Madras High Court
T.V.Ramanujan vs S.B.S.Raman on 30 April, 2010
Author: V.Ramasubramanian
Bench: V.Ramasubramanian
?IN THE HIGH COURT OF JUDICATURE AT MADRAS %DATED: 30/04/2010 *CORAM THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIAN +Civil Suit No.1215 of 1995 #F.J.Irani $Hajee Sir Ismail Wakf Estate !FOR PETITIONER : T.V.Ramanujan ^FOR RESPONDENT : S.B.S.Raman :ORDER
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.4.2010 CORAM THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIAN Civil Suit No.1215 of 1995
1. F.J.Irani
2. Dr.Mrs.R.S.Boyce
3. Dr.Mrs.S.Y.Edljee
4. J.F.Irani
5. Satish Gupta
6. Yasmin Gupta .. Plaintiffs (Plaintiffs 4 to 6 impleaded as per the order dated 24.11.2009 in A.No.5844 of 2009) Vs.
1. Hajee Sir Ismail Wakf Estate rep. By its Trustees A.Masood Sait (Amended as per the order dated 03.7.2008 in A.No.2452 of 2007) Hajee Noor Mohamed Abdul Khader Sait
2. H.M.Constructions
3. P.J.Irani
4. S.M.Irani
5. T.N.Langrana .. Defendants
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For D
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For Plaintiffs : Mr.T.V.Ramanujan, S.C. For Mr.P.J.Rishikesh For Defendant-1 : Mr.S.B.S.Raman For Defendant-2 : Mr.Satish Parasaran
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J U D G M E N T The suit is for enforcement of the right of pre-emption for the purchase of the suit schedule property.
2. Heard Mr.T.V.Ramanujan, learned senior counsel for the plaintiffs, Mr.S.B.S.Raman, learned counsel for the first defendant and Mr.Satish Parasaran, learned counsel for the second defendant.
3. The averments contained in the plaint, in brief, read as under:
(a) One Mr.J.H.Irani took on lease the premises bearing Door Nos.2, 3 and 4, Blackers Road, Mount Road, Madras. The lease was taken on and from 16.4.1940 from the Receivers of the Estate of Late Haji Sir Ismail Sait and a registered lease deed was entered into on 17.02.1943. The land bearing Door Nos.2 and 3 were taken on lease for the purpose of putting up a cinema theatre and consequently, the land contiguous to the theatre land was also absolutely necessary;
(b) The period of lease was prescribed under the lease deed as twenty one years commencing from 16.4.1940 and ending on 15.4.1961, with an option for renewal for a further period of ten years, ending on 15.4.1971. The lease rental was fixed at Rs.450/- per month;
(c) The lease was actually in respect of the land with authority to construct a theatre building adjacent to the existing building known as English Ware House, which had a separate door number, viz. Door No.4. Thus, the building that formed part of the leased premises was actually located at Door No.4 and the remaining part of the land was separate with Door Nos.2 and 3. The total extent of land was 16 grounds and 642 sq.ft. and the building known as English Ware House in Door No.4 was located in the land of an extent of 1 ground and 1926 sq.ft.;
(d) The lessee J.H.Irani constructed a theatre on the land leased out to him in Door Nos.2 and 3, at his own cost, in the year 1940-41 and the theatre was named as "Casino";
(e) Under Clause 3(a) of the registered lease deed dated 17.2.1943, all the theatre and the other buildings constructed by the lessees had to be maintained at the lessee's own cost in a good condition and had to be handed over to the lessor at the time of completion of the period of lease, without claiming any compensation for such buildings and theatre;
(f) The original lessee J.H.Irani died in 1949, leaving his widow T.J.Irani, three sons by name (i) P.J.Irani, who is the third defendant in the suit; (ii) M.J.Irani, who is now no more and whose legal heirs are defendants 4 and 5 herein; and (iii) F.J.Irani, who is the first plaintiff herein. The lessee J.H.Irani also left behind two daughters, who are plaintiffs 2 and 3 herein. T.J.Irani, the wife of the original lessee J.H.Irani, died in 1962;
(g) Late M.J.Irani, son of the original lessee J.H.Irani, left behind two other heirs, apart from defendants 4 and 5, but, they are not impleaded as parties, since defendants 4 and 5 have been appointed as Executors of his Estate and in any event, neither defendants 4 and 5, nor other heirs of M.J.Irani claim any right or interest in the suit property;
(h) The first plaintiff earlier filed a suit in C.S.No.886 of 1992 against the first defendant, for a declaration that the estate of late J.H.Irani (original lessee) was the owner of the theatre building and for a declaration that the clause in the lease deed requiring the lessees to hand over the building at the time of completion of the period of lease is null and void and for a consequential injunction to restrain the first defendant herein from claiming any rental as though the first defendant is the owner of the superstructure;
(i) After the filing of C.S.No.886 of 1992, there was a family arrangement among the legal heirs of the original lessee. By the said arrangement, the plaintiffs alone are to take over the business of the theatre. In order to confirm such a family arrangement, defendants 2 to 5 were impleaded as formal defendants to the suit;
(j) The entire structures, including the theatre at Door Nos.2 and 3, Blackers Road, were put up by Late J.H.Irani and the same has been admitted by the first defendant. The entire land is absolutely necessary for utilising the whole of the property as a theatre;
(k) After the expiry of the initial period of lease, the legal heirs of the original lessee J.H.Irani exercised their option for renewal of the lease for a further period of ten years ending on 15.4.1971. When the extended period of lease was nearing, the first defendant started demanding delivery of possession of the premises. The first defendant also promised to enter into a fresh lease. The demand was made for the purpose of enforcing the condition in the original lease deed that at the time of expiry of the lease, the superstructures also had to be handed over to the first defendant;
(l) When negotiations were taking place, Act IV of 1972 was passed amending the City Tenants Protection Act, making such conditions in the lease deed requiring the surrender of the buildings put up by the tenants to the landlord as illegal. Therefore, the plaintiffs did not concede to the demand of the first defendant to execute a fresh lease deed. This compelled the first defendant to file C.S.No.69 of 1972, praying for appropriate reliefs;
(m) The said suit ended in a settlement being thrust by the first defendant upon the legal heirs of the original lessee. But the settlement was accorded the sanction of this Court, as a consequence of which a registered lease deed dated 09.8.1974 was entered into by the first defendant with the legal heirs of J.H.Irani. By the said lease deed, the plaintiffs were granted the lease of the theatre property upto 31.12.1986, on a monthly rent of Rs.3,000/-, with an option to the lessee to renew the lease for another period of ten years on a revised rent of Rs.3,500/- per month, upto 31.12.1996. The lease deed also contained a stipulation that the legal heirs of the original lessee should surrender possession of the English Ware House building situate at No.4, Blackers Road, retaining only the remaining land and building of the Casino Theatre property at Door Nos.2 and 3. The legal representatives of the original lessee were also made to acknowledge that the first defendant became the owner of the theatre building;
(n) As a matter of fact, the entire building of the Casino Theatre property was put up by J.H.Irani on the land taken on lease. Therefore, he was entitled to the benefit of Section 9 of the City Tenants Protection Act, 1922. The Act was amended by Act IV of 1972, by which Section 12 was amended to declare that any contract made by a tenant shall not take away or limit his rights under the Act;
(o) By the lease deed dated 09.8.1974, the legal heirs of the lessee were forced to recognise that the entire building put up by J.H.Irani became the property of the first defendant, though the building was never conveyed and the Corporation of Madras never considered the first defendant as the owner. However, the lease deed proceeded on the basis that the entire premises including the theatre building in the land of an extent of 14 grounds and 1116 sq.ft. had been leased out for a period of 15 years commencing from 01.01.1972 and ending on 31.12.1986, with an option for renewal for a further period of ten years;
(p) The aforesaid clauses in the lease deed dated 09.8.1974 were thrust upon the legal heirs of J.H.Irani and they were forced to accept the same under threat of eviction. The possession of the premises at Door Nos.2 and 3 was never surrendered to and taken back from the first defendant, notwithstanding such a recital in the lease deed;
(q) Taking advantage of the aforesaid clauses in the lease deed, the first defendant filed RCOP No.2415 of 1985 on the file of the IX Small Causes Court, Chennai, praying for fixation of fair rent. When the said petition was pending, M.J.Irani died and the first defendant did not take steps, leading to the petition being dismissed;
(r) In the light of the petition for fixation of fair rent, the plaintiffs filed a suit in C.S.No.886 of 1992 seeking a declaration that the building constructed on the property were that of the plaintiffs and defendants 2 to 5 and for a declaration that the clauses in the lease deed dated 09.8.1974 were illegal in the light of the amended Section 12 of the City Tenants Protection Act and for consequential injunction;
(s) Even while holding out the threat of eviction, the first defendant was also assuring the legal heirs of J.H.Irani that they could continue to run the theatre as long as they wanted and that they can also purchase the land whenever the first defendant decided to sell the same;
(t) The document dated 09.8.1974 also contained provisions for payment of fixed amounts of money by the Estate of J.H.Irani every year, in lieu of taxes and amenities. It was further provided that in the event of the first defendant deciding to sell the property, the first option of purchase will be given to the estate of J.H.Irani;
(u) By a letter dated 30.4.1984, the first defendant offered to sell the property and desired to have the quotation of the plaintiffs. One of the heirs of late M.J.Irani (son of J.H.Irani) requested the first defendant to quote the price and the first defendant stated by a reply dated 23.5.1984 that they were unable to fix any price. In response, the third defendant sent a letter dated 07.6.1984 stating that the first defendant will have to quote the price and that the lessees were entitled to accept or reject it;
(v) There was exchange of correspondence on 09.8.1984, 11.8.1984, 10.9.1984, 03.6.1985, 11.6.1985, 21.6.1985 and 11.7.1985. In all these letters, either the legal heirs wanted a price to be quoted by the first defendant or the first defendant wanted the legal heirs to quote the price;
(w) By a letter dated 29.4.1995, the first defendant stated that they intended to call for tenders. Therefore, the plaintiffs submitted their tender. It was stated that the tenders would be opened on 15.5.1995 in a meeting. The first plaintiff was present and he stated in the presence of all the tenderers that the plaintiffs had pre-emptive rights to purchase the property in view of the clauses contained in the lease deed. In the tender submitted by the second defendant, they had made an offer of Rs.35.00 lacs per ground;
(x) Even at that stage, the plaintiffs pointed out that they should be given an opportunity to purchase the property at the highest price. The Trustees replied that they would consider the offers and revert back. But, they did not do so, forcing the plaintiffs to send a letter dated 13.6.1995 pointing out that the plaintiffs should be given the first option and that the property could be offered to others only when the plaintiffs express inability. They also made an offer of Rs.37.50 lacs per ground, with an assurance that they are also willing to negotiate the price and the terms to the convenience of the defendants;
(y) In reply to the letter dated 13.6.1995, the first defendant sent a letter dated 27.6.1995 stating that the offer of Rs.35.00 lacs per ground submitted by the second defendant had been accepted and also confirmed in the presence of the plaintiffs and therefore, the revised offer could not be entertained. The plaintiffs sent a rejoinder dated 06.7.1995 to the said reply, recording the events that happened at the meeting and also pointing out that they had offered Rs.2.50 lacs per ground over and above the highest offer. But, the first defendant sent a letter dated 12.7.1995 reiterating the claim made in the rejoinder;
(z) The plaintiffs sent a letter dated 18.7.1995 pointing out that there was no confirmation of sale at the meeting and that they still had a pre-emptive right;
(aa) The first defendant should have given option to the plaintiffs to purchase the property at the rate of Rs.35.00 lacs per ground. In any event, the plaintiffs had offered Rs.37.50 lacs per ground, which was higher than the offer made by the second defendant and the non acceptance of the offer shows that there was some shady transaction between the first and second defendants;
(ab) Under the lease deed dated 09.8.1974, the plaintiffs have the first right to purchase the property and hence, the question of handing over the same to others would arise only if the plaintiffs refuse to purchase;
(ac) In view of the pre-emptive right that the plaintiffs had, the first defendant ought to have called upon the plaintiffs to find out whether they were interested in purchasing the property at Rs.35.00 lacs per ground. When the plaintiffs offered Rs.37.50 lacs per ground, the same should have been accepted;
(ad) The property in question comprises of 14 grounds and 1116 sq.ft. The purchase price would therefore be Rs.5,42,43,750/-. Therefore, in view of the provisions of the Act, the first defendant ought to have intimated the proposed sale to the appropriate authority and should have also obtained necessary certificate under Section 230A of the Income Tax Act;
(ae) The second defendant cannot claim to be a bona fide purchaser for value, since they had knowledge about the pre-emptive right of the plaintiffs. Therefore, even if a sale deed had been executed in favour of the second defendant, they will not be entitled to claim any right, but they will have to convey the property to the plaintiffs, upon the plaintiffs paying the money already paid by the second defendant. The plaintiffs are ready and willing to pay the amount of Rs.5,42,43,750/- to the second defendant for the conveyance of the property.
