Sunday, 8 January 2017

Whether suit for specific performance of contract based on unregistered document is maintainable?

 The next submission of the Learned Counsel appearing on

behalf   of   the   Appellants   was   that   the   suit   in   question   for   specific
performance is based on a document which is unregistered and executed
on a Rs.20/­ stamp paper and therefore was not maintainable having
regard   to   Section   49   of   the   Registration   Act.   In   so   far   as   the   said
contention is concerned, it is required to be noted that the proviso to
Section 49 itself carves out an exception in respect of a suit for specific
performance. The said proviso reads thus :­ 
“49. Effect of non­registration of documents required to
be registered. ­ No document required by section 17 [or by
any provision of the Transfer of Property Act, 1882,] to be
registered shall­ 
(a) …......
(b)............
(c).................
[Provided   that   an   unregistered   document   affecting
immovable   property   and   required   by   this   Act,   or   the
Transfer of Property Act, 1882, to be registered may be
received as evidence  of  a contract in  a suit  for   specific
performance under Chapter II of the Specific Relief Act,
1877,   or   as   evidence   of   any   collateral   transaction   not
required to be effected by registered instrument.]” 
In the light of the proviso, there is no substance in the said contention.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO.795 OF 2016
ALONGWITH
CIVIL APPLICATION NO.2212 OF 2014

Sham Pundlalik Dhumatkar 
V
 Smt. Pushpa Mohanlal Talreja  
CORAM  :  R.M. SAVANT, J.


Dated  : 09.08.2016
Citation:2016(6) MHLJ736

1 Admit.   Having   regard   to   the   challenge   involved   heard
forthwith. 
2  The above First Appeal takes exception to the judgment and
order dated 06.05.2014 passed by the Learned Judge of the City Civil
Court, Greater Mumbai, by which order, the suit in question being SC Suit
No.7748 of 1998 (High Court Suit No.940 of 1998) came to be decreed.
Consequently,   the   Defendant   Nos.1   and   2   are   directed   to   specifically
perform  the  Agreement i.e. the  Memorandum  of  Understanding dated
18.09.1997 within two months subject to the  Plaintiffs depositing the
balance consideration of Rs.1,50,000/­ within a period of four weeks from
the date of the judgment with the Court Receiver. It is further provided
that if the Defendant Nos.1 and 2 failed to carry out the directions as
contained in clause (1) then the Court Receiver shall execute the sale deed
in favour of the Plaintiffs and hand over possession of the suit premises to
the Plaintiff and do such acts as may be necessary. 
3  The Appellants herein are the original Defendant Nos.1 and 2

and the Respondent Respondent Nos.1 and 2 are the original Plaintiffs and
the Respondent No.3 is the original Defendant. It appears that the original
Plaintiff No.1 Smt. Pushpa Mohanlal Talreja expired during the pendency
of the proceedings and her heirs who are shown as Respondent Nos.1­a to
1­d were brought on record in the Trial Court. 
4  The facts giving rise to the filing of the above First Appeal in
brief can be stated thus :­ 
It is the case of the Plaintiffs that the Defendant Nos.1 and 2
who were the owners of the suit premises being office block No.501,
situated on the 5th  floor of the building known as A. N. House on 31st
Road,   off   Linking   Road,   Bandra   (W),   Mumbai­50   had   agreed   to   sell,
transfer the same under the Memorandum of Understanding (For short the
“MOU”)   dated   18.09.1997   for   a   consideration   of   Rs.11,00,000/­.   The
terms of payment and the other details have been mentioned in the said
MOU.   The   Plaintiffs   paid   an   amount   of   Rs.1,00,000/­   as   the   earnest
amount. It is the case of the Plaintiffs that though the balance payment
was to be made    to the  Defendants on  compliance of the  terms and
conditions, the Plaintiffs paid an amount of Rs.8,50,000/­ on account of
the   financial   difficulty   faced   by   the   Defendants.   It   is   the   case   of   the
Plaintiff   that   they   were   always   ready   and   willing   to   complete   the

transaction. However, the Defendants avoided to complete the transaction
despite having received Rs.9,50,000/­ out of the total consideration of
Rs.11,00,000/­. In view of the reluctance of the Defendant Nos.1 and 2 to
complete the transaction though the Plaintiffs were ready and willing for
the same, it is the case of the Plaintiffs that the same aroused a suspicion
about the intent of the Defendants and therefore the Plaintiffs filed the
instant suit for specific performance. 
5  In the said suit, the Plaintiffs filed a Notice of Motion for
interim reliefs whilst the suit was pending in this Court. By an order
passed by a Learned Single Judge of this Court, the Defendants were
restrained from dealing with the property in question. However, since the
Defendants acted in violation of the said interim order, the defence of the
Defendants   was   struck   of   by   order   dated   15.12.2008   and   the   Court
Receiver was directed to take possession of the property. The said order of
striking of the defence was not taken exception to by the Defendants and
therefore the said order became final and binding. Since the defence of the
Defendants was struck of, the Trial Court proceeded to frame the following
issues :­ 
“1. Whether the agreement dated 18th September, 1997 is
valid and Binding ? 

