Diwan Rahul Nanda v. Nitish G. Kotak and others — 1997 DIGILAW 602 (BOM)

JUDGMENT - S.S. NIJJAR, J.:---In the draft Notice of Motion, leave under Rules 147/148 of the High Court, O.S. Rules is granted to take out the Notice of Motion in terms of the draft Notice of Motion handed in. With consent of the parties, motion made returnable forthwith. Defendants waive service. Office is directed to register the Notice of Motion. The plaintiff is given time to register the Notice of Motion by 8th December, 1997. To be heard forthwith along with the Notice of Motion No. 3239 of 1995. This order will dispose of both the Notice of Motion. 2. The Notice of Motion No. 3239 of 1995 was taken out for appointment of the Receiver of the suit property and for injunction. The Notice of Motion came up for hearing on 22nd November, 1995. Ad interim injunction was granted. A perusal of the order shows that it was agreed between the parties that a sum of Rs. 19 lacs were paid by the plaintiff to the defendants on the basis of the agreement dated 26th October, 1995. In view of the above, the Counsel for the defendants made a statement at the bar after taking instructions that the defendants are willing to deposit a sum of Rs. 19 lacs in the Court within three months. It was, therefore, directed that after the said sum is deposited, the defendants shall be at liberty to apply for vacating of the order of injunction or for modification of the order. The Prothonotary Senior Master was directed to invest the sum of Rs. 19 lacs in the Fixed Deposit with a Nationalised Bank for such a period as he deems fit. It was also directed that at the final hearing of the motion, the Court shall decide inter alia as to whether the said amount shall be continued to be remain invested or should be paid over to the defendants or should be returned back to the plaintiff. All contentions were kept open. The order also notices that in view of the statement made by the Counsel for the defendants, the Notice of Motion was not examined on merits of the rival contentions. The order was passed without prejudice to the rights and contentions of the parties at the final hearing of the motion. All contentions were kept open. The order also notices that in view of the statement made by the Counsel for the defendants, the Notice of Motion was not examined on merits of the rival contentions. The order was passed without prejudice to the rights and contentions of the parties at the final hearing of the motion. Thereafter it appears that the defendants did not make the payment as stipulated in the order dated 22nd November, 1995. Thereafter the Notice of Motion came up for hearing on 23rd September, 1996. In this order it is noticed that three months time had expired in February, 1996 and the defendants have not deposited a single rupee out of Rs. 19 lacs which they assured the Court to deposit within three months from the date of the order, which assurance was accepted by the Court. Thus, the plaintiff has brought the matter before the Court for further orders. Mr. Mehta, the Counsel appearing for the defendants stated that the defendants would deposit the amount on or before 31st October, 1996. The conduct of the defendants was adversely commented upon by this Court. It was observed that the conduct of the defendants can by no means be said to be praise-worthy. However, the defendants were permitted to deposit the sum of Rs. 19 lacs by 31st October, 1996, but at the same time the Court Receiver, High Court, was appointed as Receiver of the suit property in terms of prayer Clause (a), except the bracketed portion. It was, however, made clear that in the event the amount is deposited, then the aforesaid order shall automatically stand vacated. It appears again the defendants failed to comply with the aforesaid order and the matter came up for hearing on 4th November, 1996. At that stage, Mr. S. K. Jain appeared for the plaintiff and Mr. J. J. Thakkar appeared for the defendants. The defendants had taken out the draft Notice of Motion. Leave was granted to take out the Notice of Motion. Both the Counsel were heard. However, the Notice of Motion was summarily rejected in view of the earlier two orders passed by this Court. 3. Aggrieved against the said order, the defendants filed Appeal No. 1291 of 1996. The aforesaid appeal came up for hearing on 4th December, 1996. The appellants agreed to deposit the amount by 20th December, 1996. Both the Counsel were heard. However, the Notice of Motion was summarily rejected in view of the earlier two orders passed by this Court. 