IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 26/04/2006
Coram
The Hon'ble Mr.A.P.SHAH, CHIEF JUSTICE
and
The Hon'ble Mrs.Justice PRABHA SRIDEVAN
O.S.A.No. 1 of 2005
and
C.M.P.Nos. 144 of 2005, 419 of 2006, 3329 of 2006 & 420 of 2006
Marg Constructions Limited
Apex Chambers,
No.20, Thyagaraya Road,
T.Nagar, Chennai 17.
Rep. by its Managing Director,
Shri G.R.K.Reddy. ... Appellant
-Vs-
1. South India
Corporation (Agencies) Limited
South India House,
73, Armenian Street, Chennai 1.
2. Mr.S.Vasudevan
Managing Director,
South India Corporation (Agencies) Limited
South India House,
73, Armenian Street, Chennai 1.
3. State Bank of India,
Commercial Branch, EA & A Division,
232, N.S.C.Bose Road, Chennai 600 001.
4. State Bank of India,
Bazullah Road,
T.Nagar, Chennai 17.
5. Haciendaa Infotech and Realtors (P) Limited
rep. by its Director Mr.RM.Palaniappan,
having Office at Rani Seethai Hall, V Floor,
No.603, Anna Salai, Chennai 600 006.
6. Mr.RM.Palaniappan
Director,
Haciendaa Infotech and Realtors (P) Limited
rep. by its Director Mr.RM.Palaniappan,
having Office at Rani Seethai Hall, V Floor,
No.603, Anna Salai, Chennai 600 006. ... Respondents
Appeal filed under Clause 15 of the Letters Patent Appeal and
Order XXXVI of O.S. Rules against the judgment and order dated 27.12.2004 in
Application No.841 of 2004 in C.S.No. 811 of 2004.
!For Appellant :::: Mr.Mukul Rohatgi
Senior Counsel
^For Respondents :::: Mr.Vinod Bobde
Senior Counsel
:J U D G M E N T
(The Judgment of the Court was delivered by Honble The Chief Justice)
This Letters Patent Appeal calls in question the judgment and order
dated 27.12.2004 of the learned single Judge in Application No. 841 of 2004
in C.S.No. 811 of 2004 and arises under the following circumstances.
2. The appellant, which is the plaintiff in the suit, is a company
incorporated under the provisions of the Indian Companies Act. The first
respondent, which is the first defendant in the suit, is also a company
incorporated under the Indian Companies Act. The second respondent is the
Managing Director of the first respondent. The first respondent is the owner
of the property mentioned in Schedule A to the plaint. The first respondent
has entered into agreements of sale with various owners of schedule B
schedule and has obtained powers of attorney from them. It is the case of the
appellant that the first respondent is heavily indebted and to discharge the
dues to the third respondent/State Bank of India, Commercial Branch, Chennai,
decided to sell Schedule A and B properties together as it constituted one
block. On coming to know that the first respondent was interested in
completing the bargain the appellant approached the first respondent on 27th
July 2004 and negotiated for the purchase of both A and B Schedule
properties and terms of an agreement of sale were mutually agreed upon by both
the parties. The terms that were agreed upon during the discussion held at
the office of the first respondent on 27th July 2004 were that the appellant
had to pay sale consideration at the rate of Rs.19 lakhs per acre for the A
and B Schedule properties measuring totally 46.915 acres; that the first
respondent had to obtain the necessary no-objection certificate from the third
respondent/ State Bank of India and get release of the documents of title with
respect to Schedule A property; that the appellant should complete the sale
within three months from the date of receipt of No Objection Certificate
from the State Bank of India with respect to Schedule A property. It is the
further case of the appellant that the second respondent representing the
first respondent as the Managing Director also forwarded a draft agreement
through his E-mail to the plaintiff on 28th July 2004 containing essential
terms of the contract as agreed to on 27th July 2004. However, as some doubts
were raised about the Schedule B property a further meeting between the
parties was held on 2nd August 2004 and it was then agreed and finalised that
the rate per acre of Rs.19 lakhs will stand unaltered but the first respondent
shall obtain No Objection Certificate from the third respondent for purchase
of both Schedule A and B properties. The signing of formal agreement of
sale was not necessitated as the parties agreed to complete the sale on
receipt of No Objection Certificate from the third respondent. It is the
further case of the appellant that on the request of the respondents the
appellant agreed to keep the sale advance of Rs.200 lakhs in a Non lien-Fixed
Deposit account with the fourth respondent i.e., State Bank of India, Bazullah
Road Branch. The original FDRs were agreed to be in the custody of Advocate
