Search in selected Domain

MANU/MH/0358/2010

Equivalent Citation: 2010(112)BomLR1935

IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Appeal Against Order No. 142/2009

Decided On: 20.04.2010

Appellants: Sunil Mantri Realty Limited, A company incorporated under the

Companies Act, 1956, having its Administrative, through its lawfully constituted
Attorney
Vs.
Respondent: Maharashtra State Textile Corporation Limited, a Public Sector
Undertaking of the Government of Maharashtra

Hon'ble Judges:
R.K. Deshspande, J.

Counsels:
For Appellant/Petitioner/Plaintiff: M.G. Bhangde, Sr. Adv. and V.V. Bhangde, Adv.

For Respondents/Defendant: Ravi Kadam, Adv. General and Akshay Naik, Adv.

Subject: Civil

Catch Words

Mentioned IN

Acts/Rules/Orders:
Constitution of India - Article 14; Specific Reliefs Act - Sections 14(3) and 34; Transfer of
Property Act - Section 26; Maharashtra Cooperative Societies Act, 1960; Contract Act -
Section 74

Cases Referred:
Chheda Housing Development Corporation v. Bibijan Shaikh Farid and Ors. 2007 (3)
Mh.L.J. 402; Anup P. Gordia v. Manish Jaisukhlaql Shah 2009 (1) Mh.L.J. 611; Yogesh
Mehta v. Custodian appointed under the Special Court and Ors. (2007) 2 SCC 624;
Hyderabad Municipal Corporation v. M. Krishnaswami Mudaliar and Mudaliar and Anr
(1985) 2 SCC 9; P. Kolandaivelu v. The Govt. of Tamil Nadu 2009 (14) SCALE 524; K.
Madhadeva Sastry v. Director Post Graduate Centre AIR 1982 Andhra Pradesh 176; Gurudeo
Developers v. Kurla Konkan and Ors. 2000 (3) Mh.L.J. 131; Bipin v. Sunanda AIR 2006
Calcutta 209; Arun P. Garodia v. Manish Jaisukhlal Shah and Ors. 2009 (1) Mh.L.J. 611; Sri
Raja v. Sarvagnaya Kumara Krishna (1946) 2 MLJ 53; Oil and Natural Gas Corporation Ltd.
v. M/s. Streamline Shipping Co. Pvt. Ltd. 2002 (3) Mh.L.J. 530; S. Brahmanand and Ors. v.
K.R. Muthugopal (Dead) and Ors. (2005) 12 SCC 764; McDermott International Inc. v. Burn
Standard Co. Ltd. and Ors (2006) 11 SCC 181; Rajasara Ramjibhai Dahyabai v. Jani
Narottamdas Lalubhai (Dead) by LRs and Anr. (1986) 3 SCC 300; Mst. Rukhmabai v. Lala
Laxminarayan and Ors. AIR 1960 SC 335; L. Janakirama Iyer and Ors. v. P.M. Nilkanta Iyer
and Ors. AIR 1962 SC 633; C. Mohammad Yunus v. Syed Unnissa and Ors. AIR 1961 SC
808

Citing Reference:

Anup P. Gordia v. Manish Jaisukhlaql Shah Distinguished

Bipin v. Sunanda Discussed

C. Mohammad Yunus v. Syed Unnissa and Ors. Distinguished

Chheda Housing Development Corporation v. Bibijan

Shaikh Farid and Ors. Distinguished

Corporation of City of Bangalore v. M. Papaiah and Anr Distinguished

Gurudeo Developers v. Kurla Konkan and Ors. Discussed

Hyderabad Municipal Corporation v. M. Krishnaswami

Mudaliar and Mudaliar and Anr Distinguished

K. Madhadeva Sastry v. Director Post Graduate Centre Discussed

L. Janakirama Iyer and Ors. v. P.M. Nilkanta Iyer

and Ors. Distinguished

McDermott International Inc v. Burn Standad

Co. Ltd. and Ors Distinguished

Mst. Rukhmabai v. Lala Laxminarayan and Ors Distinguished

Oil and Natural Gas Corporation Ltd. v. Streamline

Shipping Co. Pvt. Ltd Mentioned

P. Kolandaivelu v. The Govt. of Tamil Nadu. Distinguished

Rajasara Ramjibhai Dahyabai v. Jani Narottamdas

Lalubhai (Dead) by LRs and Anr Distinguished

S. Brahmanand and Ors. v. K.R. Muthugopal

(Dead) and Ors Distinguished

Sri Raja v. Sarvagnaya Kumara Krishna Discussed

Yogesh Mehta v. Custodian Appointed under

the Special Court and Ors. Discussed

Case Note:
Civil — Issuance of letter of acceptance — Nature of Right created there of — Appeal
challenging legality of cancellation of acceptance of offer, forfeiture of earnest money
and issuance of fresh tender in development of property in question — Held, nature of
right created by issuance of letter of acceptance is governed by Section 26 of Transfer of
Property Act which stipulates that where the terms of a transfer of property impose a
condition to be fulfilled before a person can take an interest in the property, the
condition shall be deemed to have been fulfilled, if it has been substantially complied
with. Therefore, if there is total failure of conditions precedent, no interest is created in
the property. In the instant case, it is not in dispute that inspite of the extension of time
Plaintiff did not make the payment nor did furnish the bank guarantee. The Plaintiff
not an innocent defaulter, but has come up with a case in the plaint that it is ready and
willing to make the payment and comply with the other obligations stipulated in the
letter of acceptance, only if the defendant clarifies the position about the existing claims,
litigation, measurements, demarcation etc. The Plaintiff cannot call upon the Defendant
to first clarify the position and only then would comply with the terms of letter of
acceptance, it has been held that there is no concluded contract as the Development
Agreement has not been executed and the charge of project site having not been handed
over to the Plaintiff/builder, the Plaintiff is merely an inchoate bidder, whose rights are
yet to ripen for development of property.

Ratio Decidendi:
“Where the terms of a transfer of property impose a condition to be fulfilled before a
person can take an interest in the property, the condition shall be deemed to have been
fulfilled, if it has been substantially complied with.”

JUDGMENT

R.K. Deshspande, J.

1. This appeal is preferred by the original plaintiff, challenging order dated 29.09.2009
passed below Exh.5 by the learned Jt. Civil Judge Senior Division, Nagpur in Special Civil
Suit No. 856/2009 rejecting the application under Order XXXIX Rules 1 and 2 of the Code of
Civil Procedure, filed by the plaintiff for grant of temporary injunction restraining the
defendants from (1) acting or enforcing the order dated 17.08.2009 canceling the acceptance
of tender of the plaintiff, (2) forfeiting the amount of earnest money deposit of Rs.
1,00,00,000/, (3) from removing the security guards appointed by the plaintiff over the suit
property and (4) inviting the fresh bids in respect of the development work in question,
pursuant to advertisement published on 27.08.2009.

2. The facts that are necessary to decide the controversy raised in this appeal are stated below.
The appellant is the plaintiff and the respondent is the defendant. The parties shall be called
hereinafter according to their original status as "plaintiff" and the "defendant". The plaintiff
has filed Special Civil Suit No. 856/2009 against the defendant Maharashtra State Textile
Corporation Ltd. for declaration and permanent/prohibitory/mandatory injunction. The
plaintiff claimed the following reliefs in the plaint.

(i) Grant a declaration that the Order bearing No. Secy/G.P./NGP/775, dated 17th August,
2009, and all stipulations therein are illegal, unauthorized, vexatious, highhanded, arbitrary,
bad in law, improper and in colourable exercise of powers and not binding upon the plaintiff
and is liable to be revoked, cancelled and set aside.

(ii) Grant permanent/prohibitory injunction restraining the Defendant from acting,

implementing or enforcing the said order bearing No. Secy/G.P./NGP/775, dated 17th
August, 2009, and/or act pursuant thereto by publishing any advertisement or inviting fresh
bids or inviting any other person/s, firm or companies privately or otherwise to take up the
said project which is awarded to the plaintiff herein.

(iii) Grant a declaration that bid/allotment of development rights given to the Plaintiff in
pursuance of acceptance letter dated 15052009 is valid and is in subsistence.

(iv) Grant perpetual/prohibitory injunction restraining the Defendant from forfeiting the
Earnest Money Deposit of Rs. one Crore deposited by the plaintiff to the defendant.