4. With the aforesaid averments, the plaintiffs have come up with the suit seeking the following reliefs:
(a) directing the defendants 1 and 2 by a mandatory injunction to submit Form No.37-1 for sale of the property more fully described in the schedule hereunder to the Plaintiff at the sum of Rs.5,42,43,750/- in view of the pre-emptive right of the plaintiffs; and
(b) directing the defendants to execute the sale deed in favour of the plaintiffs in relation to the property more particularly described in the schedule hereunder on the plaintiffs paying the sum of Rs.5,42,43,750/- and register the same after getting the necessary certificates under Section 230-A of the Income Tax Act and in the event of the defendants not executing and register the same, direct the Registrar of this Hon'ble Court to execute and register the sale deed in favour of the plaintiffs on the depositing the sum of Rs.5,42,43,750/-.
5. It is relevant to note here that the property described in the suit schedule, in respect of which reliefs are sought by the plaintiffs, is confined to the land housing Casino Theatre and bearing Door Nos.2 and 3, Blackers Road, Chennai 2, with the land measuring an extent of 14 grounds 1116 sq.ft., after deducting the land occupied by English Warehouse and measuring 1 ground and 1916 sq.ft.
6. The first defendant Trust, which is the owner of the suit schedule property, has filed a written statement. In brief, the averments contained in the written statement of the first defendant proceed as follows:
(a) The tenancy of the plaintiffs in respect of the land and premises at Door Nos.2 and 3, Blackers Road is admitted. The monthly rent is admitted to be Rs.3,500/-. The tenancy, according to the registered lease deed, is for a period of 15 years commencing from 01.01.1972 and ending on 31.12.1986, with an option to the lessees to have the lease renewed for a further period of ten years upto 31.12.1996;
(b) The schedule to the lease deed describes the property as "all the piece and parcel of the land together with the cinema theatre thereon known as Casino Theatre ... ";
(c) The claim made by the plaintiffs that they were compelled to enter into a registered lease deed dated 09.8.1874 is unacceptable, since the plaintiffs are businessmen and they cannot plead ignorance. Under the Evidence Act, the plaintiffs cannot lead oral evidence to destroy the contents of the documents;
(d) The plaintiffs did not question the circumstances or the contents of the lease deed dated 09.8.1974 immediately thereafter. The plaintiffs were not minors and it is natural for any person who is compelled to execute any document, to rush to Court immediately thereafter;
(e) The first defendant Trust filed RCOP No.2415 of 1985, as they are the owners of both the land and superstructure. Though the RCOP was dismissed, an appeal was filed and it was pending;
(f) The suit C.S.No.886 of 1992 filed by the plaintiffs was dismissed on 07.4.1995 and the plaintiffs did not take any further steps;
(g) The right of pre-emption prescribed in the lease deed dated 09.8.1974 expired by efflux of time and the right was not given for eternity. The option is not a permanent option;
(h) The plaintiffs and others were invited by a communication dated 29.4.1995 to submit their offers in a sealed cover indicating the price, with a deposit of Rs.25.00 lacs by way of cheque. This was done since the first defendant wanted to augment its resources for the beneficiaries. The property was of the extent of more than 14 grounds and was fetching only a sum of Rs.3,000/- per month as rent. It was not commensurate with the value in the locality. Therefore, advertisements were issued in Deccan Herald, The Hindu, Times of India and Economic Times. Through these publications and through the notice dated 29.4.1995, in terms of the circular dated 29.4.1995, offers were invited in sealed covers. The tenders were opened on 15.5.1995 between 11.00 am and 11.45 am. The plaintiffs also made their offer along with a cheque for Rs.25.00 lacs bearing No.387963 dated 15.5.1995 drawn on Catholic Syrian Bank Limited. The offer made by the plaintiffs was for Rs.4,04,90,000/-;
(i) When the sealed covers were opened, it was found that the offer made by the plaintiffs worked out only to Rs.28,00,138/- per ground, while the offer made by the second defendant was Rs.35.00 lacs per ground. Totally seven persons had made their offers. Therefore, the highest offer made by the second defendant was accepted and confirmed in the presence of all the tenderers, the trustees of the first defendant Trust as well as the beneficiaries of the Trust. Thus, the sale transaction got concluded in favour of the second defendant;
(j) The offer letter made by the plaintiffs to pay Rs.37,50,000/- per ground could not be accepted since such an offer should have been made when the tenders were opened on 15.5.1995. After having participated in the tender process and after finding that the price offered by them was lower than the highest, the plaintiffs ought to have enhanced the offer at that time itself. Alternatively, the plaintiffs ought to have at least requested an auction between them and the second defendant;
(k) The averments of the plaintiffs that there was some under hand dealing is derogatory and the first defendant reserves its right to sue the plaintiffs;
(l) The averments of the plaintiffs that the value of the property was Rs.5,42,43,750/- and that the plaintiffs are entitled to purchase the property at that rate, cannot be accepted;
(m) The suit is a vexatious one intended to enable the plaintiffs to cling on to the property endlessly and to put the beneficiaries to a loss.
On the above averments, the first defendant prayed for the dismissal of the suit.
7. The second defendant filed an independent written statement, contending as follows:
(a) The first defendant Trust issued advertisements in the Deccan Herald dated 15.6.1992, The Times of India dated 18.6.1992 at New Delhi and Bombay and the Economic Times at Calcutta dated 18.6.1992. The second defendant also came to know that the first defendant issued a circular dated 29.4.1995, pursuant to a meeting of the Board of Trustees, calling upon persons interested to submit their offers along with a Banker's Cheque for Rs.25.00 lacs in a sealed cover on 15.5.1995 between 11.00 am and 11.45 am;
(b) On 15.5.1995, the second defendant went to the venue of auction and participated in the tender and offered to purchase the suit property for a sale consideration of Rs.35.00 lacs per ground. The second defendant also submitted a cheque for Rs.25.00 lacs towards Earnest Money Deposit. Apart from the second defendant, there were six other persons, including the first plaintiff;
(c) When all the seven offers were opened by the trustees, it was found that the offer of the second defendant to pay Rs.35.00 lacs per ground was the highest. It was also found that the offer of the plaintiffs was Rs.28,13,800/-. This amount was nearly Rs.7.00 lacs per ground lesser than the price quoted by the second defendant;
(d) Since the offer made by the second defendant was the highest, it was accepted by the first defendant on the same day and the first defendant confirmed the sale, in the presence of all the tenderers, including the first plaintiff. Acknowledging the fact that his bid was not the highest and also acknowledging the confirmation of the sale in favour of the second defendant, the first plaintiff took back the cheque for Rs.25.00 lacs brought by him as Earnest Money. Thus, the plaintiffs participated in the tender without any demur or protest and never disclosed their right of pre-emption to the second defendant or to other tenderers. The first plaintiff chose to remain silent without exercising his right of first option or pre-emption and was only a mute spectator when the sale was confirmed by the first defendant in favour of the second defendant;
(e) Subsequently, an agreement of sale dated 13.6.1995 was entered into by the first defendant with the second defendant and the second defendant paid an amount of Rs.51.00 lacs, in addition to the Earnest Money of Rs.25.00 lacs earlier paid, thus making the total amount paid as Rs.76.00 lacs;
(f) The plaintiffs were guilty of suppressio vari and suggestio falsi. The suit is liable to be dismissed also for the reason that it was filed even before the alienation of the suit property by the first defendant and was hence, pre-mature. Since the lease deed dated 09.8.1974 and the agreement conferring the alleged right of pre-emption are contemporaneous, the right has become frustrated in view of the expiry of the lease on 31.12.1986. There was no renewal of the lease after 31.12.1986. Even if the lease is taken to have been renewed upto 31.12.1996, it expired on 31.12.1996 making the plaintiffs only trespassers after 31.12.1996. Since the lease deed and the agreement conferring the right of pre-emption are contemporaneous, the agreement cannot survive independent of the lease deed;
(g) The plaintiffs are guilty of acquiescence, since they have participated in the tender and after finding that their offer was very much low, they withdrew the Earnest Money Deposit. Therefore, they are also estopped from lodging a protest at a later point of time;
(h) The right of pre-emption is a very weak right, capable of being defeated by all legitimate means. The contract does not dis-entitle the plaintiffs from giving up their right of pre-emption. If a person chooses not to exercise his right, as seen or inferred from his conduct, his right would stand extinguished. The participation of the plaintiffs in the tender and the withdrawal of the cheque for the Earnest Money Deposit amounted to a waiver;
(i) The second defendant came to know subsequently that the first defendant offered the property for sale to the plaintiffs on several occasions ever since 1984, but the plaintiffs did not respond positively. The first defendant Trust, therefore, repeatedly advertised the sale in several papers. Even in response to those advertisements, the plaintiffs did not make any offer. Thus, they have dis-entitled themselves from seeking the relief of enforcement of the right of pre-emption;
(j) Since the highest offer made by the second defendant was confirmed and an agreement was entered into and the second defendant also paid further amounts, the so-called right of pre-emption of the plaintiffs cannot defeat the legitimate rights accrued in favour of the second defendant in a concluded contract;
(k) The plaintiffs earlier filed a suit in C.S.No.886 of 1992 praying for a declaration that they are the owners of the superstructure. Such a prayer was made notwithstanding the clauses to the contrary contained in the lease deed dated 09.8.1974. They also sought a declaration that the terms of the compromise memo and the covenants in the lease deed dated 09.8.1974, recognising the first defendant as the owner of the superstructure are illegal and void, in view of the mandatory provisions of the Tamil Nadu City Tenants Protection Act. The said suit was dismissed for default on 07.4.1995. In such circumstances, the plaintiffs cannot file the present suit claiming the very same reliefs;
(l) Even on 15.5.1995, when the tenders were opened and the offer of the second defendant was confirmed, Mr.F.J.Irani, the first plaintiff chose to remain silent without exercising his alleged right of first option. Therefore, confirmation of sale was made in favour of the second defendant. This will be evident from the records of the first defendant;
(m) Pursuant to the confirmation of sale, a sale agreement was executed and duly submitted to the Income Tax Department for necessary clearance under Section 230-A of the Income Tax Act. The first plaintiff did not state either orally or in writing to the other tenderers that they had a pre-emptive right. Thus, the conduct of the plaintiffs would show that the suit is only an after thought to delay and defeat the rights of the second defendant;
(n) It is only after the sale agreement that the plaintiffs changed their minds and sent a letter dated 06.7.1995 to the first defendant raising all sorts of allegations. As per the letter, the plaintiffs claimed to have made an offer of Rs.37.50 lacs per ground. But since the plaintiffs are in occupation of the suit property, the first defendant Trust had earlier sent a registered letter dated 30.4.1984 calling upon the plaintiffs to exercise their option. Right from 1985, the first defendant Trust had been requesting the plaintiffs to quote their offer. But the plaintiffs did not respond. Thus, by their conduct, the plaintiffs had relinquished their right of pre-emption. It is only after realising that the plaintiffs were not interested in purchase of the property, that the first defendant invited tenders in sealed covers;
(o) The second defendant has no knowledge of the letter dated 27.6.1995. But, by that time, the sale transaction between the first and the second defendant had advanced to a stage where the contract had already been concluded between them. The contract was concluded as early as on 15.5.1995 and confirmed by the Trust by a letter dated 27.5.1995 and the agreement of sale dated 13.6.1995. Therefore, both the parties cannot go back on the concluded contract;
(p) Even in the circular dated 29.4.1995 issued by the Trust, it was made clear that the highest offer would be accepted at the discretion of the Trustees. Therefore, the plaintiffs ought to have protested even at that time that the very tender process was violative of their right of pre-emption. Having kept quite at that stage and having participated in the tender, the plaintiffs cannot turn around and question the same;
(q) The very right of pre-emption had lapsed on 31.12.1986 and in any event by 31.12.1996. The first defendant Trust offered the property for sale on several occasions, but the plaintiffs failed to make any offer. Therefore, the Trust had to advertise calling for prospective buyers;
(r) Right from 1985, the first defendant Trust was requesting the plaintiffs to make an offer for the purchase of the property. Since there was no response from the plaintiffs, the Trust advertised the sale of the property in 1992 and invited offers. It was only three years thereafter that the Trust issued a circular in 1995 inviting offers. The plaintiffs made an offer, which was found to be far below the highest offer. Thereafter, the first plaintiff withdrew the Earnest Money Deposit made by the plaintiffs;
(s) The essence of the sealed tender will be lost if the parties are allowed to improve their offers after the conclusion of the tender process. The plaintiffs, who unsuccessfully participated in the tender, cannot be allowed to re-open the process and strike a deal;
(t) The second defendant did not have any knowledge of the right of pre-emption that the plaintiffs claim to have. The first defendant Trust had given sufficient opportunities to the plaintiffs, but they failed to avail the same. Therefore, it would be impermissible and inequitable to permit the plaintiffs to re-negotiate their offer, after the tender process was closed;
(u) The second defendant made payment of Rs.25.00 lacs towards Earnest Money and a further sum of Rs.51.00 lacs on 30.6.1995. These amounts, totalling to Rs.76.00 lacs, are lying with the Trust for the past seven years, without fetching any interest;
(v) Even on the ground of equity, the plaintiffs are not entitled to any relief, since they failed to deposit the amount of Rs.5,42,43,760/-, as per the orders passed by a Division Bench, while disposing OSA Nos.167 of 1996 and 135 of 1998, arising out of the order dated 10.4.1996 passed in O.A.Nos.872 of 1995 and 6143 of 1995 in C.S.No.1215 of 1995;
(w) Even if the plaintiffs are held entitled to enforce their right of pre-emption, it would result in the first defendant Trust becoming liable to refund the amount of Rs.76.00 lacs already paid by the second defendant, together with interest either at 12% or 6% per annum. This amount would necessarily have to be paid out of the sale consideration now offered by the plaintiffs. The increased amount that the plaintiffs have now offered will be less than the amount to be refunded to the second defendant with interest, which would result in the Trust being put to a loss; and
(x) The failure of the plaintiffs to deposit the amount as per the order of the Division Bench in the above OSA would show lack of bona fides. This would dis-entitle them from claiming any relief, even on the grounds of equity.