Mr.P.B. Ramanujam till the No Objection Certificate is issued by the third
respondent. In pursuance of the agreement reached between the parties, the
appellant sent a cheque of Rs.200 lakhs favouring the first respondent to the
fourth respondent for being kept in a No-Lien Fixed Deposit. The fourth
respondent issued FDRs which were kept in the custody of Advocate
Mr.P.B.Ramanujam. The appellant specifically mentioned in their letter dated
3rd August 2004 to the first respondent that the said sum of Rs.200 lakhs was
paid towards the purchase of schedule A and B properties for which No
Objection Certificate was solicited and release of title deeds requested. It
is the further case of the appellant that the appellant has thus performed its
part of the contract and is ready and willing to pay the balance price and
take the sale deed within three months from the date of the first respondent
obtaining No Objection Certificate from the third respondent as agreed for
both Schedule A and B properties. But even after a lapse of more than two
months, the respondents 1 and 2 had not evinced any interest to obtain any No
Objection Certificate from the third respondent. The appellant by their
letter dated 2nd September 2004 brought to the notice of the respondents 1 and
2 that they are ready and willing to complete the sale of the property, but in
vain. The respondents 1 and 2 have not responded at all and are attempting to
sell A and B Schedule properties to some other party for a higher
consideration. The appellant, therefore, filed C.S.No.811 of 2004 for
specific performance of the contract of sale entered into between the parties
on 27th July 2004 and 2nd August 2004 for A and B Schedule properties.
3. Along with the suit, the appellant took out O.A.No.841 of 2004 seeking an
order of interim injunction restraining respondents 1 and 2 from in any way
alienating or encumbering the A and B Schedule properties, pending
disposal of the suit. On 13th October 2004 an exparte injunction came to be
issued. Pursuant to the notice, the first and second respondents appeared and
filed their counter affidavits.
4. The respondents denied the allegation that negotiations were made and the
terms were finalised on 27th July 2004 and the same were embodied in a draft
agreement to sell, prepared by the first and second respondents and forwarded
the same to the appellant on 28th July 2004. It was contended that no
negotiations were made on 27th July 2004, and no terms were finalised as
alleged and since the appellant wanted a draft agreement the same was given to
them, the terms of which were not to be taken as having been accepted by
respondents 1 and 2. It was contended that there was no agreement between
respondents 1 and 2 and the appellant with regard to the sale of the
properties described in Schedule A and B. The parties never agreed for
such sale. There was no concluded contract between the parties, oral or
otherwise. At no point of time, the first respondent had asked the appellant
to pay any advance. Since there was no concluded contract, the question of
the second respondent asking the appellan t to pay any advance did not arise
and there was no such request or demand by the second respondent. The
appellant on its own, as if to show its bona fides, volunteered to deposit a
sum of Rs.200 lakhs in the State Bank of India and requested the second
respondent to keep the amount pending finalisation of the terms and as there
was no firm agreement reached between the parties, the second respondent vide
letter dated 10th August 2004 released the FDRs for Rs.2 crores to Advocate
Mr.P.B.Ramanujam clearly setting out that if the respondents get into a formal
understanding with the appellant, both of them will approach him and inform
him of the methodology for handing over FDRs. It was contended that the
letter dated 03rd August 2004 referred to in the plaint was not received by
respondents 1 and 2 and the document which is enclosed along with the plaint
was not delivered to the respondents. It was contended that the property
comprised in both A and B Schedule properties are much more valuable than
the paltry sum of Rs.19 lakhs per acre which the appellant was offering and
the respondents were not inclined to accept the offer of Rs.19 lakhs per acre
and never accepted to the offer at any point of time. In fact on 18th August
2004 the appellant had set out certain terms and conditions as their offer in
which the appellant had quoted a price of Rs.21 lakhs per acre, and requested
the second respondent to sign the duplicate and return the same to them as
token of confirmation of the terms which were offered by the appellant. Since