(v) Grant perpetual/Prohibitory injunction restraining the Defendant from removing the
security appointed by the Plaintiff at the Mill. (va) Grant declaration that issuance of fresh
tender by the defendant (as has reflected in Daily English Newspaper "The Economic Times"
in its issue dated 27082009) in respect of development of property at Nagpur is absolutely
unfair, inappropriate, illegal, unjust and unsustainable move on part of the defendant in which
the defendant has acted vexatiously, highhandedly and malafidely and said notice is not
binding on the plaintiff and is liable to be quashed and set aside and cannot be acted upon.

(vi) Saddle the cost of this suit upon the defendant.

(vii) Grant such other and further reliefs as the nature and circumstances of the case may
required.

3. The plaintiff alleged that the Government of Maharashtra decided to develop Integrated
Textile Complex comprising of Garment Park (Textile Complex) on the suit land, along with
other lands owned and occupied by defendant at various other locations at Badnera, Kolhapur
and Solapur. Accordingly, an advertisement was released by defendant on 02.02.2009,
inviting tenders and bids for development of integrated textile complex. The plaintiff filled up
the bid and submitted it on 24.02.2009 with earnest money of Rs. 1,00,00,000/, to the
defendant. The bid submitted by the plaintiff was found to be the highest and, therefore, the
same was accepted by letter dated 15.05.2009 for a total amount of Rs. 41,25,00,000/ payable
towards development fee, in four equal installments to the defendants. The acceptance letter
required the plaintiff to make payment of Rs. 9,31,25,000/ towards 25% of offer, after
deducting the earnest money deposit of Rs. 1,00,00,000/ already paid and also to furnish the
bank guarantee as performance security, for a balance amount of Rs. 20,62,50,000/ equated to
two installments of the development fee.
4. The plaintiff alleged that the demarcation of the land was not exactly known to the plaintiff
and also there was no clarity regarding the title of garment project at Nagpur, Kolhapur and
Solapur. The plaintiff brought this fact to the notice of Project Manager Committee during its
meeting held on 28.05.2009. It was pointed out that the demarcation and the measurement of
mill property was a must and, therefore, paid an amount of Rs. 5,35,500/ on 11.06.2009,
towards the measurement fees, though the plaintiff was not liable to pay the same. Since the
demarcation and measurement was not done, the plaintiff applied for extension of time for
payment of balance amount of the first installment for 60 days. The defendants, upon
realising the necessity of demarcation and measurement, accepted the request of the plaintiff
by issuing letter dt. 18th June, 2009, and granted extension as a special case, for a period of
30 days, for payment of first installment of development, subject to the condition that the
plaintiff shall pay interest at the rate of 10% p.a. on the balance amount of fee of the first
installment, from the last due date of payment i.e. 15.06.2009, till the actual date of payment.

5. The plaintiff by referring to some instances and experience in respect of the transactions at
Kolhapur and Solapur alleged that though the bid was on "as is where is" basis, the plaintiff
did not receive the documents of title, claims of labourers on account of closure of mills at
Nagpur and information in respect of various other issues which remained to be resolved.
Hence, it started negotiating with the defendant to get the position clarified, before making
the payment of balance amount of Rs. 41,25,00,000/, as was agreed. The plaintiff specifically
alleged that he was and is ready and willing to make the payment and comply with other
obligations subject to the defendant clarifying the position about the existing claims,
litigation, measurement, demarcation etc. The plaintiff further alleged that he requested the
defendant at last to disclose the entire information regarding the existing litigation, claims
and/or disputes in regard to the properties, before making the huge payments of almost 75%
of the amount. The plaintiff alleged that the defendant assured the plaintiff that everything
will be clarified and there would be no difficulty in extending the time and the project would
not be allowed to be suffered. The plaintiff further alleged that it was apprehended that if for
any reason, the said project is blocked either for financial and/or labour and/or measurement
and/or demarcation problems, or any other problem, the plaintiff would be put to heavy
irreparable losses. The plaintiff was, therefore, assured by the defendant that all the obstacles
would be removed and till then the plaintiff would be granted an extension of time for
making the payment of installment from time to time and the plaintiff would be asked to
make the payment, only after it is satisfied about the viability of the project.

6. The plaintiff alleged that surprisingly, it received a letter dated 10.8.2009 which was a
show cause notice by the defendant, directing the plaintiff to explain the act of non payment
of first installment till 13.8.2009 and on failure of the same, the defendant would take suitable
action of forfeiting the EMD paid by the plaintiff and cancelling the offer/acceptance letter
issued to the plaintiff. The plaintiff submitted detailed reply dated 11.8.2009 and asked for
disclosure of the information and layout demarcation report and expressed that the plaintiff
itself has been, at all times, eager to make the payments to the defendant to enter into the
development agreement and to commence the development activities. It is alleged that to the
utter shock and surprise of the plaintiff, an order bearing No. SECY/G.P./NGP/775, dated
17th August, 2009, by the defendant, cancelling the letter of acceptance dated 15.5.2009 with
immediate effect and forfeiting the amount of earnest money deposit of Rs. 1,00,00,000/ and
further reserving the right to recover the interest as was communicated by letter dated
18.6.2009.
7. The plaintiff alleged that aggrieved by the letter of cancellation of acceptance of offer,
dated 17th August, 2009 and forfeiture of the earnest amount of Rs. 1,00,00,000/, it filed the
suit for the reliefs which are reproduced earlier. The plaintiff amended the suit and further
alleged that the cancellation was malafide and further steps of issuance of fresh tender in
newspaper on 27.8.2009 in respect of development of the property in question was illegal.

8. Along with the plaint, the plaintiff filed application Exh. 5 for grant of temporary
injunction under Order 39, Rule 1 and 2 of C.P.C., claiming the temporary injunction as
under;

(i) Issue temporary injunction restraining defendant, its agent, representatives, assigns and
any other person/s acting through it from acting, implementing or enforcing the said order
bearing No. Secy/G.P/NGP/ 775, dated 17th August, 2009, and/or act pursuant thereto by
publishing any advertisement or inviting fresh bids or inviting any other person/s, firm or
companies, privately or otherwise to take up the said project which is awarded to the Plaintiff
herein during the pendency of the suit.

(ii) Grant temporary injunction restraining the defendant from forfeiting the Earnest Money
Deposit of Rs. one Crore deposited by the Plaintiff with the Defendant.

(iii) Grant temporary injunction restraining the Defendant from removing the security
appointed by the plaintiff at the Mill.

(iv) Issue exparte adinterim injunction in above terms during the pendency of this application.

(v) Saddle the cost of this application upon defendant and grant any other relief which this
Hon'ble Court may deems fit and proper in the interest of justice.

The plaintiff filed another application Exh. 15 under Order 39, Rule 1 and 2 for grant of
temporary injunction in which the reliefs claimed are as under;

(i) Issue temporary injunction restraining defendant, its agents, representatives, assigns and
any other person/s acting through it from acting on its tender notice (as it appears from the
advertisement published in issue dated 27082009 of Daily English Newspaper "The
Economic Times") and/or from inviting/accepting fresh bids and/or inviting any other
person/s, firm or companies privately or otherwise to take up the said project which is
awarded to the plaintiff herein during the pendency of the suit.

(ii) Saddle the cost of this application upon defendant and grant any other relief which this
Hon'ble Court may deems fit and proper in the interest of justice.

