Dismissed

Gaurav G. Rajpurohit v. Bharat M. Parekh and 3 Ors.

Bombay HC3 Jul 2014NMS/1173/2011

Case brief

AI extract

What is this about?

High Court dismissed a petition seeking appointment of a court receiver for a bungalow and plant machinery. The court held the petitioner failed to prove readiness and willingness for contract specific performance due to delayed payments. Title deeds were ordered released to original owners upon refund of loan discharge amount.

What did the court decide?

Discharge of restraint on plant machinery; release of bungalow title deeds upon deposit of bank discharge amount.

Gaurav G. Rajpurohit Vs Bharat M. Parekh and… — Contract and Commercial Disputes | Bombay HC (2014)

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902.nms.1173.2011.doc

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dik

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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NOTICE OF MOTION NO. 1173 OF 2011 IN SUIT NO.354 OF 2011

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Gaurav G. Rajpurohit ...Plaintiff

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vs Bharat N. Paresh & Ors. ...Defendants

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Mr Zal Andhyarujina with Ms Bharati Bheda and Ms Aarti Nimbalkar i/b S.Ashwinikumar & Co. for the Plaintiff. Mr Gaurav Joshi with D.P.Desai for Defendant Nos.1 and 2. Mr Anwar Langde i/b Swami Sawant for Defendant No.3.

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CORAM : S.C. GUPTE, J.

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JULY 03, 2014

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P.C. :

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The Notice of Motion is taken out by the Plaintiff for appointment of a Court Receiver in respect of a bungalow situated on CTS Nos.907, 908 and 909 at Cama Lane, Ghatkopar (West), Bombay-400 086 and plant, machinery and movables of a partnership firm, M/s Sangita Prints, lying in the factory premises at plot No.96, Bengalpura, Behind Rameshwar Temple, Agra Road, Kalyan Naka, Bhiwandi, Dist. Thane and injunctive relief in respect of these properties.

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2 The Plaintiff and Defendant Nos.1,2 and 4 were partners of a partnership firm carrying on the business of dying and printing of fabrics in the name of M/s Sangita Prints. The Plaintiff had 30 % share, whilst Defendant Nos.1 and 2 together had 60 % share and Defendant No.4 had 10 % share in the said partnership firm. The firm was agreed to be dissolved by the parties. The Plaintiff offered to take over the partnership firm and purchase the assets of the firm. The assets of the firm included its plant and machinery which was pledged

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with Defendant No.3 Bank as a security for cash credit facility and term loan granted by Defendant No.3 to the firm. Defendant Nos.1 and 2 also owned the suit bungalow for which a housing loan was availed of from Defendant No.3 Bank by Defendant Nos.1 and 2. The bungalow was mortgaged to Defendant No.3 for repayment of the housing loan. The bungalow was also subject to an additional charge/equitable mortgage in favour of Defendant No.3 for the debts owed by the partnership firm to Defendant No.3 bank. In addition to the assets of the partnership firm, the Plaintiff also agreed to purchase the bungalow from Defendant Nos.1 and 2. There were two MOUs signed by the parties on 16 February 2010 – one MOU for sale of the bungalow for a total consideration of Rs.1.21 crores and the other MOU for sale of plant and machinery of the partnership firm at and for a total consideration of Rs.77 lacs. Both these considerations were to be paid inter alia by discharging debts owed to Defendant No.3 both by Defendant Nos.1 and 2 towards housing loan and by the partnership firm towards the cash credit and term loan facility. It is the Plaintiff's case that the Plaintiff has paid a sum of more than the aggregate consideration under the MOUs to Defendant Nos.1 and 2 partly by direct payment and partly by discharge of the liability as mentioned above. It is the Plaintiff's case that Defendant Nos.1 and 2 have failed to execute the requisite documents. The Plaintiff, in the premises, has sought specific performance of the two MOUs.

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3 The Plaintiff had earlier taken out another Notice of Motion in the suit, being Notice of Motion No.663 of 2011, for appointment of Court Receiver and injunction in respect of the suit bungalow. Ad-interim application of the Plaintiff was rejected by a learned Single Judge of this Court on 3 March 2011 observing inter alia that the Plaintiff has failed to establish that he had performed his part of the contract and that the Plaintiff was, therefore, not entitled to any adinterim relief. This order was carried in appeal by the Plaintiff. A Division Bench of this Court in appeal inter alia noted that the total amount of about Rs.1.03 crores was due and payable to Defendant No.3 towards the outstanding dues of the loan amount of the partnership firm. The Hon'ble Division Bench noted that in response to a specific query put forth by the Court, as to whether the Plaintiff / Applicant was ready and willing to pay the aforesaid amount to Defendant No.3

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bank, the learned Counsel for the Plaintiff / Applicant submitted that his client was not in a position to pay the aforesaid amount to Defendant No.3, but that the Plaintiff/ Applicant would like to participate in the auction sale of the plant and machinery. The learned Division Bench noted that in view of the above, no case was made out for grant of any ad-interim relief, as prayed in the Notice of Motion. The Division Bench, in the premises, refused to grant any ad-interim relief to the Plaintiff.

