Bangalore District Court
Lander Resorts India Pvt Ltd vs R K Industries Unit-2 on 27 April, 2024
1 Com.O.S.No.6181/2017
KABC170096752020
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 27th DAY OF APRIL 2024
PRESENT:
SUMANGALA S BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com. O.S.No.6181/2017
BETWEEN:
Lander Resorts India
Private Limited, office No.
524, above Fab India, 2nd
floor, beside stairecase,
Sahakara Nagar,
Bangalore - 5600092,
(Karnataka) (India).
Also at : 101, Ward No.2,
Bhyradevanahalli Post,
Bellary - 583117,
Karnataka, represented by
its Director, Mr. K. Anil
Kumar Reddy, S/o K. Gopal
2 Com.O.S.No.6181/2017
Reddy, aged about 38
years.
[
: PLAINTIFF
(Rep. by Sri. N Sudharshan
- Advocate)
AND
1. R.K. Industries (Unit-
2), Shree Ram House,
Khergada Street,
Khargate, Bhavnagar -
364001, Gujarat,
represented by its
Managing Director.
2. Shree Ram Steel and
Rolling Industries (Unit-2),
2, Samrat Chambers,
Khergada Street,
Khargate, Bhavanagar -
364001, Gujarat,
represented by its
Managing
Partner/Proprietor.
: DEFENDANTS
(Rep. by M/s AK Law
Chambers - Advocate and
Solicitors )
3 Com.O.S.No.6181/2017
Date of Institution 07.09.2017
Nature of the suit Recovery of money
Date of commencement of
recording of evidence 14.11.2019
Date on which judgment was
pronounced 27.04.2024
Total Duration Year/s Month/s Day/s
06 07 20
(SUMANGALA S. BASAVANNOUR),
LXXXII Addl.City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This suit is filed by the plaintiff to direct the Defendants jointly and severally to pay a sum of Rs. 5 crore to the Plaintiff in lieu of damages suffered by the Plaintiff on account of loss of profits, income as well as reputation and goodwill etc., 4 Com.O.S.No.6181/2017
2. The Brief facts of the Plaint are as follows:-
The Plaintiff is the absolute owner and in possession of the land bearing Survey No.9/2, Navarathna Agrahara, Jala Hobli, Bengaluru North Taluk measuring 2 Acres and 31 Guntas (inclusive of 2 Guntas of "b" Kharab), land bearing Survey No.10/2, Navarathna Agrahara, Jala Hobli, Bengaluru, North Taluk measuring 3 Acres and 08 Guntas, and land bearing Survey No.11, Navarathna Agrahara, Jala Hobli, Bengaluru, North Taluk measuring 2 Acres and 15 Guntas and land bearing Hobli, Bengaluru, North Falak measuring 2 Acres Guntas and land hearing Survey No.12/2, Agrahara. Jala Hobli, Bengaluru, North Taluk Acres and 11% Guntas (inclusive of y Guntas of Kharab). The above said properties/lands are hereinafter collectively referred as "the Property" for the sake of brevity. The said property was purchased by the plaintiff vide Sale Deed dated 09.12.2013. The 11 acres and 19 Guntas was converted for commercial purposes and 3 guntas of land in Survey no.12/2 is for residential purposes. In the month of September, 2014, the Defendants approached the plaintiff through Mr. Prakash Reddy S/o G. Venkata Reddy R/o 42, behind Madhuri Nursing Home, Gandhi Nagar, Bellary and Suresh V.L. Sto Rama Reddy. R/o Door No.1, KRN Building, Jai Bheema Nagar. 3 rd main, 3rd cross, BTM 1st Stage. Bengaluru with a proposal to develop the 5 Com.O.S.No.6181/2017 above mentioned property of the plaintiff. The representative of the Defendants namely Mr. Mukesh Bhai Bala Bhai Patel introduced himself as the partner of the defendant firms and apprised the plaintiff that the defendant firms are sister concern. Mr. Mukesh Bhai Bala Bhai Patel had induced the plaintiff company for the development of the Property through the defendants. He had further induced the Plaintiff by stating that one of their sister concern M/s Parinee Developer, in which Mukesh Bhai Bala Bhai Patel, is also one of the partner and authorised signatory multi-storey building. consisting of several flours, situated at G Block. Parinee Crescenzo, BLC Complex, Bandra Fast, behind MC A Club, Mumbai-400 051. The said sister concern M/s Parinee Developers is receiving several Crores of rupees as rent from its tenants including Mis. Sahara Group. The defendants through Mukesh Bhai Bala Bhai Patel had shown their persistent will and desire to develop the Property of the plaintiff since the said property is closely located to Bengaluru International Airport. Mr. Mukesh Bhai Bala Bhai Patel had offered to develop the Property by the defendants on joint development basis. In this regard, meetings were held between the plaintiff and the defendants 4 at the office of the Plaintiff situated at 98, Shop No.2, Ground Floor, Opp. Eshwara Temple. Naganathapur, Hosur Road, Bengaluru on several occasions commencing from the month of September, 2014.6 Com.O.S.No.6181/2017
The Plaintiff authorised its Director Mr. K. Anil Kumar Reddy, to negotiate for the development of the Property by the Defendants. Thereafter several meetings were held between the Plaintiff and the defendant firms/concerns (through Mukesh Bhai Bala Bhai Patel) in the presence of Mr. Prakash Reddy, Mr. V.Suresh and Mr. k. Somi Reddy. After the discussion parties agreed for the development of the Property comprising of high end Residential Condominium, Villas and Commercial Complex. It was agreed that the built up area would be shared in the ratio of 40:60 between the Plaintiff and the Defendants respectively. It agreed that the Defendants would pay a sum of Rs. 20 Crores as non refundable deposit to the Plaintiff for the development of the Property and also for allocation of 60% built up area to the Defendants. Since between December 2014 to January 2015 the time was not auspicious for executing any documents accordingly the parties had agreed to execute a registered joint development agreement by 16.01.2015 in this regard. It was further agreed that the Plaintiff would execute a registered power of attorney in favour of the Defendants or their nominees. Since the Defendants claimed to have a good marketing team and as such it was agreed that the Defendants would market to sell the built up area on the Property to the prospective buyers at abroad. It was agreed that the Defendants would hear all the expenses towards the marketing 7 Com.O.S.No.6181/2017 of the built up area and the Plaintiff would not be liable for any expenses that may be incurred by the Defendants in the course of marketing of the built up