9. The defendant filed its written statement and reply to both the applications at Exh. 5 and
Exh. 15. The claim of the plaintiff was denied and a stand was taken that the property was
sold on "as is where is" basis and in the project profile of the tender documents, all the facts
regarding title of the defendant were clarified. The plaintiff submitted its bid on 24.2.2009
willingly without any reservation and without raising any dispute as to the title of the
defendant over the suit property. The reference is also made in the written statement to the
clarifications, which were to be issued in respect of queries of the bidders, prior to 3 days of
the date prescribed for submission of the bids. It was stated that the plaintiff did ask for
clarification and extension as regards the demarcation of land in question, which was
provided in the prebid meeting, held on 10.2.2009. It was further urged that all the
clarifications sought by the bidders in the prebid meeting, were furnished. It was stated that
the issues of title as well as that of labour dues were also clarified. It was the stand taken that
the demarcation of land was already done and accordingly an approved sanction layout plan
was sanctioned by the Planning Authority i.e. Nagpur Municipal Corporation and there was
no need for any fresh measurement or demarcation in view of the approved lay out plan. The
defendant denied any assurance given to the plaintiff in the meeting of the Project Monitoring
Committee held on 28.5.2009. It was urged that the extension of time had nothing to do with
the issue of measurement and demarcation, and a letter dated 18.6.2009 does not have the
effect of altering the terms of tender documents. It was further argued that the plaintiff was
not having the financial capacity to execute the work and to discharge with the financial
liability under the agreement and, therefore, the excuses were given about the demarcation of
property and other aspects, only to defer the payment of first installment. The plaintiff has
failed to deposit the amount of first installment even within the extended period up to
15.7.2009 and to furnish the bank guarantee for which one month's time was extended. It was
further alleged that a request was never made by the plaintiff to extend the time to furnish the
bank guarantee. The plaintiff having failed to comply with the conditions of letter of
acceptance dated 15.5.2009, the defendant was right in cancelling the letter of acceptance by
issuing Order dated 17th August, 2009.

10. The defendant stated that the rights of the parties were governed by the tender documents
which under Clause 1(b) (xi) of Section III of the Tender Document provided for payment of
25% of the development fee within 30 days from the date of receipt of letter of acceptance
and also to furnish the bank guarantee for a sum equal to 50% of the total development fee.
The plaintiff has failed to comply with both these conditions. It was made clear in the tender
document itself under Clause (1) (b) (xi) of Section III that failure of the successful bidder to
deposit the amount and furnishing bank guarantee as aforesaid would result in forfeiture of
earnest money deposit, rejection of bid and withdrawal of letter of acceptance. It was the
stand taken that Clause 6(d) of the tender document does not provide for any contingency and
precondition for payment of amount and furnishing of bank guarantee. It was further stated
that the defendant had enclosed, as AnnexureH to the tender document, a copy of the
approved layout plan showing the extent, boundaries and location of the site and there was no
need for any further clarification. By referring to several clauses under the tender document,
the defendant submitted that the plaintiff ought to have verified the site and got clarification
of any areas of any doubt in the pre bid meeting, which was arranged on 10.2.2009. The
minutes of the meeting were sent to the bidders and no objection was raised in respect
thereof. The defendant then stated that in order to avoid any confrontation, the time for
making the payment of 1st installment was extended till 15.7.2009, subject to the payment of
interest.

11. The Joint Civil Judge, Senior Division, Nagpur, by his order dated 29.9.2009 passed
below Exh.5 in Special Civil Suit No. 856/2009 rejected the application filed by the plaintiff
for grant of temporary injunction. The trial Court held that the plaintiff has failed to make out
a prima facie case, the balance of convenience did not lie in favour of the plaintiff and the
plaintiff has failed to demonstrate an irreparable loss, if any, that cannot be compensated in
terms of money, if the temporary injunction prayed for, is not granted. The trial Court held
that it was not a proper stage to decide the issue of no maintainability of the suit raised by the
defendant and it proceeded to discuss the matter on merits, on the assumption that the suit is
maintainable. It was held that furnishing of final lay out plan or giving specific demarcation
of the layout to the plaintiff before payment of first installment of Rs. 9,31,25,000/, was not a
condition at all between the plaintiff and the defendant. On the contrary, the proposed lay out
plan was already submitted by the defendant to the plaintiff along with the bid document. It
was held that in order to execute the agreement of development, the deposit of Rs.
9,31,25,000/ and furnishing of bank guarantee as a performance security was must and
mandatory. The plaintiff has failed to comply with both these conditions and has, therefore,
committed a breach of contract. It is held that the development agreement could not be
executed because the plaintiff himself is a defaulter and has committed breach of conditions
mentioned in the letter of acceptance. It was further held that there is a reason to believe that
the plaintiff has no financial capacity to complete the project and if the project is allotted to
the plaintiff and it is kept on lingering for years together for want of sufficient economic
strength then it will be a great inconvenience to the defendant and also the public at large. It
was further held that there was no right created in favour of the plaintiff in respect of the suit
property as no development agreement was executed and if at all any loss is caused to the
plaintiff due to nonissuance of temporary injunction, the same can be definitely calculated
and compensated in terms of money. On these findings, both the applications for temporary
injunction, filed by the plaintiff were rejected.

12. Shri Bhangde, the learned Senior Counsel assisted by Shri V.V. Bhangde, Advocate, for
plaintiff, has urged the following points.

(a) The essential challenge in the suit, is the order dated 17.8.2009 passed by the Managing
Director of the defendant Corporation (MSTC), cancelling the letter of acceptance dated
15.5.2009 and forfeiting the earnest money deposit of Rs. 1,00,00,000/ on the sole ground
that the plaintiff has failed to deposit the amount of first installment of Rs. 9,31,25,000/ on or
before 15.7.2009. According to him, there was no other ground stated in the order of
cancellation including the nonfurnishing of bank guarantee as a performance security for an
amount of Rs. 20,62,50,000/ equated to two installments of development fees. Hence, the
only question which is involved in the suit which is to be decided is, whether the cancellation
on this sole ground was proper or not. According to him, it is not permissible for the
defendant to raise any other ground either to defend the suit or to defend the application for
temporary injunction and if any such grounds are taken, the same have to be ignored by the
trial Court, as the validity of the order challenged is required to be judged only on the basis of
the reasons that are stated in the order and not those which are supplemented by way of filing
written statement or affidavit.

(b) Shri Bhangde has urged that there is total failure on the part of the defendant to discharge
the obligation under the bid document. The obligation being to get the plot demarcated from
the city survey, to obtain certificate of measurement and map "K" in respect of demarcation
and also to get the provisional lay out sanctioned from the N.M.C. and to convey the right to
develop the property to the plaintiff. Though it is conceded by Shri Bhangde that there is no
specific clause in the bid documents creating such an obligation upon the defendant
M.S.T.C., he urged that the said obligation can be spelt out by reading other clauses in the bid
document, which contain the draft agreement of development and the agreement to sanction
the layout dated 20.12.2004 with the Nagpur Municipal Corporation. To substantiate this
argument, he has relied upon Clause 3 (c ) of Page 39 of the paper book under Section II of
the bid document, which is reproduced below.

3(c) : Available Floor Space Index (FSI) for development

MSTC has obtained provisional approval on the proposed development layout from Nagpur
Municipal Corporation (NMC) vide its letter dated January 11, 2005. A copy of the approved
layout plan in respect of the land is annexed herewith as Annexure H.

He further relied upon the lay out plan provisionally approved at AnnexureH to the bid
document and condition (B) incorporated in the agreement dated 20.12.2004 between the
Nagpur Municipal Corporation and the defendant M.S.T.C, on page 73 of the paper book,
which is reproduced below.

(B) THAT, the PARTY No. 1 has recommended the layout for demarcation by the City
Survey Deptt. The PARTY No. 2 shall get the layout demarcated from City Survey Deptt.,
within 3 months and submit it to the Corporation for final sanction of layout.

(c) According to him, unless the lay out is demarcated by city survey and the same has
obtained sanction from the Nagpur Municipal Corporation, neither the defendant M.S.T.C.
was competent to transfer the development rights nor could the plaintiff develop the property.
Hence, according to him, unless the defendant discharges the said obligation, the plaintiff
cannot be called upon to pay the first installment. According to him, it is a commercial
project and unless the obstacles in the development of property are cleared, huge investment
would result in blockage of funds and jeopardize the development of the project. He submits
that the plaintiff has shown its readyness and willingness to pay the first installment as soon
as the defendant obtains the certificate of measurement, the demarcation map "K" from the
City Survey Department and the same is sanctioned by the Nagpur Municipal Corporation.
According to him, it is the defendant who has committed the breach of contract by not
discharging the obligation and hence the letter/order of cancellation dated 17.8.2009 is
illegal.