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4 After rejection of the interim relief on 3 March 2011, the Plaintiff took out the present Notice of Motion and moved ad-interim application therein. The learned Counsel appearing for the Plaintiff stated before the Court that the Plaintiff was unable to demonstrate before the Court, in the earlier Notice of Motion, that the Plaintiff had paid an amount of Rs.55 lacs to the debtors of the partnership firm and that, therefore, the ad-interim application made in the present Notice of Motion may be granted by the Court. The learned Single Judge, by his order dated 25 April 2011, held that it would not be permissible for the Plaintiff to re-agitate an application for ad-interim relief on the same facts in a new Notice of Motion and declined to grant any ad-interim relief.

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5 The first Notice of Motion, namely, Notice of Motion No.663 of 2011, was thereafter rejected by this Court by an order dated 10 May 2012. This Court held that the Plaintiff had failed to establish even prima facie that all dues and liabilities were cleared or that he was ready and willing to perform his part of the contract under the subject MOUs.

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6 Subsequent to the dismissal of the first Notice of Motion, the Plaintiff offered to pay an amount of Rs.1.69 crores to Defendant No.3 in the present Notice of Motion. The Plaintiff's undertaking to pay the said amount was recorded by an order passed by this Court on 8 October 2012. It appears that in pursuance of this undertaking, the Plaintiff paid an amount of Rs.1.69 crores to Defendant No.3, who in turn, deposited the title deeds and all relevant documents in respect of the suit bungalow mortgaged to Defendant No.3 into the Court. It also appears that in pursuance of a further claim of Defendant No.3

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bank towards security charges, a further sum of Rs.2.71 lacs was paid by the Plaintiff to Defendant No.3. This Court, by its order dated 14 November 2013 directed that upon payment of the said amount of Rs.2.71 lacs, the parties would take a joint inventory of the plant and machinery of the partnership firm and thereafter the possession of the same would be handed over by Defendant No.3 to the Plaintiff. The Plaintiff was, however, directed not to dispose of, alienate, encumber, part with the possession or create third party rights in respect of the said plant and machinery. The order was passed without prejudice to the rights and contentions of the parties.

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7 The Notice of Motion is now heard finally by this Court.

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8 The position that emerges from the foregoing discussion is that dues of Defendant No.3 bank, with respect to the housing loan for the suit bungalow as well as the term loan and cash credit facility granted to the partnership firm, have been fully satisfied. The documents of title in respect of the suit bungalow have since been deposited by Defendant No.3 bank into this Court. As far as the plant and machinery of the partnership firm is concerned, the same is in the possession of the Plaintiff. However, the Plaintiff is put to terms in respect of the disposal of the plant and machinery. It is in this backdrop, that the Plaintiff makes the present application for appointment of Court Receiver of the suit bungalow with power to handover the possession thereof to the Plaintiff together with all documents of title relating thereto. The Plaintiff also seeks possession of the plant and machinery and movables of the partnership firm without any restrictions on the basis that the entire dues of the partnership firm have been repaid to Defendant No.3.

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9 The Notice of Motion is opposed by Defendant Nos.1 and 2 primarily by disputing the payments claimed to have been made by the Plaintiff towards the two MOUs. It is submitted by Defendant Nos.1 and 2 that the Plaintiff has failed to observe the time-line provided in the MOU. It is submitted that the Plaintiff was not at all times ready and willing to perform his part of the contract. It is submitted that accordingly, the Plaintiff is not entitled to specific

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performance of the two MOUs.

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10 In the first place, it has been considerably observed by this Court in the orders passed so far in the two Notices of Motion that the Plaintiff has failed to make out any prima facie case for ad-interim or interim reliefs. The Division Bench of this court in its order dated 9 June 2011 has clearly noted that in view of the statement of the learned Counsel for the Plaintiff that his client was not in a position to pay the dues of Defendant No.3 bank, the Plaintiff was not ready and willing to perform his part of the contract and was accordingly, not entitled to grant of any ad-interim relief. That situation was not altered when the first Notice of Motion reached hearing before this Court. At the hearing, this Court once again noted that the Plaintiff has failed to establish even prima-facie that all dues and liabilities required to be cleared under the MOUs were discharged or that the Plaintiff was ready and willing to perform his part of the contract under the subject MOUs. There has been no change of circumstances since then, except that the Plaintiff has paid to Defendant No.3 bank an amount of Rs.1.69 crores plus a sum of Rs.2.71 lacs, in response to which the title deeds in respect of the suit bungalow have been deposited by Defendant No.3 in this Court and the Plaintiff has been put in possession of the plant and machinery of the partnership firm under orders of this Court. It must, however, be noted that the Plaintiff's offer to pay the amounts was clearly unilateral and without prejudice to the rights and contentions of the parties. Such unilateral payment will not avail the Plaintiff as a change of circumstances enabling the Plaintiff to apply for fresh interim or adinterim reliefs on the same facts.

