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Millenia Realtors Private Limited Vs. Sjr Infrastructure (Private) Limited - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKarnataka High Court
Decided On
Case NumberMiscellaneous First Appeal No. 3226 of 2005
Judge
Reported in2005(6)KarLJ36
ActsTransfer of Property Act; Indian Registration Act - Sections 2(7) and 17; Specific Relief Act, 1963 - Sections 14 and 20; Code of Civil Procedure (CPC) , 1882 - Sections 375; The Karnataka Civil Rules of Practice, 1967 - Rule 23
AppellantMillenia Realtors Private Limited
RespondentSjr Infrastructure (Private) Limited
Appellant AdvocateUdaya Holla, Sr. Adv. for ;Holla and ;Holla, Advs.
Respondent AdvocateNavakesh Batra for ;Nandi Law Chambers, Advs.
DispositionAppeal dismissed
Excerpt:
- karnataka sales tax act, 1957 section 22-a: [d.v. shylendra kumar & aravind kumar, jj] suo motu powers held, while section 28-a (4) of the act does contemplate of penalty for non-compliance with the requirements of sub-sections (2). (3), 3a, 3b of section 28-a of the act, and there is a minimum penalty of like amount of tax and it can go upto one and half times, nevertheless, the justification for levy is on the premise that the dealer has failed to furnish sufficient cause for non-production of the documents at the time when it was demanded to be produced. in the present case, there is no dispute that the document in question has been produced the next day and it has also been accepted by the check post officer himself if so, a levy will be justified only if the assessing.....anand byrareddy, j.1. the facts of the case are, the appellant is said to be a reputed developer and builder. it is claimed that the appellant along with its group companies have specialized in the development of major information technology parks. the respondent, a private limited company, has obtained on lease plots bearing nos. 13, 14 and 15, epip, i phase, whitefield, bangalore measuring about 33,149 sq. m. (about 8 acres 19 guntas). the land was allotted to the respondent on 10-6-2002 by the karnataka industrial area development board ('kiadb', for short). physical possession has been delivered on 30-5-2003 and a lease agreement has been executed in favour of the respondent by the kiadb as on 17-11-2003.2. the respondent had made a proposal to the appellant as on 6-8-2003 to.....
Judgment:

Anand Byrareddy, J.

1. The facts of the case are, the appellant is said to be a reputed developer and builder. It is claimed that the appellant along with its group companies have specialized in the development of major Information Technology Parks. The respondent, a private limited company, has obtained on lease plots bearing Nos. 13, 14 and 15, EPIP, I Phase, Whitefield, Bangalore measuring about 33,149 sq. m. (about 8 acres 19 guntas). The land was allotted to the respondent on 10-6-2002 by the Karnataka Industrial Area Development Board ('KIADB', for short). Physical possession has been delivered on 30-5-2003 and a lease agreement has been executed in favour of the respondent by the KIADB as on 17-11-2003.

2. The respondent had made a proposal to the appellant as on 6-8-2003 to sub-lease the above land by the execution of an agreement of lease, within 15 days from KIADB executing the lease-cum-sale agreement in its favour. This proposal was accepted by the appellant.

3. It is the case of the appellant that pursuant to the lease deed dated 17-11-2003 executed by KIADB in favour of the respondent, the appellant who had got the subject land surveyed and building plans prepared through its Architects, had held meetings with the respondent, to finalize terms of the sub-lease, on 17-2-2004 and 18-2-2004, The appellant had got issued a public notice through several daily newspapers dated 18-3-2004 declaring the proposed intention of taking the land on sub-lease from the respondent and inviting objections if any from any other party. Also by a letter dated 18-3-2004 the appellant, called upon the respondent to complete the transaction as contemplated under the agreement dated 6-8-2003. In response the respondent had, by a letter dated 22-3-2004, informed the appellant that the agreement dated 6-8- 2003 was no longer subsisting and that it was null and void. The appellant has filed a suit for specific performance of the agreement dated 6-8-2003, as on 16-7-2004. An application for temporary injunction seeking to restrain the respondent from alienating or altering the nature of the suit land having been rejected, the present appeal is filed.