(d) Shri Bhangde has further urged that the acceptance of tender by communication dated
15.5.2009, creates an enforceable right in favour of the plaintiff to get the development
agreement executed by the defendant. He laid stress upon Clause 6(a) on page 59 of Bid
document, which states that the MSTC shall award the development rights of the project to
the successful bidder by issuing a letter of acceptance. He further relied upon Clause (d) on
page 47 regarding Modality of Transfer of Textile Complex Component and Free Sale
Component. He further urged that the letter of acceptance has to be equated with the
development agreement which in turn has to be equated with the execution of sale deed. He
relied upon the Division Bench judgment of this Court reported in MANU/MH/0070/2007 :
2007 (3) Mh.L.J. 402 (para 15) Chheda Housing Development Corporation v. Bibijan Shaikh
Farid and Ors., and Single Bench Judgment of this Court reported in 2009 (1) Mh.L.J. 611
Anup P. Gordia v. Manish Jaisukhlaql Shah. He submitted that it was a concluded contract.
He further urged that forfeiture of earnest money deposit is an instance which presupposes a
concluded contract and as such a right flows only as a result of breach of contract and
suffering of actual loss by the party alleging breach of contract. In support of this proposition,
he relied upon the decision of Supreme Court reported in MANU/SC/0192/2007 : (2007) 2
SCC 624 (Para 32) Yogesh Mehta v. Custodian appointed under the Special Court and Ors.

(e) Alternatively Shri Bhangde, the learned Senior Advocate submitted that the defendant by
its studied silence accepted particularly, the need of demarcation of layout, obtaining of
certificate and map "K" from the City Survey as a condition precedent, to convey the
development rights to the plaintiff. He urged that such an obligation was correlated with the
payment of first installment due on 15.6.2009 as well as furnishing of bank guarantee, as
performance security. Consequently, the plaintiff was not liable to comply with the two
conditions stipulated in the letter of acceptance dated 15.5.2009, before discharge of the
aforesaid obligation by the defendant. In support of this contention, Shri Bhangde, learned
Senior Advocate, referred to the minutes of Project Monitoring Committee dated 28.5.2009;
letters dated 8th June, 2009, 11th June, 2009, 12th June, 2009, 13th July, 2009, 22nd July,
2009, 24th July, 2009 and 11th August, 2009 addressed to the defendant by the plaintiff and
the letters dated 18th June, 2009, 24th July, 2009, 10th August, 2009, addressed by the
defendant to the plaintiff.

(f) Shri Bhangde, learned Senior Advocate, urged that after the meeting of Project
Monitoring Committee held on 28.5.2009, wherein it was decided to carry out the
demarcation of land, to obtain the certificate and map, letters were issued on 8th June, 2009,
11th June, 2009 and 12th June, 2009, asking the defendant to get the demarcation of lay out
completed and obtain the certificate of City Survey. It was for this purpose, that an amount of
Rs. 25,00,000/ was deposited along with the letter dated 12th June, 2009. The defendant
communicated its acceptance by letter dated 18th June, 2009 and also submitted application
to the City Survey Department for measurement and obtaining of Map K and the plaintiff was
informed by communication dated 10th August, 2009 that except demarcation all other
formalities are completed. Shri Bhangde urged that the defendant did not oppose the
requirement of demarcation and measurement, but on the contrary acted upon it and took
steps to complete the same. The actual measurement and demarcation was completed on
27.7.2009, which is an implied acceptance of the obligation.

(g) In support of above, Mr. Bhangde relied upon the decision of the Apex Court reported in
MANU/SC/0218/1985 : (1985) 2 SCC 09 Hyderabad Municipal Corporation v. M.
Krishnaswami Mudaliar and Mudaliar and Anr. He further relied upon the decision of the
Supreme Court reported in MANU/SC/1446/2005 : (2005) 12 SCC 764 (Para 34) S.
Brahmanand and Ors. v. K.R. Muthugopal (Dead) and Ors., to urge that the defendant by its
act of forbearance and not insisting upon payment of first installment proved that the
demarcation and measurement was the condition precedent for payment of first installment.
He further relied upon another decision of the Apex Court reported in
MANU/SC/8177/2006 : (2006)11 SCC 181 (Para 151) McDermott International Inc v. Burn
Standad Co. Ltd. and Ors., to urge that the condition of demarcation and measurement was
accepted in subsilentio. He also relied upon the decision of the Apex Court reported in (1986)
3 SCC 300 (para 12) Rajasara Ramjibhai Dahyabai v. Jani Narottamdas Lalubhai (Dead) by
LRs and Anr., in support of his contention that such a term although not expressed in the
contract, it can be construed to be an implied term from the nature of transaction, the matter
is found in the document and the intention of the parties. He also relied upon judgment of
Apex Court reported in MANU/SC/1888/2009 : 2009 (14) SCALE 524 P. Kolandaivelu v.
The Govt. of Tamil Nadu.

(h) Shri Bhangde, the learned Senior Counsel lastly urged that instrumentality of the State
and it cannot act arbitrarily and in an unjust manner. When the defendant is well aware that
the property cannot be developed without demarcation of layout, obtaining certificate and
Map "K" from the City Survey and sanction to the final layout from Nagpur Municipal
Corporation, which was the obligation of the defendant under Clause (b) of the Agreement
dated 25.12.2004, it could not have insisted upon the plaintiff to pay the first installment of
Rs. 9,31,20,000/ and to furnish bank guarantee as performance security for the balance
amount of Rs. 20,62,50,000/. It was the normal experience that the measurement and
demarcation of layout of the City survey takes lot of time. It was a commercial venture for
the plaintiff and the defendant and the installment of huge amount by the plaintiff would have
blocked the funds and the plaintiff would have suffered enormous loss due to delay in
completion of the project which could have been attributed to the failure to discharge the
obligation by the defendant. He relied upon the Division Bench judgment of Andhra Pradesh
High Court reported in MANU/AP/0200/1982 : AIR 1982 Andhra Padesh 176 (Para 8) K.
Madhadeva Sastry v. Director Post Graduate Centre

13. Shri Kadam, the learned Advocate General, assisted by Shri Akshay Naik, Advocate,
appearing for defendant has urged the following points.

(a) By referring to various prayer clauses in the plaint, it was urged that there is no prayer for
specific performance of the contract. The prayers, as made, are not enough to grant specific
performance of contract. Admittedly, the defendant is in possession of the property and no
relief of possession is claimed, which ought to be claimed in terms of Section 34 of the
Specific Reliefs Act and hence, no declaration, as claimed, can be granted. It was further
urged that the relief of permanent injunction claimed in the plaint is not a "further relief" as
contemplated by proviso to Section 34 of the Specific Reliefs Act. The injunction claimed
must relate to the final relief claimed in the suit while the relief of temporary injunction
claimed by the plaintiff, is not related to the final relief claimed in the suit.

(b) It was further urged that the plaintiff is not the owner of the land but only a
builder/contractor/developer entrusted with the work of development of property. Referring
to Section 14(3)(c)(iii) of the Specific Reliefs Act, it was urged that it is only the owner of
the property who can file a suit for specific performance of contract against the contractor/
developer/builder, but a suit for specific performance of contract for development, at the
instance of the builder/contractor/developer, is not maintainable. He relied upon the decision
of the Court reported in 2000 (3) Mh.L.J. 131 Gurudeo Developers v. Kurla Konkan and Ors.
and MANU/WB/0036/2006 : AIR 2006 Calcutta 209 (Bipin v. Sunanda) of Calcutta High
Court.

(c) Shri Kadam relied upon Clause 6(d) on page 59 of the bid document, which is reproduced
below.;

6(d) Execution of the Development Agreement and Charge of the Project Site.

The Bidder shall, within 30 (thirty) days from receipt of the Letter of Acceptance, be liable to
pay 25 (twenty five)% of the Development Fee and furnish a bank guarantee for 50 (fifty)%
amount of the total Development Fee, which will be valid for 30 (thirty) months
("Performance Security"). Within 30 (thirty) days from receipt of the aforesaid, MSTC will
execute the Development Agreement and will give charge of the Project Site to the
Successful Bidder. Failure of the Successful Bidder to comply with the aforesaid
requirements shall result in the forfeiture of the Bid Security and rejection of its Bid and
withdrawal of Letter of Acceptance.

He further refers to the contents of letter of acceptance dated 15.5.2009, which contain the
condition of acceptance of bid as under;

Accordingly we hereby request you to comply with the following:

1. Payment of Rs. 9,32,25,000/ (Rupees Nine Crores Thirty One Lakhs Twenty Five
Thousand only) by 15th June, 2009. (Being the 25% of the Development Fees after adjusting
Bid Security of Rs. 100 Lakhs).