3. Aggrieved against the said order, the defendants filed Appeal No. 1291 of 1996. The aforesaid appeal came up for hearing on 4th December, 1996. The appellants agreed to deposit the amount by 20th December, 1996. Therefore, the Receiver was directed not to take possession till then. The matter was adjourned to 20th December, 1996. The appeal came up for hearing on 23rd December, 1996. Even before the Appellate Court, the appellants have conceded the fact that the appellants had made a statement before the learned Single Judge, when the motion of the plaintiff came up for hearing initially, that the appellants would be depositing Rs. 19 lacs in the Court. Lengthy arguments were addressed by the Counsel for both the sides. The Counsel for the appellants stated that there is a serious dispute about the consideration agreed between the parties in respect of the suit flat. According to him the property is worth Rs. 1,94,00,000/- as per the Valuer's report and therefore, under no circumstances, the appellants could have agreed to sell the property to the respondents at the price of Rs. 74,00,000/- only. This argument was, however, rejected because the two documents which were referred by the appellants as receipts have been executed by the appellants wherein they have admitted the receipt of the consideration of Rs. 19 lacs. It was also held that if these two documents are carefully read, they reveal that the appellants entered into an agreement without caring to fix the price for their flat. Therefore, if the appellants have chosen to enter into such an agreement and received Rs. 19 lacs without fixing the total consideration, they must suffer the consequences, viz. the consequences of dispute being properly raised by the respondents regarding the price. The second argument of the Counsel for the appellant that the consideration was at Rs. 1,94,00,000/- was also rejected. It was held that the property may be worth crores of rupees, but the owner may agree to sell it at a lesser price depending on the circumstances, the emergency and the needs of the owner. The second argument of the Counsel for the appellant that the consideration was at Rs. 1,94,00,000/- was also rejected. It was held that the property may be worth crores of rupees, but the owner may agree to sell it at a lesser price depending on the circumstances, the emergency and the needs of the owner. It was also observed that once a party gives an undertaking to the Court, then it cannot be permitted to go behind the undertaking and therefore, it must fulfil its undertaking given to the Court. It was also observed that in this case not only the undertaking was given, but the defendants had also sought extension in time of making the deposit. The Court also observed that the conduct of the appellants is such which raises an inference that they gave an undertaking in the Court in order to avoid the order that would have been passed against them and as such now they cannot be permitted to take a different stand. Thus, it was held that they cannot be permitted to submit that their undertaking should be dis-regarded and the Court should not pass any order against them. On that day, the Division Bench was prepared to give further time for the deposit, but the appellants expressed their inability to make the payment. Thus, it was held that "The conduct of the appellants throughout does not deserve any interference in the impugned order of the learned Single Judge and consequently, the appeal is dismissed at admission stage. The learned Counsel for the appellants applies for staying the operation of this order and for directing the Receiver not to dispossess the appellants since the appeal is dismissed summarily. Both these prayers are rejected." Thereafter the defendants made payment of Rs. 12 lacs and took out a precipe for further time for payment of the remaining Rs. 7 lacs. By order dated 13th January, 1997, the defendants were permitted to deposit the remaining amount by 20th January, 1997. Aggrieved against the order dated 23rd December, 1996 the defendants filed Review Petition No. 2 of 1997 which was decided on 22nd January, 1997. After noticing the aforesaid facts, the review petition was allowed on condition that the defendants would deposit on or before 21st February, 1997 with the Prothonotary Senior Master a sum of Rs. 71,000/- towards the interest on Rs. After noticing the aforesaid facts, the review petition was allowed on condition that the defendants would deposit on or before 21st February, 1997 with the Prothonotary Senior Master a sum of Rs. 71,000/- towards the interest on Rs. 19 lacs for the delayed deposit for a period of three months. The defendants/appellants were directed to pay costs in the sum of Rs. 10,000/- directly to the Counsel for the plaintiff. In view of the above, the impugned order dated 23rd December, 1996 was set aside. It was also directed that the Court Receiver would remain in symbolic possession of the property in dispute. He would not direct the appellants to pay any royalty or security. Thereafter the Appeal No. 1219 of 1996 came to be finally decided on 26th February, 1997. It was agreed by the Counsel for the parties that in view of the order passed in Review petition, the impugned order of the learned Single Judge dated 23rd September, 1996 is liable to be set aside. Accordingly, the said order was set aside. It was also directed that the parties are at liberty to move the Single Judge, for any further and/or other orders, if so advised. The situation as emerges is that a sum of Rs. 19 lacs together with interest has been deposited by the defendants with the Prothonotary Senior Master, which is invested in accordance with the orders of the Court. The Receiver which was appointed in view of the infringement of the orders of the