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2011 Supreme(MP) 196
IN THE HIGH COURT OF MADHYA PRADESH (INDORE BENCH)
Shantanu Kemkar and Abhay M. Naik, JJ.
Sagarmal S/o Gulabchand Jain
Vs.
Shri Gujarati Beedi Company and Ors.
First Appeal No. 479/2003
Decided On: 07.03.2011
The main legal point established in the judgment is that an oral agreement must be binding on all partners of a partnership firm to be enforceable, and a pendente lite transferee is not liable for the cost of litigation.
Headnote:
specific performance - partnership firm - Specific Relief Act, 1963 - Sections 20, 21 - The court declined to grant relief of specific performance and instead awarded refund of consideration with interest. The court found that the alleged oral agreement of sale was not binding on the partnership firm and therefore not enforceable. The court also held that the pendente lite transferee was not liable to pay the cost of litigation.
Fact of the Case:
The Plaintiff filed a suit for specific performance, alleging an oral agreement to purchase a property owned by a partnership firm. The Defendants disputed the agreement, claiming that the partners were not authorized to enter into the sale without consent from all partners.
Finding of the Court:
The court found that the alleged oral agreement was not binding on the partnership firm and therefore not enforceable. The court also held that the pendente lite transferee was not liable to pay the cost of litigation.
Issues: The issues revolved around the authority of the partners to enter into the sale agreement, the enforceability of the alleged oral agreement, and the liability of the pendente lite transferee.
Ratio Decidendi: The court held that the alleged oral agreement was not binding on the partnership firm and therefore not enforceable. The court also found that the pendente lite transferee was not liable to pay the cost of litigation.
Final Decision: The appeal was dismissed, and the cross-objections to the imposition of litigation expenses on the pendente lite transferee were allowed. The decree was modified accordingly.
Abhay M. Naik, J.
1. This appeal by the Plaintiff has been preferred against the judgment and decree dated 22.07.2003 passed by the Court of 15th Additional District Judge, Indore in Civil Suit No. 25-A/2002 declining thereby to grant relief of specific performance and instead granting refund of consideration.
2. Facts relevant for the purpose of this appeal are that the Plaintiff/Appellant instituted a suit for specific performance with allegations that the suit house bearing No. 1/6 situated at Tilak Path, Indore was owned by Defendant No. 1, which was a partnership firm. Defendants/Respondents No. 2 and 3 were its partners. Defendants No. 2 and 3 entered into an oral agreement of sale in favour of the Plaintiff on 27.02.1989 on behalf of the said partnership firm for a consideration of Rs. 5,01,000/-. Rs. 21,000/-were received as a part of consideration vide Cheque No. 251952 dated 01.03.1989 of Bank of Baroda. Signature in token of receipt of cheque was put on the counterfoil of the cheque. Balance consideration was liable to be paid up to 01.06.1989. A formal agreement was to be executed by them up to 01.03.1989 in favour of the Plaintiff. The Defendants avoided to execute the registered sale-deed in Plaintiff's favour. Therefore, the Plaintiff vide telegraphic notice dated 27.02.1989 asked the Defendants to execute the registered sale-deed within 24 hours. He also expressed readiness and willingness to get the registered sale-deed executed at his expenses, after making payment of the balance consideration. Defendants vide reply dated 03.03.1989 disputed the agreement alleged by the Plaintiff and, instead, informed that an agreement in favour of another person was executed. During the pendency of the suit, Defendants No. 1 to 3 executed registered sale-deed dated 26.09.1995 in respect of the suit property in favour of Narendra Kumar S/o Chauthmal Ravka, who was impleaded in the suit as Defendant No. 4, with an allegation that he is bound by the agreement dated 27.02.1989.
Plaintiff prayed that the Defendants may be directed to execute the registered sale-deed in Plaintiff's favour, after receipt of balance consideration to the tune of Rs. 4,80,000/-and possession of the suit property may also be delivered to him. In the alternative, the Plaintiff prayed for refund of advance consideration of Rs. 21,000/-with damages to the tune of Rs. 1,00,000/-.
3. Defendants No. 1 to 3 submitted joint written statement, refuting thereby the claim of the Plaintiff. They, inter alia, disputed the alleged oral agreement dated 27.02.1989 for a consideration of Rs. 5,01,000/-. It has been stated that Defendants No. 2 and 3 were authorized vide general meeting dated 06.01.1989 merely to negotiate with the prospective purchasers for the purpose of sale. They were required to apprise of the same in the general meeting and that the consent from other partners was to be obtained. In this view of the matter alleged agreement dated 27.02.1989 and the receipt of Rs. 21,000/-as advance money were denied, being not binding. Defendants No. 2 and 3 were, thus, not authorized to enter into agreement of sale in favour of the Plaintiff, since consent from other partners was not obtained. It was denied that the cheque was submitted by Defendant No. 2 for an amount of Rs. 21,000/-. It has been expressly and specifically mentioned in the written statement that an agreement to sell the suit property in favour of Defendant No. 4 was entered into on 27.02.1989 for a consideration of Rs. 5,15,000/-in the meeting of Defendant No. 1. Proposal of the Plaintiff was for a lesser sum and was, therefore, not accepted. On 28.02.1989, it was reduced into writing and a sum of Rs. 51,000/-was received as advance consideration. A supplementary agreement was also executed on 05.04.1989 between Defendants No. 1 to 3, on one hand, and Defendant No. 4, on another hand, and receipt of possession was also executed by Defendant No. 4, after receiving the possession of the suit pro
