Bombay High Court
Time Star Limited vs Themis Medicare Limited on 7 August, 2025
2025:BHC-AS:29634
FA 1163 of 2015 (final).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 1163 OF 2015
THEMIS MEDICARE LIMITED ]
Themis Chemicals Limited ]
Themis Medicare Limited (Deleted) ]
A company incorporated under the ]
provisions of the Companies Act 1 of 1956 ]
having its registered office at ]
69, GIDC Industries Estate, ]
Vapi, Gujarat and its office at ]
12, Udyog Nagar, SV Road, ]
Goregaon (West), Mumbai - 400 062. ] ...Appellant
Versus
Indo French Time Industries ]
Time Star Limited (Deleted) ]
TIMESTAR PRIVATE LIMITED. ]
A company incorporated under the ]
provisions of the Companies Act 1 of 1956 ]
having its registered office at ]
12, Udyog Nagar, SV Road, ]
Goregaon - (West), Mumbai - 400 062. ] ...Respondent
WITH
FIRST APPEAL NO. 341 OF 2019
Timestar Private Limited. ]
Time Star Limited (Deleted) ]
A company incorporated under the ]
provisions of the Companies Act ]
I of 1956 having its registered office ]
at 12, Udyog Nagar, SV Road, ]
Goregaon - (West), Bombay - 400 062. ] ...Appellant
Versus
Themis Medicare Limited ]
A company incorporated under the ]
provisions of the Companies Act, 1956 ]
and having its registered office at ]
69, G.I.D.C. Industrial Estate, Vapi, Gujarat ]
and its office at 12, Udyog Nagar, ]
S.V. Road, Goregaon (West), ]
Bombay- 400 062. ] ...Respondent
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Mr. Kunal Dwarkadas, Mr. Rahul Deshpande, Mr. Nikhil Apte, Ms. Yashvi Vashi i/b Wadia
Ghandy and Co. for Appellant in FA 1163 of 2015 and for Respondent in FA 341 of
2019.
Ms. Mamta Sadh, Mr. Dharmesh Pandya, Ms. Tejal Pandya and Mr. Shyam Panchmukh,
i/b Mr. Ashwin Pandya and Associates for the Appellant in FA 341 of 2019 and for the
Respondent in FA 1163 of 2015.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : 8th May, 2025.
Pronounced on : August 7, 2025.
Judgment :
1. The First Appeals impugn the judgment dated 9th July, 2015
passed by the City Civil Court in Suit No. 9066 of 1992 seeking inter alia
specific performance of the Agreement for Sale dated 16 th February,
1990 and Supplementary Agreement dated 25th May, 1990 and in the
alternative, compensation of Rs.1,00,00,000/-. The suit came to be
partly decreed directing the Respondent herein to pay sum of Rs.
5,00,000/- to the Appellant along with interest.
2. First Appeal No. 341 of 2019 has been preferred by the original
Defendant challenging the adverse finding on Issue No.1 as regards the
valid execution of the supplementary agreement dated 25 th May, 1990
and First Appeal No.1163 of 2015 has been preferred by the original
Plaintiff. Common submissions were advanced and both Appeals are
being disposed of by this common judgment. For sake of convenience,
the parties are referred to by their status before the Trial Court.
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PLEADINGS:
3. The Defendant is the owner of the plot Nos. 11 and 12 situated
at Udyog Nagar Estate, S. V. Road, Goregaon (W), Mumbai – 62, which
are amalgamated plots on which building was constructed by
Defendant. It is pleaded that two agreements were entered into
between the parties, the first was an Agreement for Sale dated 16 th
February, 1990 in respect of sale of ground floor portion admeasuring
1691 square feet, the first floor admeasuring 5868 square feet and
second floor having buildable area of 5752 sq. ft and the second
supplementary agreement was executed on 25th May, 1990, admitting
payment of consideration of Rs.66,00,000/-, that the execution of final
deed of conveyance to take place only after construction of second
floor premises and that the possession of entire premises is handed
over on payment of entire consideration of Rs.1,26,00,000/-.
4. The Plaintiff has paid Rs.91,00,000/- and was put in possession of
ground floor and first floor, which is recorded in the Defendant’s letter
dated 5th June, 1990. Pursuant to the Defendant’s letter dated 1 st
June, 1990 addressed to the Plaintiff, a sum of Rs.5,00,000/- was paid
by the Plaintiff to the Defendant for obtaining the necessary
permission for construction of second floor. As no permission for
construction of second floor was obtained by Plaintiff, on 4 th January,
1992, meeting was held between the parties and minutes of meeting
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recorded the assurance of Defendant that the plans regarding Floor
Space Index are expected to be sanctioned by June, 1992 and once, the
Floor Space Index is obtained, either the Plaintiff or the Defendant will
start the construction. Further communication dated 6 th July, 1992,
was issued by the Plaintiff to the Defendant that no steps have been
taken for obtaining FSI and construction of second floor. It was pleaded
that the conduct of the Defendant makes it clear that the Defendant is
not interested in performing their part of the contract and that the
Plaintiff is ready and willing to perform their part of the contract.
5. The written statement takes the defence that the contract as
regards the second floor construction has become void and impossible
of performance by reason of Government Notification dated 21 st
August, 2004 restricting loading of TDR/balance FSI for development
of existing building and therefore, the additional construction on
existing structure stood totally prohibited. It was pleaded that vide
Agreement for Sale dated 16th February, 1990, the total aggregate
super built-up area of 13311 sq. ft. in the building was agreed to be
sold for a total consideration of Rs.1,26,00,000/-. By another
Agreement for Sale dated 2nd December, 1990, the Plaintiff agreed to
purchase premises having super built-up area of 459 sq. ft. for a
consideration of Rs. 5,51,000/- and were thus entitled to aggregate
super built-up area of 13,770 sq. ft. The Plaintiff has paid Rs.
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96,02,000/- under the Agreement dated 16th February, 1990 and Rs.
5,51,000/- under the Agreement dated 2nd December, 1990 and in or
about June, 1990, the Plaintiffs were put in possession of the premises
aggregating 8018 sq. ft. of super built-up area.
6. It was further pleaded that due to rejection of grant of FSI by
Superintendent of Land and Survey on 28th October, 1992/2nd
November, 2992, the Defendant is unable to construct the proposed
second floor. During the pendency of proceedings, with consent joint
measurements were taken, which revealed that the Plaintiff had
encroached upon various areas of suit property for which Suit No. 3727
of 1996 was filed.
7. It was further pleaded that the Agreement dated 16th February,
1990 stood frustrated and incapable of performance or otherwise. The
execution of the Supplementary Agreement dated 25 th May, 1990 was
denied by the Defendants pleading that they do not have any record of
it in their possession and knowledge about the same was acquired only
after taking inspection. The authority of Mr. Samir Shah to execute the
supplementary agreement was questioned and objection was taken as
the Agreement was unstamped. It was further contended that as the
essential element of the alleged Agreement is determination of
suitable alternative as per the mutual convenience which was left to be
decided by future agreement and therefore, the Agreement to enter
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into future Agreement cannot be a subject-matter of specific
performance. It was further contended that in view of absence of
requisite clearance for securing the floor space index and Government
resolutions, no question about the Defendant not being interested and
Plaintiff’s readiness and willingness arises.
EVIDENCE:
8. The plaintiff examined its Managing Director and C.E.O. who
deposed as regards the execution and the terms of the Agreement
dated 16th February, 1990 and that the Supplementary Agreement
dated 25th May, 1990 was executed to clarify certain points. He has
further deposed that the Defendant refused to construct the second
floor for which the meeting was held on 4 th January, 1992 in which
Defendant agreed to start construction of second floor but failed to do
so. He has further deposed that Mr. Samir Shah had the authority to
execute the Agreement dated 25th May, 1990 and denied that
Agreement to Sell the second floor area has become impossible of
performance and void. In support, he has produced the Agreement
dated 16th February, 1990, Supplementary Agreement dated 25 th May,
1990, Offer Letter dated 5th February, 1990, Reply to the Offer Letter
dated 7th February, 1990, resolution dated 12 th February, 1990, No
Objection Certificate issued by the Income Tax Authorities, Consent
Letters dated 5th June, 1990 and 1st June, 1990 and 15th July, 1991,
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Minutes of the meeting dated 4th January, 1992 and copies of the letter
dated 6th July, 1992 and 26th July, 1992.
9. In cross-examination, on the aspect of Supplementary
Agreement, he has admitted that he is not sure whether he was
present at the time of execution of the said Agreement. He has further
admitted that he has not read the resolution dated 12 th February, 1990
and has volunteered that the same was handled by the Company
Secretary and his father. He has deposed that he believed that Samir
Shah had power to execute and that he trusted Mr. Samir Shah and Mr.
Nikunj Shah, Directors of the Company. In cross-examination, P.W.-1
was called upon to produce the Plan referred to in the Agreement
dated 16th February, 1990, which were produced. As regards the
construction of the second floor, P.W.-1 has admitted that the
Defendant had not refused to construct the 2 nd floor. P.W.-1 was
confronted with the copy of the Defendant’s Letter dated 30 th August,
1993 (Exhibit D-1) and P.W.-1 admitted the receipt of the said letter. In
response to the question on the plans produced, he has deposed that
the plans were signed by his father and Samir Shah. He has further
admitted that he is not aware as to why the signatures of Manjula Shah
and S. B. Gokhale which were on the original Agreement are not there
on the plan. He has further admitted that the plans are not blueprint
but photocopies as the area in red was marked to be given to the
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Plaintiff on these plans. He has further admitted that he was not
present when the plans were handed over. The suggestion given was
that pink colour portion was agreed to be sold which was denied. The
plans were marked as Exhibit Nos. D-2, D-3 and D-4 respectively and
the blue-prints of the plans of ground floor and first floor were by
consent marked as Exhibit D-5 and D-6.
10. The Defendant examined its employee-Bharat Shah, who denied
the authenticity of the plans produced by the plaintiff’s witness and
marked D-2 to D-4 and deposed as to correctness of plan at Exhibit D-5
and D-6. He has further deposed about the directives dated 21 st
August, 2004, circular of MCGM dated 30 th August, 2004 prohibiting
loading of FSI on existing building in marginal open space, clarificatory
letter dated 3rd November, 2004 and that by reason therefore the
Agreement to Sell 5752 sq. ft. super built-up has become impossible of
performance though Defendant was ready and willing to complete the
transaction. He has further denied the execution of the Agreement
dated 25th May, 1990 and that as Mr. Samir Shah was not authorised by
resolution and the agreement is unstamped. He has denied any
agreement of suitable alternative arrangement by mutual convenience
upon failure of construction of 2nd Floor. He has further deposed about
the illegal encroachment by the Plaintiff in various areas of the suit
property. In support, D.W.-1 produced the report of M. M. Vaidya and
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Company dated 26th December, 1995, the directives dated 21st August,
2004, circular dated 30th August, 2004, Clarificatory Letter dated 3rd
November, 2004. The report of M. M. Vaidya and Company was
objected and was not marked in evidence.
11. In cross-examination, D.W.-1 has admitted that Manjula Shah is
still the Director of the Company. He has admitted the payment of
consideration of Rs.91,00,000/- out of the total consideration of Rs.
1,26,00,000/- and the payment of Rs. 5,00,000/- out of Rs. 35,00,000/-.
He has further admitted that he has not stated in the Affidavit about
the steps taken for completion of construction of 2 nd floor till the year
2004. He has further admitted that as the construction of second floor
is not started, the payment of balance consideration does not arise and
Defendant-Company had not called on the Plaintiff to make the
payment. He has further deposed that on the second floor, 9000 sq. ft.
FSI was available. He has deposed that his Architect had informed that
9000 sq. feet construction is permissible and that by putting external
columns extension cannot be permitted on existing structure. He has
admitted that he does not have written advice of his Architect, Pranav
Shah.
