

were bound by the said agreement. The written

note dated 14.7.1986 was not written by defendant

No.1 and was not binding upon it. There was no

occasion at all for the payment of Rs.15 lacs to be

made to the plaintiff as claimed. Defendant No.1

has also challenged the validity of the written note

being in violation of Section 23 of the Contract Act.

It is also denied that letter dated 10.7.1986 had any

reference to the alleged MoU. It is the defendant

No.2 who has admitted his liability of Rs.25 lacs

towards the plaintiff and therefore, the matter was

between defendant No.2 and plaintiff and defendant

No.1 had no concern with the same. The suit as

against the defendant No.1 is liable to be dismissed.

12. Defendant No.2 in his written statement has

contended inter alia that in the MoU dated

18.12.1986, he is only a confirming party and no

decree can be passed against him as he is not liable

to satisfy the claim of the plaintiff. He is neither

liable on the original cause of action nor he is surety

or guarantor for and on behalf of defendant No.1.

Agreement dated 4.2.1986 was entered into

between defendant No.1 and M/s. B.D. Developers,

an Association of persons including the defendant

No.1 with the knowledge, consent and intimation of

the plaintiff. The alleged agreement dated

18.12.1986 is without consideration, is

unenforceable against defendant No.2 and is only a

memorandum and parties never intended to

enforce the same and is therefore not binding on

the parties. Regular agreement regarding the

terms contained in the MoU was to be entered into

between the parties. It was incumbent upon the

parties to file said MoU with appropriate authorities

in Form 37 to seek permission under Section 269

UC of the Income Tax Act within a period of 15 days

and since Form 37-I was not filed, the document lost

its force and therefore, the suit is not maintainable.

The property at Ishwar Nagar was mortgaged with

Bank of India. Therefore, defendant No.1 and

defendant No.2 had entered into an agreement

dated 4.2.1986 for development of the property

with a view to repay the loan amount. For that

purpose defendant No.2 had deposited Rs.42 lacs

with defendant No.1 as security for development of

the property. The agreement was entered into with

a tacit understanding with the Bank of India that out

of the sale proceeds by selling the developed

property the debt of the bank would be paid by

defendant No.1. Defendant No.1 was to receive

80% of the sale proceeds and defendant No.2 was

to receive 20% for adjusting the security amount

deposited and the interest accrued thereon. Vide

letter dated 2.12.1988, the Bank of India had

objected the claims or lien of the plaintiff. It was

the absolute liability of defendant No.1 to satisfy

the claim if any of the plaintiff. Defendant No.2 has

no objection if the claims, if any, of the plaintiff are

directed to be satisfied for allocation of defendant

No.1. Bank of India has not recognized earlier, the

agreement dated 20.8.1985 as it was entered into

without the approval and consent of the bank who

is the mortgagee of property of defendant No.1 at

Ishwar Nagar. Memorandum of understanding had

no genesis in the agreement dated 8.1.1985 and

20.8.1985. It was alleged that MoU was not

executed with a view to save the agreement dated

4.2.1986 as alleged though the name of the plaintiff

appears in clause 8 in the said agreement as

architect consultant. There is no cause of action for

filing the suit against defendant No.2. Defendant

No.2 was not in a position to make any payment for

and on behalf defendant No.1 without the

permission of Bank of India or of defendant No.1

with prior approval of Bank of India. The suit of the

plaintiff as against defendant No.2 is without any

cause of action and is not maintainable and is liable

to be dismissed.

13. Plaintiff filed his replication in answer to the written

statements of both defendants wherein he has

reasserted his stand taken in the plaint and has

denied the averments of the defendants as

contained in their respective written statements.

14. Upon the pleadings of the parties, the following

issues were settled for adjudication of the disputes

inter se them:

1. Whether the plaintiff is entitled to a sum of Rs.28,30,000/- as claimed in the suit? OPP

2. Whether the plaintiff is entitled to receive interest on the said amount, if so, at what rate and for which period? OPP

3. Whether in the alternative, the plaintiff is entitled to a sum of Rs.18,30,000/- together with interest @18% p.a. from the date of suit together with vacant possession of space in the Tribhuvan Complex measuring 1275 sq.ft. as per the memorandum of understanding dated 18.12.1986 along with interest [email protected]% on Rs.10 lacs being the cost of the space, as the same was to be handed over on or before 30.9.1987? OPP

4. Whether the defendants 1 and 2 are jointly and severally liable for the dues to the plaintiff? OPP

5. Whether the memorandum of understanding dated 18.12.1986 is without consideration as against defendant No.2 and is not enforceable as set out in paras 3 and 4 of the preliminary objections of the written statement of defendant No.2? OPP

6. Whether the plaint does not disclose any cause of action against defendant No.2? OPD

7. Whether the memorandum of understanding dated 18.12.1986 was not executed on behalf of defendant No.1 and as such is not binding on

defendant No.1?

8. Whether the suit is barred by limitation ? OPD

9. Relief.

15. I have heard Mr. Ravi Sikri, learned counsel for the

plaintiff, Mr. N.K. Kantawala, learned counsel for the

defendant No.1 and Mr. J.M. Bari, learned counsel

for Defendant No.2 and have carefully perused the

record. My observations on the issues as above are

as follows:

16. Defendant No.1 has challenged the maintainability

of the suit on the grounds that it is barred by period

of limitation. Learned counsel for the defendant

No.2 conceded that defendant No.2 has not joined

any issue on the aspect of limitation.

17. Period of limitation for filing a suit for recovery of

money is three years from the date when the work

is done by the plaintiff for the defendant at his

request where no time has been fixed for payment.

18. By virtue of Section 18 of the Limitation Act

(hereinafter referred to as Act) where before the

expiration of the prescribed period for a suit in

respect of any property or right, an

acknowledgment of liability in respect of such

property or right has been made in writing signed

by the party against whom such property or right is

claimed or by any person through whom he derives

his title or liability, a fresh period of limitation starts

running against the party who is to discharge the

liability from the time when the acknowledgment is

so signed. Under section 19 of the Act where a

part payment on account of debt has been made,

fresh period of limitation is to be computed from the

time when the payment is made. Section 20 of the

Act speaks of effect of acknowledgment of payment

made by another person for and on behalf of the

person who under the law is liable to make payment

in discharge of his liability.

19. Defendant No.1 had entered into an agreement with

the plaintiff on 20.8.1985 (Ex.-P5). Thereafter

another agreement dated 12.7.1986 (Ex.-P8) was

executed between the plaintiff and defendant No.1

whereby the parties revoked all their rights and

liabilities arising out of the agreement dated

20.8.1985 and defendant No.1 agreed to provide

1250 sq. ft. covered area to the plaintiff in

consideration of the security deposit of Rs.5 lacs

already made by him. An acknowledgment letter

was issued on 14.7.1986 (Ex.-P9) by defendant No.1

through its director Bharat Bhaskar wherein it

admitted its liability towards the plaintiff and

agreed to the terms along with the time schedule

for making the payments whereby complete

payment of Rs.15 lacs was to be made by

December, 1986 and the flat was to be allotted to

the plaintiff. However, no deadline was set for the

allotment of the house. As per the said letter,

proper agreement for allotment was to be signed by

the plaintiff when defendant No.1 required the

same to be signed.

