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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF APRIL, 2023 PRESENT THE HON'BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON’BLE MR. JUSTICE C.M. POONACHA REGULAR FIRST APPEAL NO.273 OF 2007 (SP) BETWEEN
1 . M/S PATIL DEVELOPERS PVT LTD BEING A COMPANY INCORPORATED UNDER THE COMPANIES ACT HAVING ITS REGISTERED OFFICE AT NO.172,NAVIPATH JALAGOAN MAHARASTRA REP. BY ITS DIRECTOR SRI ANIRUDDHA VISHWANATH PATIL
KOLTE PATIL DEVELOPERS LTD BEING A COMPANY INCORPORATED UNDER THE PROVISION OF THE COMPANIES ACT HAVING ITS REGISTERED OFFICE NO.172 NAVIPATH JALAGAON MAHARASTRA AND A BRANCH OFFICE AT NO.22/11 PARKWEST BUILDING VITTAL MALLAYA ROAD BANGALORE 1 REP. BY ITS DIRECTOR NARESH A PATIL
A V PATIL S/O V.A.PATIL AGED ABOUT 60 YEARS SINCE DEAD BY LRs R4 AND R5 ALREADY ON RECORD
2 4. R A PATIL S/O A V PATIL AGED MAJOR
N A PATIL S/O A V PATIL AGED MAJOR
APPELLANTS 3 TO 5 ARE R/AT FLAT NO.102 LYNDHURST APARTMENT NO.3 WALTON ROAD, OFF LAVELLE ROAD BANGALORE ... APPELLANTS (BY SRI G L VISHWANATH, SENIOR ADVOCATE FOR SRI V C RAJU, ADVOCATE A3 IS DEAD, A4 AND A5 ARE THE LRs V/O DATED 10.11.2022)
AND
S NAGARAJ S/O SHIVANANJAPPA NO.109 8TH MAIN ROAD 18TH CROSS ROAD MALLESHWARAM BANGALORE 560003
SINCE DEAD BY LRs
LRs OF RESPONDENT
1(1) SMT RENUKA W/O LATE NAGARAJ AGED ABOUT 61 YEARS
1(2) N MUNESH S/O LATE NAGARAJ AGED ABOUT 45 YEARS
1(3) REVANNA
S/O LATE NAGARAJ
AGED ABOUT 33 YEARS
3 ALL ARE R/AT NO.109, 8TH MAIN ROAD 18TH CROSS ROAD MALLESHWARAM BANGALORE 560003. …RESPONDENTS [BY SRI K T VENKATESHA, ADVOCAE FOR R1(3) (ABSENT) R1(1) SERVED AND UNREPRESENTED V/O DTD 6.3.2019 SERVICE OF NOTICE TO R1(2) IS HELD SUFFICIENT]
THIS RFA IS FILED U/S 96 OF CPC AGAINST THE JUDGEMENT AND DECREE DTD. 25.10.2006 PASSED IN OS.NO.8314/1996 ON THE FILE OF THE XI ADDL. CITY CIVIL JUDGE, CITY CIVIL COURT, BANGALORE, CCH-8, PARTLY DECREEING THE SUIT FOR SPECIFIC PERFORMANCE AND ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON 21.03.2023, COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, POONACHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
The above appeal is filed by the Plaintiffs under Section 96 of the Code of Civil Procedure, 1908 (hereinafter referred to as the 'CPC') challenging the judgment and decree dated 25.10.2006 passed in OS.No.8314/1996 passed by the XI Additional City Civil Judge, Bangalore, wherein the suit for specific performance filed by the Plaintiffs has been partly decreed and the Defendant has been directed to refund a sum of `1 lakh together with interest at 6% pa.
For the sake of convenience, the parties will be referred to by their rank before the Trial Court.
It is the case of the Plaintiffs that the original Defendant (since deceased represented by legal heirs in the present appeal) is the owner in possession of the suit property and that he had agreed to sell the suit property to the Plaintiffs on a price calculated at `255/- per sq.ft., and the parties entered into an agreement of sale which was styled as a Memorandum of Understanding (hereinafter referred to as the 'MOU') dated 3.12.1993, whereunder the terms and conditions of the sale were set out in detail. That the Plaintiff paid a sum of `1 lakh and a further sum of `25.00 lakhs was agreed to be paid upon the Defendant obtaining a letter from Burma Shell Oil Company (tenant in occupation of the suit property) (hereinafter referred to as 'tenant') regarding its willingness to vacate the suit property, shift the petrol bunk and handover possession of the land to the owner within a period of 45 days from the date of letter from the Defendant. That further consideration payable by the Plaintiffs to the Defendant
5 was contemplated under the said MOU. That the Defendant was also required to obtain Income Tax Clearance Certificate and handover the title deeds to the Plaintiffs in terms of the said MOU. Various other clauses regarding the transaction between the parties were contemplated in the said MOU. 4. It is the further case of the Plaintiffs that the Defendant did not take any of the steps that were required to be taken under the said MOU and when the Plaintiffs learnt that the Defendant was looking for a prospective buyer for a higher price, the Plaintiffs filed a suit for injunction in OS.No.7269/1995. The Trial Court initially granted an order of Temporary Injunction restraining the Defendant from alienating the suit property. Thereafter, since the Defendant, inspite of service of summons, did not appear, he was placed ex parte. The Trial Court, vide its judgment and decree dated 30.7.1996, decreed the said suit for permanent injunction restraining the Defendant from alienating the schedule property to third parties in violation of the Agreement dated 3.12.1992.