On the above contentions and averments, the second defendant also prayed for dismissal of the suit.
8. On the above pleadings, the following issues were originally framed for consideration on 30.10.2002:
(i) Are the plaintiffs entitled to exercise the right of pre-emption even after the expiration of the registered lease deed, particularly when they have participated in the tender without any reservation?
(ii) Are the plaintiffs entitled to specific performance as prayed for by them?
(iii)Have the plaintiffs lost the right of the suit prayer particularly when they have not obeyed the orders of the Division Bench made in O.S.A.Nos.167 of 1996 and 135 of 1998, requiring them to deposit the entire amount in six months?
(iv) Is the second defendant entitled to purchase the property as the highest bidder? and
(v) To what relief, the parties are entitled?
9. Subsequently, two additional issues were framed on 10.7.2008, which read as under:
(i) Whether the second defendant is not a bona fide purchaser of the suit property for valuable consideration without any notice of the plaintiffs' alleged right of pre-emption? and
(ii) Whether the plaintiffs' alleged right of pre-emption has expired by efflux of time even before the execution of sale deed by the first defendant in favour of the second defendant?
10. Issue Nos.(i) & (iii) and Additional Issue No.(ii):
Since Issue Nos. (i) and (iii) and Additional Issue No. (ii) relate to the claim of the plaintiffs for enforcement of their right of pre-emption, I shall take up these issues together. But for the purpose of easy appreciation, let me divide this section of the judgment into 3 segments, viz., (i) the evidence adduced on both sides; (ii) the law of pre-emption; and (iii) the analysis of the evidence with reference to the legal principles.
EVIDENCE ADDUCED BY PARTIES 10.1. One Mrs.Yasmin Gupta, daughter of the first plaintiff, who also holds a Power of Attorney from the first plaintiff, was examined as PW1. She filed a proof affidavit and marked 33 documents as exhibits P1 to P33. In the course of cross examination, she also produced a xerox copy of the family arrangement among the members of the family of the plaintiffs, in response to a notice served on the plaintiffs. This document is marked as Ex.P34. Thus, there was one witness and 34 documents produced on the side of the plaintiffs. The first defendant marked 5 documents as Exx. D1 to D5 in the course of cross examination of PW1.
10.2. One Shabbir Malik, one of the Trustees of the first defendant Trust was examined as DW1. He also filed a proof affidavit and marked 4 documents as Exx.D6 to D9, apart from Exx.D1 to D5 marked through PW1, during cross examination. The second defendant did not adduce any evidence.
10.3. Before plunging into an analysis of the pleadings and the evidence on record, it is necessary to take a note of certain events that took place during the pendency of the suit. The suit was actually presented on 16.8.1995 and was admitted on 18.8.1995. Along with the suit, the plaintiffs filed an application in O.A.No.872 of 1995 praying for an interim order of injunction restraining the defendants from selling or conveying the suit schedule property either in the name of the second defendant or in the name of any third party, pending disposal of the suit. In the said application, an interim injunction was originally granted. Therefore, the second defendant filed an application in A.No.6143 of 1995 to vacate the injunction. By a common order dated 10.4.1996, R.Jayasimha Babu,J, dismissed the vacate injunction application and granted an injunction restraining the defendants from conveying the suit schedule property to any person by way of sale during the pendency of the suit.
10.4. As against the said order, defendants 1 and 2 filed independent appeals in O.S.A.Nos.167 of 1996 and 135 of 1998. Both the appeals were heard by a Division Bench. In the course of hearing, the Division Bench thought fit to ask the plaintiffs and the second defendant to improve their offers and to give their quotations in open Court, so that the Trust would ultimately stand to benefit. But the second defendant declined to make any offer on the ground that they are the successful bidders and that the spirit of an auction sale would be lost. Therefore, the Division bench confirmed the order of the learned single Judge insofar as the injunction restraining the first defendant was concerned. But, while doing so, the Division Bench imposed a condition upon the plaintiffs that they should deposit the total amount worked out for the entire extent of the property at the rate of Rs.37.50 lacs per ground. The operative portion of the order needs reproduction and hence, paragraphs 17 and 18 of the said order is extracted as under:
"17. Irrespective of the rights of the individual, when the interest of the Trust is involved, it is the duty of the court to see that the Trust is benefited to the utmost. Viewing the matter in this angle and as already stated, we are not proposed to decide the rights of the parties at this stage. It will be appropriate for us to confirm the order of injunction passed by the learned Judge so far as the first defendant is concerned on condition that the plaintiffs shall deposit the total cost of the land for the entire extent on the basis of the offer made by them i.e., Rs.37,50,000/- per ground. We are imposing the condition of deposit of the amount offered by the plaintiffs taking into consideration of the fact that already a decade had lapsed after calling for the tender to sell the property. Further almost 7 years had lapsed subsequent to the filing of the suit where the plaintiffs made their offer of Rs.37,50,000/- per ground. By virtue of the pendency of the proceedings the first defendant is deprived of the benefit. If the amount is deposited then ultimately whoever succeed will be entitled for the benefit of the accrued interest. The plaintiffs are directed to deposit the entire amount offered by them within six months from today in six equal instalments. We are granting time, taking into consideration of the total amount to be deposited by the plaintiffs. On such payment, the first defendant is directed to deposit the same in a Nationalised Bank in fixed deposit. In case if the plaintiffs failed to comply with the above order, the order of injunction granted by the learned Judge will stand set aside and consequently the appeal also will stand allowed.
18. We are constrained to pass this order, taking into consideration of the fact that the plaintiffs are in possession of the land and enjoying the same; whereas the first defendant is deprived of the full benefit of the expected sale consideration. The entitlement of the amount can be decided at the time of disposal of the suit, depending upon the result of the suit. ..."
It may be relevant to note here that the Division Bench proceeded on the basis as though the first defendant is a public Trust, though in fact it is only a private Trust.
10.5. The plaintiffs did not comply with the conditional order passed by the Division Bench on 28.3.2002. However, they filed two applications in CMP Nos.9605 and 9606 of 2006 seeking (i) to clarify the earlier order as to the person in whose name the amount was to be deposited; and (ii) to grant extension of time for complying with the order dated 28.3.2002. In these two petitions, the plaintiffs claimed that they actually filed similar petitions in 2002 itself, but that they were dismissed for default and that therefore they were constrained to file fresh petitions in 2006 after change of counsel. Both the petitions were dismissed by the Division Bench by an order dated 17.10.2006 holding (i) that the earlier order needed no clarification; and (ii) that since the earlier order worked itself out, there was no question of extension of time.
10.6. Thus, the condition imposed by the Division Bench for sustaining the interim order of injunction granted by the learned single Judge against the first defendant, was not complied with, resulting in the automatic vacation of the interim injunction. Consequently, there were no fetters on the first defendant to proceed with the execution of the sale. Hence, the first defendant executed a deed of sale dated 09.11.2006 in favour of the second defendant, registered as document No.3 of 2007 in the office of the Sub Registrar, Triplicane, conveying the suit schedule property to the second defendant. Keeping these subsequent developments in mind, let me now go back to an analysis of the pleadings and evidence on record.
10.7. As stated earlier, one Ms.Yasmin Gupta, daughter of the first plaintiff was examined as PW1. It was stated by her that her father was aged 82 years and suffered various ailments, making it impossible for him to give evidence. She also had a Power of Attorney executed by her father, which was filed as Ex.P1. Ex.P1 is a registered deed of Power of Attorney which authorises PW1 to depose before any Court or Tribunal. She also filed, as Ex.P2, the medical certificate issued by an ENT Surgeon to the effect that the first plaintiff was aged 82 years and was suffering from bilateral vocal cord dysfunction and that the first plaintiff was completely bed ridden and was oxygen dependant.
10.8. Apart from reiterating the contents of the plaint, PW1 marked 34 documents. Ex.P3 is the deed of lease dated 09.8.1974 executed by the first defendant in favour of P.J.Irani, the third defendant herein, representing himself and his brothers and sisters. It is a registered lease deed. The recitals contained in Ex.P3 revealed the following details:-
(i) that the father of the first plaintiff J.H.Irani took on lease, the property known as "English Ware House" bearing Nos.2, 3 and 4, Blackers Road, Mount Road, Madras, which consisted of the main English Ware House building and sheds;
(ii) that the lease taken by J.H.Irani was under the lease deed dated 17.02.1943, for a period of 21 years commencing from 16.4.1940 and ending on 15.4.1961, with an option to the lessee for renewal for a further term of ten years;
(iii) that as per paragraph 3(e) of the original lease deed, all the theatre and other buildings erected or constructed by the lessee should be maintained at the lessee's cost and should be handed over to the lessor on the conclusion of the lease, without the lessee being entitled to any compensation for such construction;
(iv) that as per paragraph 3(m) of the original lease deed, the lessee was obliged to deliver the building existing or erected later, to the lessor, upon the expiry of the period of lease or the sooner determination thereof;
(v) that after the death of the original lessee J.H.Irani in 1948, his wife, three sons and two daughters continued the lease and that the wife of the original lessee also died in 1960;
(vi) that in 1961, the lease was renewed for a period of ten years upto 15.4.1971;
(vii) that the first defendant Trust issued a notice dated 09.11.1970 calling upon the lessees to deliver possession of the properties, but the lessees sent a reply dated 09.02.1971 claiming that they are entitled in law to continue to be in occupation;
(viii) that this led to the lessor filing an originating summons in C.S.No.69 of 1972 on the file of this Court praying for appropriate reliefs, but the suit eventually got settled;
(ix) that as per the settlement so reached, the lessees were to surrender possession of the English Ware House building and the land of an extent of one ground and 1926 sq.ft. over which that building was standing;
(x) that the lessees also recognised, under the compromise, the right of the lessor to take possession of all the constructions, including the theatre building upon the termination of the lease; and
(xi) that on this understanding, the lessors agreed to extend the lease for a term of 15 years from 01.01.1972 to 31.12.1986, with an option for renewal for a further period of ten years, only insofar as the other superstructures and the remaining part of the land are concerned.
10.9. It is further stated in Ex.P3 that the terms of the compromise narrated above were reiterated to the Court and this Court passed a judgment on 05.11.1973 in C.S.No.69 of 1972, approving the terms of the compromise and sanctioning the grant of lease. Thus the lease deed dated 09.8.1974, filed as Ex.P3, itself was only a product of the compromise so reached and the decree passed in C.S.No.69 of 1972 on the basis of the compromise. The schedule to Ex.P3 described the property demised therein as "all that piece and parcel of land together with cinema theatre known as Casino Theatre bearing Door Nos.2 and 3, Blackers Road, Mount Road, Madras 2". The schedule also gave the measurement of the land covered by the lease deed as 14 grounds and 1116 sq.ft. since an extent of 1 ground and 1926 sq.ft. was surrendered along with the English Ware House in terms of the compromise. Clause 1 of Ex.P3, lease deed, also described the property leased thereunder as "Casino Theatre and the buildings and premises of an extent of 14 grounds and 1116 sq.ft.". The period of lease was indicated as 15 years commencing from 01.01.1972 and concluding on 31.12.1986. Clause 4(e) of Ex.P3 conferred an option upon the lessees for extending the lease for a further period of ten years from 01.01.1987 upto 31.12.1996 upon payment of an enhanced rent. Clause 3(e) of Ex.P3 prescribed that at the conclusion of the lease, the lessees should peacefully quit and deliver vacant possession of "Casino Theatre building and premises of the lessor".
10.10. Simultaneously with the execution of Ex.P3 lease deed, an agreement dated 09.8.1974 was also entered into between the first defendant and Mr.P.J.Irani, representing himself and his brothers and sisters. This agreement is filed as Ex.P4. A perusal of Ex.P4 shows that the purpose for which it was entered into was to make the lessees pay a lumpsum amount every year to the first defendant, in lieu of taxes and amenities. As per Ex.P4, the lessees were made obliged to pay a sum of Rs.20,000/- per annum for the years 1974-76, a sum of Rs.20,500/- per annum for the years 1977-81, a sum of Rs.21,000/- per annum for the years 1982-86, a sum of Rs.21,500/- per annum for the years 1987-91 and a sum of Rs.22,000/- per annum for the years 1992-96. After detailing the payments to be made as above mentioned in the entire body of Ex.P4 agreement, a stipulation was made in the last paragraph of Ex.P4, which has actually led to the present litigation. It is this last paragraph of Ex.P4 that confers a right of pre-emption upon the lessees and it reads as follows:
"In the event of the party of the second part decided to sell their interests in the property, they will give the first option to the party of the first part."