4. The appeal having been admitted the prayer for interim injunction was also granted. However, the interim injunction was modified at the instance of the respondent and with the consent of both Counsels for the parties, the matter was heard for final disposal.

5. The findings of the Trial Court may be summarized as follows.--

That the appellant having sought more than one relief in the application for temporary injunction - the application is liable to be dismissed as it is contrary to the Civil Rules of Practice. The Memorandum of Understanding (MOU) dated 6-8-2003 as between the parties is not enforceable under law as the same 'does not contain the essential bargain or important and material terms and to that extent the said MOU is not a concluded contract between the parties' (sic) ... and 'the same cannot be specifically enforced'. The MOU was valid, enforceable and binding only for a period of 15 days from the date on which the KIADB executed the lease agreement in favour of the respondent. Hence it was valid only upto 11-12-2003. And it was not in existence as on the date of suit, namely, as on 16-7-2004. As the permission of KIADB was necessary to sub-lease the suit property -- the respondent cannot be compelled to seek such permission. Even if it is presumed that the agreement is an enforceable one -- the appellant can be adequately compensated in terms of money.

The appellant is guilty of suppression of facts, such as the issuance of a public notice by the respondent dated 22-3-2004 by way of reply to the public notice dated 18-3-2004 and the fact that the defendant has started construction over the suit schedule property. That the respondent has spent a huge sum of money in respect of the construction on the suit property. That the appellant has 'slept over its rights'. In not approaching the Court with promptitude in respect of its cause. On these findings the Trial Court has refused to grant an order of temporary injunction.

6. Sri Udaya Holla, Senior Advocate, appearing for the appellant would urge the following contentions.--

(a) That the Trial Court was wrong in holding that the document dated 6-8-2003, which is styled as an MOU or a memorandum of understanding by the parties, was not enforceable in law. He would point out that having regard to the fact that all the essential ingredients of an agreement to lease having been agreed upon, there was consensus ad idem as between the parties and hence there was a binding contract and a legally enforceable one;

(b) The execution of the document was not in dispute. The respondent has even chosen to pay stamp duty on the same, obviously intending that the same be treated as a legally enforceable contract;

(c) That the Trial Court was in error in holding that the document was valid only upto 11-12-2003, as on which date in terms of the document - the respondent ought to have executed the deed of sub-lease, having itself obtained a lease from KIADB in respect of the land on 27-11-2003, which was the contingency reserved under the document for completion of the transaction. It is submitted, that a cause of action certainly did arise when there was failure to convey the property as agreed but it could not be said that the validity of the agreement expired on that day. It is submitted that time was not the essence of contract, from a plain reading of the document;

(d) That the Trial Court was in error in holding that the proposed sub-lease was contrary to the terms of lease in favour of the respondent as on MOU was contingent upon the KIADB granting permission and such permission not capable of being granted as on the date of the MOU because there was no lease in favour of the respondent itself. It is submitted that the Trial Court did not appreciate that Courts are competent to grant a decree for specific performance subject to any approvals to be obtained from statutory authorities - KIADB, in the present case. Especially since the respondent was conscious of this requirement in executing the MOU;

(e) That the non-payment of any amount towards rent or advance deposits was not material as the ground rent payable was agreed upon and in any event the MOU required the appellant to make payments only on the execution of the lease deed;

(f) The fact that the respondent was not a software industry would clearly demonstrate that the primary intention of KIADB placing a restriction as to the persons who were entitled to be inducted by the respondent was that the ultimate occupiers of the property should be engaged in export oriented information technology industries and hence there could not be a bar to the appellant obtaining a sub-lease to develop the same as an IT park. In any event the respondent has not terminated the MOU on the ground that KIADB had refused permission for the grant of a sub-lease in favour of the appellant;

(g) That the Trial Court has erred in holding that the appellant had slept over its rights and had approached the Court only after the property had been sufficiently developed by the respondent. And that the fact of construction having come up on the suit land was also suppressed by the appellant. It is contended that the respondent never placed the appellant on notice as being ready to execute the sublease immediately after obtaining the lease from KIADB. The initiative was that of the appellant. In any event time was not of the essence in this regard. The termination was unprovoked and unilateral. And further the respondent had proceeded With the construction on a war footing especially after the institution of the suit.

