Makers Development Services Pvt. Ltd. vs M. Visvesvaraya Industrial Research ... on 25 April, 2008

[Cites 7, Cited by 21]

Bombay High Court

Makers Development Services Pvt. Ltd. vs M. Visvesvaraya Industrial Research ... on 25 April, 2008

Equivalent citations: 2008(110)BOM.L.R.1406

1. The Plaintiff has in prayers (a) to (f) of this Notice of Motion sought orders directing the Defendant to do and perform all acts, deeds, matters and things and to execute all documents and writings to enable it to continue construction on the suit land in terms of the suit contract and for orders consequent thereto and in connection therewith. I have rejected these prayers. In prayer (g) the Plaintiff has sought an order injuncting the Defendants from selling, transferring, dealing with, disposing of or creating any thirdparty rights or interest in or entering into any agreement or arrangement with anyone else in respect of the suit land or any part thereof. I have granted this prayer.

2. The suit is filed for a declaration that the suit contract set out in Page 1410 paragraph 65 of the plaint is valid subsisting and binding and for the specific performance thereof. The Plaintiff has also sought a declaration that the unilateral repudiation of the suit contract is illegal and not binding on it; that the letter of authority executed in its favour is valid and subsisting and that the Defendant is not entitled to remove the Plaintiff from the suit land. The Plaintiff has further sought an order restraining the Defendant from committing trespass upon the suit land.

3. Mr Samdani, the learned senior counsel appearing on behalf of the Defendant, opposed to the Notice of Motion on the following grounds :

I. There is no concluded contract between the parties. All the terms and conditions of the contract had neither been agreed upon nor reduced to writing. The execution of a formal agreement was a term of the bargain.

II. The contract as pleaded is not supported by the record.

III. In any event the contract as pleaded cannot be enforced.

IV. The Plaintiff was not ready and willing to perform its obligations under the contract.

V. Assuming there is a contract between the parties, in the facts and circumstances of this case it ought not to be specifically performed.

I will deal with the first two submissions raised by Mr Samdani, not separately, but as the facts unfold as he developed his submissions in this regard not as a composite whole but on a document to document basis.

4. Mr. Samdani submitted that there never was, since inception, a concluded agreement between the parties. It is necessary therefore for me to deal with the facts in considerable detail from a point in time even prior to the formation of what the Plaintiff contends to be the original concluded agreement. There can be no quarrel with Mr. Samdani's propositions that an agreement to enter into an agreement is not enforceable in law and that a contract which is vague especially as to material terms, is incapable of enforcement. It is necessary therefore only to mention the authorities cited by Mr. Samdani in this regard viz. Chitty on Contracts, TwentySeventh Edition, p.135, H.S. Khan and Sons and Anr. v. Homi J. Mukadam and Barkat Ram v. Anant Ram AIR 1915 Lahore, 328. It would be convenient however to preface a consideration of the matter with the following observations of the Supreme Court in Kollipara Sriramulu v. T. Aswatha Narayana :

3. We proceed to consider the next question raised in these appeals, namely, whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well established that a mere reference to a Page 1411 future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway v. Wharton 2, the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von HatzfeldtWildenburg v. Alexander 3 it was stated by Parker, J. as follows:

It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contact is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.

4. In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rossiter v. Miller 4 Lord Cairns said:

If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract.

In Currimbhoy and Company Ltd. v. Creet 5 the Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. In Von HatzfeldtWildenburg v. Alexander3 was applicable in India. The question in the present appeals is whether the execution of a formal agreement was intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored."

5. By two Government Resolutions dated 16.10.1970 and 18.11.1974 the Government of Maharashtra had granted a lease in favor of the Defendant of a larger portion of land of which the suit property forms a part. Under the second Government Resolution the land user was restricted. It permitted the user of the land for various purposes but expressly excluded the construction of a hotel thereon. It is important to note that clause 12 of the terms and conditions annexed to the Page 1412 Government Resolution dated 18.11.1974 permitted construction of buildings by the Defendant either for its own use or for letting out interalia offices.

Pursuant thereto the Defendant had constructed on a portion of the said land buildings for offices and other users permitted by the said Government Resolutions. Apparently the Defendant had requested the Government to permit it to construct a residential hotel on a portion of the said plot.

6. By a third Government Resolution dated 16.4.1979 the Government had decided to accept the Defendants offer to surrender an area of 23,046 square metres and provided that orders in respect of the Defendant's request for the construction of a residential hotel on a portion of the said land would be issued separately.

7. By a letter dated 10. 7.1980 addressed to the Plaintiff the Defendant invited an offer in relation to the setting up of a multi storied hotel building on a portion of the said property. The same was made subject to the availability of permission from the State Government for the development of a hotel. Similar letters inviting offers were addressed by the Defendant to several other leading hoteliers. It appears that only the Plaintiff submitted an offer.

8. By a letter dated 10.11.1980 addressed to the Plaintiff the Defendant set out the terms and conditions for the lease of a hotel building to the Plaintiff. The Plaintiff by a letter dated 12.11.1980 accepted the terms and conditions contained therein subject to certain modifications. By a letter dated 15.11.1980 the Defendant agreed to amend the terms and conditions contained in the letter dated 10.11.1980 but proposed certain further amendments. The Defendant forwarded to the Plaintiff a fresh composite letter dated 10.11.1980 containing the then agreed terms and conditions showing the agreed amendments thereto as additions/riders inserted with marginal notes prefaced "Add" or "New Clause" under the original paragraph of the said letter dated 10.11.1980. The said composite letter was dated 10.11.1980 but was sent by the Defendant to the Plaintiff under cover of the Defendants letter dated 21.11.1980. This composite letter was countersigned by the Plaintiff. This composite letter will for convenience be hereinafter referred to as the letter dated 10.11.1980.

9. By another letter also dated 10.11.1980 the Defendant requested the Plaintiff to send it a cheque for the sum of Rs. 50,00,000 which the Plaintiff did under cover of its letter dated the said sum as advance basic rent for the said project.

10. The contractual relationship between the parties commences with the said letter dated 10.11.1980. The terms and conditions thereof underwent modifications I will refer to. The Plaintiff has sought specific performance of the agreement as modified and it is contended that in any event even assuming that the same cannot be performed the original agreement contained in the said letter dated 10.11.1980 subsists Page 1413 and has sought specific performance thereof.

11. The relevant portion of the letter dated 10.11.1980 reads as under :

Dear Sir, Sub : PROPOSED LEASE OF HOTEL BUILDING We have pleasure in referring to your letter No.MDS:141:10:80 dated 10th October,1980, and in signifying our intent to grant on lease a Hotel Building forming part of the Hotel complex consisting of a Hotel Building, a Convention Centre and an Exhibition Centre proposed to be erected on the land leased to us by the Government of Maharashtra in their Backbay Reclamation Scheme.

Subject to the availability of permission from the State Government being the Lessor of our land for the erection of a Hotel Building with an area of four lakhs square feet (builtup), our Centre proposes to erect a multistoreyed building fitted and furnished with all services amenities and facilities including central air conditioning plant, ventilation plant, fire fighting and fire protection equipment,sewage treatment plant, lifts, elevators,electrical installations etc.(hereinafter compendiously referred to as 'Hotel Building) and to lease it to your Company. The Hotel Building is designed to have a built up area which will be in the region of about 4 lakhs sq.ft, and is intended to offer aristrocratic lodging and boarding amenities to visitors to the city including delegates attending conventions and exhibitions to be organised by our Centre. The terms and conditions of the construction and lease of the Hotel Building are as follows;

(1) The Hotel Building will be constructed wholly and exclusively by our Centre.

(4) On completion, the Hotel Building exclusive of the Convention and Exhibition Centres will be demised unto you for a period of 60 years You will, however, have the option to renew the lease for a further term which will be coterminus with the lease to the Centre by the Government of Maharashtra, less one year, which renewal will be deemed to have been exercised unless a six months notice to the contrary is given by you in writing to the Centre provided that you shall have in the meantime paid to the Centre all sums due to be paid in the first instance and provided further that there shall not be outstanding any breach of the conditions and covenants agreed to be performed by you. The renewal of the lease will be on the same terms and conditions as mentioned in the lease expiring except that the annual rent in respect of the extended period shall be Re.1/ for the entire demised area plus outgoings as mentioned in Clause 6 hereof but without the right to further renewal of the lease. Add[ You shall be put in possession of the completed Hotel Building immediately after requisite permissions have been obtained for this purpose from the various bodies and authorities concerned, if we delay in fulfilling this obligation 30 days after receipt of such permissions, we shall pay Page 1414 to you all the losses or damages if any, suffered by virtue of such delay on our part.

(5) The Convention and Exhibition Centres although situate in The Hotel building will not be demised unto you and will be reserved for use by the Centre. However, such Convention and Exhibition Centres whenever not required by the Centre will be permitted to be used by you on daytoday basis' on terms and conditions to be decided mutually, ' (6) You shall pay to the Centre rent consisting of :

(i) basic rent as hereinafter provided;

(ii) outgoings rent including ground rent in respect of the area covered;

(iii) The basic rent shall be calculated and paid in the following manner:

The basic rent will be calculated on a sum equivalent to the total cost of construction, plus Rs..200/ per sq.ft. of the builtup area The cost of construction will include architects and all other fees such portion of the Centre's expenditure as would be allocated to the Hotel Building during the period of construction and also interest payable on the capital borrowed for the purpose of construction of the Hotel Building until the repayment thereof. The determination of such cost by our architects and the Centre will be final and conclusive and will be binding upon you;

Add "The cost of construction of the Convention Centre and the Exhibition Centre will not be included although housed in the Hotel Building. The built up area for the purpose of calculating the basic rent at the rate of Rs.20O/ per sq. ft builtup area will not include the area of the Convention Centre and the Exhibition Centre.