The present suit is for the enforcement of the right conferred under Ex.P4.
10.11. It is pertinent to note here that both Exx.P3 and P4 were part of the same deal, struck between the parties by way of a compromise in the suit C.S.No.69 of 1972. But the plaintiffs have chosen to assail a portion of Ex.P3 lease deed alone, which deprived them of the ownership of the buildings, as having been brought forth by coercion and undue influence and also as opposed to statutory prescription. The plaintiffs, by the same breadth, seek to enforce Ex.P4, which is a contemporaneous document and which is actually the pivotal pin around which their present litigation spins. In essence, the plaintiffs seek to challenge the detriment, but enforce the benefit, both of which arise out of the same package or contract.
10.12. A series of correspondence exchanged between the plaintiffs and the defendants are filed as Exx.P5 to P21. Out of them, Exx.P5 to P15 relate to the period 1984-85. The rest of them relate to the tender floated by the first defendant for the sale of the property in the year 1995.
10.13. By a letter dated 30.4.1984 filed as Ex.P5, the first defendant informed the third defendant, who was representing all the other brothers and sisters, of their intention to sell the property and extended an invitation to the third defendant to negotiate with them if they were interested in buying the property. Ex.P6 was the reply dated 15.5.1984 sent by Mr.M.J.Irani (one of the brothers), informing the first defendant of their intention to exercise the option. But, no price was quoted by M.J.Irani in Ex.P6. On the contrary, he requested the first defendant to communicate their offer.
10.14. In response to Ex.P6, the first defendant sent a letter dated 23.5.1984, a copy of which is filed as Ex.P7, informing Mr.P.J.Irani that the trustees were unable to fix the sale price and that therefore the lessees may send their offer. But, by a letter dated 07.6.1984, filed as Ex.P8, the third defendant took a stand that it was not for them to make an offer and that it was for the Trust to quote a price, leaving the option to the lessees to accept it or reject it. The relevant portion of Ex.P8, letter dated 07.6.1984, reads as under:
"We are advised that the terms of the agreement giving us first option is not fulfilled by your demanding an offer from us. This should be the other way about - namely, that you offered a price which we are entitled to accept or reject.
You are therefore requested to comply with the terms of the agreement in the manner stated above, by writing us full details of the offers received by you (photocopies of the offers received may be sent) so that after checking up the details we can exercise our option in accordance with the agreement."
10.15. Again, the third defendant sent a letter dated 09.8.1984 filed as Ex.P9 putting the first defendant on notice that any action on their part to sell the property will be at their own risk and that the first defendant had not indicated in writing the highest offer received for the property. In response to Ex.P9 dated 09.8.1984, the first defendant sent a reply dated 11.8.1984, filed as Ex.P10. The contents of Ex.P10 are of significance and hence, they are reproduced as follows:
"In reply to your para one, we state that due to the option given to you vide our agreement dated 9th August '74, you were requested to let us know if you were interested in purchasing the above property, to which although you have expressed to exercise the option you have not given any indication regarding the sale price, but are asking us to let you know if we have received any offer in writing. We are not obliged to do this. Therefore if you are interested in acquiring the property it is up to you to offer a reasonable price. You are also fully aware since it is a lease hold property, third parties will not be interested in purchasing the same. We will only agree to sell provided a fairly reasonable price is offered.
Regarding para 2, we are fully aware of our rights.
Regarding para 3, we do not understand what you mean by mis-understanding we had in the discussions with you, and your advisers and also that we are transferring the property to the third party. In the discussion with you, we had expressed that we will not sell the property if we do not get a reasonable price which you were not prepared to consider. Hence the discussion ended for each one to take their own course of action."
10.16. In response to Ex.P10, the third defendant sent a letter dated 10.9.1984, a copy of which is filed as Ex.P11. By this letter, the third defendant expressed satisfaction that the first defendant would not sell the property to third parties without giving the lessees the first option. But, even while recording his satisfaction, the third defendant did not quote any price.
10.17. Ex.P12 is a letter dated 03.6.1985 sent by the first defendant to the third defendant. By this letter, the first defendant called upon the lessees to indicate the highest offer that they were willing to make. The first defendant also put the lessees on notice that if the lessees did not exercise the option on or before 05.7.1985, they would be at liberty to accept any higher offer made or tendered. Immediately, the third defendant sent a letter dated 11.6.1985 marked as Ex.P13, recalling the correspondence that the parties had in 1984 and calling upon the first defendant to inform them of the highest offer quoted by any bona fide purchaser.
10.18. It appears that after Ex.P13 was sent, there was a meeting of the lessees with the trustees of the first defendant at Bangalore on 14.6.1985. Referring to the discussions so held at Bangalore, the third defendant sent a letter dated 21.6.1985, a copy of which is filed as Ex.P14. This letter records a statement allegedly made by the Managing Trustee of the first defendant to the effect that they had not received any offers, since they were not in a position to hand over possession to any willing purchaser. Even while recording the details of the discussion in Ex.P14, the third defendant stuck to his stand as per his letters dated 11.6.1985 and 09.8.1984. Therefore, by a letter dated 11.7.1985, marked as Ex.P15, the first defendant closed any further discussions on the ground that the beneficiaries had decided not to sell the property.
10.19. A careful reading of the correspondence between the lessor and the lessees filed as Exx.P5 to P15 shows that the first defendant went on pleading with the lessees for quoting a price. But, the lessees refused to quote any price without a bench mark being provided by any third party. The first defendant even went to the extent of admitting their weakness in the sense that third parties were not interested in quoting a price, when possession was with the lessees. It appears from the correspondence that the lessees took undue advantage of the position in which the first defendant Trust was placed and refused to quote any price. This attitude on the part of the lessees can hardly be appreciated, since, in order to demonstrate their bona fides, the lessees ought to have quoted some price, even if it was not the market price. When the first defendant repeatedly expressed inability to quote a price, the lessees were not justified in taking an adamant stand that they will never quote a price until someone else quoted a price. The dispute could have been resolved even at that stage if the lessees had quoted a price. Even if the issue had not been resolved, the quoting of a price by the lessees could have at least put the lessor in a tight spot and could have exposed the lessor if they have had other intentions. But by refusing to quote a price, the lessees eventually stalled the proposed sale and made the lessor put the very idea of selling the property, into a cold storage for more than a decade.
10.20. But the proposal was again resurrected by the first defendant after 10 years. Ex.P16 is a circular dated 29.4.1995 issued by the first defendant, placing on record a resolution passed by the Board of Trustees on 06.4.1995. As per this resolution, the first defendant had decided to call for tenders and the willing parties were to submit their offers in sealed covers, along with a banker's cheque or a cheque for Rs.25.00 lacs towards token deposit. It was indicated in Ex.P16 that the offers had to be produced on 15.5.1995 between 11.00 am and 11.45 am at No.11, Clerk Road, Richards Town, Bangalore 5. Ex.P16 not only contained a broad description of the property, but also indicated the subsistence of the lease. It also indicated that there was no aversion to brokers getting involved.
10.21. It is the admitted case of the plaintiffs that the first plaintiff was present on 15.5.1995 at the venue of the auction and also made his offer. There is also no dispute about the fact that the offer made by the first plaintiff worked out to about Rs.28,00,138/- per ground, while the offer made by the second defendant worked out to Rs.35 lakhs per ground. In paragraphs 22 and 23 of the proof affidavit filed by PW1 in lieu of chief examination, she has admitted that the first plaintiff submitted an offer in response to the circular Ex.P16 dated 29.4.1995 and that he was also present at the tender held on 15.5.1995. But PW1 also claims in paragraph 23 of the proof affidavit that the first plaintiff (her father) noted his protest to all the participants claiming that the plaintiffs had a pre-emptive right of purchase.
10.22. But, interestingly, PW1, who has now made a claim that her father informed all the participants about his right of pre-emption on 15.5.1995 itself, did not act after the date of the auction in tune with such a stand. From 15.5.1995 till 13.6.1995, the first plaintiff did not do anything. On 13.6.1995, the first plaintiff wrote a letter to the first defendant, a copy of which is filed as Ex.P17. In Ex.P17, the first plaintiff did not make a mention either about the protest allegedly lodged by him to the other bidders at the time of the opening of the tenders on 15.5.1995 or about his offer to enhance his bid to match the highest offer made by the second defendant. In fact, Ex.P17 makes no reference to anything that transpired on 15.5.1995 at all. But under Ex.P17, the first plaintiff made an offer for a sum of Rs.37,50,000/- per ground. This offer was made without reference to the tender held on 15.5.1995 and without reference to the offer of the second defendant.
10.23. Immediately upon receipt of Ex.P17, the first defendant sent a letter dated 27.6.1995, a copy of which is filed as Ex.P18. It was stated in Ex.P18 that when the offers were opened, the offer of the plaintiffs was found to be Rs.28.00 lacs per ground, while the offer of the second defendant was found to be Rs.35.00 lacs per ground. It was further stated in Ex.P18 that the highest bid of the second defendant was accepted and confirmed in the presence of the first plaintiff.
10.24. But, by a letter dated 06.7.1995, filed as Ex.P19, the first plaintiff claimed that even in the meeting held on 15.5.1995, he had agreed to make his offer and that he was informed that his offer would be placed before the Trust. But Ex.P19 does not contain a categorical assertion in so many words that the first plaintiff agreed to match the offer of the second defendant even on 15.5.1995. The relevant portion of Ex.P19 would show this clearly and hence, it is extracted as follows:
"You thereafter opened the covers and mentioned that the offer of HM Constructions of Rs.35 lakhs per ground was the highest. To this I immediately made by offer of such sum, pointing out that I had the first option. At this stage I was informed that the matter would be placed before the trustees and that the trust would revert to me. On failing to hear from the trust I sent my letter dated 13.6.95 to which I was most perplexed to now receive your reply dated 27.6.95. Suffice it to say that your statement as though an offer from HM Constructions was accepted and confirmed in my presence is altogether wrong. On the contrary, I was assured that my offer to pay the highest offer amount would be placed before the trust and that you would revert to me."
10.25. But as stated earlier, Ex.P17 letter dated 13.6.1995, did not contain any reference to any offer allegedly made by the plaintiffs to enhance the price to Rs.35.00 lacs per ground, even in the meeting held on 15.5.1995. Similarly, even in paragraph 23 of the proof affidavit, PW1 does not say that his father who was present on 15.5.1995, agreed to enhance his offer to Rs.35.00 lacs per ground, though in paragraph 24 a very vague claim is sought to be made.
10.26. The claim made by the first plaintiff under Ex.P19 was denied as false by the first defendant, by a letter dated 12.7.1995 filed as Ex.P20. It is only thereafter that the first plaintiff came up with a categorical statement under Ex.P21, a letter dated 18.7.1995 that he expressed willingness to match the offer of the second defendant and that the first defendant agreed to revert back to him. But such a stand on the part of the plaintiffs, made under Ex.P21 can hardly be believed, for two reasons. The first is that in the earliest communication dated 13.6.1995 (Ex.P17), sent after the date of the auction, no such stand was taken. On the other hand, the first defendant had taken a stand at the earliest point of time that the offer of the second defendant was accepted and confirmed in the presence of the first plaintiff. The second reason is that the first defendant, who had always chased the plaintiffs with a request to buy the property, has no reason to reject the offer of the plaintiffs, if really the plaintiffs had agreed to enhance their offer to Rs.35.00 lacs even on 15.5.1995.
10.27. Ex.P22 is the order of the Division Bench dated 28.3.2002 passed in OSA Nos.167 of 1996 and 135 of 1998, directing the plaintiffs to make a deposit of the total amount calculated at the rate of Rs.37.50 lacs per ground. I have already made a reference to the said order in paragraph 10.4 above.
10.28. Exx.P23 and P24 are the cheques dated 06.01.2002 (actually 1st June, 2002 written in American way) and 30.4.2002, drawn on Bank of America, each for a sum of USD 100,000, drawn in favour of the first defendant Trust. According to PW1, these cheques were returned on account of the change of counsel. But the change of counsel was on the side of the plaintiffs and not on the side of the defendants. It is not made clear whether the cheques were sent to the counsel and then there was change of counsel or vice versa. In either case it is not known why the cheques should be returned by the counsel for the plaintiffs when they were actually drawn in favour of the first defendant. There was actually no impediment for handing over the cheques to the first defendant, irrespective of the change of counsel on the part of the plaintiffs. It is not even the case of PW1 that these two cheques were forwarded to the first defendant. Therefore, the plaintiffs cannot pass on the responsibility to the first defendant for what transpired between PW1 and her previous or present counsel.