12. D.W.-1 has admitted that Samir Shah and Nikunj Shah were
Directors of Defendant-Company and after death of Nikunj Shah in
2001, Samir Shah was alone handling the Defendant-Company. He has
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admitted that in the year 1996, the Defendant-Company came to know
about the Supplementary Agreement dated 25 th May, 1990. He
deposed that in the year 1996, he inspected the records of the case
and become aware of the Supplementary Agreement. He has admitted
that there is no record to show that Samir Shah and Nikunj Shah
disputed the Supplementary Agreement dated 25th May, 1990. He has
volunteered that he is denying the Supplementary Agreement as there
is no resolution. He has further admitted that Manjula Shah who is
mother of Samir Shah has not disputed the Supplementary Agreement
till today on ground that it was executed without any acknowledgment
by Samir Shah. The case put to D.W.-1 about the possibility of
construction without putting columns on marginal space was denied on
the ground that he was not an Architect. D.W.-1 deposed that in the
year 1990 and at present, the position at site is existence of ground
plus one floor construction on the front side of Plot No.11 and ground
plus two floor building on rear side. D.W-1 has deposed that on the
right side of building, full-fledged building is constructed of ground
plus 21 floors and the area which was required to be given to Plaintiff
was on the second floor of front side of the building. He has admitted
that under Agreement dated 16th February, 1990, the Defendant-
Company had agreed to provide 1/5th share to Plaintiff-Company and
therefore, retracted the same in view of clause 19 of the Agreement.
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D.W.-1 deposed that the Defendant has taken steps to seek
construction of second floor on the front side and the copies of all
correspondence with the Corporation was provided to the Plaintiff. He
has further deposed that the steps taken regarding which the
Corporation has issued letter of rejection were taken for completion of
construction before 30th August, 2004.
FINDINGS OF TRIAL COURT:
13. The Trial Court framed and answered the following issues:-
Sr. Issues Findings
1. Whether supplemental agreement dated 25th
May, 1990 was validly executed by and between Affirmative
the parties to the suit?
2. Whether the Defendant was justified in not Defendant did not construct
constructing the premises agreed to be second floor of the
constructed being the second floor of the suit premises as permission was
building? not granted by the
Municipal Corporation.
3. Whether the agreement dated 16th February,
1990 and the supplemental agreement dated 25th Affirmative
May, 1990 are frustrated pursuant to the
directions of the BMC dated 21st August, 2004
issued under Section 154 of MRTP Act, 1996?
14. On the aspect of validity of Supplementary Agreement, the Trial
Court noted that the Defendants held back the evidence of Manjula
Shah and that despite acquiring knowledge about the agreement in
the year 1993 no action was taken against Samir Shah during his
lifetime. The Trial Court examined the terms of the Supplementary
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Agreement to arrive at a finding that the same was clarificatory
agreement and executed in light of letters dated 1st June, 1990 and
5th June, 1990. The Trial Court held that there is no evidence that
resolution has to be passed before executing agreement and
resolution dated 12th February, 1990 is consolidated resolution. It held
that non mentioning of the Supplementary Agreement in letters dated
1st June, 1990 and 5th June, 1990 is immaterial as the Supplementary
Agreement did not create any right.
15. On the issue of the construction of the second floor and the
frustration of contract, the Trial Court held that at the time of
execution of the agreement, the construction of the second floor was
only a possibility. Upon appreciation of evidence, the Trial Court came
to a finding that there is no evidence about any inquiry by Plaintiff as
regards the sanctioning of plans by Municipal Corporation and
negligence and failure of Defendant has not been proved. The Trial
Court held that Plaintiff was aware that Defendant is acting positively
to get permission for sanction but Corporation did not sanction the
plans. The trial Court held that the Plaintiff on its own did not take any
steps to seek permission from Corporation for construction by
satisfying the Corporation that second floor can be constructed on
ground floor plus first floor premises.
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16. The Trial Court held that the agreement was for construction of
second floor on the existing first floor and not at any other place on
the plot of land. It held that the evidence shows that steps were taken
by Defendant to construct second floor and no steps were taken by
Plaintiff to seek permission from Corporation for construction. The
Trial Court observed that the area directed to be reserved by order of
High Court was by way of undertaking. On the basis of the government
circulars and orders it held that there could not be any vertical
construction by putting columns in marginal space. The Trial Court cast
the burden upon the Plaintiff by holding that the Plaintiff did not lead
expert evidence to prove possibility of construction.
17. The Trial Court held that the agreement dated 16 th February
1990 is two-fold, one part is to transfer possession of already
constructed ground plus first floor and second part is the construction
of second floor which was contingent contract and by reason of Section
56 of Contract Act has become impossible due to denial of sanction by
Municipal Corporation.
18. On the enforcement of Clause 6 of the Supplementary
Agreement, the Trial Court held that there was no mutual Agreement
or convenience between the parties and the said clause cannot be
invoked to carve out any specific right in favor of the Plaintiff to get
built-up area equivalent of second floor in any other part of the
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construction of the Defendant and does not create any enforceable
right.
19. The Trial Court considered the provisions of Section 14(b) and (d)
of the Specific Relief Act, 1963 to hold that the construction of the
second floor of the building cannot be specifically performed. The Trial
Court further noted that there is no evidence on the damages and
partly decreed the suit and directed the payment of Rs. 5,00,000/- by
the Defendant which was in excess of consideration for ground floor
and the first floor.
SUBMISSIONS :-
20. Mr. Dwarkadas, learned counsel appearing for the Appellant
submits that the execution of supplementary agreement by Samir Shah
is not disputed and the objection is for the reason that Samir Shah had
no authority. Drawing attention of this Court to the resolution dated
12th February, 1990, he submits that the Board resolution does not use
the words ‘jointly’ or ‘together’ which indicates that even Samir Shah
could individually execute the Agreement and reference to all other
documents would include supplementary agreement. As an alternate
argument, he submits that the Plaintiff is not privy to the internal
functioning of the Defendant Company and the doctrine of indoor
management protects the third-parties by drawing support from the
decision in the case of Kantu Shankar Dessai vs. Sociedade Agricola
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Dos Gauncares De Cuncolim E Veroda1. He would further submit that
though the Defendant acquired knowledge about the Supplementary
Agreement in the year 1996, no action was taken against Samir Shah
during his lifetime and Manjula Shah has not disputed the
Supplementary Agreement. He would further submit that the
Plaintiff’s communication dated 6th July, 1992 referred to the
Supplementary Agreement which was not denied and neither any
proceeding has been filed under Section 31 of Specific Relief Act, 1963
seeking cancellation of the Supplementary Agreement.
21. On the aspect of Supplementary Agreement being unstamped,
he submits that the Supplementary Agreement is not instrument as
defined under Section 2(l) of the Maharashtra Stamp Act, 1958 [for
short, “Stamp Act“] as it does not create any right or liability. He
submits that the right to acquire the property arose from the
Agreement for Sale dated 16th February, 1990 and not the
Supplementary Agreement and in any event, the Deed of Conveyance,
if executed, will be the relevant document that would create rights in
the immovable property and would be required to be stamped as such.
22. Mr. Dwarkadas would submit that the suit sought specific
performance of the Agreement for Sale dated 16th February, 1990 and
Supplementary Agreement dated 25th May, 1990 and execution of
1 2019 SCC OnLine Bom 9566.
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Deed of Conveyance. He submits that the Agreement for Sale dated
16th February, 1990 is divisible as held by the Trial Court and the
Plaintiff has performed his part of the agreement and has been put in
possession, which leaves nothing but execution of Deed of
Conveyance. He submits that the case falls within the exception under
unamended Section 12(4) of the Specific Relief Act, 1963 and part
performance could be granted.
23. He submits that the Plaintiff is entitled to conveyance of
proportionate undivided share of the land and the defence of absence
of clarity of area to be conveyed is misplaced as the same is only
mathematical calculation. He points out the averments in the written
statement regarding the area already handed over to the Plaintiff. He
submits that even if it was held that the contract to construct the
second floor is frustrated by reason of Government circulars, the
Plaintiff is entitled to part performance of conveyance of ground floor
and the first floor along with the proportionate area. Drawing support
from the decision in the case of B. Santoshamma v. D. Sarala 2, he
submits that the Hon’ble Apex Court has held that Section 12 of
Specific Relief Act, 1963 must be construed liberally and to hold
otherwise would permit a party in breach to deliberately frustrate the
entire contract by his own wrongful acts. He submits that the contract
2 (2020) 19 SCC 80.
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was a commercial document and the intention of the parties must be
given effect.
24. He would further submit that the Defendant’s case of frustration
of contract is by virtue of directives issued by the Government and
therefore, burden was upon the Defendant to prove that the contract
was a contingent contract under Section 32 of the Indian Contract Act,
1872 [for short, “Contract Act“] and that the same was frustrated
under Section 56 of the Contract Act. He draws attention to Exhibit D-
1 to contend that the letter does not prove that the Defendant had
applied for floor space index and the application was rejected in
absence of production of the annexures to the letter. He submits that
the letter dated 30th August, 1993 was sent to the Plaintiff one year
after the suit was filed and under the provisions of Order VIII, Rule 1A
of Code of Civil Procedure, 1908, it was duty of the Defendant to
produce the same along with his Written Statement filed in the year
2011. He would further submit that the Trial Court erred in reversing
the burden of proof on the Plaintiff.
25. He would further submit that the doctrine of frustration under
Section 56 of Contract Act is an aspect of law of discharge of contract
by reason of supervening impossibility or illegality of act agreed to be
done, which burden to prove total prohibition was upon the Defendant
and doctrine of frustration cannot be available when the party takes
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upon itself the absolute obligation. He has taken this Court through
the Circular and Clarification issued by the State Government to
contend that the restriction was only upon construction proposed in
marginal open space and the Defendant failed to prove that it is not
possible to construct without putting up columns in the open space.
He submits that D.W.-1 has admitted that 9000 sq. ft floor space index
was available. He submits that as case for specific performance was
made out and if the Court is not inclined to direct the Defendant to
construct the second floor premises, the Defendant be directed to
convey the mutually acceptable alternate area of 5752 sq. ft. kept
vacant contemplated under clause 6 of the Supplementary Agreement
and recorded in the interim orders passed by this Court.
26. He would further submit that though the parties produced rival
plans, the plans at D-2, D-3 and D-4 are correct plans as the Agreement
refers to the ‘Plan in red colour boundary line’ which is reflected in
Exhibit D-2, D-3 and D-4 and the plans are signed whereas the Plans
under Exhibit D-5 have pink and yellow shade which do not match the
description in the Agreement and are unsigned. He submits that the
parties have submitted the ground floor plan along with the concerned
minutes of the order dated 9th August, 2005 which is identical to
Exhibit D-2 and not D-5. In support, he relies upon the following
decisions:-
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Gopal Ramvilas Gattani v. Sheshrao Pundlik Hivarkar by
LRs Dewababai w/o Sheshrao3
Satyabrata Ghose v. Mugneeram Bangur and Company4
Maharashtra State Electricity Distribution Company
Limited v. Ratnagiri Gas and Power Private Limited5
B. Santoshamma v. D. Sarala6
Nirmala Anand v. Advent Corporation (P) Ltd.7
Kantu Shankar Dessai v. Sociedade Agricola Dos
Gauncares De Cuncolim E Veroda (supra)
Naihati Jute Mills Ltd. v. Khyaliram Jagannath8
Twentsche Overseas Trading Co. Ltd. v. Uganda Sugar
Factory Ltd.9
M/s. Harishchandra Dwarkadas Cloth Market Indore v.
Firm Murlidhar Chironjilal10
Union of India v. Chanan Shah Mahesh Dass11
Zarina Siddiqui v. A. Ramalingam alias R. Amarnathan12
Sushil Kumar Agarwal v. Meenakshi Sadhu13
27. Per contra Ms. Sadh, learned counsel appearing for the
Defendant submits that as far as the Supplementary Agreement dated
25th May, 1990 is concerned, the resolution dated 12 th February, 1990
required both Samir Shah and Manjula Shah to execute the Agreement
3 2008(6) Mh.L.J. 231.
4 (1953) 2 SCC 437.
5 (2024) 1 SCC 333.
6 (2020) 19 SCC 80.
7 (2002) 8 SCC 146.
8 1967 SCC OnLine SC 10.
9 58 L. W.
10 1955 SCC OnLine MP 175.
11 1954 SCC OnLine Pepsu 19.
12 (2015) 1 SCC 705.
13 (2019) 2 SCC 241.