(iv) The basic rent as calculated above will be paid to the Centre in the following manner in advance for the whole term of the lease not carrying any interest :

(a) A sum of Rs.50/ lakhs shall be paid by you immediately on the issue of this letter ;

(b) On the Centre obtaining the permission of the Government of Maharashtra to construct the Hotel Building on the land, you shall pay to the Centre a further sum of Rs.50/ lakhs and procure and deliver to the Centre an unconditional guarantee of a nationalised bank in favour of the Centre for a sum of Rs. 30O/ lakhs, guaranteeing to the Centre that the said payment will be made on demand by the Centre without demur immediately after the loan for the construction of the Hotel Building is sanctioned by a financial institution. As soon as this said loan by the financial institution is sanctioned, you shall pay to the Centre the said sum of Rs.300/lakhs and, on such payment being made, the Page 1415 said guarantee shall stand cancelled. The aforesaid surn of Rs. 50 lakhs shall be paid and the guarantee for Rs.300/ lakhs shall be procured and delivered by you to the Centre within 14 clear days of the Centre communicating to you that the necessary permission from the Government of Maharashtra has been obtained. If you commit default in paying the said sum of Rs,50/ lakhs and/or procuring the guarantee as required by this Clause, the Centre shall be entitled to terminate this agreement by giving 14 days notice and on such termination, the amounts paid uptil such termination shall be forfeited,

(c) A sum of Rs. 400/lakhs shall be paid by you subsequent to the loan for the construction of the Hotel Building being sanctioned by a financial institution and the mode of payment would be as follows:

a) A sum of Rs.2 crores at the end of the first year after construction is commenced;

b) The balance sum of Rs 2 crores in equal quarterly instalments thereafter, over the balance period of construction at present estimated as two years, "If you commit any default in payment of any of the instalments demanded by the Centre under this clause, for a period of one week after the said demand shall, have been made by the . Centre,the Centre shall be entitled to terminate the agreement by giving you 14 days notice and, on such termination, all the amounts paid by you to the Centre up to the date of termination shall stand forfeited to the Centre without prejudice to the Centre ' s right to claim any further amount by way of damages that the Centre may suffer as a result of breaches by you of the agreement.

d) Payments under (3) (b) and (c) have been Calculated at Rs.200/ on 4 lakhs sq.ft. builtup area of Hotel Building to be leased to you. The necessary adjustments shall be made on this basis after the final area is ascertained and payments to, or re fund by the Centre, as the case may be shall be made before the possession of the Hotel Building is given to you.

(e) Payments in such instalments as the Centre may be required to pay towards the payment of instalments of the loan borrowed by the Centre for the construction of the Hotel Building. At the time of handing over the possession of the Hotel Building, to you the total amount payable to the financial institution towards the instalment of the loan, inclusive of interest, shall be calculated and the schedule of instalments will be ascertained and determined in consultation with the Page 1416 financial institution. Before handing over the' possession to you, you shall procure in favour of the Centre a guarantee of a nationalised bank guaranteeing payment by you to the Centre of the instalments that the Centre shall be required to pay towards the payment of the total loan.

Add [The Centre would indicate to you atleast three months in advance of such possession the quantum and mode of payment, Such guarantee shall be unconditional, requiring the bank to pay the instalments on demand by the Centre without demur. If you fail to procure and deliver to the Centre such guarantee, before handing over the possession of the Hotel Building, the Centre shall be entitled to terminate this agreement and forfeit the entire amount that may have been paid by you to the Centre uptil termination of the Agreement.

(f) Payment of the amount representing the difference between the loan received from the financial institution and the total cost of construction of the Hotel Building at the time of giving possession of the Hotel Building to you.

Add [ "after one month's notice by the Centre"

The difference between the loan from the financial institution and the total cost of construction of the Hotel Building shall be ascertained and determined at the time of handing over the possession to you. If you commit default in payment of the amount so determined, Add [after the aforesaid notice period "the Centre making the demand on you, the Centre shall be entitled to terminate this agreement by giving you..15 clear days notice and on such termination, all the amounts paid by you upto the date of such termination shall stand forfeited to the Centre.

NEW CLAUSE

(g) Add [a) further, it is understood and agreed that, if there is delay in the performance of any of these obligations by us due to Force Majeure, then the period for performance of such obligations will stand extended to the extent of such delays.

b) Further, it is agreed that the termination and forfeiture wherever it accrues to the Centre will not be unreasonably and unlawfully exercised.

12. In the correspondence that followed between the parties the Defendant sought the views of the Plaintiff regarding substituting in the letter dated 10.11.1980 the words "Serviced Apartments" in the place of the word "hotel" in order to ensure expeditious commencement of the work. This was in anticipation of receiving the permission from the Government for change in user of the said plot to include the construction of a hotel. The Plaintiff agreed to the same till such time that the permission for hotel user was obtained from the Government of Maharashtra. The Defendant therefore instructed its architects to go ahead with the work of designing Page 1417 the serviced apartments complex in collaboration with the Plaintiff and to secure necessary approval from the Bombay Municipal Corporation in that regard.

13. By a letter dated 1.3.1984 the Defendant enquired of the Plaintiff whether it would be in a position to accept the balance area of approximately 1, 25,000 sq. ft. available on the project and on the same terms and conditions entered into between the parties for the construction of the serviced apartment/hotel on the site. By a letter dated 10.3.1984 the Plaintiff confirmed its acceptance of the said offer.

14. As stated earlier, the Defendant had requested the Government for permission to include in the terms of the lease the construction of a hotel on the said plot. By a letter dated 26.2.1985 the Government informed the Defendant that it intended to consider the request for allowing hotel use on the unutilised portion of the said land on various terms and conditions mentioned therein. Conditions ( iii) to (viii) read as under :

(iii) The Centre would surrender the land required for the composite building of Convention Centre and Hotel to the Government, calculated on the basis of the different F.S.I. as above, for being almost simultaneously leased out back to them afresh, on the revised terms and conditions for the unexpired period of the lease.

(iv) The lease rental for the proportionate land that will be attributable to the user of Convention Centre etc. will be at 8% of the market value prevalent on the date the land was originally lease to the World Trade Centre.

(v) The lease rent both for the Convention Centre and Hotel shall commence from the date of issue of the final orders of Government regarding the lease of land afresh on the revised terms and conditions of lease.

(vi) The lease rental so fixed will be revised every 10 years in such a manner and to such an extent as the Government deems reasonable and proper. The condition in the present lease regarding sharing 50% surplus of the Centre shall not be applicable for the subplot for which the fresh lease is proposed to be given.

(vii) There will be no concessions given, such as rent free period, in stamp duty etc.

(viii) The body in charge of the composite building and the management of the Convention Centre and Hotel shall have to undertake to make available to the State Government, on demand, at any time, 10 rooms in the Hotel at the concessional Tariff of 33% of the normal tariff charged to the outside customers."

15. The Defendant by a letter dated 15.4.1985 signified its broad acceptance but subject to certain conditions mentioned therein. Paragraph 2 of the letter is significant and reads as under:

2. Provisions of permission for a sublease:

(a) As explained in our earlier correspondence our activities require Conventions to be held for bringing together Indian exporters or foreign buyers and, therefore, would be severely handicapped Page 1418 without adequate availability of hotel accommodation, which is not always available in outside hotels in the number needed. For this reason we are sacrificing an office building and converting it into a hotel.

However not being a commercial organisation, we do not have their expertise for a commercial activity like operating a hotel. Further Centre cannot afford the risk involved in taking on the financial liabilities of borrowing the large funds required for putting up of the hotel, from financial institutions. Accordingly, it will be necessary for us to involve a hotel operator to finance, put up and operate the hotel and provide hotel accommodation to us as required from time to time for activities.

(b) Since such a hotel operator would be investing large funds and would also need to raise institutional finance, it would become necessary for us to be able to provide a sublease of the balance land of 13,326 square metres on which the composite project is to be put up.

(c) We therefore, request the government to confirm that in the separate lease to be issued, for the balance land of 13,326 square metres we would be permitted a sublease in favour of the hotelier.

(d) Since the government is already enhancing the lease rental and other terms we hope that the government would have no objection to this request."

16. Paragraph 2 in my view clearly indicates not merely the intention but also the anxiety and desire of the Defendant to implement the agreement dated 10.11.1980. Further, it must be noted that the agreement dated 10.11.1980 proposed the lease of the hotel building whereas permission was now sought by the Defendant to sublease the plot to the hotel operator. Moreover, this request was for the convenience and benefit of the Defendant.

17. By a Government Resolution dated 22.1.1986 permission to use the land admeasuring 13,326 square metres was granted subject to the terms and conditions mentioned therein. One of the conditions reads as under :

Convention CentrecumLuxury Hotel

a) Since the M. Vishvesvaraya Ind. Res. and Dev. Centre (Defendant) does not have experience in establishment and management of a hotel, it should be given the option to sublease the plot. It is, however, directed that in case the Centre decided to sublease the plot, it should invite competitive and open offers and the decision to sublease the plot should be taken after the offers are placed before the Council of Management and a decision is taken after following the usual procedure. It should also be ensured that the Government Representative on the Council of Management attend the meeting (s) before which this matter is placed for consideration and decision.

b) Government is also pleased to direct that the Centre should fix the terms of the sub lease as it deems fit and proper, subject to the condition Page 1419 that the terms and conditions as prescribed by government shall be binding on the sublessee and that the government lessee shall enjoin the sub lessee to abide by the same." (emphasis supplied)

18. The Collector by his letter dated 13.5.1986 informed the Defendant of the same. The Defendant forwarded to the Plaintiff a copy of the Collectors letter and the Government Resolution dated 22.1.1986 under cover of its letter dated 19.5.1986. By the letter dated 19.5.1986 the Defendant enquired of the Plaintiff whether it was in agreement with the terms and conditions mentioned therein to enable the Defendant to write to the Government in response to the letter and to proceed further with "our project".

19 (A). The Plaintiff by its letter dated 21.5.1986 addressed to the Defendant confirmed its acceptance of the conditions of the Government order except paragraph (ii) in so far as the requirement of the Defendant inviting competitive bids and open offers was concerned. It stated that in view of the concluded agreement between the Defendant and itself the question of its accepting this condition did not arise. The Plaintiff further stated that since this condition was in the nature of an additional option to the Defendant and does not come in the way of the implementation of the project, the Defendant may in turn confirm its acceptance of the Government order.

