"(a) this Hon'ble Court be pleased to declare that the concluded contract in terms of the unsigned MOU being Exhibit 'O' to the Plaint, arrived at between the Plaintiffs and the Defendant is valid and subsisting and binding on the Defendant;

(b) the Defendant be ordered and decreed to specifically perform the said concluded contract contained in terms of the unsigned MOU being Exhibit 'O' to the Plaint and for the said purpose to do all acts, deeds and things and execute all necessary documents, papers, applications etc. ;

(c ) this Hon'ble Court be pleased to grant a permanent injunction restraining the Defendant by herself and or through her servants and or agents from in any manner selling, alienating, encumbering, transferring, disposing off, parting with possession and/or creating any third party rights in respect of the suit property more particularly described in Exhibit A to the Plaint in favour of any person or persons other than the Plaintiffs;

(c 1) without prejudice to the aforesaid, in the event of this Hon'ble Court holding that the Plaintiffs are entitled to specific performance, but in exercise of its discretion, declining to grant the same, the Defendant be ordered and decreed to pay to the Plaintiffs such compensation in lieu of specific performance, as may be determined by this Hon'ble Court."

2. The facts as narrated by the Plaintiffs, are briefly set out hereunder:

2.1 In or about August 2004, the Plaintiffs had a meeting at Hotel President in Mumbai, where they met Mr. Jayesh Shah, the Plaintiffs' Broker, Mrs. Villoo Kapadia, the Defendant's sister and Mr. Salim Merchant the Defendant's Broker. At the said Meeting the Plaintiffs expressed their desire to purchase the suit property viz. Flat No. C-32, on the third floor, Darshan Apartments, Malabar Hill Co-operative Housing

2

Society, Mount Pleasant Road, Mumbai ("the suit flat"). Mrs. Villoo Kapadia furnished the email address of the Defendant and her husband, to the Plaintiffs.

2.2 After this meeting, the Plaintiffs started communicating via email with the Defendant through her husband Mr. Jamshed Modi, for purchase of the the suit flat.

2.3 Negotiations with respect to price continued between the parties by email, wherein the Defendant demanded a price of Rs. 3.42 crores whereas the Plaintiffs offered a price of Rs. 3.25 crores. The parties subsequently arrived at a mutually agreed price of Rs. 3.33 crores. The Plaintiff No. 1 by his email dated 19th December 2004 (Exh. P-1) offered to buy the suit flat for a price of Rs. 3.33 crores. The said email was acknowledged by the Defendant by an email dated 20th December, 2004 (Exh. P-2), wherein it was stated by the Defendant through her husband that "I am, indeed, happy that we have reached agreement on the price." By the said email the Defendant also agreed to give possession of the suit flat to the Plaintiffs by the end of February 2005 as requested by the Plaintiffs in the email dated 19th December 2004 referred to earlier. Thus an agreement in writing, by exchange of emails, was arrived at qua the price, identity of the property and the date of possession.

2.4 There were further emails exchanged between the parties with respect to the modalities of completing the said transaction and the Plaintiffs emailed a draft Memorandum of Understanding ("MOU") to the Defendant in terms of the above mentioned concluded agreement of sale between the Plaintiffs and the Defendant.

2.5 On 1st February, 2005, there was a meeting at the residence of the Plaintiffs. This was attended by the Defendant, her husband Mr. Jamshed Modi, Mr. Rakesh Sirsalewala (Tax Advisor of the Defendant and her husband and DW-2 herein) and the Plaintiffs, members of their family and their Solicitor Mr. Shriraj Dhruv. At this meeting, the Defendant and her husband had brought a copy of the draft MOU (earlier emailed by the Plaintiffs) and which had certain track changes on it. All the terms and conditions of the draft MOU were discussed at the meeting and finalized

3

between the parties including that the Plaintiffs would pay 10% of the price as earnest money to the Defendant.

2.6 At the said Meeting, the Defendant informed the Plaintiffs that she would be in a position to hand over possession of the suit flat by the end of March 2005, instead of February 2005 as earlier agreed between the parties. This was accepted by the Plaintiffs in a subsequent telephonic conversation between the first Plaintiff and the husband of the Defendant on 3rd February 2005.

2.7 On 8th February 2005, after telephonic discussion between the first Plaintiff and Mr. Rakesh Sirsalewala, the Plaintiffs forwarded a final revised MOU incorporating the changes as discussed and finalized, to Mr. Rakesh Sirsalewala through their ' Advocates' email dated 8th February, 2005 (Exh. D-7).

2.8 On 9th February 2005 at about 9.00 p.m. Mr. Rakesh Sirsalewala telephoned the first Plaintiff and informed him that the Defendant was having second thoughts about the deal and the first Plaintiff should call the Defendant next morning in that regard.

2.9 On 10th February, 2005, the first Plaintiff attended the Defendant's residence and offered to pay 10% earnest money with respect to the suit flat even before execution of the MOU. At this meeting, the Defendant informed the first Plaintiff that some Committee Members/Members of the Society were desirous of sabotaging the transaction between the Plaintiffs and the Defendant and the Defendant was in two minds whether to proceed further or not with respect to the transaction concerning the suit flat.

2.10 On 11th February, 2005, the Defendant telephoned the first Plaintiff and informed him that she had decided not to go ahead with the transaction, thereby resiling from the concluded contract.

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2.11 In these circumstances, by their Advocates letter dated 11th February, 2005, (Exh. P-11) the Plaintiffs inter alia called upon the Defendant to specifically perform the concluded contract for sale of the suit flat. The letter further recorded that the Defendant had informed the first Plaintiff on 10th February, 2005, that some Committee Members/Members of the Society were desirous of sabotaging the transaction between the Plaintiffs and the Defendant. A letter dated 12th February 2005 was also addressed by the Plaintiffs to the Secretary of the concerned Society to confirm as to whether the apprehensions of the Defendant regarding certain Committee Members/Members intending to sabotage the concluded contract, were correct and requested for the names of the persons who were interested in the same.