the second respondent was not interested in having the transaction on the said
terms and it was not acceptable to them, the second respondent did not sign
and return the duplicate. It was contended that the appellant has suppressed
the letter dated 18th August 20 04 and has thus approached the Court with
unclean hands. It was contended that if the injunction, which was granted by
this Court, is not vacated, great prejudice and irreparable loss would be
caused to the respondents, as the first respondent company would be deprived
of its right to deal with the properties and get the best price for the same
5. The case put up before the learned single Judge on behalf of the appellant
was that though no agreement was formally signed between the parties, yet the
contemporaneous correspondence exchanged between them shows that a binding
contract did come into existence between the parties on 27th July 2004 and
02nd August 2004. On the other hand, according to respondents 1 and 2, no
concluded contract had been reached between the parties and the correspondence
exchanged between the parties also shows that there was no enforceable
contract between them as the essential conditions of the contract and bargain
were never agreed upon by the parties.
6. Upon hearing the learned counsel and considering the materials placed on
record, the learned single Judge vacated the temporary injunction on the
following reasonings: –
Learned counsel appearing for the first defendant very seriously disputed as
to the existence of contract much less a oral contract that too in respect of
a property the value of which, if not its entirety atleast the part of its is
admitted to be more than Rs.Two crores by the applicant themselves and further
contend ed that the act of the applicant is only to bring the defendant for
some settlement or otherwise. As there is a strong dispute as to the
existence of the agreement, which is the basis for filing a suit for specific
performance and the existence or otherwise of the same has to be decided only
at the time of trial, I am of the considered view taking into consideration of
the settled legal principle that the grant of specific performance is
discretionary in nature, the balance of convenience lies more with the real
owner the first defendant, the injunction granted on 13.10.2004 would cause
hardship to the real owner and further more whatever transaction takes place
during the pendency of the suit would be protected under Section 52 of the
Transfer of Property Act, the stay granted on 13.10.2004 is vacated by
observing that any encumbrance or alienation made during the pendency of the
suit would depend upon the outcome of the suit.
7. We have heard the learned senior counsel appearing for the parties, and
have perused the records.
8. The short question that falls for our consideration is whether the
appellant has prima facie established that there was a valid and subsisting
agreement between the parties?
9. Mr.Mukul Rohatgi, learned senior counsel appearing for the appellant
submitted that the essential terms of the agreement were reached between the
parties in the meetings held on 27th July 2004 and 02nd August 2004 and at the
request of the respondents, the appellant had deposited a sum of Rs.200 lakhs
in No-Lien Fixed Deposit with the fourth respondent/bank. He submitted that
even though agreement had not been signed by the parties, but they acted upon
it treating it to be a binding contract. He argued that the signing of the
formal agreement was not necessary as the parties had agreed to complete the
sale on receipt of No Objection Certificate from the third respondent and
pursuant to the same, a sum of Rs.200 lakhs was deposited with the third
respondent/bank in furtherance of the agreement reached between the parties.
On this basis, Mr.Rohatgi submitted that a binding agreement had come into
existence, through correspondence and non signing of the formal agreement by
the parties was of no consequence. In reply, Mr.Vinod Bobde, learned senior
counsel appearing for the respondents submitted that even a bare perusal of
the correspondence exchanged between the parties would show that there was no
meeting of mind between the parties and no agreement can also be spelt out
from the correspondence exchanged between the parties. Learned senior counsel
submitted that the documents on record especially the letters dated 18th
August 2004 and 21st August 2004 clearly show that at no point of time a
concluded contract was reached between the parties, and the FDRs were duly
discharged by the respondents vide letter dated 10th August 2 004.