(B). The contents of the letter and the purport thereof are clear. What the Plaintiff conveyed was that in view of the concluded agreement dated 10.11.1980 the Defendant was not in a position to invite fresh tenders for the sublease of the land. Since the Government order permitted the Defendant hotel user irrespective of whether it decided to sublease the plot or not it did not come in the way of the Defendant implementing the agreement with the Plaintiff for lease of the hotel building. The agreement between the parties was therefore capable of being implemented on its own. This is also clear from the Plaintiff's letter dated 28.1.1987.

20. The Defendant by a letter dated 6.6.1986 addressed to the Collector conveyed its acceptance of the terms and conditions contained in the Government order dated 22.1.1986.

21. The parties agreed in or about June 1986 to modify the agreement to the extent that now the Plaintiff would be granted a sublease of the land on which the Plaintiff and not the Defendant would construct the building at its cost. Thus, lease rent would stand reduced to Rs.200/ per sq. ft. of the built up area and would not include the cost of construction as it was to be paid by the Plaintiff. This arrangement was for the benefit and at the request of the Defendant in view of its tax liabilities and to facilitate its cash flow/expenditure as is evident from the correspondence. Thus, thereafter the Plaintiff by its letter dated 3.7.1986 stated that in view of the Government order it was now anxious to proceed further with the project.

22. By a further letter dated 29.7.1986 the Plaintiff in accordance with the agreement dated 10.11.1980 enclosed a cheque for a further sum of Rs.50,00,000 and requested the Defendants to provide a Page 1420 draft of a bank guarantee also required as per the terms of the said agreement. By the said letter dated 28.1.1987 the Plaintiff also stated that the condition of inviting competitive bids contained in the Government order dated 22.1.1986 may have been on account of the Government having overlooked the fact that the contract between the parties was pursuant to and already based on competitive offers invited from other hoteliers. The Plaintiff further stated that if the same along with other facts was brought to the notice of the Government it was likely to take a reasonable view and waive the condition for exercise of the option to sublease the land. The Plaintiff therefore suggested that the Defendant makes a suitable representation in this regard to the Government.

23. Thereafter considerable correspondence ensued between the Defendant and the Government in the course of which the Defendant made detailed representations to the Government interalia for the deletion of the condition of inviting competitive bids for the sublease of the said the plot. The correspondence commences with a letter dated the 27.3.1987 from the Defendant to the Government. Ultimately the Government by a letter dated 14.6.1990 directed that the stipulation in paragraph 2 (ii) (a) of the Government Resolution dated 22.1.1986 be deleted. In other words the condition requiring the invitation of competitive bids in order to enable the Defendant to sublease the plot was deleted.

24. The next aspect to be noticed in the above correspondence is that during this period, in anticipation of the permission to be received from the Government the parties had agreed to further modify the agreement dated 10.11.1980. This modification was recorded in the correspondence referred to above. It would suffice to refer to what is stated in the note that was enclosed along with the said letter dated 13.4.1987 to indicate the further modifications. After stating the background of the case the Defendant stated as under :

PRESENT POSITION According to the 1980 agreement with MDS, (Plaintiff) the Centre (Defendant) was expected to construct the convention/exhibition Centres, forming part of the hotel building, both at its own cost and (the) lease the building to MDS. In present day context, and in view of the financial constraints faced by the Centre it was considered advantageous to sublease the allotted plot of land to MDS which then would bear the cost of construction of the hotel comprising the convention/exhibition Centres, thereby, reducing the financial burden on the Centre.

Recognizing further, and as advised by its Solicitors that the terms and conditions of the 1980 agreement with MDS were binding on both parties, and that the hotel was essential to the WTC movement, the Centre thought it prudent to come to an understanding with MDS, in mutual interest, to vary the terms and conditions for overcoming the difficulties faced by the Centre.

As a result of negotiations between MDS and the Centre, the following terms are agreed upon:

Page 1421

1) That MDS will abide by the clause in the original agreement of 1980 and pay to the Centre Rs. 8 crores as advance rent. It is acknowledged that 1/50th of the advance rent together with the interest component thereon would be subject to the payment of income tax in the hands of the Centre.

2) That MDS shall bear the cost of construction of the hotel comprising the convention/exhibition Centres thereby effecting a saving to the Centre of an approximate amount of Rs. 8 crores representing the cost of construction. MDS shall further grant to the Centre the right of user, on a priority basis, of the convention/exhibition Centres for a nominal consideration to be fixed and agreed upon at a later date.

3) That MDS, in deference to its long standing association with the Centre, and in consideration of the financial constraints faced by the Centre, shall make available to the Centre, hotel and allied facilities for managing the various services to be offered by the World Trade Centre Club, situated on the 32nd floor of Centre 1. While it is difficult to quantify accurately the value of these facilities, it is felt that the financial advantage to the Centre would be considerable.

25. Mr.Samdani submitted that the agreement dated 10.11.1980 as well as the modification thereto of April 1987 did not constitute a concluded contract but merely an agreement to agree. I am unable to agree.

26. Let me first consider the agreement dated 10.11.1980 itself. The agreement contained all the essential features necessary to constitute an agreement to lease the said property. The lease rent was stipulated. The period of the lease was also stipulated. The subject matter of the lease was specified. The other rights and liabilities of the parties were also provided for. Indeed Mr Samdani was unable to point out any further terms which would be required for a concluded agreement to lease. In other words he was unable to indicate any term the absence whereof denuded the transaction between the parties of the force of a concluded agreement. Added to this is the fact that the Defendant had, as stated above, throughout expressly considered the agreement to be concluded and binding.

27. The correspondence and detailed representations by the Defendant to the Government even upto this stage, namely, during this period between 27.3.1987 and 14.6.1990 are of crucial importance while deciding whether all that had transpired between the parties up to that stage constituted a concluded agreement between them as contended by the Plaintiff or constituted merely an agreement to enter into an agreement as contended by the Defendant.

(A). Almost every representation by the Defendant during this period expressly and unequivocally admitted that there was a concluded and binding agreement between the Defendant and the Plaintiff. For instance a background note enclosed along with a letter dated 27.3.1987 after referring to the aforesaid facts stated that the terms mentioned in the agreement of 10.11.1980 were still binding on both the parties. Page 1422 The background note enclosed along with the Defendants letter dated 13.4.1987 expressly stated that the Defendant recognized and was also advised by its solicitors that the terms and conditions of the 10.11.1980 agreement with the Plaintiff were binding on both the parties. The Defendants letter dated 21.5.1987 also stated that its solicitors had advised that the said agreement was valid and binding and added that it was not open to the Defendant to rescind the contract or to go for a fresh invitation or offers. In the Defendants letter dated 4.8.1987 it was stated that in view of the binding contract between the Plaintiff and the Defendant any attempt to avoid the same by inviting fresh offers would only lead to long drawn out an expensive litigation and financial loss to the Defendant. By a letter dated 20.1.1989 the Defendant stated that it was contractually bound by the agreement with the Plaintiff.

28. Further by a letter dated 5.1.1990 the Defendant furnished detailed reasons in support of the validity of the agreement entered into with the Plaintiff and also stated that all decisions in regard to the project including those in regard to inviting offers and the agreement with the Plaintiff were taken in the meetings of the Managing Committee of the Defendant of which the Government nominees were members and to which meetings such nominees were always invited and some of which meetings they attended. It was also stated that the minutes of such meetings were duly sent to such Government nominees. The entire tenor of the letter indicates that the Defendant considered the transaction between the parties herein as concluded and not merely at the stage of negotiations, to wit not merely an agreement to enter into an agreement.

29. I do not suggest that the mere reference by a party to an agreement establishes the existence of a concluded contract. But, the terms agreed to being sufficient to constitute an agreement the repeated clear, unequivocal and express admissions of a concluded agreement casts a heavy burden upon the Defendant to establish contrary thereto its defence that the transaction thus far was only an agreement to enter into an agreement. Mr.Samdani being unable to indicate the absence of any essential term or any aspect that the parties had in fact agreed to decide upon has failed to discharge this burden.

30. Mr.Samdani however submitted that there is intrinsic evidence within the agreement dated 10.11.1980 itself which indicates that it is merely an agreement to agree. In support of this contention he relied upon clauses 17, 19, and 22 thereof which read as under :

(17) Stamp duties on the agreement to lease and the lease will be borne by you.

(19) Y0u will make available to the Centre 50 % of the total number of rooms of the Hotel Building for its use so long as they are booked in advance to house the delegates/visitors etc., for the Exhibition/Conventions. The formula for the determination of the rent in this connection will be based on an index linked to room charges levied by similar hotels like the Oberoi or Taj Mahal less 15 %. This arrangement will be applicable not exceeding three times every year.

Page 1423 (22) An agreement to lease between you and the Centre will be executed embodying the aforesaid terms and conditions and such other conditions as may be considered by the Centre as incidental to the lease, including a provision in favour of the Centre, enabling the Centre to terminate the lease and reenter upon the demised premises in the event of your committing default in payment of rent or any other moneys payable under the lease, or under this agreement, or if you will commit any breach of any of the stipulations, covenants and conditions of the lease. (NOTE: 'The agreement to provide other usual and standard terms and conditions of the lease)"

31. Clause 17 certainly does not assist Mr.Samdani. I will assume that it contemplates a formal agreement to lease being executed between the parties. That however would not indicate that the parties considered the execution of such an agreement to be a term of the bargain between them. It would merely indicate that the parties agreed that as and when such an agreement to lease is executed the stamp duty if any payable thereon would be borne by the Plaintiff.

32. Mr Samdani relied upon the last sentence of clause 19 in support of his submission. Considering all the facts and circumstances of the case and especially the fact that the parties themselves at every material stage considered a final and concluded agreement as having been arrived at the stipulation certainly does not indicate anything to the contrary. At the highest it would indicate that the parties would have to establish what exactly they contemplated to be the period on each of the three occasions every year. I will presume and Mr Tulzapurkar was willing unconditionally to proceed on the presumption, that the Defendant would be entitled on each occasion to the maximum possible period. In other words he was willing to proceed on the basis that the Defendant would be entitled to avail of the facility throughout the year.

