CIVIL APPELLATE JURISDICTION
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
FIRST APPEAL NO. 1653 OF 2011
Shri Pradeep Shankar Walvekar
v/s
Shri Anil Narsinha Annachhatre
CORAM: A. S. OKA &
SHRIHARI P. DAVARE, JJ.
DATED :
18TH JULY, 2012
Citation;2013(7) ALLMR788,2013(1)ABR 380
The appellants who are the original defendants have
taken an exception to the judgment and decree dated 7 th
April, 2011 passed by the learned Joint Civil Judge, Senior
Division, Pune. The respondents/plaintiffs who had admittedly
paid a consideration of Rs.90,00,000/- out of the agreed
consideration of Rs.1,10,00,000/- filed a suit for specific
performance of the agreement dated 18th October, 2007
which was styled as an agreement of development or a
development agreement. The said agreement was executed
by the present appellants in favour of the respondents.
2.
The appellants were the owners of the property bearing
Plot No.15 admeasuring 522 square meters together with a
bungalow constructed thereon, more particularly described in
paragraph 1 of the plaint. (The said property is hereinafter
referred to as “the suit property”). It is alleged in the plaint,
which is not disputed, that the 1st appellant has 10%
undivided share in the suit property.
The share of the 2 nd
appellant is also 10% and the shares of 3 rd and 4th appellants
are respectively 40% each. It is pointed out in the plaint that,
the first two appellants in the capacity as the partners of
M/s.Decal Industries had obtained loan from the Rupee Co-
operative Bank Ltd., whereunder the suit property was
mortgaged in favour of the said Bank. The Bank had kept a
charge on the suit property.
According to the case of the
respondents, the appellants had represented that on payment
of a sum of Rs.29,00,000/-, the said Bank shall release the
property from the charge. The case made out in the plaint is
that till the date of execution of the agreement dated 18 th
October, 2007 ( hereinafter
Bhangale
referred to as
the
suit
agreement), the total consideration of Rs.90,00,000/- was
paid by the respondents to the appellants. It is not in dispute
that the appellants have received a sum of Rs.90,00,000/-
from the respondents. The suit agreement was duly registered
in
the
office
of
the
Sub-Registrar
after
payment
of
Rs.1,10,000/- by way of stamp duty. Reliance is also placed
on a registered power of attorney executed by the appellants
in favour of the respondents which has been duly registered.
The case made out in the plaint is that respondents took
further steps by appointing Architects, Structural Engineers
and got the building plans prepared.
It is alleged that the
respondents received various enquiries from the prospective
purchasers and one prospective purchaser Mrs.Archana Ajit
Gulwani has paid a sum of Rs.10,00,00/- to the respondents
by way of an advance towards consideration of price of the
flat in the proposed building.
3.
The appellants pointed out that further consideration of
Rs.19,00,000/- was made payable under the suit agreement
within 120 days for execution of the said agreement.
It is
alleged that post-dated cheques in the names of the
appellants aggregating to Rs.19,00,000/- were issued by the
respondents. It is pointed out that a sum of Rs.1,00,000/- was
to be paid at the time of execution of the final conveyance. In
the plaint, it is contended that the 4 th appellant tried to
of Baroda on 10th June, 2008.
February, 2008.
agreement
encash the post dated cheque of Rs.7,60,000/- drawn on Bank
The cheque was dated 16th
It is pointed out that though the suit
contemplated
delivery
of
possession,
the
appellants avoided to deliver the possession. It is alleged that
the respondents did not permit the appellants to encash the
ig
said cheque without seeking necessary clarification.
It is
alleged that, in June, 2008, the appellants visited the office of
the defendants, but the defendants did not hand over the
possession.
4.
The further case made out in the plaint is that the
appellants represented to the respondents that they were
willing to execute a conveyance in favour of the respondents,
and therefore, respondents were told to prepare a draft of the
conveyance.
It is alleged in the plaint that a draft of
conveyance was prepared by the respondents which was
approved by the appellants. Stamp duty of Rs.5,50,000/- was
paid by the respondents on 3rd July, 2008 on the final
conveyance deed. Four demand drafts totally amounting to
Rs.20,00,000/- were purchased by the respondents in the
names of the petitioners towards balance consideration.
However, the appellants did not come forward to execute the
sale deed, and therefore, on 1st January, 2009 the respondents
Maharashtra
Rs.5,50,000/-.
State,
for
refund
of
were forced to apply to the Joint District Registrar, Stamps,
the
stamp
duty
of
After deducting 10% of Rs.5,50,000/-, refund
was ordered. The respondents relied upon legal notice dated
5th November, 2009 issued by their advocate to the appellants
calling upon the appellants to execute the conveyance and to
hand over the possession of the suit property.
Though the
said notice was delivered to the appellants, there was no
reply by the appellants. Therefore, on 11 th December, 2009,
the suit for specific performance was filed by the respondents.
5.
