M/s J.P. Builders & ANR Vs A. Ramadas Rao & ANR
WITH CIVIL APPEAL Nos. 9824-9825 OF 2010
(Arising out of S.L.P.(C) Nos. 15008-15009 of 2010) AND CIVIL APPEAL NO. 9826 OF 2010
(Arising out of S.L.P.(C) No. 17435 of 2010)
JUDGMENT
P. Sathasivam, J.
1. Leave granted in all the Special Leave Petitions.
2. These appeals seek to challenge the common judgment and order dated 23.02.2010 passed by the Division Bench of the High Court of Judicature at Madras in A.S. Nos. 708 of 2008 and 946 of 2009 and W.P. No.23405 of 2009 whereby the High Court partly allowed A.S.No. 708 of 2008 confirming the decree for specific performance granted by the Principal District Court, Chengalpet in O.S. No. 336 of 2008 and dismissed A.S.No. 946 of 2009 preferred by the appellants herein. By the same order, the High Court disposed of W.P. No.23405 of 2009 with certain directions. By a subsequent order dated 29.04.2010, the High Court dismissed the Review Application No. 37 of 2010 in A.S. No. 708 of 2008and Review Application No. 47 of 2010 in W.P. No. 23405of 2009 preferred by the appellants herein. Brief facts:-
3.
a. The subject matter of the suit is a total extent of 30acres 86 cents of land in Senthamangalam Village, Sriperumbadur Taluk, Kancheepuram District comprised in 38 items. M/s J.P. Builders-Appellant No. 1 and ShriJ.P. Paramanandam-Appellant No. 2 herein are the owners of the suit property which they acquired under various sale deeds. The sister concern of M/s J.P.Builders viz., M/s Anand Agency has availed certain financial assistance from the Indian Bank, (herein after referred to as `the Bank') and for the said assistance Appellant Nos. 1 and 2 herein offered their various properties including the suit property as security for the principal as well as interest amount payable by M/s Anand Agency of which Appellant No. 2 is the sole proprietor.
b. On 15.08.2005, the appellants entered into a Memorandum of Understanding (MoU) (Ex. A-2) with Respondent No. 1 herein for sale of the suit property at a sale consideration of Rs. 14 lakhs per acre and a sum of Rs. 1 lakh was paid as advance by way of cheque on the same day. Balance sale consideration was to be paid within three months from the date of obtaining confirmation letter from the Bank.
c. On 10.10.2005, M/s J.P. Builders, by a letter addressed to the AGM, Indian Bank, Asset Recovery Management Branch II, offered a sum of Rs. 100 lakhs as full and final settlement of the dues of its sister concern, M/s Anand Agency, which was declined by the Bank by letter dated 15.10.2005 advising them to revise the offer with substantial improvement. By letter dated 23.01.2006,the Bank stated that Appellant No. 2 herein had not made any improvement in his One Time Settlement (in short` OTS') proposal of Rs. 100 lakhs and hence the Bank is proceeding to enforce its rights under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (hereinafter referred to as` the Act'). By letter dated 01.02.2006, Appellant No. 2offered a sum of Rs. 148 lakhs as one time settlement of the loans availed by M/s Anand Agency.
d. On 03.02.2006, Respondent No. 1 entered into a Sale Agreement with the appellants for purchase of the suit property. The sale price of Rs. 14 lakhs per acre was enhanced to Rs. 18 lakhs per acre and the total sale consideration was fixed at Rs. 5,55,48,000/-. On the same day, Respondent No. 1 had paid a sum of Rs. 24lakhs by way of cheque as further advance to AppellantNo.2 in addition to Rs. 1 lakh already paid. On18.04.2006, a further payment of Rs. 50 lakhs was made by Respondent No. 1.
e. On 26.04.2006, the Bank rejected the OTS offer of Rs. 148 lakhs stating that since the amount offered is very low, the Bank has decided to pursue the recovery application filed before the Debts Recovery Tribunal,(hereinafter referred to as `DRT') Chennai for the recovery of the dues of the Bank. Again, by letter dated15.05.2006, the Bank stated that out of court settlement can be done if an offer of Rs. 629.60 lakhs by working out interest at PLR i.e. 11% compound on the principal outstanding as on 31.03.1993 be made. However, since the settlement amount was more than the sale consideration for the suit property, the Appellant No. 2could not agree to pay the same.
f. On 26.07.2006, Respondent No. 1 issued a legal notice to the appellants calling upon them to liquidate the loans out of the amounts received from him and retrieve the original documents from the Bank in order to execute the sale deed. By letter dated 27.07.2006, the Appellant No. 1replied to the notice stating that the first respondent had not paid the balance sale consideration in spite of repeated requests and raised doubt that the first respondent is no longer interested to buy the suit property, therefore, a legal notice was sent calling upon Respondent No. 1 to pay a sum of Rs. 1 crore as liquidated damages.