2.12 By her Advocate's letter dated 28th February 2005 (Exh. D-8), the Defendant replied to the Plaintiffs' Advocates' letter dated 11th February 2005, and whilst denying that there was any concluded contract, they did not deny the following statement in the Plaintiffs' Advocates' letter referred to above:

"Our client visited your residence on 10th February 2005 and offered payment of 10% of the price even before you executed the Memorandum of Association. At this stage, however, you informed our client that you were afraid that some Committee Members of the society or some Members of the Society would create problems and sabotage the transaction between you and our clients."

2.13 Thereafter the Plaintiffs filed the present Suit in March, 2005. Upon the Plaintiffs depositing an amount of Rs. 30 lacs in Court, the Defendant was restrained by an interim order from creating third party rights in respect of the suit flat.

3. The Defendant filed her Written Statement dated 28th September 2006, wherein she alleged that she had not authorised her husband to bind her in any legal obligation with respect to the suit flat. However, this contention was neither argued nor pressed by the Defendant's Advocate, and in fact Mr. Jamshed Modi, the

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Defendant's husband, gave evidence on behalf of his wife. It was further contended in the Written Statement that there was no concluded contract although the price was agreed upon between the parties. It was further contended that it was always intended that the parties would be bound only by an agreement in writing, which was not done.

3.1 On 13th February, 2012, the following Issues were framed :

(1) Whether the Plaintiffs prove that at the Meeting held on 1st February 2005, the draft MOU (Exh. 'O') was discussed and the terms thereof finalised, agreed and accepted by the parties as set out in para 5 of the Plaint?

(2) If the Issue No. 1 is answered in the affirmative, whether the Plaintiffs prove that the contract entered into between the Plaintiffs and the Defendant is capable of specific performance?

(3) Whether the Plaintiffs prove that they were and are ready and willing to perform their part of the contract for the purchase of the suit property?

(4) What reliefs?

3.2 The Defendant filed Chamber Summons No. 867of 2012 and sought to amend the Written Statement. By an Order dated 20th March, 2013, the said Chamber Summons was allowed and paragraphs 23A and 23B were added to the Written Statement.

3.3 By an Order dated 9th April, 2013, the following additional Issues were framed as a result of the amended Written Statement and numbered as 3 (a) to 3 (d):

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"3(a) Whether the Plaintiffs prove that they are entitled to a decree of performance?

3(b) Whether the Defendant proves the hardship as alleged in paras 23A and 23B of her amended Written Statement?

3 (c ) Whether by reason of the alleged hardship, discretion to grant specific performance should not be exercised?

3 (d) In the event of the Court not granting specific performance in favour of the Plaintiffs, whether the Plaintiffs are entitled to compensation in lieu of specific performance."

The Order further recorded that Issue No. 3 (d) relating to compensation in lieu of specific performance would be decided only in the event of the Court not granting specific performance in favour of the Plaintiffs.

3.4 On behalf of the Plaintiffs, Plaintiff No. 1 (PW-1) has examined himself. On behalf of the Defendant, her husband Shri Jamshed Modi (DW-1) and their Tax Advisor Shri Sirsalewla (DW-2) have been examined.

3.5 The documents produced by the Plaintiffs have been marked as Exhibits P-1 to P-16, and the documents produced by the Defendant are marked as Exhibits D-1 to D-

8.

3.6 The Suit was reserved for orders in April 2014. Due to paucity of time there was delay on the part of the Court in writing the judgment. Certain clarifications were also required by the Court from the parties. In view thereof the Court was about to place the Suit for further hearing in February 2015, when the Advocate for the Defendant, after giving notice to the Advocates for the Plaintiffs, mentioned the matter on 25th February 2015 and made a request for pronouncement of judgment. This Court admitted that there was delay in writing the judgment and informed the Advocates that since further submissions/clarifications were required on certain

7

aspects, the Suit would be placed on Board for hearing. The Advocates agreed to inform the Associate the date on which it would be convenient for them to address the queries of the Court. The Learned Advocates thereafter requested that the matter be placed on Board for hearing on 16th April 2015. The Suit was accordingly placed for hearing on 16th April 2015 when this Court informed the Advocates for both the sides that the Court needed further submissions on some of the issues. The Learned Advocates for the parties filed additional submissions on 23rd April 2015 after which this Judgement came to be written.

4. Issue No. 1 Whether the Plaintiffs prove that at the Meeting held on 1st February 2005 the draft MOU (Exhibit-O to the Plaint) was discussed and the term thereof finalized, agreed and accepted by the parties as set out in Para 5 of the Plaint?

4.1 It is the Plaintiffs' case in the pleadings (paragraphs 3.3, 3.4, 4 and 6), Evidence (Paras 4, 5 and 20 of the Affidavit of PW-1) and arguments advanced that there was a concluded contract by exchanging emails between the Plaintiffs and the Defendant, for sale of the suit flat for a price of Rs. 3.33 crores. Possession was agreed to be given by the Defendant by the end of February 2005 which was later at the request of the Defendant, agreed to be given by the end of March 2005. According to the Plaintiffs, the execution of the MOU was therefore only a formality, to complete the transaction. By email dated 6th January 2005, a draft MOU (Exh. D-7) was forwarded by the Plaintiffs to the Defendant who was in Canada. A Meeting was held on 1st February, 2005, at Mumbai and the clauses in the said MOU were discussed and finalized at the said Meeting. In fact, according to the Plaintiffs, at the said Meeting a draft MOU with certain track changes and hand- written notations was brought by the Defendant along with her husband (DW-1) and

8

Mr. Sirsalewala (DW-2). DW-1 has admitted in answer to Q.38 of his cross- examination that the hand written notations were made by him at the Meeting held on 1st February, 2005. The Plaintiff No.1 has admitted in his Examination-in-Chief that certain notations at pages 25 and 26 of Exh. P-8 are in the handwriting of his Solicitor Shri Shriraj Dhruv. According to the Plaintiff, after the Meeting, the draft MOU containing the track changes and the handwritten notations was handed over by the Defendant and her husband to the Advocate for the Plaintiffs (Exh. P-8). On 8th February 2005, a copy of the Memorandum of Understanding incorporating the changes agreed and finalized at the Meeting held on 1st February 2005 (Exh. P-10) was forwarded to the Defendant/Advisor of the Defendant, which draft according to the Defendant did not contain all the changes/corrections contained in Exh. P-8. The Plaintiffs have submitted that Issue No. 1 ought to be divided into three parts, viz.