2. Whether the plaintiffs have at all material times been
and   continue   to   be   ready   and   willing   to   perform   the
agreement ?” 
The Trial Court on the basis of the material on record answered both the
issues against the Defendants. 
6  In so far as the Plaintiffs are concerned, they have led the
evidence of the Plaintiff No.2 and produced the following documents :­
1]   The   Memorandum   of   Understanding   dated   18th
September 1997.
2]  Five   receipts   for   the   payment   made   under   and
pursuant to the Memorandum of Understanding dated 18th
September 1997. 
3] The   Plaintiffs'   letter   dated   11th  December   1997
addressed to the Secretary of the Society. 
4] The Plaintiffs' then advocates letter dated 14th January
1998 with postal records in connection therewith.” 
7  The   said   documents   were   marked   as   Exhibits.   Initially,   it
seems that the Defendants did not appear after the suit was transferred to
the City Civil Court on the enhancement of the pecuniary jurisdiction of
the City Civil Court. However on notice being issued to the Defendant
Nos.1   and   2   the   said   Defendants   appeared   through   advocate   who
tendered written  submissions on 22.07.2014. It was contended in  the
written submissions that specific performance of the MOU is sought, which

is not a contract enforceable by law, since the document is executed only
on a stamp paper of Rs.20/­ when the transaction is for Rs.11,00,000/­. It
was further contended that though the defence of the Defendants has been
struck of, the Plaintiffs are required to prove their case independently. It
was further contended that the MOU is a contingent contract as the title
deeds are in possession of the Defendant No.3. The filing of the suit was
also questioned on the ground that the society was not a party to the suit
and lastly it was contended that the Defendant Nos.1 and 2 cannot pass a
better title than they possess. 
8  In the context of the said submissions, it is required to be
noted that the document on which the suit is based i.e. the MOU dated
18.09.1997 was marked as Exh.P1 whilst the suit was pending in this
Court. 
9  The   Trial   Court   as   indicated   above   has   by   the   impugned
judgment and order dated 06.05.2014 decreed the suit. The gist of the
reasoning of the Trial Court was that the MOU was an agreement for the
sale   of   suit   property   and   therefore   considering   the   nature   of   the
agreement, it was not necessary to be stamped or registered as the same
could also be oral. The Trial Court also recorded a finding that from the
covenants   it   could   not   be   said   that   the   contract   evidenced   by   the

agreement is a contingent contract. The Trial Court held that in so far as
the Defendant No.3 i.e. City Bank N.A. is concerned, its right could be
decided independently in the suit filed by it. However, in so far as the
instant suit is concerned, the rights which the Defendant Nos.1 and 2 have
in the suit property could be well conveyed to the Plaintiffs. The Trial
Court also recorded a finding that the Plaintiffs have proved that they had
paid an amount of Rs.8,50,000/­. The Trial Court accordingly concluded
that the rights of the third parties i.e. the Bank would not be affected by
the decreeing of the suit if their dues are not cleared by the Defendant
Nos.1 and 2. As indicated above, it is the said judgment and order dated
06.05.2014 which is taken exception to by way of the above First Appeal.
10 The   submissions   on   behalf   of   the   Appellants   by   the
Learned Counsel Mr. Krishna Kore :­
A)  That the judgment and order passed by the Trial Court is
contrary to the order dated 04.05.1999 passed by a Learned Single Judge
of this Court whereby the Notice of Motion filed by the Plaintiffs was
made absolute in terms of prayer clause (a) without the power of sale.
B)  That since the suit property was mortgaged the instant suit
filed for specific performance was not maintainable. Reliance is placed on

the judgment of the Apex Court reported in  2016 (1) SCC 290  in the
matter of Market Committee, Hodal, through its Secretary Vs. Sukhdevi
and others. 
C)  That though the defence of the Defendant Nos.1 and 2 was
struck of, the Plaintiffs were required to prove their case which they have
not done so and therefore are not entitled to the discretionary relief of
specific performance.       
D) That the Trial Court had erred in decreeing the suit based on
the MOU which was not registered. Reliance is placed on the judgment of
the Apex Court reported in 2008(8) SCC 564 in the matter of K. B. Saha
and Sons Private Limited Vs. Development Consultant Ltd. 
E) That the Trial Court had failed to appreciate that assuming
the MOU was a contract capable of being enforced, it was a contingent
contract and therefore the suit as filed in the year 1998 was premature as
the title deeds were in possession of the Defendant No.3. 
11. Submissions on behalf of the Respondent Nos.1 and 2 by
the Learned Counsel Mr. Sanjay Jain :­
I) That   the   Respondent   Nos.1   and   2   herein   i.e.   the   original