10.29. Ex.P25 is a copy of the affidavit filed by the first plaintiff, in support of the applications seeking clarification of the order of the Division Bench dated 28.3.2002 and also seeking extension of time to comply with the order. The date shown in the jurat portion of the affidavit (Ex.P25) is 04.7.2002. As per paragraph 35 of the proof affidavit of PW1, the petition so filed in CMP SR No.70505 of 2002 was dismissed for default on 24.8.2004. It is further claimed in paragraph 35 that the plaintiffs came to know about it later when they engaged a new counsel. But, the stand taken in paragraph 35 is wholly unbelievable for two reasons, viz. (a) that a petition will normally get dismissed for default only after getting numbered and not before; and (b) that as per paragraph 34, the cheques sent were returned due to change of counsel, while as per paragraph 35, the change of counsel happened after the dismissal of CMP SR No.70505 of 2002. It is stated in paragraph 4 of Ex.P25 that the copies of two cheques Exx.P23 and P24 were enclosed to the affidavit. If CMP SR No.70505 of 2002 had been filed by the former counsel, as could be made out from paragraph 35, what was returned was only the xerox copies and not the originals. If the said CMP had been filed by the new counsel, as could be made out from paragraph 34, there was no occasion for the return of the cheques. Thus, paragraphs 34 and 35 of the proof affidavit of PW1 bristle with contradictions.
10.30. Exx.P26, P27, P28 and P29 are the copies of the affidavits and petitions filed by the plaintiffs in CMP Nos.9605, 9606, 9607 and 9608 of 2006 in OSA Nos.167 of 1996 and 135 of 1998 seeking the very same clarification and the very same extension of time, as were sought in Ex.P25. These applications were sworn to on 30.8.2006 as seen from the jurat portion. In paragraphs 6 to 10 of the affidavit in support of Exx.P26 to P29, a new case was built up by the plaintiffs. It is stated in these paragraphs that the plaintiffs had engaged one M/s. Moorthy and Vasan, Advocates and filed the application for extension of time in CMP SR No.70505 of 2002 on 05.8.2002 and that since there were talks of compromise, the said application was not followed up. It is further claimed in those paragraphs that after the compromise talks failed, they engaged another counsel and filed Exx.P26 to P29.
10.31. But, there is no whisper in paragraph 35 of the proof affidavit of PW1 about any such compromise talks. All that PW1 says in paragraph 35 is that due to communication gap, CMP SR No.70505 of 2002 was dismissed for default on 24.8.2004.
10.32. By the time Exx.P26 to P29 were filed, a period of four years had lapsed from the date of the original order passed by the Division Bench. Therefore, finding that there was nothing to clarify and also that the order had worked itself out, the Division Bench dismissed all these miscellaneous petitions by order dated 17.10.2006, a copy of which is filed as Ex.P30. In view of the dismissal of the petitions for clarification and extension of time, the first defendant proceeded to execute a sale deed in favour of the second defendant on 09.11.2006, the certified copy of which is filed as Ex.P31. It is pertinent to note here that the time limit fixed by the Division Bench by its order dated 28.3.2002 for the deposit of money, was only six months. It expired in September 2002 and hence, from September 2002, there was no impediment in the form of any prohibitory order, restraining the first defendant from proceeding with the execution of the sale deed. However, the first defendant waited from September 2002 till the Division Bench dismissed all the miscellaneous petitions in October 2006 and thereafter, executed the sale deed, Ex.P31, in favour of the second defendant on 09.11.2006. In other words, defendants 1 and 2 have not proceeded to act in haste.
10.33. Ex.P32 is the encumbrance certificate filed by PW1 to show that the sale deed Ex.P31 was referred under Section 47(A) of the Indian Stamp Act for adjudication with regard to the correct amount of stamp duty payable. Ex.P33 series are the property tax receipts standing in the name of the first plaintiff from 1992 onwards. They are filed with a view to show that the plaintiffs continued to claim ownership of the superstructures, despite what is stated in Ex.P3 lease deed dated 09.8.1974.
10.34. Ex.P34 is the deed of assignment of the lease hold interest of plaintiffs 2 and 3 in favour of the first plaintiff. This is filed for the purpose of showing a family arrangement between the plaintiffs and the other members of the family of the original lessee.
10.35. Coming to the evidence let in on the side of the defendants, as stated earlier, the Trustee of the first defendant was examined as DW1. On the side of the defendants, nine documents were marked as Exx.D1 to D9. While Exx.D1 to D5 were marked through PW1 during cross examination, Exx.D6 to D9 were marked through DW1. Exx.D1 and D2 are the decreetal and fair orders dated 25.7.2007 passed in CRP NPD No.252 of 2002, arising out of the rent control proceedings initiated by the first defendant against the plaintiffs for fixation of fair rent. It is seen from these two exhibits that based upon the lease deed Ex.P3, the first defendant claimed ownership of the superstructure and filed a petition for fixation of fair rent. The Rent Controller fixed a fair rent, but the same was reversed by the appellate authority. On revision, this Court restored the order of the Rent Controller, fixing the fair rent at Rs.2,59,217/-. But, it appears that the plaintiffs took the matter on appeal to the Supreme Court and it is pending there.
10.36. Ex.D3 is a copy of the order passed by the Division Bench of this Court on 14.7.2004 in OSA Nos.120 and 121 of 1999. It is seen from this exhibit that the suit filed by the plaintiffs in C.S.No.886 of 1992 seeking a declaration that they are the owners of the superstructure was dismissed for default on 07.4.1995. An application to set aside the order of dismissal, along with an application to condone the delay, were filed in A.Nos.1136 and 1137 of 1996. Both were dismissed by a learned single Judge by order dated 28.01.1997 as against which OSA Nos.120 and 121 of 1999 were filed by the first plaintiff herein. But, the Division Bench dismissed both the appeals by order dated 14.7.2004, which is filed as EX.D3. It appears that there was no further appeal by the plaintiffs against the said order and hence, the claim of the plaintiffs for a declaration of their title to the superstructure got extinguished, with the dismissal of the suit attaining finality.
10.37. Ex.D4 is a notice issued by the counsel for the first defendant calling upon the plaintiffs to produce certain documents. The documents summoned to be produced are--
(1) the family arrangement under which the first plaintiff claimed a right to prosecute;
(2) the date of death of the second plaintiff and the details of her legal heirs;
(3) the authority of the third plaintiff to represent the estate of the deceased second plaintiff;
(4) the bank statement showing availability of funds at the time of issue of the cheques dated 06.01.2002 and 30.4.2002 (filed as Exx.P23 and P24); and (5) the original of Exx.P24 and P25.
10.38. Out of the above five documents called upon to be produced under Ex.D4, PW1 could produce only the deed of assignment by which the second and third plaintiffs assigned their lease hold rights in favour of the first plaintiff. PW1 could not even produce the bank statement to show that she had sufficient funds at the time when the 2 cheques Exx.P23 and 24 were issued.
10.39. In response to Ex.D4 notice, the counsel for the plaintiffs sent a reply dated 29.5.2004 along with a memo, both of which were filed as Ex.D5 series. In the memo filed by the plaintiffs, an explanation is given in respect of the documents which could not be readily produced and a reference to the documents which could be produced.
10.40. Ex.D6 is the letter of the first plaintiff dated 15.5.1995. This letter was submitted in response to the circular dated 29.4.1995. By this letter Ex.D6, the first plaintiff offered to purchase the property for a total consideration of Rs.4,04,90,000/-. At the bottom of this letter, there is an indication that a cheque for Rs.25 lakhs was enclosed to the letter. But this letter also bears an endorsement at the bottom to the effect that the cheque bearing No.397863 for Rs.25.00 lacs drawn on Catholic Syrian Bank was received back by the first plaintiff.
10.41. Ex.D7 is the xerox copy of the list of bidders who participated in the tender held on 15.5.1995. It contains the names and addresses of all the participants along with their signatures and the rate quoted by each of them per ground. At the bottom of Ex.D7, three trustees of the first defendant have signed. But, the marking of this document was objected to by the learned counsel for the plaintiffs on the ground that it is a xerox copy. DW1 claimed that the original was misplaced, as it was a 13 years old document. Therefore, this document was marked subject to objections. This document contains a statement at the bottom which reads as under:
"The sale is confirmed in favour of HM Constructions tendering the highest offer".
The objection of the plaintiffs to the marking of this document is obviously because of the above endorsement, as otherwise, the plaintiffs have no objection with regard to the other contents of Ex.D7.
10.42. Ex.D8 is the letter dated 18.5.1995 issued by the first defendant to the second defendant informing them of the acceptance of their offer. This letter contains an acknowledgement at the bottom from the second defendant. This was followed by an agreement dated 30.6.1995 entered into between the first defendant and the second defendant, the xerox copy of which is filed as Ex.D9. The same is also marked subject to objections.
10.43. As stated earlier, the second defendant did not adduce any evidence, oral or documentary, in view of the fact that the suit is one for enforcing a right of pre-emption claimed by the plaintiffs against the first defendant and the second defendant is only a purchaser.
10.44. Before getting into an analysis of the evidence on both sides, it is necessary to take a note of the essential facets of the "law of pre-emption", so that the analysis of the evidence will be with reference to the requirements of the law.
PRINCIPLES OF THE LAW OF PRE-EMPTION 10.45. The word pre-emption is derived from "prae emptio" and is defined as the act of buying before another. A right to purchase property before or in preference to another person is defined as pre-emption (see Advanced Law Lexicon by P.Ramanatha Aiyar). It is also known as "the right of first refusal". The law of pre-emption was introduced in India by Mohamedans. Mohamedan Law gives the name Shuffa, for the right of pre-emption and defines it as the power of possessing immovable property, which has been sold, by paying a sum equal to that paid by the purchaser. Under Mohamedan Law, the right of pre-emption is in the nature of an easement and it cannot take effect until after the sale is complete, so far as the interest of the seller is concerned. It is strictly speaking, not a right of re-purchase, but a right of substitution, entitling the pre-emptor to stand in the shoes of the vendee in respect of all the rights and obligations arising from the sale.
10.46. Muslim Law makes it necessary for a person claiming the right of pre-emption to declare his intention of becoming a purchaser, immediately on hearing of the sale and this is known as Talab-mowasibat. The pre-emptor is required, with the least practicable delay, to make affirmation at least by two witnesses, of his intention, either in the presence of the seller or of the purchaser or on the premises and this is known as Talab-i-ishhad. Though it is not necessary that the pre-emptor should tender the price at the time of Talab-i-ishhad, he must certainly declare his readiness and willingness to pay the price.
10.47. As pointed out by Umesh C.Banerjee,J, in Mattoo Devi v. Damodar Lal [(2001) 6 SCC 330], the principle of talab in Mohamedan law has three specific facets: the first being talab-i-muwathaba: talab in common parlance means and implies a demand and talab-i-muwathaba literally means "the demand of jumping". The idea is of a person jumping from his seat, as though startled by news of the sale. In talab-i-muwathaba the pre-emptor must assert his claim immediately on hearing of sale though not before and the law stands well settled that any unreasonable delay will be construed as an election not to pre-empt. The second, being popularly known as the second demand, is talab-i-ishhad, which literally speaking means and implies the demand which stands witnessed. The second demand thus must be in reference to the first demand. It is so done in the presence of two witnesses and also in the presence of either the vendor (if he is in possession) or the purchaser and the third demand though not strictly a demand but comes within the purview of the principle and means initiation of legal action. It is however not always necessary since it is available only when one enforces his right by initiation of a civil suit such an action is called talab-i-tamlik or talab-i-kusumat. In this form of talab the suit must be brought within one year of the purchaser taking possession of the property and a suit or claim for pre-emption must relate to whole of the interest and not a part of the estate.
10.48. In S.K.Mitra's Mahomedan Law, edited by S.P.Sen Gupta (II Edition 2001), the learned author enlists six circumstances under which the right of pre-emption may be lost. They are
(i) if the pre-emptor acquiesces in the sale;
(ii) if the pre-emptor who claims pre-emption as the owner of a contiguous property, sells his property to another, after the institution of the suit;
(iii) when the pre-emptor of a superior class enforces his right, the claim of the subordinate class falls through;
(iv) if the vendee acquires an equal or superior right of pre-emption, before the institution of the suit by the pre-emptor;
(v) when a person having no right of pre-emption is made a co-plaintiff by a pre-emptor; and
(vi) when the pre-emptor splits the bargain.
10.49. Apart from being identified as a right traditionally recognised by Muslim Law, the right also appears to have been recognised as prevailing among Hindus in Bihar and certain provinces of western India, as observed by Sir Barnes Peacock in Fakir Rawat v. Emambaksh [1863 BLR Supp. 35WR (FB) 143]. But, among Hindus, the right was founded either upon contract or upon custom. In some Provinces, the right has been conferred by Statute. Therefore, in essence, a right of pre-emption may be based upon (1) Mohamedan Law or (2) custom or (3) Statute or (4)contract.
