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Judgment
A.P. Shah, C.J.—This Letters Patent Appeal calls in question the judgment and order dated 27.12.2004 of the learned single Judge in
Application No. 841 of 2004 in C.S. No. 811 of 2004 and arises under the following circumstances.
The appellant, which is the plaintiff in the suit, is a company incorporated under the provisions of the Indian Companies Act. The first
respondent, which is the first defendant in the suit, is also a company incorporated under the Indian Companies Act. The second respondent is the
Managing Director of the first respondent. The first respondent is the owner of the property mentioned in Schedule A to the plaint. The first
respondent has entered into agreements of sale with various owners of schedule B schedule and has obtained powers of attorney from them. It is
the case of the appellant that the first respondent is heavily indebted and to discharge the dues to the third respondent/State Bank of India,
Commercial Branch, Chennai, decided to sell Schedule A and B properties together as it constituted one block. On coming to know that the first
respondent was interested in completing the bargain the appellant approached the first respondent on 27th July 2004 and negotiated for the
purchase of both A and B Schedule properties and terms of an agreement of sale were mutually agreed upon by both the parties. The terms that
were agreed upon during the discussion held at the office of the first respondent on 27th July 2004 were that the appellant had to pay sale
consideration at the rate of Rs. 19 lakhs per acre for the A and B Schedule properties measuring totally 46.915 acres; that the first respondent had
to obtain the necessary no-objection certificate from the third respondent/ State Bank of India and get release of the documents of title with
respect to Schedule A property; that the appellant should complete the sale within three months from the date of receipt of No Objection
Certificate from the State Bank of India with respect to Schedule A property. It is the further case of the appellant that the second respondent
representing the first respondent as the Managing Director also forwarded a draft agreement through his E-mail to the plaintiff on 28th July 2004
containing essential terms of the contract as agreed to on 27th July 2004. However, as some doubts were raised about the Schedule B property a
further meeting between the parties was held on 2nd August 2004 and it was then agreed and finalised that the rate per acre of Rs. 19 lakhs will
stand unaltered but the first respondent shall obtain No Objection Certificate from the third respondent for purchase of both Schedule A and B
properties. The signing of formal agreement of sale was not necessitated as the parties agreed to complete the sale on receipt of No Objection
Certificate from the third respondent. It is the further case of the appellant that on the request of the respondents the appellant agreed to keep the
sale advance of Rs. 200 lakhs in a Non lien-Fixed Deposit account with the fourth respondent i.e., State Bank of India, Bazullah Road Branch.
The original FDRs were agreed to be in the custody of Advocate Mr. P.B. Ramanujam till the No Objection Certificate is issued by the third
respondent. In pursuance of the agreement reached between the parties, the appellant sent a cheque of Rs. 200 lakhs favouring the first respondent
to the fourth respondent for being kept in a No-Lien Fixed Deposit. The fourth respondent issued FDRs which were kept in the custody of
Advocate Mr. P.B.Ramanujam. The appellant specifically mentioned in their letter dated 3rd August 2004 to the first respondent that the said sum
of Rs. 200 lakhs was paid towards the purchase of schedule A and B properties for which No Objection Certificate was solicited and release of
title deeds requested. It is the further case of the appellant that the appellant has thus performed its part of the contract and is ready and willing to
pay the balance price and take the sale deed within three months from the date of the first respondent obtaining No Objection Certificate from the
third respondent as agreed for both Schedule A and B properties. But even after a lapse of more than two months, the respondents 1 and 2 had
not evinced any interest to obtain any No Objection Certificate from the third respondent. The appellant by their letter dated 2nd September 2004
brought to the notice of the respondents 1 and 2 that they are ready and willing to complete the sale of the property, but in vain. The respondents 1
and 2 have not responded at all and are attempting to sell A and B Schedule properties to some other party for a higher consideration. The
appellant, therefore, filed C.S. No. 811 of 2004 for specific performance of the contract of sale entered into between the parties on 27th July
2004 and 2nd August 2004 for A and B Schedule properties.
Along with the suit, the appellant took out O.A. No. 841 of 2004 seeking an order of interim injunction restraining respondents 1 and 2 from in
any way alienating or encumbering the A and B Schedule properties, pending disposal of the suit. On 13th October 2004 an exparte injunction
came to be issued. Pursuant to the notice, the first and second respondents appeared and filed their counter affidavits.