2. Please furnish a Bank guarantee as "Performance Security" of a Nationalised Bank for an

amount of Rs. 20,62,50,000/- (Rupees Twenty Crores Sixty Two Lakhs Fifty Thousand Only)
by 15th June, 2009. This should remain valid for a period of 30 (Thirty) months from the date
of issue.

Your failure to comply with the aforesaid requirements shall result in the forfeiture of the Bid
Security with rejection of your Bid and withdrawal of this Letter of Acceptance.

We request you to sign duplicate copy of this letter in token in acceptance of the above and
submit the same to us at the earliest.

On the basis of the aforesaid provision, it was urged that the plaintiff was only an inchoate
bidder who can be sent out of process, at any time, and no legal right is created in favour of
him for development of property. According to him, the aforesaid letter of acceptance dated
15.5.2009 cannot be equated with an agreement, nor can a proposed development agreement
be equated with the sale deed, as urged by Shri Bhangde.

(d) By referring to Clause 6(b) on page 42 and the approximate area as per layout approved
by the Nagpur Municipal Corporation stipulated in square meters on page 43 of the bid
documents, it was urged that the charge of site was to be given to the bidder on "as is where
is" basis and the plaintiff was well aware that the area as per the City Survey in Section III on
page 43 was shown to be "blank". Reference was also made to Clause (C ) (ii) on page 46
under the bid document, which is reproduced below;

(c) Time Frame For The Project and Penalty for Non Compliance.

(ii) The Developer shall obtain approval of the Development Plan, Drawing and architectural
plan for Local Municipal Authority within from Local municipal corporation/ competent
Authority within 6 (six) months from the Date of Commencement.

The attention was invited to the definition of "date of commencement" and "development
plan" under clauses 12 and 17 respectively of the bid document on page 31, which are
reproduced below.

12. "Date of Commencement" shall mean the date of execution of the Development
Agreement and taking over charge of the project site.

17. "Development plan" means the proposed lay out plan for the Development, as approved
by MSTC and the concerned local Authority.

It was pointed out that Clause 2(b) of the bid document deals with the clarification of the bid
documents and subclause (iii) under Clause 2(b), a provision was made as under;

(iii) A prebid conference, open to all Bidders, shall be held at MSTC's office at Mumbai on
Tuesday, 10th February 2009 at 11.30 A.M., wherein the prospective Bidders shall have an
opportunity to obtain clarifications regarding the Bid conditions and the Project. The
prospective Bidders are free to request any additional information or clarification, either in
writing or orally during the prebid meeting and appropriate queries shall be replied to by the
MSTC. The copies of the queries raised and the replies given shall be furnished to all those
attending the meeting (and subsequently to all those who purchased this Bid Document). Any
modifications to the Bid Documents, which may become necessary because of prebid
conference, shall be through issuance of an addendum pursuant to Clause 2(c) of Section III
of this Bid Document.

It was expected to formulate his bid by taking into consideration various provisions pointed
out above and if there was any doubt and clarification was required, then it was to be done in
a PreBid Conference which was fixed on 10th February, 2009 i.e. 3 days prior to the
submission of bid. Shri Kadam submitted that such a PreBid Meeting was held and
clarifications were issued, leaving no room for any doubt and accordingly the plaintiff has
formulated his bid. It can, therefore, be said that no prejudice is caused to the plaintiff.

(e) By referring to the extension of a further period of 30 days granted by the defendant for
payment of first installment, Shri Kadam submitted that it had no relation with the
measurement or demarcation to be got done from City Survey. He submitted that this was not
the condition under the letter of Acceptance, nor does it amount to alteration of any terms of
letter of acceptance. It was merely to facilitate the bidder, so that the exercise of carrying out
demarcation and measurement of lay out was undertaken. Inspite of the expiry of time to
deposit the first installment and to furnish the bank guarantee, the plaintiff has committed
default which resulted in cancellation of letter of allotment and forfeiture of earnest money.

14. After reproducing the points urged by the learned Senior counsels for both the sides, I
proceed to deal with the same.

15. The trial Court has held that it was not a proper stage to decide the issue of non-
maintainability of the suit raised by the defendant and it proceeded to discuss the matter on
merits on the assumption that the suit is maintainable. Shri Bhangde, the learned Senior
Counsel initially has urged that the issue of maintainability of suit can be gone into either on
the application under Order 7, Rule 11 of C.P.C. or by framing it as a preliminary issue under
Order 14, Rule 2 C.P.C. The trial Court was, therefore, right in exercising its discretion of not
going into the said issue. The trial Court having not recorded its finding on the same, the
High Court cannot for the first time go into the said aspect on the basis of the arguments
advanced by the defendant as in undertaking such exercise for the first time in this appeal, the
prejudice to the plaintiff is inherent. With due respect, this submission of Mr. Bhangde,
cannot be accepted. It cannot be disputed that when the suit involves disputed question of
facts and law, the Court will have to go into all such questions necessary to discover the
prima facie case for recording finding. Also it is not necessary for the Court to defer the
decision on prima facie case, while deciding an application under Order 39, Rule 1 and 2 of
C.P.C. In order to find out a prima facie case, it is also necessary for the Court to take into
consideration the disputed position of law. This Court exercises an appellate jurisdiction over
the decision of the trial Court, granting or refusing to grant injunction and to consider the
challenge to the finding recorded by the trial Court, on the ground of ignorance of or
improper dealing with some aspects, that can be gone into. The appellate Court can deal with
the matter as if the Court of original jurisdiction. It is permissible for the appellate Court to
record its finding even on the aspects which are ignored or brushed aside consciously or
without notice by the trial Court and there is no question of any prejudice being caused to any
of the parties. It cannot, therefore, be said that this Court cannot go into the said aspect. The
contention of Shri Bhangde is, therefore, rejected.

16. The next contention of the learned Senior Counsel Shri Bhangde, that the validity of the
order of cancellation of letter of acceptance will have to be judged only on the basis of the
reasons stated in the order of cancellation dated 17th August, 2009, and no other ground can
be permitted to be raised in defence to substantiate the action, also cannot be accepted. It may
be true that in the order of cancellation of letter of acceptance, the only reason stated is that
the plaintiff has failed to deposit the amount of first installment of Rs. 9,31,25,000/ within the
extended period upto 15th July, 2009. However, that would not prevent the defendant to
substantiate the cancellation of letter of acceptance on all such other grounds as are available
to it in law. Shri Bhangde, submitted that however, in such a situation, the condition is that
the defendant must place before the Court record to point out that other grounds also are
taken into consideration while cancelling letter of acceptance. The submission of Mr.
Bhangde cannot be accepted. In fact, the plaintiff himself has come before the Court with a
plea that it was ready and willing to make the payment and to comply with the other
obligations subject to the defendant clarifying the position about the existing claims,
litigations, measurement, demarcation etc., and without getting the clarification on these
aspects, the plaintiff was neither ready to make the payment of the first installment nor
furnishing the bank guarantee as performance security. Thus the plaintiff itself has raised the
question of discharge of various obligations by the defendant. Not only that, but detailed
pleadings are made in various paras of petition like paras No. 13, 17, 18, 21A etc.,
challenging action of defendants on the grounds/points raised in defence in written statement.
The plaintiff has visualized such defences. In view of such pleadings, the defendant is bound
to justify its action on all such counts. The plaintiff cannot now turn around and argue that the
validity of the order of cancellation of letter of acceptance will have to be judged only on the
basis of the sole reason stated in the order of cancellation and that, it is not permissible for the
defendant to defend the action on any other ground.