10. It is an admitted fact that the first respondent is the owner of
A Schedule property and has entered into agreements of sale with various
owners of B Schedule property and has obtained powers of attorney from them,
and intended to sell both the properties as one block. It is also not in
dispute that the appellant represented by their Managing Director
Mr.G.R.K.Reddy, approached the second respondent on 27 th July 2004 and
negotiated for the purchase of both A andB Schedule properties. According
to the appellant, the essential terms of the agreement were reached between
the parties in the meetings held on 2 7th July2004 and 2nd August 2004, and
pursuant to the agreement, the appellant had deposited a sum of Rs.200 lakhs
in No-Lien Fixed Deposit with the fourth respondent bank. At this stage, it
would be relevant to refer to the letter of the appellant addressed to the
second respondent dated 18th August 2004, which reads as follows: –
The South India Corporation Ltd., (SICAL)
No.73, Armenian Street,
Chennai 600 001.
Kind Attn: Mr.S.Vasudevan
Dear Sirs,
Sub: Sale of your lands at Sholinganallur village.
This is to confirm the conversation we had in respect of sale of your
lands situated at Sholinganallur Village. The broad understanding we have
reached are as follows: –
1)SICAL who are the absolute owners of the lands in extent 47 acres and 5
cents comprised in Survey Nos. 429/4, 436/3, 437/1, 438/1, 530/2 B, 534/2,
535/1, 535/1B, 536/2, 539/1, 540/1A, 540/1C, 540/2A, 540/2 B, 540/2, 540/4A,
541/4B, 561/1A, 561/2A, 561/2B, 561/3A1, 562/1, 562/2, 562/3, 562/4, 562/5B,
562/8, 563/1A, 563/1B, 563/2, 564/1A, 563/1 B, 563/2, 564/1A, 563/1B, 563/2,
564/1A, 563/1B, 565/2, 566/4B, 568/13 , 568/5, 568/7, 5701/1 of Sholinganallur
Village having good and marketable title, will convey the same to us or our
nominees.
2)The total consideration for the transaction will be Rs.9,97,50,000/- (Rupees
nine crores and ninety seven lakhs and fifty thousand only)
3)SICAL will fulfil all the statutory requirements like passing Board
Resolution, etc.
4)As suggested by SICAl, a sum of Rs.2,00,00,000 (Rupees two crores) has been
deposited with the State Bank of India, Bazulla Road Branch, Chennai 600 017
and the receipts handed over to Mr.P.B.Ramanujam to be kept by him or trust.
5)The stamp and registration charges shall be borne by us/our nominees.
6)Clearance from Bank and other papers necessary are agreed to be produced
within a month from this date.
Kindly confirm your acceptance by signing the office copy of this
communication.
Yours sincerely, G.R.K.Reddy, Managing Director (emphasis supplied)
11. A bare reading of the above letter shows that there was no meeting of
mind between the parties as to the essential terms and conditions of the
contract, and the case of the appellant that the agreement was reached between
the parties in the meetings held on 27th July 2004 and 2nd August 2004 is
completely untrue. In fact, by this letter the appellant had increased the
offer of Rs.9,97,50,000/- computed at the rate of Rs.21 lakhs per acre. The
letter dated 21st August 2004 addressed by the appellant further confirms the
fact that there was no concluded contract between the parties. In this
letter, the appellant inter alia stated: –
This has reference to the discussions we had with you in regard to the sale
of the above property. We confirm our agreement for purchase of the same as
detailed hereunder: –
1.The total consideration will be Rs.2,70,00,000/- (Rupees two crores and
seventy lakhs only)
2.As required by you, we are enclosing our cheque no.186312 dated 20.08.2004
for Rs.1,00,00,000/- (Rupees one crore only) drawn on Punjab National Bank,
Purasawalkam Branch and Cheque No.638838 dated 30.08.2 004 for
Rs.1,00,00,000/- (Rupees one crore only) drawn on Indian Overseas Bank,
Purasawalkam Branch, Chennai as advance consideration for the above sale.
3.The balance consideration of Rs.70,00,000/- (Rupees seventy lakhs only) will
be paid within 7 days from the date of obtaining vacant possession by SICAL
from John Crane. The likely date of obtaining vacant possession by SICAL is
31st August 2004.