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for Sale under the common seal of the company and Supplementary
Agreement does not bear the common seal of the Company nor the
endorsement of the Company and is on the blank piece of paper. She
submits that there is no pleading that the resolution was joint or
consolidated resolution authorizing Samir Shah to execute the
Supplementary Agreement. She has taken this Court in detail through
the cross-examination of P.W.-1 and would submit that it is clear from
the evidence that there was no inquiry as to whether the Samir Shah
was authorized to execute the Supplementary Agreement. She would
further submit that the Trial Court erred in holding that the
Supplementary Agreement was Clarificatory Agreement by considering
the letter dated 5th June, 1990 which letter was subsequent to the
Supplementary Agreement.
28. She would further submit that for the first time at the appellate
stage, the plaintiffs seeks relief of being handed over area of 5752 sq.
ft. kept vacant as contemplated under Clause 6 of the Supplementary
Agreement, which was not pleaded before Trial Court. She has taken
this Court through Paragraph No.14 of the Written Statement to
contend that the Agreement to enter into the Agreement cannot be a
subject-matter for suit for specific performance and as there was no
pleading about Clause 6 of Supplementary Agreement, the Defendant
did not have a chance to meet the case. She would further submit that
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the area of 5752 sq. feet was kept vacant by way of an undertaking
given to the Court and cannot be said to be mutually convenient area
agreed between the parties. She would submit that the order of 18 th
March, 1996 of this Court makes it clear that the Plaintiff was given
liberty to lodge their claim before the B.I.F.R. which the Plaintiff did not
lodge and therefore, there is lack of readiness and willingness on the
part of the Plaintiff.
29. She would further submit that the Agreement dated 16 th
February, 1990 was contingent upon two future happenings i.e.,
consent of the income tax authorities and the sanction of the plan by
the BMC. She submits that the income tax clearance was duly received.
She submits that as per Clause 17 of the Agreement dated 16 th
February, 1990, the Defendants were to utilize certain unutilized FSI on
the property including the set back area, which floor space index was
not granted. She has taken this Court through the Written Statement
which makes reference to the letters dated 28 th October, 1992 and 2nd
November, 1992 received from the Superintendent of Land and Survey
and submits that it was for the Plaintiff to call upon the Defendant to
produce the letter or to take inspection under the provisions of CPC
and not having done so cannot place the burden on Defendant to
produce the same. She submits that the reason why the Plaintiff did
not take inspection is because the papers relating to FSI were already
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handed over to Plaintiff under the covering letter dated 30 th August,
1993 i.e. Exhibit D-1.
30. She has taken this Court through evidence of D.W.-1 and submits
that there is not even a suggestion that the BMC papers regarding the
Floor Space Index were not handed over to the Plaintiff under Exhibit
D-1. She submits that the silence of the Plaintiff after the receipt of
the letter dated 30th August, 1993 Exhibit D-1, speaks volumes as the
Plaintiff had acquired the knowledge about the sanction being refused
and by reason of refusal there was no question of construction of
second floor.
31. She would submit that the contract for construction and sale of
second floor stood frustrated under Section 56 of the Contract Act in
view of the circular issued by the Government of Maharashtra. She
submits that by production of circulars, the burden was discharged by
the Defendant and onus shifted upon the Plaintiff to prove that the
second floor could be constructed which burden has not been
discharged. She submits that the Trial Court has rightly concluded that
it was the Plaintiff who failed to lead expert evidence that the
construction of the second floor was still possible.
32. On the aspect of specific performance of part of the contract
under Section 12 of Specific Relief Act, 1963, she submits that it is
undisputed that the Plaintiff is in possession of ground floor and first
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floor and only the construction of second floor remains to be
performed for which, the suit came to be filed by pointing out prayers
in the plaint. She would further submit that to claim part performance
there has to be pleading and evidence and the same cannot be raised
for the first time before the Appellate Court.
33. She would further submit that the conveyance as regards the
ground floor and first floor and the undivided proportionate share in
the land cannot be executed as the Agreement is silent on the ratio of
the land appurtenant to the ground floor, first floor and second floor
to be constructed and therefore there is no clarity of area. She submits
that the Agreement makes reference to the super built-up area and in
absence of any evidence in respect of the loading on the carpet area to
convert into super built-up area which was material fact, no conveyance
could be granted. She submits that the plans forming part of the
Agreement were not produced by the plaintiff along with the plaint
and upon being called to produce, different plans were produced. She
would further submit that in Exhibit D-2 which was one of the Plans
produced, the area sold to the Plaintiff on 2 nd December, 1991 which is
subsequent to the execution of the Agreement dated 16 th February,
1990 is reflected and therefore, Exhibit D-2 cannot be said to be Plan
annexed to the Agreement of 16th February, 1990. She further submit
that the Plans Exhibit D-2 to D-4 bear signature of two parties whereas
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the signatories to the Agreement are four parties. She would further
submit that the conduct of the Plaintiff in encroaching upon portion of
Defendant’s property disentitles them to any relief.
34. She would further submit that under Clause 19 of the Agreement
dated 16th February, 1990, the Vendor could execute the Deed of
Apartment under the Maharashtra Apartment Ownership Act, 1970 for
undivided rights of the Plaintiffs and not exclusive conveyance of the
structure along with the land. She submits that under Section 22 of the
Specific Relief Act, 1963, the Plaintiff could have asked for possession,
partition and separate possession and any other relief to which, he may
be entitled and the relief of part performance falls squarely under
Section 22(1)(b) and will be barred by Section 22(2) of Specific Relief
Act, 1963.
35. She would further submit that the readiness and willingness of
the Plaintiff is not established as Clause (9) of the Minutes of the
Meeting dated 4th January, 1990 provides that upon FSI being
obtained, the construction can be commenced by Plaintiff or
Defendant. She submits that it is not the Plaintiff’s case that no FSI
was obtained and as entire BMC papers were handed over to Plaintiff,
who did not take any steps to perform their part, there was no
readiness and willingness.
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36. She would further point out the discrepancies in the Agreement
and plaint as the Agreement mentions super built-up area whereas the
Plaint mentions the same as built-up area. She would further submit
that P.W.-1 has deposed that the plans regarding the FSI was to be
sanctioned by June, 1992 and that the construction would be started
by June, 1992 which is contrary to the Paragraph 11 of the Plaint which
states that either Defendant or Plaintiff will start construction. She
would further submit that the Plaintiff has deposed that the
Defendants have admitted the execution of Agreement on 16 th
February, 1990 and 25th February, 1990 whereas the execution of the
Supplementary Agreement was disputed. She would further submit
that the communications as regards the encroachment have been
deliberately not tendered in evidence by P.W.-1. In support, she relies
upon the following decisions:
Madholal Sindhu v. Asian Assurance Co. Ltd.14
Sir Mohammed Yusuf v. D15
Narbada Devi Gupta v. Birendra Kumar Jaiswal16
Bachhaj Nahar v. Nilima Mandal17
Nandkishore Lalbhai Mehta v. New Era Fabrics Private
Limited18Sopan Sukhdeo Sable v. Assistant Charity
14 (1954) 56 BOMLR 147.
15 AIR 1968 Bombay 112.
16 2003 (8) SCC 745.
17 2008 17 SCC 491.
18 (2015) 9 SCC 755.
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Commissioner19
Anil Rishi v. Gurbaksh Singh20
Rangammal v. Kuppuswami21
A. Raghavamma v. Chenchamma22
Muddasani Venkata Narsaiah (dead) through Legal
Representatives v. Muddasani Sarojana23Union of India v. Ibrahim Uddin24
Harish Mansukhani v. Ashok Jain25
Shardaprasad v. Sikandar26
K. Prakash v. B. R. Sampath Kumar27
Parswanath Saha v. Bandhana Modas (Das)28
N. P. Thirugnanam (Dead) by Lrs. vs. Dr. R. Jagan Mohan
Rao29Kamal Kumar v. Premlata Joshi30
Joseph Constantine Steamship Line Limited v. Imperial
Smelting Corporation Ltd.31
37. In rejoinder, Mr. Dwarkadas has tendered a chart setting out the
calculation of proportionate area to which Ms. Sadh has tendered a
chart setting out rival calculations. He would further submit that there
is no requirement of pleading part-performance drawing support from
19 AIR 2004 SC 1801.
20 AIR 2006 SC 1971.
21 2011 AIR SCW 3428.
22 AIR 1964 SC 136.
23 (2016) 12 SCC 288.
24 AIR Online 2012 SC 785.
25 2009(109) DRJ 126(DB)(SN)
26 AIR 1915 Nagpur 15.
27 2014 AIR SCW5795.
28 AIR Online 2024 SC 872.
29 (1995) 5 SCC 115.
30 AIR 2019 SC 459.
31 H.L. (E.) 1941.
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the decision in the case of Gopal Ramvilas Gattani vs. Sheshrao
Pundlik Hivarkar by LRs. Dewababai w/o Sheshrao (supra). He would
further submit that the burden was upon the Defendant to prove its
case and reliance on provisions of CPC as regards production and
inspection are entirely misplaced. He submits that no reliance can be
placed on Exhibit D-1 which was merely a covering letter dated 30 th
August, 1993 and during evidence, D.W.-1 did not produce the
complete copy of this letter and there is no reference in the Affidavit
of Evidence of D.W.-1 to the said letter.
POINTS FOR DETERMINATION:
38. The facts of the case and the submissions canvassed would give
rise to the following points for determination:
(i) Whether the Supplementary Agreement dated 25th May,
1990 has been validly executed by Mr. Samir Shah and if validly
executed, is unenforceable being exigible to stamp duty?
(ii) If the Supplementary Agreement is validly executed,
whether Clause 6 of the Supplementary Agreement could be
specifically enforced to direct the Defendant to hand over the
area kept vacant under interim orders of this Court?
(iii) Whether under the Agreement for Sale dated 16 th
February, 1990, the parties had agreed for sale of the ground
and first floor alongwith proportionate undivided share in the
land and effect of Clause 19 of the Agreement for Sale dated
16th February, 1990?
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(iv) Whether by reason of the Agreement for Sale making a
reference to super built up area there is ambiguity qua the
proportionate undivided share of land to be conveyed, which
is incapable of specific performance?
(v) Whether the Agreement for Sale dated 16th February,
1990 in respect of ground floor and first floor stands on an
independent and separate footing from the agreement for
construction and sale of second floor and is thus capable of
part performance?
(vi) Whether the agreement to construct the second floor
was contingent contract and has become void by reason of
impossibility of performance under Section 32 of Indian
Contract Act, 1872?
(vii) Whether the Agreement for Sale dated 16th February,
1990 and Supplementary Agreement dated 25 th May, 1990
stood frustrated by reason of directives dated 21 st August,
2004 issued under Section 154 of the Maharashtra Regional
and Town Planning Act, 1966?
(viii) Whether there was readiness and willingness on
part of the Plaintiff to perform their part of the contract?
(ix) Whether it is equitable to grant specific performance or
part performance of the Agreement for Sale dated 16 th
February, 1990 and Supplementary Agreement dated 25 th
May, 1990?
REASONS AND ANALYSIS:
39. For sake of clarity, I have set out my reasons and findings on each
of the points determined above ad-seriatim.
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AS TO POINT Nos. (i) AND (ii):
40. Point Nos (i) and (ii) are in respect of the validity of
Supplementary Agreement dated 25th May, 1990 and enforcement of
Clause 6 thereof. Prior to the execution of the Supplementary
Agreement on 25th May, 1990, the parties had executed Agreement for
Sale dated 16th February, 1990. The Plaintiff and Defendant being
corporate entities, the Agreement of 16th February, 1990 was executed
by the Plaintiff though Shantilal Patel, Chairman and Managing
Director and counter signed by Mr. S.B. Gokhale whereas on behalf of
the Defendant, the Agreement was executed through Samir Shah as
the Chairman and the Managing Director and counter-signed by
Manjulaben P. Shah, the Director. The Agreement for Sale dated 16 th
February, 1990 bears the common seal of the Defendant Company. The
execution clause makes a specific reference to the resolution of the
Board of Directors dated 12th February, 1990 of the Defendant-
Company. The resolution dated 12th February, 1990 which was
admitted by consent of both the parties reads as under:-
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED BY THE
BOARD OF DIRECTORS OF THE COMPANY AT THEIR MEETING
HELD ON MONDAY THE 12TH FEBRUARY, 1990 AT 5.00 P.M. AT
THE REGISTERED OFFICE OF THE COMPANY.