area. Understanding between the parties, the Defendants had offered to make the payment of Rs.20 Crores for the agreement to ensure that the Plaintiff would not look for any other prospective developer in the mean time i.e.,. till the execution of joint development agreement between the parties. Thus in order to bind the Plaintiff with the understanding reached between the parties, the Defendant No.2 had transferred a sum of Rs.15 Crores through RTGS in the account of the Plaintiff on 28.10.2014 and the Defendant No.1 had transferred a sum of Rs.5 Crores through RTGS in the account of Plaintiff on 30.10.2014. Thus, accordingly the Defendants joint is transferred Rs.20 Crores through RTGS in the bank account of the Plaintiff. The Defendants had failed to come forward for the execution of the joint development agreement on 16.01.2015 for the reason best known to the Defendants. Instead, the Defendants had sought extension of time till the end of month of February 2015 and had assured the Plaintiff that the defendant would commence the project i.e., the development of above mentioned property by first week of July, 2015 and further assured to complete the project within a period of 24 months from 01.07.2015. The Plaintiff had agreed to extend the time keeping in view of the fact that the 8 Com.O.S.No.6181/2017 defendant had already made pavement of Rs.20 Crores as non refundable security and as such there was no occasion to doubt about the integrity and commitment of Defendants to start the project. Despite the extension of time as stated above, the Defendants have failed to come forward for the execution of the Joint Development Agreement and for the development of the property. The Plaintiff had time and again requested the Defendants to come forward and execute the Joint Development Agreement, however the Defendants avoided it on the one pretext or the other. Finally, the Plaintiff had called upon the Defendants in the last week of March, 2015 to come forward for execution of Joint Development Agreement, failing which, the Plaintiff would forfeit the non-refundable deposit made by the Defendants. However. to the shock and surprise of the Plaintiff, the Defendants had, with their malafide intention, served a notice dated 16.04.2015 alleging concocted and afterthought story about advancement of a loan by the Defendants to the Plaintiff. Upon receipt of the said notice. the Plaintiff had agitated the issue to the Defendants and more particularly to Mr. Mukesh Bhai Bala Bhai Patel. However, the Defendants had stated that the notice has been served as the Defendants are not in a position to go ahead with the project at the moment, but assured to execute a Registered Development Agreement by 15.07.2015 and further agreed that if the Defendants fail to 9 Com.O.S.No.6181/2017 come forward for the execution of Joint Development Agreement, by 15.07.2015, then the Plaintiff would be entitled to forfeit the non refundable deposit i.e, the deposit of Rs.20 Crores made by the Defendants with the Plaintiff. Despite considerable extensions of time given by the Plaintiff to the Defendants for the execution of joint development agreement, the Defendants have failed to abide to their assurances and the terms and conditions orally agreed between the parties and as such the Plaintiff was left with no option, but to forfeit the non refundable deposit of Rs.20 Crores made by the Defendants. The fact of forfeiture of non refundable deposit was duly communicated to the Defendants through Mr. Mukesh Bhai Bala Bhai Patel.
The Petitioner alleged that, after payment of Rs.20 Crores by the defendants as non refundable deposit in the month of October, 2014. number of reputed developers had also approached the Plaintiff for the development of the aforesaid property of the plaintiff and offered a much better deal to the Plaintiff and even offered Rs.30 Crores to Rs.35 Crores as non refundable deposit, but the Plaintiff being bound by its commitment with the defendants after receiving a sum of Rs.20 Crores as non refundable deposit, had not entertained the said 10 Com.O.S.No.6181/2017 proposal. Due to non performance of the part of the agreement by the Defendants, the Plaintiff has suffered huge losses as the Plaintiff was not able to negotiate further even after getting good offers. It was only because the Plaintiff is loyal, committed to its customers business partners and is known for its integrity, good reputation and goodwill. The Defendants with malafides and despite being aware of the fact of forfeiture of their non refundable deposit, the Defendants had procceded further on the basis of their false and frivolous demand notice 16.04.2015 and initiated two Winding Up petitions' against the Plaintiff before the Hon'ble High Court of Karnataka at Bengaluru vide COP No.189/2015, titled as 'R.K. Industries (Unit-2) Vs. Lander Resorts India Pvt. Ltd. and COP No.190/2015, titled as Shree Ram Steel & Rolling Industries (Unit-2) Vs. Lander Resorts India Pvt. Ltd." The Plaintiff has already filed its Statement of Objections in the said Winding Up petitions by stating true and correct facts. The said disposal before the Hon'ble High Court of Karnataka at petitions are pending Bengaluru and as such the Plaintiff refrains itself from making any further averment with regard to the said pending petitions as the Hon'ble High Court of Karnataka is seized with the subject matters in these winding up petitions.11 Com.O.S.No.6181/2017
The Petitioner further alleged that the Plaintiff had suffered in terms of money, but due to delay in the development of the Property, the Plaintiff has also suffered in terms of its reputation and goodwill in the pertinent to mention here that market. Due to the delay further in the project and the dispute between the Plaintiff and the Defendants, now the Plaintiff is not getting good offers and proposals from any reputed developer for the development of the Property without there being any fault on the part of Plaintiff. The Plaintiff has already forfeited the non refundable deposit made by the Defendants to the tune of Rs.20 Crores and as such the Plaintiff is restricting its claim of the damages at present suit to the tune of Rs. 5 crore only. Hence, this suit.