g. On 07.08.2006, Respondent No. 1 filed O.S. No. 336of 2006 before the Principal District Judge, Chengalpet against the appellants and the Bank. By judgment and decree dated 30.04.2008, the Principal District Judge, Chengalpet decreed the suit partly, granting the relief of specific performance directing appellant Nos. 1 & 2 hereinto specifically perform their part of the obligations arising out of the agreement for sale (Ex. A-3) dated 03.02.2006by executing the sale deed in favour of Respondent No. 1on receipt of the balance sale consideration of Rs.4,80,48,000/- subject to the mortgage of the Bank. Further the relief in respect of permanent injunction restraining the appellants from alienating or encumbering or dealing with the subject property was granted. The prayer for mandatory injunction for directing the appellants to discharge the loan in respect of DRT proceedings pending on the file of DRT-I, Chennai, there by retrieve the documents and deliver the same to Respondent No. 1 at the time of execution and registration of sale deed was refused. Challenging the rejection of the prayer of mandatory injunction and failure to award costs, Respondent No. 1 filed A.S. No. 708 of 2009 before the High Court of Madras along with interim applications being M.P. Nos. 1 and 2 of 2008. On 01.02.2009, Respondent No. 1 filed another interim application in M.P.No. 1 of 2009 in A.S. No. 708 of 2008. By order dated18.04.2009, the Division Bench of the High Court passed an order of injunction in M.P. No. 1 of 2008 and M.P. No.1 of 2009 restraining the appellants herein from alienating, encumbering or dealing with the suit property pending appeal.
h. On 06.10.2006, the Bank filed OA No. 491 of 1999withdrawing its OTS offer of Rs. 629.60 lakhs and called upon the appellants to pay the total amount due along with future interest, costs and charges. By order dated15.05.2009, the Presiding Officer, DRT-I, Chennai, disposed of O.A. No. 491 holding that the Bank is entitled to recover a sum of Rs. 11,08,51,875/- from M/s Anand Agency. Pursuant to the order, the Recovery Officer issued the recovery certificate being D.R.C. No. 102 of2009 and also issued the 1st sale notification dated23.10.2009 bringing to sale the suit property. The upset price was fixed at Rs. 27 crores and the date of sale was fixed as 25.11.2009.
i. Challenging the decree for specific performance granted by the Principal Judge, Chengalpet, the appellants filed A.S. No. 946 of 2009 before the High Court which was admitted by the Division Bench on20.10.2009. On 16.11.2009, Respondent No. 1 filed a writ petition being W.P. No. 23405 of 2009 before the High Court praying for a writ of mandamus for bringing the suit property in O.S. No. 336 of 2006 on the file of the Principal District Judge, Chengalpat in his favour and also filed Miscellaneous Petition in the aforesaid writ petition being M.P. No. 1 of 2009 praying to stay the auction sale of the property covered by the decree dated 30.04.2008made in O.S. No. 336 of 2006. On the same day, the interim applications bearing M.P. Nos. 2 & 3 of 2009 in A.S. 708 of 2008 were also listed and the same were dismissed by the Division Bench.
j. Questioning the auction sale proposed to be conducted by the DRT, on 19.11.2009, Respondent No. 1filed I.A. Nos. 1 to 3 in D.R.C. No. 102 of 2009 in O.A. No.491 of 1991 before the Recovery Officer, DRT-I, Chennai praying for release of the scheduled property and stay of auction sale. On 23.11.2009, the Recovery Officer, DRT-I, Chennai dismissed the said applications. On 24.11.2009,Respondent No. 1 filed SLP (C) No. 31358 of 2009 before this Court challenging the order dated 16.11.2009 passed by the Division Bench of the High Court in M.P. No. 1 of2009 in W.P. No. 23405 of 2009. Respondent No. 1 also filed another SLP (C) Nos. 19154-55 of 2009 challenging the order dated 18.04.2009 passed by the Division Bench of the High Court in M.P. No. 1 of 2008 and M.P. No. 1 of2009 in A.S. No. 708 of 2008 and order dated 16.11.2009in M.P. Nos. 2 & 3 of 2009 in A.S. No. 708 of 2008. On the very same day, i.e. on 24.11.2009, this Court passed an order to continue auction but not to declare the result. On 11.12.2009, this Court dismissed the SLPs filed by Respondent No. 1.
k. On 23.02.2010, the Division Bench, by impugned judgment, partly allowed A.S. No. 708 of 2008 filed by Respondent No. 1 herein directing him to deposit the balance sale consideration of Rs.4,80,48,000/- with 18%interest from the date of filing of the suit and also directed the appellants herein to execute the sale deed conveying the subject property to Respondent No. 1 and the Bank was directed to proceed against the various other properties of the appellants being the subject matter of O.A. No. 491 of 1999 for recovering the balance amount. The appellants preferred Review Petition No. 37 of 2010before the High Court which was dismissed on29.04.2010. Being aggrieved by the impugned judgment dated 23.02.2010 and order dated 29.04.2010, the appellants have preferred these appeals by way of special leave petitions before this Court.