7. Sri Holla cited the following authorities in support of legal propositions urged.

Kollipara Sriramulu (dead) by L.R. v T. Aswatha Narayana (dead) by L.R. and Ors., : [1968]3SCR387 . In the circumstances of that case the Court held that the parties making reference to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent a binding contract.

Currimbhoy and Company Limited v. L.A. Creet and Ors. . Where the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of a further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract, while in the latter there is a binding contract.

Rickmers Verwaltung Gimb H. v. Indian Oil Corporation Limited, : AIR1999SC504 . An agreement, even if not signed by the parties, can be spelt out from correspondence exchanged between the parties:

'... it is the duty of the Court to construe correspondence with a view to arrive at a conclusion whether there was any meeting of mind between the parties, which could create a binding contract between them but the Court is not empowered to create a contract for the parties by going outside the clear language used in the correspondence, except insofar as there are some appropriate implications of law to be drawn. Unless from the correspondence, it can unequivocally and clearly emerge that the parties were ad idem to the terms, it cannot be said that an agreement had come into existence between them through correspondence. The Court is required to review what the parties wrote and how they acted and from that material to infer whether the intention as expressed in correspondence was to bring into existence a mutually binding contract. The intention of the parties is to be gathered only from the expressions used in the correspondence and the meaning it conveys and in case it shows that there had been meeting of mind between the parties and they had actually reached an agreement, upon all material terms, then and then alone can it be said that a binding contract was capable of being spelt out from the correspondence'.

Harichand Mancharam v. Govind Luxman Gokhale, AIR 1923 PC 47. Whether an agreement is a completed bargain or merely a provisional arrangement depends on the intention of the parties as deducible from the language used by the parties on the occasion when the negotiations take a concrete shape.... The fact of a subsequent agreement being prepared may be evidence that the previous negotiation did not amount to an agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement.

Subimalchandra Chatterji v. Radhanath Ray, AIR 1934 Cal. 235. Equity holds people bound by a contract, which, though deficient in some requirement as to form, is nevertheless an existing contract.

Progressive Constructions Limited v. Bharat Hydro Power Corporation Limited, : AIR1996Delhi92 . A formal contract had remained to be signed because there were minor discrepancies or variations in the terms which were being negotiated between the parties. The finalisation of the details would not adversely effect the conclusion of the contract which had stood arrived at with the acceptance of tender and award.

Mrs. Chandnee Widya Vati Madden v Dr. C.L. Katial and Ors., : [1964]2SCR495 . Plaintiffs entered into a contract of sale of a house belonging to the defendant on the plot granted by the Government. One of the terms of the contract was that the vendor shall obtain permission from the Government for the sale within two months of the agreement. The vendor made the application but withdrew it. In the suit for specific performance the ground of attack was that the contract was not enforceable being of a contingent nature and the contingency not having been fulfilled. The Court held that the parties had agreed to bind themselves by the terms of the document executed. It was for the vendor to perform her part of the contract and that time was not of the essence of the contract, and that the Court has to enforce the contract enjoining the vendor to make the necessary application.

Rojasara Ramjibhai Dahyabhai v. Jani Narottamdas Lallubhai (dead) by L.Rs and Anr., AIR 1986 SC 1912 : (1986)3 SCC 300. Under an agreement of sale there was a precondition to obtain the permission of the authorities to use the subject property as a village site, for the execution of a sale deed. The Court held that such a contract was not a contingent contract and that a suit for specific performance filed within 3 years after obtaining permission was not barred by limitation.

State of Maharashtra and Ors. v. Atur India Private Limited, : [1994]1SCR881 . While considering the distinction between an agreement to lease and an agreement of lease has held as follows.--

'We will now turn to Indian law. Mulla in the Transfer of Property Act (7th Edition), at page 647 dealing with agreement to lease states as under

'An agreement to lease may effect an actual demise in which case it is a lease. On the other hand, the agreement to lease may be a merely executory instrument binding the parties, the one, to grant, and the other, to accept a lease in the future. As to such an executory agreement the law in England differs from that in India. An agreement to lease not creating a present demise is not a lease and requires neither writing nor registration.