4.SICAL shall hand over the original title deeds upon payment of the entire
consideration and complete the registration formalities.
5.Stamp and Registration charges shall be borne by us/our nominees.
6.SICAL confirms that the above property is unencumbered and has a marketable
title to the property.
Kindly confirm your acceptance by signing the duplicate copy of this letter.
(Emphasis supplied)
12. The letter of the even date addressed by the second respondent to
Mr.P.B.Ramanujam, Advocate, also shows that the parties were still negotiating
the terms and they had not actually reached an agreement on all material terms
of contract of sale. By the said letter, the 2 nd respondent acknowledged the
appellants offer of Rs.9,97,50,000/- computed at Rs.21 lakhs per acre and
stated as follows: –
SICAL is willing to enter into any firm agreement for the sale of the
property with such persons, including Mr.G.R.K.Reddy, provided the condition
above with reference to the payment of consideration is adhered to. If
Mr.G.R.K.Reddy were to purchase the property, we are willing to adjust the
face value of the FDR of Rs.2 crores and receive the balance consideration of
Rs.7,97,50,000/-.
Upon receiving the full consideration, SICAL would be willing to meet with all
other requirements of the purchaser, except the following: –
a.Obtaining clearances/NOC from Tamil Nadu Housing Board.
b.Obtaining the re-classification of the property to residential/ commercial
zone from its present classification of open space recreation zone from CMDA.
c.Facilitating purchase of the pockets of lands which would make the present
holding contiguous.
d.Eviction of the encroachers from the eari poramboke which is on the front
side of the property.
e.Steps for widening the access road of the property, including getting
clearances for the same from the concerned statutory authorities.
We would be willing to submit photo copies of the title deeds of the property
to you or to any advocate of your choice for scrutiny to satisfy yourself that
our title to the property referred herein is clear and marketable. (emphasis
supplied)
13. On going through the entire material placed on record we are
satisfied that no mutually binding contract had come into existence between
the parties through correspondence. There was no concluded contract between
the parties on 27thJuly 2004 and 02nd August 2004 as alleged by the appellant.
In fact by letter dated 18th August 2004 the appellant had offered enhanced
consideration of Rs.9,97,50,000/- computed at the rate of Rs.21 lakhs per
acre. The appellant has deliberately suppressed this letter, which
conclusively shows that there was no agreement between the parties about the
price even as on 18th August 2004. The parties, thus, for all intended
purposes were still negotiating the terms of the contract and at no point of
time did the respondents accept the terms offered by the appellant.
14. It is true that an agreement, even if not signed by the parties,
can be spelt out from correspondence exchanged between the parties. The
question, however, is can any agreement be spelt out from the correspondence
between the parties in the instant case?
15. In Rickmers Verwaltung GMBH v. Indian Oil Corpn. Ltd., (1999) 1
SCC 1, the Supreme Court while considering a similar issue observed: –
In this connection the cardinal principle to remember is that 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 the
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.
(emphasis supplied)
16. The question is whether in the facts and circumstance of the
case, it can be unequivocally and clearly said that the parties were ad idem
to the terms. On a very careful perusal of the entire correspondence on
record, we are of the view that no concluded bargain had been reached between
the parties and at no point of time, the terms and conditions of the contract
were accepted by the respondents. The correspondence exchanged between the
parties shows that there is nothing expressly agreed between the parties and
no concluded enforceable and binding agreement came into existence between
them. As observed by the Supreme Court there is a vast difference between
negotiating a bargain and entering into a binding contract. After negotiation
of bargain in the present case, the stage never reached when the negotiations
were completed giving rise to a binding contract. The learned single Judge
was, therefore, perfectly justified in vacating the injunction, inasmuch as no
concluded and binding contract ever came into existence between the parties.
We find no merit in the appeal. It fails and is dismissed with costs.
Consequently, C.M.Ps are closed.
On the request of the learned senior counsel appearing for the
appellant, the ad-interim relief is continued for a period of four weeks.