(a) There is a valid and subsisting written contract contained in emails for sale of the suit flat between the Plaintiffs and the Defendant for a price of Rs.

3.33 crores.

(b) The execution of the MOU was only a formality or modality to implement the transaction.

(c ) All clauses of the MOU were discussed and finalized at the Meeting of 1st February 2005 and the draft MOU (Exhibit-O to the Plaint) contained the terms and conditions as finalized.

5. According to the Defendant, no valid and subsisting written contract is contained in the emails and no such valid and subsisting contract was discussed or finalised at the Meeting of 1st February, 2005. According to the Defendant, it was always intended that the parties would be bound only by an agreement in writing which was not done. The husband of the Defendant has in his Affidavit of Evidence categorically deposed as follows:

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"It is true that there were exchange of emails between Mr. Rohit Kapadia and myself wherein based on my judgment the price suggested was broadly found to be acceptable. However the Defendant had never expressly agreed on any aspect. The entire issue even as understood and indicated by Mr. Rohit Kapadia, was to be finalised through written Memorandum of Understanding and Agreement to be signed by the Plaintiff and the Defendant."

6. Thus, the main question to be decided in this case is whether there was already a concluded contract as contained in the emails exchanged between the parties, or as contained in the draft MOU purportedly finalized in the Meeting of 1st February 2005, and reflected in Exhibit 'O' to the plaint, or whether the parties really agreed to be bound when the MOU, whether finalized already or to be finalized later, was executed by both the parties.

6.1 By an email dated 19th December, 2004, (addressed by the Plaintiff No. 1 to the Defendant ( Exh. P-1), the Plaintiff has recorded that:

" I intend to buy your flat on the third floor in Darshan, for the price of Rs. 3.33 crores".

There is only one thing I ask for in return - all cooperation on your end in expediting the sale of the flat to me and giving me possession. To that end, I would appreciate if you could allow me to go ahead with drafting an agreement here in Mumbai, which I could send you in Canada for your signature. This would save us considerable time until the point that you are able to clear your medical formalities and fly here.

…... I am quite keen to occupy the flat by the end of February 2005.

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There is a hurry on my part because this is a flat for my daughter and my son-in-law, who are currently staying in temporary accommodation and are desperately in search of a permanent home to settle down in.

…. I would appreciate some written assurance from your end, too, that you will give me possession at the soonest, by February or earlier." (emphasis supplied)

6.2 The husband of the Defendant (DW-1) by his e-mail dated 20th December, 2004, addressed to the Plaintiff No. 1 (Exh. P-2) responded to the email dated 19th December, 2004 received by the Defendant from Plaintiff No. 1 as under:

"Thank you for your email of 19th Dec. I am, indeed, happy that we have reached agreement on the price.

Subject to the surgeon's clearance on 31st Dec. we will do our best to reaching Bombay during January and to giving possession of 32C Darshan apts. end February.

If convenient, please fax the draft agreement..... … On completion of the signing of the agreement by both sides, we would like to advise Villoo Kapadia ourselves and request her to hold the deposit cheque given by you and arrange for you to meet with the Committee. We will request her to get in touch with you after the agreement is signed." (emphasis supplied)

6.3 The husband of the Defendant (DW-1) by his email dated 23rd December 2004 addressed to the Plaintiff No.1 (Exh. P-3) inter alia recorded:

" I note from your email of 22nd Dec. that you will send the agreement, by fax presumably, on 9th January. I am rather worried on the following points:

1. My wife is expected to sign this agreement - will it already be signed by Payal? Who is the agreement between?

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2. We understand then that a requisite deposit is to be made and such deposit is to be held in escrow ?

3. After which an introduction is to be arranged with the Darshan Committee (Malabar Hill Co-operative Housing Society) whenever they are to meet.

4. We would need time in town before giving possession and since we have agreed to try and do so by end February, we see problems if we are not in Bombay by third week of January.

Since my appointment with the surgeon is scheduled for 31st December, we can really make travel arrangements only in January.

Even this will be delayed while we wait to see what is in this agreement and whether it means it binds just Perviz as signatory.

I have tried to state very simply what is worrying us, ten thousand miles away and I would appreciate if you took my questions in that light." (emphasis supplied)

6.4 The Plaintiff No. 1 by his email dated 26th December 2004 (Exh. P-4) answered the queries raised by the husband of the Defendant (DW-1) vide his email dated 23rd December, 2004 as follows:

"1. My wife is expected to sign this agreement - will it already be signed by Payal? Who is the agreement between?

THE FIRST WILL BE A MEMORANDUM OF UNDERSTANDING

(MOU), WHICH WILL SPELL OUT THE BASIC FACTS OF THE

AGREEMENT (PRICE, FLAT DETAILS, ETC) AND STATE THAT WE

INTEND TO PURCHASE THE FLAT FROM MRS. MODI. I WILL SEND

YOU TWO SIGNED COPIES OF THIS MOU. AFTER REVIEWING THE

SAME, PLEASE SIGN BOTH, KEEP ONE, AND RETURN ONE SIGNED

COPY TO ME BY FED-EX.

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THE SECOND WILL BE A DRAFT OF THE ACTUAL AGREEMENT TO

SELL THE FLAT AT DARSHAN. WE CAN DISCUSS ANY CHANGE

YOU MIGHT SUGGEST OVER EMAIL/FAX OR WHEN YOU ARRIVE IN

BOMBAY.