33. As far as clause 22 is concerned I am in agreement with Mr Tulzapurkar that the same does not in any manner denude the agreement of its binding effect. His submission that the words "incidental to the lease" indicate only such terms and conditions that are normally applicable where the agreement is silent appears to be well founded. This in any event would be taken care of by the presumptions in law to be drawn when an agreement of this nature is silent on any aspect.

34. There was not even a suggestion that there were any topics/aspects which were in fact to be decided upon. What is most important to note however is that the parties themselves considered the agreement of 10.11.1980 to be final and concluded. This is evident from the series of letters/notes addressed by the Defendants to the Government of Maharashtra which I have referred to earlier. As stated above the representation made by the Defendants to the Government of Maharashtra for the deletion of the precondition of inviting competitive bids for permitting the Defendant to sublease the plot was based on the premise that there was a concluded and binding agreement between the Plaintiff and the Defendant. The parties themselves having considered the agreement to be final, conclusive and binding I see no reason to pick out individual clauses Page 1424 and stray sentences within such clauses and read them in isolation to hold anything contrary to what the parties themselves considered to be the correct position at all material times.

35. Faced with this Mr Samdani submitted that the agreement dated 10.11.1980 as modified as aforesaid in any event did not constitute a concluded agreement but was only an agreement to enter into an agreement. In this regard he relied upon clauses 2 and 3 I have set out earlier from the notes enclosed with the Defendants letter dated 13.4.1987.

36. He relied upon the concluding words in clause 2: "for a nominal consideration to be fixed and agreed upon at a later date". However as rightly pointed out by Mr Tulzapurkar there was in fact an agreement between the parties in this regard as recorded in the minutes of the meeting held on 3.3.1987 the relevant portion whereof reads thus :

Further, it was not clear as to what the charges would be on the basis of 'no profit and no loss'. The suggestion made by Mr.Akerkar, that the same principle of common monthly outgoings as currently charged to individual tenants, should be made applicable in this particular case to the charge from MDS to the Centre for the use of the convention and exhibition facilities, was accepted. The amended clause would now read as:

MDS shall make available to the Centre on a priority basis use of the said exhibition, auditorium and convention facilities on the same terms and conditions as are applicable under the Said Agreement in respect of the grant of the use of the hotel rooms to the Centre save and except that the charges in respect thereof will be on the same basis as ' common monthly outgoings' currently being charged to individual tenants in the buildings of the WTC complex.

37. Nor is there any substance in Mr Samdani's contention based upon clause 3. As rightly pointed out by Mr Tulzapurkar this aspect of the matter was subsequently dropped between the parties. This is evident from a series of documents.

38. Under cover of the said letter dated 21.5.1987 the Defendant had forwarded to the Government of Maharashtra copies of the relevant extracts from the minutes of the various committee meetings of the Defendant giving the status of the hotel project since 1980 to date. The minutes of the meeting held on 13.4.1987 are relevant in this regard. It is recorded therein that the Defendant had been advised by the tax consultants to enter into a separate agreement with the Plaintiff for managing the club whereby the Plaintiff would give it to the Defendant on an agreed upon fee either every month or every year during the period of such licence. The Plaintiff would run the club on its own account and the Defendant will not be concerned with the profit or loss picture shown by the Plaintiff in managing the club. What is important to note is that the Defendant as advised had agreed to enter into a separate agreement with the Plaintiff in respect of the club. Thus the aspect of the club was taken out of the purview of the suit transaction. Subsequently and as is evident from the Defendants letter dated 31.1.1992 and the plaintiffs letter dated 4.3.1992 it Page 1425 was agreed that the aspect regarding the club would be considered anew.

39. It is also important to note that throughout this period the parties were in fact making every effort to implement the agreement and to that end attempts were made to commence the construction in respect of the said project one way or the other.

40. For instance by a letter dated 11.11.1983 the Defendant enquired of the Plaintiff whether it was agreeable to the word serviced apartments substituting the word hotel in the agreement dated 10.11.1980. As the letter itself suggests this was with a view to ensure that the work on the project commenced as soon as possible. The letter specifically stated that this substitution in the words would be till such time as the permission for the hotel user was obtained from the Government of Maharashtra. It further provides that as and when the permission is obtained the same may be converted into a hotel. Finally the Defendant stated that it had instructed its architects to go ahead with the work of designing the serviced apartment complex in close collaboration with the Plaintiff and to secure the necessary approval from the BMC.

41. Even while awaiting permission for deletion of the precondition for the sublease of the land, efforts in this regard continued.

42 (i) The Plaintiff by a letter dated 25.4.1990 suggested that pending receipt of this permission it was necessary to commence the work on the basis of the plans under consideration by the BMRDA duly amended to incorporate office user in respect of certain floors as stated in its letter dated 23.8.1989.

(ii) What is important to note is that the Defendant by its reply dated 30.4.1990 fully concurred with the suggestion to commence work on the basis of the plans approved by the BMRDA. The Defendant further noted that this had become all the more important as the commencement certificate for the project was due to lapse in July 1990. The Defendant also stated that the podium housing the exhibition/convention facility being common to the alternatives of an office tower or hotel user, should that be approved at a later stage was equally relevant to commencing the work without further delay. To enable the Plaintiff to commence and proceed with the work the Defendant authorised it to deal on its behalf with the BMRDA and the BMC and other concerned authorities to speedily obtained all such permissions and sanctions as may be necessary to commence the project. The Defendant also agreed that the services of its architect be taken over by the Plaintiff. The Defendant permitted the Plaintiff to appoint structural and other consultants as may be required and to invite tenders and to award contracts for construction after gaining approval from the Defendant.

43 (i). Accordingly, the Defendant by a letter dated 14.5.1990 addressed to the Government of Maharashtra noted the fact that the commencement certificate in regard to the work was due to expire in July 1990 and that it had therefore become imperative to commence work. The Defendant further stated that the plan for the hotel project could only be submitted after the approval from the Government was received and that in the meantime the plans in respect of the project based on the user permitted under the earlier Page 1426 Government Resolutions were pending approval with the BMRDA which had indicated its willingness to approve such plans subject to certain amendments. The Defendant stated that the project plans under approval by the BMRDA consisted interalia of a basement and podium which would house the exhibition/convention and other facilities which are common to the project even it if it were to be converted to hotel user at a later date. The Defendant informed the Government that it accordingly planned to proceed with the work on the project on the basis of such plans under approval by the BMRDA pending receipt of the Governments concurrence of its request.

(ii) The Government of Maharashtra by its letter dated 16.5.1990 stated that it had no objection pending a decision on the hotel project of the Defendant to the Defendant proceeding with its plans as approved by the competent authorities.

44. In the circumstances the Defendant by a letter dated 23.5.1990 addressed to its architects referred to the need to commence the work on the project before the expiry of the commencement certificate. The Defendant requested the architect to go ahead with the implementation of the necessary amendment to the plan with the concerned authorities for commencement of construction. The Defendant also urged the architect to work closely with the Plaintiff for the speedy commencement of the project stating that that was in the interest of everyone concerned.

45. After the permission was received by the Defendant for including in the terms of the lease hotel user, the Plaintiff paid a further sum of Rs. 50 lakhs in accordance with clause 6 (v) (b) of the agreement dated 10.11.1980. The Defendant accepted the payment unconditionally. In fact the Defendant by a letter dated 22.6.1990 requested the Plaintiff to confirm the balance of advance basic rent of Rs.1,00,00,000 paid by the Plaintiff towards the hotel project. The Defendant also requested the Plaintiff to confirm that the Defendant was holding this free of interest as on 31.3.1989 and 31.3.1990. This was in connection with the Defendants income tax returns. The Plaintiff admittedly by its letter dated 2.7.1990 confirmed the same. These acts are contrary to the parties having considered the agreement to be merely an agreement to enter into an agreement and not a concluded agreement.

46. If all the essential terms and conditions of the bargain had not been agreed upon between the parties it is impossible to imagine the Defendant having not only admitted in every document and letter that there was a concluded contract but proceeding with the execution thereof to such a large extent which would irretrievably affect the rights of the parties. These facts are a strong indication that the parties considered all the terms and conditions essential to the relationship between themselves as having been arrived at leaving only formal documents to be drawn up. In these circumstances it is not possible to hold atleast at this stage that the drawing up of such formal documents was a term of the bargain between the parties.

47. Even assuming that each of the aforesaid facts do not by themselves indicate a concluded agreement having been arrived at between the parties, Page 1427 taken together they certainly established the same at least primafacie.

48. Upon receipt of the permission from the Government the Defendant put the Plaintiff in possession of the suit land. The Plaintiff accordingly entered into possession of the suit land with effect from 16.7.1990. The Plaintiff thereafter commenced construction work. Mr Tulzapurkar contended that this was in part performance of the contract. For this purpose the necessary notices to the authorities had been issued. Extensive correspondence ensued including between the Defendant and the Plaintiff, the Defendants architect and the Plaintiff and the Defendant and various authorities in respect of the construction work on the suit land. Under cover of a letter dated 23.10.1991 the Defendant even forwarded letters addressed by it to various authorities to the Plaintiff for forwarding the same to the relevant authorities. The Defendant issued necessary instructions to its security department to allow the Plaintiff and its workers access to the site including after office hours and informed the Plaintiff of the same.

49. Mr.Samdani submitted that with effect from 16.7.190 the Defendant put the Plaintiff in possession and permitted the construction to commence and continue to the extent of the basements and over 80 feet in height only on an adhoc basis without there being a concluded contract. The facts thus far do not support this contention. The facts that follow belie it altogether.

50. Mr.Samdani relied upon paragraph 1 of a letter dated 19.7.1990 addressed by the Plaintiff to the Defendant stating that the contract between themselves as recorded from time to time in various writings and the discussions may now be reduced to writing in the form of one consolidated memorandum of agreement which may thereafter be executed in the form of an agreement for sublease. The letter in fact is against the Defendants contention in this regard. It in fact presupposes all the essential terms and conditions of the agreement having been arrived at in the various discussions and writings. All that it suggests is that the same be reduced to writing. This by itself does not indicate that the parties considered a formal agreement being a term of the bargain.