Single Judge dated 23rd September, 1996, has been discharged. But the ad interim injunction continues for not creating third party rights. The plaintiff has taken out draft Notice of Motion for permission to withdraw the suit with costs. It is also prayed that the Prothonotary Senior Master be directed to pay the amount deposited in the Court along with interest by the defendants to the plaintiff. The prayer made by the plaintiff is vehemently opposed by the defendants. The suit has been filed for specific performance of an oral agreement for sale of the suit property by the defendants to the plaintiff. In the alternative, a prayer is made for damages in the sum of Rs. 1 crore and for the refund to the plaintiff of the amount of Rs. 20,08,616.67 inclusive of interest on Rs. 19 lacs received by the defendants from the plaintiff under the said contract. In the alternative, a prayer is made for damages in the sum of Rs. 1 crore and for the refund to the plaintiff of the amount of Rs. 20,08,616.67 inclusive of interest on Rs. 19 lacs received by the defendants from the plaintiff under the said contract. In the plaint, it is stated that the defendants No. 1 and 3 had approached the plaintiff some time in June, 1995 with an offer to sell the suit property for a consideration of Rs. 74 lacs. The plaintiff is said to have paid in cash a sum of Rs. 1 lac on 3rd July, 1995. On 4th July, 1995, a further sum of Rs. 9 lacs was paid by cheque. On 5th August, 1995 a further sum of Rs. 10 lacs was paid by the plaintiff to the defendants. Receipts Ex. B and C, which are attached to the plaint, have been executed by the defendant No. 3, acknowledging the receipt of Rs. 19 lacs. Thereafter the plaintiff approached the defendants to complete the sale in October, 1995, so that the transaction should be complete before 30th November, 1995. On 26th October, 1995, the first defendant sent a Fax Message to the plaintiff. In this Fax Message, it is stated that the defendants were to receive a sum of Rs. 51 lacs on or before 31st August, 1995 and the balance amount was to be paid on or before 15th November, 1995. It was also stated that a number of meetings were held between the parties and the plaintiff had assured that the payment would be made. The Fax Message also records that in October, 1995, the plaintiff had conveyed to the defendants through the brokers that they are not in a position to complete the transaction due to financial constraints. In view of the above it was stated that "the deal stands cancelled as you desire and we have to forfeit the deposit given by you as agreed in view of non completion of the transaction by you." The allegations made in this Fax Message were denied by the plaintiff through his advocate. We also claimed specific performance of the contract. 4. I have heard the lengthy arguments made by the Counsel for both the parties. It is the submission of Mr. S.K. Jain, the learned Counsel appearing for the plaintiff that admittedly, the defendants have received a sum of Rs. We also claimed specific performance of the contract. 4. I have heard the lengthy arguments made by the Counsel for both the parties. It is the submission of Mr. S.K. Jain, the learned Counsel appearing for the plaintiff that admittedly, the defendants have received a sum of Rs. 19 lacs. It is also apparent from the perusal of the orders passed by this Court at various stages of the litigation that the defendants had deposited a sum of Rs. 19 lacs in order to avoid the appointment of the Receiver. Furthermore throughout the conduct of the defendants has been such that the plaintiff is entitled to the relief prayed for in the Notice of Motion No. 3239 of 1995. However, since it is admitted fact that the defendants have illegally received the money from the plaintiff, they are entitled for the refund of the same together with interest. It is submitted that the defendants cannot be permitted to take advantage of their own wrong. Both the Counsel and the parties have submitted that in fact there is no contract in existance. If there is a contract, then it is a void contract. In view of the above, Mr. S.K. Jain submits that the plaintiff is entitled to withdraw the suit and he is also entitled to receive the refund of the money deposited by the defendants. It is, reiterated that the said amount was deposited only to avoid the grant of relief as prayed for in the Notice of Motion No. 3239 of 1995. For this proposition, Mr. Jain has relied upon section 65 of the Indian Contract Act, which is as under : "65. Obligation of person who has received advantage under void agreement, or contract that becomes void - When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." 