3. The defendant resisted the claim of the plaintiff and filed the written statement stating that the malafide intention of creating some kind of false defense in order to circumvent the winding up proceedings pending on the file of the Hon'ble High court of Karnataka and numbered as C.O.P No. 189 and 190/2016. The said winding up proceedings are at an advanced stage of final hearing and the instituting of the present suit is completely malafide. The Plaintiff has filed this suit deliberately to make it appear as if it has a claim, something which was not raised to date. This suit for damages has been instituted as 12 Com.O.S.No.6181/2017 against the admitted debt of Rs. 20,00,00,000/- in C.O.P. No. 189 and 190 of 2016. The Plaintiff has already deposited a sum of Rs. 2,00,00,000/- with the Hon'ble High Court that it owes to the Defendants as debt. It was only after the Hon'ble High Court directed the Plaintiff to deposit the remaining Rs. 18,00,00,000/- that it woke up to an idea of filing the above suit with a singular motive of avoiding the winding up proceedings.. Such effort is malafide and an illegal attempt to avoid winding up proceedings. Such being the case it only seems like the Plaintiff's attempt at not only circumventing the winding-up proceedings that is arriving at its culmination before the Hon'ble High Court of Karnataka, but also at setting off the claim for damages as against the claim for debt. It is reiterated that the Defendants debt is admitted and due. A claim for damages requires adjudication by a Court of law. Merely because a claim for damages is made, it is of no consequence and the debt due and payable will not be affected in any manner, whatsoever, by a suit for damages. Thus the present suit holds no water and is not maintainable. No part of the cause of action has arisen within the jurisdiction of this Court. The Plaintiff claims that there has been some discussion within the jurisdiction of this Court. Even if one assumes this to be true, yet a mere negotiation or discussion does not vest jurisdiction within this Hon'ble Court. The suit pertains to an immovable property.
13 Com.O.S.No.6181/2017Hence the court which has jurisdiction would be the court where the immovable property is situated. Even otherwise if the claim for damages requires to be sustained against the Defendants then the suit would have to be filed before the court where the Defendants carry on business which is not within the jurisdiction of this court. Consequently, since this court does not have jurisdiction, the plaint may be rejected. The object for which the Plaintiff company was established was to carry on the business of promoting, developing, marketing and managing holiday resorts, retreats, rehabilitation centers, hotels, entertainment/amusement parks, health and sports centers, club houses, etc. and to carry on such other activities incidental to the foregoing object. The 1st Defendant and the 2nd Defendant for a financial assistance in the form of a temporary loan of Rs. 5,00,00,000/- and Rs. 15,00,00,000/- at the compounding interest rate of 15% per annum on 30.10.2014 for business purpose. The said loan amount was credited to the account of the Plaintiff through RTGS in Canara Bank Account of the 1st Defendant on 30.10.2014 bearing No. 4009201000022. The due date for the repayment of the said loan was 31.03.2015 along with the interest. The Plaintiff failed to provide any response to the various reminders of the Defendants for the repayment of the loan amount along with the interest. The Defendants were left with no option other than 14 Com.O.S.No.6181/2017 issue winding up notices dated 16.04.2015 under Section 433(e) read with Section 434 of the Companies Act, 1956 and corresponding Section 271 and 272 of the Companies Act, 2013 wherein the 1st Respondent requested the Plaintiff to an amount of Rs. 5,00,00,000/- and also requested to pay an interest of Rs. 31,43,836/- which has been outstanding as on 31.03.2015 and the 2nd Respondent requested the Plaintiff to pay an amount of Rs. 15,00,00,000/- and also requested to pay an interest of Rs. 95,54,795/-. The notice dated 16.04.2015 the Defendants categorically informed the Plaintiff to clear total outstanding dues along with interest as on 31.03.2015 within 21 days of the receipt of the said notice. The Plaintiff, in silent acquiescence of its liability, neither made the payment of any sum of money nor did it bother to respond to the said notice. It is apparent that the Plaintiff had no reply to the statutory notice given the truth in the statements made in the said notice. The Plaintiff did not even controvert any of the statements made in the statutory notice. The Plaintiff in fact has all along accepted this position except when it has now made an effort to avoid its liability to make payment and to avoid the winding up proceedings. The Plaintiff's failure to make payment of the amount legally due and payable to the Defendant despite service of statutory notice it became obvious that the Plaintiff Company was unable to pay its debts within the meaning and scope of the provisions 15 Com.O.S.No.6181/2017 of the Companies Act, 1956. As the Plaintiff company was unable to pay its debts within the meaning of Section 434 read with Section 433(e) and (f) of the Companies Act, 1956 and as the Defendants are creditor of the Plaintiff Company under the provisions of Section 439(1)(b) of the Companies Act, 1956, the Defendants filed a petition to wind up the Plaintiff company vide C.O.P. No. 189 and 190 of 2015 before the Hon'ble High Court. The aforementioned two petitions were subsequently clubbed and heard The conjointly since their facts and circumstances were the same and the reliefs sought analogous. The High Court of Karnataka vide order dated 03.06.2016 admitted the petition but deferred publication of advertisement so as to given an opportunity to the Plaintiff to make the payment of the entire amount. The Plaintiff, however, failed to make the payment all the same. A common order was passed in the two company petitions granting the Plaintiff four weeks time as a last opportunity to pay the due amount. The Appellant challenged the order dated 03.06.2016 in O.S.A. No. 13/2016, the said appeal came to be disposed as withdrawn after the Appellant filed a memo for withdrawal of the appeal. Accordingly, this Hon'ble High Court by an order dated 30.08.2016 permitted the Appellant to withdraw the appeal without providing any liberty to file a fresh appeal, further time of eight weeks. However, the Hon'ble High Court reduced the amount to be deposited to Rs.