51. The BMC had revised the assessment in respect of the suit land as land under construction and began charging property taxes on that basis. By a letter dated 9.1.1991 the Defendant forwarded to the Plaintiff copies of the municipal assessment bills along with the relevant letter levying service taxes. The Defendant called upon the Plaintiff to make payment in respect of the said bills. Since January 1991 the Plaintiff had been bearing all property/service taxes in respect of the said land pursuant to a demand for the same by the Defendant till as late as July 2007 aggregating to Rs.2,37,00,000. Surely if no concluded contract had been arrived at the Defendant would not have demanded payment of municipal taxes from the Plaintiff.

52. By a letter dated 27.1.1992 the Plaintiff informed the Defendant that the amended plans in respect of the officecum convention Centre project had been sanctioned by the Municipal Corporation comprising of 500,000 square feet FSI instead of the 400,000 square feet FSI originally Page 1428 sanctioned. It was further stated that the commencement certificate in respect thereof was awaited and upon receipt of the same construction would continue on the basis of the newly amended plans for 500,000 sq. ft. FSI.

53. Mr.Samdani submitted that for this additional 100,000 square feet FSI there was no agreement. This submission overlooks the fact that by the said letter dated 1.3.1984 the Defendant had asked the Plaintiff to confirm whether it would be in a position to accept the balance area of approximately 1,25,000 sq. ft. available on the project on the same terms and conditions entered into between the parties for the construction of the service apartment on the site. As stated above the Plaintiff by its letter dated 10.3.1984 accepted the offer on the same terms and conditions entered into between the parties. There is no question therefore of there not being a concluded agreement in respect of the 100,000 sq. ft. FSI.

54. In a subsequent letter dated 27.1.1992 addressed to the Defendant the Plaintiff had set out various possibilities of converting the project into different users. These were only suggestions. Mr.Samdani however in this regard relied upon paragraph II (1) (f) to suggest that there was no concluded agreement. I do not agree. All that is stated is a suggestion from the Plaintiff that the benefits arising out of the additional FSI of 100,000 sq. ft. may be shared appropriately between the Defendants and the Plaintiff by way of a suitably higher advance rent in respect thereof. This suggestion regarding a "suitably higher rent" by no means indicates that there was no agreement regarding the rent itself payable for the additional FSI.

It is important to note for an aspect I will deal with later, that while making the various suggestions the Plaintiff expressly stated that if efforts with the Government were successful and the alternatives being considered were permitted in such terms, the alternative would be operative, whereas if such efforts are not successful then the contract will carry on as at present in respect of the hotelcumconvention Centre complex project.

55. This brings us to the next modification. As is evident from the minutes of the meeting held on 29.1.1992 the parties noted the importance of an MOU being prepared. Item 1 of the minutes is important as it contains a modification to the agreement between the parties. It reads as under :

1. On the current status of the hotel project, Dr Maker outlined for the members the historical background giving details of the area/FSI available, the permission as stated in the Government Resolution, and the fact that we are awaiting final clearance from the BMRDA before we can proceed.

The members considered the several options available (as mentioned in the agenda) and agreed that, in the present circumstances, it might be most advantageous to the Centre to undertake, as quickly as possible, the construction of an office tower comprising the Convention/Exhibition Centre for which permission already exists. The members agree with Dr Maker that, once the construction is undertaken, we should make every effort to gain permission for developing a Service Apartment complex on certain floors within the office tower. Dr Maker/Akerkar were asked to proceed on this basis and bear this decision in mind when preparing the Memorandum of Page 1429 Understanding between the Centre/Defendants and MDF/Plaintiff."

It is necessary to note that in item 4 it is recorded that the Defendants President and VicePresident had stated that in view of the changed circumstances and the decision to go ahead with the office building, the question of developing the WTC club should be considered anew.

56. A copy of these minutes were forwarded to the Plaintiff. The Plaintiff responded thereto by its letter dated 4.3.1992. Paragraph 3 of the letter pertains to item 1 of the minutes quoted above and reads as under :

3. As regards the users for the project, it has now been agreed to construct the project as an Office Tower which shall also include within it the Convention/Exhibition facilities.

At the subsequent stage, efforts may be made if considered desirable, to obtain permission for a Serviced Apartment Complex on certain floors in the Office Tower, if permissible. However, the alternative of the HotelcumConvention/Exhibition facilities as originally envisaged in our agreement will continue to subsist as a fall back contingency.

A conjoint reading of the minutes and the said letter dated 4.3.1992 makes it clear that it had now been decided between the parties that what was to be constructed was an office tower comprising the convention/exhibition Centre for which the permission already existed from the necessary authorities. There was no dispute between the learned counsel in this regard.

57. It would be convenient at this stage to set out paragraph 65 of the plaint in order to appreciate the manner in which the transaction between the parties has been pleaded and the defences raised to the present proceeding. Paragraph 65 of the plaint reads as under :

65. The Plaintiff states that the finally agreed material terms of the contract (which constitutes the "Suit Contract") as presently subsisting between the Plaintiff and the Defendant are as under:

(i) Tower No. 2 to be constructed on the Suit Land with permissible FSI and would consist of office building with Convention Centre and Exhibition Centre (as recorded, interalia, in letter dated 9th February 1994 of the Plaintiff to the Defendant, the letter dated 11th February 1994 of the Defendant to the Plaintiff, Minutes of the Meeting of the Managing Committee of the Defendant held on 29th January 1992 and letter dated 20th May 1996 of the Plaintiff to the Defendant, being Exhibits "BL", "BM", "BI" and "BR" hereto);

(ii) The hotel user in respect of Tower No.2 subsists as a fall back option in the event of it not being possible, for any reason, to implement the contract for office user (as recorded, interalia, in the letter dated 5th January 1990 of the Defendant, letter dated 25th April 1990 of the Plaintiff to the Defendant, the letter dated 30th April 1990 of the Defendant to the Plaintiff, letter dated 14th May 1990 of the Defendant to the Government, letter dated 16th May 1990 of the Government to the Defendant and letter dated 4th March 1992 of the Plaintiff to the Defendant, being Exhibits "AL", "AN", "AO", "AP", "AQ" and "BJ" hereto);

Page 1430

(iii) Tower No. 2 would be constructed by the Plaintiff at its own costs and expenses (as recorded, interalia, in the Note attached to letter dated 27th March 1987 of the Defendant to the Government, Note attached to letter dated 13th April 1987 of the Defendant to the Government, letter dated 5th January 1990 of the Defendant, letter dated 9th February 1994 of the Plaintiff to the Defendant and letter dated 11th February 1994 of the Defendant to the Plaintiff, being Exhibits "AD", "AE", "AL", "BL" and "BM" hereto);

(iv) The Defendant would grant a lease to the Plaintiff of the entire Tower No.2, for which the Plaintiff would pay basic rent to the Defendant at the rate of Rs. 200/ per square feet of the builtup area in Tower No.2 as stated in the Letter of November 1980 1/60th of the aggregate a Defendants calculated as aforesaid is to be adjusted as annual rent over the 60 years lease period; (as recorded, interalia, in the Letter of November 1980, the Note attached to the letter dated 13th April 1987 of the Defendant to the Government, the letter dated 21st May 1987 of the Defendant and letter dated 20th May 1996 of the Plaintiff to the Defendant, being Exhibits "F", "AE" "AF" and "BR" hereto);

(v) The lease would be for a period of 60 years with an option to the Plaintiff for renewal of the lease for the remainder of the term of the head lease of the Larger Land granted by the Government to the Defendant, less 1 (one) year, such renewal to be at an annual rent of Re.1/, as stated in the Letter of November 1980;

(vi) The Plaintiff would bear all property and municipal taxes as stated in the Letter of November 1980 during the entire lease period (including renewal); (vii) The Plaintiff would be entitled to rent out, lease, etc. parts of premises in the constructed building as stated in the Letter of November 1980, subject to the terms of the Letter of November 1980;

(viii) The Plaintiff would allow the Defendant to use the Convention and Exhibition Centres for nominal fee. The nominal fee was to be calculated on the same basis as 'common monthly outgoings' being charged by the Defendant to individual tenants of the Defendant in the other buildings of the World Trade Centre Complex, as stated in Minutes of the meeting of the subcommittee of the Defendant held on 3rd March 1987 (as recorded, interalia, in Minutes of meeting of the subcommittee of the Defendant held on 3rd March 1987, being Exhibit "CP" hereto);

The terms set out in clauses (i) to (viii) above were agreed upon and accepted by both the parties. Except to the extent set out in clauses (i) to (viii) above, the other terms and conditions as stated in the Letter of November 1980 remain unchanged and mutatis mutandis apply. The Plaintiff states that the Suit Contract consists of the aforesaid terms which were agreed between the parties as evidenced, inter alia, by the documents and correspondence referred to hereinabove. The Plaintiff craves leave to file a separate compilation containing the copies of the relevant documents and correspondence. The contract which is the subject matter of this suit and of which specific performance is sought (i.e. the Suit Contract) contains Page 1431 the aforesaid terms set out hereinabove.

58. Relying upon the above the minutes of the meeting held on 29.1.1992 Mr Samdani submitted that upon the understanding recorded between them the original agreement dated 10.11.1980 and the modification thereof of March 1987 stood annulled. He stated that with effect from the date of the meeting held on 29.1.1992 the only agreement was the one contained therein.

59. I am unable to agree. In the last sentence of paragraph 3 of the letter dated 4.3.1992 addressed by the Plaintiff it is stated that the alternative of the hotel convention/exhibition facilities as originally envisaged in the agreement will continue to subsist as a fallback contingency. This letter and in particular the above statement was not denied at any stage by the Defendant.