THE AGREEMENT WILL BE SIGNED BETWEEN MRS. MODI AND ME

(ROHIT KAPADIA).

2. We understand then that a requisite deposit is to be made and such deposit is to be held in escrow?

THAT IS CORRECT. AFTER RECEIVING A SIGNED COPY OF THE

MOU, I WILL PLACE A DEPOSIT IN ESCROW. I SUGGEST A

DEPOSIT OF RS. 30 LAKHS TO BE KEPT IN ESCROW. KINDLY

SUGGEST THE NAME OF ANY EMINENT SOLICITOR OF YOUR

CHOICE WHO CAN HOLD THIS AMOUNT FOR US. IF YOU WOULD

SUGGEST A NAME TO ME OVER EMAIL, WE CAN INCORPORATE

THE SOLICITOR'S NAME IN THE MOU.

3 After which an introduction is to be arranged with the Darshan Committee (Malabar Hill Cooperative Housing Society) whenever they are to meet.

YES. HOW DO WE WORK THIS OUT AS YOU WILL BE IN CANADA?

WOULD MRS. KAPADIA BE ABLE TO INFORM THE SOCIETY ON

YOUR BEHALF AND REQUEST FOR AN INTRODUCTION. PERHAPS

YOU COULD SEND A LETTER OF INTRODUCTION BY COURIER

ALONG WITH THE SIGNED MOU/ WE NEED TO WORK OUT THE

DETAILS ON THIS.

4. We would need time in town before giving possession an since we have agreed to try and do so by end February, we see problems if we are not in Bombay by third week of January.

…. …. …

I COMPLETELY UNDERSTAND YOUR CONCERNS REGARDING THE

PLANNING OF YOUR TRIP AS WELL AS YOUR HEALTH. SINCE

YOUR DAUGHER WILL BE IN THE OFFICE ONLY ON JAN 9, I WILL

COURIER THE DOCUMENTS TO YOU EARLIER. KINDLY SEND ME

YOUR PREFERRED MAILING ADDRESS, AS WELL AS THE EXACT

SPELLING OF YOUR WIFE'S NAME AND HER POSTAL ADDRESS IN

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CANADA SO THAT I CAN INCORPORATE THE SAME IN THE

AGREEMENT." (emphasis supplied)

6.5 On 3rd January 2005 the husband of the Defendant (DW-1) sent the following email (Exh. P-5) to the Plaintiff No. 1, to which the Plaintiff No. 1 responded on the same day. Both the emails (Exh. P-5) are reproduced hereunder:

"Dear Mr. Kapadia, I have been given medical clearance to travel by my surgeon when I saw him on the 31st.

I look forward to the MOU you will be faxing on the 3rd. Regards,

Jamshed Modi".

"Dear Mr. Modi, I am glad to know that your trip to India has been cleared by your doctor.

As per your last letter, you informed me that your daughter was only returning to work on January 9. I thought that I would fax you the MOU at that time.

You have also not replied to the queries raised by me in my last email to you, i.e. your address in Canada, etc. These details are necessary for me to prepare the MOU.

Please reply at the earliest so that we can have the necessary paperwork in place by Jan. 9.

Thanks and regards,

Rohit Kapadia".

(emphasis supplied)

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6.6 The emails exchanged by and between the Plaintiff No.1 and the husband of the Defendant (DW-1) dated 4th January 2005 (Exh. P-7) are reproduced hereunder:

"Dear Mr. Modi, This is to acknowledge receipt of both your emails. We will not send any fax to Niara's office number anymore, but we will send a fax to her home number. The agreement is in the process of being prepared, and now that we have your wife's details, it should be ready in a few days' time. As soon as this happens, we will give you advance notice and then send a fax to you. You can expect news from us in a few days. Please go ahead with your travel plans to India.

Thanks and regards,

Rohit Kapadia".

"Dear Mr. Kapadia, Thank you for your email of 4th Jan. I note that the MOU will take some days to prepare and that you will advise when you are ready to fax it to my daughter's home fax number.

The delay is, indeed, unfortunate and we will make our travel plans after receiving and signing the MOU.

Please confirm receipt of the repeat of my email of 26th Dec. We look forward to your comments regarding an eminent solicitor re. The deposit.

Regards,

Jamshed Modi."

(emphasis supplied)

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6.7 By an email dated 9th January 2005 the Plaintiff forwarded the draft MOU to the Defendant (Exh. D-7) which is reproduced hereunder:

" Dear Mr. Modi, I am sending you the draft MOU by email. Kindly review the attached document, fill in the spaces marked with [*],suggest any changes you might have. I have turned on the "track changes" feature in Word, so that any changes made by you are highlighted in red.

Once you return the corrected document to me by email, I will have it stamped, sign the same from my end and send you the same to you by courier for your signature.

In clause 2.1, I have provided for the payment of a sum of Rs. 15 lacs. I cannot pay the same to you legally, as you are a non- resident and Reserve Bank permission is required. I have provided that I will keep the money in escrow. You may suggest a person with whom I can keep it in escrow. Neither Bomi or Dara (both being practising senior counsel of the High Court) are likely to hold the money in escrow. I shall, of course, ask them on your behalf. In the meantime, would you also consider suggesting some eminent solicitor's name for this purpose?

Kind regards,

Rohit Kapadia".

