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2013 Supreme(Del) 1544
High Court of Delhi
S. MURALIDHAR, J.
Sanjay Sethi & Another
Versus
Deepak Sethi & Another
CS (OS) No. 1736 of 2012
Decided On : 20-11-2013
For the Plaintiffs:Anil Sapra, Senior Advocate with Sameer Chaudhry, Ms. Rupali Kapoor, Ms. Astha Lumba, Nikhar Mutwani, Advocates.
For the Respondents:R.N. Vats, Naushad Alam, Jitendra Bharti, Pankul Nagpal, Advocates.
The readiness and willingness of a party to perform its obligations under an agreement are essential for seeking specific performance.
Headnote:
specific performance - agreement for specific performance - Companies Act, 1956 - Sections 397 and 398 - Order XXXIX Rule 1 and 2 CPC - Order VII Rule 11 - MoU dated 6th January 2010 - summary judgment
Fact of the Case:
The Plaintiffs sought specific performance of an agreement dated 6th January 2010, and injunctions against the Defendants. The Defendants contested, alleging non-performance of obligations by the Plaintiffs.
Finding of the Court:
The Court found that the Plaintiffs failed to demonstrate readiness and willingness to perform their part of the obligations under the agreement, and thus, the plaint did not disclose a cause of action for the grant of the relief of specific performance.
Issues: The main issue was whether the Plaintiffs demonstrated readiness and willingness to perform their part of the obligations under the agreement.
Ratio Decidendi: The Court held that the plaint did not disclose a cause of action for the grant of the relief of specific performance as it failed to demonstrate the Plaintiffs' readiness and willingness to perform their part of the obligations under the agreement.
Final Decision: The Court rejected the plaint, vacated interim orders, and disposed of all pending applications.
I.A. No. 22335 of 2012 (u/O VII R-11 and u/O I R-9 CPC by D-1) with IA 17003 of 2013 (by D-1 u/s 151 CPC)
1. The background to these applications is that Mr. Sanjay Sethi (Plaintiff No. 1) and his mother, Mrs. Raj Sethi (Plaintiff No. 2) have filed the above suit against his brother Mr. Deepak Sethi (Defendant No. 1) and Mr. Y.P. Chanana, Advocate (Defendant No. 2) seeking specific performance of an agreement dated 6th January 2010, and for an injunction restraining Defendant No. 1 from acting against the interests of the Plaintiffs and their companies and a mandatory injunction directing Defendant No. 2 to hand over the original share certificates and transfer deeds to Plaintiff No. 1 and/or his nominee.
2. It is stated that Plaintiff No. 1 and Defendant No. 1 were carrying on business of manufacturing, installation and commissioning services of equipment for LPG Bottling Plants, testing equipment and various RVI jobs through private limited companies, viz., (a) Laycock Engineers Pvt. Ltd. [‘LEPL’] and (b) International Corporate Signs Pvt. Ltd. [‘ICSPL’]. It is stated that Plaintiff No. 1 along with Defendant No. 1 were on the Board of Directors (‘BoDs’) of both the above companies.
3. Some time towards the end of 2009, differences arose between the brothers and it was decided that they would part ways in an amicable manner. According to the Plaintiffs, it was agreed that the Defendant No. 2 would resign as a director of LEPL and ICSPL and also sell/transfer shares in the said companies. The Plaintiffs claim that an oral agreement was arrived at after several rounds of discussions and negotiations, including discussions held in the presence of late Mr. S.K. Pruthi and Mr. Sarabjeet Sharma. A Memorandum of Understanding (‘MoU’) was executed between Plaintiff No. 1 and Defendant No. 1 on 6th January 2010. Inter alia, it was agreed that:
(i) Defendant No. 1 would resign from LEPL and ICSPL and retire from the business. All liabilities were to be discharged by Plaintiffs 1 and 2. Defendant No. 1 was to have no right, title and interest, including the liabilities and assets in the said two companies.
(ii) In due course, Plaintiff No. 1 was to get the residential house of Defendant No. 1 released by settling the liabilities of the bank. The title deeds of the house were to be handed over to Defendant No. 1 on or before 6th January 2011.
(iii) Defendant No.1 was to transfer and assign his entire shareholding in both companies and sign the share transfer deeds or his nominated parties. He was also to resign as full time Director of both companies and cease to be involved in dealing with the companies thereafter.
(iv) The signed transfer deeds were to be kept by Defendant No. 2 in trust and were to be handed over to Plaintiff No.1 upon the entire payment of Rs.1.25 crores being made to Defendant No.1.
4. It is stated that pursuant to the above MoU, Defendant No. 1 resigned from the BoDs of both companies and Form 32 was filed with the Registrar of Companies (ROC), National Capital Territory of Delhi and Haryana. He is also stated to have parted possession with his original share certificates which were then kept by Defendant No. 2 as an escrow agent.
5. The Plaintiffs state that a sum of Rs. 50 lakhs was paid to Defendant No. 1 in two equal instalments of Rs. 25 lakhs each by cheque dated 6th January 2010 at the time of signing of the agreement and another cheque dated 6th April 2010 both which were encashed by Defendant No. 1. It is further stated that a sum of Rs. 1 lakh by way of four equal instalments of Rs. 25,000 along with sum of Rs. 6,51,000 was also paid by the Plaintiffs to Defendant No.1 towards fulfilment of the other obligations under the MoU.
6. It is stated that property at 355, Bhera Enclave, Delhi owned by Defendant No. 1 was mortgaged as security to avail loan by the two companies. It was the obligation of Plaintiff No. 1 to settle the liabilities of the bank and get the title deeds released by 6th
