M M BHATIA AND CO Vs. BINNY LTD

JUDGEMENT

(1.) THIS is the plaintiffs' first appeal, being aggrieved of the order passed on I. A. 's in. S, No. 15572/2004 by the learned XIII Addl. City Civil judge, Mayo Hall Unit, Bangalore City, dated 19-4-2006, rejecting the plaint under Order vii Rule 11 (d) r/w. Section 151 C. P. C. , consequently dismissing the suit for specific performance.

(2.) THE brief facts of the case are as follows : the suit of the plaintiffs for specific performance of the contract for sale of the suit schedule property by directing the defendants to execute a Sale Deed in favour of the plaintiffs after receiving the balance consideration and for consequential relief. That in pursuance of the notification by the defendants, binny Limited published in daily newspaper "the Hindu" dated 11-6-2001 offers for purchase of properties detailed therein, particularly the 'b-Schedule property situated at commissariat Road, Bangalore, the plaintiff deposited earnest amount of Rs. 5,00,000. 00 towards the earnest money through demand draft, in favour of defendant No. 1. The said offer was accepted by the defendant by its letter dated 1-12-2001. The sale price of the property being Rs. 3. 65. 50,000. 00. The 1st defendant directed the plaintiffs to prepare and submit draft Sale Agreement for further action. But, the defendants failed to deliver the copies of the title deeds pertaining to the property for preparing the Sale Agreement. However, on the demand of the 1st defendant, to pay 25% of the sale price, the plaintiffs issued a cheque for rs. 91,37,500. 00, dated 22-1-2002. But, for the best known reasons, they did not realise the amount and the cheque. The balance consideration amount that was payable was Rs 2,69,12,500. 00 after adjusting the initial amount already paid. But, at that stage, the 1st defendant by its letter dated 27-2-2002 sent an untenable reply. Without encashing the cheque, the 1st defendant by its letter dated 25-6-2002 informed the plaintiff to remit 25% of the offered price on or before 24-7-2002, by way of demand draft in favour of the Industrial Development Bank of India (hereinafter referred to as "idbi" for short) or otherwise Earnest Money Deposit (hereinafter referred to as "emd" for short)of Rs. 5,00,000. 00 would be forfeited. The 1st defendant instead of encashing the cheque went on insisting the plaintiffs that they did not sent the demand draft. Subsequently, the plaintiffs by their letter dated 25-7-2002 again sent a letter along with a cheque for Rs. 91,37,500. 00 jn favour of the IDBI. In spite of these correspondence and after several months, the 1st defendant by their letter dated 9-12-2003 arbitrarily and unilaterally sought to cancel the Agreemept and also stated they had forfeited the EMD of Rs. 5,00,000. 00. The correspondence makes it manifest that there is a concluded contract between the parties. The unilateral cancellation is illegal. On the above pleadings, the plaintiffs brought the suit for specific performance, also filed I. A. No. I under Order XXXIX Rules 1 and 2 of CPC to restrain the defendants from alienating the suit schedule property. The 3rd defendant Binny Karnataka Limited filed a detailed written statement stating that the 2nd defendant Binny Limited is a branch of 1st defendant and is one of the oldest companies manufacturing textiles. For various reasons it suffered heavy loss. The company was declared as a Sick industry, under the provisions of Sick Industrial companies (Special Provisions) Act 1985 (hereinafter referred to as "the Sick Act" ). On a reference to The Board for Industrial and Financial Reconstruction (hereinafter referred to as "bifr" for short) declared it as a sick company and scheme was sanctioned for rehabilitation following the guidelines for BIFR. A Committee was constituted for the sale of the assets of 1st defendant including the suit schedule property at Bangalore. The plaintiffs offered to purchase the said property for Rs. 363 lakhs. It was one of the condition that the plaintiffs have to make payment of advance money of 25% of the accepted offer price, within 30 days or it will be cancelled and the emd amount will also be forfeited. The amount of 25% of the price was not paid by the plaintiffs by way of demand draft and thus the EMD amount came to be forfeited and alleged that there was no privity of contract for sale of the properties between the parties. In the meanwhile, the BIFR disbanded Sales committee with immediate effect by its Order dated 1-7-2002. Therefore the relief claimed is also not tenable. Even otherwise, by reason of Sections 26 and 32, the suit itself is not maintainable. The Sale Agreement has become nullity and not enforceable. When the matter was pending before the BIFR, the sick Act has an overriding effect thereby the civil Court has no jurisdiction to try the suit. The other allegations in the plaint were also denied and they put the plaintiff to strict proof of the same. It was also urged that the matter is wholly covered by rehabilitation Scheme of the BIFR and the alleged agreement, even if be true is nullified by the BIFR as the Final rehabilitation Scheme has been formulated and the suit schedule property now vests with these defendants. Accordingly, prayed to dismiss the suit with costs. Defendant Nos. 1 and 2 have filed a memo, adopting the written statement filed by the third defendant. However, filed objections to i. A. I. Defendant No. 1 filed an application under Order 7, Rule 11 (d) r/w Section 151, CPC, praying to reject the plaint. The plaintiffs filed detailed objections to the said application and also counter objections. The learned XIII Addl. City Civil Judge, after hearing I. A. No. I filed under Order 39, rules 1 and 2 CPC by the plaintiffs and also the application filed by the defendants under order 7 Rule 11 (d) r/w Section 151 CPC, rejected the plaint. Consequently, dismissed the suit. It is this Order, which is questioned in the present appeal by the plaintiff.