10.50. In Shri Audh Behari Singh vs. Gajadhar Jaipuria [AIR 1954 SC 417], one of the earliest cases to come up before the Supreme court, a Constitution Bench of the Supreme Court traced the origin and development of the law of pre-emption in India. The Court observed that during the period of Mughal Emperors, the law of pre-emption was administered as a rule of common law of the land in those parts of the country which came under the domination of the Mohamedan rulers and was applied both to Muslims and non-Muslims. It was further pointed out by the Supreme Court that after the advent of the British rule in India, the Courts in British India administered the Mohamedan law of pre-emption as between Mohamedans entirely on grounds of justice, equity and good conscience.
10.51. But, it was held by this Court in Krishna Menon v. Kesavan [20 Mad. 305] that the law of pre-emption, could not be regarded to be in consonance with the principles of justice, equity and good conscience, since it placed restrictions upon the liberty of transfer of property. After referring to the said decision of this Court, the Supreme Court pointed out in the aforesaid decision in Audh Behari Singh that "the right of pre-emption is not recognised in the Madras Presidency at all even amongst Mohamedans, except on the footing of a custom".
10.52. After pointing out that in some Provinces, such as Punjab, Agra and Oudh, the right of pre-emption has been embodied even in statutes, the Supreme Court pointed out in paragraph 10 of its decision that apart from being created by Mohamedan Law or Territorial law or custom, a right of pre-emption can also be created by contract.
10.53. Though the right of pre-emption may arise out of the personal law or custom or contract, the Courts have always found the right to be a very weak right, since it operates as a clog on the right of the owner to alienate his property. Consequently, as in the case of tax laws, the Courts have recognised the right of the vendor and the vendee to use all lawful means to avoid the enforceability of the right of pre-emption. The Supreme Court pointed out in Bishan Singh v. Khazan Singh [AIR 1958 SC 838], as follows:
"The plaintiff is bound to show not only that his right is as good as that of the vendee but that it is superior to that of the vendee. Decided cases have recognized that this superior right must subsist at the time the preemptor exercises his right and that that right is lost if by that time another person with equal or superior right has been substituted in place of the original vendee. Courts have not looked upon this right with great favour, presumably, for the reason that it operates as a clog on the right of the owner to alienate his property. The vendor and the vendee are, therefore, permitted to avoid accrual of the right of pre-emption by all lawful means. The vendee may defeat the right by selling the property to a rival preemptor with preferential or equal right. To summarize : (1) The right of pre-emption is not a right to the thing sold but a right to the offer of a thing about to be sold. This right is called the primary or inherent right. (2) The preemptor has a secondary right or a remedial right to follow the thing sold. (3) It is a right of substitution but not of re-purchase, i.e., the preemptor takes the entire bargain and steps into the shoes of the original vendee. (4) It is a right to acquire the whole of the property sold and not a share of the property sold. (5) Preference being the essence of the right, the plaintiff must have a superior right to that of the vendee or the person substituted in his place. (6) The right being a very weak right, it can be defeated by all legitimate methods, such as the vendee allowing the claimant of a superior or equal right being substituted in his place."
10.54. Again in Radhakishan Laxminarayan Toshniwal v. Shridhar Ramchandra Alshi [AIR 1960 SC 1368], a Constitution Bench of the Supreme Court pointed out that the right of pre-emption is not one which is looked upon with great favour by the Courts, presumably for the reason that it is in derogation of the right of the owner to alienate his property. The Court also observed that "it is neither illegal nor fraudulent for parties to a transfer to avoid and defeat a claim for pre-emption by all legitimate means". While quoting with approval, the decision in Bishan Singh, the Court observed that even where the right of pre-emption is statutorily recognised, the Courts have not looked with disfavour, the attempts of the vendor and the vendee to avoid the accrual of the right of pre-emption by any lawful means.
10.55. In Bhagwati Prasad Sah v. Bhagwati Prasad Sah [1964 (5) SCR 105], a Constitution Bench of the Supreme Court considered the scope of the right of pre-emption under the Mohamedan Law, as applied by custom in Bihar. While doing so, the Court relied upon the propositions laid down in Bishan Singh and Audh Behari Singh. The Court pointed that since the right was a weak one, a Court need not be astute to rationalise the doctrine, so as to make it fit into modern trends of property law. The Court also quoted the following opinion of Mahmood,J, in Gobind Dayal v. Inayatullah:
"Pre-emption is a right which the owner of certain immovable property possesses, as such, for the quiet enjoyment of that immovable property, to obtain, in substitution for the buyer, proprietary possession of certain other immovable property, not his own, on such terms as these on which such latter immovable property is sold to another person."
After quoting the above passage, the Constitution Bench also pointed out one most important ingredient for exercising the right of pre-emption in the following words:
"The same learned Judge in Sakina Bibi v. Amiran states that in the pre-emptive tenement (the tenement by the ownership of which the pre-emptor wants to exercise his right of pre-emption), the pre-emptor should have vested ownership and not a mere expectancy of inheritance or a reversionary right, or any other kind of contingent right, or any interest which falls short of full ownership. Beaumont C.J. in Dashrathlal v. Bai Dhondubai, after considering the law on the subject, accepted the view that the custom of pre-emption only exists as between freeholders, that is to say neighbouring lands in respect whereof the custom is claimed to apply must be freehold and that the land sought to be pre-empted must also be free hold.
...
This legal requirement of the full ownership of the pre-emptor may be traced either to the fact that "in ancient times Mohamedan law did not recognize leases although it recognized hire of land for the purpose of user, or to the circumstance that the right was conferred to enable the pre-emptor to prevent an undesirable person from becoming his neighbour" which would not be the case if he was only a temporary occupant of the property in respect whereof the right arose. Whatever may be the reason, it may safely be held now that the pre-emptor must be the owner of the property in respect whereof he claims the right of pre-emption."
10.56. In Prem Dulari v. Rajkumari [AIR 1967 SC 1578], another Constitution Bench of the Apex Court, while quoting with approval, the decision in Bishan Singh, also recorded the principle of law expressed by Mahmood,J, in Gobind Dayal v. Inayatullah [1885 ILR 7 Allahabad 775] in the following words:
"The right of pre-emption is simply a right of substitution, entitling the pre-emptor, by means of a legal incident to which sale itself was subject, to stand in the shoes of the vendee in respect of all the rights and obligations arising from the sale, under which he derived his title. It is, in effect, as if in a sale deed the vendee's name were rubbed out and pre-emptor's name inserted in its place."
10.57. In Jagad Bandhu Chatterjee v. Smt. Nilima Rani [1969 (3) SCC 445], the Supreme Court held that "in the law of pre-emption the general principle which can be said to have been uniformly adopted by the Indian courts is that acquiescence in the sale by any positive act amounting to relinquishment of a pre-emptive right has the effect of the forfeiture of such a right".
10.58. In Indira Bai v. Nand Kishore [(1990) 4 SCC 668], the very question framed for consideration reflected the trend of judicial opinion towards the exerice of this right. The question reads as follows:
"Is estoppel a good defence to 'archaic' right of pre-emption which is a 'weak right' and can be defeated by any 'legitimate' method?"
In this case also, the Supreme Court relied upon its earlier decisions in Bishan Singh and Radhakishan and also quoted the famous opinion of Mahmood,J, in Gobind Dayal. Apart from doing so, the Court also considered the question of estoppel arising in such cases and held as under:
"Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious conduct by preventing the inducer from taking advantage and assailing forfeiture already accomplished. It is invoked and applied to aid the law in administration of justice. But for it great many injustice may have been perpetrated. Present case is a glaring example of it. True no notice was given by the seller but the trial court and appellate court concurred that the pre-emptor not only came to know of the sale immediately but he assisted the purchaser-appellant in raising construction which went on for five months. Having thus persuaded, rather misled, the purchaser by his own conduct that he acquiesced in his ownership he somersaulted to grab the property with constructions by staking his own claim and attempting to unsettle the legal effect of his own conduct by taking recourse to law. To curb and control such unwarranted conduct the courts have extended the broad and paramount considerations of equity, to transactions and assurances, express or implied to avoid injustice."
10.59. In Mohd. Noor v. Mohd. Ibrahim [(1994) 5 SCC 562], the Court reiterated the principle that the owner of the property in respect of which a pre-emptive right is sought to be enforced, must have transferred the ownership and that it is not enough if there was a mere transfer of tenancy rights.
10.60. Even in Smt. Vijayalakshmi v. B.Himantharaja Chetty [AIR 1996 SC 2146], the Supreme Court quoted with approval the opinion of Mahmood,J, in Gobind Dayal, which I have extracted in an earlier paragraph. Thereafter, the Court pointed out that the right of pre-emption is actually a right of substitution, conferred either by statute or by custom or by contract. The right is to step into the shoes of the vendee preferentially, on the terms of the sale already settled between the vendor and the vendee. In Vijayalakshmi's case, the Supreme Court also took note of its earlier decision in Atam Prakash v. State of Haryana [AIR 1986 SC 859], wherein the Court struck down the right of pre-emption based on consanguinity as a relic of the feudal past, inconsistent with the constitutional scheme and modern ideas. However, it was held in Vijayalakshmi that the decision in Atam Prakash did not alter the situation that the right of pre-emption, wherever founded, whether in custom or statute or contract, is still a right of being substituted in the place of the vendee, in a bargain of sale of immovable property.
10.61. In a case arising from the State of Madhya Pradesh, where the right of pre-emption was earlier statutorily recognised under the Gwalior Pre-emption Act, the Apex Court pointed out in Krishna Dass Agarwal v. Kanhaiyalal [AIR 1996 SC 3464], that the right of pre-emption is not only a weak right, but that "it is a claim which is generally looked upon by Courts with certain amount of distaste as it interferes with the freedom of the owner to sell his property to the person of his choice" (the Court also took note of the fact that the Pre-emption Act was repealed in 1968 itself).
10.62. In Mattoo Devi v. Damodar Lal [(2001) 6 SCC 330], the Supreme Court followed its earlier decisions in Bishan Singh, Audh Behari Singh and Indira Bai and stressed in paragraph 3 that the right of pre-emption is the right which the owner of immovable property possesses to acquire by purchase, of any immovable property which had been sold to another person.
10.63. In Shyam Sunder v. Ram Kumar [(2001) 8 SCC 24], the Supreme Court pointed out that "in modern times, the right of pre-emption based on statutes is very much a maligned law". In fact, the Court also took note of (without expressly agreeing) the submission at the bar that such rights have been characterised as feudal, archaic and outmoded and so on. However, the Court pointed out that its origin was based on custom and subsequently codified out of necessity of the then village community and society for its preservation, integrity and maintenance of peace and security. Therefore, the Court held that in changed circumstances, the right of pre-emption may be called outmoded, but so long it is statutorily recognised, it has to be given the same treatment as any other law deserves. The Court further observed that the main object behind the right of pre-emption, either based on custom or statutory law, is to prevent the intrusion of a stranger into the family-holding or property. A co-sharer under the law of pre-emption has a right to substitute himself in the place of a stranger in respect of a portion of the property purchased by him, meaning thereby that where a co-sharer transfers his share in holding, the other co-sharer has right to veto such transfer and thereby prevent the stranger from acquiring the holding in an area where the law of pre-emption prevails.
10.64. In Lachhman Dass v. Jagat Ram [(2007) 10 SCC 448], the Court issued a word of caution, by pointing out that a Court has to weigh the right of pre-emption as against the constitutional and human right of the owner of the property to dispose it of as he pleases. It was held in paragraph 16 as follows:
"... To hold property is a constitutional right in terms of Article 300-A of the Constitution of India. It is also a human right. Right to hold property, therefore, cannot be taken away except in accordance with the provisions of a statute. If a superior right to hold a property is claimed, the procedures therefor must be complied with. The conditions precedent therefor must be satisfied. Even otherwise, the right of pre-emption is a very weak right, although it is a statutory right. The court, while granting a relief in favour of a pre-emptor must bear it in mind about the character of the right vis-a-vis the constitutional and human right of the owner thereof."
10.65. In Kumar Gonsusab v. Mohd. Miyan [(2008) 10 SCC 153], the Supreme Court referred to Chapter XIII of Mohamedan Law (19th Edition by Mulla), wherein Section 226, the right of pre-emption is said to be a right which the owner of an immovable property possesses to acquire by purchase, another immovable property which has been sold to another person. After referring to Sections 226 and 232 thereof, the Supreme Court held in paragraph 16 as follows:
"On a plain reading of Sections 226 and 232 of Mohamedan law, it is clearly evident that the right of pre-emption can only accrue to an owner of immovable property when another immovable property is sold to another person."
The Court then went on to hold that a mere agreement of sale entered into by the owner of the property with a third party, would not give raise to a cause of action for the pre-emptor to file a suit. After holding so, the Court pointed out in paragraph 19 as follows:
"We should not be unmindful of the fact that there are no equities in favour of a pre-emptor, whose sole object is to disturb a valid transaction by virtue of the rights created in him by statute. It is well settled that it would be open to the pre-emptee, to defeat the law of pre-emption by any legitimate means, which is not fraud on the part of either the vendor or the vendee and a person is entitled to steer clear of the law of pre-emption by all lawful means."
