Case Note & Summary
The suit was filed by the plaintiffs, Pankaj Anantrai Bhuwa & others, against the defendant, M/s. Ramkumar Shivchandray & Sons, seeking specific performance of an agreement for sale dated 23.04.1981, a declaration that the agreement was valid, and a direction to convey the suit property at Prabhadevi Road, Mumbai. The defendant company owned the property, and the plaintiffs were tenants of a large portion. Under the agreement, the defendant agreed to sell the property for Rs.20 lakhs, with Rs.50,000 paid as earnest. The balance was to be paid on completion within 10 months. The sale was on 'as is where is' basis, subject to tenancies. The defendant was to obtain an income-tax clearance certificate under Section 230A and permission under Section 27 of the Urban Land Ceiling Act, though the land was fully built. The agreement also provided that the defendant's board had resolved that two directors, Deviprasad Poddar and Bhagwatiprasad Poddar, would jointly settle documents and execute the conveyance. The plaintiffs did not pay the balance consideration within the 10-month period expiring on 23.02.1982. Instead, they dealt with one director, Deviprasad Poddar, and claimed to have made two additional payments of Rs.50,000 each to him and that time was extended to 15.04.1982. The defendant terminated the contract on 24.02.1982, forfeiting the earnest, arguing that the resolution required joint action and that no valid payment was made. The termination was without the 15 days' notice required by the agreement to make time essential. The court examined whether the plaintiffs were ready and willing to perform, whether the defendant validly terminated, and whether specific performance should be granted. It held that the plaintiffs' failure to pay the balance consideration and their dealings with a single director, contrary to the board resolution, showed they were not ready and willing. The company's resolution was known to them, and the directors had to act jointly. Therefore, the extension claimed was not binding. The defendant's termination was procedurally defective for not providing the required notice, but the plaintiffs' own default precluded them from obtaining equitable relief. The court also noted that the ULCRA permission was not necessary, and the Section 230A certificate was not a precondition to sale. Ultimately, the suit was dismissed.
Headnote
A) Contract Law - Specific Performance - Readiness and Willingness - Specific Relief Act, 1963 - Plaintiffs failed to pay balance consideration of Rs.19.50 lakhs within the agreed 10-month period ending 23.02.1982, and payments made to a single director were not binding due to a board resolution requiring joint action; thus, plaintiffs were not ready and willing to perform - Held, not entitled to specific performance (Paras 10-17). B) Company Law - Authority of Directors - Board Resolution - Where a board resolution authorizes two directors to act jointly for settling and executing documents, any dealings with a single director are not binding on the company; plaintiffs' payments to one director and reliance on his extension of time were therefore invalid (Paras 14-16). C) Contract Law - Termination of Contract - Notice Requirement - Clause 18(b) of the agreement required the defendant to make time the essence by giving 15 days' notice before termination; defendant's termination without such notice was invalid, but plaintiffs' own default prevented equitable relief (Paras 11, 18-19). D) Urban Land Ceiling (Regulation) Act, 1976 - Section 27 - Permission for Transfer - Since the suit land was fully built-up with no vacant land, Section 27 permission was not required and was struck down as ultra vires; defendant's failure to obtain it was not a breach (Paras 5-6, 17). E) Income Tax Act, 1961 - Section 230A - Certificate - The agreement provided that sale would proceed even without the certificate, with a security deposit; thus, non-production of the certificate did not excuse plaintiffs from completing the sale (Paras 3, 5, 17). F) Evidence - Estoppel - Tenants - Section 116 Indian Evidence Act, 1872 - Plaintiffs, being tenants of the defendant, were estopped from questioning the defendant's title to the suit property (Para 6).
Issue of Consideration
Whether the plaintiffs were entitled to specific performance of the agreement for sale; whether the defendant validly terminated the agreement; whether the plaintiffs were ready and willing to perform their part of the contract; whether payment to one director was valid given the board resolution requiring joint action; whether the defendant breached the agreement by not obtaining necessary permissions.
Final Decision
The suit for specific performance is dismissed. The plaintiffs are not entitled to any relief.
Law Points
- specific performance requires readiness and willingness
- company board resolution mandating joint action of directors must be respected
- payment to single director not binding
- termination of contract invalid if not preceded by notice making time essence
- estoppel under Section 116 Indian Evidence Act
- Section 230A Income Tax Act certificate not a precondition
- Section 27 Urban Land Ceiling Act permission not required for built-up land