16 Com.O.S.No.6181/20172,00,00,000/- from Rs. 20,00,00,000/-. The Defendants filed a memo dated 18.10.2016 and sought a clarification against the order dated 16.09.2016 that while allowing the request of the Plaintiff herein for additional time to deposit the due amount, vide order dated 16.09.2016, the Hon'ble High Court has allowed a further time of eight weeks and without any reason reduced the amount to be deposited to Rs. 2,00,00,000/- only. The Hon'ble High Court by an order dated 21.10.2016 in Company Petition No. 189 of 2015 connected with Company Petition No. 190/2015 observed that amount of Rs. 2,00,00,000/- directed to be deposited by a co-ordinate bench of this Hon'ble High Court by an order dated 16.09.2016 does not require any clarification. Thereafter, the Defendants filed an appeal against the said order dated 21.10.2016 in O.S.A. No. 20/2016 and O.S.A. No. 21/2016 respectively and the same came to be disposed of vide order dated 22.11.2016 and the learned Division Bench of the Hon'ble High Court clarified the said order. Thereafter, the Hon'ble High Court passed an order dated 09.03.2017 directing the 1st Defendant to take out advertisements in the leading daily newspapers and the same was complied with on 22.03.2017. Thereafter, on 31.08.2017, when the matter was taken up for final hearing, the Hon'ble High Court directed the Appellant to deposit the remaining sum of Rs. 18,00,00,000/- with the Registrar General of this Hon'ble 17 Com.O.S.No.6181/2017 Court on or before 21.09.2017. This order is currently under challenge by the appeal filed by the Plaintiff herein in its appeal numbered as O.S.A. No.25/2017 before the Learned Division Bench of the Hon'ble High Court. The Hon'ble High court vide order dated 12.10.2017 in the company petition No. 189 and 190 of 2015 connected with company petition No. 190/015 modified the earlier order dated 31.10.2017 and directed the Plaintiff's to deposit a sum of Rs. 1 crore by next day and further deposit a sum of Rs. 5 crore by 4 weeks. Pursuant to all of the aforementioned incidents having taken place the Plaintiff herein has found it wise to file the present suit in order to recover a sum of Rs. 5,00,00,000/- from the Defendants under the pretext that the Defendants had induced them to enter into a deal. The suit has been filed on 08.09.2017 after the order dated 31.08.2017 of the Hon'ble High court to deposit the balance sums of money. This suit was filed as a strategy to delay the proceedings before the company court. The suit is nothing but an afterthought in order to tackle any adverse situation before the Hon'ble Company court that the Plaintiff might be placed in. The suit has been filed at a belated stage since the Plaintiff should have filed the appropriate proceedings right when it had realised that the Defendants have allegedly failed to perform their obligations under the alleged oral agreement, as averred in the plaint.
18 Com.O.S.No.6181/2017The 2nd Defendant had transferred a sum of Rs. 15,00,00,000/- through RTGS in the account of the Plaintiff on 28.10.2014 and the 1st Defendant had transferred a sum of Rs. 5,00,00,000/- through RTGS in the account of the Plaintiff on 30.10.2014. Moreover, the said sum was given to the Plaintiff not as a token of agreement to develop any property as averred by the Plaintiff but as a short-term loan pursuant to the Plaintiff's request dated 30.10.2014. All other averments in the paragraph under reply is denied as false and the Plaintiff is put to strict proof thereof. The Defendants issued notices seeking it is repayment of the loan extended to the Plaintiff, it is submitted that no communication or explanation as alleged by the Plaintiff took place between the parties. It is necessary to mention that the Plaintiff here claims that it was "shocked and surprised" at receiving the notice; however the Plaintiff despite being shocked and surprised did not bother to respond to the said notice. This demonstrates beyond any shadow of doubt that the Plaintiff admitted the transaction of a loan and since it had no money to make payment failed to repay the loan and since it had no justifiable reasons to respond to the notice, failed to do so. It is owing to the fact that the Plaintiff is unable to make payment, that the Defendants filed a petition for winding up of the Plaintiff. The Defendants reiterate that they had advanced a sum of Rs. 5,00,00,000/- to the Plaintiff as a 19 Com.O.S.No.6181/2017 loan amount with a compounding interest at the rate of 15% p.a. Thus, the averment that the Plaintiff has already forfeited the non-refundable deposit of Rs. 20,00,00,000/- that was apparently paid by the Defendants does not hold water and is merely a baseless allegation. The Rs. 5,00,00,000/- that it seeks to recover as damages from the Defendants is in fact the amount that the Defendants had advanced to the Plaintiff as loan. Hence, he prayed to dismiss the suit.
4. Heard arguments and perused the records.
5. Based on the above pleadings, the following Issues are framed:
1. Whether the plaintiff proves that defendants had agreed to enter into a Joint Development Agreement dated 16.01.2015 as contended ?
2. Whether the Plaintiff proves that Defendants had paid a sum of Rs.
20,00,00,000 to it as a non-refundable deposit ?
3. Whether the Plaintiff is entitled to damages as claimed ?
4. What order or decree?
20 Com.O.S.No.6181/20176. My findings on the above Issues are as under:
Issue No.1 t 3 : In the Negative Issue No.4 : As per the final Order for the following reasons.
REASONS
7. Issue Nos.1 to 3: The Plaintiff filed this suit for damages on the basis of oral contract. Whether the oral agreemnt is valid on the basis of the said agreement can the Plaintiff seek the damages this point has to be conisdered.
8. An oral agreement is as valid as a written one. The legality of an oral agreement cannot be questioned if it falls under the ambit of the requirements stated in Section 10 of the Indian Contract Act, 1872. This was substantiated by the Delhi High Court in the case of Nanak Builders and Investors Pvt. Ltd.
9. The existence of a contract is sine qua non, or the grant of relief for a specific performance. The entire provisions of the Specific Relief Act contained in Chapter Ii refer to contracts that can be specifically enforced or otherwise. As per the provisions of Section 2 (h) of the Contract Act, "an agreement enforceable by law is a contract." Even an oral agreement can be a valid and enforced contract." Therefore, in the strict sense, it is not 21 Com.O.S.No.6181/2017 essential that a contract be in writing. Where the parties contemplate writing to complete the contract or where the contract is required by law or otherwise to be in writing, it will be necessary that the contract be reduced to writing. Further, where all the specific terms have been agreed upon and reduced into writing, the mere fact that it is stated that a formal contract will be executed does not render the writing, in the first instance, to be of no avail. These are certain general principles regarding the formation of contracts.
10. The first question arises for consideration: whether there is a valid, enforceable agreement between the parties. It is to be noted that the plaintiffs are relying on an oral agreement. There is no denial of the legal proposition that a suit for specific performance can lie on an oral agreement, and it is not mandatory that there be an agreement in writing. However, when a claim for specific performance is based on an oral agreement, it becomes even more necessary for the plaintiff to establish all the necessary ingredients of Joint Development agreement of immovable property, as well as those circumstances that entitle the plaintiff to claim the damages.
