Misrepresentation in a contract does not render it void, but voidable at the option of the defrauded party. Section 64 of the Indian Contract Act imposes an obligation to refund the consideration upon rescission of a voidable contract.

JUDGMENT

N. J. Jamadar, J. - This appeal is directed against a decree passed by the learned Judge, City Civil Court, Greater Mumbai in S.C. Suit No. 8228 of 1984 whereby and whereunder the suit for specific performance instituted by the appellants came to be dismissed.

2. For the sake of convenience and clarity, the parties are hereinafter referred to in the capacity in which they were arrayed before the trial Court.

3. The background facts leading to this appeal can be stated, in brief, as under:-

(a) The plaintiff Nos.1 to 5 claimed to be the tenants of the premises forming part of the chawls namely Mandodari, Tara, Bangali, Sita, Ahilya and Draupadi and corrugated tin sheds situated at New Badam Wadi, V.P. Road, Mumbai standing on a free hold land admeasuring about 3032 sq. mts. (hereinafter referred to as the 'suit property'), owned by the defendant - the Life Insurance Corporation of India, a Public Sector Corporation established under the provisions of Life Insurance Corporation Act, 1956.

(b) The defendant Corporation had floated tenders for sale of the suit property. The plaintiff Nos.1 to 5 claimed to have formed Girgaum Griha Nirman Mandal, an Association of tenants, and submitted an offer to purchase the suit property for a consideration of Rs.4,25,000/- vide letter dated 20th January, 1981. Along with the said offer the plaintiff Nos. 1 to 5 deposited a sum of Rs. 50,000/- with the defendant which was duly acknowledged by defendant by passing a receipt dated 22nd January, 1981. The said offer was accepted by the defendant vide letter dated 27th February, 1981 incorporating therein the material terms and conditions of sale.

(c) It was, inter alia, provided that the suit property was to be purchased for a consideration of Rs. 4,25,000/- on 'as is where is basis'. A sum of Rs. 50,000/- was already deposited. The balance amount of Rs. 3,75,000/- was to be paid within one month of the said acceptance of the offer. The plaintiffs shall get the proposed society registered within three months from the date of the execution of the agreement for purchase and complete the transaction within six months from the date of the agreement for purchase. Conveyance was to be executed in favour of the co-operative housing society proposed to be formed by the sitting tenants in the suit property. If the society could not be registered for any reason, the sale transaction shall be completed, notwithstanding the non-registration of the society, and the plaintiff would be liable to take conveyance of the property and complete the sale transaction within the stipulated period of six months.

(d) The plaintiffs averred, a lengthy correspondence, thereafter, ensued. Vide letter dated 27th March, 1981 the plaintiff called upon the defendant to give list of tenants and title documents. Simultaneously, the plaintiffs delivered a demand draft for the balance consideration of Rs. 3,75,000/-. By a further communication dated 31st March, 1981 the plaintiffs made it clear that they had agreed to purchase the suit property on behalf of the tenants. However, at that stage, only the plaintiff Nos. 1 to 5 had contributed for the consideration. The defendant was further informed that the plaintiffs were making an earnest endeavor to form a cooperative society of the tenants.

(e) In the further correspondence, that ensued between the plaintiff Nos. 1 to 5 and defendant, the plaintiffs conveyed the difficulties in forming co-operative society in accordance with the letter of acceptance dated 27th February, 1981. Repeated request of the plaintiffs to share the draft conveyance in order to execute the Deed of Conveyance did not elicit any response.

(f) Eventually, vide letter dated 25th September, 1981 the defendant took an unreasonable and unjustifiable stand that it had offered to sale the suit property only to the sitting tenants in the suit property. Initial offer by the plaintiff was for and on behalf of the tenants in the suit property and the defendant had accep