As to an executory agreement to lease, it was at one time supposed that an intending lessee, who had taken possession under an agreement to lease capable of specific performance, was in the same position as if the lease had been executed and registered. These cases have, however, been rendered obsolete by the decisions of the Privy Council that the equity in Walsh v. Lonsdale does not apply in India'.

28. If it is merely an agreement to lease as to whether it requires registration has come up for discussion of this Court in Tiruvenibai v Lilabai, : AIR1959SC620 it was held as under:

'Before dealing with these points, we must first consider what the expression 'an agreement to lease' means under Section 2(7) of the Indian Registration Act (hereinafter to as 'the Act'). Section 2(7), provides that a lease includes a counterpart, Kabuliyat, an undertaking to cultivate and occupy and an agreement to lease. In Hemanta Kumari Debi v. Midnapur Zamindari Company Limited, AIR 1919 PC 79 : LR (1919)46 IA 240, the Privy Council has held that 'an agreement to lease, which a lease is by the statute declared to include, must be a document which effects an actual demise and operates as a lease'. In other words, an agreement between two parties which entitles one of them merely to claim the execution of a lease from the other without creating a present and immediate demise in his favour is not included under Section 2, Sub-section (7). In Hemanta Kumari Debi's case, a petition setting out the terms of an agreement in compromise of a suit stated as one of the terms that the plaintiff agreed that if she succeeded in another suit which she had brought to recover certain land, other than that to which the compromised suit related, she would grant to the defendants a lease of that land upon specified terms. The petition was recited in full in the decree made in the compromised suit under Section 375 of the Code of Civil Procedure, 1882. A subsequent suit was brought for specific performance of the said agreement and it was resisted on the ground that the agreement in question was an agreement to lease under Section 2(7) and since it was not registered it was inadmissible in evidence. This plea was rejected by the Privy Council on the ground that the document did not effect an actual demise and was outside the provisions of Section 2(7). In coming to the conclusion that the agreement to lease under the said section must be a document which effects an actual demise the Privy Council has expressly approved the observations made by Jenkins, C.J., in the case of Panchanan Bose v. Chandra Charan Misra, ILR (1910)37 Cal. 808 : 14 CWN 874, in regard to the construction of Section 17 of the Act. The document with which the Privy Council was concerned was construed by it as 'an agreement that, upon the happening of a contingent event at a date which was indeterminate and, having regard to the slow progress of Indian litigation, might be far distant, a lease would be granted'; and it was held that 'until the happening of that event, it was impossible to determine whether there would be any lease or not'. This decision makes it clear that the meaning of the expression 'an agreement to lease' 'which, in the context where it occurs and in the statute in which it is found, must relate to some document that creates a present and immediate interest in the land'. Ever since this decision was pronounced by the Privy Council, the expression 'agreement to lease' has been consistently construed by all the Indian High Courts as an agreement which creates an immediate and a present demise in the property covered by it' '.

8. Sri Holla further contended that the claim of the respondent that the suit schedule property having been extensively developed and third party interests having been created is not demonstrated with reference to documents, in the instant case, the necessary permission from KIADB in respect of any such sub-lessees being inducted into the property is not forthcoming. Nor are any documents produced to indicate alienations under any registered documents to raise a presumption in this regard. The Trial Court has placed undue reliance on photographs produced by the respondent in respect of its exaggerated claims in respect of works that were apparently being carried on during the pendency of the application. Such acts on the part of the respondent are carried out lis pendens and cannot be cited to plead equities.