(emphasis supplied)

6.8 A copy of the MOU prepared by the Plaintiffs, and forwarded to the Defendant was forwarded by the husband of the Defendant (DW-1) to Mr. Sirsalewala (DW-2) under cover of the email [Exh. P-14]. The same is reproduced hereunder:

"Dear Rakesh, Am enclosing a draft Memo of Understanding prepared for/by the person who is interested in buying our flat. He had originally

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insisted on a Jan 31st completion date but we later agreed in exchange of emails that we wld do our best to give possession by end Feb. Accordingly, he was to prepare and has today emailed a draft MOU. Will send u my draft reply which I will email after receipt of yr comments. Our main pt is rejection of firm deadline and the deposit amt. My question for u are:

Is this a std. Form or is Kapadia taking advantage of my ignorance to draft a one-sided memo? He has been described to me as an eminent legal person. FEMA: Is permission really needed for non- resident to sell property? Does it take long to obtain clearance. Wld u be able to act on our behalf or do u know a specialist to expedite such application. Appreciate yr early response and full and frank comments.

Thks and regards,

Jamshed"

(emphasis supplied)

6.9 The husband of the Defendant by his email dated 8th January, 2005, addressed to Mr. Sirsalewala (DW-2) (Exh. P-15), after referring to the draft MOU as

"aggressive and one sided document" sought comments from Mr. Sirsalewala on various points set out therein. The relevant portion of the said email is reproduced hereunder:

"...... assuming the flat sale progresses favourably. A little background re our dealing with Mr. Kapadia:

We started email correspondence last year when Viloo put us in direct contact with him. He was silent from early November and then suddenly revived the matter mid Dec. asking if we cld give possession by end January as he wanted the flat urgently for his married daughter. We said we wld do our best to give possession by end Feb. Mr. K advised he wld draft a MOU. He has been described to us as a well known legal man and a decent person. So we assumed that the MOU wld be a fair, brief document stating the agreed terms of sale. Instead, we have what seems to me to be an aggressive and one-sided document. I have acknowledged receipt briefly and that we will go

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thru and send our comments. We do want to complete this sale by end of Feb but there are some points where I particularly need yr comments:

1. The deposit amt - is 10% of price the standard? In an earlier email Mr. K. had stated 30 lacs; in the draft mou it is 15 lacs. Shld be 33.3 lacs?

2. In the covering email he states he cannot pay the deposit to an NRI due to FEMA. This is surely wrong? The cheque/draft shld be in Perviz's name, to be held in escrow? We had been advised that if, for some reason, his offer /application is not approved by the committee, the deposit amt is ours? Is this correct?

3. We cannot agree to a specific 45 days deadline, for obvious reasons. E.g. we don't know when the Society will meet and when the sale is approved.

4. I assume FEMA is not a factor in the matter. Plse confirm.

5. Is this a fairly std. form of mou or are my impressions correct that it is biased?

6. If matters proceed in this manner, we wld possibly need some legal help for a suitable mou and the final sale document. Wld u suggest/know a legal expert whom you cld recommend?

This email is simply to provide background info and express my worries in the matter. Thks for yr help. It is good to have u on our side.

Regards,

Jamshed".

6.10 Reading the aforesaid emails in a sequence, each in light of the former/s , what emerges is the following :

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(1) On 19th December 2004, the purchaser (i.e. the Plaintiff No. 1 herein) expresses his "intention" to buy the suit flat @ 3.33. crores. ( He advisedly does not say, "I agree to buy the flat for 3.33 crores".)

(2) On 20th December 2004, the husband of the vendor/Defendant adverts to the parties having reached an agreement on the price. (He advisedly does not say "We have reached an agreement for sale".)

(3) Though, the husband of the vendor/Defendant does say that he will do his best to give 'possession ...... end February', and in that sense, on all three essential particulars, namely, the price, and time of performance and the identity of the property, the parties were more or less 'ad idem', it cannot possibly be suggested that on 20th December, 2004, there was already a concluded contract for sale of the flat, in the sense that after 20th December 2004 none of the parties could have backed out. This is clear from the following:

(i) At least at this stage, that is on 20th December, 2004, nobody seems to suggest, or possibly even had in their mind that the agreement for sale was concluded and the execution of a formal document was a mere formality thereafter.

(ii) In the very first email for expediting the sale, the purchaser (i.e. the Plaintiff No. 1), suggests that an agreement would be drafted in Mumbai and sent to Canada for the vendor's/Defendant's signature.

(iii) The husband of the vendor/Defendant, after noting that there was an agreement 'on the price' and suggesting possession by end of February, and in response to the purchaser's suggestion of sending the agreement to Canada for signature, calls for the draft agreement and further says that on completion of signing "by both sides", the vendor would advise the sister of the Defendant in

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Mumbai to hold the deposit cheque and arrange for a meeting with the Committee of the Society.

(iv) On 23rd December, 2004, after noting that the draft of the MOU would be sent, presumably on 9th January, 2005, the husband of the vendor/Defendant expresses his reservations on some points. These points include : (a) when the MOU comes to Canada, will it already be signed by the purchaser? (b) whether the deposit against the MOU would be an escrow transaction? and

(c) some problems in giving possession by end February, as assured earlier. From the email it is apparent that the main problems expressed by the vendor/Defendant were - (a) the travel arrangements, even after the doctor approved such travel, the same could be made only after the draft was seen ('what is in this agreement') and (b) whether the signature of the vendor/Defendant would bind the vendor alone?

(v) On 26th December 2004, the purchaser/Plaintiff No.1 answered the queries. He made it clear that the transaction involved two stages - (i) the MOU containing the basic facts of the agreement, and (ii) the actual agreement to sell. The purchaser/Plaintiff No.1 made it clear that two signed copies (by the purchaser/Plaintiff No.1) will be sent for the vendor's/Defendant's signature, who would sign the same "after reviewing" the MOU and return one signed copy to the Plaintiffs. The Draft of the actual Agreement for Sale would also be forwarded by the Plaintiff No.1 to the Defendant. If the Defendant had any changes to be suggested, the same may be suggested over Email/Fax or when the Defendant arrived in Mumbai. It was also clarified that the Agreement for Sale would be signed by the Plaintiff No.1 and the Defendant. The vendor/Defendant has also offered to place a deposit in escrow - and suggests a deposit of Rs. 30 Lacs and asks for the vendor's suggestion as to the identity of the escrow agent.

