Bombay High Court
O.S. vs Navinchandra N. Majithia on 29 March, 2012
Author: Roshan Dalvi
Bench: Roshan Dalvi
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUIT NO. 1084 OF 1978
(O.S.)
M/s.Gundecha Builders ...Plaintiff
Vs.
Navinchandra N. Majithia ...Defendant
Mr. Dinesh Shah i/b. Lilani Shah & Co., for Plaintiff
Mr. U.J.Makhija with Mr. Sandeep Parikh
i/b. S.G. Lakhani for Defendant ig CORAM : MRS. ROSHAN DALVI, J.
DATED : 29TH MARCH, 2012
JUDGMENT:
1. The Plaintiff has taken out this Originating Summons under Rule 241 of the High Court (O.S.) Rules for answering certain questions that arise upon the agreement entered into by and between the parties.
2. The Defendant initially purchased the suit property on 10th April 1974 from a certain Mehta Family. Thereafter the Defendant agreed to sell the suit property to the Plaintiff. The suit property is a plot of land under final Plot No.33 of TPS - VI, Santacruz. The agreement between the parties Exhibit-C to the plaint has been executed on 13th June 1978. On the same day an indemnity has been executed by the Defendant in favour of the Plaintiff in respect of a certain litigation of one BEST Co-operative Society (BEST Society) to whom also the Defendant had agreed to sell the ::: Downloaded on - 09/06/2013 18:22:20 ::: 2 S.1084.1978(902).sxw suit plot of land. On the same day the Defendant wrote a letter to the Plaintiff in respect of another suit being Suit No.911 of 1970 which was filed by the original Vendors against one occupant in the property which the parties were to settle.
3. The parties, therefore, entered into a complete transaction with regard to these aspects on a single day - 13th June 1978. It is in view of this that the agreement would have to be interpreted so as to answer the questions framed by the Plaintiff in this Originating Summons.
4. The agreement between the parties is clear specially with regard to the payment of consideration. The payment of consideration is not conditional upon any aspect required to be performed by the Defendant as the Vendor. Consequently, the agreement shows no reciprocal promise between the parties in that regard. It would be material to set out the relevant portions of the agreement which runs thus:
"Clause 1. ...... the price of Rs.6,00,000/- to be paid as under:
(a) Rs.25,000/- already paid as token deposit along with the offer letters dated 28-11-1977 the receipt whereof the Vendor has already passed earlier;
(b) Rs.25,000/- paid as further deposit on 28-2-1978
(c) Rs.50,000/- paid on 25-4-1978
(d) Rs.25,000/- paid on 28-4-1978
(e) Rs.25,000/- paid on 16-5-1978
(f) Rs.1,60,000/- paid on execution hereof as part payment of the price (receipt whereof the vendor doth hereby admit and acknowledge)
(g) Rs.2,40,000/- in four equal installments of Rs.60,000/-
each to be paid to the Vendor or his assigns as follows:
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i) Rs.60,000/- on or before 30th June 1978
ii) Rs.60,000/- on or before 31st July 1978
iii) Rs.60,000/- on or before 31st August 1978
iv) Rs.60,000/- on or before 30th September 1978
(h) Rs.50,000/- to be paid to the vendors at the time of completion of sale as hereinafter provided.
(i) It is agreed that in case the purchasers commit any default in payment of any of the aforesaid installments on its due dates and such default continues for more than 7 days the whole of the balance of the purchase price shall become forthwith payable to the Vendor by the purchasers and purchasers shall pay interest at the rate of 15% per annum provided that the provisions for payment of interest shall not affect or prejudice the rights and remedies of the Vendor to recover the balance of the purchase price from the purchasers and to make time essence of the contract by giving 7 days further notice in writing.