Plaintiffs   have   proved   their   case   by   adducing   oral   evidence   as   also
producing documents in support of their assertions in the suit. 
II) That the MOU having been exhibited in this Court whilst the
suit   was   pending   in   this   Court,   the   Appellants   are   estopped   from
questioning the maintainability of the suit on the ground of the said MOU
being not properly stamped. Reliance is placed on the judgment of the
Apex Court reported in  AIR 2007 SCC 637  in the matter of  Shyamal
Kumar Roy Vs. Sushil Kumar Agarwal. 
III) That   having   regard   to   the   proviso   to   Section   49   of   the
Registration Act in a suit for specific performance an unstamped document
can be received as evidence and a suit can be based on it. 
IV)    That in the impugned judgment and order care has been
taken by the Trial Court to see to it that the rights of the third parties are
not affected and therefore it cannot be said that the impugned judgment
and order has been passed by the Trial Court thereby affecting the rights
of the third parties. 
V) That the Respondent Nos.1 and 2 having paid 90% of the
consideration were entitled to specific performance of the said MOU dated
18.09.1997   and   the   Appellants   having   accepted   the   said   substantial

consideration   cannot   now   call   in   question   the   decree   of   specific
performance.   
CONSIDERATION
12  Having heard  the  Learned  Counsel  for  the  parties,  I have
considered the rival contentions. The issue which arises in the above First
Appeal is whether the decree of specific performance granted by the Trial
Court is required to be interfered with. As indicated above, the suit in
question   has   been   filed   for   specific   performance   of   the   MOU   dated
18.09.1997 which was in respect of the sale of the office premises being
block No.501, situated on 5th floor of the building known as A. N. House
on 31st road, off Linking Road, Bandra (W), Mumbai­50. The consideration
mentioned in the said MOU Rs.11,00,000/­ out of which a amount of
Rs.1,00,000/­ was paid as earnest money and the balance amount was to
be paid in terms of the schedule mentioned in the said MOU. However, it
seems that on account of the financial stringency that the Defendant Nos.1
and 2 were facing they had requested the Plaintiffs for payment of the
amount. The Plaintiffs have accordingly paid an amount of Rs.8,50,000/­
for which the Defendant Nos.1 and 2 issued receipts. It is on account of
the reluctance of the Defendant Nos.1 and 2 to complete the transaction
that the Plaintiffs were required to file the suit in question. As indicated

above, by the impugned judgment and order dated 06.05.2014 the suit
has   been   decreed   and   the   Plaintiffs   have   been   granted   specific
performance   of   the   said   MOU   dated   18.09.1997.   Now  coming   to   the
contentions raised on behalf of the Appellants i.e. original Defendants.
One of the contentions raised was that the contract comprising the said
MOU   was   a   contingent   contract   and   since   the   contingency   had   not
occurred the filing of the suit by the Plaintiffs was premature. The Trial
Court has rejected the said contention by holding that from the covenants
of the agreement it does not appear that the same was to take effect on
the happening of certain events. This Court has also with the assistance of
the Learned Counsel for the parties has gone through the said MOU and
the Learned Counsel for the Appellants has not able to point out any
covenant from which it can be said that the contract in question was a
contingent contract. The said contention was probably sought to be urged
on the basis that since a mortgage was created in favour of the Defendant
No.3 unless the mortgage was redeemed, the suit could not have been
filed by the Plaintiffs. In my view, the said submission is misconceived as
the   Trial   Court   in   the   impugned   judgment   and   order   has   adequately
protected the rights of the third parties in so far as their claim against the
Defendant   Nos.1   and   2   is   concerned.   Moreover,   the   Learned   Counsel
appearing   for   the   Defendant   No.3   stated   that   the   suit   filed   by   the