60. And this was not the first time that the Plaintiff had stated so. The Plaintiff had also stated this in the letter dated 27.1.1992. In this letter the Plaintiff referred to some of the above facts including the fact that the hotel/ Convention Centre permission had been received and also the permission for the sublease of the land for the project. The Plaintiff also referred to the amended plans being allowed for 500,000 sq. ft. FSI instead of the 400,000 sq. ft. originally sanctioned. What is important to note is that the Plaintiff stated that it had sent a draft MOU to the Defendant but that certain aspects /issues needed to be crystallised and decisions taken to enable the MOU to be finalised and executed expeditiously. These decisions were outlined. The need for crystallising the aspect/issues must be considered in this context. The need arose as a result of the alternatives being discussed by the parties. I do not read the reference to the need for crystallising certain aspect/issues as pertaining to the original agreement itself. Nor do I read it as pertaining to the agreement as amended. I read it as a reference to the Defendant being required to deal with the various alternatives and clarifying the position of the parties in respect thereto. This is apparent from what immediately follows. For instance the Plaintiff referred to the aspects regarding the discussions pertaining to the desirability of exploring the possibility of converting the project into an office/convention Centre complex with or without some part thereof as serviced apartments. After referring to the discussions in this regard the Plaintiff stated as under in paragraph II (d):

It may be mentioned that since requisite Government Resolutions have been passed for the HotelcumConvention Centre Complex, one cannot be certain as to whether it would now be possible to revert to this alternative. This aspect would have to be explored and efforts would have to be made in that direction, once a clear decision has been taken setting out the preferences in the order of priority. It would, of course be necessary to have a clear decision taken between us as to which alternative we prefer and crystallise the contractual relationship between us in respect thereof as a part of the MOU. Thereafter, if efforts with the Government are successful and the alternative being considered is permitted, such terms in regard to that alternative would be operative, whereas if such efforts are not successful then the Page 1432 contract will carry on as at present in respect of Hotelcum Convention Centre Complex project.

61. The Defendant did not deny or protest in any manner whatsoever to the Plaintiff contending that the hotel cum convention Centre complex project would always be available as a fall back option. Indeed even thereafter by a letter dated 4.3.1994 the Plaintiff stated in paragraph 4 that the Defendant had clarified and confirmed in the meeting that the alternatives would not affect the contract between the parties of 10.11.1980 as amended from time to time. The Plaintiff stated that it was proceeding with the work pending finalisation of these aspects. There was no denial of this either.

62. In the circumstances it is not possible to accept Mr Samdani's contention that the original agreement stood annulled and cancelled upon the modification thereto.

63. Mr Samdani had also relied upon the opening part of the minutes of the meeting held on 29.1.1992 in support of his submission that the parties considered the drawing up of a formal agreement to be a term of the bargain. The first paragraph of the said minutes refers to the president of the Defendant stressing the importance of an MOU and stating that if the same was not executed the Defendants would be laying themselves open to criticism. The President of the Defendant added that even a general MOU covering all points or, if need be, individual MOUs on the several issues under consideration would suffice.

64. This by itself is not decisive of the matter. The paragraph does not suggest that the parties considered the drawing up of a formal agreement to be a term of the bargain and a condition precedent to the formation of a contract between themselves. The paragraph read as a whole indicates that the drawing up of a MOU was considered necessary to avoid any criticism. It does not indicate that any essential terms were left outstanding. Nothing to this effect was either pleaded or even submitted before me. Indeed all that preceded and followed the meeting indicates the contrary to wit it indicates that the parties considered a concluded contract as having been arrived at between themselves.

65. Mr.Samdani relied upon a letter dated 13.4.1990 in which the Plaintiff stated that the agreement of 10.11.1980 would be suitably amended to include various points as stated therein "as also others which may be pertinent to the successful completion of the project." (emphasis supplied). I do not see how these words which form but part of a sentence are of any assistance to Mr.Samdani. It is neither pleaded not contended before me that the parties had in fact contemplated including certain clauses/aspects in relation to the agreement. Nor was it either pleaded or contended before me that the agreement is inchoate on account of the absence of any particular provision. In other words there is nothing to suggest that the agreement between the parties cannot be implemented on account of the absence of any particular term.

Page 1433

66. Mr.Samdani then relied upon a letter dated 11.2.1994 addressed by the Defendant to the Plaintiff. This letter also does not support his submission that the execution of a formal agreement was a term of the bargain between the parties. The reference to the agreement between the parties at a meeting referred to therein regarding pending finalisation of certain items pertaining to the execution of the MOU between the parties is of no assistance to Mr Samdani's submission. Firstly there is neither any pleading nor was there any suggestion before me as to what the certain items were. In the absence thereof it is not possible to accept Mr Samdani's submission. Had the Defendant indicated what those certain items were the Plaintiff would have had an opportunity of dealing with the same. As stated earlier there is every possibility for instance that the reference was merely to the incorporation of the suggested alternative modes for the execution of the contract. It is pertinent to note that in the same letter the Plaintiff has in fact been directed to go ahead with the construction work without any delay.

67. The construction continued thereafter. There is no dispute that the construction continued on the basis stated in the said letters namely in accordance with the NOC granted by the BMRDA. This was in fact clarified by the Defendants letter dated 15.5.1995 addressed to the BMRDA.

68. Thereafter for the first time by a letter dated 19.12.1995 addressed to the Plaintiff by a newly appointed DirectorGeneral of the Defendant it was alleged that the Defendant did not have any information about the particulars of the project nor any idea about the cost estimates, the plans, the FSI proposed to be utilised and the expenditure incurred by the Plaintiff till then. The Defendant pleaded ignorance of all that had been going on. It was also alleged that there did not appear to be any valid agreement between the parties under which the construction work was going ahead with considerable pace. The Plaintiff was called upon to stop further work until a firm understanding was reached between the parties.

69. The Plaintiff addressed a detailed reply dated 20.5.1996 to which there was no response from the Defendant.

70. Dr. Tulzapurkar submitted with considerable force that the Defendants conduct after the receipt of the Plaintiffs reply dated 20.5.1996 indicated that the Defendant was satisfied with the Plaintiffs reply. This is evident from the subsequent facts.

71. The Plaintiff neither took any action nor raised any protest thereafter for ten years.

72. Indeed by a letter dated 27.5.1996 the Defendant called upon the Plaintiff to confirm that it was holding the said sum of Rs.1,00,00,000 as an interest free deposit towards advance basic rent as on 31.3.1996. The Plaintiff by its reply dated 15.7.1996 confirmed the same. There was thus an affirmation of the contract.

73. The further correspondence also indicates that the Defendant far from considering a concluded agreement as not having been entered into and far from terminating the same in fact confirmed the agreement and took all steps pursuant thereto and in implementation thereof. This will be clear Page 1434 from the correspondence I will refer to while dealing with Mr Samdani's submission regarding delay and laches. Suffice it to state at this stage that one of the impediments to the execution of the work was the existence of a temporary receiving station of the BEST. The Defendant, at the Plaintiff's suggestion/request addressed correspondence in this regard to the BEST. The Defendant forwarded the said correspondence to the Plaintiff. By a letter dated 13.6.2002 the Defendant ultimately informed the Plaintiff that the BEST had given their no objection to the demolition of the receiving station and in fact called upon the Plaintiff to take suitable action for the demolition thereof.

74. It is important to note in this connection that two letters dated 29.4.2002 and 13.6.2002 were addressed by the Defendant to the BEST and to the Plaintiff respectively were signed by one Dr. V. S. Gopalakrishnan who had also signed the letter dated 19.12.1995 which was the first letter that alleged that there was no valid agreement between the parties. The letters dated 29.4.2000 and 13.6.2000 primafacie at least indicate that the Defendant had upon receiving the Plaintiff's reply dated 20.5.1996 to the letter dated 19.12.1995 satisfied itself that there was a contract between the parties. There is no other explanation as to why after having contended by the letter dated 19.12.1995 that there was no contact between the parties the same signatory acted pursuant to and in implementation of the transaction between the parties. I do not suggest that even if the signatory to the letters had been different it would have made any difference.

75. Mr.Samdani submitted that the Plaintiff had wrongly stated in the letter dated 20.5.1996 that it would be the licensee of the land and the lessee of the office building when there was no agreement or even a reference to a licence.

76. I have already referred to the fact that the Defendant had instructed its security personnel to permit the Plaintiff access to the said plot for the purpose of construction. Hence for the purpose of carrying on the project work it was necessary to grant the Plaintiff a licence to enter upon the suit plot. The Plaintiff by a letter dated 9.2.1994 stated that it was proceeding with the work in pursuance of the licence granted by the Defendant to it to enter the plot. This was never denied by the Defendant. Incidentally Mr Tulzapurkar fairly conceded that it was only through inadvertence that the Plaintiff had stated that the cost of the Convention cum exhibition Centre would have to be borne by the Defendant. No such claim has been made before me. The Plaintiff also pointed out that it had already spent a sum of over Rs 17,00,00,000 on the project.

77. Ten years after the letter dated the 19.12.1995 the Defendant addressed a letter dated 15.12.2005 stating that there was no satisfactory progress in the matter for about fifteen years and that no terms were finalised between the parties. The Defendant referred to the said letter dated 19.12.1995 and stated that the Plaintiff had not sent any concrete proposal even after June 2002 i.e. after the demolition of the BEST receiving station. The Defendant stated that it had noticed that work/construction activities had started and called upon the Plaintiff Page 1435 to stop the same. It was further stated that the Defendant was instructing the security not to allow the Plaintiff to enter upon the premises. The Defendant called upon the Plaintiff to remove the site office and staff, employees and other labourers from the premises. Finally the Defendant withdrew the authority letter dated 11.2.1994. The Plaintiff immediately replied to the said letter by a letter dated 16.12.2005. This letter in turn was replied to by the Defendants letter dated 16.12.2005.

78. Almost nineteen months later the Defendant by a letter dated 9.7.2007 noted that the Plaintiff was continuing to carry out its activities and therefore called upon the Plaintiff to move out from the suit premises. The Defendant stated that it had instructed the security staff not to allow the Plaintiff on the suit premises. Further correspondence ensued between the parties wherein the Plaintiff reiterated its above stand.

79. It is important to note that despite the said letter dated 19.7.2007 the Defendant forwarded to the Plaintiff a bill for property taxes received from the BMC for the period 1.10.2006 to 31.3.2007 in the sum of Rs.9,84,472 and requested the Plaintiff to reimburse the same which the Plaintiff did by forwarding a cheque under cover of its letter dated 17.7.2007.