17. On merits of the matter, the submissions of Shri Bhangde, learned Senior Counsel are two
fold; i.e. (1) that there is an implied obligation created upon the defendant to first get the land
measured and demarcated from City Survey and to get the provisional layout sanctioned from
N.M.C, before the plaintiff is called upon to pay the first installment and to furnish the
performance security, and (2) that the defendant by its conduct and also by an act of
forbearance altered the conditions of letter of acceptance to the effect that the production of
certificate of measurement, demarcation map "K" and sanctioned layout from Nagpur
Municipal Corporation, is made a condition precedent, for payment of first installment and
also furnishing of bank guarantee. Hence, according to him, the defendant should not have
called upon the plaintiff to pay the first installment and to furnish the bank guarantee, without
discharging the obligations. As against this, the submission of Shri Kadam, the learned
Advocate General, is that there is neither any such implied obligation, nor an alteration in the
terms of letter of acceptance, as urged. The plaintiff is bound to comply with the conditions
of letter of acceptance. The plaintiff having committed default in complying with the terms
which are mandatory, the letter of acceptance was rightly withdrawn in terms of the
conditions of the bid document. According to him, merely because a letter of acceptance is
issued, no legal, contractual and enforceable right accrued in favour of the plaintiff. There is
no concluded contract and even if there is a concluded contract, it is of the development of
property, which is not specifically enforceable at the instance of a
bidder/contractor/developer, in view of Section 14(3)(c)(iii) of the Specific Relief Act.
18. In view of the aforesaid rival submissions of the learned Counsels, the questions which
prima facie arise for my determination are -

(i) What is the nature of right created in favour of the plaintiff/bidder, merely by issuance of
letter of acceptance?

(ii) Does it create an indefeasible right in favour of the plaintiff/bidder to get the specific
performance of execution of development agreement.

19. In order to consider the aforesaid questions, the provisions under the bid documents relied
upon by the learned Counsels are required to be seen. Shri Bhangde, the learned Senior
Counsel, has relied upon Clause 6(a) of the bid document, whereas Shri Kadam, the learned
Advocate General, has relied upon Clause 6(d) of the bid documents. The same are, therefore,
reproduced below.

6. Award of Contract

(a) Award Criteria

The MSTC shall award the development rights of the Project to the Successful Bidder by
issuing a letter of acceptance.

(d) Execution of the Development Agreement and Charge of the Project Site.

The Bidder shall, within 30 (thirty) days from receipt of the Letter of Acceptance, be liable to
pay 25 (twenty five)% of the Development Fee and furnish a bank guarantee for 50 (fifty)%
amount of the total Development Fee, which will be valid for 30 (thirty) months
("Performance Security"). Within 30 (thirty) days from receipt of the aforesaid, MSTC will
execute the Development Agreement and will give charge of the Project Site to the
Successful Bidder. Failure of the Successful Bidder to comply with the aforesaid
requirements shall result in the forfeiture of the Bid Security and rejection of its Bid and
withdrawal of Letter of Acceptance.

Bare perusal of the aforesaid clauses reveal that the development rights of the project are
awarded to the successful bidders by issuing letter of acceptance. However, the bidder is
required to pay 25% of the development fee and to furnish bank guarantee for 50% amount of
the total development fee, within 30 days from the receipt of letter of acceptance, which will
be valid for 30 months as performance security. Within a period of 30 days from the
compliance of these two conditions, the defendant M.S.T.C. shall execute the development
agreement and give charge of the project site to the successful bidder. The failure of the
successful bidder to comply with the aforesaid two conditions shall result in forfeiture of the
bid security and rejection of the bid and withdrawal of the letter of acceptance.

20. In my opinion, both the aforesaid clauses will have to be harmoniously construed, so that
no part of either of them, is rendered nugatory. Hence, the award of development rights of the
project, by the harmonious construction of both the provisions, would be subject to the
fulfillment of two conditions regarding; (1) payment of 25% of the development fee within
30 days and (2) furnishing of bank guarantee for 50% of the total development fee. Not only
this, but it is further circumscribed by a condition that if the bidder fails to comply with the
aforesaid two conditions, the same shall result in the forfeiture of the bid security and
rejection of the bid and withdrawal of letter of acceptance. The plaintiff has accepted such
conditions without protest. Hence, the nature of right created by issuance of letter of
acceptance is that till fulfillment of these two conditions, the bidder remains an inchoate
bidder, having no right to get the development agreement executed and to receive the charge
of the project site. This position is governed by Section 26 of Transfer of Property Act
dealing with fulfillment of condition precedent, which stipulates that where the terms of a
transfer of property impose a condition to be fulfilled before a person can take an interest in
the property, the condition shall be deemed to have been fulfilled, if it has been substantially
complied with. It, therefore, follows, that if there is total failure of conditions precedent, no
interest is created in the property. At the most, letter of acceptance may be construed as an
agreement to execute an agreement of development, dependent upon the fulfillment of the
conditions. Hence, the effect of letter of acceptance is that, it is necessary for the
plaintiff/bidder to comply with two conditions, in order to seek specific performance to get
the Development Agreement executed and upon total failure to comply with the conditions
precedent, no indefeasible right is created and the plaintiff will not get any interest in
property.

21. In the instant case, it is not in dispute that inspite of the extension of time by a further
period of 30 days to pay the first installment of Rs. 9,31,25,000/, upto 15th July, 2009, the
plaintiff did not make the payment. The plaintiff also did not furnish the bank guarantee for
the 50% amount of total development fee i.e. for Rs. 20,62,50,000/ as performance security.
Shri Bhangde, the learned Senior Counsel has accepted that there is no specific condition
incorporated in the bid document to the effect that the compliance of the two conditions
mentioned therein is subject to discharge of any obligation on the part of the defendant. He
has further admitted that no such obligation is specifically incorporated in the letter of
acceptance dated 15.5.2009. Hence, the consequences of failure to comply with the two
conditions, within stipulated period have flown and the letter of acceptance dated 15.5.2009
has been withdrawn and the amount of bid security has been forfeited. The plaintiff has prima
facie no right to get specific performance of execution of Development Agreement.

22. Shri Bhangde, the learned Senior Counsel referred to the provisions of Clause 1(d) under
Section III of the bid document, which is reproduced below.

(d) Modality of Transfer of Textile Complex Component and Free sale Component

(i) The Developer will be granted an appropriate restricted power of attorney for carrying out
the development.

(ii) During the Development Period, the Developer shall have right to enter in to agreement to
sale (in form and substance as approved by MSTC) with any prospective purchaser of the
units/premises in the Textile Complex Component and the Free Sale Component. The
Developer shall make MSTC a confirming party to all agreements to sale/allot with the
prospective purchasers of units/premises in the Textile Complex Component and Free Sale
Component.

(iii) The Developer shall be responsible for forming the cooperative societies, under the
provisions of the Maharashtra Cooperative Societies Act, 1960, or any other appropriate
entity, as may be permitted by law, in respect of all the units/premises in the Textile Complex
Component and Free Sale Component, and make all the purchasers of the units/premises in
the Textile Complex Component and Free Sale Component their members of such societies.
MSTC shall grant lease of the land forming part of the Textile Complex Component for a
period of 30 (thirty) years with two renewals of 30 (thirty) years each. The Developer shall
execute a deed(s) of conveyance in respect of the Land forming part of the Free Sale
Component in favour of such societies. the draft of the deed of conveyance shall be in the
form and substance as approved by MSTC.

Relying upon the aforesaid provision, read with similar such provisions entrusting the work
of development to the plaintiff, Shri Bhangde, the learned Senior Counsel, has urged that
once the letter of acceptance is issued granting development rights of project, which includes
the rights to enter into an agreement to sell, with any prospective purchaser of the
Unit/premises in the Textile Complex component and Free Sale Component, to form the
Cooperative Society under the provisions of the Maharashtra Cooperative Societies Act in
respect of the Unit/premises, to be held by the prospective purchasers and to execute a deed
of conveyance in respect of the land forming part of the Free Sale component in favour of
such societies, such an agreement becomes specifically enforceable. For this proposition, he
relied upon the Division Bench of this Court reported in MANU/MH/0070/2007 : 2007 (3)
Mh.L.J. 402 (para 15); Chheda Housing Development Corporation v. Bibijan Shaikh Farid
and Ors.

23. In the aforesaid Chheda Housing Development Corporation's case, it was the question
involved as to whether the agreement dated 24th March, 2005, executed between the
respondent Nos. 1 to 9 and 10th respondent on the one hand and the appellants on the other
hand, whereby the development rights were granted to the appellants in respect of 2,00,000
sq. ft. of plot No. C2, was specifically enforceable. The case of respondent No. 10 was that it
was an agreement of security and in the alternative, that it was the development agreement, of
which the specific performance cannot be claimed. The learned single Judge held that the
agreement was specifically enforceable. The Division Bench after taking into consideration
the various clauses in the agreement and the provisions of law, has held that the documents
on the face of it cannot be an agreement for security. It can only be construed as an
agreement to sell or a development agreement. It was held that prima facie such an agreement
is specifically enforceable.