6 Despite the same, since there was no response from the Defendant to comply with the terms of the MOU, the Plaintiffs have filed the present suit. The Defendant though has entered appearance through an Advocate has not filed Written Statement. 5. The Trial Court upon the pleadings of the parties framed 5 issues. Plaintiff No.5 who was also the Director of Plaintiff Nos.1 and 2 was examined as PW.1 and marked Exs.P1 to P7. The Defendant neither cross- examined PW.1 nor adduced any evidence. The Trial Court, vide its judgment and decree partly decreed the suit of the Plaintiffs directing the Defendant to refund the said sum of `1 lakh together with interest. Being aggrieved, the present appeal is filed.
Sri.G.L.Vishwanath, learned Senior Counsel appearing for the Appellants/Plaintiffs vehemently contended:
i) that the Trial Court ought to have decreed the suit of the Plaintiffs for specific performance instead of ordering for refund of the money;
ii) that all the terms and conditions for sale of the suit property were agreed between the parties under MOU dated 3.12.1993;
iii) that the judgment and decree passed in OS.No.7269/1995 having become final, the finding of readiness and willingness recorded in the said judgment is required to be taken note of and applied in the present case;
iv) that it is the Defendant who has not performed his part of the contract regarding obtaining letter from the tenant;
v) the finding of the Trial Court that the agreement between the parties was only an MOU and hence specific performance was not ordered is erroneous and liable to be interfered with;
In support of his contentions, the learned Senior Counsel relied upon the judgment of the Hon'ble Supreme Court in the case of Kollipara Sriramul (dead) by his legal representatives v. T.Aswatha Narayana (dead) by his legal representatives & Ors.1
We have considered the submissions made on behalf of the Appellants and perused the material on record. The point that arises for consideration is, Whether the judgment of the Trial Court directing the Defendant to refund a sum of `1 lakh is liable to be interfered with?
The relevant clauses of the MOU - Ex.P1 are extracted herein below for ready reference:
"1. That the party of first part having agreed to sell and party of second part having agreed to purchase the schedule property at the rate of Rs.255/- per sq.ft. of sanctioned F.A.R, the party or second part have this day paid in cash a sum of Rs.1,00,000/- (Rupees one lakh only) as advance or part of sale consideration, at the time of execution and singing of this memorandum between the parties, and party of first part do hereby acknowledge receipt of the said advance, and acquit and release the party
1 AIR 1968 SC 1028
9 of second part from payment of the same and every part thereof, which is paid in cash as stated above.
It is further agreed between the parties that a further sum of `.25,00,000/- (Rupees twenty- five lakhs only) shall be paid by party of second part to party or first part on the party of first part obtaining a letter from Burmah Shell Co. who are in occupation of the property, regards the willingness of the said occupant to release and relinquish their leasehold rights in the schedule property, and terminating the lease and shifting their activities in the said petrol pump, petrol stock, garage and transfer of possession of land to owner i.e. party or first part within the stipulated period of 45 days from the date of submission of letter from M/s. Burmah shell.
It is further agreed between the parties that 30% (thirty percent) of total sale consideration shall be paid i.e. after deducting Rs.26,000,00/- (Rs. twenty six lakhs only) already paid by the party of second party to party of first part, on the party of first part fulfilling the following terms and conditions:
a) To arrange vacant possession in respect of the schedule property within the stipulated time as stated above.
b) ……..
c)……...
d) Satisfaction of party of second part regarding the marketable title of party of first part to schedule property and subject to the property being free from all and every kind of encumbrances.
e) The party of first part on receiving the aforesaid amount of 30% as stated above, shall handover actual physical vacant possession of the schedule
10 property to party of second part to enable the party of second part to develop the schedule property, and party of first part shall also execute agreement for sale and necessary power of attorney and other documents that may be required in this behalf.
It is agreed between the parties that the party of second part shall pay the remaining 70% of the total sale consideration in equal tri monthly instalments or every three months from the date of aforesaid clause (e) and within a period of 2(two) years.
The taxes payable to the Corporation of Bangalore of my other local authority shall be paid by party of first part till date of agreement of sale of schedule property.
The party or first part shall handover all the original previous title deeds pertaining to schedule property to party of second part at the time of execution of agreement for sale.