80. Ultimately the Defendant on 31.7.2007 put up a notice on the premises notifying all concerned including the Plaintiff to move out from the property and instructing its security not to permit the Plaintiff to enter upon the said property. The Plaintiff alleged that the Defendant wrongly did so despite the fact that discussions were continuing between the parties during which the Defendant wrongly demanded additional payments.

81. The Plaintiff filed a suit for injunction in the Bombay City Civil Court. By an order dated 6.8.2007 the learned judge recorded the statement on behalf of the Defendant that till a substantive suit is filed by the Plaintiff the notice dated 31.7.2007 would not be acted upon upto an inclusive of 17.9.2007. Ultimately the Plaintiff filed the present suit on 10.9.2007. By an ad interim order dated 14.9.2007 the assurance given in the Bombay City Civil Court was directed to be observed and the Respondent was directed not to create any third party rights pending the Notice of Motion.

82. By a letter dated 19.12.2007, during the pendency of the suit, the Defendant terminated the said agreement.

83. Mr Samdani was unable to explain the innumerable categoric and clear admissions by the Defendant about the existence of a contract between the parties. He did not contended that the admissions were a mistake. Nor did he contend that the admissions were due to a misapprehension of the legal position regarding concluded agreements. Indeed, at least at the interlocutory stage, it would have been difficult for him to so contended successfully for the admissions were admittedly based not merely upon the Defendants perception of the matter but also upon the advice received by the Defendant from its solicitors.

Page 1436

84. Mr.Samdani however contended that the admissions were in respect of the original agreement dated 10.11.1980 and not in respect of the modification thereof. Let me assume that to be so. It would not carry his case any further.

85. Firstly, the subsequent developments were indeed modifications to the original agreement. The agreement only stood modified and not annulled or novated. If the agreement was merely modified then the rest of the terms and conditions remained as they were to the extent that they were not inconsistent with the modification. Further, if as a result of the modifications there came into existence only an agreement to enter into an agreement, the same being unenforceable in law the original agreement would ipso facto continue to remain in force even in the absence of an assertion to that effect.

86. Moreover, as I have already noted, the Plaintiff expressly kept the original agreement alive in the event of the modified agreement not being implemented or being capable of implementation. The Defendant never denied this assertion.

87. In view of the above facts and specially in view of the extent to which the parties have proceeded to implement the transaction between themselves, I find Mr. Tulzapurkar's reliance upon the observations of the judgment of the Court of Appeal in Verrall v. Gt. Yarmouth B.C. [1981] 1 Q.B., 202 at 220, well founded:

We were referred to a 19th century decision of Kay J. in Hart v. Hart (1881) 18 Ch.D. 670, where the judge referred, at p. 685, to the judgment of Turner L.J. In Wilson v. West Hartlepool Railway Co. (1865) 2 De G.J. & Sm. 475:

... .that when an agreement for valuable consideration between two parties has been partially performed, the court ought to do its utmost to carry out that agreement by a decree for specific performance. I think, if I do not misquote the words, Turner I.J. went as far as this : it is the duty of the court, as far as it is possible to do so, to ascertain the terms of the agreement, and to give effect to it. That is, as I understand, the rule of equity, that although there may be considerable vagueness in the terms, and although it may be such an agreement as the court would hesitate to decree specific performance of, if there had not been part performance, yet when there has been part performance the court is bound to struggle against the difficulty arising from the vagueness.

I do not in the present case think there is any vagueness whatsoever. Large sums were extracted from the plaintiffs, no doubt with propriety, by the local authority for the protection of their property, and those sums were paid before the repudiation took place. Accordingly, I think it is open to this courtas the judge thoughtto grant equitable relief.

88. Mr.Samdani submitted that that the modified agreement is not capable of being implemented as under the modified agreement it is the Plaintiff and not the Defendant who was to construct the building. In that event Page 1437 according to him the Plaintiff would necessarily be the owner of the building. An owner, he submitted, can never lease property owned by him to himself.

89. It is true that a person cannot be both an owner/lessor and a lessee of a property. However it does not necessarily follow that a person who constructs a building necessarily becomes the owner thereof. That would depend upon the agreement between the parties. For instance under a pure construction contract the contractor does not become the owner of the building. In the present case the parties had in fact agreed that even if the Plaintiff were to construct the building the Defendant would be the owner thereof. By the letter dated 20.5.1996 the Plaintiff had stated in paragraph 10 that it would be the licensee of the land and the lessee of the office building to be constructed by the Plaintiff. This assertion by the Plaintiff was never denied by the Defendant. I am unable therefore to accept Mr Samdani's contention that the agreement is for this reason not capable of being performed.

90. Mr.Samdani submitted that prayers a(iii), (b), (e.), (h), (i) are contrary to the alleged agreement and that therefore the Plaintiff is admittedly not ready and willing to perform the contract as per the true construction thereof.

91. The prayers must be read in the context of the plaint as a whole. So read it is obvious that the Plaintiff does not claim any interest in the land contrary to the agreement. The Plaintiff however is entitled to the use of the land for the purpose of the contract. For instance it is necessary for the Plaintiff to enter and remain upon the said land for the purpose of construction of the building. It would be absurd to suggest that the Plaintiff must restrict itself only to the plinth area of the building itself.

92. Mr Samdani further submitted that the Plaintiff is guilty of delay and laches. He submitted that the Defendant had obtained permission for the construction of a hotel on 20.1.1986 and that the Plaintiff accepted the conditions, excepting the condition regarding inviting competitive bids, on 21.5.1986. Even this condition was deleted on 30.4.1990. The Plaintiff's request for permission to work even after office hours was granted by the Defendant on 17.7.1990. By 1995 the construction had gone up to 62 feet in height. But by the year 2001 only 20 feet more was added. On 8.5.2002 BEST granted permission for the removal of the receiving station. By 2007 the construction had gone up to a height of only 80 feet. In fact according to him after 2001 there was no construction at all. Thus he submitted, in the last 25 years there has not been an appreciable progress in the work. In these circumstances, he submitted, that in any event the Plaintiff ought to be denied specific performance.

93. Firstly it must be remembered that there was no time stipulated in the agreement between the parties regarding completion of the work. The purported termination of the agreement was after legal proceedings had been initiated. In that event the Plaintiffs claim for specific performance cannot be said to be barred by limitation.

94. Further, the contract has been kept alive by the Defendant right up to the year 2007. The facts referred to above establish this. In fact the Defendant Page 1438 from time to time called upon the Plaintiff to execute the work. The Defendant even demanded from the Plaintiff property taxes and accepted the same. This was even after the contract was denied. Even assuming that there was any delay or laches the Defendant had thereby waived the same.

95. As far as the slow progress of the work is concerned, primafacie it appears that the same was an account of two important factors.

96. The Defendant had granted a lease to the BEST for a period of three years ending around September/October 1991. Almost immediately after being put in possession of the suit plot the Plaintiff by a letter dated 19.7.1990 informed the Defendant that the receiving station impeded the piling and construction work. The Plaintiff therefore requested the Defendant to persuade the BEST to abandon the idea of using the receiving station in the mutual interest of the parties.

97. The conduct of the defendant establishes that it accepted that the work was impeded by the existence of the receiving station. It is important to note that at no stage did the Defendant controvert the Plaintiff's contention that the presence of the receiving station hampered the work at the site. On the contrary, as the correspondence I will now refer to indicates, the Defendant made every effort with the concerned authorities, including the BEST and Collector of Bombay to resolve the problem by removing the substation/receiving station.

98. By a letter dated 18.4.1991 the Defendant informed the Collector that the receiving station needed to be demolished urgently in order to enable the construction work to proceed.

99. Discussions were held between the Defendant and the BEST regarding the removal of the receiving station. By a further letter dated 22.10.1991 the Defendant informed the Collector of Bombay once again that in view of the permission for the hotel complex having been granted the receiving station would need to be demolished to enable the development of the land as permitted by the government. The Defendant therefore requested that the BEST be given possession of alternate land urgently so that the temporary receiving station could be demolished for the reasons stated earlier.

100. The Plaintiff by its letter dated 27.1.1992 stated that one of the aspects that needed to be reviewed was the relocation of the receiving station on the project site as it was impeding the construction work. The Plaintiff stated that action for this purpose was required expeditiously. The Plaintiff by a further letter dated 4.3.1994 once again stated that the receiving station infringed on the building line and the foundation of the project and obstructed the construction work which needed to be carried out with utmost dispatch. By yet another letter dated 27.2.1997 the Plaintiff stated that the work at site was severely hampered because of the receiving station which in spite of the Defendants vigorous efforts still remained a major problem as it overlapped the construction work of the project making it physically impossible to construct a major portion of the project. The Plaintiff therefore requested the Defendant to take expeditious action to have the receiving station removed from the site.

Page 1439

101. Far from denying the Plaintiffs assertion in this regard, the Defendant accepted the same. By a letter dated 29.4.2000 the Defendant informed the BEST that the structure was coming in the way of construction as per the plans approved by the BMC. The Defendant further stated that it proposed bringing down the structure as early as possible to permit smooth construction of Tower 2 which was going on and that it felt that the BEST could have no objection to this.

102. The Defendant by a letter dated 13.6.2002 informed the Plaintiff that the BEST had given its no objection for the demolition of the receiving station and enclosed a copy of a letter addressed by the BEST dated 8.5.2002. The Defendants expressly stated: " Since the temporary receiving station comes in the way of construction of Tower 2 as per the approved plan, you are requested to take suitable demolition action."

103. At the cost of repetition, it is also of importance to note that the letter dated 29.4.2002 addressed by the Defendant to the BEST and the letter dated 13.6.2002 addressed by the Defendant to the Plaintiff was signed by the said Dr V. S. Gopalakrishnan who had also signed the letter dated 19.12.1995 which was the first letter that alleged that there was no valid agreement between the parties. The letters dated 29.4.2000 and 13.6.2000 primafacie at least indicate that the Defendant had upon receiving the Plaintiff's reply dated 20.5.1996 to the letter dated 19.12.1995 satisfied itself that there was a contract between the parties. There is no other explanation as to why after having contended by the letter dated 19.12.1995 that there was no contact between the parties the same signatory acted pursuant to and in implementation of the transaction between the parties.