5. A perusal of the said section shows that in the event, an agreement is discovered to be void or when a contract becomes void, then the person who has received any advantage under the void contract is bound to restore it or to compensate the person from whom he received it. A perusal of the said section shows that in the event, an agreement is discovered to be void or when a contract becomes void, then the person who has received any advantage under the void contract is bound to restore it or to compensate the person from whom he received it. In support of his proposition, the Counsel has relied upon a judgment of the Supreme Court reported in (State of Rajasthan v. Associated Stane Industries (Kotah) Ltd.)1, A.I.R. 1985 Supreme Court 466, ( L.I.C. of India v. Rajmata Saheb Chowhanji)2, A.I.R. 1978 Supreme Court 1447, Division Bench judgement of Orissa High Court in (Fakirchand Seth v. Dambarudhar Bania)3, A.I.R. 1987 Orissa page 50. The agreement is said to be void firstly, because it is an oral agreement and secondly, because of the amount of consideration. According to both the parties, the oral agreement was entered into some time in June, 1995. At that time, the provisions of section 26-UC, UL of the Income Tax Act, became applicable if the consideration for sale was above Rs. 10 lacs. This amount was raised to Rs. 75 lacs by notification which came into effect on 1st August, 1995. Although the notification was made effective from 1st August, 1995, it was published on 15th July, 1995. According to the plaintiffs, the consideration in this case is Rs. 74 lacs. According to the defendants, it is Rs. 1,90,00,000/-. 6. Mr. Thakkar appearing for the defendants has very vehemently argued that no relief can be granted to the plaintiff in the Notice of Motion No. 3239 of 1995 as the amount ordered by this Court has been deposited. It is submitted that this amount was deposited only because the plaintiff had obtained an ad interim order which was working against the defendants. The plaintiffs are not only not entitled to any relief on the basis of void contract, but they are actually liable to pay damages they have put defendants to a great loss, in that they were unable to sell the suit property to any other interested party. As opposed to Rs. 19 lacs deposited by the plaintiff, it is submitted by Mr. Thakkar that the defendants have suffered a loss of Rs. 76 lacs by way of loss of interest. Since no final relief can be granted to the plaintiff, obviously, therefore, no interim relief can be granted. As opposed to Rs. 19 lacs deposited by the plaintiff, it is submitted by Mr. Thakkar that the defendants have suffered a loss of Rs. 76 lacs by way of loss of interest. Since no final relief can be granted to the plaintiff, obviously, therefore, no interim relief can be granted. Even on merits, it is submitted that in view of the conduct of the plaintiff himself this Court would not order specific performance of the agreement. The plaintiff was to pay the money in a fixed time schedule, which he failed to do. It was in fact, he who sought to cancel the agreement. The defendants have no option, but to accept the cancellation of the agreement and the amount has been forfeited as provided by the agreement. It is further submitted that the conduct of the defendants in not depositing the amount in time was not dishonest. They had to make a statement about depositing the amount in order to avoid the rigours of the interim order which has been passed in favour of the plaintiff. They were finally not in a position to arrange for Rs. 19 lacs in such a short period of time. 7. Coming to the second Notice of Motion, it is submitted by Mr. Thakkar that the plaintiff has no absolute right to withdraw the suit, along with refund of the money deposited by the defendants. It is submitted that the plaintiff is at liberty to withdraw the suit without any further condition. The plaintiff cannot possibly claim that he may be permitted to withdraw the suit along with refund of the amount deposited by the defendants. On the other hand, Mr. Jain has submitted that the statement was made by the advocate for the defendants on instruction from the client. The statement about deposit of the money was made in order to avoid the prayer in the Notice of Motion, which was for appointment of Receiver and for putting the plaintiff in possession of the suit property as an agent of the Receiver. In order to avoid the passing of such an order, the defendants had offered to deposit a sum of Rs. 19 lacs. Further more they have admitted that the amount has been received by them on the basis of the agreement for sale of the suit property. 8. I have considered the arguments of both the Counsels carefully. In order to avoid the passing of such an order, the defendants had offered to deposit a sum of Rs. 19 lacs. Further more they have admitted that the amount has been received by them on the basis of the agreement for sale of the suit property. 