In the event of default committed by party of first part to fulfil the aforesaid conditions within the stipulated period and extension period, then in such an event the party of first part shall be liable to pay interest on the advances received to party of second part."
(emphasis supplied)
Learned Senior Counsel for the Appellants has relied upon the judgment of the Hon'ble Supreme Court in the case of Kollipara Sriramulu1 wherein it is held as follows: "3. We proceed to consider the next question raised in these appeals, namely, whether the oral
11 agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. ……. "
(emphasis supplied) 11. The Hon'ble Supreme Court considering the facts of the said case held that the question depends upon the intention of the parties. 12. The Hon'ble Supreme Court in the case of PSA Mumbai Investments Pvt.Ltd., v. Board of Trustees of the Jawaharlal Nehru Port Trust2 noticing the judgment in the case of Kollipura Sriramulu held that "a mere reference to a future formal contract will not prevent
2 (2018) 10 SCC 525
12 a binding bargain between the parties if, in fact, there is such a bargain." Hence, the fact whether there is a binding contract is required to be ascertained from the facts of each case.
It is forthcoming from a perusal of the MOU that clause 3 specifically contemplates fulfilling of a series of terms and conditions, consequent to which as per clause (3)(e) an Agreement of Sale was required to be entered into along with other documents that may be required in that behalf. It is clear that the very first condition as contemplated under clause 3(a) regarding vacant possession itself has not been complied with as also clause 3(d) which provides for satisfaction of the Plaintiff regarding marketable title and that the property to be free from all encumbrances. It is clear from the aforementioned that vide clause 3(e) the parties contemplated signing of an Agreement of Sale and Power of Attorney at a future date subsequent to the MOU which has admittedly not been entered into. Clauses 10 and 11 also contemplate certain steps to be taken upon execution of the Agreement
13 of Sale. Clause 13 of the MOU provides that in the event of default committed by the Defendant/owner of the property, he shall be liable to pay interest on the advance amount received. It is relevant to note that there is no clause in the said MOU which entitles the Plaintiffs to sue for specific performance to enforce the terms of the MOU. 14. Hence, it cannot be said in the facts of the present case that all the terms and conditions have been concluded between the parties. The Trial Court, noticing the terms of the MOU held that the same cannot tantamount to an Agreement of Sale and ordered for refund of the advance amount together with interest at 6% pa. The conclusion arrived at by the Trial Court cannot be said to be erroneous having regard to the various terms and conditions as contemplated under clause 3 of the MOU, which has admittedly not been fulfilled.
The contention of the Appellant that the finding of readiness and willingness recorded in O.S. No. 7269/95 is required to be applied in the present case is liable to be
14 rejected, inasmuch as there is no issue framed in O.S.No. 7269/95 regarding readiness and willingness of the parties and there is no specific discussion regarding the aspect of readiness and willingness. Hence the judgement rendered in O.S.No. 7269/95 will not aid the case of the Appellant in the present proceedings.
It is a settled proposition of law that the relief of specific performance ought not to be granted merely because it is lawful to do so. The said relief is a discretionary one, which discretion is to be exercised on sound principles and is required to be guided by justice, equity, good conscience and fairness to both parties [see: Kanshi Ram v. Om Prakash Jawal 3 and Laxman Tatyaba Kankate v. Taramathi Harishchandra Dhatrak 4]. 17. In view of the aforementioned and having regard to the fact that the Plaintiff has only paid a minor fraction of the sale consideration contemplated and having
3 AIR 1996 SC 2150 4 (2010) 7 SCC 717
15 regard to the fact that various clauses as set out in Ex.P1 were required to be complied with by both the parties before an Agreement of Sale was required to be entered into, it is just and appropriate that the relief of specific performance not be granted in the present case. 18. The Appellants/Plaintiffs have failed in demonstrating that a different conclusion is required to be arrived at from what has been arrived at by the Trial Court.
However, the Trial Court while directing refund of the earnest money has ordered the same to be refunded with interest at 6% p.a.
Section 34 of the CPC states as follows: "34. Interest.- (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent, per annum, as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit.
Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent, per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions.
Having regard to the proviso contained in Section 34 of the CPC, since the transaction between the parties is a commercial one and having regard to the rate of interest at which monies are advanced by nationalized banks for commercial transactions, it is just and expedient that the Defendant be directed to refund the said amount of `1 lakh with interest at 18% pa.
In view of the aforementioned, we pass the following: ORDER i. The appeal is partly allowed; ii. The judgment and decree dated 25.10.2006 passed in OS No.8314/1996 by the XI Additional City Civil Judge, Bangalore, is modified only to the extent of directing the Defendant to pay to the Plaintiffs the said sum of `1 lakh together with interest at 18%
17 pa., from the date of suit till date of payment, with costs. iii. In all other respects the judgment and decree passed by the Trial Court remains unaltered. Decree be drawn accordingly. No costs.
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JUDGE
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