The suit was contested on the basis of a written
statement filed by the 1st to 3rd appellants. A contention was
raised that, one of the post dated cheques bearing date of
16th February, 2008 was deposited by the appellants on 10 th
June, 2008 which was dishonoured. It is alleged that
thereafter, two cheques were deposited by the appellants
which were dishonoured. It is alleged that the cheques were
deposited
by
respondents.
the
appellants
Therefore,
it
at
was
the
instance
contended
of the
that the
respondents were never ready and willing to perform their
part of the agreement. It is contended that though the suit
agreement records that possession of the suit property was
handed over to the respondents, it is an admitted position
that possession was in fact not handed over. The appellants
did not dispute receipt of payment of a sum of Rs.90,00,000/-
from the respondents. Apart from denying various averments
made in the plaint, the appellants denied the case made out
in the plaint that draft sale deed was sent for their approval
by the respondents and that the same was approved by the
appellants. They also denied that, as per their suggestion,
demand drafts in the sum of Rs.20,00,000/- were purchased
by the respondents.
The
appellants
6.
contended
that
the
balance
consideration of Rs.19,00,000/- was payable on or before 17 th
February, 2008 and the post-dated cheques were bearing the
date of 16th February, 2007.
It is contended that the
respondents avoided to pay the said amount and as per the
request of the respondents, the post dated cheques were
deposited by the respondents which were dishonoured. Thus,
it is contended that the respondents have committed the
breach of the contract.
It is, therefore, submitted that the
respondents were not entitled to any of the reliefs claimed in
the plaint.
The respondents examined the 1 st respondent as a
7.
witness. No other witness was examined by the respondents.
The appellants examined only the 1st appellant as a witness.
The parties led documentary evidence.
The Trial Court
decreed the suit by directing the respondents to deposit the
balance consideration of Rs.20,00,000/- within a period of one
month from the date of the decree and further directed the
appellants to execute the sale deed within a period of two
8.
months.
The learned counsel appearing for the appellants has
taken us through the pleadings, notes of evidence and other
relevant documents on record. His first submission is that the
suit agreement is not an agreement for sale but is a pure and
simple agreement for development which is not specifically
enforceable. He pointed out relevant recitals and clauses in
the suit agreement. He pointed out that, initially in recital (d)
there was a reference to sale of the suit property but the word
“sale” in Marathi has been struck out. He pointed out various
other clauses of the development agreement which according
to him show that the suit property was not to be sold to the
respondents but ultimately the suit property was to be sold to
the Association of Apartment Holders or to the body of flat
purchasers after development of the suit property. He made
reference to clause Nos.8 and 14 of the suit agreement. He
pointed out clause 27 of the agreement which shows that the
agreement was purely a development agreement and the
necessary stamp duty payable on development agreement
was paid and not the stamp duty for an agreement of sale.
He pointed out sub-clause 5 of Clause 1 of the suit agreement
which provided time limit for 120 days from the date of the
execution of the suit agreement to pay the consideration of
He submitted that the fact that the post
Rs.19,00,000/-.
dated cheques totally amounting to Rs.19,00,000/- were
issued by the respondents/plaintiffs, shows that time of 120
days was the essence of the contract. The learned counsel
fairly stated that the appellants could prove dishonour of only
one post dated cheque issued in favour of the appellants. He
submitted that the dishonour of the said cheque clearly shows
that the respondents were not ready and willing to perform
their part of the agreement. He submitted that though the
respondents were aware of the dishonour of the cheque in
June, 2008, they never offered to pay the amount covered by
the dishonoured cheque to the appellants, which shows that
the respondents were never ready and willing to pay balance
consideration of Rs.19,00,000/-.
He submitted that, at no
stage after execution of the suit agreement that the balance
consideration was even offered by the respondents.
He
performance,
the
plaintiffs
must
show
readiness
submitted that, in order to succeed in the suit for specific
and
date of passing the decree.
willingness right from the date of the suit agreement till the
He submitted that though one
cheque in the sum of Rs.7,60,000/- was dishonoured, the
respondents/plaintiffs did not produce any evidence including
the bank statement to show that on that day they were possessing necessary funds.
He submitted that the Trial
Court has committed an error by relying upon the documents
which were not even marked as exhibits. He submitted that
though the respondents claim that they purchased demand
drafts in the sum of Rs.20,00,000/-, but no evidence was
adduced to show that the demand drafts were purchased by
them. He submitted that only the photo copies of the demand
drafts were produced which were not exhibited. He submitted
that there is no evidence to show that they purchased
demand drafts and mere productions of the statements of
accounts of the respondents will not prove the said fact. He
criticized the judgment of the Trial Court by pointing out that
even the Article-A which was relied upon, was not proved in
accordance with the law of evidence.
9.
The learned counsel for the appellants relied upon
various decisions in support of his plea that the respondents
have failed to prove readiness and willingness to perform
their part of the agreement. He relied upon various decisions
in support of his contention that an agreement which is a
simplicitor development agreement is not enforceable in law.
10.
The learned counsel appearing for the respondents
supported the impugned judgment and decree. He submitted
that, in the case of contract in question, the presumption is
that time was never the essence of contract. He submitted
that, if sub-clause (5) of clause (1) of the suit agreement is
read with clause (25), it is apparent that the post dated
cheques were issued only by way of security and the
appellants were not supposed to encash the said cheques. He
submitted that the balance consideration payable was subject
to accounting in view of clause (25) as well as clause (16) of
the suit agreement. He submitted that, without notice to the
respondents, one post-dated cheque was deposited by the
respondents.