104. Mr Samdani however submitted that the existence of the receiving station did not in fact impede the progress of the work. He submitted that the fact that construction had proceeded over the years belied the Plaintiff's contention in this regard. I am unable to agree.

105. That the construction proceeded to a certain extent does not indicate that it could have extended to any extent/the full extent without the removal of the impediment created by the existence of the receiving station. Even if the receiving station was not within the plinth of the building itself as constructed above the ground level it would have impeded the construction work which also involved the construction of basements. In any event this is an aspect which, to say the least, would require consideration at the final hearing. In view of the unequivocal admissions by the Defendant as is evident from the aforesaid correspondence it is not possible to nonsuit the Plaintiff at this stage on the ground of delay. Nor is it possible in view of the above correspondence to ignore the Plaintiffs contentions regarding the receiving station being one of the causes of delay in the execution of the work.

106. Nor do I find any force in Mr Samdani's submission that the grounds of delay were taken for the first time only in the affidavit in rejoinder and not in the plaint. Obviously, it is only when a contention regarding delay is taken by the defendant that it becomes necessary for the plaintiff to deal with the same.

Page 1440

107. It is also pertinent to note that the Defendant at no time raised this objection and made time of the essence of the contract.

108. Mr.Tulzapurkar submitted that the work had been delayed also due to the Defendant having requested for the relocation of the convention hall and the redesigning thereof.

109. By a letter dated 27.2.1997 the Plaintiff interalia stated that it was at the Defendants request that the convention facilities in the project were to be redesigned and relocated at the northern side of the building instead of the southern side as sanctioned. It was further stated that it had been suggested by the Defendant that a special consulting architect should be appointed by the Plaintiff in which context the name of one Stein had been suggested by the Defendant. Mr Samdani however submitted that the permission pursuant to this letter was given by a letter dated 4.3.1997 itself and yet the plans had been submitted only in 2005. However the said letter itself went on to record that the constraints of not being able to carry out the work on the project was affected by the receiving station and the redesign/relocation of the convention facilities. As a result thereof the only work physically possible, it was stated, at site was only a small portion of the project consisting of the central core and a little appurtenant area. This was not controverted by the Defendant in the course of the correspondence. I did not understand Mr Tulzapurkar to contended that the relocation/redesigning of the convention hall was an independent cause in itself for the delay in the execution of the work. It was one of the factors. The work in respect of the redesigning and the relocation of the convention hall was in turn impeded by the existence of the receiving station.

110. Mr Samdani submitted that the Defendant had never requested the redesigning and the relocation of the convention centre. This was alleged in the affidavit in reply. As a result of this assertion the Plaintiff filed a further affidavit dated 4.2.2080 and annexed thereto a letter dated 4.3.1997 addressed by the Defendant to the Plaintiff in reply to the said letter dated 27.2.1997. It is important to note that the Defendants reply did not contradict the Plaintiff's contention that the redesigning and the relocation was requested by the Defendant.

111. Considering all the facts and circumstances of the case it is difficult to hold that the Plaintiff is bound to be denied at the trial, the relief of specific performance on the ground of delay and laches.

112. Finally Mr. Samdani submitted that this is a fit case where the court ought to refuse specific performance. He founded the submission on the basis of a decision of a Division Bench of this court in the case of Niwas Builders versus Chanchalaben (2003) 7 LJSOFT = (2003) 3 Mh. L.J. 312 and in particular paragraph 31 thereof which reads as under :

31. While taking into account the aforesaid evidence and the findings recorded hereinabove, we propose to return to the issue with respect to escalation of the real estate prices. A judicial note of the rise in prices Page 1441 during the pendency of this appeal can always be taken by this Court. This Court irrespective of the data produced by the Defendant can safely conclude that the prices of the immovable properties have been increased, especially; in Pune, Mumbai, Aurangabad and Nagpur belt of Maharashtra in the last 21 years. A similar trend is to be found in other parts of the country. This aspect of the matter, therefore, cannot be ignored while considering this appeal. The Apex Court in the second case of Nirmala Anand v. Advent Corpn. (P) Ltd. while resolving the differences of opinion between the learned Judges on the condition in respect of additional Defendants to be paid by the appellant to respondent Nos. 1 and 2 therein observed as under:

It is true that grant of decree for specific performance lies in the discretion of the Court and it is also well settled that it is not always necessary to grant specific performance simply for the reason that it is legal to do so. It is further well settled that the Court in its discretion can impose any reasonable condition including payment of an additional a Defendants not by one party to the other while granting or refusing decree of specific performance. Whether the purchaser shall be directed to pay an additional Defendants to the seller or converse would depend upon the facts and circumstances of a case. Ordinarily, the Plaintiff is not to be denied the relief of specific performance only on account of phenomenal increase of price during the pendency of litigation. That may be, in a given case, one of the considerations besides many others to be taken into consideration for refusing the decree of specific performance. As a general rule, it cannot be held that ordinarily, the Plaintiff cannot be allowed to have, for her alone, the entire benefit of phenomenal increase of the value of the property during the pendency of the litigation. While balancing the equities, one of the considerations to be kept in view is as to who is the defaulting party. It is also to be borne in mind whether a party is trying to take undue advantage over the other as also the hardship that may be caused to the Defendant by directing specific performance. There may be other circumstances on which parties may not have any control. The totality of the circumstances is required to be seen.

If that be so, this Court would be perfectly justified in taking judicial note of the phenomenal increase in prices of the immovable properties, especially, when this Court is considering the question "whether a decree for specific performance should be granted in favour of the Plaintiff?" for the first time, it being one of the relevant factor besides many others to be taken into consideration for denying the decree of specific performance as held by the Apex Court in K.S. Vidyanandam and Ors. v. Vairavan (supra) and three Judge Bench of the Apex Court in the second case of Nirmala Anand (supra).

113. I do not to see how the judgment is of any assistance to Mr Samdani. Far from supporting his submission the judgment in fact militates against Page 1442 his contention that specific performance can and ought to be refused merely on the ground that there has been an escalation in the price of the property. A mere increase in price by itself is no ground for refusing specific performance. If that were so the provisions of the Specific Relief Act would be rendered nugatory.

The judgment of the Supreme Court referred to in the above extract was pursuant to a reference by a two judge bench in the same case on a limited issue as to whether while granting specific performance the purchaser ought to be burdened with an order directing her to pay an additional amount to the Defendants. The judgment of the two judge bench, reported in (2002) 5 SCC 481, in fact granted specific performance. Even in this case, the learned judge who ordered the payment of an additional amount to the Defendants did not hold that specific performance can be refused merely on the ground that there has been an escalation in prices. In fact, after referring to a series of judgments of the Supreme Court, the learned Judge held that "mere escalation of prices in real estate properties per se is no ground to deny relief of specific performance". Escalation in prices is only one of the facts which a court may consider while deciding whether or not to grant specific performance. It certainly cannot be a determinative factor in itself isolated from the other facts and circumstances of the case. 114. The Supreme Court had occasion to consider the judgment of the two judge bench in the case of P.D'Souza versus Shondrilo Naidu . In paragraph 45 the Supreme Court held and under :

45. The said decision cannot be said to constitute a binding precedent to the effect that in all cases where there had been an escalation of prices, the court should either refuse to pass a decree on specific performance of contract or direct the Plaintiff to pay a higher sum. No law in absolute terms to that effect has been laid down by this Court nor is discernible from the aforementioned decision.

115. It is clear on a reading of the judgment of the Division Bench as a whole that escalation in prices was not the only factor that was taken into consideration. The Division Bench for instance had come to the conclusion that the Plaintiffs themselves had delayed the progress of the implementation of the agreement considerably that the parties were not even adidem as to the terms of the agreement; that no efforts had been made in three years to remove the tenants which was the responsibility and obligation of the Plaintiff and that there was nor any material to show that the Plaintiff had the necessary funds to develop the suit property as per the terms of the agreement. Thus it was not the mere escalation in prices which persuaded the Division Bench to deny specific performance of the contract.

Page 1443

116. The plaintiff before me, has been ready and willing to perform the contract as modified from time to time. It had never been suggested by the defendant at any material stage to the contrary. From the record it appears that the plaintiff had indeed accommodated the defendant by agreeing to the modifications. It would be unfair now to pick holes in the plaintiff's case for specific performance.

117. Mr Samdani submitted that the agreement pleaded is not in conformity with the agreement dated 10.11.1980 as allegedly modified. He attempted to substantiate this contention by referring to the individual sub paragraphs of paragraph 65 of the plaint. This would not be a correct reading of the plaint. Paragraph 65 must be read as a whole. So read it is perfectly in conformity with the agreement dated 10.11.1980 as modified as aforesaid. This is further clarified for instance in paragraphs 63 and 64 of the plaint. It must be remembered that the modifications to the original agreement dated 10.11.1980 were at the request and behest of the defendant.

118. I am however not inclined to permit the plaintiff to carry on construction pursuant to the agreement during the pendency of the suit despite Dr Tulzapurkar's statement that by doing so the plaintiff would not claim any equities, would do so at its own risk and that in the event of the plaintiff not succeeding the defendant would be entitled to retain free of cost any construction that may have been carried out on the suit property.

119. I am unable to accept Dr Tulzapurkar's submission that in view of the statement the balance of convenience would be in favour of permitting the plaintiff to carry on construction. If the suit is dismissed or if the plaintiff is denied specific performance at the final hearing of the suit it would create enormous difficulties in the way of the defendant enjoying the plot of land freely and without any difficulties. If specific performance is refused the defendant would be entitled to enjoy the plot in such manner as it desires. If construction is permitted to be put up on the suit plot and the defendant desires to use the plot in a different manner with another construction it would not be able to do so without incurring enormous expenditure, inconvenience, and difficulties which are too obvious to enumerate.

120. The Notice of Motion is made absolute in terms of prayer (g) except the words "dealing with" bracketed in red. The costs of the Notice of Motion shall be costs in the cause.

121. The hearing of the suit is expedited. Both the parties have agreed to the evidence being recorded on commission. They are at liberty to obtain suitable orders from the Court to which suits are assigned.

Unlock Advanced Research with PRISMAI

Bombay High Court