“RESOLVED THAT subject to the permissions of the State Bank
of Hyderabad, State Bank of India, Central and State
Governments and Local Authorities being received, a portion
of the Company’s building situated on free hold landSairaj 29 of 79
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S. V. Road, Goregaon West, Bombay – 400 062 being ground
floor admeasuring 1691 sq. ft. 1st floor admeasuring 5868 sq.
ft. and second floor to be constructed admeasuring 5752 sq.
ft. aggregating to 13,311 sq. ft. be sold to M/s. Themis
Chemicals Limited having its registered office at 69 GIDC
Industrial Estate, Vapi, Gujarat at an aggregate consideration
of Rs. 126.00 lacs and that the draft agreement for sale for the
same placed before the meeting initialed by the Chairman for
the purpose of identification be and is hereby approved and
that Smt. Manjula P. Shah, Chairman and Shri Samir P. Shah,
Managing Director be and are hereby authorised to execute
the agreement for sale and such other documents as may be
required, under the common seal of the Company”.
“RESOLVED FURTHER THAT Shri Samir P. Shah, Managing
Director be and is hereby authorised to approach and receive
permissions from the Bankers of the Company viz. State Bank
of Hyderabad and State Bank of India and Central and State
Governments and Local Authorities and such other
permissions as may be required for the proposed sale of a
portion of the building and to take such steps as may be
necessary for the completion of the sale”.
“RESOLVED THAT since the Land and Building of the Company
situated at 12 Udyog Nagar, S V Road, Goregaon West,
Bombay 400 052 is charged to State Bank of Hyderabad and
State Bank of India, Bombay, they may be request to accord
their permission to sell the vacant space of 30,000 sq. ft area
of the building situated at plot nos. 11 & 12 of Udyog Nagar,
Goregaon at the prevailing market price only for the use as
offices for administrative sales/marketing and services
purposes.”
41. A plain reading of the resolution would indicate that the Board
of Directors of the Plaintiff-Company had authorized Smt. Manjula B.
Shah, Chairman and Shri. Samir Shah, Managing Director to execute the
Agreement for Sale and such other documents as may be required
under the common seal of the Company. It was further resolved that
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Samir P. Shah was authorized to approach and receive the permissions
from the bankers of the Company and other permissions which may be
required for the proposed sale of the building and take such steps as
may be required. The resolution is in two Parts. The first part of the
resolution authorizes Manjula P. Shah and Samir P. Shah to execute the
Agreement for Sale and other documents under the common seal of
the Company. Though there is absence of the word “jointly”, the use of
the word ‘and’ indicates that the Board of Directors had authorized
Manjula P. Shah and Samir P. Shah jointly to execute the Agreement for
Sale and such other documents under the common seal of the
Company. The fact that the second part of the resolution authorized
Samir P. Shah individually to carry out certain acts for securing such
permissions and to take steps as may be necessary for completion of
sale makes it clear that the first part of the resolution was joint
authorization of Manjula P. Shah and Samir P. Shah, Managing Director.
The individual authorisation to Samir Shah to take steps as may be
necessary for completion of sale has to be read in the context of the
second part restricting the individual authorisation only for
approaching and receiving permissions from financial institutions and
authorities.
42. The resolution of 12th February, 1990 authorised the persons
therein to execute the Agreement for sale and such other documents
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as may be required. The use of the expression “such other documents
as may be required” will necessarily mean such documents which are
required for completion of the sale such as conveyance deed. The same
cannot be construed to mean documents which would supplement the
terms and conditions which were already arrived at between the
parties under the Agreement for Sale of 16th February, 1990. Ms. Sadh
is right in pointing out that the resolution speaks of execution of other
documents under the common seal of the company, which is missing in
the present case. It is also not the case of the Plaintiff, that the
resolution of 12th Febuary, 1990 was joint and consolidated resolution
for execution all further agreements between the parties.
43. Perusal of the original Supplementary Agreement dated 25 th
May, 1990 makes it clear that it is not executed under the common seal
of the Company and has only been signed by Samir P. Shah as the
Chairman and Managing Director. Another aspect of the matter is the
discrepancy in the description of the designation of the Directors of
Defendant. The resolution of 12th February, 1990 refers to Manjula P.
Shah as the Chairman and Samir P. Shah as the Managing Director,
whereas the Agreement for Sale dated 16 th February, 1990 has been
executed by Samir Shah as Chairman and Managing Director and
countersigned by Manjulaben Shah as Director. If the resolution of 12 th
February, 1990 is accepted, then the execution of the Supplementary
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Agreement by Samir Shah in the capacity of Chairman and Manging
Director is itself invalid. There is no material on the basis of which it can
be concluded that the execution of the Supplementary Agreement by
Samir P. Shah as the Chairman and Managing Director of Defendant has
been validly executed.
44. Even if Manjulaben Shah has not stepped into the witness box,
the specific defence taken was that Samir Shah had no authority to
execute the Supplementary Agreement dated 25 th May, 1990. The
resolution of 12th February, 1990 was on record and could be read for
its true meaning and purport. It is well-settled that there is no inherent
authority possessed by an individual director to act on behalf of the
Company unless there is board resolution to authorize the act of
individual director. The absence of any action against Samir Shah or for
seeking cancellation of the supplementary agreement will not validate
the supplementary agreement executed without due resolution of the
Board of Directors and its invalidity can be raised in present
proceedings.
45. The admission of D.W-1 that Manjula Shah has not disputed the
Supplementary Agreement on the ground that it was executed without
any authority by Samir Shah does not assist the case of the Plaintiff as
the Company being a distinct and separate legal entity, inaction on the
part of one of the Director would not ratify the execution of the
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Supplementary Agreement dated 25th May, 1990. The act of individual
director of the Company of execution of Supplementary Agreement
not supported by valid authority by resolution of the Board of
Directors does not legally bind the Company. In the absence of any
valid resolution, Samir Shah by individually executing the
Supplementary Agreement has exceeded the authority and the
Agreement being void has no legal effect from the outset and is
therefore, unenforceable.
46. To support the validity of the Supplementary Agreement of 25 th
May, 1990, Mr. Dwarkadas would rely upon the decision in the case of
Kantu Shankar Dessai v. Sociedade Agricola Dos Gauncares De
Cuncolim E Veroda (supra) passed by the Hon’ble Division Bench of this
Court propounding the doctrine of indoor management. The Court
noted the decision in Lakshmi Ratan Cotton Mills Co. Ltd where the
creditor of the company was held to be required in law to be
conversant with the terms of Memorandum and Articles of Association
and no more and if the transaction is not barred, he is entitled to
presume completion of necessary formalities. In such circumstances,
the Allahabad High Court had held that passing of the resolution is a
matter of indoor or internal management of the company and its
absence under the circumstances therein could not be used as to
defeat the just claim of the bona fide creditor.
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47. In facts of that case, the Lease Deed was executed by the
President of the Plaintiff-Society without any authority and the
submission was that the bye-laws of the Society authorized the person
to represent the society,. The Hon’ble Division Bench noted that the
charter of the Society suggested clearly that the Society shall be
represented by the Manager acting as an Administrator of the
Company and as it found that there is no restriction on the authority of
the person to execute the act in the Constitution, it held that there is
no further duty on the person to inquire into the internal management
of the Company and assess whether or not due process has been
followed in executing the act.
48. The doctrine of indoor management propounded on the basis of
the decision of Kantu Shankar Dessai (supra) is premised on the
assumption of existence of authority on part of the party executing a
document. In the present case, the facts are completely
distinguishable in as much as when the first Agreement for Sale was
executed on 16th February, 1990, the execution clause makes a specific
reference to the resolution of 12th February, 1990. The plaintiff was
therefore, aware of the resolution of 12 th February, 1990 that the
Agreements have to be executed by Manjula Shah and Samir Shah
under the common seal of the Company. The Plaintiff is a corporate
entity manned with corporate experts including Company Secretary,
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legal advisers etc and is not expected to enter into contracts on
presumption of ostensible authority. The factual position is that the
Agreement for sale dated 16th February, 1990 was executed by both
Manjula Shah and Samir Shah and therefore, the Plaintiff cannot
assume ostensible authority of Samir Shah being in clear knowledge of
the resolution of 12th February, 1990 by relying on doctrine of indoor
management. The Supplementary Agreement was executed on behalf
of the Plaintiff by its Chairman and Managing Director and is expected
that he would be aware of the legal formalities. In the cross
examination PW-1 has deposed that the checking of formalities was
the job of the Company Secretary who must have checked the same,
however, the Plaintiff has failed to examine the Company Secretary.
49. Going one step further, even if it is held that Samir Shah was
authorized to individually execute the Agreement, the resolution
clearly provides for execution of the contract or other documents
under the common seal of the Company. There is admittedly, no
common seal of the Company and no authority to back the execution
of the Supplementary Agreement by Samir Shah.
50. The Trial Court answered the issue of validity of the Agreement
by holding that no Director had stepped into the witness box to state
about the Agreement and Supplementary Agreement and that there is
no defence that the document is forged and fabricated document. The
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Trial Court accepted that there is no resolution passed before
execution of the supplementary agreement, however, by examining
the terms of the supplementary agreement held that the same is in
consonance with the earlier agreement. It further relied upon the
letters of 1st June, 1990 and 5th June, 1990 to hold that subsequent to
the Agreement, Plaintiff and Defendant moved forward to complete
the terms and conditions. The fallacy of the said finding is that the
Supplementary Agreement was executed on 25 th May, 1990 and
communications relied upon by Trial Court were subsequent to the
execution of the Supplementary Agreement. The Trial Court erred in
holding that further clarifications were required as evident from the
contents of the two letters and therefore, the Supplementary
Agreement was executed which is factually incorrect finding. The Trial
Court mis-directed itself in holding that there is no evidence to show
that the Defendant-Company always followed the practice of passing
of the resolution and that the resolution dated 12 th February, 1990 is a
consolidated resolution as it was not the case of Plaintiff that the
resolution of 12th February, 1990 is a consolidated resolution. Even if it
is accepted that the resolution would authorize the Directors to
execute further documents, the resolution did not authorize Samir
Shah individually to execute the said Supplementary Agreement.
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51. Apart from the above discussion, PW-1 has tendered the
supplementary agreement dated 25th May, 1990 in evidence and has
deposed and identified the signature of the parties on the
Supplementary Agreement and the document was marked as Exhibit.
There is no evidence led by the Plaintiff to establish that the parties
had agreed to the terms and conditions contained in the
supplementary agreement. The proof of signatures on the agreement
is not proof of contents of the Agreement.
52. As regards the objection on the ground of the Supplementary
Agreement being unstamped, it is not necessary for this Court to go
into the said issue as I have already held that the Supplementary
Agreement has not been validly executed. Despite thereof, dealing
with the said objection, perusal of the Supplementary Agreement
would indicate that the same by itself does not create any right or
liability. Mr. Dwarkadas is right in relying upon Section 3 and Section
2(l) of the Maharashtra Stamp Act, 1958 to contend that the
Supplementary Agreement cannot constitute an instrument as defined
in Sections 2 (l) of the Stamp Act as it does not create, transfer, limit,
extend, extinguish or record any rights or liabilities. The rights or
liabilities were already created under the Agreement for Sale of 16 th
February, 1990.
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53. Proceeding on the assumption that the Samir Shah could have
executed the Supplementary Agreement, the emphasis is on the
enforceability of clause 6 of the Supplementary Agreement which
reads as under:-
“The vendors, in the event of their failure to complete the
construction of the second floor and handing over the
possession of the same before 31.12.1990 shall make suitable
alternate arrangements as per mutual convenience.”