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(vi) It is clear from the communication of the Defendant dated 23rd December 2004 raising several queries and the above response from the Plaintiffs dated 26th December 2004, that the vendor ( and even the purchaser) never felt that they were already bound by a concluded contract as on 23rd December

2004.

(vii) The further emails between the parties merely concern the travel plan and replies to some basic queries, etc. and throw no light on the concluded nature or otherwise of the transaction. Even then, one thing needs to be noted, that the draft MOU is under preparation at the purchaser's end and the vendor is worried that his travel plans can only be made after "receiving and signing the MOU".

(viii) Next comes the email enclosing the draft MOU sent by the purchaser/Plaintiffs. The purchaser asks the vendor/Defendant to 'review' the same and 'suggest any changes'. The draft, after such corrections, would be stamped, then signed from the purchaser's end and then sent to the vendor for signature. In fact, it appears that the matter of payment of deposit - whether payment or escrow, and if escrow, with which escrow agent, is also not yet finalized.

(ix) The husband of the Defendant has thereafter by his emails (Exhibits P-14 and P-15) expressed his reservations on the draft MOU and sought advice/comments from Mr. Sirsalewala (DW-2), as regards several issues pertaining to the transaction. In Exh. P-15, he states, "..... assuming the flat sale progresses favourably".

(x) The net result is that though it was repeatedly recorded that the Defendant would sign the MOU at Canada and send the same to the Plaintiffs at Mumbai, the same could not be signed since the Defendant/her husband had serious

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reservations qua the terms of the MOU, till the time the Defendant and her husband came to Mumbai.

It is clear from the foregoing narration that there is no agreement as yet between the parties; that the agreement was meant to be a signed MOU- to be signed by both the parties; that the parties obviously contemplated to be bound only when the document was signed; and that the terms of the document were only proposed by the purchaser and not even completely agreed upon by the vendor by this time.

7. It will not be out of place to mention here that the Plaintiffs have placed heavy reliance on the answer given by DW-1 to Q. 132 in his cross-examination viz. " Q.132 : Have you anywhere stated that until the MoU was signed, there would be no binding agreement between the parties? Ans : No." In my view, this answer will not assist the case of the Plaintiffs as, even though it is admittedly not expressly stated that there would be no binding agreement between the parties until the MOU is executed, the said intention/understanding is certainly borne out from the conduct of the parties, i.e. mainly from the contents of the emails exchanged between them, as narrated by me above.

8. I now proceed to consider if any difference would be made to this situation by reason of the meeting of the parties held in Mumbai, that is to say, whether there was change in the intention/understanding arrived at in Mumbai qua the conclusion of the contract, or whether the parties were still trying to finalize the terms of the contract which was to be signed between them.

9. Before doing so, a few preliminary observations need to be made. As already held above, that so far there was no agreement for sale between the parties, not

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because the parties were not ad idem on the essential terms of the bargain, but because the bargain itself was to be by a signed document, namely, the MOU, spelling out all the essential terms of the bargain. In other words, the conduct of the parties so far indicated that the bargain was not to be concluded by (a mere) exchange of emails, but by execution of a MOU. Therefore, what is essential to see now is whether their conduct in Mumbai in any way changed this basic understanding. If the basic understanding were the same, namely, the parties intended to be bound only when the MOU was signed between them, their attempts to hammer out the terms of the MOU could only be seen as matters of negotiation in order to arrive at the text of the MOU, and even if there is a complete consensus on the terms, it still would merely signify that the negotiations were at an end and the parties were now ready to actually conclude the contract by signing the MOU.

10. The draft MOU prepared by the Plaintiff No.1 in January 2005 was admittedly received by the Defendant. The Defendant had emailed a copy of the same to Mr. Sirsalewala who in turn had carried out certain track changes on the same and forwarded the same to the Defendant and her husband DW-1. The Defendant along with her husband and Advisor Mr. Sirsalewala (DW-2) attended the Meeting held at the residence of the Plaintiffs on 1st February, 2005. There were hand written notations on the draft brought by the Defendant and her husband in the Meeting held on 1st February, 2005. It has come to light in the evidence, for example, that at page 29 clause (9), the words on the left side of clause "What is this? Define properly" was in the hand writing of Mr. Modi or Mr. Sirsalewala and the same was cancelled after discussions. Plaintiff No.1 has in his Examination-in-Chief admitted that on pages 25 and 26 of the draft, certain notations are made by the Solicitor of the Plaintiffs Shri Shriraj Dhruv in his handwriting. DW-1 has also admitted in answer to Q 38 of his cross-examination that he has made some hand written notations on the draft at the said Meeting. Plaintiff No. 1 in his evidence has also stated that each

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of the points with respect to the said MOU was discussed and finalized at the said Meeting. However, DW-1 has in his cross-examination in answer to Q 137 has stated that, "We attended the meeting to discuss the clauses in the MOU which were not acceptable to us not necessarily to finalize the draft MOU." Without going into these semantics, it appears fairly clearly that the draft MOU sent by Plaintiff No. 1, after initially having sought permission from the Defendant to prepare a MOU and send the same to the Defendant at Canada and which MOU was consequently sent by Plaintiff No.1 and received by the Defendant, was, after seeking suggestions from the Tax Advisor Mr. Sirsalewala, sought to be finalized in Mumbai by the parties in the Meeting held between them on 1st February 2005 at the residence of the Plaintiffs.