5. Under the agreement the covenants to be performed by the Defendant as a vendor are separate and distinct and not shown to be the reciprocal promises of the Defendant to be performed upon which the Plaintiff would make payment of consideration as agreed between the parties in his capacity as the purchaser. These are clauses 2 to 6 which run thus:
"Clauses 2 to 6:
2. The vendor has already caused the original Vendors to send to the purchasers' Advocates titile deeds relating to the property for investigation of title of the property and the purchasers shall intimate to the vendor in writing the acceptance or rejection of title within 2 months from the date hereof and in the absence of such intimation within the time aforesaid the purchasers shall be deemed to have accepted the title on the expiration of two months from the date hereof.::: Downloaded on - 09/06/2013 18:22:20 :::
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3. The sale is subject to the vendor and the original vendors obtaining the respective certificate under Section 230-A (1) of the Income Tax Act 1961.
4. Subject to the aforesaid, the sale shall be completed within 16 months from the date of acceptance of title they the purchasers after the expiry of which period either party shall be at liberty to make time of the essence of the contract by giving one month's previous notice to the other.
5. Simultaneously with the execution hereof the vendor shall get the original vendors shall get the original vendors to execute a power of attorney in favour of the partners or partner of the purchasers authorising such attorney or attorneys to:
(a) negotiate with the occupiers of the property being the defendants in the suit No.911 of 1970 referred to in the said agreement dated 10th April 1974 for any agreement or arrangement with them;
(b) to prosecute the said High Court Suit No.911 of 1970 and/or to settle and/or withdraw the same as may beareed to with the defendants
(c) to get prepared and submit plan of the proposed building to be constructed on the said property by the purchasers to the Bombay Municipal Corporation and other authorities fro approval and sanction and for that purpose to sign all applications writings and undertakings;
(d) to apply to the Competent Authority under Section 22 of the Urban Land (Ceiling and Regulations) Act 1976 for permission for development and/or redevelopment of the said property by constructing new building thereof if necessary by demolishing the present structures standing on the said property (It is agreed that the cost expenses and/or charges with respect to aforesaid causes shall be borne entirely to purchasers).::: Downloaded on - 09/06/2013 18:22:20 :::
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6. The purchasers shall execute a Deed of Indemnity in favour of the vendor and the original vendors indemnifying them against all actions, claims, demands, proceedings and/or consequences arising out of any act or deed done or executed by the purchasers in pursuance of such power of attorney."
6. These clauses show the covenants to be performed by the Defendant as the vendor, the first of which was relating to the investigation of title and later the authority to negotiate with the occupiers, prosecute the suit against the occupiers, submit the plan to develop, obtain the ULC sanction and the last of which would be to complete the sale upon obtaining the relevant IT certificate.
7. The payment of price is not conditional upon any of the covenants required to be performed by the vendors. This is despite the knowledge of the litigation of the original vendors with the occupier as also the indemnity with regard to the contemplated litigation by the previous purchasers, BEST Society.
8. The investigation of title is rather inconsequential in lieu of the deeming provisions in clause 2 itself relating to the acceptance of the title of the Defendant as the vendor.
9. The negotiations with the occupier is inconsonance with the letter written by the Defendant on the same day to the Plaintiff about how the parties would share the expenses incurred in the litigation to pay off the occupant.
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10. The letter dated 13th June 1978, Exhibit-D to the plaint requires the Plaintiff to expend Rs.1 lakh for the settlement with the occupier and to recover any amount in excess of Rs.1 lakh paid by the Plaintiff as the purchaser to the occupant for recovering possession from the occupant by deducting the same from the balance consideration payable. The right of such deduction would accrue upon payment of that amount. The Plaintiff paid Rs.2 lakhs to the occupier on 10th October 1978 by cheque No.VB 76/CB/B 879942 dated 10th October 1978. The right to recover Rs.1 lakh, therefore, accrued to the Plaintiff on 10th October 1978 and for whatever balance payment that would remain due and payable on and after 10th October 1978, the Plaintiff would be entitled to deduct Rs.1 lakh paid in excess of the agreed amount between the parties from the balance consideration.