The respondents denied the allegation that negotiations were made and the terms were finalised on 27th July 2004 and the same were embodied
in a draft agreement to sell, prepared by the first and second respondents and forwarded the same to the appellant on 28th July 2004. It was
contended that no negotiations were made on 27th July 2004, and no terms were finalised as alleged and since the appellant wanted a draft
agreement the same was given to them, the terms of which were not to be taken as having been accepted by respondents 1 and 2. It was
contended that there was no agreement between respondents 1 and 2 and the appellant with regard to the sale of the properties described in
Schedule A and B. The parties never agreed for such sale. There was no concluded contract between the parties, oral or otherwise. At no point of
time, the first respondent had asked the appellant to pay any advance. Since there was no concluded contract, the question of the second
respondent asking the appellan t to pay any advance did not arise and there was no such request or demand by the second respondent. The
appellant on its own, as if to show its bona fides, volunteered to deposit a sum of Rs. 200 lakhs in the State Bank of India and requested the
second respondent to keep the amount pending finalisation of the terms and as there was no firm agreement reached between the parties, the
second respondent vide letter dated 10th August 2004 released the FDRs for Rs. 2 crores to Advocate Mr. P.B.Ramanujam clearly setting out
that if the respondents get into a formal understanding with the appellant, both of them will approach him and inform him of the methodology for
handing over FDRs. It was contended that the letter dated 03rd August 2004 referred to in the plaint was not received by respondents 1 and 2
and the document which is enclosed along with the plaint was not delivered to the respondents. It was contended that the property comprised in
both A and B Schedule properties are much more valuable than the paltry sum of Rs. 19 lakhs per acre which the appellant was offering and the
respondents were not inclined to accept the offer of Rs. 19 lakhs per acre and never accepted to the offer at any point of time. In fact on 18th
August 2004 the appellant had set out certain terms and conditions as their offer in which the appellant had quoted a price of Rs. 21 lakhs per
acre, and requested the second respondent to sign the duplicate and return the same to them as token of confirmation of the terms which were
offered by the appellant. Since the second respondent was not interested in having the transaction on the said terms and it was not acceptable to
them, the second respondent did not sign and return the duplicate. It was contended that the appellant has suppressed the letter dated 18th August
20 04 and has thus approached the Court with unclean hands. It was contended that if the injunction, which was granted by this Court, is not
vacated, great prejudice and irreparable loss would be caused to the respondents, as the first respondent company would be deprived of its right
to deal with the properties and get the best price for the same
The case put up before the learned single Judge on behalf of the appellant was that though no agreement was formally signed between the
parties, yet the contemporaneous correspondence exchanged between them shows that a binding contract did come into existence between the
parties on 27th July 2004 and 02nd August 2004. On the other hand, according to respondents 1 and 2, no concluded contract had been reached
between the parties and the correspondence exchanged between the parties also shows that there was no enforceable contract between them as
the essential conditions of the contract and bargain were never agreed upon by the parties.
Upon hearing the learned Counsel and considering the materials placed on record, the learned single Judge vacated the temporary injunction on
the following reasonings:-
Learned counsel appearing for the first defendant very seriously disputed as to the existence of contract much less a oral contract that too in
respect of a property the value of which, if not its entirety atleast the part of its is admitted to be more than Rs. Two crores by the applicant
themselves and further contend ed that the act of the applicant is only to bring the defendant for some settlement or otherwise. As there is a strong
dispute as to the existence of the agreement, which is the basis for filing a suit for specific performance and the existence or otherwise of the same
has to be decided only at the time of trial, I am of the considered view taking into consideration of the settled legal principle that the grant of
specific performance is discretionary in nature, the balance of convenience lies more with the real owner the first defendant, the injunction granted
on 13.10.2004 would cause hardship to the real owner and further more whatever transaction takes place during the pendency of the suit would
be protected u/s 52 of the Transfer of Property Act, the stay granted on 13.10.2004 is vacated by observing that any encumbrance or alienation
made during the pendency of the suit would depend upon the outcome of the suit.
We have heard the learned senior counsel appearing for the parties, and have perused the records.
The short question that falls for our consideration is whether the appellant has prima facie established that there was a valid and subsisting
agreement between the parties?
Mr. Mukul Rohatgi, learned senior counsel appearing for the appellant submitted that the essential terms of the agreement were reached
between the parties in the meetings held on 27th July 2004 and 02nd August 2004 and at the request of the respondents, the appellant had
deposited a sum of Rs. 200 lakhs in No-Lien Fixed Deposit with the fourth respondent/bank. He submitted that even though agreement had not
been signed by the parties, but they acted upon it treating it to be a binding contract. He argued that the signing of the formal agreement was not
necessary as the parties had agreed to complete the sale on receipt of No Objection Certificate from the third respondent and pursuant to the
same, a sum of Rs. 200 lakhs was deposited with the third respondent/bank in furtherance of the agreement reached between the parties. On this
basis, Mr. Rohatgi submitted that a binding agreement had come into existence, through correspondence and non signing of the formal agreement
by the parties was of no consequence. In reply, Mr. Vinod Bobde, learned senior counsel appearing for the respondents submitted that even a
bare perusal of the correspondence exchanged between the parties would show that there was no meeting of mind between the parties and no
agreement can also be spelt out from the correspondence exchanged between the parties. Learned senior counsel submitted that the documents on
record especially the letters dated 18th August 2004 and 21st August 2004 clearly show that at no point of time a concluded contract was
reached between the parties, and the FDRs were duly discharged by the respondents vide letter dated 10th August 2 004.