10.66. A survey of the law as propounded by the Supreme court, over the past 60 years, from Shri Audh Singh upto Kumar Gonsusab, shows that the claim for enforcement of the right of pre-emption has to be tested keeping in mind, the following principles:-
(i) It is a right of substitution and hence it arises only after the sale;
(ii) The right exists only as between freeholders. The pre-emptor should have vested ownership of the pre-emptive tenement, to be able to exercise the right of pre-emption in respect of another property. However, the right of pre-emption may also be available to tenants, by virtue of statutes or contract;
(iii)It is a very weak right, which can be defeated by all legitimate means, by the owner;
(iv) Acquiescence in the sale by any positive act, amounting to relinquishment, would result in the forfeiture of the right; and
(v) There are no equities in favour of the pre-emptor.
ANALYSIS OF THE EVIDENCE ON RECORD WITH REFERENCE TO THE LEGAL PRINCIPLES
(i) RIGHT OF SUBSTITUTION- ARISES ONLY AFTER THE SALE:
10.67. The right of pre-emption is actually a right of substitution. Consequently, the cause of action to sue for the enforcement of the right would arise only after a sale is made in favour of a third party. The Courts have held that this right should subsist on three dates, viz. (i) the date of sale; (ii) the date of institution of the suit; and (iii) the date of the decree. A suit to enforce the right of pre-emption, filed before the actual sale of the property, is therefore pre-mature. But, in this case, the suit was filed immediately after the first defendant took a stand that the offer made by the second defendant was accepted and confirmed even on 15.5.1995 in the presence of the first plaintiff. There was an injunction in favour of the plaintiffs, which got vacated after the failure of the plaintiffs to comply with the conditional order passed by the Division Bench. Thereafter, a sale deed came to be executed by the first defendant in favour of the second defendant on 09.11.2006 during the pendency of the suit. Therefore, though the objection was well founded till 9-11-2006, the execution of the sale deed pendente lite, has diluted its vigour and vitality. Though the plaintiffs failed to seek an amendment of the pleadings and the prayer, after the execution of the sale deed, I do not wish to hold it against them. Therefore, I hold that the suit need not be dismissed on the sole ground that it was laid premature.
(ii) AVAILABILITY OF THE RIGHT ONLY TO OWNERS OF PROPERTY:
10.68. It is an essential pre-requisite for the enforcement of this right that a pre-emptor has ownership of one property, to be able to enforce the right in respect of another property. As pointed out by the Apex Court in several decisions cited supra, the very object of the right is to prevent strangers, from acquiring ownership of an adjoining property, thereby making the enjoyment of the property already owned, difficult.
10.69. In the case on hand, the plaintiffs are not the owners of any portion of the suit property or of any adjoining property. Their claim is based upon their repeated assertion that they are the owners of the superstructure, viz., the theatre building. But such assertion is in vain, in view of the following facts:
(i) The surrender of ownership of the superstructure under Ex.P3 lease deed dated 09.8.1974, was brought forth by a compromise decree passed in C.S.No.69 of 1972. It also conferred the right of pre-emption upon the plaintiffs under a contemporaneous agreement Ex.P4. If the plaintiffs seek to assail the compromise decree, on the ground of coercion and undue influence, they must forego the lease and also forego the right conferred under Ex.P4. What is sauce for the goose must be sauce for the gander too;
(ii) Moreover, the attempt made by the plaintiffs to set at naught that particular clause in Ex.P3 lease deed by filing a suit in C.S.No.886 of 1992 (after a long period of 18 years from the date of execution of the lease deed) also failed. Therefore, any attempt now made to claim ownership of the superstructure, despite the compromise decree in C.S.No.69 of 1972 and despite the dismissal of C.S.No.886 of 1992, would be barred by res judicata and it is no more open to the plaintiffs to claim ownership of the superstructure;
(iii)The reliance placed by the plaintiffs upon the amendment to Section 12 of the Madras City Tenants Protection Act, 1921, is of no avail to the plaintiffs. Section 12 makes it very clear that nothing in any contract made by a tenant shall take away or limit his rights under this Act. Therefore, any clause in a lease deed that would have the effect of defeating the rights of a tenant under that Act, is what is declared as null and void, under the amendment to Section 12. In this suit, the plaintiffs are not seeking to enforce the right under Section 9 of the City Tenants Protection Act, but are seeking to enforce the terms of a contract conferring the very right of pre-emption. Therefore, the amended Section 12 will not go to the rescue of the plaintiffs, especially in the present proceedings; and
(iv) In any event, Ex.P3 lease deed and Ex.P4 agreement are to be construed as forming part of a wholesome deal. The undertaking given by the plaintiffs to surrender the ownership of the superstructure to the first defendant, is to be seen as part of the consideration, for the benefit of pre-emption conferred upon the plaintiffs. Therefore, the plaintiffs cannot seek to retain the benefit and take away the consideration.
Hence, the claim made by the plaintiffs that they continue to be the owners of the superstructure is devoid of merits. Consequently, the plaintiffs cannot rest their claim on the ground that they are the owners of the superstructure.
10.70. Once it is found that the plaintiffs are neither the owners of any part of the suit property including the superstructure, nor the owners of any adjoining property, then it follows as a corollary that their claim of the right of pre-emption hovers in thin air.
10.71. While the right of pre-emption under Mohamedan law is available only to owners of pre-emptive tenements, the right of pre-emption conferred by statutes or contracts could also be available to tenants. Therefore, let me see if the claim of the plaintiffs, can be sustained at least on the basis of tenancy rights, if they have any.
10.72. The period of lease prescribed under Ex.P3 is 15 years, commencing from 01.01.1972 and ending on 31.12.1986. Clause 4(e) of Ex.P3 conferred an option to the lessees to have the lease renewed for a period of 10 years from 01.01.1987 to 31.12.1996. But the manner in which such an option is to be exercised, is also stipulated in clause 4(e) itself. The second limb of clause 4(e) reads as follows:-
".... the option shall be deemed to be exercised by the lessees giving a notice in writing of their intention to extend the lease at any time on or before 30-9-1986."
10.73. Therefore, the lease could have been renewed for a period of 10 years from 01.01.1987 to 31.12.1996 only if the plaintiffs had issued a notice in writing on or before 30.9.1986. There is no pleading in the plaint that the plaintiffs issued any such notice at any point of time. In fact, there is not even a pleading anywhere in the plaint to the effect that the plaintiffs exercised their option and that the lease got renewed. On the contrary, the first defendant had already initiated proceedings for fixation of fair rent in the year 1985 itself and the plaintiffs started contesting it on the ground that they are the owners of the buildings. Therefore, there was no occasion for the plaintiffs to exercise their option to renew the lease in 1986. As a matter of fact, the plaintiffs had a dilemma at that time. What was to be renewed under Ex.P3 was a lease of the land and buildings. The plaintiffs already started claiming that they are the owners of the buildings. Therefore, they could not and did not seek renewal of the lease granted under Ex.P3 as per clause 4(e). Consequently, the lease expired on 31-12-1986. After the expiry of the lease, no right of pre-emption was available to the lessees, since the right of pre-emption conferred by Ex.P4 is co-terminus with the right of lease conferred by Ex.P3.
10.74. It is well settled that on the expiry of the period of lease, an erstwhile tenant continues in possession because of the law of the land, under which he cannot be physically thrown out except by due process of law. The status of such an erstwhile tenant is that of a tenant at sufferance, akin to a trespasser having no independent right to continue in possession. [Raptakos Brett & Co Ltd vs. Ganesh Property (1998) 7 SCC 184].
10.75. Thus, the plaintiffs had lost their status as tenants on 31.12.1986, due to their failure to renew the lease in accordance with clause 4(e) of Ex.P3. Their claim for ownership of the theatre building cannot stand in the eye of law, due to
(i) the compromise decree in C.S.No.69 of 1972;
(ii) the execution of EXX.P3 and P4, in pursuance of the compromise reached in the suit;
(iii) the dismissal of the suit C.S.No.886 of 1992 for declaring the plaintiffs to be owners of the building; and
(iv) the non applicability of the provisions of the amended section 12 of the Madras City Tenants Protection Act, to proceedings other than those under that Act.
10.76. In other words, the plaintiffs were neither tenants in respect of the suit property nor owners of any portion of the suit property or of an adjoining property. Therefore, their claim for pre-emptive right to purchase the suit property, was not maintainable at all. To put it differently, the right of pre-emption was not available to the plaintiffs, on the date of institution of the suit, as they neither had a vested ownership of any pre-emptive tenement nor had tenancy rights in respect of the suit property.
ACQUIESCENCE AND ESTOPPEL 10.77. It is admitted in the plaint that the plaintiffs and the first defendant exchanged a lot of correspondence, during the period from April 1984 to July 1985. These letters, filed by the plaintiffs themselves, as Exx.P5 to P15 and whose contents have been referred to by me in previous paragraphs, would show that the first defendant repeatedly requested the plaintiffs to quote a price. However, the plaintiffs always insisted that it is for the first defendant to quote a price and that the plaintiffs have a right to accept or reject it. Despite the first defendant informing the plaintiffs that they are unable to fix a price, the plaintiffs stuck to their guns. As a matter of fact, the first defendant pleaded in their letter Ex.P10 dated 11.8.1984 that since the property is a lease hold property, third parties will not be interested in purchasing the same and that they are prepared to accept a fairly reasonable price. In response, the first plaintiff sent a reply dated 10.9.1984 filed as Ex.P11 stating that the plaintiffs are glad about the realisation on the part of the first defendant that third parties will not be interested in the property. After this tug-of-war that went on for about 15 months, the first defendant eventually dropped the very idea of a sale. It is only thereafter that proceedings for fixation of fair rent were initiated by the first defendant, obviously as a result of frustration. But those proceedings also faced a road block, with the plaintiffs claiming to be the owners of the superstructure and questioning the maintainability of the rent control proceedings.
10.78. Therefore, the first defendant eventually issued a circular dated 29.4.1995 filed as Ex.P16 inviting offers. As per Ex.P16, the offers were to be made in sealed covers on 15.5.1995 between 11.00 am and 11.45 am at No.11, Clerk Road, Richards Town, Bangalore, along with a cheque for Rs.25.00 lacs towards token deposit. Admittedly, the first plaintiff physically participated and quoted a price of Rs.4,04,90,000/-, for the entire property, which worked out to about Rs.28,00,138/- per ground. There is also no dispute about the fact that the second defendant had come up with an offer for Rs.35.00 lacs per ground.
10.79. As to what transpired at the meeting held on 15.5.1995, after the sealed covers were opened, there are two versions, one by the plaintiffs and another by the defendants 1 and 2. According to the plaintiffs, the first plaintiff informed the participants on 15.5.1995, of their right of pre-emption and also offered to buy the property at the highest rate. But according to the defendants, the plaintiffs did not do so and the offer of the second defendant was accepted and confirmed in the presence of the first plaintiff and thereafter the first plaintiff took back the cheque brought by him towards deposit.
10.80. But among the two versions, the version of the defendants appears more probable than that of the plaintiffs, as I shall demonstrate now. The hand written letter of offer submitted by the first plaintiff on 15.5.1995 is filed as Ex.D6. In Ex.D6, the first plaintiff has indicated the fact that a cheque for Rs.25.00 lacs drawn on Catholic Syrian Bank Limited, bearing No.397863 dated 15.5.1995 was enclosed. But, Ex.D6 also contains an endorsement which reads "received cheque No.397863 of Catholic Syrian Bank", with the signature of the first plaintiff below the endorsement. This endorsement corroborates the claim of the first defendant that the first plaintiff took back the cheque representing the token deposit, after the offer of the second defendant was accepted in his presence. If the first plaintiff had agreed even in the meeting held on 15.5.1995 to increase his offer to match the highest price, he need not have taken back the cheque. Just as the highest bidder did not take back his cheque, the first plaintiff could have left the cheque with the first defendant. The fact that the first plaintiff took back his cheque, while the second defendant left the cheque with the first defendant, shows that the case of the defendants is more probable than that of the plaintiffs. The first defendant, who did not conduct an auction behind the back of the plaintiffs, but who chose to be transparent by inviting the plaintiffs to participate in the tender held on 15.5.1995, had no reason to reject an offer, if any, made by the plaintiffs to match the price quoted by the second defendant. As a matter of fact, the first defendant was always worried about the actual physical possession being with the plaintiffs, as seen from the correspondence filed as Exx.P5 to P15. Therefore, the first defendant had no reason to reject an offer, if the first plaintiff had really made an offer on 15.5.1995 to enhance his bid to match the offer of the second defendant.
10.81. It is pertinent to note that from 15.5.1995 (the date on which sealed covers were opened), till 13.6.1995, no attempt was made by the plaintiffs to place on record their desire to match the highest offer made by the second defendant. The earliest communication sent by the plaintiffs, after the tender conducted on 15.5.1995, was the one dated 13.6.1995, filed as Ex.P17. The plaintiffs seek to explain this time gap, by contending in paragraphs 45 and 46 of the plaint that the first plaintiff offered even on 15.5.1995 to buy the property at the highest price and that since the Trustees promised to consider the offer and revert back, the plaintiffs waited.