4. Heard Mr. L. Nageswara Rao and Mrs. Nalini Chidambaram, learned senior counsel for the appellants and Mr. R.F. Nariman, learned senior counsel for respondent No.1 and Mr. Himanshu Munshi, learned counsel for respondent No.2-Bank.
5. Mr. L.N. Rao and Mrs. Nalini Chidambaram appearing for the appellants after taking us through the pleadings, judgment of the trial Court as well as the impugned judgment of the High Court raised the following contentions:
i. The plaintiff has not established "readiness and willingness" in terms of Section 16(c) of the Specific Relief Act, 1963, hence the Courts below ought not to have granted discretionary relief of decree for specific performance. ii) Inasmuch as the agreement being a contingent contract, which is impossible to fulfill and cannot be implemented, in such circumstance, whether the Courts below are justified in granting the relief in favour of the plaintiffs.
ii. Whether the right of marshaling by subsequent purchaser as provided in Section 56 of the Transfer of Property Act, 1882 (hereinafter referred to as `the T.P. Act') is available to a decree holder in a suit for specific performance and whether the High Court is justified in granting such a relief in the absence of any pleading and issue before the trial Court.
iii. Whether the High Court is justified in hearing a writ petition filed under Art. 226 of the Constitution of India along with the regular first appeal filed under Section 96 C.P.C.v) Whether the High Court is justified in issuing certain directions to the Bank which are contrary to the orders passed by the competent forum, namely, Debts Recovery Tribunal.vi) Whether the High Court is justified in granting cost in favour of the plaintiff when the same was rightly disallowed by the trial Court.
6. On the other hand, Mr. R.F. Nariman, learned senior counsel for the first respondent, by drawing our attention to all the relevant materials relied on by the trial Court and the appellate Court supported the ultimate decision of the High Court. He submitted that –
i. The plaintiff has established his readiness and willingness all along and the same was rightly accepted by the trial Court and confirmed by the High Court.
ii. The contract in question is not a contingent contract in terms of Sections 31 and 32 of the Indian Contract Act, 1872.
iii. In view of the fact that the plaintiff has prayed for larger relief and the trial Court has confined to lesser relief of decree for specific performance, the plea of marshaling being a question of law and taking note of equity and justice, the High Court rightly applied the said principle and there is no error warranting interference on this ground.
iv. The subject matter of the appeals and the relief prayed for in the writ petition were interconnected, hence the High Court is justified in disposing of the writ petition along with the appeals.
v. Inasmuch as the plaintiff has succeeded partial relief at the hands of the trial Court after paying substantial court fee, the High Court is justified in awarding cost which was omitted by the trial court.
vi. In any event, in view of the materials placed and the ultimate decision by both the Courts below, interference by this Court exercising jurisdiction under Art. 136 is not warranted. Even after grant of leave, this Court has ample power to dismiss the appeal without going into all the issues.
7. We have considered the rival contentions and perused all the relevant materials in the form of oral and documentary evidence.
Readiness and Willingness
8. Section 16(c) of the Specific Relief Act, 1963 provides for personal bars to relief. This provision states that specific performance of a contract cannot be enforced in favour of a person, a) who would not be entitled to recover compensation for its breach; or b) who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or will fully acts at variance with, or in subversion of, the relation intended to be established by the contract; or c) who fails to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms the performance of which has been prevented or waived by the defendant. Explanation.- For the purposes of clause (c),-
i. where a contract involves the payment of money, it is not essential for the plaintiff to actually tender to the defendant or to deposit in court any money except when so directed by the court;
ii. the plaintiff must aver performance of, or readiness and willingness to perform, the contract according to its true construction."Among the three sub-sections, we are more concerned about sub-section(c). "Readiness and willingness" is enshrined in clause (c) which was not present in the old Act of 1877.However, it was later inserted with the recommendations of the 9th Law Commission's report. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed byhim.
9. The words "ready" and "willing" imply that the person was prepared to carry out the terms of the contact. The distinction between "readiness" and "willingness" is that the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally, readiness is backed by willingness.
10. In N.P. Thirugnanam vs. Dr. R. Jagan Mohan Rao &Ors., (1995) 5 SCC 115 at para 5, this Court held: ".....Section 16(c) of the Act envisages that plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than those terms the performance of which has been prevented or waived by the defendant. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the plaintiff fails to either aver or prove the same, he must fail. To adjudge whether the plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit along with other attending circumstances. The amount of consideration which he has to pay to the defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was always ready and willing to perform his part of the contract."