It is an admitted fact that the first respondent is the owner of A Schedule property and has entered into agreements of sale with various owners
of B Schedule property and has obtained powers of attorney from them, and intended to sell both the properties as one block. It is also not in
dispute that the appellant represented by their Managing Director Mr. G.R.K.Reddy, approached the second respondent on 27 th July 2004 and
negotiated for the purchase of both A andB Schedule properties. According to the appellant, the essential terms of the agreement were reached
between the parties in the meetings held on 2 7th July2004 and 2nd August 2004, and pursuant to the agreement, the appellant had deposited a
sum of Rs. 200 lakhs in No-Lien Fixed Deposit with the fourth respondent bank. At this stage, it would be relevant to refer to the letter of the
appellant addressed to the second respondent dated 18th August 2004, which reads as follows:-
The South India Corporation Ltd., (SICAL) No. 73, Armenian Street, Chennai - 600 001.
Kind Attn: Mr. S.Vasudevan
Dear Sirs,
Sub: Sale of your lands at Sholinganallur village.
This is to confirm the conversation we had in respect of sale of your lands situated at Sholinganallur Village. The broad understanding we have
reached are as follows: -
1) SICAL who are the absolute owners of the lands in extent 47 acres and 5 cents comprised in Survey Nos. 429/4, 436/3, 437/1, 438/1, 530/2
B, 534/2, 535/1, 535/1B, 536/2, 539/1, 540/1A, 540/1C, 540/2A, 540/2 B, 540/2, 540/4A, 541/4B, 561/1A, 561/2A, 561/2B, 561/3A1,
562/1, 562/2, 562/3, 562/4, 562/5B, 562/8, 563/1A, 563/1B, 563/2, 564/1A, 563/1 B, 563/2, 564/1A, 563/1B, 563/2, 564/1A, 563/1B,
565/2, 566/4B, 568/13 , 568/5, 568/7, 5701/1 of Sholinganallur Village having good and marketable title, will convey the same to us or our
nominees.
2) The total consideration for the transaction will be Rs. 9,97,50,000/- (Rupees nine crores and ninety seven lakhs and fifty thousand only)
3) SICAL will fulfil all the statutory requirements like passing Board Resolution, etc.
4) As suggested by SICAl, a sum of Rs. 2,00,00,000 (Rupees two crores) has been deposited with the State Bank of India, Bazulla Road
Branch, Chennai 600 017 and the receipts handed over to Mr. P.B.Ramanujam to be kept by him or trust.
5) The stamp and registration charges shall be borne by us/our nominees.
6) Clearance from Bank and other papers necessary are agreed to be produced within a month from this date. Kindly confirm your acceptance by
signing the office copy of this communication.
Yours sincerely,
G.R.K.Reddy, Managing Director
A bare reading of the above letter shows that there was no meeting of mind between the parties as to the essential terms and conditions of the
contract, and the case of the appellant that the agreement was reached between the parties in the meetings held on 27th July 2004 and 2nd August
2004 is completely untrue. In fact, by this letter the appellant had increased the offer of Rs. 9,97,50,000/- computed at the rate of Rs. 21 lakhs per
acre. The letter dated 21st August 2004 addressed by the appellant further confirms the fact that there was no concluded contract between the
parties. In this letter, the appellant inter alia stated: -
This has reference to the discussions we had with you in regard to the sale of the above property. We confirm our agreement for purchase of the
same as detailed hereunder: -
The total consideration will be Rs. 2,70,00,000/- (Rupees two crores and seventy lakhs only)
As required by you, we are enclosing our cheque No. 186312 dated 20.08.2004 for Rs. 1,00,00,000/- (Rupees one crore only) drawn on
Punjab National Bank, Purasawalkam Branch and Cheque No. 638838 dated 30.08.2 004 for Rs. 1,00,00,000/- (Rupees one crore only) drawn
on Indian Overseas Bank, Purasawalkam Branch, Chennai as advance consideration for the above sale.
The balance consideration of Rs. 70,00,000/- (Rupees seventy lakhs only) will be paid within 7 days from the date of obtaining vacant
possession by SICAL from John Crane. The likely date of obtaining vacant possession by SICAL is 31st August 2004.