He submitted that, after dishonour of the
cheque, no grievance was made by the appellants.
He
submitted that no attempt was made by the appellants to
make the time of 120 days as essence of the contract. He
submitted that the appellants have never terminated the
agreement and the said agreement continued to be valid and
subsisting.
Bhangale
He
submitted that, admittedly, a sum of
out
of
the
total
consideration
of
Rs.90,00,000/-,
Rs.1,10,00,000/-, was paid to the appellants and in fact the
appellants committed the breach by not handing over the
possession of the suit property to the respondents.
He,
therefore, submitted that no case for interference is made
out.
Before proceeding with the issues which arise based on
11.
factual contention raised by the parties, it is necessary to deal
with the first contention raised by the appellants that the suit
agreement being a pure and simple development agreement
is not specifically enforceable. Reliance has been placed on
various decisions by both the sides. In this behalf, it will be
necessary to deal with the relevant provisions of the Specific
Relief Act, 1963 (hereinafter referred to as the said Act of
1963).
Chapter II of the said Act of 1963 under the heading
Specific Performance of Contract is relevant on this aspect.
We may note here that though the word “contract” has not
been specifically defined under the Act of 1963, clause (e) of
Section 2 of the said Act of 1963 provides that, all words and
expressions used therein but not defined, and defined in the
Indian contract Act, 1872 (9 of 1872), have the meaning
respectively assigned to them in that Act. We may note here
that Chapter II of the said Act is applicable to all categories of
contracts whether they relate to movable or immovable
property. The said fact is clear from Section 10 forming part
of Chapter II which also deals with the agreement relating to
movable property. It is also pertinent to note that Chapter II
does not confine itself only to the contracts relating to sale or
purchase of movable or immovable property.
Section 10
Section 10 reads thus -
deals with contracts which may be specifically enforced.
“Section 10: Cases in which specific performance of
contract enforceable. - Except as otherwise provided in
this Chapter, the specific performance of any contract
may, in the discretion of the Court, be enforced -
(a) when there exists no standard for ascertaining the
actual damage caused by the non-performance of the
act agreed to be done; or
(b) when the act agreed to be done is such that
compensation in money for its non-performance would
not afford adequate relief.
Explanation: Unless and until the contrary is proved,
the Court shall presume -
(i) that the breach of a contract to transfer immovable
property cannot be adequately relieved by
compensation in money; and
(ii) that the breach of a contract to transfer movable
property can be so relieved except in the following
cases:-
(a) where the property is not an ordinary article of
commerce, or is of special value or interest to the
plaintiff, or consists of goods which are not easily
obtainable in the market;
(b) where the property is held by the defendant
as the agent or trustee of the plaintiff.”
Thus, what is laid down in Section 10 is that specific
performance of a contract, in the discretion of the Court, may
be enforced in a case where there exists no standard for
ascertaining
the
actual
damage
caused
by
the
non-
performance of the act agreed to be done; or in the case
when the act agreed to be done is such that compensation in
money for its non-performance would not afford adequate
relief. The clause (I) of the Explanation to the section is a rule
of evidence which provides that unless and until the contrary
is proved, the Court shall presume that the breach of a
to
transfer
contract
immovable
property
cannot
be
adequately relieved by compensation in money. The clause
(ii) of Explanation shows that Chapter II deals with all
contracts
property.
including
the
contracts
relating
to
movable
Section 11 deals with cases in which specific
performance of contracts connected with trusts is sought.
Section 12 deals with specific performance of a part of
contract. Another material section in this behalf is Section 14,
which reads thus -
“Sec.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;
(ii) to take up and pay for any debentures of a
company;
(b) where the suit is for, -
(ii) the purchase of a share of a partner in a firm;
(i) the execution of a formal deed of partnership, the
parties having commenced to carry on the business of
the partnership; or
(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 of 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.
Clause (a) of sub-section (1) is converse of clause (b) of
Section 10.
Clause (a) provides that the contract for non-
performance of which compensation in terms of money is an
adequate relief is not specifically enforceable. Clause (b) of
sub-section (1) of Section 14 is another category of non-
enforceable
contracts
which
run
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 are such, that the Court cannot enforce specific
performance of its material terms. Clause ( c ) deals with the
contract which is in its nature determinable. Clause (d) deals
with the contract the performance of which involves the
performance of a continuous duty which the Court cannot
supervise.
12.
Sub-section (2) of Section 14 deals with the contract to
refer disputes of arbitration. Sub-section (3) is in two parts,
the first part deals with suits for enforcement of a contract to
execute a mortgage or furnish any other security for securing
the repayment of the loan and to take up and pay for any
debentures of a company. Sub-section (3) is an exception to
sub-section (1) of Section 14. The clause (b) of sub-section
(3) deals with suits for execution of formal deed of partnership
and the clause ( c ) deals with enforcement of a contract for
the construction of any building or the execution of any other
work on land. Thus, Clause ( c ) deals with pure and simple
building contracts under which a person appoints any other
person to carry on construction of a building or to carry on
execution of a particular work on a land.