8. I have considered the arguments of both the Counsels carefully. Under section 269-UC of the Income Tax Act, it is provided that notwithstanding anything contained in the Transfer of Property Act, no transfer of any immoveable property shall be effected except after an agreement for transfer is entered into between the parties in accordance with the provisions of sub-section (2), atleast 4 months before the intended date of transfer. Sub-section (2) provides that the agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement by each of the parties. The agreement in the present case is admittedly an oral agreement. Thus, obviously no party can claim any relief on the basis of such an agreement. On the relevant date, the agreement had to be registered under section 269-UC as the value of the suit property was more than Rs. 10 lacs. Admittedly, there was no written agreement. Under section 269-UC of the Income Tax Act, there is a complete bar on the registration of any document purported to transfer immoveable property exceeding the value prescribed under section 269-UL unless a certificate from the appropriate authority has been obtained to the effect that it has no objection to the transfer of such property. This certificate has to be furnished along with the document for registration. Admittedly, the consideration for the said property was either Rs. 1,90,00,000/- or Rs. 74 lacs. There is absolutely no dispute between the parties that the consideration was more than Rs. 10 lacs. Thus, prima facie it has to be held that the agreement of which the specific performance is sought was void ab initio. The plaintiff cannot seek specific performance of such an agreement. This is so as the Court would not order the specific performance of an agreement which would lead to an infringement of the law. On the other hand, the defendants should not be permitted to take any advantage of any consideration they may have received under such a void agreement. Mr. This is so as the Court would not order the specific performance of an agreement which would lead to an infringement of the law. On the other hand, the defendants should not be permitted to take any advantage of any consideration they may have received under such a void agreement. Mr. S.K. Jain is right in his submission that section 65 of the Indian Contract Act would not permit the defendants to continue to enjoy the fruits of the consideration received under the void contract. At the same time, the Court cannot be oblivious of the fact that triable issues have been raised. These issues will have to be decided at the final hearing of the case. In the midst of arguments it was pointed out to the Counsel for the parties that on the basis of their own admission, both the sides run the risk of being prosecuted under section 276 of the Income Tax Act. The Counsel for both the parties were granted short adjournment in order to explore the possibility of settlement in the case. It was suggested by the Court since both the parties are claiming to have suffered loss, perhaps a settlement could be reached on the basis that both the parties cut their losses. Mr. Thakkar appearing for the defendants has submitted that his client is prepared to forgo 50% of the amount which is lying deposited in the Court. Mr. Jain on the other hand has expressed his inability to accept the offer. His client is not prepared to compromise. A perusal of the prayers made in the plaint shows that refund of the amount paid by the plaintiff to the defendants is sought as a final relief also. It is also apparent that the plaintiff would not dream of withdrawing the suit, but for the deposits made by the defendants. This is evident from the fact that the plaintiff has refused to accept even half the amount which has been offered by the defendants. Justice Dhanuka's order dated 22nd November, 1995 which is still continuing provides that it should be decided at the final hearing of the motion as to what is to be done with the money deposited by the defendants. 9. Justice Dhanuka's order dated 22nd November, 1995 which is still continuing provides that it should be decided at the final hearing of the motion as to what is to be done with the money deposited by the defendants. 9. Having considered all the aspects of the matter, I am of the opinion that only appropriate order in these circumstances would be to retain the amount in the suit account. Consequently, the Notice of Motion No. 3239 of 1995 is made absolute in terms of prayer Clause (b) except the words "dealing with". Prayer Clause (b) reads as under : (b) that pending the hearing and final disposal of this suit, the defendants by themselves, their family members, servants and agents, representatives and/or any person or persons claiming through, by or under them be restrained by an order and injunction of this Hon'ble Court from in any manner dealing with, disposing of, alienating, encumbering or parting with possession of the suit property or any part thereof or inducting any third party in or upon the suit property described in Schedule, Exhibit A to the plaint or any part thereof. The amount deposited by the defendants along with the interest shall continue to be invested by the Prothonotary Senior Master in a fixed deposit with a nationalised Bank at his discretion. 10. In view of the order passed in the Notice of Motion No. 3239 of 1995, prayer Clause (b) in the draft Notice of Motion can obviously not be granted. Since prayer Clause (a) for withdrawing the suit is linked with prayer Clause (b), the same can also not be granted. This is especially so as at the trial of the suit, it would have to be decided by the Court as to whether or not the parties are to be prosecuted under section 276 of the Income Tax Act. 11. In view of the above, the Notice of Motion No. 3239 of 1995 is made absolute in the aforesaid terms. The draft Notice of Motion is dismissed.