11. In P.D'Souza vs. Shondrilo Naidu, (2004) 6 SCC 649paras 19 and 21, this Court observed: "It is indisputable that in a suit for specific performance of contract the plaintiff must establish his readiness and willingness to perform his part of contract. The question as to whether the onus was discharged by the plaintiff or not will depend upon the facts and circumstance of each case. No strait-jacket formula can be laid down in this behalf.... The readiness and willingness on the part of the plaintiff to perform his part of contract would also depend upon the question as to whether the defendant did everything which was required of him to be done in terms of the agreement for sale."
12. Section 16(c) of the Specific Relief Act, 1963 mandates" readiness and willingness" on the part of the plaintiff and it is a condition precedent for obtaining relief of grant of specific performance. It is also clear that in a suit for specific performance, the plaintiff must allege and prove a continuous" readiness and willingness" to perform the contract on his part from the date of the contract. The onus is on the plaintiff. It has been rightly considered by this Court in R.C. Chandiok &Anr. vs. Chuni Lal Sabharwal & Ors., (1970) 3 SCC 140 that" readiness and willingness" cannot be treated as a straightjacket formula. This has to be determined from the entirety of the facts and circumstances relevant to the intention and conduct of the party concerned. It is settled law that even in the absence of specific plea by the opposite party, it is the mandate of the statute that plaintiff has to comply with Section16(c) of the Specific Relief Act and when there is non-compliance with this statutory mandate, the Court is not bound to grant specific performance and is left with no other alternative but to dismiss the suit. It is also clear that readiness to perform must be established throughout the relevant points of time. "Readiness and willingness" to perform the part of the contract has to be determined/ascertained from the conduct of the parties.
13. In the light of the above principles, let us consider whether the plaintiff has established his case for decree for specific performance.
14. Mr. L.N. Rao and Mrs. Nalini Chidambaram vehemently contended that the plaintiff has miserably failed to prove that the has fulfilled his obligation both under Ex. A-2 (MoU) and Ex. A-3 - Agreement for Sale and in those circumstances, defendants 1 & 2 are not bound to convey the suit property in favour of the plaintiff. It is not in dispute that on 15.08.2005,the defendants entered into a MoU with respondent No.1 for sale of the suit property at a sale consideration of Rs. 14 lakhs per acre and a sum of Rs. 1 lakh was paid as advance. Balance sale consideration was to be paid within three months from the date of obtaining confirmation letter from the second respondent-Bank. It is seen from the materials that on10.10.2005, M/s J.P. Builders, by a letter addressed to the AGM, Indian Bank Assets Recovery Management Branch II, offered a sum of Rs. 100 lakhs as full and final settlement of the dues of its sister concern which was declined by the Bank advising to revise the offer with substantial improvement. By a letter dated 23.01.2006, the Bank stated that defendant No.2herein had not made any improvement in his onetime settlement proposal of Rs. 100 lakhs and hence the Bank is proceeding to enforce its rights under the Act. It is further seen that on 01.02.2006, the appellant No.2 offered a sum of Rs. 148 lakhs as one time settlement. Within two days of the said offer i.e. 03.02.2006 the plaintiff entered into a Sale Agreement with the defendants for purchase of the suit property. The sale price of Rs. 14 lakhs per acre was enhanced to Rs. 18 lakhs per acre and the respondent No.1 had paid a sum of Rs. 24 lakhs as further advance to defendant No.2. It is further seen that on 18.04.2006, a further payment of Rs. 50lakhs was made by the plaintiff. It is also seen that on15.05.2006, the Bank rejected the one time settlement offer of Rs. 148 lakhs stating that out of court settlement can be done if an offer of Rs. 629.60 lakhs by working out interest at PLR i.e. 11% compound on the principal outstanding as on31.3.1993 be made. For this, defendant No.2 could not agree to pay the same.
15. A perusal of the recitals in the Agreement for Sale (Ex.A-3) are to the effect that to discharge the bank loan and for the business purpose of the vendors, the appellants have decided to sell the properties and offered the same for sale and the Respondent No. 1 has agreed to purchase the said property. In Ex. A-3, it is stated that defendant Nos. 1 & 2/vendors have undertaken to discharge the loans and hand over the original title deeds of the said property to the plaintiff within three months from the date of the agreement for scrutiny of title. It is relevant to mention here that Ex. A-3, was executed on03.02.2006. The recital also shows that the plaintiff has to pay further advance, if any, required by the vendors to release the documents from the Bank. It is the definite case of the plaintiff that defendant Nos. 1 & 2 had agreed to liquidate the property and hand over the original title deeds for which the plaintiff had paid further advance of Rs. 24 lakhs and on18.04.2006, he had paid Rs.50 lakhs.
16. We have already adverted to the initial OTS proposal dated 01.02.2006 expressing second defendant's willingness to pay for Rs. 148 lakhs since the bank has expressed its inability to consider, by letter dated 15.05.2006, the bank has conveyed that OTS will be accepted if the offer is given for Rs.629.60 lakhs by working out compound interest at 11%. In the plaint, there is a specific averment that the plaintiff even on 18.4.2006 has paid a further advance of Rs. 50 lakhs.