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11 Even otherwise, the Plaintiff has failed to make out any prima-facie case on merits. The basic premise on which the Plaintiff makes the present application for interim relief is that the two MOUs formed part of one transaction, under which a sum of over Rs.2 crores has been paid by the Plaintiff to the Defendants. Perusal of the MOU in respect of the suit bungalow (designated as MOU-1) clearly show that the consideration payable for the suit bungalow was separate from the consideration payable for takeover of the plant and machinery of the partnership firm, which was part of the second MOU ( designed as MOU –

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2). The consideration for the suit bungalow was separately fixed at Rs.1.21 crores, to be raised to Rs.1.51 crores together with a penalty of Rs.35 lacs in the contingencies named in the MOU. The MOU clearly provides that this consideration would be paid partly by discharge of the liability owed to Defendant No.3 towards the housing loan by Defendant Nos.1 and 2, aggregating to about Rs.24 lacs, and that the balance amount would be paid by the Plaintiff to Defendant Nos.1 and 2. The MOU has a payment schedule which requires payment of a sum of Rs.5 lacs to Defendant Nos. 1 and 2 within ten days of the signing of the MOU, a further payment of Rs.5 lacs each within two and three months of signing of the MOU and balance consideration after adjusting the payment of the housing loan (estimated at Rs.24 lacs ) to Defendant Nos.1 and 2 within four months of signing of the MOU. Admittedly, apart from the initial payment of Rs.5 lacs, no further payment was made by the Plaintiff to Defendant Nos.1 and 2 or Defendant No.3 bank, within the stipulated period. Having regard to this failure to pay the consideration stipulated under the MOU within time the Plaintiff was denied interim relief by holding that he was not prima facie ready and willing to perform his part of the contract. The Plaintiff cannot, by unilaterally depositing the dues of the bank into the Court, during the pendency of the suit, make out a case of his readiness and willingness. The law requires a continuous readiness and willingness on the part of the Plaintiff as a condition precedent for granting the relief of specific performance. This readiness and willingness must be shown to exist right from the date of execution of the contract till the date of the decree. The Supreme Court in the case of N.P.Thirugnanam Vs Dr. R. Jagan Mohan Rao and Ors¹ held as follows;

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“It is settled law that remedy for specific performance is an equitable remedy and is in the discretion of the Court, which discretion requires to be exercised according to settled principles of law and not arbitrarily as adumbrated under Section 20 of the Specif Relief Act, 1963 ( for short “the Act”). Under Section 20, the court is not bound to grant the relief just because there was a valid agreement of sale. Section 16(c) of the Act envisages that plaintiff must plead and prove that he had performed or has always been ready and willing to perform the essential terms of the contract

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1 (1995) 5 Supreme Court Cases 115

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which are to be performed by him, other than those terms the performance of which has been prevented or waived by the defendant. The continuous readiness and willingness on the part of the plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the court while granting or refusing to grant the relief. If the plaintiff fails to either aver or prove the same, he must fail. To adjudicate whether the plaintiff is ready and willing to perform his part of the contract, the court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit along with other attending circumstances. The amount of consideration which he has to pay to the defendant must of necessity be proved to be available. Right from the date of the execution till date of the decree he must prove that he is ready and has always been willing to perform his part of the contract. As stated, the factum of his readiness and willingness to perform his part of the contract is to be adjudged with reference to the conduct of the party and the attending circumstances. The court may infer from the facts and circumstances whether the plaintiff was ready and was always ready and willing to perform his part of the contract.”

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12 The facts narrated above clearly establish that prima facie the Plaintiff has failed to make out a case of readiness and willingness to perform his part of the contract. Accordingly, there is no merit in the Plaintiff's application for interim relief of appointment of Court Receiver and injunction in respect of the suit bungalow.