20. In the meantime, defendant No. 1 and defendant

No.2 entered into a development agreement dated

4.2.1986 and they agreed among themselves to

retain the plaintiff as their consultant architect on

behalf of defendant No.1. This resulted into

execution of a Memorandum of Understanding

dated 18.12.1986 (Ex.-P1) between the plaintiff and

defendants No. 1 and 2. In this memorandum of

understanding defendant No.1 admitted its liability

to pay sum of Rs.15 lacs to the plaintiff in

installments. Parties admit having executed the

MoU dated 18.12.1986. Defendant No.2 made

payment of Rs.3 lacs being the first installment in

terms of the MoU in the last week of December

1986. However, no payment was made later on.

The present suit was filed by the plaintiff on

4.12.1989. Therefore, under the circumstances,

fresh period of limitation started running against the

defendants on execution of memorandum of

understanding as well as when part payment of

Rs.3 lacs was made by defendant No.2.

21. Since the present suit has been filed on 4.12.1989,

the acknowledgment was lastly made on

18.12.1986 and the part payment was made in the

last week of December, 1986, the suit having been

filed within three years of the acknowledgment and

part payment is well within the period of limitation.

22. Learned counsel for the defendant No.2 has argued

that plaintiff has no right to sue defendant No.2 as

he had acted as an agent for and on behalf of

defendant No.1 and was not a party to the property

development agreement dated 4.2.1986 executed

between the plaintiff and defendant No.1. It is

further argued that primary liability to pay the dues

is that of defendant No.1. Defendant No.2 only

became a collection agent for defendant No.1 from

the owners of the site and payment to the plaintiff

was to be made by him from the amount so

collected. It is impressed upon that under the

circumstances there is no cause of action for the

plaintiff to file the present suit against him.

23. Learned counsel for the plaintiff has submitted that

plaintiff has filed the present suit for recovery of

amounts due and payable to the plaintiff by

defendants No. 1 and 2 which were admitted by

defendants and reduced to writing in the form of

MoU dated 18.12.1986 wherein defendant No.2

agreed to make payment to the plaintiff due from

defendant No.1 and therefore, a cause of action has

accrued in favour of the plaintiff and against the

defendant No.2 to file the present suit for recovery

of money against him.

24. Before MoU was executed on 18.12.1986 defendant

No.1 had written in hand that 1275 sq. ft. to be

retained and Rs.15 lacs to be paid in cash in

installments. Rs.8 lacs to be paid by 17th August,

1986 and balance amount was to be paid by

December, 1986. This document is dated

14.7.1986 (Ex.-P9) and is signed by Mr. Bharat

Bhaskar, the director of defendant No.1 company.

Though initially defendant No.1 denied having

executed any such writing but at the stage of

admission and denial of the documents, Bharat

Bhaskar admitted this document. MoU dated

18.12.1986 (Ex.-P1) is an admitted document. In

the MoU defendant No.2 has been described as

confirming party. The relevant part of the MoU qua

defendant No.2 reads as follows:

"This understanding supersedes all other previous agreements, understandings, writings or any other document executed between the first party and the second party or confirmed by the third party in respect of the property at Ishwar Nagar belonging to Ishwar Industries Ltd. Broadly the terms as agreed are:

A sum of Rs.15,00,000/- (Fifteen lakhs) payable to the second party, will be paid either by the first party or the confirming party in the following manner....."

25. Since defendant No.2 has admitted the execution of

this MoU and also admits that this amount was

payable by defendant No.1 to plaintiff and had

undertaken to make the payment for and on behalf

of defendant No.1, the defendant No.2 admitted his

liability.

26. Cause of action consists of bundle of facts which

give cause to the plaintiff to enforce his legal rights

for settlement in a court of law. The cause of action

therefore means a right to sue. In Meenu Bhar v.

      Renu         Khosla   &   Anr.       bearing   CS       (OS)

      No.1033/2004          decided   on    7.11.2008,    I   have

      discussed the meaning of cause of action.               The

relevant paragraphs of the said case read as

follows:

25. Cause of action consists of bundle of facts which give cause to enforce the legal injuries for redress in a court of law. The 'cause of action' means, therefore, every fact, which if traversed, would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendants. It must include some act done by the defendant since in the absence of such an act no cause of action would possibly accrue or would arise.

27. What is a cause of action has been summed up in

reference to its various judgments by the Supreme

Court in Om Prakash Srivastava v. Union of

India and Anr. - 2006(7) SCALE 318 in the

following manner:

"9. By "cause of action" it is meant every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, a bundle of facts, which it is necessary for the plaintiff to prove in order to succeed in the suit (See Bloom Dekor Ltd. v. Subhash Himatlal Desai and Ors. (1994 (6) SCC 322).

10. In a generic and wide sense

(as in Section 20 of the Civil Procedure Code, 1908) "cause of action" means every fact, which it is necessary to establish to support a right to obtain a judgment (See Sadanandan Bhadran v. Madhavan Sunil Kumar (1998 (6) SCC 514).

11. It is settled law that "cause of action" consists of bundle of facts, which give cause to enforce the legal inquiry for redress in a court of law. In other words, it is a bundle of facts, which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action would possibly accrue or would arise. (See South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd. and others (1996 (3) SCC 443).

12. The expression "cause of action" has acquired a judicially settled meaning. In the restricted sense "cause of action" means the circumstances forming the infraction of the right or the immediate occasion for the reaction. In the wider sense, it means the necessary conditions for the maintenance of the suit, including not only the infraction of the right, but also the infraction coupled with the right itself. Compendiously, as noted above the expression means every fact, which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Every fact, which is necessary to be proved, as distinguished from every piece of evidence, which is necessary to prove each fact, comprises in "cause of action". (See Rajasthan High Court

Advocates‟ Association v. Union of India and Ors. (2001 (2) SCC 294).

13. The expression "cause of action" has sometimes been employed to covey the restricted idea of facts or circumstances which constitute either the infringement or the basis of a right and no more. In a wider and more comprehensive sense, it has been used to denote the whole bundle of material facts, which a plaintiff must prove in order to succeed. These are all those essential facts without the proof of which the plaintiff must fail in his suit. (See Gurdit Singh v. Munsha Singh (1977 (1) SCC 791).

14. The expression "cause of action" is generally understood to mean a situation or state of facts that entitles a party to maintain an action in a court or a tribunal; a group of operative facts giving rise to one or more bases of suing; a factual situation that entitles one person to obtain a remedy in court from another person. (See Black‟s Law Dictionary). In Stroud‟s Judicial Dictionary a "cause of action" is stated to be the entire set of facts that gives rise to an enforceable claim; the phrase comprises every fact, which if traversed, the plaintiff must prove in order to obtain judgment. In "Words and Phrases" (4th Edn.) the meaning attributed to the phrase "cause of action" in common legal parlance is existence of those facts, which give a party a right to judicial interference on his behalf. (See Navinchandra N. Majithia v. State of Maharashtra and Ors. (2000 (7) SCC 640).

