Ronita Biswas | National Law University, Orissa | 20th January 2020
Ambalal Sarabhai Enterprise v. KS Infraspace LLP Limited & Anr. (Civil Appeal No. 9346 of 2019)
Facts
The appeal arose from a common order, passed in three separate miscellaneous appeals filed before the High Court affirming an order of injunction. Respondent, K.S. Infraspace LLP Ltd. filed a suit before the Principal Civil Judge against the Appellants Ambalal Sarabhai Enterprise and Haryana Containers Ltd., which were sister concerns.
In the initial suit, the plaintiff had filed two suits for declaration and specific performance against the defendant sister concerns with regard to a particular land. The plaintiff contended that there existed a concluded contract with the defendants after negotiations for sale of the suit lands for a total sum of Rs.31,81,73,076/ and 58,26,86,984/ respectively. The plaintiff had duly communicated its acceptance of the final draft of MOU dated 30.03.2018. Only the formal execution of the contract documents remained as a formality. A sum of Rs. 2.16 crore had also been paid as advance. The plaintiff was ready and willing to pay the balance amount. However, it was claimed that there existed a concluded oral contract between the parties. The Defendants had surreptitiously entered into a registered agreement for sale with defendant no. 2 on 31.03.2018. Hence, the suit was filed before the Principal Civil Judge praying for injunction. It was held that the terms and conditions for sale stood finalised by the e-mail dated 29.30.2018 and 30.03.2018. A token amount of Rs. 2.16 crore had already been paid and the plaintiff was ready and willing with the balance amount. Creation of third party rights would lead to further litigation. Thus, by an order of temporary injunction, the defendants were restrained from executing any further documents including a sale deed or creating further charge, interest, or deal with the suit lands in any manner.
The High Court affirmed the order of injunction holding that the communication of acceptance to the draft MOU sent by e-mail dated 30.03.2018 coupled with the exchange of WhatsApp correspondences between the parties amounted to a concluded contract.
Appellant’s contention
The counsel on behalf of the defendant sister concerns submitted that they had decided to sell the land due to financial stringency and their inability to meet financial commitments leading to attachment of immovable properties by the Income Tax Department for dues of Rs. 48, 74, 45, 929/- apart from other statutory liabilities. The negotiations with the plaintiff did not attain finality but remained at the stage of discussions only. The wavering conduct of the plaintiff to meet the Income Tax liability of the defendants as part of the consideration amount to facilitate sale by lifting of the attachment, left the defendant with no other choice but to negotiate afresh with defendant no. 2. The contention that execution of the agreement remained a formality was disputed because of the alternative contention in the suit that there existed an oral contract.
The Plaintiff’s response of acceptance to the final draft MOU dated 30.03.2018 was belated. The plaintiff was well aware that the defendants were negotiating with two others also apart from it. The defendants contended that the plaintiff knew before 30.03.2018 that the deal with it was not coming through and the defendant was going ahead with another. The deal with the defendant no. 2 was finalised by execution of a registers agreement for sale on 31.03.2018 after defendant no. 2 had cleared the Income Tax dues of the sister concerns enabling lifting of the attachment orders for the land.
Despite full awareness and knowledge from 30.03.2018 and refund through RTGS of Rs. 2.16 crore on 31.03.2018 itself, the plaintiff published a public notice only on 03.04.201 advising all concerned not to deal with the property. This was duly replied and refuted by the defendants in another public notice dated 04.04.2018.
The counsel on behalf of defendant no. 2 submitted that submitted that it was a bona fide purchaser. The plaintiff was well aware of the simultaneous negotiations with it. The registered agreement for sale was followed by delivery of possession much prior to the institution of the suit.
Respondent’s contention
The counsel appearing on behalf of the respondent submitted that the plaintiff had at no stage declined to meet the Income Tax liabilities of the defendant sister concerns, as part of the consideration amount. The negotiations were widespread both by WhatsApp messages and exchanges of e-mails. These collectively have correctly been interpreted to hold a prima facie case in favour of the plaintiff. The terms and conditions of payment were all finalized which reflects the existence of a concluded contract. In any case, the plaintiff had communicated its acceptance without delay and also protested the refund of the advance of Rs. 2.16 crore the same day followed by public notice. The hurried manner in which the defendants proceeded to finalise the deal indicated the desire of the defendant to cause harm to the plaintiff.
The respondent contended that defendant no. 1 cannot claim to be a bona fide purchaser as it was all along aware of the negotiations taking place between the plaintiff and the defendant sister concerns and that it was at a very advanced stage.
Held
The Court reiterated the laws involved in the instant case. Chapter VII, s.36 of the Specific Relief Act, 1963 (hereinafter referred as the ‘Act’) provides for grant of preventive relief. S. 37 provide temporary injunction in a suit shall be regulated by CPC. The Court observed that the grant of relief in a suit for specific performance is itself a discretionary remedy. A plaintiff seeking temporary injunction in a suit for specific performance will have to establish a strong prima-facie case on basis of undisputed facts.
The Court observed that if the plaintiff contended a concluded contract by inference, leaving an executed document as a mere formality, the onus lays on the plaintiff to demonstrate that the parties were ad idem having discharged their obligations (Brij Mohan v. Sugra Begum 1990 4 SCC 147). The plaintiff had failed to sow the same on admitted facts. The draft MOU dated 30.03.2018 in clause C contemplated payment of the income tax dues as part of consideration amount only after the agreement was to be signed. Had this amount been already paid or remitted by the plaintiff, entirely different consideration would have arose with regard to the requirement for execution of a written agreement remaining a mere formality.
The Court held that the grant of injunction to the plaintiff was unsustainable.
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