11. In this regard, I relied upon a decision reported in Brij Mohan vs. Sugra Begum (1990) 4 SCC 147: 1990 (2) R. R. R. 401, it was observed that an agreement or contract may be 22 Com.O.S.No.6181/2017 either oral or in writing. So, it is not necessary for enforcing relief arising out of a contract that such a contract be in writing. But where the plaintiff seeks a decree for damages on the basis of an oral agreement of sale of immovable property, a heavy burden lies on him to prove, firstly, that there was consensus agreement between the parties and the oral agreement for which the sale was concluded. Secondly, that the vital fundamental terms for the sale of immovable property were concluded between the parties orally (and any written agreement, if any, to be executed subsequently would only be a formal agreement incorporating such terms that had already been settled and concluded in the oral agreement). Whether there was such a concluded oral contract or not would be a question of fact. The burden of proof is heavy on a person who intends to get an oral agreement specifically enforced through a court of law.
12. Similarly in Ameer Mohammed vs. Barkat Ali, AIR 2002 Raj 406, it was observed that when the plaintiff bases his suit for specific performance on the basis of the oral agreement of sale of immovable property then it is his duty to disclose all material facts and particulars with all the conditions of the agreement and the surrounding circumstances including the fact that if oral agreement was entered into between the parties then 23 Com.O.S.No.6181/2017 whether it was in presence of any person and if there was any mediator who was he and what negotiations took place and if the agreement was acted upon then all the material particulars; how it was acted upon which includes the writing of any document by the parties, including the payments, mode of payment, receipt if was executed or the transaction was entered into books of accounts and what are the entries which are in the handwriting of other party. These basic facts are required to let the other party know about the detailed facts that will be used by the party seeking performance of the contract against the other party so that the other party can take its defenses. Even if an oral agreement is permissible under the law and is enforceable through the court of law, even then the plaintiff is required to prove the oral agreement with certainty so that the court can enforce the agreement in its entirety, and unless and until all the conditions relating to the contract requiring performance by the parties are not before the court, the court cannot enforce the agreement, which is required to be enforced specifically and not generally. If, after entering into an oral agreement containing a period sufficiently long for the performance of the contract, the parties get sufficient time and opportunity to put everything in black and white in a document, then further burden lies upon the party alleging oral agreement as to why the formal deed was not 24 Com.O.S.No.6181/2017 executed. The requirement of a formal deed is not a mandatory requirement for the enforcement of a contract, even though it may be one of the circumstances that go against the party seeking the performance of an oral agreement. Of course, it is true that oral agreements are not prohibited by law. However, whenever the very existence of such an oral agreement is disputed by one of the parties, a heavy burden lies upon the party who pleads for such an oral agreement to establish its existence as well as the conditions thereof with the support of clinching and admissible evidence.
13. In the present case, as discussed above, it is the case of the Plaintiff that after the discussion, parties agreed on the development of the property, which comprises high-end residential condominiums, villas, and commercial complexes. It was agreed that the built-up area would be shared in the ratio of 40:60 between the plaintiff and the defendants, respectively. It was agreed that the defendants would pay a sum of Rs. 20 crore as a non-refundable deposit to the plaintiff for the development of the property and also for the allocation of 60% of the of the built-up area to the defendants. The defendants had offered to make a payment of Rs. 20 crore for the agreement to ensure that the plaintiff would not look for any other prospective developer in the mean time, i.e., until the 25 Com.O.S.No.6181/2017 execution of a joint development agreement between the parties. The defendant No. 2 transferred a sum of Rs. 15 crore through RTGS into the account of the plaintiff on October 28, 2014, and the defendant No. 1 transferred a sum of Rs. 5 crore through RTGS into the account of the plaintiff on October 30, 2014. The defendants had failed to come forward for the execution of the joint development agreement on January 16, 2015.
14. PW.1 stated that in the month of September 2014, an alleged first meeting between the plaintiff and defendants took place relating to the alleged Joint Development Agreement. There were two meetings held in the office of the plaintiff, and then two more meetings were held with the broker, i.e., PW.2. There were four members were present in the meetings. Those four members are Pw. 2, his friend Sri. Suresh, Sri. Mukesh Bhai Bala Bhai Patel. Somi Reddy was not present in the meeting. The proposal to enter into a joint development agreement with the defendant was placed before the board meeting of the plaintiff. But the plaintiff has not produced the board resolution before this court. On the contrary, in the plaint averments and evidence affidavit, the plaintiff stated that the meeting was held in the presence of Sri. Anil Kumar, Mukeshabhi Balabhai Patel, Mr. Prakash Reddy, Mr. V. Suresh, and Mr. K. Somi Reddy.
26 Com.O.S.No.6181/2017But in cross-examination, he has stated that Mr. K. Somi Reddy was not present in the meeting.
15. Further, the plaintiff is a company as a legal entity, and the joint development agreement is a big contract, and approval has to be obtained in the board meeting. The plaintiff stated that they have placed the proposal of entering into a joint development agreement with the defendant before the board meeting of the plaintiff, but he has not produced any document to show that the plaintiff has placed the proposal of entering into a joint development agreement before the board meeting or whether the board has passed any resolution in this regard.
16. Further, the alleged mediator, Pw.2 Prakash Reddy, has stated that in the month of September 2014, negotiations between the plaintiff and Sri. Mukeshbhai Balabhai Patel took place; at the time, Sri. Anil Reddy and Sri Suresh were present, and he has clearly stated that the minutes of the meeting were not recorded. It was specifically stated that the agreement was not executed since Sri. Mukeshbhai Balabhai Patel is not ready and willing to come and sign the agreement. Further, the PW.2 has stated that in the month of January 2015, an oral agreement was taken regarding the forfeiture of a non- refundable security deposit if the defendant failed to execute 27 Com.O.S.No.6181/2017 the Joint Development Agreement on or before July 15, 2015, the Plaintiff can forfeit the non-refundable security deposit. The said terms were agreed by the defendant.
17. The PW.2 has categorically stated that the MukeshBhai Balabhai patel is not ready and willing to come and sign the agreement. But, the Plaintiff has not produced any docuemnts to shows that they have prepared the draft agreement. Furhter, except the PW.2 interested witness, there is oral or documentary evidence to shows that the defendant was orally agreed. Further neither the PW.1 nor the PW.2 has not stated that whether Sri. Mukeshbhai Balabhai Patel was agreed for forfieture clause or Defendat No.2.