10.82. But, the said stand taken in paragraphs 45 and 46 of the plaint, is clearly an after thought. This is seen from the fact that such a stand was not reflected even remotely, in Ex.P17 dated 13.6.1995. In Ex.P17, the first plaintiff did not even make a whisper about the sealed covers opened on 15.5.1995. The fact that the first defendant issued a circular on 29.4.1995 and the fact that the first plaintiff submitted an offer on 15.5.1995 and the fact that the offer of the second defendant was found to be higher by about Rs.7.00 lacs per ground, are all not mentioned in Ex.P17. The claim of the first plaintiff that he agreed to match the highest offer even on 15.5.1995, is also not mentioned in Ex.P17. Ex.P17 is hopelessly silent about the very meeting held on 15.5.1995. If really the first plaintiff had made an offer on 15.5.1995 to increase his bid and the first defendant agreed to consult the trustees and revert back, the first plaintiff would have made a reference to it in Ex.P17. It is only after the first defendant placed on record through their reply dated 27.6.1995 (filed as Ex.P18) that the offer of the second defendant was accepted and confirmed on 15.5.1995 in the presence of the first plaintiff, that the first plaintiff came forward with the stand now taken, by sending a rejoinder under Ex.P19 dated 06.7.1995. Therefore, I hold that there is no acceptable evidence on the side of the plaintiffs to prove that on 15.5.1995, the first plaintiff agreed to match the highest offer and that he put the second defendant and other offerors on notice of their right of pre-emption.
10.83. Coming to the version of the defendants, the first defendant has produced a xerox copy of the proceedings dated 15.5.1995, as Ex.D7. It contains the names and addresses of seven persons, including the first plaintiff and the second defendant, who had made offers. The rate offered by each one of them per ground, is also indicated therein. Each of the participants has also signed the proceedings in the second column of Ex.D7. At the bottom of Ex.D7, it is written by hand that "the sale is confirmed in favour of HM Constructions, tendering the highest offer". At the bottom, the Managing Trustee as well as two other Trustees of the first defendant have signed. Ex.D7 is also attested to be a true copy, by an Advocate and Notary.
10.84. The marking of Ex.D7 was objected to by the learned counsel for the plaintiffs only on the ground that it is a xerox copy. But, DW1 stated in chief examination that they had misplaced the original of Ex.D7 as it was more than 13 years old. However, DW1 stated during cross examination that at the time of opening of tenders on 15.5.1995, he was present in that place. He reiterated in cross examination that the original of Ex.D7 could not be traced. He also stated that he had signed in Ex.D7. Though it was elicited in cross examination of DW1 that he did not know when the original was lost and that he was not personally aware whether the same was attested by Notary after seeing the original, it may be of no serious consequence, in view of the fact that there is actually no dispute about any of the contents of Ex.D7, viz.
(i) the names and addresses of the participants;
(ii) the rates quotes by each one of them;
(iii) the signatures of each one of them;
(iv) the signatures of the Managing Trustee and two other Trustees of the first defendant; and
(v) the endorsement at the bottom.
In other words, the plaintiffs do not dispute
(a) the fact that there were seven offerors;
(b) the fact that the plaintiffs quoted a rate of Rs.28,00,138/- per ground; and
(c) the fact that the second defendant quoted a rate of Rs.35.00 lacs per ground.
More over, Ex.D7 also contains the name and address of the first plaintiff along with his signature and the rate quoted by him. The signatures of the first plaintiff in the plaint tally with his signatures found in Ex.D6 as well as in Ex.D7. Neither the first plaintiff went into the witness box to challenge Ex.D7 as a fabricated document nor was there a cross examination of DW1 to suggest that Ex.D7 is a cooked up document. On the contrary, none of the contents of Ex.D7 is challenged, either in the evidence let in by the plaintiffs or during cross examination of DW1.
10.85. As pointed out earlier, the first plaintiff was present when the sealed covers were opened on 15.5.1995. He could not go to the witness box, allegedly due to ill-health. PW1 stated during cross examination by the learned counsel for the second defendant that she did not remember whether she was living in India or USA during April 1995. She admitted that she was not present along with her father at Bangalore on 15.5.1995. Therefore, whatever she deposed, as having happened on 15.5.1995 at Bangalore, was only hearsay. On the contrary, what was deposed by DW1, about the happenings on 15.5.1995, came out of first hand personal knowledge. Even if the oral assertion of DW1 is kept aside for a moment, the Court has to go by the circumstantial evidence, as reflected by any contemporaneous document. The earliest of the said documents is Ex.P17, the letter of the first plaintiff dated 13.6.1995. This Ex.P17 is completely silent about the happenings on 15.5.1995. If there is any truth in what the plaintiffs claim, the first plaintiff ought to have recorded in Ex.P17 that he offered to match the highest offer and that he informed the other participants in the tender, of their right of pre-emption.
10.86. A question was put to PW1 during cross examination whether her father made known to all those present on 15.5.1995 about his objections, in writing. PW1 admitted that there is nothing in writing. Another question was put to her as to whether there is anything in Ex.P17 to show that her father protested on 15.5.1995 or that he wanted to match the highest bid. Interestingly, PW1 gave a very evasive reply, without pointing out whether there was anything in Ex.P17 to support their stand. Therefore, I do not believe the plea of the plaintiffs that the first plaintiff either agreed to match the highest offer or informed the other participants of their right of pre-emption on 15.5.1995. On the contrary, the stand taken by the first defendant that the highest offer made by the second defendant was accepted and confirmed in the presence of the first plaintiff, deserves to be accepted.
10.87. Once it is concluded that the offer of the second defendant, found to be the highest, was accepted and also confirmed in the presence of the first plaintiff, the next question that arises for consideration is as to what were the consequences of such a conduct and such an event, on the right of pre-emption.
10.88. As pointed out by the Supreme Court in Indira Bai (supra), estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith. Therefore, if the plaintiffs have so conducted themselves, as to give an impression to third parties, then they would be estopped from seeking to enforce the right of pre-emption.
10.89. In the case on hand, the plaintiffs are guilty of three acts of omission, viz. (a) the omission to avail the repeated opportunities provided by the first defendant during the period 1984-85, as revealed by Exx.P5 to P15; (b) the omission to make an offer to match the highest bid, in the meeting held on 15.5.1995; and (c) the omission to comply with the order of the Division Bench for a full period of four years. Apart from these acts of omission, the plaintiffs were also guilty of an act of commission, namely that of taking back the cheque and also allowing the offer made by the second defendant to be confirmed on 15.5.1995, without any demur or protest. These acts of omission and commission would operate as acquiescence in the sale by a positive act, amounting to relinquishment and they led to the forfeiture of the right of pre-emption. Hence the plaintiffs are not entitled to enforce the right of pre-emption.
10.90. As stated earlier, the right sought to be enforced by the plaintiffs is a weak right and there are no equities in favour of the plaintiffs. Therefore, in the light of the above discussion, I hold on issue No.(i) that though their very participation in the tender, per se may not operate as estoppel against the plaintiffs, their right became unenforceable, after their status as tenants got extinguished and after the ownership of the buildings became vested with the first defendant. Their conduct on 15.5.1995 amounted to acquiescence, leading to the forfeiture of the right.
10.91. Similarly, I hold on issue No.(iii) that the failure of the plaintiffs to deposit the amount as ordered by the Division bench also amounted to acquiescence, since it was that failure which emboldened the first defendant to execute the sale deed in favour of the second defendant, after the petitions filed by the plaintiffs for clarification and extension of time were dismissed.
10.92. In the light of my findings on the above issues, it goes without saying that even before the execution of the sale deed dated 9-11-2006 by the first defendant in favour of the second defendant, the plaintiffs had lost their right. Additional issue No.(ii) is accordingly answered against the plaintiffs.
11. Issue No.(ii) 11.1. Since the right of pre-emption sought to be enforced by the plaintiffs in this case, arises out of a contract, the second issue framed in the case is as to whether the plaintiffs are entitled to specific performance.
11.2. As pointed out by me in the previous chapter, the right of pre-emption conferred under Ex.P4 was co-terminus with the lease conferred under Ex.P3. Since the plaintiffs did not seek renewal of the lease, in accordance with the terms of Ex.P3, they ceased to have the right under Ex.P4 also.
11.3. But even assuming that they continued to have a right, the right arose out of a contract. Therefore, the present suit partakes the character of a suit for specific performance. Hence the plaintiffs are obliged to prove all the ingredients of such a suit. One of the most essential ingredients is the readiness and willingness on the part of the plaintiffs at all times.
11.4. But the plaintiffs have not demonstrated their readiness and willingness, either before the filing of the suit or even subsequently. They could not show readiness and willingness even on the date on which the Division Bench directed them to deposit the amount. The suit was instituted in 1995. The direction issued by the Division Bench, to deposit the sale consideration into Court within 6 months, was dated 28.3.2002. It was admittedly not complied with for a period of 4 years, on the specious plea that petitions for clarification and extension of time were pending.
11.5. Any amount of explanation for not doing so, may not save the plaintiffs, in view of the fact that the total amount covered by the two cheques (Exx.P23 and 24) allegedly sent from USA, even if taken to be true, would only be less than Rs.1.00 crore. Even when the applications for extension of time and for clarification were moved before the Division Bench in 2006 (after a gap of four years), the plaintiffs did not produce proof of having sufficient means to the extent of about Rs.5.00 crores, which they were supposed to deposit. Interestingly, questions were put to PW1 during cross examination as to whether she had produced any bank account to show that she had sufficient funds at the time when the two cheques were allegedly issued. She admitted that she did not produce bank accounts to show the availability of funds. The counsel for the first defendant issued a notice dated 29.5.2008 filed as Ex.D4 calling upon the plaintiffs to produce certain documents. One of the documents sought for, was the bank statement showing availability of funds in the accounts of the plaintiffs, from which the two cheques were allegedly issued. Under Ex. D6 reply dated 25.9.2008, the plaintiffs claimed that the bank statement was not readily available, but that there were sufficient funds. Even after saying so, the plaintiffs failed to take any steps to produce the accounts. Thus, despite the grant of opportunities, the plaintiffs were unable to establish that they had sufficient funds to pay the consideration. The repeated assertions that they wanted to buy the property would, at the most show the willingness on the part of the plaintiffs, but not their readiness. Consequently, even if I give them the benefit of doubt and hold that they had willingness, I cannot find readiness on their part to go ahead with the deal. Therefore on Issue No.(ii), I hold that the plaintiffs are not entitled to specific performance since they have not established that they were ready as well as willing, at all points of time, to perform their part of the obligations.
12. Issue Nos.(iv) and Additional Issue No.(i):
12.1. Admittedly, the second defendant participated in the tender held on 15.5.1995 and quoted the highest bid. According to the defendants 1 and 2, the bid was accepted and confirmed in the presence of the first plaintiff. This stand of the defendants has been established by evidence. The contention of the plaintiffs that the first plaintiff put all the participants on notice of their right of pre-emption, is not established. Therefore, there is no evidence to show that on the date on which the second defendant participated in the tender, he was informed of the right of pre-emption claimed by the plaintiffs. The first plaintiff who alone was present on the spot on 15.5.1995, could not go to the witness box. PW1 was not even sure whether she was in U.S. Or India at that time. Therefore I hold that there is nothing on record to show that the second defendant had notice of the right of pre-emption claimed by the plaintiffs either on the date of auction or on the date on which an agreement was entered into.
12.2. The tender took place on 15.5.1995. The suit was filed in August 1995 along with an application for interim injunction, impleading the second defendant as a party. Therefore, there is no doubt that the second defendant got to know about the claim of the plaintiffs at least after the institution of the suit. But this knowledge would not make the purchase of the property by the second defendant, a mala fide one. The interim injunction granted by the learned single Judge on 10.4.1996 was under challenge before the Division bench for 6 years. The Division Bench disposed of the appeals on 28.3.2002 granting 6 months time for the plaintiffs to deposit the amount. Even after the failure of the plaintiffs to deposit the amount within time, the second defendant did not proceed in haste to complete the transaction. It is only after the dismissal of the petitions of the plaintiffs for clarification and extension of time in 2006 that the second defendant proceeded to complete the transaction. Therefore, the second defendant is certainly, a bona fide purchaser for value.
12.3. It must be remembered that the first plaintiff is a private trust, created for the benefit of named beneficiaries. The trustees have proceeded to complete the transaction and the beneficiaries have not raised any concern. Therefore, the plaintiffs cannot now assail the sale in favour of the second defendant on the ground that they offered more amount than what was offered by the second defendant. A mere offer kept alive allegedly from 1995, but which was never supported by any proof to show availability of funds, despite the orders of the Division Bench, cannot displace a valid and genuine transaction. Therefore, I hold on Issue No.(iv) that the second defendant was entitled to purchase the property. In the facts and circumstances, I also hold on Additional Issue No.(i) that the second defendant was a bona fide purchaser for value, though they gained knowledge of the right claimed by the plaintiffs, after the institution of the suit.
13. Issue No.(v) In view of my findings on all the above issues, I hold that the claim of the plaintiffs is devoid of merits and that they are not entitled to any relief. Consequently, the suit is liable to be dismissed.
14. Result In the result, the suit is dismissed with costs.
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