Ashok Kumar Kothari vs Sanwarlal Agarwal

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Bom) 729

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ABHAY AHUJA, J.
Ashok Kumar Kothari & Others - Judgment Creditors
Versus
Sanwarlal Agarwal & Others - Judgment Debtors
Execution Application No.1041 of 2022 With Execution Application (L) No.139 of 2020 With Interim Application (L) No.28981 of 2021 And Interim Application (L) No.5203 of 2021 And Interim Application No.546 of 2022 In Execution Application No.1041 of 2022 With Notice (L) No.31837 of 2022 In Execution Application No.1041 of 2022
Decided On : 19-09-2024

Advocates Appeared:
Mr. Anil Singh, Senior Advocate a/w. Mr. Amogh Singh, Mr. Vikas Mishra, Mr. Nirav Karia, Mr. Adarsh Vyas, Mr. Rohit Yadav, Ms. Krutisha Pandey, Ms. Monika Shekhawat i/by Mr. Bhavin Bhatia, Mr. Dinyar Madon, Senior Advocate a/w. Mr. Vishal Kanade, Mr. Bhadrish Raju i/by Mr. Jamshed Ansari.

Headnote:(A) General Principles of Contract Law - Specific Performance - Execution of Decree - Dispute arose from the sale of shareholding between two groups - Court upheld the specific performance of agreement dated 27th March 2019 stating that terms in consent decree cannot be altered; reverse mechanism not included - Final decree in favor of Agarwals to execute share transfer, payment of remaining consideration also mandated. (Paras 6, 27, 64)

(B) Execution of Decrees - It was emphasized that execution courts cannot extend terms not included in original decrees, reaffirming judicial economy to prevent undue litigation. (Paras 80, 84)

Facts of the case:
Disputes escalated after Kotharis and Agarwals, competing shareholders of Special Ear, Nose and Throat Hospital Pvt. Ltd., failed to amicably resolve a financial agreement for share transfer which was outlined via emails exchanged on 27th March and 28th March 2019. After reaching a purported settlement, disagreements led to Kotharis' initiation of litigation for specific performance, leading to a decree favoring Kotharis to take control of Agarwals' shares, which Agarwals later contested in a series of appeals.

Findings of Court:
Kotharis were required to compensate Agarwals the outstanding amount evidently stemming from the share transaction while upholding that the reverse sale mechanism was not an enforceable term of the consent decree.

Issues: The court addressed whether the consent decree allowed for an automatic reverse sale of Kotharis' shares in case of payment failure, which formed a core dispute in the judgment, confirming that consent terms were clear and unambiguous.

Ratio Decidendi: The court ruled that execution courts must adhere strictly to the terms of the decrees they enforce, maintaining that any addition or alteration is impermissible unless originally part of the accepted consent agreement.

Result: Execution Application (L) No. 139 of 2020 is allowed; Execution Application No. 1041 of 2022 is dismissed.

JUDGMENT :

Abhay Ahuja, J.

1. A company by the name of Special Ear, Nose and Throat Hospital Private Limited (the “said company”) was incorporated on 2nd April 2009 with the object to construct a multi-speciality hospital on a parcel of land called as “Hospital Plot AM6” admeasuring 4897.40 square meters and bearing CTS No.827/C/1/20 situate at Dindoshi, Malad (East), Taluka Borivali, Mumbai (the “project”) by the Defendants (the “Agarwals”) in Suit No.844 of 2019 (the “said suit”) and the Agarwals were 100% shareholders of the said company till 8th May 2012. On 8th May 2012, the Plaintiffs (the “Kotharis”) in the said suit acquired 50% shareholding in the said company. Accordingly, the shareholding of the said company was equally divided between the Kotharis and the Agarwals.

2. The Kotharis advanced sum of Rs.10,30,27,700/- to the said company as an interest free loan by way of quasi-equity and the Agarwals had also advanced a sum of Rs.10,32,55,000/- to the said company as an interest free loan by way of quasi-equity.

3. Around 27th March 2019, differences arose between the parties with respect to the implementation of the project, which differences were sought to be settled by a mutual agreement whereby both the groups decided to bid against each other, in order to acquire and have full control of 100% shareholding of the said company. The Agarwals made a bid of Rs.35 crores for purchase of the 50% shareholding of the Kotharis and in counter thereto, the Kotharis made a bid of Rs.36.75 crores for the purchase of the 50% shareholding of the Agarwals. The Agarwals did not increase their bid and as a result, the Kotharis were the successful bidder.

4. On 28th March 2019 the Agarwals addressed an email to the Kotharis regarding the terms and conditions of the agreement arrived at on 27th March 2019.

5. The Kotharis, thereafter, addressed two emails, one on 29th March 2019 and the second on 3rd April 2019 further adding terms to the email dated 28th March 2019. The Agarwals rescinded from the entire deal vide email dated 29th April 2019.

6. As disputes and differences arose between the two with respect to the performance of the said email/agreement dated 28th March 2019, on 2nd May 2019, the Kotharis filed the said Suit no.844 of 2019 against the Agarwals before this Court praying for specific performance of the agreement arrived at on 27th March 2019 and reduced to writing by email/agreement dated 28th March 2019. On 30th July 2019, the Kotharis also filed a Notice of Motion No.1916 of 2019 in the said suit praying for a judgment on admission under Order XII Rule 6 of the Code of Civil Procedure, 1908 (“CPC”).

7. Thereafter, on 5th August 2019, this Court (Coram : K.R. Shriram, J.) decreed the said suit in view of the settlement on behalf of the Defendants that they are submitting to a decree in terms of prayer clauses (a) to (d) to the plaint. The said order is usefully quoted as under :

“(a) That this Hon'ble Court be pleased to declare that the said agreement arrived at on March 27, 2019 which is reduced to writing by the defendant no.2 and is recorded by the email dated March 28, 2019 in respect of the 50% shares held by the Agarwal Group in the capital of the plaintiff no.6 is valid, subsisting and binding upon the defendants and upon persons claiming by, through or under the defendants;

(b) That this Hon'ble Court be pleased to order and decree the defendant to specifically perform the said agreement arrived at on March 27, 2019 for sale of the 50% shareholding of the defendants in the plaintiff no.6 as reduced into writing and as recorded by the email dated March 28, 2019 of the defendant no.2 inter alia by :

(i) executing, signing and attesting all necessary