18. Further, as above discussed the Pw.2 stated that in the month of January the oral agreement has taken place regarding the forfeiture of amount of non refundable of security deposit in case of failure of execute the Joint Development Agreement. But this fact is not indicates in averments of the plaint and evidence of Pw.1 and further except the transfer of the money from the Defendants, there is no documents to shows that there was any circumstantial document to shows that the Plaintiff and Defendant have entered into the oral agreement for Joint Development Agreement.
28 Com.O.S.No.6181/201719. Further, the 20 crore amount paid by the Defendant in the month of October 2014 till January 2015 no discussion were held. It is undisputed fact during Dasara and Diwali festival the definitely the days are aspicious and these festivals are generally celebrate in the month of October and November. Under these circumstances, the contention of the Plaintiff that time was not aspicious for execution of documents is not acceptable. Hence, I do not find any reason for non execution of joint development agreement, if defendant was agreed for Development of property as alleged by the Plaintiff.
20. In this regard, I relied upon a decision reported in S.R. Balakrishna vs. Yakoob, AIR 2001 Ker 215, it was observed that in cases of suit for specific performance by tenants of suit property alleging oral agreement of sale in their favour by the landlord, Whereas the averment denied by the landlord in a written statement. There is testimony of an interested witness in support of oral agreement. It was held that a decree for specific performance cannot be granted in favour of tenants as the alleged oral agreement was not proved and thus cannot be relied upon.
21. As per the Plaintiff, PW.2 and Suresh were particiapted in the suit transaction. The Plaintiff/Anil Kumar Reddy and PW.2/Prakash Reddy are native of Bellary and they know each 29 Com.O.S.No.6181/2017 other. The Plaintiff has not examined Suresh, according to the Plaintiff who was also involved in this transaction. Under such being the case, the interested testimony of PW.2 is not relied upon.
22. On the other hand, the defendant has categorically stated that the 1st defendant and the 2nd defendant received financial assistance in the form of a temporary loan of Rs. 5,00,00,000/- and Rs. 15,00,00,000/- at a compound interest rate of 15% per annum on October 30, 2014, for business purposes. In this regard, they have produced Ex.D.4 and Ex.D.5 RTGS challens to shows that amount 20 crores paid by the Defendant to the Plaintiff in the month of October 2014. The Defendant also produced E.xD6 letter dated April 16, 2015 under Section 433(e) read with Section 434 of the Companies Act, 1956, and corresponding Section 271 and 272 of the Companies Act, 2013, wherein the 2nd Defendant requested the Plaintiff to make repayment of sum of Rs. 15,00,00,000/- and with interest of Rs. 94,54,794.52 being interest calculated from the date of payment of loan till the 31.03.2015, failing which they shall initiated winding up petition against the Plaintiff at the risk of Plaintiff. The Defendant also produced E.xD7 letter dated April 16, 2015 under Section 433(e) read with Section 434 of the 30 Com.O.S.No.6181/2017 Companies Act, 1956, and corresponding Section 433(e-f) and read with Section 434 and 439 of the Companies Act, 1956, for winding up of the Respondent Company, wherein the 1 st Defendant requested the Plaintiff to make repayment of sum of Rs. 5,00,00,000/- and with interest at the rate of 15% of Rs. 31,43,836/- being interest calculated from the date of payment of loan till the 31.03.2015, failing which they shall initiated winding up petition against the Plaintiff at the risk of Plaintiff.
23. From Ex.D.8 and Ex.D.11 it is clear that the Defendant No.1 and 2 filed a company petition under Section 433 (e- f) read with Section 433 and 439 of the companies act against the Plaintiff for appointment of official liquidator for Plaintiff company. This case registered vide COP numbers 189 and 190 of 2015 before Hon'ble High court of Karnataka. It also admitted the fact that thereafter, on August 31, 2017, when the matter was taken up for a final hearing, the Hon'ble High Court directed the appellant to deposit the remaining sum of Rs. 18,00,00,000/- with the Registrar General of this Hon'ble Court on or before September 21, 2017. The Hon'ble High Court issued an order dated 10.12.2017.
31 Com.O.S.No.6181/201724. Ofcourse the Defendant has not produced any document to shows that he has paid an amount of Rs. 20 crore to the Plaintiff as a short term loan, but It is settled law that the Plaintiff In civil suit has to prove His Case On His Own Strength, Can't Draw Strength From Documents Of Other Side. Further, the plaintiff has to prove his case and he cannot rely upon the weakness of the defendant. As above discussed in this case, heavy burden is on the Plaintiff to prove oral agreement, on which basis the suit is filed for damages.
25. The plaintiff has alleged that the defendant has not come forward to execute the joint development agreement. So, as per the agreement, they have forfeited the 20 crores of non- refundable security deposit amount, and due to the non- performance of the part of the agreement by the defendant, they have suffered huge losses as they were not able to negotiate, even after getting good offers. The plaintiff also suffered in terms of reputation and goodwill in the market. Further, due to the delay in the project and the dispute between the plaintiff and defendant, the plaintiff is not getting good offers and proposals from any reputed developers for the development of property without any point on part of the plaintiff.
32 Com.O.S.No.6181/201726. It is admitted fact that till filing of the company petition the Plaintiff has not issued any notice to the Defendant calling upon to execute the Joint Development Agreement and also not issued any notice to the Defendant till filing of the company petition by the Defendant, stating that if Defendant fails to execute the Joint Development Agreement, he will forfeit the 20 crores amount. The Plaintiff alleged that according to the oral agreement they forfeited the security deposit amount. Further, the Plaintiff being a private limited company and the Defendant is also a partnership firm and company they are doing day to day commercial transaction. Inspite of that the Plaintiff has not chosen to execute any memorandum of agreement regarding execution of Joint Development Agreement and mentioning all the clauses as stated in the plaint.