15. In Halsbury Laws of England (Fourth Edition) it has been stated as

follows:

"Cause of action has been defined as meaning simply a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person. The phrase has been held from earliest time to include every fact which is material to be proved to entitle the plaintiff to succeed, and every fact which a defendant would have a right to traverse. „Cause of action‟ has also been taken to mean that particular act on the part of the defendant which gives the plaintiff his cause of complaint, or the subject matter of grievance founding the action, not merely the technical cause of action‟.

16. As observed by the Privy Council in Payana v. Pana Lana (1914) 41 1A 142, the rule is directed to securing the exhaustion of the relief in respect of a cause of action and not to the inclusion in one and the same action or different causes of action, even though they arises from the same transaction. One great criterion is, when the question arises as to whether the cause of action in the subsequent suit is identical with that in the first suit whether the same evidence will maintain both actions. (See Mohammad Khalil v. Mahbub Ali Mian (AIR 1949 PC 78).

28. The cause of action has no relation either to the

defence that may be raised by the defendant nor

does it depend on the character of relief prayed for

by the plaintiff. It only refers to facts upon which

the plaintiff basis his claim before the Court to

arrive at a conclusion in his favour.

29. In this case it is the defence raised by defendant

No.2 that he was acting as an agent for and on

behalf of defendant No.1 and had agreed to make

payment due to the plaintiff in terms of MoU (Ex.-

P1) after realization of the amount from the owners

of the site and he in no manner is individually liable

to pay the amount claimed by the plaintiff.

30. Defendant No.2 in his written statement also

admitted that he was to pay a sum of Rs.25 lacs to

the plaintiff as per MoU. This admission itself is a

relevant fact to reach to a conclusion that plaint

discloses cause of action against defendant No.2.

31. Under these circumstances, I conclude that in view

of the admitted facts and documents a cause of

action has accrued in favour of the plaintiff and

against defendant No.2 as is apparent from the

pleadings contained in the plaint. Hence, this issue

is accordingly decided against defendant No.2 and

in favour of the plaintiff.

32. An agreement was executed between the plaintiff

and defendant No.1 through Mr. Bharat Bhaskar, its

director, on 20.8.1985 (Ex.-P5/D1/6). This

agreement was executed for renovation of property

erected on plot bearing Khasra No.264, Village

Bahapur, New Delhi (now known as Ishwar Nagar)

on terms and conditions laid down in the

agreement. Plaintiff in his cross examination has

stated that on 24.8.1985, there was a newspaper

publication in Hindustan Times wherein it was

stated that Mr. Bharat Bhaskar was not authorised

to enter into an agreement for redevelopment of

the property in question. With the result plaintiff

wrote a letter on 12.9.1985 to Bharat Bhaskar to

clarify his stand in regard to the publication which

appeared in the paper. Admittedly this letter was

replied by defendant No.1 company on 13.9.1985

(Ex.-D1/21) duly signed by Bharat Bhaskar as

director of the company. Letter dated 13.9.1985 is

an admitted document (Ex.-D1/21). The relevant

part of this letter reads:

"We are pleased to inform you that the publication of the notice in the Hindustan Times dated 24th August 1985 was wrongly made and without any authority and as such, the said S/Shri Rajeev Bhaskar, Sanjeev Bhaskar and Sunil Johar have subsequently on 6-9-1985 withdrawn and cancelled the earlier notice published by them in the Hindustan Times of 24th August, 1985. A photocopy of the notice dated 6-9- 1985 is enclosed for your information and perusal.

Further, in clarification, a resolution was passed in the meeting of the Board of Directors of the Company on 6-9-1985 clarifying the necessary authority pursuant to the publication in the Hindustan Times, a copy of which is also enclosed for your information."

33. This letter clarified the confusion created by the

publication appearing in the newspaper „Hindustan

Times‟ and Mr. Bharat Bhaskar continued to deal

with the plaintiff as director of defendant No.1.

34. In its written statement defendant No.1 has

nowhere objected to the authority of Bharat

Bhaskar to act as director of defendant No.1

company and have business dealings with the

plaintiff or enter into the impugned agreements for

and on behalf of the company. The only plea which

has been raised in the written statement is that

plaintiff by virtue of his dominant position executed

his influence on Bharat Bhaskar who, without actual

verification of the accounts and the work signed the

writing dated 14.7.1986. According to the

defendant No.1, it is also not a party to the MoU

dated 18.12.1986 (Ex.-P1).

35. Vinay Bhaskar DW-1 has denied execution of writing

dated 14.7.1986 (Ex.-P9). He has deposed that the

said writing was executed by Bharat Bhaskar under

the influence of the plaintiff without actual

verification of the account and without the authority

of defendant No.1 and therefore it has no binding

effect on defendant No.1. In his cross examination

he did admit that Mr. Bharat Bhaskar is one of the

directors of defendant No.1. He also admitted that

Bharat Bhaskar had dealt with all the transactions

including execution of all the agreements and

subsequent correspondences with the plaintiff on

behalf of defendant No.1 company. Thus, it is clear

that Bharat Bhaskar as director of defendant No.1

continued to represent the company while dealing

with the plaintiff. He was duly authorised by the

company to act on its behalf. MoU (Ex.-P1) dated

18.12.1986 is signed by Bharat Bhaskar as director

of defendant No.1. Defendant No.1 has not been

able to prove its case that Bharat Bhaskar was not

authorized by defendant No.1 company to enter

into an agreement for renovation on 20.8.1985 and

subsequent agreements and to indulge into

correspondences for and on behalf of defendant

No.1 company with the plaintiff. Learned counsel

for the defendant No.1 has argued that no

resolution was passed in favour of Bharat Bhaskar

authorizing him to act on behalf of the company. As

pointed out above these submissions are without

any force specially when defendant No.1 has

admitted that Bharat Bhaskar has been dealing for

and on behalf of defendant No.1 with the plaintiff.

Neither he nor any other director of the company

dealt with the plaintiff for renovation of the

properties at Ishwar Nagar owned by defendant

No.1 company.

36. Learned counsel for the defendant No.1 has argued

that MoU does not bear any stamp of Ishwar

Industries and it was executed by Bharat Bhaskar in

his individual capacity. Therefore, this MoU is not

binding on defendant No.1. He has referred to G.

Subba Rao v. M/s. Rasmi Die-Castings Ltd. -

AIR 1998 AP 95 to support his submissions.

37. I do not agree with the contentions of the learned

counsel for the defendant No.1. From the

contentions of the parties it is clear that MoU was

executed. The opening lines of the MoU (Ex.-P1)

suggest that it was between the plaintiff and Ishwar

Industries Ltd. The relevant lines are:

"This understanding supersedes all other previous agreements, understandings, writings or any other document executed between the first party and the second party or confirmed by the third party in respect of the property at Ishwar Nagar belonging to Ishwar Industries Ltd...."