24. In my view, the aforesaid judgment is clearly distinguishable. There was a specific
agreement executed between the parties on 24th March, 2005, of which the specific
performance was asked for. So far as the present case is concerned, there is no such
agreement executed between the parties, but on the contrary, the letter of acceptance and
condition 6(d) reproduced above, clearly indicated that the defendant was obliged to execute
the agreement, only upon fulfillment of two conditions of depositing first installment and
furnishing of bank guarantee as performance security. The plaintiff/bidder has accepted a
further condition that failure to comply with these two conditions shall result in forfeiture of
earnest money and withdrawal of letter of acceptance. The plaintiff in this case is merely an
inchoate bidder and shall get right to ask for specific performance of execution of
development agreement only upon fulfillment of the conditions. The question whether the
proposed agreement is an agreement to sell or a development agreement which is specifically
enforceable, does not arise in the present case, as the rights of the plaintiff are still to mature,
to compel any such performance, if at all permissible in law. The said judgment is of no help
to the plaintiff.

25. Shri Bhangde, the learned Senior Counsel then relied upon another decision of the learned
Single Judge reported in 2009 (1) Mh.L.J. 611 Arun P. Garodia v. Manish Jaisukhlal Shah
and Ors. It was a suit for specific performance of an agreement/MOU executed by and
between the plaintiff and defendant on 8th May, 2004. The said agreement was terminated by
the defendant by notice dated 10th August, 2005. Hence, the suit was filed for declaration
that the notice of termination was without authority of law, an order of injunction was
claimed restraining the defendant from creating any third party rights in the suit property. It
was held that the MOU shows the comprehensive, consolidated agreement between the
parties to the suit, including the plaintiff as the developer, defendant Nos. 1 and 2 as lessees
and defendant Nos. 4 to 8 as tenants. The MOU was signed by the plaintiff as well as
defendants. It was executed by the defendant Nos. 1 and 2. The said MOU contained
reciprocal promises and obligations. It was held that the plaintiff was not merely a contractor
but was a developer having interest in new construction, as also the corresponding interest in
plot of land as a coowner with the defendant Nos. 1 & 20 and as a member of the defendant
No. 3 society, upon the construction. What has been held by the learned Single Judge in para
32 is that if a MOU is entered into by the parties, without setting out the detailed terms and
conditions, it would not be enforceable. If, however, a MOU sets out the entire agreement
between the parties for development of the entire plot of land as per the sanctioned plan to the
extent of the FSI as also the additionally purchased TDR and sets out the extent of rights and
entitlement of the parties being the owner as well as developer in the new construction to be
put up by the developer at his own costs, the agreement between the parties is complete. Such
MOU is itself specifically enforceable whether or not a formal development agreement is to
be further entered into by them.

26. The aforesaid judgment in Arun Garodia's case is also, in my opinion, clearly
distinguishable. In the present case, admittedly, the parties have not signed the development
agreement. It is merely a letter of acceptance of bid which has been issued in favour of the
plaintiff. As has already been held earlier, Clause 6(a) r/w Clause 6(d) of the bid document in
question, makes it clear that the development rights of the project are awarded to the plaintiff
subject to the fulfillment of two conditions and failure to comply with those conditions,
results in withdrawal of letter of acceptance. Such is also the condition incorporated in the
letter of acceptance dated 15.5.2009. The letter of acceptance is not a comprehensive or
consolidated agreement signed by the parties setting out the entire agreement between the
parties for development of the entire plot of land as per the sanctioned plan, setting out the
extent of right and entitlement of parties on owner and developer, as was the MOU in
judgment cited supra. There is no mutuality in the agreement in as much as there were no
rights and corresponding duties between the parties set out in the letter of acceptance.
Therefore, such letter of acceptance cannot be considered to be a concluded contract between
the parties. The judgment is, therefore, of no help to the petitioner.

27. Shri Bhangde, the learned Senior Counsel, relied upon the decision of the Apex Court
reported in (2007) 2 SCC 624 (Para 32); Yogesh Mehta s. Custodian Appointed under the
Special Court and Ors., for the proposition that the forfeiture of earnest money is permissible
when it is treated by the parties that the contract is concluded. This may be so, where the
provisions of Section 74 of the Contract Act is invoked. The provisions of Section 74 of the
Contract Act itself deals with the case where there is a breach of contract. When in the
present case, there is no concluded contract between the parties, no question of breach of
contract arises. However, the forfeiture has taken place in terms of Clause 6(d) of the bid
document, read with such clauses incorporated in the letter of acceptance dated 15.5.2009.
The said judgment is of, therefore, no avail to the plaintiff. If at all ultimately on final
decision of the suit, it is held that the forfeiture was not warranted as there was no concluded
contract, then the plaintiff would be entitled to refund of the earnest money. However, that
would not entitle the plaintiff to get an order of injunction.

28. Then reliance is placed upon the decision of the Andhra Pradesh High Court reported in
MANU/AP/0200/1982 : AIR 1982 AP 176 (Para 8) K. Madhadeva Sastry v. Director, Post
graduate Centre, Anantapur; for proposition that the defendant is a public authority and it
cannot act arbitrarily. The defendant having accepted that it is not possible to develop the
property without demarcation of layout, obtaining certificate and Map "K" from City Survey
and the sanction of layout from N.M.C., should not have insisted upon compliance of the
terms of letter of acceptance dated 15.5.2009, which amounts to an unjust act. This decision
relied upon by Shri Bhangde, the learned Senior Counsel, deals with the question as to
whether in spite of granting declaration by the Civil Court that the plaintiff's correct date of
birth is 29th December, 1921, it was open for the defendant, which was a public authority to
urge that no direction is given by the Civil Court to correct the service record of the plaintiff
and therefore, it would still be open for the public authority to act upon the entries in the
service record as they stand and to retire the petitioner on the basis of incorrect date of birth.
The said judgment on the face of it is based upon the construction of the relief granted by the
Civil Court and its effect. The same is of no help to the plaintiff. On the similar lines, is the
judgment relied upon of the Madras High Court reported in MANU/TN/0012/1946 : (1946) 2
MLJ 53; Sri Raja v. Sarvagnaya Kumara Krishna by Shri Bhangde, the learned Senior
Counsel and the same is of no help to him. Here in this case, it is the question of compliance
of terms of letter of acceptance which has been accepted by plaintiff. It is a commercial
venture for plaintiff as well as the defendant and doctrine of fairness and reasonableness for
the purpose of altering or adding to the terms and conditions of the Contract or the question
of public law based upon Article 14 of the Constitution, has no role to play and this is the law
laid down by the Division Bench Judgment of this Court reported in MANU/MH/0320/2002 :
2002 (3) Mh.L.J. 530 Oil and Natural Gas Corporation Ltd. v. M/s. Streamline Shipping Co.
Pvt. Ltd. The same is binding on me.

29. So far as the contention of Shri Bhangde, learned Senior Counsel, that there is an implied
obligation created upon the defendant to first get the land measured and demarcated from
City Survey and to get the provisional layout sanctioned from the NMC, before the plaintiff is
called upon to pay first installment and to furnish performance security is concerned, Shri
Bhangde, the learned Senior Counsel, has relied upon Clause 3(c) on page 39 of the bid
document, which is already reproduced and Clause (B) of the agreement dated 28.12.2004,
which is also reproduced earlier. He has urged that it has been accepted by the learned
Counsel for the defendant that it is not possible to develop the property without demarcation
of layout, obtaining certificate and map K from City Survey and sanction of layout from
NMC. The contention cannot be accepted. The question of such implied obligation upon the
defendant would come up, only when the agreement of development is signed and brought
into force. Before execution of such agreement, the terms of proposed /draft agreement
cannot be invoked, to urge that the letter of acceptance creates such obligation upon the
defendant. As pointed out earlier, there is no agreement entered into between the parties of
which the specific performance can be asked for. The plaintiff is not an innocent defaulter,
but has come up with a case in the plaint that it is ready and willing to make the payment and
comply with the other obligations stipulated in the letter of acceptance, only if the defendant
clarifies the position about the existing claims, litigation, measurements, demarcation etc.
The plaintiff cannot call upon the defendant to first clarify the position and that only then the
plaintiff would comply with the terms of letter of acceptance and thereafter to compel the
defendant to execute a development agreement.
30. Shri Bhangde, the learned Senior Counsel for the plaintiff relied upon the minutes of the
project Monitoring Committee dated 28.5.2009, the letters dated 8th June, 2009, 11th June,
2009, 12th June, 2009, 13th July, 2009, 22nd July, 2009, 24th July, 2009 and 11th August,
2009 addressed to the defendant and the letters dated 18th June, 2009, 24th July, 2009 and
10th August, 2009, addressed by the defendant to the plaintiff. On the basis of this
correspondence, it has been urged that the defendant has by its conduct and also by the act of
forbearance altered the conditions of letter of acceptance to the effect that the production of
certificate of measurement, demarcation of Map "K" and sanction of provision layout from
NMC as a condition precedent to comply with the conditions of letter of acceptance.

