2003 Supreme(Bom) 183

IN THE HIGH COURT OF BOMBAY
Kochar R.J., J.
Volition Investment Pvt. Ltd. .... Plaintiff.
Versus
Madhuri Jitendra Mashroo another.... Defendants.
Notice of Motion No. 361 of 2003 in Suit No. 426 Notice of Motion No. 362 of 2003 in Suit No. 425 of 2003, decided on 13-2-2003.
Advocates appeared :
Janak Dwarkadas i/b., S. Ashwinikumar Co., for plaintiffs.
P.K. Samdani i/b., Haridas Co., for defendant.

Headnote:Contract Act, 1872 - Section 8 - Civil Procedure Code, 1908, Order XXXIX, Rules 1 and 2 - Contract - Time - Essence of contract - MOU with developer/plaintiff - Payment of stipulated amount in cash to defendant and free accommodation also to other occupants/tenants provided therein - Subject to obtaining letters of consent from all tenants/occupants within 6 months by defendant - Part payment accepted by defendant - Not taken steps - Held - Time is not essence of contract - Defendant can obtain letters of consent even after stipulated period within a reasonable time - Defendant accepting part payment cannot take advantage of her own wrong - Plaintiff prima facie made out a strong case - Plaintiff entitled to interim relief in their favour. - Since the plaintiffs have offered the amount as stipulated in the MOU, Clause 7 cannot be said to have come into operation to terminate the MOU. Court has already held that the MOU was for sale and transfer of interest in the immovable property under the MOU and, therefore, the principle of time is not essence of the contract in the present case of the transaction of immovable property. D is right in his submission that if the MOU is not duly stamped and if there is deficiency that can always be fulfilled after payment of penalty at the time of trial as per the order passed by the Court. According to the MOU is a commercial document and that it should be interpreted commercially. Even D made the same submission. In Court s opinion, Court has interpreted the MOU commercially. The commercial moral or mercantile ethic is certainly not to breach the agreement to retain a large amount of Rs. 10.50 lakhs for doing nothing as contemplated in the MOU and thereafter again expect Rs. 39.50 lakhs without any commitment to perform the terms in the MOU. The plaintiffs even then made full payment of Rs. 39.50 lakhs but with a condition which was already incorporated in the MOU and no other new condition was attached to fall within the trap of Section 38 of the Indian Contracts Act. The commercial moral would have made the defendant to act as per the MOU and make all efforts to get consent letters from the tenants failing which she would have requested the plaintiffs to bear with her for some more time. Instead, she contends that under clause 7 the MOU has come to end after using Rs. 10.50 lakhs for six months and she further expects the plaintiffs to pay Rs. 39.50 lakhs so that the death of the MOU can be put off without any assurance in return. This is no commercial interpretation of the commercial document in the world of commerce which certainly is not devoid of commercial ethics. The defendant is bound to perform the contract unless the plaintiffs desire to avoid it.

       Trade and Merchandise Marks Act, 1958 - Section 54 - Agreement for sale or development - Memorandum of understanding between parties - Plaintiffs paid price in part - Plaintiffs promised by defendant/owner rights and interest in property to be developed by plaintiffs and to be sold by them in open market - Also permitted to sell additionally constructed flats on permissible F.S.I. - To earn or retain whole amount - And also given rights of landlord qua tenants including right to collect rents from tenants - And to provide permanent alternative accommodation for defendant and her tenants - Agreement not mere development agreement - It is agreement for sale. - Under the MOU under question the plaintiffs have paid to the defendant a price in part of the total price agreed between the parties. The total price agreed was Rs. 1 crore for the property. In return the plaintiffs were promised by the defendant owner the rights and interest in the property to be developed by them and to be sold by them in the open market the additionally constructed flats on permissible F.S.I. and to earn or retain the whole amount with them. They were also given all the rights of the landlord qua the tenants/occupants of the suit premises. They were virtually put in the place of the owner defendant of the building while dealing with the tenants in every respect as provided in the MOU, including the right to collect rent from the tenants/occupants. The plaintiffs have virtually stepped in the shoes of the landlord of the buildings i.e. the defendant, under the MOU. Such a role cannot be assigned to a developer- simpliciter of the structure. He will merely develop the building as per agreement and will get out after getting his price for the work. He will render his services and get his agreed amount and nothing more in the bargain. The tenants and their rights and liabilities will not be his problems. He will not be required to pay any amount to the owner of the building or to provide any permanent accommodation to the owner and the tenants in addition to the work of the development to be done by him for the owner. In the present case, the plaintiffs have to pay a sum of Rs. 1 crore in Addition to provision of permanent alternative accommodation for the defendant and her tenants and also do the work of development of the structure to earn out of the sale of the additionally developed area. It is, therefore quite clear that the plaintiffs are to pay to the defendant a sum of Rs. 1 crore as consideration in cash and also to provide for the her and her tenants permanent accommodation in return of the suit property with all the other appertaining rights and interest as also the obligations of the ownership of the property. The plaintiffs rights are not restricted to get only a sum of consideration out of the development but they actually step in the shoes of the owner of the property in every respect after they fulfil their obligation of payment of the agreed amount in cash and the consideration in kind in the form of provisions of alternative permanent accommodation to the owner and to the tenants. In the bargain, he gets the right to sell the developed flats and also rent from the tenants and all other rights of the landlord owner. Such a right never accrues to a developer simpliciter unless the whole property gets vested in the developer. In that case the developer ceases to be a developer as ordinarily understood. Ordinarily, it is the right of the owner of the property to sell or deal with the property as he likes. No developer gets a right to sell or deal with the property unless he is given such right specifically and specially. All these ingredients of sale are present in the MOU.