54. The submission of Mr. Dwarkadas is that the area of 5752 sq. feet
which has been kept vacant on the ground floor of the building
pursuant to the undertaking given by the Defendant to this Court as
recorded in order of 18th March, 1996 and continued subsequently
amounts to a suitable alternate arrangement as per the mutual
convenience and therefore, Plaintiff is entitled to a decree to convey
mutually acceptable area. Firstly, there is no specific pleading or prayer
in the plaint seeking specific enforcement of Clause 6 of the
Supplementary Agreement and the Defendant had no chance of
meeting the case of suitable alternate arrangement of mutual
convenience. Secondly, by taking help of the interim orders it is now
sought to be contended that without any pleading or evidence, the
interim order be specifically decreeed by accepting the vacant area as
mutually suitable arrangement, which cannot be countenanced. What
Clause 6 envisages is an alternate arrangement in event, the
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construction of second floor or handing over the possession of the
same before 31st December, 2019 is not complied by the Defendant
which alternate arrangement was to be arrived as per the mutual
convenience of the parties. The area which is kept vacant under the
orders of the Court though by way of an undertaking given by the
Defendant cannot be said to be a suitable alternate arrangement of
mutual convenience. The alternate arrangement recorded in the
interim orders of this Court was subject to the final adjudication and
contentions of the parties cannot be said to be mutual agreement of
convenience. At the Appellate stage for the first time, the relief which
was not prayed, not pleaded and not proved cannot be granted and
therefore there can be no directions to treat the area kept vacant
under the orders of the Court as an alternate arrangement of the
Parties.
55. In light of the discussion above, the Supplementary Agreement
dated 25th May, 1990 having being executed by Samir Shah without any
valid authority is not legally binding on the Company and is therefore
unenforceable. Consequently, Clause 6 of the Supplementary
Agreement cannot be specifically enforced and in any event, not by
decreeing the interim order of keeping vacant the area of 5752 square
feet.
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AS TO POINT NOS. (iii) and (iv):
56. Point Nos.(iii) and (iv) relate to the interpretation of the
Agreement for Sale dated 16th February 1990 qua the proportionate
undivided share of land to be conveyed. The relevant clauses which are
Clause 1, 4, 14, 15 and 19 of the Agreement for Sale reads as under:-
“1. The Vendors shall sell to the Purchasers and the
Purchasers shall purchase from the Vendors the said Premises
shown on the plan hereto annexed in red colour boundary line
and having a total super built up area of 13311 square feet.
4. If the Vendors fail to make out a marketable title to the said
premises and the land beneath it and/or Vendors do not able
to obtain sanction of the Second Floor the Agreement shall at
the option of the Purchasers be terminated whereupon the
Vendors shall return the earnest money deposited with them
herein to the Purchasers and thereafter neither party shall
have any claim against the other.
14. The Vendors agree to do all such further acts and execute
of such further writings documents including the Deed of
Conveyance as may be required by the Purchasers Solicitors to
give effect to the provisions of this Agreement and effect the
same and transfer the said Premises alongwith the land from
the Vendors to the purchasers in terms of this agreement.
15. At the time of completion of sale the Vendors shall
convey to the Purchasers the proportionate undivided share in
the said land and the said Premises. The Conveyance shall
contain appropriate covenants (which shall be covenant
running with the land) as under :-
(a) The Purchasers shall always be entitled to deal with
dispose of by way of sale, mortgage, transfer, lease
giving on Leave and License basis or other basis the said
Premises and its undivided share in the said land.
(b) Similarly, the Vendors shall also be entitled to deal
with dispose of by way of sale, mortgage, transfer, lease
giving on Leave and Licenses basis or other basis its
undivided share in respect of the remaining portion of
the said land and the remaining portion of the said
Building.
(c) The Vendors shall also be entitled to deal with and
dispose of the same manner various portions of the said
Building to different persons and also proportionate
undivided share in the said land as shall be referable toSairaj 41 of 79
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19. If necessary and if the Vendors shall so desire the
Vendors shall submit the entire property to the provisions of
Maharashtra Apartment Ownership Act and in that event
instead of executing the Conveyance of undivided share in the
said property as aforesaid in favour of the Purchasers, the
Vendors shall execute the Deed of Apartment in respect of
the said Premises in favour of the Purchasers.”
57. The above clauses make it evident that the parties had agreed
for sale of the said premises, i.e. the ground floor, first floor and
proposed second floor alongwith the proportionate undivided share in
the land. There is no averment in the written statement that the
proportionate undivided share in the land cannot be conveyed as there
is no clarity. For the first time before this Court, the defence of
absence of clarity of proportionate undivided share of land is taken,
which is impermissible. If such defence would have been taken before
the Trial Court, an appropriate relief in that respect would have been
framed and necessary evidence led to substantiate respective cases.
Before this Court, both parties have produced rival charts of
calculations as regards the proportionate super built up area which
cannot be accepted in absence of any supporting evidence.
58. In any event, in Paragraph 4(b) of the Written Statement, the
Defendant refers to report of one M.M. Vaidya and Company certifying
the total carpet area of premises being 7575 square feet equivalent to
10226 super built up area which constitues an admission of the ratio of
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the carpet area to the super built up area. The submission of Ms. Sadh
is that the Agreement makes reference to the super built-up area and
the Agreement for Sale is not clear that the parties were ad idem on
the loading percent on the carpet area. The parties are corporate
entities and have entered into the Agreement for sale in respect of
the ground floor and the first floor (super built-up area) and the
proportionate undivided share in the land. What the agreement
envisages is the sale of ground and first floor area admeasuring super
built up area of 13311 square feet. The Plaintiff is already put in
possession of the ground and first floor and it is only matter of
mathematical calculation by taking into consideration the relevant
carpet area of which the Plaintiff has obtained possession to
thereafter arrive at the proportionate undivided share in the land. The
non construction of the second floor and the corresponding
proportionate undivided share in the land is immaterial as the
Agreement for Sale mentions the areas of the ground floor and first
floor separately from the proposed second floor.
59. Dealing with Clause 19 of the Agreement for Sale dated 16 th
February, 1990, the Clause permits the Vendors to submit the entire
property to the provisions of Maharashtra Apartment Ownership Act in
which event, instead of executing the conveyance of undivided share,
the Vendors shall execute Deed of Apartment. The effect of Clause 19
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is that where the property is submitted to Maharashtra Apartment
Ownership Act, instead of execution of Deed of Conveyance, a Deed of
Apartment would be executed. The arrangement between the parties
in respect of transfer of undivided share in the land remains the same
and only the mode of transfer is changed from Deed of Conveyance to
Deed of Apartment, which also gives an undivided proportionate share
in the land to the Apartment Owners. The said clause cannot be
construed as denying conveyance of the proportionate undivided share
in the land to the Plaintiff upon the Vendors deciding to submit the
property to Maharashtra Apartment Ownership Act. It is also not
shown that the Defendant has submitted the property to provisions of
Maharashtra Apartment Ownership Act.
60. In view of the above discussion, vide the Agreement for Sale
dated 16th February, 1990, insofar as ground and first floor is
concerned, the parties had agreed for sale of the ground and first floor
along with proportionate undivided share in the land and there is no
ambiguity as regards the area of the proportionate undivided share in
the land. Clause 19 of the agreement for sale merely refers to the
form of transfer and does not impede the conveyance of proportionate
undivided share in the land to the Plaintiff, if the Agreement for Sale
dated 16th February, 1990 is held to be enforceable.
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AS TO POINT NO. (v):
61. As regards the divisibility of the Agreement for Sale dated 16 th
February, 1990, insofar as ground plus first floor is concerned, the
agreement speaks of sale of the already constructed ground floor and
first floor portion and possibility of construction of second floor. The
Agreement refers to the total super built up area of 13311 square feet
comprising of 1691 square feet of ground floor, 5868 square feet of
first floor and the possible construction of 5752 square feet on second
floor. The total purchase consideration was Rs 1,26,00,000/ (Rupees
One Crore twenty six lakhs). Clause 2 of the Agreement sets out the
tranches of payment of sale consideration and payments to be made as
per sub clause (a) to (e) aggregates to Rs.91,02,000/- and sub-clauses
(f) to (g) aggregates to Rs.35,00,000/-.
62. The payment of Rs.70,00,000/- as per sub clause (e) of Clause 2
of the Agreement is subject to handing over vacant and peaceful
possession of the ground and first floor which makes it clear that the
payments from sub clause (a) to (e) of Clause 2 of the agreement are in
respect of the ground and first floor premises and the final payment as
contemplated in sub clause (e) is subject to the handing over of vacant
and peaceful possession after obtaining necessary permissions.
Whereas Sub Clause (f) makes the payment of Rs 15,00,000/ subject to
obtaining approval of the plans for construction of second floor and
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completion of slab, sub clause (g) refers to payment of Rs 10,00,000/
upon completion of second floor slab and sub clause (h) provides for
payment of Rs 10,00,000/ on obtaining occupation certificate and
handing over possession of second floor. There is thus clear division of
the payments to be made for sale of ground and first floor and
proposed second floor.
63. Upon a holistic reading of various clauses of the Agreement, it is
evident that the parties made separate arrangements as regards the
ground and first floor on one hand and the second floor on the other
hand. Clause 5 of the Agreement for Sale provides that the completion
of sale of the ground and first floor shall be on or before 31 st May, 1990
and as regards the second floor on or before December, 1990. The
agreement for sale sets out different time lines for payment of
consideration and for completion of sale as regards ground plus first
floor and proposed second floor. There is clear divisibility evident from
the agreement. The contract discloses that the parties were ad-idem
that the agreement for sale of the ground and first floor is
independent and separate from the agreement for construction and
sale of second floor which at the time of execution of the agreement
was a possibility and were careful in separately providing for the areas,
the purchase consideration, the date of handing over possession and
completion of sale. The conduct of the parties in putting the Plaintiff
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in possession of the ground and first floor in June, 1990 upon receipt
of the purchase consideration as detailed in sub clauses (a) to (e) of
Clause 2 of the Agreement is also indicative of the fact that the
agreement for sale in respect of ground plus first floor stood on an
independent and separate footing.
AS TO POINT NO. (vi):
64. The written statement pleads that in 1990, the Defendant made
an application for grant of FSI which was rejected by letters dated 28 th
October, 1992 and 2nd November, 1992 and therefore the contract has
become void.
65. The recital in the Agreement for Sale dated 16th February, 1990 is
that the construction of the second floor is a possibility. The
consideration clause provides for payment of part of the sale
consideration on approval on plans for the construction of second floor
from the BMC. Clause (4) of the Agreement for Sale provides that
where the Vendors are unable to obtain the sanction of the second
floor, the Agreement shall at the option of purchaser be terminated.
66. Section 31 of the Indian Contract Act, 1872 defines ‘contingent
contract’ as a contract to do or not to do something, if some event,
collateral to such contract, does or does not happen. Section 32 of the
Contract Act provides that the contingent contract to do or not to do
anything if an uncertain future event happens cannot be enforced by
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law until and unless such event has happened. If the event becomes
impossible, such contracts become void.
67. At the time of execution of Agreement for Sale dated 16 th
February, 1990, there was only a possibility of permissibility of the
construction of second floor which was dependent on the sanction of
the plan by the BMC and therefore a contingent contract. The written
statement does not specifically plead that the plans were submitted to
the Corporation for approval and were rejected. The case put up in
paragraph 3 and 10 of the written statement is that an application was
made in the year 1990 for grant of FSI to enable them to construct the
proposed second floor which was rejected by Superintendent of Land
and Survey by letter dated 28th October, 1992/2nd November, 1992 and
due to unavailbility of FSI, the second floor could not be constructed. In
paragraph 15 of written statement, in response to paragraph 7 to 9 of
the plaint, it is averred that despite spending huge amounts and
making all efforts, the Defendants were unable to obtain requisite
permission from Municipal Corporation of Greater Bombay for
construction of second floor.
68. In this context, it would be appropriate to refer to Clause 17 of
the Agreement for Sale, which reads as under:
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“17. It is expressly agreed between the parties that the Vendors
shall be entitled to utilise the un-utilised Floor Space Index (FSI)
is as referable to the said property on the basis of FSI one
prevailing as on the date hereof (including FSI that may be
available in respect of the set back area as on the date of this
Agreement) to the end and intend enitre un-utilised FSI of the
said property including as may be available of the set back area
as on the date hereof shall be at the disposal of the Vendors
who shall be entitled to utilise the same in construction of
additional constructed area on the said building and the
Vendors shall be entitled to dispose of on ownership basis
and/or in such manner as may be determined for its benefit
such additional constructed area.”