38. The recital of the MoU therefore clarifies that Bharat

Bhaskar was acting on behalf of defendant No.1

company and not in his personal capacity. It is true

that Resolution of the Board dated 6.9.1985 has not

been placed on record. It was for the defendant

No.1 to produce it as it finds reference in the letter

dated 13.9.1985 (Ex.-P7) written by Bharat Bhaskar

on behalf of defendant No.1 company to the plaintiff

informing him that he had been authorized to enter

into agreements on behalf of defendant No.1. It

was for the defendant No.1 to discharge the onus of

proving that Bharat Bhaskar was not authorized by

it to enter into agreement or transaction or writing

etc. with the plaintiff which it has miserably failed.

39. In G. Subba Rao v. M/s Rashmi Die-Castings

Ltd. - AIR 1998 Andhra Pradesh 95 who can be

a managing director of a company is defined.

Besides, in the said case it was questioned if the

MoU could be treated as a settlement between two

individuals or Chartered Accountant and the

respondent company. The Court held MoU as not

binding on the company with the observations that

preamble did not describe the signatory of the MoU

as the managing director of the company. Besides

the petitioner was director of the company till the

year 1993. The court presumed that under the

circumstances the two individuals wanted to settle

certain disputes of the respondent company on the

basis of this MoU. Besides the observations were

made in a writ petition filed by the petitioner

seeking winding up of the company. Therefore, the

observations made in the said case were in the

context whether the company under such

circumstances on the basis of MoU should be wound

up or not. This judgment therefore is of no help to

defendant No.1.

40. The signatory of the MoU happened to be the

director of Ishwar Industries. The contents of the

MoU also indicate that the terms and conditions

were settled for and on behalf of defendant No.1.

Therefore, it is not acceptable that Bharat Bhaskar

had no authority to act on behalf of the company for

want of resolution of the company.

41. Under these circumstances, I conclude that MoU

(Ex.-P1) was executed by Bharat Bhaskar on behalf

of defendant No.1 and it is binding on it. This issue

is accordingly decided against defendant No.1 and

in favour of the plaintiff.

42. Mr. Ravi Sikri, counsel appearing for the plaintiff has

submitted that the present suit has been filed by

the plaintiff for recovery of professional fee. All the

documents executed between the plaintiff and

defendant No.1 are admitted and proved in

evidence. Defendant No.1 admitted its liability to

pay a sum of Rs.15 lacs in its writing dated

14.7.1986 (Ex.-P9) in two installments by the end of

December 1986 and also an area of 1275 sq. ft. was

to be retained by the plaintiff in the proposed

Tribhuvan Complex, Ishwar Nagar, Delhi against the

security amount of Rs.5 lacs deposited by the

plaintiff in pursuance of the agreement dated

20.8.1985 (Ex.-P5). He further argued that

defendant No.1 also admitted its liability to pay the

due amount when memorandum of understanding

was executed between the plaintiff and defendant

No.1 and defendant No.2 and that defendant No.1 is

legally bound to pay the admitted amount along

with interest of Rs.6,21,000/- @18% per annum as

on 15.11.1989 as agreed inter se the parties.

Learned counsel for the plaintiff has referred to

following judgments:

1. United India Insurance Co. Ltd. & Anr. v. Andrew Vivera - AIR 1990 Kerala 139.

2. Gopal Krishnaji Ketkar v. Mahomed Haji Latif & Ors. - (1968) 3 SCR 862.

3. Sports Authority of India v. Sports Authority of India Kamgar Union & Ors. - 2005 III AD (Delhi)

55.

43. Mr. N.K. Kantawala, counsel appearing for the

defendant No.1, has argued that plaintiff is an

architect and builder. His services were engaged

for purpose of addition/alteration/renovation of the

existing office block, phase-I at a cost of Rs.4 lacs

which were to be borne by the plaintiff and later on

to be paid by defendant No.1. This agreement is

absolutely silent about any work to be carried out at

M/s Allied Fiber Glass Products Pvt. Ltd. at

Sahibabad.

44. It is argued that plaintiff did not complete the

construction work and has raised bills for the work

done at Sahibabad by one Navin Jaitly. Therefore,

he is not entitled to the amount claimed for the

work done at Sahibabad. On the failure of the

plaintiff to complete his work, defendant No.1 had

to enter into a second agreement with defendant

No.2 on 4.2.1986. Plaintiff never objected to this

agreement though he has tried to argue that the

said agreement was executed without his

consultation and previous knowledge. Plaintiff has

not placed on record any document nor has

adduced any evidence to prove that the total cost

of the work executed by him at Mathura Road and

at Sahibabad was Rs.4 lacs. He has also pointed

out that there was no written agreement between

the plaintiff and defendant No.1 for executing any

work at Sahibabad and the work at Sahibabad was

with Navin Jaitly, a cousin of the plaintiff.

45. It is further argued that plaintiff has committed

breach in the enforcement of the agreement as he

only deposited Rs.5 lacs as security amount against

Rs.10 lacs as per the terms contained in clause 3 of

the agreement dated 12.7.1986. Learned counsel

for the defendant No.1 has submitted that MoU

dated 18.12.1986 cannot be enforced in law

because there is a clause contained in the said MoU

that a regular agreement would be executed but no

such agreement was executed. He has referred to

letter dated 10.7.1989 wherein there is no mention

of any MoU having been entered into by the parties

whereby defendant No.1 admitted its liability to pay

the suit amount and for the first time vide this letter

that plaintiff has clubbed both the claims as against

Tribhuvan Complex and construction at Sahibabad

unit. He argued that vide letter dated 5.10.1989

claim of the plaintiff made in letter dated 10.7.1989

has been specifically refuted and liability if any to

pay the amount is that of defendant No.2. He has

submitted that MoU is to be read as it is and cannot

be given any other meaning in view of Sections 91

and 92 of the Evidence Act.

46. It is further argued that plaintiff has not led any

evidence to show that any forgery or fraud has

been played by the MD of the company and no

evidence has been led to show that defendant No.1

is liable to pay the amount. To support his

submissions he has referred to M.V. Shankar Bhat

and another v. Claude pinto (D.) by L.Rs. and

others - AIR 2004 SC 636 and National

Properties Ltd. v. Bata India Limited - AIR

2001 Calcutta 177.

47. As per the agreement dated 20.8.1985 plaintiff was

to carry out the renovation/alteration of the first

part of the existing office block, phase-I owned by

the company at Ishwar Nagar, New Delhi. It was

agreed between the parties that plaintiff would be

responsible to make additions/alterations/

renovations in the existing office block, phase-I as

per the specifications and plans mutually agreed

between the parties along with a covered area of

1275 sq. ft. approximately at his own cost which

was assessed at Rs.4 lacs. It was also agreed that

defendant No.1 would clear all the structures,

machines and other items lying in the said office

block on execution of the agreement and the work

was to be completed within four months from the

date of the handing over of the possession of the

impugned property to the plaintiff. Plaintiff agreed

to deposit security of Rs.10 lacs carrying interest

@15% per annum for three months i.e. during the

period of completion of the work. Out of this Rs.10

lacs, Rs. 2 lacs were deposited at the time of

signing of the agreement, Rs.3 lacs were to be

deposited on or before 10.9.1985 and balance

amount of Rs.5 lacs was to be deposited by the

plaintiff immediately on receipt of approval from the

Bank of India in its name as builders for

redevelopment of the total land of the owner.