27. In this case as above discussed, the Plaintiff case based on oral agreement. As above discussed except the interested testimony of PW.2. The Plaintiff has not examined any other witness and also not produced documents like board resolution and any documents to shows that he had received an amount towards the Joint Development Agreement. As above discussed heavy burden is costed on the Plaintiff to prove oral agreement regarding the Joint Development Agreement. But, in this case 33 Com.O.S.No.6181/2017 the Plaintiff has utterly failed to prove that there was an agreement between the Plaintiff and Defendant and the Defendants have paid 20 crore to bind the contract with the Plaintiff and Defendant and also failed to prove that the defendants are not come forward to execute the Joint Development Agreement. In this case, the Defendant contention that they have transferred 20 crore towards the Plaintiff for financial assistance. If really the Defendant have paid amount of Rs. 20 crore towards the Joint Development Agreement definitely would have execute the agreement immediately after transfer of the amount. Even today the Defendant has not come forward to execute the Joint Development Agreement. Furthermore, the Defendant has filed company petition before Hon'ble High Court of Karnataka for recovery of amount of Rs. 20 crore. It is clearly shows that the amount paid by the Defendant not towards the Joint Development Agreement it is for financial assistance and it is also admitted fact that the Plaintiff has deposited the amount of Rs. 20 crore before Hon'ble High court in company petition under Section 433(e) read with Section 434 of the Companies Act, 1956. So, by looking to the facts and circumstances of this case i hold that the Plaintiff has utterly failed to prove the oral joint development agreement and he is entitle to forfeit the 20 crore and also entitled to claim damages against the 34 Com.O.S.No.6181/2017 Defendant.
28. This suit is filed for damage. Even we presumed that there was a oral agreement for forfeiture of non-refundable deposit. The heavy burden is costed on the Plaintiff is establish that he has suffered a loss due to breach of oral agreement by the Defendant.
29. Section 73 of the Indian Contract Act reads as under :
"Section 73 of the ICA provides as follows: When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has committed breach, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from such breach. Compensation is not paid for any remote or indirect loss or damage sustained by reason of the breach. Besides, an explanation to this section adds that:
In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.
The avowed principles underlying the award of compensation are that the injured party should as far as possible be placed in the same position in terms of money as if the contract had been performed by the party in default. Where the contract is one of sale, this principle calls for assessment of damages as at the date of breach. Under a contract for the sale of goods, the measure of damages 35 Com.O.S.No.6181/2017 upon a breach by the buyer is the difference between the contract price and the market price at the date of breach. On a breach of contract to supply goods by the seller, the buyer is entitled to recover all the expenses of procuring same or similar goods. This was held by the Calcutta High Court in the case of Tata Iron & Steel Co Ltd v. Ramanlal Kandoi (1971) 2 Cal. Rep. 493, 528. In case of non-delivery of goods, the damages are fixed on the basis of the price prevailing on the date on which delivery is to be made, as was held by the Supreme Court in the case of Union of India v. Jolly Steel Industries (Pvt) Ltd. (AIR 1980 SC 1346). This tenet is also extended to instances of late delivery of goods."
30. Hon'ble Supreme Court in the case of Fateh Chand v. Bal Kishan Das, AIR 1963 SC 1405 and as followed in the recent judgment of the Hon'ble Supreme Court in the case of Kailash Nath Associates vs. Delhi Developers Authority and Another, (2015) 4 SCC 136, as also in the judgment delivered by this Court in the case of M.C. Luthra vs. Ashok Kumar Khanna in RFA No.780/2017 decided on 27.02.2018, 248 (2018) DLT 161: 2018 (169) DRJ 418, is that a seller under an agreement to sell cannot forfeit the amount received under the agreement to sell unless loss is pleaded and proved to have been caused to the seller on account of the breach of contract by the buyer. The relevant paras of the impugned judgment are paras 12.10 to 12.12 and these paras read as under:
36 Com.O.S.No.6181/2017"12.10 Hon'ble Supreme Court of India in its judgment titled "Fateh Chand vs. Bal Kishan Das" AIR 1963 Supreme Court 1405 has held that seller cannot forfeit the earnest money received under the agreement to sell even if the buyer is guilty of breach of performance of agreement to sell as forfeiture being in the nature of penalty is hit by Section 74 of The Indian Contract Act, 1872 which cannot take place unless loss is pleaded and proved by the seller. 12.11 Ratio of the earlier judgment titled Fateh Chand (supra) has been reiterated by Hon'ble Apex Court in "Kailash Nath Associates vs. Delhi Developers Authority and Another"
(2015) 4 SCC 136 by holding :-
"43.6 The Expression "whether or not actual damage or loss is proved to have been caused thereby"
means that where it is possible to prove actual damage or loss, such proof is not dispensable. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded".
31. M.C. Luthra vs. Ashok Kumar Khanna RFA No. 780/2017. Finding :- Defendant Sh. Nafe Singh having defaulted in obtaining NOC within time is not entitled to forfeit the earnest money as sale deed could not be executed in the absence of NOC. Similarly, he is not entitled to receive reasonable compensation under Section 74 of The Indian Contract Act, 1872 in the absence of pleading verifying any loss caused to 37 Com.O.S.No.6181/2017 him on account of termination of agreement to sell by the plaintiff.
32. Shree Hanuman Cotton Mills vs. Tata Air Craft Limited, wherein the Hon'ble Supreme Court held that "
(1) It must be given at the moment at which the contract is concluded.
(2) It represents a guarantee that the contract will be fulfilled or, in other words, "earnest" is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default or failure of the purchaser. (5) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest.
33. The Hon'ble Supreme Court in Kailash Nath Associates has clarified with reference to the ratio of Fateh Chand's case that when what is forfeited pursuant to a clause in a contract being an agreement to sell then that act of forfeiture is one falling under Section 74 of the Indian Contract Act, 1872 and that Section 74 of the Contract Act would only apply if the contract is of such a nature that loss cannot be proved on account of breach of contract but if the loss can be proved then 38 Com.O.S.No.6181/2017 it/loss must be proved failing which earnest money cannot be forfeited. The clause of forfeiture coming into application would only be where contract is such by its nature that the loss cannot be proved, unlike those contracts where it is possible to prove the loss caused and that breach of an agreement to sell/ purchase of immovable property is a type of contract where loss can be proved, and that once loss is not pleaded and proved to be caused to the defendant, then earnest money amount cannot be forfeited. The forfeited amount is in the nature of a penalty amount, then the Courts will not allow forfeiture of the liquidated amount/earnest money which is in the nature of penalty and that Courts will only grant reasonable compensation lesser than the total amount of earnest money which is a penalty amount.