9. Per contra, the Counsel for the respondent, Sri Navkesh Batra would contend as follows.--

(a) The letter of the respondent dated 6-8-2003, which is variously styled as on MOU, an agreement to lease and by such other name, of which the appellant seeks specific performance is not a concluded contract which is capable of enforcement in law. There is hence no basis for the suit and consequently for temporary injunction;

(b) Even assuming that the same could be given the colour of a workable agreement, it has spent itself out by efflux of time. Firstly by virtue of the express term incorporated under the document itself and secondly by the fact that the respondent has proceeded to develop the suit property into an information technology park on its own, immediately after obtaining the lease agreement in its favour from the KIADB as on 27-11-2003. Time was of the essence of contract. The relief of temporary injunction is defeated by delay;

(c) That, in terms of Section 14 read with Section 20 of the Specific Relief Act, 1963, the Court is not bound to enforce specific performance, having regard to the nature of the terms said to have been agreed upon, at the instance of the appellant. If the appellant being entitled to the main relief is in doubt both on facts and in law, the relief of temporary injunction ought to be refused;

(d) The conduct of the appellant in the circumstances of the case would be of much significance in the grant of injunctory relief. The fact that the appellant has chosen to approach the Trial Court seeking such a relief well-over eight months after the supposed cause of action accruing to it is a case in point. And so is the fact that the present appeal is itself filed after a month and a half from the date of order;

(e) The Trial Court having exercised its discretion in the facts and circumstances, on a prima facie examination of the material averments and documents on record, the same may not be interfered with in the absence of the same being demonstrated to be capricious, arbitrary or without jurisdiction;

(f) A contract which envisages a consideration of a total sum of Rs. 554 crores during its term, could not be said to be concluded in the form of a letter and especially while indicating no present consideration as having passed;

(g) That in terms of the lease deed, which is for an initial period of six years, executed by the KIADB in favour of the respondent, it is contemplated that in the event the respondent does not utilize the land and complete construction or permits usage other than for IT or ITES companies with a 33% export obligation, the lease deed is capable of being cancelled. The appellant straightaway would be disqualified to hold a sub-lease;

(h) The respondent has demonstrated the huge expenditure incurred by it -- by way of consideration under the lease deed and the galloping cost of the major construction work which is underway. Whereas, in a relative sense, the appellant has not incurred any expenditure. The balance of convenience is in favour of the respondent.

10. The Counsel for the respondent relied on the following citations in support of the legal propositions urged:

Mulla on Indian Contract and Specific Relief Acts, page 209, Volume I, 12th Edition: Where an agreement of sale or lease is 'subject to the purchaser's solicitor approving the lease' the contract is conditional. .... it cannot be said that there is a final and concluded agreement.

Von Hatzfedt-Wildenburg v. Alexander, (1912)1 Ch 284 : 81 LJ Ch 184. The acceptance by the plaintiff was subject to a condition that the plaintiffs solicitor should approve the title to and covenants contained in the lease, the title from the freeholder and the form of contract, the negotiations did not form a binding agreement between the parties.

New Mofussil Company Limited v. Shankerlal Narayandas Mundade, AIR 1941 Bom. 247. Where some of the conditions of the proposed contract were settled and other conditions were to be settled through lawyer and the agreement itself was to be drawn up thereafter, the contract is not complete until such agreement is drawn up and signed.

Baijnath v. Kshetrahari Sarkar, : AIR1955Cal210 . Where a prospective lessee demands title deeds from the prospective lessor for his investigation and approval, it cannot be said that there has been a final and concluded agreement between them although most other material terms may have been agreed upon by them.

11. It is submitted by the Counsel for the respondent that in the facts and circumstances of the case on hand, the MOU contemplates other terms being agreed upon, it also contemplates the title deeds being approved by the appellant or its Counsel, according to the appellant itself there were several meetings subsequent to the lease deed which remained inconclusive as regards agreement on material terms as to the consideration, and therefore there was no concluded agreement.

Dr. C.L. Katial v. Mrs. Chandnee Widya Vati Madden, . An agreement for sale of house which contains a clause to the effect that the vendor is to obtain the sanction of the Chief Commissioner for transfer of the site does not remain inchoate when there is nothing to suggest that the application for sanction is likely to be rejected.

Faridabad CT Scan Centre v D.G. Health Services, : 1997ECR801(SC) . A party cannot seek relief which perpetuates a wrong. Wrong orders issued in favour of others cannot be perpetuated in favour of a party.