Clause ( c )
provides that such contract can be specifically enforced
provided that, (i) the building or other work in the contract is
described sufficiently 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 terms of
money for non-performance of the contract is not an
adequate relief, and (iii) the defendant has, in pursuance of
the contract, has 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. Therefore, even in the case a of pure
Section 15 deals with the person
specifically enforceable.
and simple building contract, in certain cases, the contract is
who may obtain specific performance. Section 16 deals with
personal bars to relief of specific performance.
Section 17
deals with contract to sell or let property by one who has no
Section 18 deals with non-enforcement except with
title.
variation.
The persons against whom
a contract can be
enforced are set out in Section 19. It must be noted here that
though under the aforesaid sections, a contract may be
specifically enforceable, the relief of specific performance
being a discretionary and equitable relief, the Court retains
discretionary
power
to
refuse
a
decree
for
specific
performance. The said discretionary power is found in Section
20 of the Act of 1963.
On plain reading of provisions of
Chapter II, it cannot be laid down as a matter of law that a
development agreement is not specifically enforceable. Such
a contract is enforceable if it falls within the clauses (a) or (b)
the prohibited categories under Section 14.
of Section 10 provided such contract does not fall in any of
On plain reading
of provisions of Chapter II, it can be said that they do not
support an argument that only an agreement for sale of
immovable property is enforceable and an agreement for
development is not specifically enforceable.
agreement
for
sale.
The Transfer of Property Act, 1882 recognizes an
However,
ig
13.
the
concept
of
the
There
can
agreements.
development agreement is a broad and flexible concept.
be
different
categories
of
development
One category of development agreement can
be, where the developer proposes to subject
the property
subject matter of contract either to the provisions of The
Mahaharashtra
Ownership
of
Flats
(Regulation
of
the
Promotion of Construction., Sale, Management and Transfer)
Act, 1963 (hereinafter referred to as the MOFA) or to the
provisions of The Maharashtra Apartment Ownership Act,
1970 (hereinafter referred to as the said Act of 1970). If the
property is to be developed in accordance with the said
enactment, several obligations are created under the said
statutes.
The said two statutes create rights in favour of the
flat purchasers and also create corresponding obligations
which are required to be performed by a developer.
Under
the MOFA, the breach of provisions by a developer/promoter
leads to prosecution of the developer. In all such cases, the
owner invariably executes an irrevocable general power of
attorney empowering the developer to sell the land with
building or to execute a lease in respect of the same. Such
power of attorney creates irrevocable agency. The second
category of development agreement can be where the
developer does not subject the property either to the MOFA or
the said Act of 1970, but agrees to execute the sale deed in
favour of flat purchasers in respect of their respective flats
along with proportionate undivided right, title and interest in
the land on which the building is constructed.
category
another
of
development
There can be
agreement
where
a
developer is supposed to construct building at his own cost
and recover the cost of construction by leasing out some of
the premises in the newly constructed building.
In such a
case, there cannot be any clause regarding execution of any
sale deed or lease in respect of the land as the title is to be
retained by the owner of the property.
illustrations.
The development agreements can be in some
other forms also.
development,
These are only
the
In case of breach of certain contracts of
monetary
compensation
cannot
be
adequate relief and it may not be possible to ascertain actual
damage caused by non-performance.
Bhangale
The first category of
development agreement where the developer proposes to
subject the property either to the provisions of MOFA or the
said Act of 1970 may be a category of agreement which may
be specifically enforceable.
14.
Therefore, the answer to the question whether an
agreement which is styled as a development agreement is
specifically enforceable under the said Act of 1963 depends
upon the nature of the agreement.
The said question is
required to be decided by applying relevant statutory
provisions in Chapter II and especially Sections 10 and 14 of
the Act of 1963. As we have narrated earlier, Section 10 lays
down as to which contracts are enforceable and Section 14
lays
down
that
certain
contracts
are
not
enforceable.
Therefore, it cannot be laid down as a proposition of law that
an agreement styled as a development agreement is not
specifically enforceable under the said Act of 1963.
The
aspect of enforceability depends on facts of each case.
15.
On this aspect, several decisions have been relied upon.
The first decision is in the case of Asso Nihalani v/s Wilfred
D'Souza, which is an order dated 15 th January, 1988 in Notice
of Motion No.2716 of 1987 in Suit No.2673 of 1987.
The
learned Single Judge of this Court was dealing with the notice
of motion for interim relief taken out in a suit for specific
performance. In paragraph 7, the learned Single Judge dealt
with a submission that the suit agreement was not an
agreement to sell but it is an agreement to develop the
property. A submission was made that having regard to the
provisions of Section 14 of the said Act of 1963, such an
agreement cannot be specifically enforced.
learned
Judge
has
observed
in
paragraph 7 thus -
Single
the
ig
argument,
Dealing with this
“7. ...... Prima facie, I am inclined to agree with the
submissions made by Mr.Muchala in this behalf. I must
mention that the property belongs to the Society which
has imposed various restrictions as to development of
this property. Therefore, prima facie, it is difficult for a
member of the Society to enter into an agreement and
to have the property sold to a non-member. I must,
therefore, necessarily proceed on the assumption that
it is an agreement to develop. If one has regard for
the terms of this agreement with regard to the
requirement as to the tenants vacating the property
and the tenants and the owners being accommodated
in a suitable alternative accommodation temporarily
elsewhere and having regard to various other
conditions of this agreement, it must prima facie be
held that it is not an agreement which could be
specifically enforced. Therefore, even from that point
of view, no relief can be given to the plaintiff at this
stage.”