48. Clause 5 of this agreement finds mention that

necessary sanction and approval of Bank of India,

Khan Market Branch, with which the property was

mortgaged for lease/transfer, had already been

granted in favour of the defendant No.1, the owner,

vide letter dated 2.8.1985. In case the approval of

the Bank was not obtained in favour of the builder,

the security deposit of Rs.5 lacs was to be returned

back to the builder i.e. plaintiff. Para 7 of the

agreement also contains a narration of fact that

necessary sanction and approval for redevelopment

of the property has already been accorded by the

Bank of India in favour of the owner vide letter

dated 23.4.1985.

49. Letter (Ex.-P6) is dated 20.8.1985 written by

defendant No.1 to the plaintiff on the same day

when the agreement (Ex.-P5) was executed inter se

the parties. As per this letter, physical possession

of the office block was handed over to the plaintiff

and in acknowledgment of having received the

physical possession, plaintiff had appended his

signatures. In this letter defendant No.1 undertook

to remove the material/furniture/equipments etc. in

due course. Perusal of letter dated 13.9.1985 (Ex.-

P7) makes it clear that the equipments etc. installed

in the premises were not completely removed by

the defendant No.1 and it undertook to remove

them on 21.9.1985.

50. Plaintiff in his cross-examination admitted that he

did not deposit the balance security amount of Rs.5

lacs but volunteered that since the necessary

approval from Bank of India as well as municipal

corporation in his name was not received, he did

not deposit the balance security amount of Rs.5

lacs. He was confronted with the letter dated

14.9.1985 (Ex.-D1/20) written by Bank of India to

defendant No.1. To this he replied that this letter

was not approval of the Bank of India in his name.

Perusal of this letter makes it clear that the bank

did not give any approval to the plaintiff to carry out

necessary work in the suit premises. It permitted

defendant No.1 to lease out the administrative

block of the property (present built up area with

certain conditions). In fact this letter does not

relate in any manner to the renovation work to be

carried out by the plaintiff in the office block. It has

come in evidence that Bank of India never gave any

approval in the name of the plaintiff for execution of

the work as agreed. Under these circumstances,

therefore, plaintiff was right when he did not

deposit the balance security amount of Rs.5 lacs as

agreed because the pre-requisite condition for

deposit was not fulfilled by defendant No.1.

51. Ex.-D1/7 to Ex.-D1/16 are the bills purportedly

raised by N.K. Jaitly on M/s. Allied Fibre Glass

Products (P) Ltd. for the construction work carried

out by him in the premises of the said firm at

Sahibabad for the period from 31.1.1996 onwards.

Defendant No.1 has produced these bills to prove in

evidence that Sahibabad work was carried out by

Naveen Kumar Jaitly and this work was never

allocated to the plaintiff. True, that there is no

mention of any work to be carried out by the

plaintiff at M/s. Allied Fibre Glass Products (P) Ltd.

Sahibabad which is a sister concern of defendant

No.1. The fact remains that this work was carried

out by Navin Jaitly on behest of the plaintiff.

52. As per clause 9 of the agreement (Ex.-D1/6/Ex.-P5)

plaintiff was at liberty to appoint in consultation

with the owner engineers, supervisors, workers and

other staff in connection with the said work to be

carried out under the joint supervision of the owner

and the builder. Plaintiff was to provide

workmanship required, labour and material etc.

Plaintiff has stated that he engaged the services of

Navin Jaitly as he was entitled to do under the said

agreement. Plaintiff accordingly took the services

of Mr. Navin Jaitly and he was making payment.

53. Navin Jaitly in his affidavit on oath as PW-2 has

affirmed that in September 1985 he was appointed

by Arun Jaitly to carry out addition/alteration work in

one of the factory complex belonging to Ishwar

Industries, Okhla. Since the scope of work was not

defined, no specific contract was signed and it was

agreed that he would be paid by Arun Jaitly on the

cost plus basis i.e. actual expenses incurred by him

on the work plus 15% as the contractor‟s profit. He

carried out the work under the instructions of

Mr.Arun Jaitly in the presence of Bharat Bhaskar

who was having his office in the same premises.

However, in December 1985 though his work was

not complete he was asked to stop his incomplete

work and shift all the material procured by him and

the old salvage structural material to the site of M/s.

Allied Fibre Glass Products (P) Ltd., sister concern of

M/s. Ishwar Industries in which Bharat Bhaskar

happened to be the director. He carried out the

construction work there on item rate basis.

However no agreement was executed despite his

persistent requests. He has further declared that

he never received any payment from M/s. Allied

Fibre Glass Products (P) Ltd. or Bharat Bhaskar

against the bills raised by him. He received all the

payments from Arun Jaitly for the work done by him

at Okhla unit and Sahibabad unit. Admittedly no

written agreement was executed between him and

the plaintiff.

54. It is significant to note that when agreement dated

20.8.1985 (Ex.-P5/D1/6) was enforced, defendant

No.1 without prior intimation or consultation with

the plaintiff entered into an agreement dated

4.2.1986 (Ex.-P-2/D1/22) with Mr.R.C. Goenka and

others forming a consortium, by virtue of which the

original agreement entered into between R.C.

Goenka and others dated 8.1.1985 (Ex.-D1/19) was

sought to be restored. This was so done after

finalising the terms and conditions of the

consortium between the two on 22.11.1985. This

fact is admitted by defendant No.2 in his cross-

examination. The said agreement dated 4.2.1986

(Ex.-D1/22) was executed by B.D. Steel Castings

Ltd., Acharya Arun Dev and others with Ishwar

Industries Ltd. This agreement, therefore, was

executed between defendant No.1 and defendant

No.2 in utter violation of the terms and conditions of

the agreement dated 20.8.1985, without giving the

statutory period of four months to the plaintiff to

complete the work.

55. When agreement dated 4.2.1986 (Ex.-P2) was

executed between the defendants, they had agreed

to retain the services of the plaintiff as

architect/builder. Plaintiff must have been

executing his work properly and that must have

been the reason for the defendants to continue with

the services of the plaintiff despite the fact that

agreement entered into between the plaintiff and

defendant No.1 on 20.8.1985 was still in force when

agreement dated 4.2.1986 (Ex.-P2) was executed.

Defendant No. 2 has not placed on record any

document to indicate that the payment of the bills

Ex.-D1/7 to Ex.-D1/16 was directly paid by it to

Naveen Jaitly and not to the plaintiff. Viney Bhaskar

DW-1 in his cross-examination has avoided giving

any specific reply to the questions put to him and

rather has shown his ignorance about various

documents executed and correspondence

exchanged between the parties. Viney Bhaskar in

his cross examination admitted that he and Bharat

Bhaskar are the directors of M/s Allied Fiber Glass

Products Pvt. Ltd. Viney Bhaskar was given

opportunity to go through the relevant record of the

company but he was evasive when he said that

record was an old one and old employees had left

the company. He could not do the same. When

asked as to whether any payment was made by

defendant No.1 for the work done at Sahibabad

unit, he could not give any specific reply. He also

could not answer if there was any agreement with

the plaintiff or Mr. Naveen Jaitly for execution of

work at Sahibabad unit.