11. The ULC permission was required to be applied for and obtained by the Plaintiff who alone desired to develop the property. The Plaintiff accordingly applied. The ULC permission was refused on 13th July 1978. The payment of consideration has nothing to do with the refusal. The Plaintiff as the builder/developer must be taken to know the consequences of the application and the probable rejection of the permission, but executed the agreement nonetheless.
12. It is, therefore, clear from the aforesaid documents that :
(a) Rs.3,10,000/- were paid by the Plaintiff on execution ::: Downloaded on - 09/06/2013 18:22:20 ::: 7 S.1084.1978(902).sxw of the agreement and prior to that - i.e. on 13th June 1978.
(b) The indemnity was taken by the Plaintiff on the same day for the expected litigation by BEST Society. The Plaintiff would only be entitled to enforce the indemnity for recovery of all legitimate expenses and costs incurred by the Plaintiff in prosecuting or defending that litigation.
(c) The Plaintiff knew about the occupation of the occupier on the premises and had to settle with the occupier in the suit filed by the original vendor, the number of which also recited in agreement, being suit No.911 of 1970. The Plaintiff settled for larger than the amount of settlement expected. The Plaintiff had to bear the expenses of Rs.1 lakh as per the agreement and recover the remainder from the Defendant from the balance purchase price payable. That recovery would be from the date of his payment.
(d) Rs.2,90,000/- was the balance consideration payable in 5 installments. The first installment of Rs.60,000/- was payable within 17 days of the execution of the agreement.
Nothing has transpired within those 17 days to merit any modification or alterations of the terms agreed between the parties or even a novatio between the parties.
(e) On 30th June 1978 the first installment was not paid. The Plaintiff defaulted. As per the terms of the agreement in clause (1) upon the commission of that default on the due ::: Downloaded on - 09/06/2013 18:22:20 ::: 8 S.1084.1978(902).sxw date i.e. 30th June 1978 and for 7 days thereafter i.e until 7th July 1978, "the whole of the balance purchase price" became forthwith payable with interest 15% p.a thereon. Hence on 8th July 1978 Rs.2,90,000/- became payable.
(f) The Defendant/Vendor issued his notice making time the essence of the contract under clause (1) and failing which to terminate the contract.
(g) The suit filed by BEST Society being Suit No.815 of 1978 was contemplated by the parties at the time of execution of the agreement. A separate indemnity has been taken. That indemnity alone can be enforced with regard to the whatever liability that is incurred in the suit by the Plaintiff. The payment of consideration is also not conditional upon such liability. That liability can be enforced only after the suit is fully prosecuted to its conclusion and costs and expenses are incurred by the Plaintiff therein for recovery of such costs and expenses. In fact the indemnity itself shows that the Defendant as the Vendor had terminated the agreement with BEST Society after giving due notice. The Plaintiff was, therefore, put to knowledge of such notice and consequently the merits of the Defendant's case against th BEST Society and agreed to enter into the transaction with the Defendant.
13. It has to be seen whether the termination is valid. It is contended by Mr. Dinesh Shah on behalf of the Plaintiff that ::: Downloaded on - 09/06/2013 18:22:20 ::: 9 S.1084.1978(902).sxw aforesaid litigation had to be defended and settled by the Plaintiff.
The Plaintiff, therefore, was not liable to make payment of the installments as per the terms of consideration clause in the agreement. That argument is not in terms of the agreement at all. That argument is at best of a plea in justification upon a suit being filed for recovery of the balance purchase price together with interest which has not yet been filed. However, it is seen that even that plea as a defence to an action for recovery of the balance amount would not be justified because on the date of the agreement the Plaintiff accepted to make the payment of installments, whether or not the suits were to be defended or settled and whether or not the ULC permission was to be obtained. The Plaintiff as the developer and builder knew the market forces and trends and must be taken to have agreed upon the consideration price as mentioned in the consideration clause taking into account each of the aforesaid three factors.
14. Mr. Dinesh Shah contended that the Defendant as the Vendor had to complete the sale though he contended that the consideration of the balance amount mentioned in the consideration clause was not payable. Such is an argument without substance and has to be rejected.