11. There also exists some controversy between the parties as to whether or not the notings made by the Defendant on the draft MOU (Exh. P-8) contained all the objections of the Defendant on the draft of the Plaintiffs. DW-1 in his Affidavit-of- Evidence has deposed that after the Meeting held on 1st February 2005, he made certain hand written corrections to the draft MOU which, along with the corrections of Mr. Sirsalewala, were handed over to Plaintiff No. 1 or his Solicitors, though he does not exactly remember how it reached Plaintiff No.1. He further states that,

"suffice to state that the MOU at Exh. P-8 appears to contain the corrections/noting/objections. Despite these corrections/notings/objections, Mr. Rohit Kapadia, Solicitor, forwarded under cover email dated 8th February 2005 a revised draft of the MOU ( Exh. P-10) in which these objections/corrections/notings were ignored, not agreed to and not incorporated and essentially terms mentioned in the original MOU to which we have not agreed were reiterated". In his cross-examination DW-1 however, tried to contend that he has in Exh. P-8 not incorporated all the changes which were agreed at the Meeting of 1st February 2005. Again, though the Plaintiffs have contended that all the terms set out in Exh. P-10 were finalized at the Meeting held on 1st February 2015 at the residence of the Plaintiffs and admittedly Exh. P-8 contained the notations carried out by DW-1 as well as the Solicitor of the

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Plaintiffs, the Plaintiffs have failed to bring anything on record to show that the period of 45 days mentioned in clause 5 of Exh. P-8 was agreed to be reduced to 30 days and a cure period of 30 days was agreed to be given to the Plaintiffs before forfeiting the earnest money as provided in clause 10 of Exh. P-10. In other words, in the absence of any notation either by the Plaintiffs and/or their Advocates and/or the Defendant and/or her husband on Exh. P-8, the Plaintiffs have failed to establish on what basis such changes were incorporated in Exh. P-10 which was forwarded by them to the Defendant, a few days after the Meeting. The Plaintiffs have also not made any attempt to explain as to why each page of Exh. P-10 contained a footer-

"First Draft : without prejudice and for discussion purpose only", more so when the Plaintiff No.1 has in answer to Q. 53 of his cross-examination admitted having gone through the said Exh. P-10 before forwarding the same to the other side and despite his attention being drawn in cross-examination to the said footer.

12. According to Plaintiff No. 1 Exh. P-8 was handed over to his Solicitors by the Defendant and her husband after the Meeting was concluded. DW-1 has stated that Exh. P-8 was subsequently sent to the Plaintiff No.1 and/or the Advocates for the Plaintiffs. DW-1 in his examination-in-chief stated that, "..I do not exactly remember how it reached Mr. Rohit Kapadia". Mr. Sirsalewala (DW-2) too has stated that to the best of his memory, the draft MOU with hand written corrections was collected by the Solicitors of the Plaintiffs from his office. Be that as it may, it is fairly clear that the Defendant and/or her husband had attended the Meeting along with the draft of the MOU containing track changes carried out by Mr. Sirsalewala and certain hand written notations by DW-1. At the said Meeting, pursuant to the discussion, certain hand written notations were corrected/added by the Defendant as well as by the Advocate for the Plaintiffs, and the draft containing the corrections made, i.e. Exh. P- 8, was handed over to the Advocates for the Plaintiffs presumably to enable the Advocates for the Plaintiffs to incorporate the suggestions made at the said Meeting. It does not matter whether the draft was handed over at the end of the Meeting or

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thereafter. Admittedly, the Memorandum of Understanding Exh. P-10 was thereafter forwarded by the Advocate for the Plaintiffs to Mr. Sirsalewala (DW-2) on 8th February 2005. As set out above, again there is a controversy between the parties as to whether or not Exh. P-10 contained all the terms and suggestions which were finalised at the Meeting held on 1st February 2005. The Plaintiffs have not been able to show that certain changes found in Exh. P-10 were agreed upon by the parties at the said Meeting held on 1st February 2005 and have also failed to explain the footer on each page of Exh P-10 namely- "First Draft : without prejudice and for discussion purpose only".

13. However, the Court need not strictly decide the controversy as to whether or not all the terms and suggestions discussed and / or finalized at the Meeting of 1st February 2005 were incorporated in the draft finally sent by the Plaintiffs, i.e. in Exh.P-10. What is important to note is that all this still means that the parties were trying to prepare an agreed draft, expecting to put the same on an engrossment paper, stamp the same and then execute the contract. Far from requiring this Court to take a different view on the basic understanding between the parties referred to above ( namely, to be bound only when the MOU was actually signed), the discussions and events noted above show that the parties were only trying to finalize the terms so as to conclude the contract by signing the MOU. From the evidence on record it does not emerge that the parties were working on a mere formality, namely, the MOU, whilst being ad idem on the fact that there was already a concluded contract of sale. Thus, even if at the end of the day, the Plaintiff's case on finalization of all the terms of the MOU in the Meeting of 1st February 2004 as reflected in the draft Exh. P-10 were to be accepted, that still does not take them to a concluded contract. The concluded contract was to be only by execution of the MOU and not by simply finalizing the terms of the MOU.

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14. It is trite to say that whenever a contract is concluded, it is the essential commercial terms of bargain which are finalized first, then the parties hammer out a mutually acceptable text of the contract, and then execute the same. It is quite possible that in a given case, the intention of parties may be to be bound by the essential terms of the bargain without waiting for finalization of the text of the document or execution of the document. In such a case, there is a concluded bargain even before finalization of a formal document or execution of the same. In fact, finalization and execution of a formal document is itself a term of the concluded bargain, which reflects on the performance of the concluded bargain and does not form part of the making of the bargain. On the other hand, there are cases where finalization and execution of a document is itself an essential term of the bargain and there is simply no bargain unless and until such document is executed.

15. The Privy Council in Shankaral Narayandas Mundade vs. The New Mofussil Co. Ltd. & Ors.1 held inter alia as follows:

"7... The Chief matter of dispute before him was an allegation by the defendant company that Nandurdikar had refused to accept the terms put before him by Manekshaw, and had reopened the negotiations. It was said that by reason of his attitude, either the business had never proceeded beyond the stage of negotiation, or that, alternatively after a contract had been concluded it was re-opened and the parties entered into negotiations afresh, which negotiations did not result in a concluded agreement...."

8. … By the law of India, such an oral contract is valid and enforceable. It was, however, natural enough that the parties should

1 AIR 1941 Bombay 247

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wish to have their agreement put in writing and drawn up in proper form...."