56. In Gopal Krishnaji Ketkar v. Mahomed Haji

Latif & Ors. (supra), it was observed that even if

the burden of proof does not lie on a party, the

court is within its rights and powers to draw an

adverse inference, if he withholds important

documents in his possession which can throw light

on facts at issue. The Supreme Court detested the

practice for those desiring to rely upon a certain set

of facts to withhold from the court, the best

evidence which is in their possession which could

throw light upon the issues in controversy and to

rely upon the abstract doctrine of onus of proof.

57. In Sports Authority of India v. Sports Authority

of India Kamgar Union & Ors. (supra) this Court

drew an adverse inference against the management

for withholding the attendance register which was

in the power and possession of the management to

decide the objections filed to the award by the

petitioner.

58. Since defendant No.1 failed to produce the record

about the work executed by the plaintiff, an adverse

inference is drawn against the defendant No.1 that

had the record been produced, it would have gone

against the defence of defendant No.1 that plaintiff

did not complete the work in terms of agreement

dated 20.8.1985 and that Naveen Jaitly was

separately engaged by M/s Allied Fiber Glass

Products Pvt. Ltd. to carry out work at Sahibabad.

59. Therefore, I do not find any reason to disbelieve the

testimony of Naveen Jaitly that he had received all

the payments of the bills from plaintiff only.

60. The other significant factor in this case is the

execution of an agreement between plaintiff and

defendant No.1 on 12.7.1986 (Ex.-P8). By virtue of

this agreement, defendant No.1 did acknowledge

that plaintiff had deposited a sum of Rs.5 lacs

carrying interest @15% per annum in the manner

mentioned in the agreement dated 20.8.1985. Both

the parties to this agreement (Ex.-P8), released

themselves of their obligations and gave up their

rights under the said agreement against each other.

The agreement dated 20.8.1985 was superseded

vide agreement dated 12.7.1986. By virtue of this

agreement deposit of security amount of Rs.5 lacs

was to be treated as consideration for allotment/

sale of 1250 sq. ft. of covered area in favour of the

plaintiff. Its value was worked out at Rs.4000 per

sq. ft. and plaintiff agreed to forego his interest

which was receivable by him on security deposit

from defendant No.1 in terms of agreement dated

20.8.1985 because plaintiff had paid the full value

of the said area in advance. Letter (Ex.-P9) dated

14.7.1986 is an acknowledgment by Bharat

Bhaskar, director of defendant No.1 to the fact that

besides the agreement (Ex.-P8) dated 12.7.1986,

defendant No.1 had agreed to make payment of

Rs.15 lacs in cash to the plaintiff in two

installments; one to be paid by 17.8.1986 and the

balance amount to be paid by December, 1986

along with handing over 1275 sq. ft. area to the

plaintiff.

61. Defendant No.1 has raised a plea that

acknowledgment dated 14.7.1986 (Ex.-P9) was

obtained by plaintiff and executed by Bharat

Bhaskar without verification of accounts, on plaintiff

exercising undue influence by virtue of his

dominant position on Bharat Bhaskar.

62. Order VI Rule 4 CPC provides that in cases where a

party pleading relies on misrepresentation, fraud,

breach of trust, wilful default or undue influence

and in all other cases in which particulars may be

necessary, the particulars with dates and items if

necessary have to be stated in the pleading.

63. In M/s. United India Insurance Co. Ltd. v.

Andrew Vivera (supra), it was observed:

"6. Order 6, Rule 4, C.P.C. provides that in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading. The position admits no doubt that allegation of fraud, undue influence and coercion must be set forth in full particulars and not vaguely. The allegation must be fully stated so that the case be decided on the particulars pleaded. There cannot be any departure from what has been ordained under O. 6, R.

4. Any allegation in a sweeping manner will hardly suffice for the Court to act....."

64. In the present case written statement of defendant

No.1 does not contain any particulars regarding the

alleged undue influence or misrepresentation or

fraud or breach of trust or willful default. Therefore,

the argument raised by the defendant No.1 at this

stage regarding undue influence having been

exercised on Bharat Bhaskar in getting

acknowledgment (Ex.-P9) executed from him

cannot be looked into and is of no relevance. It is

not disputed by defendant No.1 that this document

was written and signed by Bharat Bhaskar on

14.7.1986 in his own writing and under his

signature. Plaintiff being the builder of the property

was working in terms of the agreement executed

inter se the parties on 20.8.1985 (Ex.-P5). In what

manner he could be in a dominant position to

exercise undue influence on Bharat Bhaskar is not

known or explained or proved in evidence by

defendant No.1.

65. Viney Bhaskar has admitted that the entire

transaction in this case i.e. execution of agreements

and correspondences were dealt with by Bharat

Bhaskar and no other director of the company. He

as a director did not even attend a single meeting

held between Bharat Bhaskar and the plaintiff.

Bharat Bhaskar is still working as a director in the

company. Why he did not step in the witness box is

not known. He was the only person who could

explain the circumstances in which letter dated

14.7.1986 (Ex.-P9) was written by him. Bharat

Bhaskar‟s conduct in not appearing as a witness in

the case raises an adverse inference against

defendant No.1 that had he appeared in the witness

box his testimony would have gone against the

defence raised by defendant No.1.

66. Under these circumstances, it is clear that pleadings

pertaining to undue influence are not specific and

lack material particulars. Such pleadings cannot be

looked into by the court. The document (Ex.-P9),

which is an acknowledgment of liability by Bharat

Bhaskar on behalf of defendant No.1, proves that

defendant No.1 had agreed to pay the amount due

to the plaintiff and also allot space measuring 1275

sq. ft. to the plaintiff.

67. Since defendant No.1 failed to honour its

acknowledgment made in the agreement dated

12.7.1986 (Ex.-P8) and acknowledgment dated

14.7.1986 (Ex.-P9), plaintiff wrote a letter dated

17.12.1986 (Ex.-D1/3) calling upon defendant No.1

not to disturb the possession of the structure with

the plaintiff. Consequently, parties to the suit

entered into a tripartite agreement i.e. MoU on

18.12.1986 (Ex.-P1). Broadly the terms as agreed

between the parties as per the MoU are:

"A sum of Rs.15,00,000/-

(fifteen lakhs) payable to the second party, will be paid either by the first party or the confirming party in the following manner.

            a.    Rs.3,00,000/- by cheque/cash
            on or before 22 Dec. 1986
            b.    Rs.2,00,000/- ---- do ----
            --- on or before 31st Dec. 1986.
            c.    Rs.2,50,000/- ---- do ----
            (Two and half only) --- on or before
            31st Jan. 1987.
            Thereafter        further        monthly

instalments Rs.1.50 lakhs (one and half) on or before the end of each month i.e. 28 Feb, 1987, 31st March, 1987, 30 April, 1987, 31 may 1987, 30 June, 1987."

68. It was also agreed in the MoU that the plaintiff by

way of security for due payment would have lien over

the sale proceeds recovered by Ishwar Industries Ltd.

of which Bharat Bhaskar is the director, out of the sale

of the area/flats in Tribhuvan Complex, Ishwar Nagar,

New Delhi. It was also agreed that defendant No.1

would furnish sale statements to the plaintiff so that

the installments as decided in the MoU could be

regularly remitted to the plaintiff by defendant No.1.