15. Upon the terms of the contract the consideration clause being clause 1 of the agreement is separate and distinct and has to be interpreted independently of the clauses showing the covenants on the part of the Defendant being clauses 2 to 5 upon which the consideration clause is not dependent or conditional.
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16. The Plaintiff/purchaser has shown nothing that has transpired between 13th June 1978 when the agreement was executed and 30th June 1978 when the first installment became due and payable to show when and why that part of the agreement stood frustrated or justifiably need not even be performed. The rights of the Plaintiff are therefore, dependent only upon the requirement of making the payment of the first installment of the balance consideration as agreed under the agreement dated 13th June 1978 and its breach without reason or justification on 30th June 1978.
The second installment of Rs.60,000/- is payable on 31st July, 1978.
The third installment of Rs.60,000/- is payable on 31st August, 1978, The fourth installment of Rs.60,000/- to be payable on 30th September, 1978.
Thereafter Rs. 1 lakh came to be paid on 10th October, 1978.
The right to recover Rs.1 lakh paid in excess to the occupant would accrue on 10th October 1978 before which the first four installments of Rs.60,000/- each would become due and payable and would have to be paid by the Plaintiff. Consequently, after 10th October 1978 the Plaintiff would have been able to recover the excess amount of Rs.1 lakh by deduction of Rs.50,000/- which is the last installment payable at the time of the completion of the sale and by actual payment to be made by the Defendant/vendor ::: Downloaded on - 09/06/2013 18:22:20 ::: 11 S.1084.1978(902).sxw to him with regard to the remainder Rs.50,000/- of that excess payment. Hence the last payment of Rs.50,000/- could be made at the time of the completion of the sale which could be only upon and after the earlier installments were paid in time without any default as contemplated in clause 1 of the agreement.
17. In view of the above, the questions put by the Plaintiff would have to be answered.
1. Question No.1: Since clause (1) is not conditional upon or dependent upon clauses 2 and 4 the authority given to the Defendant/vendor to make time the essence of the contract and accordingly to terminate the contract is valid and binding. Hence, question No.1 is answered in the negative.
2. Question No.2 : The suit of BEST Society is stated to have been filed on 31st May 1978, but the Plaintiff was made a party Defendant in that suit later. The consequence of the suit was present to the mind of the parties at the time of the execution of the agreement on 13th June 1978. In view of the indemnity separately taken from the Defendant/vendor the contract between the parties under the agreement for sale would not become impossible of performance for the completion of the sale; it would be subject to the decision of the Court in the suit which the Plaintiff agreed to defend and for which Defendant agreed to indemnify the Plaintiff. The transaction would continue to be valid and binding despite the suit; only the indemnity could be enforced after ::: Downloaded on - 09/06/2013 18:22:20 ::: 12 S.1084.1978(902).sxw the suit has been fully defended. Consequently, the agreement had not become impossible of performance. The sale could be completed between the parties after the four installments of balance consideration were paid on due dates and without default by the Plaintiff and upon payment of the last balance consideration at the time of the sale. The contract cannot become impossible of performance pending the suit. Hence the Defendant cannot be taken to be deprived of his right to terminate the agreement as per the terms of contract. Hence, question No.2 is also answered in the negative.
3. Question No.3: The refusal of the ULC permission is a separate and independent matter for which the Plaintiff was given the power of attorney by the original vendors to proceed under the ULC Act. The payment of consideration was not conditional upon the ULC permission being obtained by the Plaintiff as the purchaser, the Defendant as the Vendor or even the original Vendors. Hence, the Defendant cannot be taken to have been unable or ceased to be entitled to enforce the payment of installments. Hence, question No.3 is also answered in the negative.