       The plaintiffs have a very strong case in their favour that the MOU is not a mere agreement for development but is an agreement for sale of the whole interest in the immovable property

       Trade and Merchandise Marks Act, 1958 - Section 54 - Sale of land - Development agreement - Memorandum of understanding - Plaintiff paid price in post to defendant/owner - In return, defendant-owner promised plaintiffs rights and interest in property to be developed by them and to be sold by them in open market - Also additionally constructed flats on permissible F.S.I. and to earn or retain whole amount with them - Also given right to collect rent from tenants and to provide permanent alternative accommodation for defendants and her tenants - Memorandum of understanding was a sale-deed and not a development agreement

       Specific Relief Act, 1963 - Section 37 - Interim injunction - Grant of - Memorandum of under- taking between parties - To develop and sell land - Owner has to obtain agreements from tenants to get tentaments vacated for starting development work - Owner retained first instalment of payment - Demanding second instalment without fulfiling obligation - Owner failed to obtain agreements from tenants - MOU not comes to an end - Plaintiff entitled to grant of interim injunction against owner - Owner restrained from transferring property to any other person.

       Specific Relief Act, 1963 - Section 37 - Interim injunction - Grant of - MOU between parties - To develop and sale of land - Obligation on owner in MOU - To obtain consent agreement from tenants to get premises vacated for initiating development of structure - First instalment of payment retained by owner - Demand of second instalment of large amount without fulfilling obligation - Failure of owner to fulfil said obligation not makes MOU inoperative - Plaintiff entitled to get injunction restraining defendant/ owner from transferring property to some one else. - The defendant has retained an amount of Rs. 10.50 lakhs and on the other hand the defendant wants the large amount of Rs. 39.50 lakhs without any condition and without fulfilling the obligation in the MOU in respect of the consent agreement from the tenants to get the tenaments vacated for starting development of the structure.

       The commercial moral or mercantile ethic is certainly not to breach the agreement to retain a large amount of Rs. 10.50 lakhs for doing nothing as contemplated in the MOU and thereafter again expect Rs. 39.50 lakhs without any commitment to perform the terms in the MOU. The plaintiffs even then made full payment of Rs. 39.50 lakhs but with a condition which was already incorporated in the MOU and no other new condition was attached to fall within the trap of Section 38 of the Indian Contracts Act. The commercial moral would have made the defendant to act as per the MOU and make all the efforts to get consent letters from the tenants failing which she would have requested the plaintiffs to bear with her for some more time. Instead, she contends that under Clause 7 the MOU has come to end after using Rs. 10.50 lakhs for six months and she further expects the plaintiffs to pay Rs. 39.50 lakhs so that the death of the MOU can be put of without any assurance in return. This is no commercial interpretation of the commercial document in the world of commerce which certainly is not devoid of commercial ethics. The defendant is bound to perform the contract unless the plaintiffs desire to avoid it.

       The plaintiffs have made out a very strong prima facie case for the interim reliefs in their favour. The notice of motion, therefore, is made absolute in terms of prayer clauses (a) (b) and (c).

       Specific Relief Act, 1963 - Section 34 - Suit seeking declaration - That wife was benamidar and real ownership was with husband - Claim for ownership of flat can be basis of agreement as well as share certificate standing in her name - Held - As agreement is entered favouring defendant - And merely because the share certificate stand in her name it cannot be conclusively decided that she is exclusively the owner of flat - There is nothing abnormal in a matter between husband and wife. - The plaintiff does not deny this fact, on the contrary he stated, in the given circumstances of his employment on the foreign ships he was required to be away from his home for a substantial part of the year. It was to facilitate the day to day affairs and the maintenance of the family and the flat he had caused the agreement to be in her name and also the share certificates to be issued by the society in her name. Merely because the agreement is entered into in the name of the defendant No. 1 and merely because the share certificates stand in her name it cannot be conclusively held that she is the exclusive owner of the flat. Her right to claim such ownership has been demolished by the plaintiff who has proved his own income and who had proved his financial capacity to purchase the flat and who has also proved the disability of the defendant No. 1 to purchase the flat from her own income. The plaintiff has proved that the flat was purchased by him with his own income though in the name of the defendant No. 1 as a matter of convenience for day to day affairs. There is nothing abnormal or unusual in the conduct of the plaintiff in getting the agreement in the name of his wife and in getting the share certificates in her name as the entire affair was between the husband and the wife. At the relevant time the couple was living peacefully without any quarrel or clashes between them. From the fact that the plaintiff had purchased the flat in the name of the defendant No. 1 indicates that both had good relations of husband and wife at that time. The unfortunate rift between them is of a subsequent event. Court answers all the issues whether that the plaintiff is the owner of the flat though the agreement and the share certificates stood in the name of the defendant No. 1 for the sake of convenience.