17. In his oral evidence before the Court, the plaintiff - PW-1had reiterated and in fact asserted that he was always ready with the money and duly pursuing the OTS along with Defendant Nos. 1 & 2. Insofar as readiness and willingness on the part of the plaintiff is concerned, apart from the specific plea in the plaint about the payment and advance of substantial amount, he also placed the relevant materials in the form of letters to show that he was corresponding with the Bank for early settlement of the dues. In other words, the assertion in the form of specific plea in the plaint and correspondence in the form of letter, his assertion in the witness box at the time of trial, the Courts below are right in arriving at a conclusion that the plaintiff has proved and complied with the mandates provided under Section 16 (c) of the Specific Relief Act.
18. Mrs. Nalini Chidambaram before the High Court as well as before us by basing reliance on clause 4 of the MoU (Ex. A-2) contended that the balance sale consideration has to be paid within one week of the receipt of Confirmation Letter from the Bank and absolutely there is no material to show that the plaintiff was ready with the money within the prescribed period of one week. It is also pointed out that in addition to the same, plaintiff has to pay the amount to clear the bank loan and without paying the amount within the prescribed period, the plaintiff has committed breach of his obligations, hence, the plaintiff is not permitted to blame the defendant which would arise only after the performance of the plaintiff's obligation. In order to prove her stand, learned senior counsel for the appellants heavily placed reliance on Clauses 4, 6 and7 of Ex. A-2. In the light of the said claim, we perused various clauses in Ex. A-2 as well the subsequent agreement for sale dated 03.02.2006, Ex. A-3. As rightly pointed out by the Division Bench, defendant Nos. 1 & 2 had entered into an agreement to sell the suit property to discharge loans and handover the original title deeds has been reiterated both in Ex. A-2 and Ex. A-3. However, it is to be noted that after execution of Ex. A-3, i.e. agreement for sale dated 03.02.2006,defendant Nos. 1 & 2 have undertaken to discharge the loans and handover the original title deeds to the plaintiff. No doubt, as per Ex. A-3, plaintiff has to pay further advance, if required by the vendors to release the documents from the Bank. The plaintiff has demonstrated by placing oral and documentary evidence that on the date of execution of Ex. A-3,he has paid further advance of Rs. 24 lakhs and Rs. 50 lakhs on 18.04.2006. It was pointed out that the plaintiff has settled Rs. 75 lakhs out of the sale consideration and for the balance sale price he has deposited a sum of Rs. 2,45,00,000/- in Indian Overseas Bank, Sow carpet Branch, Chennai. The deposit receipt of the said amount is produced as Ex. A-13. In order to prove that he had sufficient means of finance, the plaintiff has produced documents under Ex. A-12 and Ex. A-13. In his evidence as PW-1, the plaintiff has asserted that he was having ready cash and also produced Ex. A-11, Fixed Deposit Receipt (FDR dated 19.04.2006 in his name) in Indian Overseas Bank for Rs. 2,45,00,000 with date of maturity as18.07.2006. Ex. A-12 is the certificate issued by the Indian Bank, Alwarpet Branch, Chennai stating that the plaintiff is maintaining Savings Bank Account No.726244658 in their bank and the balance as on 20.04.2007 is Rs. 1,50,00,444/-Ex. A-13 is the Certificate issued by Indian Overseas Bank stating that credit balance of plaintiff's savings bank account No. 6874 is Rs. 304,12,574.08 as on 21.04.2007. If we analyse Ex. A-11 to Ex.A-13 coupled with assertion made in the oral evidence of PW-1, it would amply show that plaintiff was having sufficient cash and financial capacity to complete the transaction. Further the plaintiff is required to pay the balance amount of consideration only on the event of a demand made for payment of further amount by the defendants on the basis of the confirmation letter to be obtained from the bank as per the agreement for sale under Ex. A-3. Absolutely, there is no evidence as to any demand made by defendant Nos. 1 & 2 from the plaintiff for further payment of sale price. Inasmuch as under Ex. A-4, he had intimated that he is prepared to get the sale executed while perusing the aforesaid bank deposit receipts, it is clearly revealed that the plaintiff was endowed with the means to pay the sale consideration and had ever been prepared to do the same. On the other hand, it is not the case of Defendant Nos.1 & 2 that they have asked for further advance and that the plaintiff did not respond for their request. As rightly pointed out by the