Thus, the learned Single Judge has recorded only a prima
facie opinion by observing that he was inclined to agree with
the submissions advanced by the concerned counsel that the
agreement could not be specifically enforced. In the facts of
the case, the learned Single Judge observed that the property
on the development of the property.
belongs to the Society which has imposed various restrictions
Thus, what is expressed
is only a prima facie view and the said decision cannot be
read as a decision laying down the proposition of law that a
The second decision relied upon is dated 9 th February,
16.
development agreement is not specifically enforceable.
1988 by which the learned Single Judge decided Notice of
Motion No.76 of 1987 in Suit No.3419 of 1986 (Narayan
Ramchandran v/s Mahabhodi Society & ors.). It will be
necessary to make a reference to paragraph 7 of the said
order, which reads thus :-
“7. I need not go into this controversy for the simple
reason that the Charity Commissioner has not given
any sanction so far. Mr.Chinai points out that the
trustees have not yet applied to the Charity
Commissioner for obtaining sanction and he therefore,
submits that the suit is for compelling them to comply
with the said agreement which will necessarily include
their applying to the Charity Commissioner for the
necessary sanction. Trustees do not want to obtain
such a sanction. They proceeded on the footing that
the agreement has been terminated because of a
breach of the agreement. Assuming that the trustees
were wrong in their approach, the fact remains that the
agreement becomes enforceable, only after obtaining
the sanction from the Charity Commissioner.
Therefore, the plaintiff's remedy, if any, could be by
way of damages and not by way of specific relief.”
Thus, even the said decision does not lay down any
The said decision of the learned Single
proposition of law.
Judge dated 9th February, 1988 was challenged in Letters
Patent Appeal No.285 of 1983 before the Division Bench of
this Court. The judgment of the Division Bench is dated 7 th
March, 1988. The judgment is very short which reads thus -
“In essence the suit agreement where the aim of the
professional builder contractor (appellant) is to make a
profit by completing building and selling the flats at a
profit.
A breach of such an agreement can be compensated by
way of damages.
Merely because a temple and a guest house for
devotees were also to be constructed within the plot
makes no difference to the essence of the development
agreement, while we applaud the pious zest of the
professional builder contractor in seeking to ameliorate
the spirits and material comforts of the devotees, the
essence of the contract still remains a building contract
entered into with the aim of making profits by the
expedient of constructing the building and selling the
flats at a profit; we agree with the learned Single Judge
that damages for breach of such a contract would be
the adequate remedy.”
On plain reading of the said judgment, it is apparent that
again this Court has not laid down a proposition of law that
development agreement of every type is not specifically
enforceable. At this stage, we may note that another Division
Bench of this Court had an occasion to deal with the said
decision of the Division Bench dated 7 th March, 1988. We are
referring to a decision of the Division Bench dated 25 th
September, 1991 in the case of Mrs.Pallavi R. Karani v/s
M/s.Dadhawala Builders Pvt. Ltd. & ors. (Appeal No.784
of 1991).
The decision in Letters Patent Appeal No.285 of
1983 was relied upon before the Division Bench in support of
the
submission
that
a
development
is
not
The Division Bench specifically
specifically enforceable.
agreement
referred to the order dated 7 th March, 1988 in L.P.A. No.285 of
read
as
2003 and held that the order of the Division Bench cannot be
laying
down
that
specific
performance
of
a
development agreement can never be granted or that interim
relief in a suit for enforcing such agreement should always be
refused.
17.
Therefore, we are of the considered view that, none of
the aforesaid decisions specifically decide the issue whether
an
agreement
styled
as
a
development
agreement
is
specifically enforceable under Chapter II of the said Act of
1963.
Today, when the appeal is fixed for delivery of
judgment, the learned counsel appearing for the appellants
relied upon another unreported decision of Division Bench of
this Court dated 19th January, 2004 in First Appeal No.1543 of
2003 (M/s.Runwal Constructions v/s P.K.Velu & Co. Pvt.
Ltd.). Paragraph 7 of the said decision reads thus -
“7. Admittedly, the Memorandum of Understanding
dated 8th August, 1988 is not an agreement of sale.
In fact, the defendant No.1 could not have agreed to
sell the suit property as it was not the owner thereof
but, was only a lessee.
The Memorandum of
Understanding is an agreement to develop the
property. In a catena of decisions, this Court has
held that no specific performance can be granted in
respect of an agreement of development. In Notice
of Motion No.3302 of 2000 decided by one of us
(D.K.Deshmukh, J.), this Court reiterated that no
decree for specific performance of development can
be granted. The said decision was affirmed by the
Division Bench in Appeal No.142 of 2003 decided on
17th July, 2003.
In the circumstances, we are
satisfied that no decree for specific performance
could have been granted in favour of the
appellants/plaintiff.”
Perusal of paragraph 7 shows that the Division Bench has not
laid down that a development agreement is not enforceable.