(3.) LEARNED senior counsel Sri. K. G. Raghavan submitted that the defendant Binny limited issued a public notice for sale of its property, which came to be notified in "the hindu" daily newspaper, dated 11-6-2001. It is in pursuance of it, the plaintiff participated and also paid the EMD of Rs. 5,00,000. 00. The sale price is being Rs. 3,65,50,000. 00. The plaintiffs are the highest bidders. Therefore, there was a concluded contract. Further submitted that in the subsequent notices and latest notice dated 27-1-2004, letters dated 19-1-2004 by the first defendant it is stated that the plaintiffs have not deposited 25% of the value of the property. This itself shows that there exists a contract, which is concluded. It is also submitted that the learned trial Judge has erred in recording a finding that plaintiff is barred to prosecute a suit as provided under Section 26 of The Sick industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Sick Act. The very exchange of legal notices and the reply by the defendant Binny Limited makes clear that the suit for specific performance is very well maintainable. The findings of the trial Judge that the contract stands cancelled automatically and condition No. 22 is erroneous. In fact, condition No. 22 does not say anything about the automatic cancellation of agreement in view of the fact that the defendants have called upon the plaintiff to deposit 25% of the price amount. Further submitted that whether time is essence of the contract is purely a matter of evidence. Therefore, the recording of the finding by the learned trial Judge is erroneous. The question as to whether there is bar to proceed with the suit does not come within the meaning of Order 7 Rule 11 (d) of CPC. The Court has to see only the averments of the plaint and the nature of the pleadings. Merely because of the reasons that the matter was pending before the BIFR itself is not a ground to hold that the suit is not maintainable. It is also clear that it is BIFR, which has given approval for sale of the properties. It is in pursuance of it Binny Mill Limited invited the general public to submit the completed offer form. It is also submitted that the Order of the BIFR dated 1-7-2002 shows the Assets sale Committee (hereinafter referred to as "the ABC") was disbanded with immediate effect. The Company is restrained from proceeding further in any manner in regard to sale/development of the properties. This itself shows what is disbanding is the ASC. But, the subsequent Order of BIFR dated 23-10-2003 bifurcating assets of Binny Madras and company, Karnataka (Annexures "a and B")shows that the schedule property is held by the Binny Karnataka Limited and also permitted for the sale of the properties subject to certain terms. Therefore, there is no prohibition for alienating the property. When once the scheme was approved and transfer of the property is permitted, in the absence of any condition, there is no bar of alienation and the same is an admitted fact.