4. Question No.4: The liability of payment of the amount of compensation in excess of Rs.1 lakh to the Plaintiff by the Defendant would arise only from 10th October 1978 after the first four installments of Rs.60000/- became due and payable and were paid without any default on the due dates ::: Downloaded on - 09/06/2013 18:22:20 ::: 13 S.1084.1978(902).sxw and within 7 days therefrom as contemplated under clause (1) of the agreement between the parties. The liability could be set off by the Plaintiff only from the further installments, if any, payable and which is the last installment of Rs.50,000/- payable at the time of the completion of the sale and not from the entire balance price payable by the Plaintiff to the Defendant on specified dates without any default. Hence, the Defendant's claim in the notice of termination which has been given promptly after the first payment became due and payable and was defaulted is valid and enforceable and the notice is not invalid. Hence, the question No.4 is also answered in the negative.
5. Question No.4A: A sum of Rs.1 lakh is certainly deductable from the balance purchase price. However, it is not deductable from the entire balance purchase price which was payable on specified dates prior to the liability having been incurred by making payment of that amount i.e prior to 10th October 1978. That amount, therefore, cannot reduce the entire balance liability from Rs.2.90 lakhs to Rs.1.90 lakhs. That is deductable and adjustable only from the last payment of Rs.50,000/-; Rs.50,000/- being deductable and further Rs.50,000/- being claimable separately by the Plaintiff from the Defendant. Consequently, the balance purchase price would not be Rs.1,90,000/- on any given date. Hence, question No.4A is also answered in the negative.
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6. Question No.5: The Defendant gave his notice of termination on 30th June 1978. On that date one installment being the first installment had become due and payable. It was not paid. The first default was committed. Upon the first default itself the entire balance amount which was then Rs.2.90 lakhs became immediately payable and the Defendant became immediately entitled to claim that amount under his notice. The Defendant was, therefore, entitled to make that claim. Hence, question No.5 is also answered in the negative clarifying that the Defendant was not not entitled and, therefore, entitled to make the claim.
7. Question No.6: The Defendant made time the essence of the contract under the letter dated 13th June 1978.
Clause (1) which expressly gives the Defendant the right to make time the essence of the contract, aside from claiming to recover the balance of the purchase price as on that date.
Hence, question No.6 is answered in the affirmative.
8. Question No.7: Question No.7 follows from question No.6. The Defendant is entitled to terminate the contract as claimed in the notice. Hence, question No.7 is answered in the affirmative.
9. Question No.8: The Plaintiff is liable to pay the balance consideration as on 30th June 1978 which was Rs. 2,90,000/- with interest thereon at 15% p.a as per the ::: Downloaded on - 09/06/2013 18:22:20 ::: 15 S.1084.1978(902).sxw agreement in clause (1) of the agreement between the parties. The Plaintiff is entitled to set off /adjust Rs. 50,000/- from such amount being part of the amount which would have remained rightly unpaid on 10th October 1978 when the Plaintiff incurred the additional liability of settling with the occupant and paying off the occupant. The Plaintiff would only be entitled to make a separate claim for the balance Rs.50,000/- payable by the Defendant as per the agreement contained in the Defendant's letter dated 13th June 1978 Exhibit-D to the plaint. Question No.8 is answered accordingly.
10. Question No.9: The Plaintiff has defaulted in the payment of the first installment of balance consideration.
Not only the balance amount became immediately due of payable with interest of 15% p.a thereon, but the Plaintiff lost the right of completion of sale since the completion of sale under clause 4 of the agreement was "subject to the aforesaid" which meant subject to the payment of the balance consideration, subject to the acceptance of the title of the Defendant as the Vendor and also subject to the certificate under Section 230-A(1) of the Income Tax Act 1961 which would have to be obtained only at the time of the sale. The Plaintiff would, therefore, not be entitled to the conveyance in respect of the suit property in law upon the Plaintiff's own breach, except, of course, with the consent of the Defendant constituting a novatio. Question No.9 is answered accordingly.
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11. Question No.10: the Plaintiff has failed to perform the most important part of his contract and yet taken out the Originating Summons on the premise that he had not made any default. The Plaintiff, shall therefore, pay costs of the Originating Summons fixed at Rs.50,000/- to the Defendant.
12. The Originating Summons is disposed off accordingly.
ig (ROSHAN DALVI, J.)
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