The Division Bench has simply stated that in catena of
decisions this Court has held that development agreement is
not enforceable. The Division Bench has made a reference to
a judgment of a learned Single Judge of this Court which was
affirmed in an appeal. Therefore, even this decision will not
help the appellants.
18.
In the case of Gurudev
Konkam
Niwas Co-op. Hsg.
Developers
Society
v/s
(1999
Kurla
(supp.)
Bom.C.R. 257 (OOCJ), a learned Single Judge dealt with the
same issue. However, it is not necessary to go into the said
decision as there is one decision of the Division Bench which
of
Chheda
Housing
directly deals with the issue. The said decision is in the case
Development
Corporation
v/s
Bibijan Shaikh Farid & ors. (2007(2) Bom.C.R. 587). It
appears that one of the contentions raised before the division
Bench was that an agreement for development cannot be
specifically enforced. This Court made a reference to various
decisions of this Court including the first four decisions which
we have referred to above. In para 12 of the said decision,
the Division Bench has held thus :-
“12. In our opinion from a conspectus of these
judgments, what is relevant would be the facts of
each case and the agreement under consideration.
Agreements considering what is discussed, amongst
others, could be :-
(a) An agreement only entrusting construction work
to a party for consideration;
(b)
An agreement for entrusting the work of
development to a party with added rights to sell the
constructed portion to flat purchasers, who would be
forming a Co-operative Housing Society to which
society, the owner of the land, is obliged to convey
the constructed portion as also the land beneath
construction on account of statutory requirements.
( c ) A normal agreement for sale of an immovable
property.
An Agreement of the first type normally is not
enforceable as compensation in money is an
adequate remedy. An agreement of the third type
would normally be specifically enforceable unless
the contrary is proved. A mere agreement for
development, which creates no interest in the land
would not be specifically enforced.
We are however dealing with a case of the
second type. Courts for construing such a contract
in this State will have to take into consideration, the
Maharashtra Ownership Flats (Regulation of the
Promotion of construction, Sale, Management and
Transfer) Act, 1963 (hereinafter referred to as the
Act, 1963 apart from the Specific Relief Act. Under
that Act, a local Act, there is an obligation cast on
the owners of the land to convey not only the
constructed portion but also his interest in the land
beneath the construction. Under the Act an owner
of the land who causes the construction to be put up
becomes the promoter. Such construction can be
put up by a developer or builder, who in turn sells
the constructed portions to various persons by
entering into Agreements. These provisions, in our
opinion would be relevant in determining the true
character of the document. Can such a contract be
specifically enforced. Let us, therefore, consider
some of the arguments advanced by the
respondents to contend that the agreement is a
development agreement. Reliance was placed by
the 10th respondent on Clause 6 of the Agreement to
contend that no specific performance can be
claimed and that payment of interest is sufficient
remedy.
In our opinion, such a contention is
misplaced. The clause, correctly construed prima
facie would be a clause for liquidated damages in
addition to specific performance.
The other
contention is that, considering the agreement was
stamped and stamp duty paid as a Development
Agreement and it must be so held. In our opinion,
mere payment of stamp duty on an instrument will
not change or alter the nature of the Agreement.
The Agreement will have to be read considering its
terms. Reliance is placed on the judgment in (The
Godhra Electricity Co. Ltd. v/s The State of Gujarat)
12, A.I.R. 1975 S.C. 32. The ratio of that judgment is
that, in a case of an ambiguous instrument, there is
no reason why subsequent interpreting statement
should be inadmissible and that extrinsic evidence
to determine the effect of an instrument is
permissible where there remains a doubt as to its
true meaning and evidence of the acts done under
it, is a guide to the intention of the parties,
particularly, when acts are done shortly after the
date of the instrument. In our opinion, the learned
Single Judge has construed the various terms of the
agreement and the other material on record and at
the prima facie stage has come to the conclusion
that the Agreement can be specifically performed.
An Appellate Court, more so a Court considering an
interim order which involves exercise of discretion
normally will not interfere with the finding of fact
recorded by the trial Court and the exercise of
discretion unless the finding is perverse. Nothing
has been brought on record to hold that the findings
are perverse. The document on the face of it,
cannot be an agreement for security. It can only be
construed as an agreement to sell or a development
agreement. In our opinion in this case, the finding
recorded by the learned Single Judge was a finding
eminently possible on the material on record. We
are, therefore, clearly of the opinion that the
Agreement prima facie is an agreement which can
be specifically enforced and consequently the
appellants have made out a prima facie case. The
other predicates for grant of an injunction will be
answered in the discussion that follows.”
19.
On plain reading of the provisions of Chapter II of
the said Act of 1963, we reiterate that it cannot be laid down
as a proposition of law that every agreement which is styled
as a development agreement is not specifically enforceable.
We may also note here that Chapter II does not indicate that
only an agreement for sale of immovable property is
specifically enforceable under
which the vendor
agrees to
convey the immovable property to the purchaser. Chapter II
applies to various types of Agreements.