69. Clause 17 thus speaks of the unutilised FSI as well as the FSI that
may be available in respect of the set-back area as on the date of the
agreement. It is not the pleaded case of the Defendant that the plans
could not be sanctioned due to rejection of grant of FSI and only case is
that the application for grant of FSI has been rejected. It was necessary
for the Defendant, in view of Clause 17 of the Agreement for Sale, to
plead and prove that either there was no un-utilised FSI available or the
available FSI was inadequate for construction of proposed second
floor. There is not an iota of evidence led to substantiate the plea of
rejection of FSI. By raising the plea of impossibility of performance,
the Defendant invited the burden of proving that the construction of
proposed second floor was rendered impossible by reason of rejection
of FSI. The case put up in the Written Statement about rejection of
grant of FSI by letters dated 28 th October, 1992 and 2nd November,
1992 has been given go-by in evidence. D.W.-1 has deposed in respect
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of the directives of August, 2004 issued by the Government of
Maharashtra under Section 154 of the MRTP Act inter alia prohibiting
vertical extension on existing building which is the case put up under
Section 56 of Contract Act. DW-1 has not even orally deposed about
the rejection of application for grant of FSI muchless produced the
communications dated 28th October, 1992/2nd November, 1992. There
is no evidence that FSI was unavailable for construction of second floor
or that plans submitted to Corporation for construction of the second
floor has been rejected.
70. As the contract to construct the second floor was contingent
contract, the burden was upon the Defendant to establish that the
future event, i.e., availability of FSI and sanction of plans has become
impossible rendering contingent contract void. Ms. Sadh would submit
that plea of Section 32 of Contract Act is based on non sanction of
plans by corporation whereas there is no such evidence adduced by the
Defendant. In the cross-examination of P.W.-1, the case put up by the
Defendant was that the Defendant had kept the Plaintiffs aware about
what was happening with the Corporation and had also sent the
relevant papers. PW-1 was confronted with communication dated 30 th
August, 1993 which was marked as Exhibit D-1.
71. Much reliance has been placed on document Exhibit D-1, which is
letter dated 30th August, 1993 to demonstrate that the permission was
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rejected. Perusal of Exhibit “D-1” discloses that the same is a covering
letter addressed by the Defendant to the Plaintiff stating that the FSI
and building papers file is sent and to kindly acknowledge the receipt.
The document is not referred in the written statement and was
introduced during cross examination of PW-1. In this context the
provisions of Order XIII Rule 1 (1) and Order VIII Rule 1A of CPC that
the parties are required to produce on or before settlement of issues
all documentary evidence except the documents which are produced
for the cross-examination of witness of the other party. The said issue
was considered in decision of Laxmikant Sinal Lotlekar vs Raghuvir
Sinai Lotlkear32 that the only documents which can be produced in
cross-examination are those which are outside the case of each of the
parties and those meant to refresh witness memory. It has further
held that the amendment of 1976 introducing Sub-Rule (2) of Rule 2 of
Order XIII of CPC was to remove the mischief that documents covered
by Rule 2 should not find their way in the evidence by way of cross-
examination circumventing the provisions of law. As the Defendant
was relying on the document in support of its plea of Section 32 of
Contract Act, it was bound to produce the letter alongwith its
annexures with the written statement and the document could not
have been introduced in cross examination and that too in absence of
32 1984 SCC Online Bom 228.
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any reference to the said document and absence of pleading of non
sanctioning of plans by Corporation.
72. Perusal of Exhibit D-1 discloses that the same is a covering letter
addressed to the Plaintiff recording that they are sending FSI and
building papers, annexures to the covering letter, i.e. the FSI and
building papers are not produced on record. From the covering letter,
it cannot be deduced that the FSI was not made available to the
Defendant or that the Corporation had rejected the application for
construction of second floor. There is no explanation for non-
production of Exhibit D-1 by the Defendant along with entire file at the
time of filing its written statement when the defence of rejection of
FSI and sanction was put forth under Section 32 of the Contract Act.
73. The submission of Ms. Sadh that the burden was upon the
Plaintiffs to seek production or discovery under Order XI, Rule 12 of
the Code of Civil Procedure, 1908 and the Plaintiffs have failed to
prove their case is misplaced. The burden was upon the Defendant to
prove that by virtue of rejection of permission, contract has become
unenforceable rendering the contract void. There was no obligation
upon the Plaintiff to establish the case of Defendant by calling for the
annexure to Exhibit D-1. Further, Exhibit D-1, i.e. communication dated
30th August, 1993 is a communication subsequent to the filing of suit in
the subject-matter in 1992 and, therefore, the Plaintiff obviously could
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not have produced the communication even if the same was sent by
the Defendant.
74. Accepting Exhibit D-1 in evidence for the moment, the document
would only indicate that FSI and building papers were sent to the
Plaintiff. It is too far fetched to arrive at a conclusion based on this
covering letter that the Corporation had rejected the plans even if
there was silence on part of the Plaintiff after receipt of this letter. The
submission that it was for the Plaintiff to invoke the CPC provisions for
inspection and production cannot be accepted in absence of burden of
proof upon the Plaintiff. As there was no pleading in the written
statement about the plans being put up for sanction before the
Corporation and rejection thereof, there was no question of any denial
by the Plaintiff. Although not permissible to introduce documents in
cross examination, which should find place alongwith the written
statement, there is no explanation as to why PW-1 was confronted only
with the covering letter and the annexures were not produced. No
reliance can be placed on Exhibit D-1 to substantiate the Defendant’s
plea under Section 32 of Contract Act.
75. In cross-examination, DW-1 has admitted that on second floor
9,000 square feet FSI was available and 9,000 square feet construction
is permissible. The evidence discloses that FSI was available for
construction of the proposed second floor and the Defendant has
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neither pleaded nor proved that despite the FSI being available, the
building plans were not sanctioned by the Corporation. Upon
appreciation of oral and documentary evidence on record, it is evident
that the Agreement for Sale dated 16 th February, 1990 insofar as
construction of second floor is concerned, was a contingent contract.
The Defendant has failed to prove the unavailability of FSI or that plans
were submitted to the Corporation for construction of second floor
and were rejected by reason of which the contract cannot be enforced
and has become void under Section 32 of Contract Act.
76. The Trial Court committed an error in reversing the burden of
proof to hold that the Plaintiff had failed to give details whether the
Corporation sanctioned the plan for construction and failed to prove
refusal or negligence. The burden was upon the Defendant to prove
that the future event has become impossible by reason of rejection of
plans by Corporation or rejection of grant of FSI by reason of which the
contract has become void and having failed to do so, the plea of
Section 32 of Contract Act is not available to the Defendant.
AS TO POINT NO.(vii):
77. The other defence is of frustration of contract under Section 56
of the Contract Act which provides that an Agreement to do an act
impossible in itself is void and that the contract to do an act which,
after the contract is made, becomes impossible or by reason of some
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event which the promisor could not prevent, unlawful, becomes void
when the act becomes impossible or unlawful. The plea of frustration
of contract is premised on the directives issued by the Government of
Maharashtra and the subsequent clarifications. The circular of 21 st
August, 2004 issued under Section 154 of the MRTP Act, 1966
prohibited the vertical expansion of the existing building by loading
TDR and balance FSI where the erection of columns was in the available
marginal open spaces. By clarification of 3rd November, 2004, the
Government of Maharashtra clarified that where columns have been
provided in the existing building, i.e. on internal side, the existing
marginal distances are not reduced, the directives will not apply.
78. The directives were issued on 21 st August, 2004. The Agreement
for Sale was executed on 16th February, 1990 and under the said
agreement, the first installment of Rs.15,00,000/- in respect of the
second floor was to be paid on plans being approved. As per Clause 5,
the sale as regards the second floor was to be completed on or before
December, 1990. In the meeting held on 4th January, 1992 between the
parties, it was recorded that the plans regarding FSI is expected to be
sanctioned by June, 1992, which envisages that the plans were put up
for sanction. The circular of 3rd November, 2004 clarifies that in respect
of proposal received before receipt of directives and processed further
but IOD is not issued, the directives will not apply. As reliance is placed
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on Circular dated 3rd November, 2004 by the Defendant, it is evident
that the Defendant had not submitted the proposal for construction of
second floor till 2004 as in event the same would have been done, the
directives would not have applied. The plea is that by virtue of these
directives issued under Section 154 of MRTP Act, the contract stood
frustrated as the directives prohibit vertical expansion of building by
putting up columns in marginal open spaces.
79. Perusal of the directives and clarifying circular dated 3 rd
November, 2004 would indicate that the prohibition was on vertical
expansion by putting external columns in marginal open spaces and
additional floors proposed over existing building with new columns but
vertical expansion with columns provided within existing building i.e.
on internal side was permitted. DW-1 has admitted that on the second
floor 9000 sq. ft. FSI was available and the construction was
permissible. He has further deposed that their architect has advised
that by putting external columns extension cannot be permitted on the
existing structure. The defence is of total prohibition which is not
borne out from the Government directives and clarifying circulars. As
the Defendant asserted total prohibition, the burden was upon the
Defendant to prove total prohibition, which the Defendant failed to
prove. There is no evidence adduced by the Defendant that the second
floor cannot be constructed by putting up internal columns in which
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case the directives would apply resulting in frustration of contract.
D.W.-1 has merely produced copy of the directives and circulars and
deposed that due to the directives and circulars, the construction of
second floor become impossible of performance. It was necessary to
lead evidence of qualified expert to prove that it is not possible to
construct the second floor by reason of the directives and circulars.
The Trial Court has noted that in the cross examination, it was
suggested to DW-1 that there can be construction without putting
columns in the marginal space, which DW-1 denied to answer on the
ground that he is not an Architect.
80. After the initial burden of impossibility of putting up internal
columns was discharged by the Defendant, the onus would have
shifted to the Plaintiff to establish that the construction is permissible
and that there is no requirement of the columns being put in marginal
open spaces. As the initial burden was not discharged by the
Defendant, the onus did not shift upon the Plaintiff to prove the
exception. If the Defendant would have established that the contract
stood frustrated by reason of the directives, then the question of
examining the contract in order to ascertain whether the parties had
contemplated the possibility and provided for consequences thereof
would arise.
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81. The Trial Court held that in the case of load bearing structure on
the ground and first floor which is not disputed, there is no possibility
of construction of second floor by erecting internal column which was
not even the deposition of D.W.-1 and did not have any foundation in
evidence or pleadings. The Defendant cannot take advantage of the
circulars which were issued in the year 2004 to plead frustration of
contract without leading cogent evidence to establish that the only
way of construction of second floor on the existing building is by
putting external columns in marginal open space.
82. In absence of total prohibition on vertical expansion of the
existing building, the only evidence of directives issued under Section
154 of MRTP Act in support of frustration of contract produced, is not
sufficient to prove frustration of contract. It is not necessary to
consider the various citations on frustration of contract referred by
both the parties as the evidence on record does not establish that the
contract stood frustrated by reason of total prohibition on
construction of second floor.
AS TO POINT NOS. (viii) and (ix):
83. As far as readiness and willingness of the Plaintiff is concerned,
the Trial Court has held that the Plaintiff had made payment in excess
of agreed amount to extent of Rs.5,00,000/- and it cannot be said that
Plaintiff was not ready and willing. Ms. Sadh would assail the finding on
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January, 1992, it was agreed that once FSI is received, the same will be
handed over to the Plaintiff and the construction can be commenced
by either Plaintiff or Defendant and secondly that by interim order of
this Court, the Plaintiffs were at liberty to lodge their claim with BIFR,
which was not done. It is incomprehensible as to how the finding of the
Trial Court could be assailed on ground of subsequent interim order of
the High Court passed at the Appellate stage. The finding of readiness
and willingness arrived at by the Trial Court was on the basis of the
material produced during trial and the interim order passed by this
Court in the present Appeal proceedings cannot form the basis to
assail the finding of Trial Court. Secondly, the inaction of Plaintiff to
commence construction which was permitted as recorded in the
minutes of meeting dated 4th January, 1992 cannot be construed as
lack of readiness and willingness as it is the Defendant’s own case that
the Defendant’s application for grant of FSI was rejected. If there was
no sanction of FSI, the question of the Defendant handing over the
same to the Plaintiff purusant to which the Plaintiff could have
commenced construction does not arise. The Plaintiff has duly
complied with all its obligations under the Agreement for Sale and had
stood by the contract and the Trial Court was right in coming to the
finding of readiness and willingness in favour of the Plaintiff. That
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Written Statement that in the absence of requisite clearance for FSI,
the question of Defendant being not interested in performing their
part of contract or readiness and willingness of the Defendant does
not arise.