31. The contents of above correspondence are not disputed by the that, it is merely to
facilitate the plaintiff /bidder to know in advance the exact area of various plots, which are
proposed to be developed as per City Survey, that exercise was carried out and there was no
intention to alter the terms of acceptance letter in a way suggested by the plaintiff. Shri
Kadam seems to be right in his submissions. The development of project commences from
the date of execution of development agreement and taking over charge of the project site in
terms of Clause 12 of the bid document. Thus, if at all any such obligations are there or can
be spelt out from reading of the various clauses of the bid documents, the same would be
after execution of the development agreement and after the date of commencement of the
project. In prebid meeting held on 10th February, 2009, the plaintiff was present, the
clarifications were issued and all points were answered including those which are raised by
the plaintiff in the instant suit. The plaintiff has agreed to take over the site on "as is where is"
basis. The column in the bid document in Schedule B, regarding the area as per the City
Survey, in respect of plots was kept blank and the approximate area as per the layout
approved by NMC in respect of each plot area, was furnished. It was on the basis of this
approximate area that the bidders were expected for formulate their bid and this was clarified
in the prebid meeting. The plaintiff did not take any objection to the minutes of prebid
meeting. It cannot, therefore, be said that there was any question of altering the terms and
conditions of letter of acceptance by the defendant, in processing the matter in advance, to get
the measurement and demarcation of layout from the City Survey, which may be a step which
the defendant would be required to take after the execution of the agreement of development.
Therefore, Shri Kadam was right in urging that the response to various correspondence of the
plaintiff was to facilitate the plaintiff in advance, in the development of project.

32. Shri Bhangde, the learned Senior Counsel for the plaintiff has relied upon the following
decisions of the Apex Court in support of his proposition that the defendant by its conduct
and the act of forbearance accepted alteration in the terms of letter of acceptance in sub-
silentio.

(a) MANU/SC/0218/1985 : (1985) 2 SCC 09 Hyderabad Municipal Corporation v. M.

Krishnaswami Mudaliar and Mudaliar and Anr.

(b) MANU/SC/1446/2005 : (2005) 12 SCC 764 (para 34) S. Brahmanand and Ors. v. K.R.
Muthugopal (Dead) and Ors.

(c) MANU/SC/8177/2006 : (2006) 11 SCC 181 (Para 151) McDermott International Inc., v.
Burn Standard Co. Ltd. and Ors;

(d) (1986) 3 SCC 300 (para 12) Rajasara Ramjibhai Dahyabai v. Jani Narottamdas Lalubhai
(Dead) by LRs and Anr.
All the aforesaid judgments are rendered in the facts where there was a contract already
concluded, creating obligations between the parties. The said judgments are rendered upon
facts and circumstances obtaining therein. The judgments are essential on the finding of facts
recorded, based upon the conduct and the act of forbearance alleged therein. Hence, the said
judgments are of no avail. In the present case, there is no agreement which has been executed
between the parties creating rights and obligations. The correspondence, as pointed out
earlier, was entered into only with a view to facilitate the plaintiff and it does not in any
manner amount to alteration in the terms of letter of acceptance.

33. Shri Kadam, the learned Advocate General has relied upon Section 14(3)(c)(iii) of the
Specific Relief Act to urge that the agreement of development cannot be specifically enforced
at the instance of a developer/contractor or builder. For this purpose, he has relied upon the
decision of the Division Bench of the Calcutta High Court reported in MANU/WB/0036/2006
: AIR 2006 Calcutta 209 [Bipin v. Sunanda]. He has further relied upon the decision of the
learned Single Judge of this Court reported in 2000 (3) Mh.L.J. 131 [Gurudeo Developers v.
Kurla Konkan and ors], to urge that the development agreement is not specifically
enforceable. In my opinion, Section 14(3)(c)(iii) of the Specific Relief Act would be
attracted only in cases where there exists a concluded contract and the Contractor/ Developer/
Builder has obtained possession of property to be developed. Whether the agreement of
development is specifically enforceable at the instance of the contractor/ developer/ builder
would necessarily depend upon the nature of contract, the rights and liabilities contained in
such contract and whether it amounts to the transfer of property, as has been held by the
judgment of the Division Bench of this Court in case of Chheda Housing Development
Corporation (supra) which considers the judgment of learned Single Judge in Gurudeo
Developer's case cited supra. Since, in the facts of the present case, it has been held that there
is no concluded contract as the Development Agreement has not been executed and the
charge of project site having not been handed over to the plaintiff/ builder, the plaintiff is
merely an inchoate bidder, whose rights are yet to ripen for development of property, the
judgments relied upon by Shri Kadam are not at all applicable.

34. In view of the aforesaid findings, I need not to go to the other aspect of the matter and the
grounds of challenge/those raised in defence by the learned senior counsels for the parties.
The questions, (1) whether an injunction can be claimed in spite of the fact that there was no
specific performance claimed or (2) what is the effect of amendment of the prayer clause in
plaint or (3) how the averments in the plaint or made in the prayer clauses are to be construed
to grant the relief with reference to Section 34 of Specific Relief Act etc., loose their
significance, in view of the findings, which I have recorded in the earlier paras. In view of
this, the other judgments relied upon by the learned Counsels which are reported in,
MANU/SC/0186/1959 : AIR 1960 SC 335 Mst. Rukhmabai v. Lala Laxminarayan and Ors.;
MANU/SC/0352/1961 : AIR 1962 SC 633 L. Janakirama Iyer and Ors. v. P.M. Nilkanta Iyer
and Ors; MANU/SC/0147/1989 : 1989 (3) SCC 612 Corporation of City of Bangalore v. M.
Papaiah and Anr.; MANU/SC/0359/1961 : AIR 1961 SC 808 C. Mohammad Yunus v. Syed
Unnissa and Ors., are not necessary to be considered. The trial Court has rightly considered
all the aspects of the matter and no case is made out to disturb the decision of the trial Court.

35. In the result, the instant appeal fails and the same is, therefore, dismissed. No order as to
costs.

Lateron
At this stage, Mr. Bhangde, the learned Counsel for the appellant, submits that this Court has
recorded a statement of the learned Counsel for the respondent on 20.10.2009 that the
respondent shall not proceed with the matter and would maintain statusquo till the next date.
The statusquo order was, thereafter, continued upon the said statement being made by the
learned Counsel for the respondent. Hence, Mr. Bhangde, the learned Counsel for the
appellant, submits that the statusquo order, which was operating in this Appeal Against Order
since October2009, be extended by further period of four weeks so as to enable to the
appellant to take appropriate steps.

Mr. Naik, the learned Counsel for the respondent, opposes the prayer made. He submits that
it is only on the basis of the statement made by him that this Court had granted statusquo
order without going into merits of the matter. He further submits that once the appeal is
dismissed, there is no question of continuation of status quo for further period.

After considering the statement made by the learned Counsel, I am of the view that no
prejudice would be caused to the parties if the order of status quo is continued for further
period of four weeks from today, particularly when the statusquo was operating from October
20, 2009. Hence, the statusquo granted by this Court shall continue for further period of four
weeks from today, after expiry of which the statusquo order shall stand automatically vacated
without further reference to the Court.

© Manupatra Information Solutions Pvt. Ltd.

76