34. In this case as above discussed the Plaintiff did not pleaded or proved that loss had been caused to them so as to entitle them to forfeit the amount paid to them under the Agreement. The Constitution Bench of the Supreme Court in the case of Fateh Chand makes it more than clear that a mere breach of contract by a buyer does not entitle the seller to forfeit the amount as received, unless, loss is proved to have been caused to the prospective sellers/defendants.
39 Com.O.S.No.6181/201735. In view of the Judgment of Hon'ble Supreme Court in the present case, the Plaintiff does not entitle to forfeit the amount. Since he has not pleaded or proved that he has been caused loss or damage on the account of breach of contract by the Defendant. Hence, by looking to the any angle of this case, the Plaintiff is utterly failed to prove that the Plaintiff is entitle for the relief as claimed in this suit. Accordingly, I answer these issues are in the Negative.
36. Issue No.4 : Therefore, I proceed to pass the following Order.
ORDER Suit of the Plaintiff is Dismissed.
Draw Decree accordingly.
The Office is directed to send copy of this Judgment to Plaintiff and Defendants to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(Dictated to the Stenographer, typed by her directly on computer, verified and then pronounced by me in open Court on this the 27th day of April, 2024).
(SUMANGALA S BASAVANNOUR), LXXXII Addl.City Civil & Sessions Judge, Bengaluru.
40 Com.O.S.No.6181/2017ANNEXURE LIST OF WITNESSES EXAMINED ON BEHALF OF THE PLAINTIFF P.W.1 K. Anil Kumar Reddy PW.2 Prakash Reddy LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE PLAINTIFF Ex.P.1 Board resolution dated 28.08.2017.
Ex.P.2 Board resolution dated 30.09.2014.
Ex.P.3 Certificate of Incorporation of the plaintiff
Company along with Memorandum of
Association and Articles of Association Certified copy of the sale deed dated 9.12.2013.
Ex.P.4 Certified copy of the sale deed dated 9.12.2013. Ex.P.5 Income Tax Return acknowledgment filed by the plaintiff Company for the assessment year 2015-
16. Ex.P.6 Form No.MGT-7 filed by Parinee Developers Pvt.
Ltd., before the Registrar of Companies.
Ex.P.7 Form No.MGT-7 filed by Shree Ram Vessel Scrap Pvt. Ltd., before the Registrar of Companies. Ex.P.8 Form No.MGT-7 filed by Parinee Reality Pvt. Ltd., before the Registrar of Companies.
Ex.P.9 Certificate U/Sec.65B of the Indian Evidence Act. Ex.P.10 Certified copy of I.A and Affidavit.
LIST OF WITNESSES EXAMINED ON BEHALF OF THE DEFENDANT D.W.1 MUKESHBHAI PATEL 41 Com.O.S.No.6181/2017 LIST OF DOCUMENTS EXHIBITED ON BEHALF OF THE DEFENDANT Ex.D1 Statement of Account.
Ex.D.2 Certificate of Registration online copy
(admitted by the defendant during the
course of statement of admission and
denial)
Ex.D.3 Reconstitution Partnership deed
Ex.D.4 Original RTG transaction form
Ex.D.5 Original RTG transaction form
Ex.D.6 Office copy of the demand notice dt
16.04.2015
Ex.D.7 Certified copy of the Company petition No.
189/2015
Ex.D.8 Certified copy of the Company petition No.
190/2015
Ex.D.9 Certified copy of the staqtement of
objections filed in Company Petition
189/2015
Ex.D.10 Certified copy of the staqtement of
objections filed in Company Petition
190/2015
Ex.D.11 Certified copy of the Order in Order of COP
No. 189/2015 c/w 190/2015
Ex.D.12 Certified copy of the withdrawal memo
filed in OSA no. 13/2016
Ex.D.13 Certified copy of Order in OSA no. 13/2016
Ex.D.14 Audit report of defendant no.1 for the
period 2014-15 (pg no.3 to 55)
Ex.D.15 Audit report of defendant no.1 for the
period 2015-16 (pg no.56 to 106)
Ex.D.16 Audit report of defendant no.1 for the
period 2016-17 (pg no.107 to 138)
Ex.D.17 Audit report of defendant no.1 for the
42 Com.O.S.No.6181/2017
period 2017-18 (pg no.139 to 178)
Ex.D.18 Audit report of defendant no.1 for the period 2018-19 (pg no.179 to 240) Ex.D.19 Audit report of defendant no.1 for the period 2019-2020 (pg no.241 to 285) Ex.D.20 Audit report of defendant no.1 for the period 2020-2021 (pg no.286 to 332) Ex.D.21 Audit report of defendant no.2 for the period 2014-15 (pg no.333 to 384) Ex.D.22 Audit report of defendant no.2 for the period 2015-16 (pg no.385 to 429) Ex.D.23 Audit report of defendant no.2 for the period 2016-17 (pg no.430 to 465) Ex.D.24 Audit report of defendant no.2 for the period 2017-18 (pg no.466 to 517) Ex.D.25 Balance sheet of Bhatukbhai Balabhai Patel for the period 2018-19 (pg no.518 to 519) (marked subject to objection) Ex.D.26 Balance sheet of Bhatukbhai Balabhai Patel for the period 2019-2020 (pg no.520 to
521) (marked subject to objection) Ex.D.27 Balance sheet of Bhatukbhai Balabhai Patel for the period 2020-2021 (pg no.522 to
523) (marked subject to objection) Ex.D.28 Online copy of I.T return acknowledgment for the assessment year 2015-16 of defendant no.1 Ex.D.29 Online copy of I.T return acknowledgment for the assessment year 2015-16 of defendant no.2 Ex.D.30 Certificate U/s.65b of Indian Evidence Act (SUMANGALA S. BASAVANNOUR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.