84. Coming next to the issue as to grant of part performance of the
Agreement for Sale dated 16th February, 1990, specific performance of
part of contract cannot be directed except as provided in Section 12 of
Specific Relief Act, 1962, which reads as under:-
“12. Specific performance of part of contract.–(1) Except as
otherwise hereinafter provided in this section, the Court shall
not direct the specific performance of a part of a contract.
(2) Where a party to a contract is unable to perform the
whole of his part of it, but the part which must be left
unperformed bears only a small proportion to the whole in
value and admits of compensation in money, the Court may, at
the suit of either party, direct the specific performance of so
much of the contract as can be performed, and award
compensation in money for the deficiency.
(3) Where a party to a contract is unable to perform the
whole of his part of it, and the part which must be left
unperformed either–
(a) forms a considerable part of the whole, though
admitting of compensation in money; or
(b) does not admit of compensation in money;
he is not entitled to obtain a decree for specific
performance; but the Court may, at the suit of the
other party, direct the party in default to perform
specifically so much of his part of the contract as he
can perform, if the other party–
(i) in a case falling under clause (a), pays or has
paid the agreed consideration for the whole of the
contract reduced by the consideration for the part
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which must be left unperformed and in a case falling
under clause (b), pays or has paid the consideration for
the whole of the contract without any abatement; and
(ii) in either case, relinquishes all claims to the
performance of the remaining part of the contract and
all right to compensation, either for the deficiency or
for the loss or damage sustained by him through the
default of the defendant.
(4) When a part of a contract which, taken by itself, can and
ought to be specifically performed, stands on a separate and
independent footing from another part of the same contract
which cannot or ought not to be specifically performed, the
Court may direct specific performance of the former part.
Explanation.–For the purposes of this section, a party to a
contract shall be deemed to be unable to perform the whole
of his part of it if a portion of its subject-matter existing at the
date of the contract has ceased to exist at the time of its
performance.”
85. Sub-section (4) of Section 12 provides that where the part of the
contract taken by itself can and ought to be specifically performed
stands on the separate and independent footing from another part of
the same contract which cannot or ought not to be specifically
performed, the Court may direct the specific performance of the
former part. In the present case, the Agreement for Sale dated 16 th
February, 1990 was clearly divisible in respect of two parts, i.e. ground
floor and first floor, which was already constructed, and, the
construction and sale of second floor which was dependent on the
necessary permissions being obtained from the Planning Authorities.
The Plaintiff in performance of the obligations under the Agreement of
Sale is put in possession of the ground floor and the first floor in the
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year 1990 itself, which is an admitted position. The obligation of the
Plaintiff was to make the payment of the entire consideration for the
ground floor and the first floor as per Clause 2(a) to (e) of Agreement
for Sale and the obligation of Defendant was to make out marketable
title free from all encumbrances and hand over the vacant and peaceful
possession and obtain permission from the appropriate authority,
under the Income Tax Act, 1961 and other consents and permissions.
The payment of the consideration and the handing over possession of
the ground floor and first floor has not been disputed. The obligations
under the Agreement for Sale dated 16 th February, 1990 confined to
the sale of ground floor and first floor stood complied by both the
parties save and except the execution of the conveyance of the ground
floor and the first floor along with the proportionate undivided share
as per clause 15 of the Agreement for Sale which reads as under:-
“15. At the time of completion of sale the Vendors shall
convey to the Purchasers the proportionate undivided share in
the said land and the said Premises. The Conveyance shall
contain appropriate covenants (which shall be covenant
running with the land) as under :-
(a) The Purchasers shall always be entitled to deal with
dispose of by way of sale, mortgage, transfer, lease
giving on Leave and License basis or other basis the said
Premises and its undivided share in the said land.
(b) Similarly, the Vendors shall also be entitled to deal
with dispose of by way of sale, mortgage, transfer, lease
giving on Leave and Licenses basis or other basis its
undivided share in respect of the remaining portion of
the said land and the remaining portion of the said
Building.
(c) The Vendors shall also be entitled to deal with and
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undivided share in the said land as shall be referable to
the different portions of the said Building.
86. It is not debated that the Agreement for Sale provides for
conveyance of proportionate undivided share in the land and,
therefore, the only obligation which now remained to be performed
was the conveyance of the ground floor and the first floor along with
the proportionate undivided share. The Agreement for Sale dated 16 th
February, 1990 for sale of ground and first floor alongwith the
proportionate undivided share in the land stood on a separate and
independent footing capable of being specifically performed and
would fit squarely within the defined parameters of Section 12 (4) of
Specific Relief Act, 1963.
87. The grant of specific performance of part of the contract is
resisted by contending that there was no pleading and no prayer
seeking specific performance of part of the contract. Perusal of the
prayers in the plaint would indicate that there is no specific prayer
seeking part performance of the Agreement for Sale dated 16 th
February, 1990. In Bachhaj Nahar vs Nilima Mandal(supra), the
Hon’ble Apex Court was considering the decree where the relief of
easementary right was granted in title suit without any pleading. In
that context, the Hon’ble Apex Court held that the object and purpose
of pleadings and issues is to ensure that litigants come to trial with all
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issues clearly defined and and its object is also to ensure that each side
is fully alive to the questions that are likely to be raised or considered
so that they may have an opportunity of placing the relevant evidence
appropriate to the issues before the Court for its consideration. The
proposition of law formulated by the Hon’ble Apex Court was that no
relief can be granted when the Defendant had no opportunity to show
that the relief proposed by the Court could not be granted.
88. In the instant case, the plaint seeks specific performance of the
Agreement for Sale dated 16th February, 1990 and Supplementary
Agreement dated 25th May, 1990 in respect of property described
therein. The obligation of handing over possession of the ground and
first floor was fulfilled by the Defendant, and what remained is the
execution of Conveyance Deed of the ground and first floor alongwith
proportionate undivided share of land. Being aware of the said factual
position, the parties went to trial and the Defendant cannot be said to
be unaware of the case they had to meet. The grant of relief of part
performance would arise out of the same Agreement for Sale dated
16th February, 1990, and the non compliance of the obligations by the
parties. The issues in controversy were known to the parties and
evidence was led by the parties. Mr. Dwarkadas is right in relying on
paragraph 15 of Bachhaj Nahar vs Nilima Mandal (supra) noting the
decision of Constitution Bench of Hon’ble Apex Court setting out the
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relevant principle relating to circumstances in which the deficiency in
or absence of pleadings could be ignored.
89. In this context, it would also be apposite to consider that the
Plaintiff seeks part performance under Section 12(4) of Specific Relief
Act, 1963 which would require consideration of various clauses of
agreement for sale in order to ascertain whether part of contract
stands on independent or separate footing so as to enable part
performance. Contrast the said sub section with sub-section (3) of
Section 12 which would require the party seeking specific performance
to agree to payment or relinquishment of remaining part of contract.
There is no quarrel with the proposition of law laid down in the
decisions cited by the Defendant to contend that unless specific plea is
taken and the plaint is amended, the Court cannot consider the same,
however, none of the decisions are in context of plea of part
performance arising under Section 12(4) of the Specific Relief Act,
1963. If the issue arose by implication and the parties were aware of
the same, the absence of pleading can be ignored.
90. The pivotal defence to grant of decree of part performance is
that there is no pleading and no prayer in the plaint. The answer to the
said objection can be found in the decision in the case of Gopal
Ramvilas Gattani vs. Sheshrao Pundlik Hirvarkar (supra). In facts of
that case, similar submission was raised that unless there is pleading in
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context of Section 12 (3) of Specific Relief Act, 1963 ,no relief can be
granted. The learned Single Judge of this Court has held that there is
no necessity that the plaintiff should plead part performance of the
contract and in the absence of any pleading, a decree in respect of part
performance could be passed.
91. In B.Santoshamma vs D.Sarala(supra), the Hon’ble Apex Court
was considering the decree of part performance in facts where the
vendor had sold to the Appellant 300 square yards and thereafter sold
100 square yards to third party. The Appellant therein filed suit for
specific performance of agreement for sale of 300 square yards and
despite being aware of the subsequent sale did not amend the
pleadings nor amended the prayers while impleading the subsequent
vendee of 100 square yards. The Hon’ble Apex Court held in paragraph
87 and 88 as under:
“87. Section 12 of SRA is to be construed and interpreted
in a purposive and meaningful manner to empower the Court
to direct specific performance by the defaulting party, of so
much of the contract, as can be performed, in a case like this.
To hold otherwise would permit a party to a contract for sale
of land, to deliberately frustrate the entire contract by
transferring a part of suit property and creating third party
interests over the same.
88. Section 12 has to be construed in a liberal, purposive
manner that is fair and promotes justice. A contractee who
frustrates a contract deliberately by his own wrongful acts
cannot be permitted to escape scot-free.”
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92. The factual position existing is though the Plaintiff has complied
with its part of the obligations and is put in possession of ground and
first floor, the Defendant by not executing the conveyance deed in
respect of the ground and first floor alongwith proportionate
undivided share in the land has defaulted in complying with its
obligations. As discussed above, the contract for sale of the ground
and first floor alongwith proportionate undivided share in the land
stands on independent and separate footing. As per Clause 5 of the
Agreement for Sale dated 16th February, 1990, the time for completion
of sale as far as ground and first floor alongwith proportionate
undivided share in the land is on or before 31 st May, 1990. Clause 5 sets
out different timelines for completion of sale of the ground and first
floor alongwith the proportionate undivided share in the land and for
the second floor. Clause 6(iv), 8, 11 and 15 follows the timeline set out
in Clause 5 and conjoint reading of the various clauses maket is clear
that the sale had to be completed and conveyance to had to be
executed by 31st May, 1990. The Defendant has clearly defaulted in
complying with its obligations under the contract in so far as the
execution of conveyance deed for ground and first floor and
proportionate undivided share in the land is concerned. The Plaintiff
has demonstrated its readiness and willingness and complied with its
obligation. The issue of alleged encroachment by the Plaintiff is
Sairaj 67 of 79
FA 1163 of 2015 (final).docimmaterial for considering the present issue and is subject matter of
other appeals.
93. The Trial Court in paragraph 40 of the impugned judgment has
considered Clause 19 of the agreement for sale dated 16 th February
1990 to deny relief of execution of conveyance in the land which is
clearly erroneous.
94. It is well-settled that the exercise of jurisdiction under Specific
Relief Act, 1963 is an equitable jurisdiction and under Section 20 of the
unamended Specific Relief Act, 1963, the Court has the discretion to
grant specific performance. In facts of present case, the Plaintiff has
been put in possession of ground and first floor in the year 1990 after
receipt of the equivalent sale consideration without being conferred
rights of ownership by non execution of Deed of Conveyance not only
of the portion in respect of which it has been put in possession but also
in respect of the proportionate undivided share in the land for past
about 35 years. The Defendant who has defaulted to comply with its
obligations cannot be heard to raise a plea of absence of pleading or
prayer. Equity demands that the Defendant be directed to comply with
its part of obligation in so far as execution of deed of conveyance of
ground and first floor alongwith proportionate undivided share in the
land.
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95. The decision of Shardaprasad vs Sikandar (supra) arose in
context of suit for specific performance, where the agreement
between the parties was for sale of 4 anna share in a village together
with cultivating rights in sir. The Defendant undertook to obtain
sanction which was refused and thereupon he sold the property
without cultivating rights in sir to 2nd and 3rd Defendant. The plaintiff
sought specific performance of the agreement and prayer in the
alternative was that in event the sir land with cultivating rights cannot
be included in sale deed, the Defendant be directed to execute a sale
deed in respect of 4 anna share with reservation of cultivating rights in
sir and at Appellate Stage sought specific performance of contract
excluding cultivating rights in sir. The objection raised was that this was
completely new case where Plaintiff asked for a relief not raised in the
trial court where the Plaintiff asked for a relief inconsistent with the
relief under Section 15 of Specific Relief Act. The Hon’ble Court held
that if Section 14 and 15 (pari materia with Section 12(3) and (4) of
unamended Specific Relief Act, 1963) applied, the objection was well
founded but dismissed the Appeal on the ground of the contract being
contingent. The said decision does not assist the case of the
Defendant as in that case there was no divisible contract in respect of
which part performance could be granted. The Hon’ble Court held that
Section 14 and 15 applied to cases where the inability to perform the
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FA 1163 of 2015 (final).docwhole contract was not contemplated by the contracting parties and
has no application if the obstacle is known to the parties and no
provision is made for the eventuality.