12. The Counsel for the respondent would therefore submit that there is no concluded agreement which is capable of enforcement, time was of essence insofar as compliance with the terms imposed on it under the lease deed by KIADB, in view of the laconic attitude of the appellant in seeking to1 further the transaction proposed under the MOU, the respondent had itself proceeded with the development of the land at substantial cost. Third party rights having been created, it would result in serious hardship and injury to the respondent. Whereas, the appellant cannot possibly raise any such claim of hardship or injury.

13. In the light of the rival contentions, the impugned order is examined to consider whether the same can be sustained.

14. Before proceeding to consider the material aspects of the impugned order, the observation of the Trial Court as to the application of the appellant warranting dismissal solely on the ground that more than one relief was sought and. the same being 'contrary to the Civil Rules of Practice' and is liable to be dismissed, requires to be placed in the correct perspective. The observation is made without reference to the Rule. The Karnataka Civil Rules of Practice, 1967, Chapter III, Rule 23 reads as follows.--

'23. There shall be a separate application in respect of each distinct prayer. When several prayers are combined in one application, the Court may direct the applicant to confine the application only to one of such prayers and to file a separate application in respect of each of the others'.

The observation is hence incorrect.

15. The Trial Court has held that the MOU was not a concluded contract and that the same cannot be specifically enforced. Having held thus, it is a contradiction in terms for the Trial Court to also hold that the MOU was valid, enforceable and binding only for a period of 15 days from the date on which the KIADB executed the lease agreement in favour of the respondent. This is plainly capricious.

16. The finding of the Trial Court that as the execution of the lease agreement by KIADB was a condition precedent for any contract of sublease and as there was no lease in existence on the date of the MOU, there was no subsisting right in respect of which there could be an agreement and hence the MOU was not enforceable, is a total misreading of the facts and the law. The Supreme Court in more than one case, cited by the appellant herein, has held that such contracts are not to be construed as contingent contracts and are capable of enforcement.

17. The observation of the Trial Court that the appellant has suppressed material facts such as the reply issued by the respondent to the appellant's public notice and the fact of construction having commenced on the suit property as on the date of suit - has completely failed to address the conduct of the respondent who had neither terminated the MOU after obtaining the lease from KIADB, nor called upon the appellant to complete the transaction contemplated under the MOU, especially when the Trial Court has held that the MOU was valid for 15 days from the date of lease by KIADB.

18. The Trial Court having refused to grant an order of temporary injunction on the (in) conclusive finding that the MOU was not an enforceable agreement and having regard to the delay, in the Trial Court's opinion, in the appellant having approached the Court and the further circumstance that the defendant had substantially changed the nature of the suit property at much expense and was in an irreversible position, the Court has passed an order in the exercise of its discretion. However, the findings which are only prima facie are worded so conclusively that a trial on the respective contentions of the parties is rendered almost unnecessary. Determination of contentious issues cannot be allowed to be prejudiced by the impugned order. The capricious findings on the nature and scope of the MOU require to be set at naught.

19. On the question whether there was delay on the part of the appellant in approaching the Court for appropriate relief is concerned, prima facie it is to be held that the appellant has chosen to move the Trial Court at its own pace and this could be said even in respect of the present appeal. The plea that time was not of essence of the contract or that the appeal having been preferred within the period of limitation prescribed, could not defeat the appellant's claim, would be ignoring the facts and circumstances sought to be urged and demonstrated. The appellant shall bear the consequence of delay. Consequently the respondent's claim of the balance of convenience being in its favour, gains force. The appellant would not be entitled to any order of temporary injunction.

20. Whether the MOU would constitute a concluded and enforceable agreement remaining to be determined at the trial, the further question whether there was breach committed by the respondent, and the quantum of damages that the appellant may be entitled to, in the alternative, in the face of disentitlement to the relief of specific performance of the same would be secondary questions dependent on the frame of suit on any additional pleadings and a conclusive finding on the MOU.

21. In the result the following judgment.--

The appeal is dismissed. The interim order dated 17-6-2005 and the modified order dated 20-6-2005 stand vacated. Insofar as the findings of the Trial Court as to the document dated 6-8-2003 are concerned, it shall only be construed as a prima facie opinion of the Court and shall not preclude the appellant from establishing its case as regards the nature and scope of the document.


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