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13 As far as the plant and machinery of the partnership firm is concerned, which is already in possession of the Plaintiff, having regard to the fact that the entire dues of Defendant No.3 bank in respect of the term loan and cash credit facility granted to the partnership firm have been satisfied, there is a case for allowing the Plaintiff to take over and possess his property without any restriction. It is, however, made clear that such order would be subject to on account being taken finally of the partnership and the discharge of its liabilities as mentioned in MOU-2 at the trial of the suit.

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14 The learned Counsel for Defendant Nos.1 and 2 applies for release

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of the title documents deposited by Defendant No.3 bank in this Court upon Defendant Nos.1 and 2 depositing a sum of Rs.24 lacs in this Court. The learned Counsel for the Plaintiff resists this application. She submits that such order cannot be passed on an oral application of Defendant Nos.1 and 2.

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15 The title deeds were deposited into this Court by Defendant No. 3 Bank against payment of a sum of Rs. 1.69 crores by the Plaintiff. The sum of Rs.1.69 crores comprised of the liability of Defendant Nos. 1 and 2 towards the housing loan, originally estimated at Rs. 24 Lac, and the liability of the partnership firm towards the term loan and cash credit facility originally estimated at 77 Lac. Both these liabilities now stand fully discharged and Defendant No. 3 Bank has ceased to hold any charge in respect of either the suit bungalow or the plant and machinery of the partnership firm. The plant and machinery, as noted above, has already been allowed to be taken over without any restriction by the Plaintiff. As for the title documents relating to the suit bunglow, there is no reason to keep these documents in Court. Keeping these documents in Court would imply an embargo on the rights of Defendant Nos. 1 and 2 with respect to the suit bunglow, which this Court is not in any way inclined to order, as discussed above. The documents rightfully belong to Defendant Nos. 1 and 2 and after the discharge of the Bank's liability ought to go back to Defendant Nos. 1 and 2.

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16 The liability of the Bank in respect of the housing loan has been discharged by the Plaintiff, though unilaterally as noted above. If the title documents of the suit bunglow have to be handed over to Defendant Nos. 1 and 2, equity demands that the amount paid by the Plaintiff towards discharge of the housing loan and securing the release of those documents from the Bank should be brought by Defendant Nos. 1 and 2 into the Court. This amount may in fact be returned to the Plaintiff, since the offer to discharge the liability of the Bank was in any event a unilateral offer of the Plaintiff, and if that liability is now discharged by Defendant Nos. 1 and 2, there is no reason why the Plaintiff should be kept away from getting a refund of the said amount.

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17 The only question that would arise in such a case is of

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ascertainment of the amount paid to Defendant No. 3 Bank towards the discharge of the housing loan. If this amount is brought into the Court by Defendant Nos. 1 and 2, the title deeds of the suit bunglow can very well be returned to Defendant Nos. 1 and 2. The Plaintiff may be at liberty in such a case to apply for withdrawal of that amount. This amount needs to be ascertained from the Bank since both housing loan as well as the term loan and cash credit of the partnership have been recovered by the Bank with interest as of the date of repayment and the inter se appropriation towards these accounts is not on record.

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18 Accordingly, the following order is passed :

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(i) The Notice of Motion is dismissed. It is, however, clarified that the restraint order passed by this Court on 14 February 2013 in respect of the plant and machinery of the partnership firm in possession of the Plaintiff shall cease to operate.

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(ii) Defendant No.3 is directed to communicate to this Court the amount appropriated by Defendant No. 3 towards the outstandings under the housing loan of Defendant Nos. 1 and 2 from out of the amount of Rs. 1.69 crores paid by the Plaintiff to Defendant No.3 under orders of this Court, within a period of two weeks from today by filing a short affidavit with copies to the other parties.

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(iii) Upon Defendant Nos. 1 and 2 depositing the amount so communicated by Defendant No.3 into this Court, the Prothonotary and Senior Master of this Court to release and hand over the documents of title relating to the bunglow at CTS Nos. 907, 908 and 909 at Cama Lane (Ghatkopar ), Mumbai, deposited into this Court by Defendant No. 3 to Defendant Nos. 1 and 2.

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(iv) The Plaintiff will be at liberty to apply for withdrawal of the amount deposited by Defendant Nos. 1 and 2 into this Court in terms of Clause (iii) above.

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(v) If and when such application is made, the Prothonotary and Senior Master of this Court shall permit the Plaintiff to withdraw the said amount without any security.

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(vi) There shall be no order as to costs.

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(vii) The Prothonotary and Senior Master and the parties to act on the authenticated copy of this order.

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The Plaintiff's application for stay of this order is refused.

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( S.C.GUPTE J. )

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Gaurav G. Rajpurohit v. Bharat M. Parekh and 3 Ors.

Case brief

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Gaurav G. Rajpurohit v. Bharat M. Parekh and 3 Ors.

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