SICAL shall hand over the original title deeds upon payment of the entire consideration and complete the registration formalities.
Stamp and Registration charges shall be borne by us/our nominees.
SICAL confirms that the above property is unencumbered and has a marketable title to the property.
Kindly confirm your acceptance by signing the duplicate copy of this letter.
The letter of the even date addressed by the second respondent to Mr. P.B.Ramanujam, Advocate, also shows that the parties were still
negotiating the terms and they had not actually reached an agreement on all material terms of contract of sale. By the said letter, the 2 nd
respondent acknowledged the appellants offer of Rs. 9,97,50,000/- computed at Rs. 21 lakhs per acre and stated as follows: -
SICAL is willing to enter into any firm agreement for the sale of the property with such persons, including Mr. G.R.K.Reddy, provided the
condition above with reference to the payment of consideration is adhered to. If Mr. G.R.K.Reddy were to purchase the property, we are willing
to adjust the face value of the FDR of Rs. 2 crores and receive the balance consideration of Rs. 7,97,50,000/-.
Upon receiving the full consideration, SICAL would be willing to meet with all other requirements of the purchaser, except the following:-
a. Obtaining clearances/NOC from Tamil Nadu Housing Board.
b. Obtaining the re-classification of the property to residential/ commercial zone from its present classification of open space recreation zone from
CMDA.
c. Facilitating purchase of the pockets of lands which would make the present holding contiguous.
d. Eviction of the encroachers from the eari poramboke which is on the front side of the property.
e. Steps for widening the access road of the property, including getting clearances for the same from the concerned statutory authorities. We would
be willing to submit photo copies of the title deeds of the property to you or to any advocate of your choice for scrutiny to satisfy yourself that our
title to the property referred herein is clear and marketable.
On going through the entire material placed on record we are satisfied that no mutually binding contract had come into existence between the
parties through correspondence. There was no concluded contract between the parties on 27thJuly 2004 and 02nd August 2004 as alleged by the
appellant. In fact by letter dated 18th August 2004 the appellant had offered enhanced consideration of Rs. 9,97,50,000/- computed at the rate of
Rs. 21 lakhs per acre. The appellant has deliberately suppressed this letter, which conclusively shows that there was no agreement between the
parties about the price even as on 18th August 2004. The parties, thus, for all intended purposes were still negotiating the terms of the contract and
at no point of time did the respondents accept the terms offered by the appellant.
It is true that an agreement, even if not signed by the parties, can be spelt out from correspondence exchanged between the parties. The
question, however, is can any agreement be spelt out from the correspondence between the parties in the instant case?
In M/s. Rickmers Verwaltung GMB H Vs. The Indian Oil Corporation Ltd., , the Supreme Court while considering a similar issue observed:-
In this connection the cardinal principle to remember is that it is the duty of the Court to construe correspondence with a view to arrive at a
conclusion whether there was any meeting of mind between the parties, which could create a binding contract between them but the court is not
empowered to create a contract for the parties by going outside the clear language used in the correspondence, except insofar as there are some
appropriate implications of law to be drawn. Unless from the correspondence, it can unequivocally and clearly emerge that the parties were ad
idem to the terms, it cannot be said that an agreement had come into existence between them through correspondence. The Court is required to
review what the parties wrote and how they acted and from that material to infer whether the intention as expressed in the correspondence was to
bring into existence a mutually binding contract. The intention of the parties is to be gathered only from the expressions used in the correspondence
and the meaning it conveys and in case it shows that there had been meeting of mind between the parties and they had actually reached an
agreement upon all material terms, then and then alone can it be said that a binding contract was capable of being spelt out from the
correspondence.
The question is whether in the facts and circumstance of the case, it can be unequivocally and clearly said that the parties were ad idem to the
terms. On a very careful perusal of the entire correspondence on record, we are of the view that no concluded bargain had been reached between
the parties and at no point of time, the terms and conditions of the contract were accepted by the respondents. The correspondence exchanged
between the parties shows that there is nothing expressly agreed between the parties and no concluded enforceable and binding agreement came
into existence between them. As observed by the Supreme Court there is a vast difference between negotiating a bargain and entering into a
binding contract. After negotiation of bargain in the present case, the stage never reached when the negotiations were completed giving rise to a
binding contract. The learned single Judge was, therefore, perfectly justified in vacating the injunction, inasmuch as no concluded and binding
contract ever came into existence between the parties. We find no merit in the appeal. It fails and is dismissed with costs. Consequently, C.M.Ps
are closed.
On the request of the learned senior counsel appearing for the appellant, the ad-interim relief is continued for a period of four weeks.