Bhangale
The answer to
20.
law will ultimately depend upon facts of each case.
question whether a development agreement is enforceable in
Before dealing with submissions on merits, it will be
necessary to have look at the development agreement in the
present case and the power of attorney for deciding the
question whether the agreement is hit by Section 14 of the
It must be noted that, out of agreed
said Act of 1963.
consideration of Rs.1,10,00,000/-, a sum of Rs.90,00,000/-
was already received by the appellants on the date of
execution of the agreement.
In fact, the total amount of
Rs.27,00,000/- was received by the appellants from April, to
It will be necessary to make a reference to the
July, 2006.
recitals of the suit agreement and in particular recital (d). It is
true that, in the recital (d), initially, there the word “sale” was
typed which was struck out. But it will be necessary to refer to
second part of recital (d). It notes that an offer was made by
the respondents to pay consideration of Rs.1,10,00,000/- and
the appellants found the said offer consistent with the market
value and reasonable, and therefore, the appellants agreed to
execute
the
cancelled.
development
agreement
which
cannot
be
Thus, there is a specific recital that what was
agreed was to execute a development agreement which
cannot be cancelled. We may also note that, apart from the
there is a power of attorney at Exh.37 executed
development agreement (the suit agreement at Exh.36),
by the
appellants in favour of the 1st and 2nd respondents conferring
all the powers including the power to execute the sale deed.
All pervasive powers have been conferred on the respondents.
Clause (15) thereof records that the power of attorney was
irrevocable.
Thus, the aforesaid recital in the development
agreement as well as the execution of irrevocable power of
attorney shows that what was agreed to confer on the
property.
respondents was an irrevocable right to develop the suit
The other clauses and facts borne out from the
record are consistent with what is set out in clause (d) of the
recitals.
20.
Apart from aforesaid relevant clauses of the suit
agreement, clauses (8), (11) and (14) thereof and clause 9 of
the Power of Attorney indicate that the respondents were
intending to take recourse to the provisions of either MOFA or
the said Act of 1970, and therefore, there is a provision for
execution of the sale deed in favour of incorporated body.
Moreover, on the basis of the irrevocable power of attorney,
the respondents could have obtained sale deed in favour of
any person.
Thus, this was a case where the intention on the part of
21.
the appellants to confer irrevocable right in respect of the suit
property on the respondents is clearly reflected from the
recitals in the suit agreement as well the power of attorney
admittedly executed by the respondents.
Moreover, the
development was proposed to be carried out by subjecting to
the property either to the provisions of MOFA or the said Act
In the circumstances, it is not possible to come to the
22.
of 1970.
conclusion that for non-performance of the said contract,
compensation in terms of money can be adequate relief as
irrevocable rights in respect of the immovable property were
created by the agreement. Though the agreement was styled
as a “development agreement”, there is a provision therein
for transfer of the property.
Therefore, presumption under
clause (i) of Explanation to Section 10 will apply in this case
which has not been rebutted. Apart from the said clause (i) of
Explanation to Section 10, it cannot be said that, considering
grant of irrevocable right in respect of the immovable
property, compensation in terms of money can be adequate
relief to the respondents.
Considering the nature of the
agreement and various rights created thereunder, at least one
of the two clauses (a) and (b) of Section 10 of the said Act of
Hence, it is not possible to accept the submission of the
appellants
that
the
23.
1963 and in any event, clause (b) will squarely apply.
suit
agreement
is
not
specifically
enforceable in accordance with the provisions of the said Act
of 1963.
provides
that,
by
way
of the said agreement
Sub-clause (5) of Clause 1
of
security
ig
24.
for
payment
of
Rs.19,00,000/-, four post-dated cheques were handed over by
the respondents to the appellants and what remained payable
was only an amount of Rs.1,00,000/- which is even less than
1% of the agreed consideration which was to be paid at the
time of execution of sale deed after obtaining Occupation
Certificate from the builder.
Clause (5) of the agreement
clearly provides that the four post-dated cheques issued were
by way of security. Clause (16) provides that the appellants
assured that area of the suit property was 522 square meters.
However, it is recorded that, if the area is found to be less,
corresponding deduction will have to be made from the
consideration
amount.
Clause
(25)
provides
that
the
appellants have paid all taxes, outgoings, but if any amount is
found due and payable, the same will be paid by the
respondents and the amount so paid was to be adjusted
against the balance consideration. It is specifically provided
therein that if the said amount exceeds the amount of last
instalment payable, the same shall be adjusted against the
payment of amount of Rs.19,00,000/- payable as per sub-
clause (5) of clause (1) of the agreement. That is the reason
why in sub-clause (5), it is stated that the post dated cheques
were issued by way of security. The conduct of the parties is
also consistent with the said interpretation.
Though the
appellants admittedly could not substantiate that the three
out of the four post dated cheques were deposited and all of
them were dishonoured, it is established that in June, 2008
one cheque was deposited which was dishonoured. However,
there is no communication in writing by the appellants on the
basis of said dishonour of the cheque.
There is no protest
made. No attempt has been made to call upon
the
respondents to pay the amount and there is no attempt even
to terminate the suit agreement.
25.