trial Court and commended by the High Court, it is not clear that why Defendant Nos. 1 & 2 fail to led oral evidence in support of their claim. It is also not clear why they have avoided the witness box, though it is stated that the plaintiff had admitted the stand of Defendant Nos. 1 & 2which is factually incorrect and unacceptable. The only objection pointed out was that for effective OTS, even though, the plaintiff has deposited Rs.10,01,000/- in the "No lien account" of second defendant, the plaintiff has surreptitiously with drawn the said amount which had upset the settlement talks between defendant Nos. 1 & 2 and the 3rd defendant-Bank on the other side. It is true that as per clause 4 of Ex.A-2 MoU, the plaintiff has agreed to pay further advance to defendant Nos. 1 & 2 to enable them to pay and clear the bank loan obtained by their sister concern namely, M/s Anand Agency, wherein defendant No.1 - J.P. Builders have stood as guarantors to the said loan. It is equally true that in the letter (Ex. B-1), addressed to the Assistant General Manager of the Bank, the plaintiff has stated that he has depositedRs.10,01,000/- in a "No-lien account" towards M/s. Anand Agency and that he has proposed to purchase the property from them which was mortgaged to the Bank and after acceptance of the compromise settlement, the amount can be appropriated towards the compromise arrived. In the same letter, the plaintiff has also informed that if the compromise settlement is not materialized, the said deposit may be released to him. However, as pointed out earlier, one time settlement offer of Rs. 148 lakhs was not acceptable by the Bank and because of the same, the plaintiff withdrew the said deposit and the bank by a letter (Ex. B-2), informed the second defendant about the same. As rightly pointed out by the High Court, mere withdrawal of Rs. 10,01,000/- deposited in "No-lien account" by the plaintiff has no significance since subsequent to the same both parties have entered into Ex. A-3, Agreement for sale on 03.02.2006 and on which date the plaintiff has also paid a further advance of Rs. 25 lakhs. These facts have been clearly explained by PW-1 in his evidence and he also asserted that the same fact was orally informed to Defendant Nos. 1 & 2. We have already pointed out that there is no reason to disbelieve the assertion of PW-1.As rightly pointed out by Mr. R.F. Nariman, learned senior counsel for the first respondent-plaintiff that after receipt of Ex. B-2 Defendant Nos. 1 & 2 have not raised any protest but on the other hand they proceeded to further advance of Rs. 50lakhs from the plaintiff on 18.04.2006 and made endorsement in Ex. A-3 agreement for sale. In those circumstances, as rightly pointed out and correctly appreciated by the High Court, withdrawal of Rs. 10,01,000 from "No-lien account" of M/s Anand Agency by the plaintiff would not lead to the conclusion that the plaintiff had committed breach and was not ready to perform his part of the contract.
19. With the materials placed, specific assertion in the plaint, oral and documentary evidence as to execution of agreement, part-payment of sale consideration, having sufficient cash and financial capacity to execute the sale deed, bank statements as to the moneys in fixed deposits and saving accounts, we are of the view that the plaintiff has proved his "readiness" and "willingness" to perform his part of obligation under the contract. The concurrent findings of the trial court as well the High Court as to readiness and willingness to perform plaintiff's part of the obligations under the contract; in the absence of any acceptable contra evidence is to be confirmed. We agree with the conclusion arrived at by the trial Court as well as by the High Court on the readiness and willingness on the part of the plaintiff and reject the argument of the learned senior counsel for the appellants. Contingent Contracts
20. By pointing out various clauses in the MoU (Ex. A-2), Ms. Nalini Chidambaram, learned senior counsel for the appellants heavily contended that inasmuch as the contract was depending upon uncertain events of the Indian Bank, agreeing for OTS, the contract entered is contingent depending on the move of the Indian Bank. According to her, inasmuch as various clauses insists certain impossible conditions at the hands of the Indian Bank, the contract entered into between the plaintiff and defendants become impossible and void. Though such an argument was advanced before us, there was no such specific plea in their written statement and the Trial Court has not framed separate issue and considered the same. Irrespective of the above position, in view of the assertion made by learned senior counsel, we intend to discuss and giveour answer.