Defendant No.3 has been withdrawn. In my view, therefore the reliance
placed by the Learned Counsel appearing on behalf of the Appellants on
the judgment of the Apex Court in Market Committee, Hodal, through its
Secretary's case (supra) is misplaced, as the said suit concerned a suit for
possession filed in respect of a land acquired for a public purpose under
the Land Acquisition Act. 
13  It was also the submission of the Learned Counsel appearing
on behalf of the Appellants that though the defence of the Defendants was
struck of as a consequence of the order dated 15.12.2008 passed in Notice
of Motion No.3631 of 2006 in the above suit whilst it was pending in this
Court neverthless the Plaintiffs were still required to prove their case.
There can be no dispute about the said proposition. It is required to be
seen whether the Plaintiffs have discharged the burden cast upon them in
the   instant   case.   As  indicated   above,  the   Plaintiff   No.1  has   examined
himself and produced the documents on which the Plaintiffs have relied
upon in assertion of their case. Having regard to the material which has
come on record on behalf of the Plaintiffs, it would have to be said that
the Plaintiffs have proved their case as the said case of the Plaintiffs has
not been dented by the Defendant Nos.1 and 2. 
14  The next submission of the Learned Counsel appearing on

behalf   of   the   Appellants   was   that   the   suit   in   question   for   specific
performance is based on a document which is unregistered and executed
on a Rs.20/­ stamp paper and therefore was not maintainable having
regard   to   Section   49   of   the   Registration   Act.   In   so   far   as   the   said
contention is concerned, it is required to be noted that the proviso to
Section 49 itself carves out an exception in respect of a suit for specific
performance. The said proviso reads thus :­ 
“49. Effect of non­registration of documents required to
be registered. ­ No document required by section 17 [or by
any provision of the Transfer of Property Act, 1882,] to be
registered shall­ 
(a) …......
(b)............
(c).................
[Provided   that   an   unregistered   document   affecting
immovable   property   and   required   by   this   Act,   or   the
Transfer of Property Act, 1882, to be registered may be
received as evidence  of  a contract in  a suit  for   specific
performance under Chapter II of the Specific Relief Act,
1877,   or   as   evidence   of   any   collateral   transaction   not
required to be effected by registered instrument.]” 
In the light of the proviso, there is no substance in the said contention. It
was   also   the   submission   of   the   Learned   Counsel   appearing   for   the
Appellants that an unregistered document could not have been exhibited.
In my view, the said submission also cannot be countenanced in view of
the fact that whilst the suit was pending in this Court, the documents were
marked by order dated 28.07.2009 passed by a Learned Single of this

Court (Dr. D. Y. Chandrachud, J, as His Lordship then was) and having
regard to Section 36 of the Bombay Stamp Act, the Court was prohibited
from reopening the matter as regards the exhibition of the document.
Reference could be made to the judgment of the Apex Court in Shyamal
Kumal Roy's case (supra) wherein the Apex Court has held that if an
insufficiently stamped document is admitted in evidence then Section 36
gets attracted and the Court is prohibited from re­opening the matter
(Section 36 of the Indian Stamp Act is pari­materia with Section 35 of the
Maharashtra Stamp Act). The Plaintiffs would undoubtedly be required to
pay the stamp duty at the  time of the execution of the  document of
Conveyance in their favour. In my view, the judgment of the Apex Court in
K. B. Saha & Sons case (supra) would not aid the Appellants, as the facts
in the said case can be distinguished from the facts of the present case.
The suit in question in K. B. Saha & Sons case (supra) was not a suit filed
for specific performance but a suit filed for eviction of a lessee and a
clause in an unregistered lease deed was sought to be relied upon for a
collateral purpose. The Apex Court held that the purpose for which the
clause was sought to be relied upon was not a collateral purpose and
therefore the unregistered lease deed could not be relied upon. 
15  A submission was also sought to be raised on behalf of the
Appellants that the Trial Court has erred in not appreciating the fact that

the rights of the Defendant No.3 Bank would get affected. As indicated
hereinabove, the Trial Court in the impugned judgment and order has
taken sufficient care to see to it that the rights of the third parties are not
affected by observing that the third parties would not be affected if their
dues   are   not   cleared   by   the   Defendant   Nos.1   and   2.   Moreover   the
Defendant No.3 it seems has withdrawn the suit filed by it against the
Defendant Nos.1 and 2. The submission of the Learned Counsel for the
Appellants   that   the   instant   decree   is   contrary   to   the   order   dated
04.05.1999 passed in the suit is only stated to be rejected as it is well
settled that all interim orders are subject to the final orders that are passed
in the suit. In my view, there is no merit in the above First Appeal, the
decree passed by the Trial Court granting specific performance to the
Respondent Nos.1 and 2 herein i.e. the Plaintiffs therefore does not merit
any   interference   in   the   Appellate   jurisdiction   of   this   Court.   The   First
Appeal is accordingly dismissed.
[R. M. SAVANT, J]
After pronouncement of Judgment
At this stage, the Learned Counsel for the Appellants seeks
stay of the instant judgment. Rather than staying the judgment, it would
be appropriate that the decree is stayed for a period of four weeks. 
[R. M. SAVANT, J]

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