69. The other term settled in the MoU was that

defendant No.1 would provide the plaintiff with area of

1275 sq. ft. in Tribhuvan Complex on or before 30th

September, 1987 and two percent brokerage was to

be paid to Bharat Bhaskar as the sale proceeds by the

plaintiff. In default of allotment of the space as

agreed, defendant No.1 was to pay to the plaintiff the

value of the said space @Rs.775/- per sq. ft.

70. Last lines of the MoU read as follows:

"This is only understanding and the parties will enter into regular agreement embodying the above terms on or before 15th Jan, 1987."

71. Admittedly, no regular agreement was executed

into between the parties after execution of the MoU on

18.12.1986. Thus, it is clear that defendant No.1

admitted its liability to pay a sum of Rs.15 lacs and

also to allot a space measuring 1275 sq. ft. to the

plaintiff within the specified period as above. The MoU

was acted upon partially when, defendant No.2, the

confirming party to the MoU paid a sum of Rs.3 lacs to

the plaintiff in part performance of the settled terms at

the end of December, 1986. Plaintiff handed over the

physical possession of the suit property to defendant

No.2. Vide letter dated 20.7.1989 (Ex.-P3), defendant

No.2 acknowledged having received the physical

possession of the office block, phase-I from the

plaintiff with the consent of the plaintiff and Bharat

Bhaskar of Ishwar Industries Ltd. in terms of the MoU.

Though, no agreement was executed between the

parties, but since MoU has been acted upon by parties,

it has a binding force on the parties. Thus, it is proved

on record that defendant No.1 acknowledged its

liability to pay a sum of Rs.25 lacs including cost value

of the space to the plaintiff.

72. Plaintiff had earlier filed a suit for mandatory

injunction against the defendants seeking direction

against defendant No.1 to provide the original

tripartite agreement to the plaintiff for its due

compliance and implementation with a further

direction to be issued to defendants No.2 and 3 to

issue no objection to the defendant No.1 regarding

passing over of the original tripartite agreement along

with copy thereof to the plaintiff for its due

implementation. Defendant No.1 in the said case was

Sh. B. Mohan, who was in custody of this document.

The said case was decided on 21.2.1990 by the civil

judge and he decreed the suit of the plaintiff for

mandatory injunction with the direction to the

defendants to provide a certified copy of the tripartite

agreement to the plaintiff. The copying agency was

also directed to prepare a certified copy of the MoU

and supply the same to the plaintiff on payment of

fees as per law. Hence, MoU (Ex.-P1) stood proved in

the civil court as an admitted document.

73. The acknowledgment of liability undisputedly was

made by Bharat Bhaskar for and on behalf of

defendant No.1 for the professional fees payable to

the plaintiff whose services as an architect were

engaged for carrying out additions/alterations/

renovations etc. at Tribhuvan Complex, Ishwar Nagar.

Pertinently, before filing of the suit defendant No.1

never raised any objection by way of correspondence

or otherwise that plaintiff had not completed his work

within the stipulated time. Therefore, I conclude that

plaintiff is entitled to the balance amount of Rs.12 lacs

(as three lacs have admittedly been received by him).

74. As regards the space of 1275 sq. ft. in Tribhuvan

Complex, I am of the view that since the flats/space

have been sold away by defendant No.1 to different

people it might be that no space is available with

defendant No.1 for allotment to the plaintiff. Under

these circumstances, it is more appropriate that

plaintiff is paid the value of the space as agreed

between the parties which comes to Rs.10 lacs.

Therefore, plaintiff in all is entitled to a sum of Rs. 22

lacs as claimed by him.

75. There is no agreement inter se the parties regarding

payment of interest @18% per annum or any other

rate on the value of the space at the agreed rate

which comes to Rs.10 lacs. Hence, plaintiff is not

entitled to any interest on the said amount of Rs.10

lacs before the filing of the suit.

76. Plaintiff has fastened the liability jointly and

severally on defendant No.2 and defendant No.1 for

the dues claimed by him in the suit on the basis of

MoU (Ex.-P1) as well as the agreement dated

4.2.1986 (Ex.-P2). Plaintiff was not a party to the

agreement dated 4.2.1986 (Ex.-P2) entered into

between defendants No.1 and 2, R.C. Goenka and

others. Even if in the said agreement defendants

had agreed to retain the plaintiff as consultant

architect for the project on behalf of the defendant

No.1, it does not in any manner make liable

defendant No.2 to make the payment which was

due to plaintiff from defendant No.1. The

agreement does not speak of liability of defendant

No.1 to be discharged by defendant No.2. It only

revived earlier agreement dated 8.1.1985 between

defendant No.1 and R.C. Goenka. Defendant No.2

appeared in the scenario when he signed MoU

dated 18.12.1986 as a confirming party and

therefore, it can be safely said that defendant No.2

was not a party to any agreement or

correspondence which took place between the

plaintiff and defendant No.1 prior to MoU (Ex.-P1).

77. Learned counsel for defendant No.2 has argued that

defendant No.2 was neither a guarantor nor an

indemnifier for payment of the amount due from

defendant No.1 to the plaintiff. At the maximum he

can be considered as an agent and an agent cannot

be sued where the principal is disclosed. He further

argued that liability of defendant No.2 to satisfy the

claim of the plaintiff in the present suit is only to the

extent of payment of Rs.15 lacs out which Rs.3 lacs

have been paid and defendant No.2 is not

connected with the provision of the area of 1275 sq.

ft. or payment of the value of the said area in lieu

thereof.

78. The handing over of the possession of Office Block

Phase-I by the plaintiff in terms of MoU cannot be

termed as consideration nor there are any such

pleadings in the plaint as defendant No.2 had

received the possession of the said property by

virtue of agreement dated 4.2.1986. Learned

counsel for the defendant No.2 has also highlighted

that MoU was merely an agreement to enter into

another regular agreement which never came into

light and therefore MoU is not enforceable against

the defendant No.2. The MoU was never intended

to create any legal relationship between the plaintiff

and defendant No.2. He has referred to Punit

Beriwala v. Suva Sanyal & Anr. - AIR 1998

Calcutta 44.

79. It is further argued by the learned counsel for the

defendant No.2 that he was authorized to collect

sale proceeds in respect of „owners‟ allocation‟ in

proposed building Tribhuvan Complex and to use,

utilise and disburse the same in terms of the

agreement and arrangement between the

defendants as well as other concerned parties like

Bank of India. Plaintiff was also to be paid from the

amount so collected by defendant No.2 for and on

behalf of defendant No.1. The bank had made it

clear vide letter dated 28.2.1989 that no payment

was to be made to the plaintiff.

80. It is emphasised that though defendant No.2 was

ready and willing to make the payment as agreed in

terms of MoU but because of refusal by Bank of

India he could not make the payments and it is for

the defendant No.1 to clear the dues of the plaintiff

which fact is also borne out from the MoU (Ex.-P1).