21. Chapter III of the Indian Contract Act, 1872 deals with Contingent Contracts. Contingent contract has been defined in Section 31 and method of enforcement is stated in Section32 which reads as under: "31. "Contingent contract" defined.-- A "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. 32. Enforcement of contracts contingent on an event happening.-- Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void."It is clear that if the condition prescribed or even described in the contract is impossible, undoubtedly, such contracts become void and not enforceable in terms of Section 32. The events enumerated in the contract, according to Ms. Nalini Chidambaram are (a) a letter specifying the balance due to the bank (b) an undertaking later from the Bank that it will receive the said balance amount (c) they will hand over the original documents directly to the plaintiff. While elaborating the said points, learned senior counsel highlighted that for executing the sale deed, getting confirmation or clearance letter from the Indian Bank on payment of the dues to the Bank and getting original documents have been emphasized in various clauses in the MoU (Ex. A-2). Among various clauses, she highlighted Clauses 4, 6, 7 in the MoU (Ex. A-2). No doubt, those conditions have been enumerated in the above referred clauses. She also brought to our notice that the Indian Bank not only declined the OTS offer of Rs 148 lakhs but got a decree for Rs. 8,51,825.29 from the DRT. The very same contentions were raised before the High Court. Mr. R. F. Nariman, by drawing our attention to Ex. A-3 contended that Agreement for Sale dated 03.02.2006 is a fresh agreement hence clause 4, 6 and 7 of the MoU (Ex. A-2) would not govern the parties. We have once again perused various clauses in Ex. A-2 as well as subsequent agreement for sale Ex. A-3. It is relevant to note that in the plaint, in paragraph 7, this aspect has been specifically pleaded wherein it was highlighted that the plaintiff sought for performance of contract strictly in accordance with the original Memorandum of Understanding (MoU) dated 15.08.2005 as emerged with the agreement for sale dated 03.02.2006 entered into between the plaintiff and the defendant Nos. 1 and 2 in Chennai for sale and purchase of the suit property. In fact, this was specifically mentioned by the plaintiff in his rejoinder notice dated 31.07.2006addressed to defendant Nos. 1 and 2 and even after receipt of the same, they have not chosen to send any reply disputing the same. In those circumstances, we agree with the conclusion arrived at by the High Court, namely, after the parties entered into Ex. A-3 agreement for sale, Clauses 4, 6and 7 of the MoU (Ex A-2) would not govern the parties. On the other hand, as per Clause 3, 4 and 6 in Ex. A-3, the vendor and defendant Nos. 1 and 2 have undertaken to discharge their loans and hand over title deeds. The relevant clauses, namely, 3, 4 and 6 of Ex. A-3 are as follows. "......3. The balance of sale consideration shall be paid by the PURCHASER TO THE VENDORS on or before the Registration of the Deed of Sale. 4. The Vendor undertake to discharge the Loans and hand over the ORIGINAL TITLE DEEDS relating to Schedule mentioned properties to the PURCHASER, within three months from this date for scrutiny of title. HOWEVER, the 3 purchaser has to pay further advance if any required by the VENDORS, to release the documents from Bank. 6. The sale shall be completed within six months from the date of production of ORIGINAL DOCUMENTS by the VENDORS to the Purchaser....."
22. If we accept the above stand and conduct of the parties and fresh terms as mentioned above in Ex. A-3, the conditions incorporated in Ex. A-2 need not be complied with and it cannot be contended that the contract was a contingent contract and unless and until a letter of confirmation issued by the Indian Bank, the same is not enforceable. As rightly pointed out by Mr R. F Nariman, the vendors have agreed to sell the property but agreed to execute the sale deed after discharge of the mortgage in favour of the defendants. In other words, it was only the execution of the sale deed which was postponed to a future date. The clauses referred above in Ex A-3 do not insist the sale deed is to be executed only after the acceptance of OTS proposal by the Bank. It is true that the first OTS offered by defendant Nos. 1 and 2 was not acceptable by the Bank. When the Bank offered OTS for Rs.629.60 lakhs, it was not acceptable by the defendant Nos. 1and 2. Clause 4 of Ex. A-3, makes it clear that to discharge the loans of the Bank, the vendors are free to make a request to the purchaser, namely, the plaintiff, to make further advance and after getting the amount from the plaintiff, defendant Nos. 1 and 2 have to secure documents from the Bank. The trial Court as well as the High Court held that there is no material to show that the defendant Nos. 1 and 2made any attempt to comply with Clause 4 in Ex. A-3 by requiring the plaintiff to make further advance. In the earlier paragraphs, we have also highlighted the conduct of the plaintiff in keeping the required money, no doubt, in their SB account for the purpose of meeting the demand of the defendant Nos. 1 and 2. Even otherwise, the agreement to discharge the loans of the Bank and handover the original title deeds to the plaintiff cannot be construed as impossible event and it would affect the terms of contract to become void, more particularly, when the plaintiff deposited substantial amount facilitating the defendant Nos. 1 and 2 to meet their requirement for fulfilling the contract. As rightly observed by the High Court, in the light of various clauses in the agreement agreed to by both the parties, the same cannot be termed as a contingent contract.
23. As stated earlier, merely because the contract insist settlement of a loan of the bank and handover the title deeds to the plaintiff from the bank are not impossible events in the light of the performance made by the plaintiff, the contract in question did not come to an end on this ground and such contract is not a contingent contract and undoubtedly, the Court has jurisdiction to grant relief in terms of the contract. Obtaining No Objection Certificate (NOC) from the authority concerned, clearance of NOC from Income Tax Department or any other State/Central authority, securing title deeds after clearing certain loans are incidental and implied covenant on the part of the vendors to do the needful to give effect to theagreement.
24. It is also relevant to point out that though defendant Nos.1 and 2, at the first instance offered OTS for Rs. 148 lakhs the Bank, after taking note of various aspects claimed Rs.629.60 lakhs as their proposal. As rightly pointed out by Mr. R.F. Nariman, it was not an impossible performance considering the amount borrowed by the sister agency of the Ist defendant and various properties possessed by defendant Nos. 1 and 2 in prime localities of Chennai and in and around the sub-urban areas of Chennai.