Now, the other issue is regarding readiness and
willingness. The learned counsel for the appellants has relied
upon a decision of the Apex Court in the case of J.P.Builders
& anr. v/s A. Ramadas Rao & anr. (2011 (5) ALL MR 899
(S.C.). The submission in short is that, in view of Section
16(C) of the said Act of 1963, the readiness and willingness
has to be shown right from the date of execution of the suit
agreement till the date of passing the decree. In the facts of
the case, the issue of readiness and willingness is connected
with the other issue, namely, whether time of 120 days
stipulated by sub-clause (5) of clause 1 of the suit agreement
was the essence of the contract.
As far as the contract
regarding immovable property is concerned, the law is well
Mere stipulation of time incorporated in the
settled.
agreement does not make the stipulation as to time the
essence of the contract. If the contract does not make the
time essence of the contract, by a giving notice, the time can
be always made essence of the contract. The learned counsel
for the respondents relied upon a decision in the case of
Gomathinayagam Pillai & ors. v/s Palaniswami Nadar
(AIR 1967 SC 868). As we have held earlier that the post
dated cheques referred to in sub-clause (5) of clause (1) were
issued by way of security. There is no stipulation in the suit
agreement
that
in
case
the
post-dated
cheques
are
dishonoured either the agreement stands cancelled or that
appellants will get right to terminate the same. In fact, the
intention is to confer irrevocable right on the
respondents.
Therefore, on plain reading, sub-clause (5) of clause (1)
appears to be a mere stipulation of time which cannot be the
essence of the contract.
Bhangale
The conduct of the parties, as
pointed out earlier, is also consistent with this. Though one of
the four post-dated cheques was dishonoured, there is not
even an attempt made by the appellants to make any protest.
There is no termination made by the appellants by either
contending that the time was essence of the contract or by
making the time essence of the contract. Therefore, it cannot
be said that the stipulation of 120 days provided in sub-clause
(5) of clause (1) was a stipulation making the time essence of
26.
the contract.
We may note here that clause (19) records that
possession of the suit property has been handed over to the
However, it is an admitted position that
respondents.
possession has not been handed over. This aspect has to be
considered in the context of the fact that nearly 82% of the
consideration was received by the appellants apart from the
post-dated cheques in respect of entire balance consideration,
save and except, a small balance amount of Rs.1,00,000/-.
We have already held that post-dated cheques were issued by
way of security. One cheque was attempted to be encashed
even without handing over possession of the suit property to
the respondents.
strictly
not
The cheque which was deposited was
towards
the
way of security. Dishonour
consideration
of
the
said
but
cheque,
it was by
in
the
willingness pleaded by the respondents.
facts of the case, cannot militate against the readiness and
We may also note
one more factual aspect which is virtually an admitted
position that the suit notice dated 5th November, 2009 was
issued by the respondents to the appellants making an offer
to pay balance consideration and calling upon them to
perform their part. Admittedly, the suit notice was received
Now turning to the impugned judgment, it is true that,
27.
by the appellants but no reply was issued to the suit notice.
in paragraph 18 of the judgment, the learned Judge has
referred to the draft sale deed (Art. A). It is true that the said
draft sale deed was not proved, and therefore, could not have
been read in evidence but the reference to the said sale deed
in the judgment is in the context of the averments made in
the plaint and what is stated in paragraph 15 of the
examination-in-chief regarding the preparation of the draft
sale deed. It is also true that the fact that four demand drafts
were purchased by the respondents is not specifically proved.
However, there are statements of the bank accounts of the
respondents which are marked as Exhibit Nos.39 to 42 which
show that demand drafts were purchased and in any case,
sufficient
funds
were
available
to
pay
the
balance
consideration. There is an order produced at Exh.38 passed
by the Deputy Inspector General of Stamps, Pune, which is
dated 26th November, 2009. The said order shows that stamp
duty on the sale deed was paid by the respondents and
subject to deduction of 10%, refund was granted. The said
order is specifically referred to in paragraph 16 of the
examination-in-chief of the 1st respondent.
Perusal of the
cross-examination shows that there is not even a suggestion
put to the witness that the stamp duty was paid on some
other document and not on the sale deed in respect of the
suit property. Thus, the said order at Exch.38 can be safely
said to be an order relating to the refund of the stamp duty
paid on the conveyance in respect of the suit property got
prepared by the respondents. It is true that the respondents
have not established that the said draft conveyance was
approved by the appellants, but the fact that substantial
amount of stamp duty on the sale deed was paid and the fact
that the respondents had sufficient funds to purchase demand
drafts in the sum of Rs.20,00,000/- clearly proves the
readiness and willingness on the part of the appellants. On
the other hand, the agreement has not been terminated by
the appellants. The appellants have neither made any
correspondence with the respondents at any stage, nor
offered to refund the Rs.90,00,000/- received by them.
Considering the conduct of the parties, the discretion
28.
under Section 20 of the said Act has been rightly exercised by
the Trial Court. Therefore, it is not possible to find fault with
the findings recorded by the Trial Court and the decree for
specific performance passed by the said Court.
Accordingly, we pass the following order :-
29.
ORDER
Appeal is dismissed with no order as to costs.
On the prayer made by the learned counsel for the
appellants, interim relief granted in the appeal will continue to
operate for the period of 12 weeks from today subject to
condition that appellants will not create any third party rights
or part with the possession of the suit property.
(SHRIHARI P. DAVARE, J. )
Bhangale
( A.S. OKA, J. )
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