He has referred to Rahunath Jha v. Kesori Lal

and others - AIR 1934 Patna 269 and Midland

Overseas v. M.V. "CMBT Tana and others - AIR

1999 Bombay 401 to support his submissions.

81. It is submitted that defendant No.2 is neither

severally nor jointly liable to pay any amount to the

plaintiff and the memorandum of understanding

dated 18.12.1986 being without consideration is not

enforceable as against defendant No.2.

82. Section 10 of the Indian Contract Act defines

agreements which are contracts. All agreements

are contracts if they are made by the free consent

of the parties competent to contract for a lawful

consideration and with a lawful object and are not

declared to be void.

83. Section 48 of the Companies Act authorises a

company to empower any person either generally

or in respect of specific matters as its attorney to

execute its deeds on its behalf at any place. A deed

signed by such an attorney on behalf of the

company under its seal, where sealing is required,

becomes binding on the company.

84. Undisputedly MoU dated 18.12.1986 (Ex.-P1) qua

defendant No.2 is without consideration. Defendant

No.2 was appointed to collect money for the

owners‟ allocation. This fact finds mention in the

letter dated 20.7.1989 (Ex.-P3). Vide this letter

plaintiff was informed by defendant No.2 that he

and Bharat Bhaskar were to pay Rs.25 lacs out of

the money receivable from the sale of owners‟

allocation and that in terms of the agreement he

had already paid a sum of Rs.3 lacs. Defendant

No.2 showed his inability to pay the balance amount

and informed the plaintiff that Mr. Bharat Bhaskar

had entered into a MoU without prior consent of

Bank of India, the mortgagee bank and the bank

had intimated him not to make any payments to the

plaintiff. Defendant No.2 wrote another letter dated

7.10.1989 to Mr. O.P. Khadaria, Advocate that

whatever money was to be paid by him to the

plaintiff was on behalf of and on account of Ishwar

Industries.

85. Plaintiff in his cross-examination admitted that

defendant No.2 had made payment of Rs.3 lacs to

the plaintiff on behalf of defendant No.1. These two

letters clearly indicate that defendant No.2 was to

make payment for and on behalf of defendant No.1

from the amount so collected by him from owners‟

allocation. Therefore, he never made himself

personally liable to pay the debt of the plaintiff

payable by defendant No.1.

86. Bare reading of MoU (Ex.-P1) makes it clear that

defendant No.2 did not undertake to discharge the

liability of defendant No.1 completely. The line

appearing in the MoU "either by the first party or

the confirming party" clearly indicates the liability

of defendant No.2. This liability was confined to the

payment of Rs.15 lacs only for and on behalf of

defendant No.2. As discussed above no regular

contract followed the MoU. While contracting,

defendant No.2 did not undertake any personal

liability. Hence his status remained as that of

collecting agent and he cannot therefore be made

personally liable for the alleged breach of contract.

Reference is made to Rahunath Jha v. Kesori Lal

and others (supra) and Midland Overseas v.

M.V. "CMBT Tana and others (supra).

87. Similarly, in the facts and circumstances of this

case, it cannot be said that defendant No.2 had

entered into a concluded agreement with the

plaintiff for valid consideration. A mere agreement

to agree to pay certain amount to the plaintiff

cannot be considered as a legal agreement

between the parties and therefore, such an

agreement is not enforceable against defendant

No.2.

88. MoU was never executed with a view to create a

legal relationship between the plaintiff and

defendant No.2. As already stated above, no formal

or regular agreement was executed between the

parties after the execution of MoU (Ex.-P1).

Impugned MoU is written in hand on three sheets

probably torn out from some notebook. Plaintiff did

not do anything for defendant No.2 which the

defendant No.2 was legally bound to do so as to

bind defendant No.2 to compensate him for

something by him. In such circumstances

therefore, MoU qua defendant No.2 is a void

agreement within the meaning of Section 25 of the

Contract Act. Payment of Rs.3 lacs made by

defendant NO.2 to the plaintiff does not make MoU

as valid contract. Reference is made to Punit

Beriwala v. Suva Sanyal & Anr. (supra).

89. It is a common case of the parties that the

impugned property was mortgaged with Bank of

India even prior to the execution of agreement

dated 20.8.1985 between plaintiff and defendant

No.1. Being a mortgagee, bank is a secured

creditor and has a lien over the property.

Therefore, without the permission of the bank

plaintiff could not have enforced any rights against

the property.

90. Reference has already been made to letter dated

14.9.1985 written by Bank of India to Ishwar

Industries Ltd. wherein it was made clear that in

respect of areas proposed to be leased out,

cheques, drafts for all interest free deposits and

rentals to be received from the prospective lessees

should be made out in the name of Bank of India A/c

of the Ishwar Industries Ltd. and deposited with

their Khan Market Branch.

91. Because of the embargo placed by the Bank of India

on defendant No.1, defendant No.2 after realization

of the owners allocation could not have made the

payment of the due amount to the plaintiff.

Therefore, no liability can be fastened on defendant

No.2. Hence, I conclude that defendant No.2 is

neither severally nor jointly liable to pay the suit

amount to the plaintiff. Memorandum of

Understanding dated 18.12.1986 (Ex.-P1) is not

enforceable against defendant No.2. These two

issues are accordingly decided in favour of

defendant No.2 only.

92. Plaintiff has claimed interest @18% per annum on

the due amount on the basis of clause 4 contained

in the MoU wherein the parties agreed that if the

payment was not made in time, the defendant shall

be liable to pay interest @18% from the date of

default till payment.

93. The amount of Rs.28,30,000/- also includes interest

amounting to Rs.6,30,000/- upto 30.11.1989. As

per MoU (Ex.-P1) rate of interest was agreed as 18%

per annum from the date of default until payment

was made. As discussed above, MoU (Ex.-P1) has

been fully proved on record and being admitted

document wherein defendant No.1 has

acknowledged its liability to pay the amount of

Rs.15 lacs and allot space of 1275 sq. ft. or in the

alternative to pay the value of the space to the

plaintiff within the stipulated period and in case the

payment was not so made defendant No.1 agreed

to pay interest @18% per annum on the due

amount. Therefore, plaintiff is entitled to interest as

per agreement and as claimed by him in the suit. In

all plaintiff is entitled to Rs.6,30,000/- as interest

upto 30.11.1989 i.e. for the period before the filing

of the suit. These two issues are accordingly

decided.

94. Plaintiff has claimed interest @18% per annum on

the amount of Rs.22,00,000/- from the date of the

institution of the suit till realization. Since parties

had an agreement that defendant shall pay interest

to the plaintiff @18% per annum if the installments

were not made in time, plaintiff is entitled to the

interest at the agreed rate on the principal amount

of Rs.22,00,000/- (principal amount of Rs.12 lacs

plus Rs.10 lacs, value of the space) from the date of

filing of the suit i.e. 4.12.1989 till realization.

95. In view of my observations on the issues as above, I

hereby pass a decree for Rs.28,30,000/- with cost in

favour of the plaintiff and against defendant No.1.

Suit as against defendant No.2 is hereby dismissed.

Plaintiff is also awarded interest pendentelite and

future interest @18% per annum on the principal

amount of Rs.22,00,000/-. Decree be prepared

accordingly.

ARUNA SURESH (JUDGE) July 24, 2009 jk