25. We are satisfied that the contract in question is capableof performance and the contention of the learned senior counsel for the appellants that it is a contingent contract and is incapable of performance cannot be accepted. We have already pointed out that this was not an issue before the trial Court and such plea was not raised in the written statement. We have also pointed out that defendant Nos. 1 and 2 did not bother to explain all salient features by entering the witness box in support of their claim. We have already highlighted that the plaintiff has established that he has partially performed his part of obligations by paying the advance amount of Rs. 25 lakhs and another Rs. 50 lakhs in addition to the initial deposit of Rs. 1 Lakh. We also hold that plaintiff has proved his readiness and willingness and financial ability to complete the sale transaction. Accordingly, we reject the second contention also.Marshalling
26. It is the claim of the plaintiff before the High Court that having secured a decree for specific performance as per Section 56 of the T.P. Act, 1882, by applying the principles of Marshalling, directions may be issued to the Bank to exhaust its remedy from other items of property which are located in the prime places in Chennai before bringing the properties covered in the agreement of sale.
27. In order to understand the claim of the plaintiff and the stand taken by the defendant Nos. 1 and 2, it is useful to refer Section 56 of the T. P. Act. "56. Marshalling by subsequent purchaser.--If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties."Similar to this is Section 81 of the T.P. Act which speaks about marshalling securities. The High Court after noting that the plaintiff had paid substantial amount as advance and secured decree for specific performance came to the conclusion that the right of marshalling is available to the plaintiff. Section 56deals with the right of subsequent purchaser to claim marshalling. It should be contrasted with Section 81 which refers to marshalling by a subsequent mortgage. The concept as in Section 56 applies to sales in a manner similar to Section81 which applies to mortgages alone.
28. The concept of marshalling by subsequent purchaser can be explained by the following illustration. Suppose A owns properties X and Y. Both these properties are mortgaged to C. Later, A sells property X to B. Now, B will be entitled to insist that his vendor A, shall satisfy his mortgage debt out of property Y (unsold) in the first instance as far as possible. If after property Y is exhausted there still remains balance of debt, only then property X will be drawn upon. As stated earlier, Section 56 deals with the concept of marshalling in a transaction involved in subsequent sale, on the other hand, Section 81 is applicable only to mortgages. The doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds.
29. As rightly pointed out, in view of the sale agreement which results into decree for specific performance, the plaintiff is entitled to insist upon defendant Nos. 1 to 3 to have the mortgage debt satisfied out of the properties not sold to the plaintiff and in any case if the sale proceeds are not sufficient then to proceed against the said suit properties. Learned senior counsel for the appellants strongly objected the application of the principle of marshalling by subsequent purchaser by the High Court when the plea of marshalling was not taken by the plaintiff in the trial Court. In other words, according to them, without taking such plea before the trial court, the same cannot be taken for the first time before the Appellate Court. It is not in dispute that the plea of marshalling and applicability of Section 56 of the T.P. Act was not raised before the trial Court. However, if we consider the entire plaint, which is available in the appeal paper-book, the plaintiff has claimed a larger relief. In para 12 of the plaint, the plaintiff has prayed for the following reliefs.
i. "directing the Defendant Nos. 1 and 2 to specifically perform the Agreement for Sale Deed dated 03.02.2006 in respect of the suit schedule mentioned property which is more fully described in the schedule hereunder, by executing a Deed of Sale or Deeds of Sale and register a valid conveyance in favour of the Plaintiff or his nominee or nominees on a date to be fixed by this Court and/or in default, direct the officer of this Court to convey the suit schedule mentioned property on behalf of the Ist and 2nd Defendants herein in favour of the plaintiff or his nominee or nominees on a date to be fixed by this Court on receipt of the balance sale consideration of Rs. 4,80,48,000/- payable by the Plaintiff to them.
ii. For a mandatory injunction directing the 1st and 2nd Defendants to discharge the loan payable to the 3rd Defendant Bank in respect of DRT proceedings pending on the file of DRT, Chennai as per the terms of the contract dated 03.02.2006 thereby retrieve the documents and deliver the same to the plaintiff at time of execution and registration of Sale Deed or Sale Deeds in favour of the plaintiff or his nominee or nominees either in one lot or in pieces as the case may be.
iii. Not pressed, deleted.
iv. For a permanent injunction restraining the Defendants 1 and 2, their men, servants, agents, or any one claiming through them or authorized by them in any manner alienating, encumbering or dealing with the suit schedule mentioned property either by way of sale, mortgage, lease, joint-development, or otherwise, or putting up any construction thereon except in accordance with law.
v. To grant such further or other reliefs; and (vi) To award the costs of this suit."