96. In the present case, the facts are completely different as the
Agreement for Sale dated 16th February, 1990 contained an
arrangement for sale of the already constructed ground and first floor
alongwith proportionate undivided share in the land for which part
performance can be granted and the sanction of plans for the
construction of proposed second floor has not been established to
have been rejected to hold that as the future event became impossible,
the contract fell through.
97. As far as the construction of second floor is concerned, the
Agreement between the Parties as recorded in the Agreement for Sale
dated 16th February, 1990 was a contract to build as there was
possibility of construction of second floor having built-up area of 5752
sq. ft. As discussed earlier, the evidence on record fails to establish
that the contract for construction of second floor was void because of
impossibility of performance or that it stood frustrated. The question
therefore to be considered is whether the specific performance of
contract to build as regards the second floor can be granted.
98. The unamended Section 14 of Specific Relief Act, 1963 provides
for the contracts which are not specifically enforceable and reads as
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“14. Contracts not specifically enforceable.– (1) The
following contracts cannot be specifically enforced, namely:–
(a) a contract for the non-performance of which compensation
in money is an adequate relief;
(b) a contract which runs into such minute or numerous details
or which is so dependent on the personal qualifications or
volition of the parties, or otherwise from its nature is such,
that the court cannot enforce specific performance of its
material terms;
(c) a contract which is in its nature determinable;
(d) a contract the performance of which involves the
performance of a continuous duty which the court cannot
supervise.
(2) Save as provided by the Arbitration Act, 1940 (10 of 1940),
no contract to refer present or future differences to
arbitration shall be specifically enforced; but if any person who
has made such a contract (other than an arbitration agreement
to which the provisions of the said Act apply) and has refused
to perform it, sues in respect of any subject which he has
contracted to refer, the existence of such contract shall bar the
suit.
(3) Notwithstanding anything contained in clause (a) or clause
(c) or clause (d) of sub-section (1), the court may enforce
specific performance in the following cases:–
(a) where the suit is for the enforcement of a
contract,--
(i) to execute a mortgage or furnish any other security
for securing the repayment of any loan which the
borrower is not willing to repay at once: Provided that
where only a part of the loan has been advanced the
lender is willing to advance the remaining part of the
loan in terms of the contract; or
(ii) to take up and pay for any debentures of a company;
(b) where the suit is for,–
(i) the execution of a formal deed of partnership, the
parties having commenced to carry on the business of
the partnership; orSairaj 71 of 79
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(ii) the purchase of a share of a partner in a firm;
(c) where the suit is for the enforcement of a contract
for the construction of any building or the execution of
any other work on land:
Provided that the following conditions are fulfilled,
namely:–
(i) the building or other work is described in the contract
in terms sufficiently precise to enable the court to
determine the exact nature of the building or work;
(ii) the plaintiff has a substantial interest in the
performance of the contract and the interest is of such
a nature that compensation in money for non-
performance of the contract is not an adequate relief;
and
(iii) the defendant has, in pursuance of the contract,
obtained possession of the whole or any part of the
land on which the building is to be constructed or other
work is to be executed”.
99. Section 14(3)(c) of Specific Relief act, 1963 permits enforcement
of contract to build subject to fulfillment of conditions set out in the
proviso thereto. It is only where the work of construction is described
in sufficiently precise terms in the contract which enables the Court to
determine the exact nature of work that the contract can be enforced.
100. In Sushil Kumar Agarwal v. Meenakshi Sadhu (supra), the
Hon’ble Apex Court was considering the issue of specific performance
of development agreement filed by the Developer against the owner.
The Hon’ble Apex Court considered the provisions of Section 14(3) (c)
(iii) of Specific Relief Act, 1963 and examined the clauses in the
agreement to ascertain whether the scope of work is sufficiently
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defined. In that case, Clause 8 provided for building to be constructed
in accordance with approved plans and built with first class materials
with wooden doors, mosaic floor, basin and lavatories, tap water
arrangement, electric points, finished distemper and bathroom fittings
of glazed tile upto 6″ height and lift. Clause 13 provided that the
contractor would construct a building consisting of residential
apartments of various sizes and denominations in the said building in
accordance with the plans sanctioned by the Calcutta Municipal
Corporation and the owner shall convey the proportionate share in the
land to the respective buyers. Clause 22 provided for refund if for any
reason the building cannot be constructed. Clause 20 provided that the
owner’s apartments shall be constructed and be made in ‘similar
condition’ as that of the contractor with water connection, sewerage,
electric wiring except special fittings.
101. The Hon’ble Apex Court held in paragraph 30 as under:
“30. Use of such vague terms in the agreement such as ‘first
class materials’, residential apartment of various sizes and
denomination, etc, similar condition and special fittings while
discussing the scope of work clearly shows that the exact
extent of work to be carried out by the developer and the
obligations of the parties, have not been clearly brought out.
The parties have not clearly defined interalia, the nature of
material to be used, the requirements of quality, structure of
the building, sizes of flats and obligations of the owner after
the plan is sanctioned…..The agreement between the parties
is vague.”
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102. In the instant case, for the purpose of construction of second
floor, the un-utilised FSI as well as the FSI which is available in respect
of setback area was to be utilised for construction of second floor. DW-
1 has stated that 9000 square feet FSI was available, which evidence
was led in the year 2014. Clause 2 of the contract which is the
consideration clause provides for part payment to be made qua the
second floor upon the approval of the plans of the second floor, as
shown in the plans annexed, by the BMC and other competent
authority.
103. The Agreement for sale dated 16th February, 1990 makes
reference to the Plans which were annexed to the Agreement. There is
a considerable debate about the correct plans annexed to the
Agreement. Exhibit D-2 to D-4 which according to the Plaintiffs were
the Plans annexed to the original Agreement were not produced with
the plaint or during evidence of PW-1, but were produced upon being
called upon during the cross-examination. PW-1 has admitted that he
was not present when the plans were given and thus cannot depose
about the authenticity of the plans. The plans have been signed by only
two Parties whereby the Agreement for Sale has been signed by four
parties. The objection of Ms. Sadh is well founded that Exhibit D-2
shows the area of 459 sq. ft., which was sold on 2 nd December, 1991
subsequent to the execution of the main Agreement and there is no
Sairaj 74 of 79
FA 1163 of 2015 (final).docmaterial demonstrated by Mr. Dwarkadas to refute the same. The
Defendant has produced the counter plans at Exhibit D-5 and D-6,
however, the same refers to the ground floor plan and first floor plan
and there is no plan of second floor. The Agreement for Sale mentions
about the area to be sold being marked in the annexed plan in red
colour boundary line. The plans produced by Defendant do not show
the red colour boundary line. In the absence of any conclusive
evidence to establish that these plans were part of the Agreement for
Sale of 16th February, 1990, it is not possible to accept the rival plans
produced for the purpose of considering the exact nature of work
which was agreed to be carried out for construction of second floor.
104. On the basis of evidence, the rival plans produced cannot be
accepted to ascertain the dimensions of the proposed second floor.
That leaves only the built up area of proposed second floor which is
mentioned in the Agreement for Sale dated 16 th February, 1990, which
taken by itself cannot sufficiently define the nature of construction. In
the written submissions, the contention of Plaintiff is that admittedly
the FSI to construct the second floor has not yet been received. That
being the accepted position, there is no certainty about the availability
of FSI for construction of the second floor. Apart from the super built
up area of the second floor mentioned in the agreement, there are no
other details of the proposed construction of the second floor. On
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FA 1163 of 2015 (final).docrecord there is no floor specifications, structural components or
construction material details, no layout plan/floor plan, building
specifications or the plans submitted to the Corporation for its
approval. The provisions of Section 14(3) (c) carves out an exception
where the building or the work is described in the contract in terms
sufficiently precise to the Court to enable the exact nature of the
building or work. It may have been a slightly better position if the plans
were already sanctioned by the Corporation and placed on record.
105. From the terms of the Agreement for Sale dated 16th February,
1990, the scope of work cannot be determined. Based only on the
super built up area mentioned in the Agreement, the Plaintiff seeks
specific performance of contract to build the second floor which is
unenforceable in absence of precise description about the work of
construction.
CONCLUSION:
106. In light of the above discussion, the following is the summation
of the findings
(a) The Supplementary Agreement dated 25th May 1990
having been executed by Mr. Samir Shah without any valid
authority is not legally binding on the Defendant and is
unenforceable. Consequently, Clause (6) of the Supplementary
Agreement cannot be enforced in favour of the Plaintiff.
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(b) In any event, the area kept vacant under order of Court
by way of interim relief cannot be decreed by holding the same
to be mutually convenient agreement.
(c) Vide Agreement for Sale dated 16th February 1990, the
parties had agreed for sale of ground and first floor and
possibility of proposed second floor along with proportionate
undivided share in land and there is no ambiguity as far as area
of proportionate undivided share is concerned by reason of
area being mentioned as super built up area. As the Plaintiff is
put in possession of ground plus first floor, the area can be
calculated accordingly. In the Written Statement, there are
admissions to help decide the ratio of carpet area to super built
up area.
(d) Clause 19 of the Agreement for Sale refers to form of
transfer of proportionate undivided share in land and does not
impede conveyance.
(e) The Agreement for Sale dated 16th February 1990, in so
far as construction of second floor is concerned, was
contingent contract. The Defendant has failed to prove that
the contract is rendered void by impossibility of performance
under Section 32 of the Indian Contract Act, 1872.
(f) In absence of total prohibition on vertical expansion of
the existing building, to establish the frustration of contract,
the burden was upon the Defendant to establish that the
vertical expansion was possible only by putting external column
in marginal open spaces. The evidence on record establishes
that the Defendant has failed to discharge the burden as DW-1
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has merely produced the Government directives and circulars
without leading cogent evidence.
(g) The Plaintiff has been put in possession of ground and
first floor in the year 1990 without being conferred with
ownership rights by reason of non execution of deed of
conveyance. The agreement as regards sale of ground and first
floor is divisible contract and under Section 12(4) of the
Specific Relief Act, 1963 can be directed to be specifically
performed. The prayers seek specific performance of the
agreement and part performance can be directed as the issue
arose out of implication and deficiency of pleading can be
ignored.
(h) Based only on super built up area of proposed second
floor, the nature of contract is not capable of precise
determination under Section 14(3)(c) of the Specific Relief Act,
1963 and the contract to build second floor is unenforceable.
107. In view of the above, following order is passed :
-ORDER-
(a) First Appeal No. 341 of 2019 is allowed. The finding
of the Trial Court on issue No.1 of the impugned judgment
dated 9th July 2015 about validity of Supplementary
Agreement dated 25th May 1990 is set aside. The Issue No.1
stands answered in the negative.
(b) First Appeal No. 1163 of 2015 is partly allowed.
(c) The Defendant is directed to execute Deed of
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Conveyance in respect of ground plus first floor along with
proportionate undivided share of land within period of two
months from date of uploading of this order on the official
website.
(d) Clause (2) of the impugned judgment dated 9 th July
2015 is undisturbed.
108. In view of the disposal of First Appeals, nothing survives for
consideration in the pending Interim Applications and the same stand
disposed of.
[Sharmila U. Deshmukh, J.]
109. At this stage, request is made by both the parties for stay of this
judgment and for continuation of the interim relief for a period of six
weeks. The judgment is stayed for period of six weeks. The interim
relief operating since 9th October 2015 is continued for a further period
of six weeks.
[Sharmila U. Deshmukh, J.]
Sairaj 79 of 79
Signed by: Sachin R. Patil
Designation: PS To Honourable Judge
Date: 07/08/2025 20:16:15