       Specific Relief Act, 1963 - Section 20 - Agreement - For sale of immovable property - Terms of agreement - Unless and until owner obtains agreements from tenants/ occupants for vacating tentaments and for shifting them to transit accommodation no further steps for completion of transaction could be taken - 6 months period generally stated - Time whether essence of contract - Whole payment to be made by plaintiffs to defendant - No time given as to when defendant would obtain agreements from tenants - Time is not essence of contract.

       Specific Relief Act, 1963 - Section 20 - Contract - Time essence of contract - Sale agreement of immovable property - Terms of - Unless and until owner becomes able to obtain agreements from tenants for vacating tenements and for shifting them to accommodation in transit no further steps for completion of transaction could be taken - Six months period stated - Whole payment to be made by plaintiff to defendant/owner - No time given as to when defendant would obtain agreements from tenants - Time not essence of contract. - It is not merely because of specification of time at or before which the thing to be done under the contract is promised to be done and default in compliance therewith, that the other party may avoid the contract. Such an option arises only if it is intended by the parties that time is of the essence of the contract. Intention to make time of the essence, if expressed in writing must be in language which is unmistakable it may also be inferred from the nature of the property agreed to be sold, conduct of the parties and the surrounding circumstances at or before the contract. Specific performance of a contract will ordinarily be granted, notwithstanding default in carrying out the contract within the specified period. If having regard to the express stipulations of the parties, nature of the property and the surrounding circumstances, it is not inequitable to grant the relief. If the contract relates to sale of immovable property, it would normally be presumed that time was not of the essence of the contract. Mere incorporation in the written agreement of a clause imposing penalty in case of default does not by itself evidence an intention to make time of the essence.

       Specific Relief Act, 1963 - Sections 5, 6, 15 and 40 - Civil Procedure Code, 1988, Order XXXIX, Rules 1 and 2 - Memo of understanding - For development - A document for sale of property - Created rights in favour of plaintiffs - Interim relief sought - Payment of stipulated amount for property provided in MOU - In addition to free accommodation to all occupants subject to minimum 225 sq. ft. each - Part payment made by plaintiff - Balance withheld because defendant not taken steps for obtaining consent of occupants - Not noticed plaintiffs for cancellation of MOU - Held - No developer has right to deal with or sell property as it likes unless specifically given - MOU not a simple agreement for development for sale of whole interest in property - Plaintiff not vested with right of conveyance to society of occupants/tenants and new buyers. - The plaintiffs rights are not restricted to get only a sum of consideration out of the development but they actually step in the shoes of the owner of the property in every respect after they fulfill their obligation of payment of the agreed amount in cash and the consideration in kind in the form of provisions of alternative permanent accommodation to the owner and to the tenants. In the bargain, he gets the right to sell the developed flats and also rent from the tenants and all other rights of the landlord owner. Such a right never accrues to a developer simplicitor unless the whole property gets vested in the developer. In that case the developer ceases to be a developer as ordinarily understood. Ordinarily, it is the right of the owner of the property to sell or to deal with the property as he likes. No developer gets a right to sell or deal with the property unless he is given such right specifically and specially. All these ingredients of sale are present in the M.O.U. The intention of transfer of the interest in the immovable property can be seen from the M.O.U. if Court pierces the curtain of the transaction. From the aforesaid terms and conditions in the M.O.U. and from the tenor of the agreement between the parties, on closer scrutiny it becomes clear that the owner- defendant had intended to sell the property or atleast the whole interest therein to the plaintiffs. It was not a simple agreement for development of the property. Had it been so, we must remember that the plaintiffs would not have been vested with the right of conveyance of the property to the society of the tenants/occupants and new buyers. Such rights would otherwise be exercised by the owner of the property. In the present case, the owner has transferred almost all the rights of the ownership of the property to the plaintiffs for a stipulated consideration. Prima facie, therefore, the plaintiffs have a very strong case in their favour that the M.O.U. is not a mere agreement for development but is an agreement for sale of the whole interest in the immovable property