"10.... It is a question of construction whether the execution of the further contract is a condition or term of the bargain, or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed will in fact go through...."

"11. … The question to be decided was in his opinion, whether, a draft agreement and engrossment being evidently contemplated by the parties, the contract can be said to be complete without the formal agreement being signed and executed...."

16. In Gostho Behari Sirkar vs. Surs Estates Ltd.2, the Court quoted with approval the relevant observations from the decisions of the House of Lords in (1878) 3 AC 1124, which are to the following effect :

" It has been established for far too long a time, and by some precedents in your Lordships House, that if you can find the true and important ingredient of an agreement in that which has taken place between two parties in the course of a correspondence, then, although the correspondence may not set forth, in a form which a solicitor would adopt if he were instructed to draw an agreement in writing, that which is the agreement between the parties, yet, if the parties to the agreement, the thing to be sold, the price to be paid and all those matters, be clearly and distinctly stated, although only by letter, an acceptance clearly by letter will not the less constitute an agreement in the full sense between the parties, merely because that letter may say. We will have this agreement, put into due form by a solicitor...."

2 AIR 1960 Calcutta 752

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17. In Whymper & Co. vs. Buckle & Co.3, it was held as follows:

….. there is no principle of law better established than this that even although parties may intend to have their agreement expressed in the most (482) solemn and complete form that conveyancers and solicitors are able to prepare, still there may be consensus between the parties far short of a complete mode of expressing, it and … imperfect and incomplete description; I mean imperfect and incomplete as regards form...."

…. "as soon as the fact is established of the final mutual assent of the parties to certain terms, and those terms are evidenced by any writing signed by the party to be charged, or his agent lawfully authorized, there exist all the materials which this Court requires to make a legally binding contract...."

18. In Bonnewell vs.Jenkins4, it was held as follows:

" JAMES, L.J._ "... Whether there is a binding contract or not depends on the construction of two letters. It is settled law that a contract may be made by letters, and that the mere reference in them to a future formal contract will not prevent their constituting a binding bargain.... here there is an unconditional acceptance by the Defendant of the Plaintiff's offer, and the reference to the preparation of a formal contract appears to me to be immaterial....."

" BAGGALLAY, L.J.- ".... The signature of such a contract may be made a condition precedent to the existence of any binding bargain, but the letter must be expressed in such a way as to show clearly that such a condition is intended, ....."

3 3 All. 469 @ 478, 482483

4 (1877) 8 Ch D 70 @ 73.

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19. In Brij Mohan & Ors. vs. Sugra Begum and others5, the Court puts the matter thus :

"whether there was such a concluded oral contract or not, would be a question of fact to be determined in the facts and circumstances of each individual case." The Judgment also holds that it has to be established by the Plaintiffs that:

"vital and fundamental terms for sale of immovable property were concluded between the parties orally and a written agreement, if any, to be executed subsequently would only be a formal agreement incorporating such terms which had already been settled and concluded in the oral agreement."

20. In Kollipara Sriramulu vs. T. Aswatha Narayana6, the Supreme Court has observed as follows:

"3. We proceed to consider the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase AIR 1968 SC 1028oney was not actually agreed upon. It was submitted on behalf of the appellant that there was no contract because the sale was conditional upon a regular agreement being executed and no such agreement was executed. We do not accept this argument as correct. It is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is

5 (1990) 4 SCC 147

6 AIR 1968 SC 1028

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made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case. As observed by the Lord Chancellor (Lord Cranworth) in Ridgway

v. Wharton (1857) 6 HLC 238 at p. 263, the fact of a subsequent agreement being prepared may be evidence that the previous negotiations, did not amount to a concluded agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement. In Von Hatzfeldt-Wildenburg v. Alexander, (1912) 1 Ch 284 at p. 288, it was stated by Parker, J. as follows :

"It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further con- tract between the parties, it is a question of construction whether the execution of the further contact is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored." In other words, there may be a case where the signing of a further formal agreement is made a condition or term of the bargain, and if the formal agreement is not approved and signed there is no concluded contract. In Rossier v. Miller, (1878) 3 AC 1124 Lord Cairns said :

"If you find not an unqualified acceptance subject to the condition that an agreement is to be prepared and agreed upon between the parties, and until that condition is fulfilled no contract is to arise then you cannot find a concluded contract."

In Currimbhoy and Company Ltd. v. Creet 60 Ind App 297 = (AIR 1933 PC 29) the Judicial Committee expressed the view that the principle of the English law which is summarised in the judgment of Parker, J. in (1912) 1 Ch 284 was applicable in India. The question in the present appeals is whether the execution of a formal agreement was

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intended to be a condition of the bargain dated July 6, 1952 or whether it was a mere expression of the desire of the parties for a formal agreement which can be ignored. The evidence adduced on behalf of respondent No. 1 does not show that the drawing up of a written agreement was a pre-requisite to the coming into effect of the oral agreement. It is therefore not possible to accept the contention of the appellant that the oral agreement was ineffective in law because there is no execution of any formal written document. As regards the other point, it is true that there is no specific agreement with regard to the mode of payment but this does not necessarily make the agreement ineffective. The mere omission to settle the mode of payment does not affect the completeness of the contract because the vital terms of the contract like the price and area of the land and the time for completion of the sale were all fixed. We accordingly hold that Mr. Gokhale is unable to make good his argument on this aspect of the case".

21. In Dresser Rand S.A. vs. Bindal Agro Chem Ltd. and Anr.7 the Court held as follows :

"Parties agreeing upon the terms subject to which a contract will be governed, when made, is not the same as entering into the contract itself. Similarly, agreeing upon the terms which will govern a purchase when a purchase order is placed, is not the same as placing a purchase order. A prelude to a contract should not be confused with the contract itself."

22. A review of the aforecited authorities clearly indicates that whether the execution of a formal contract is a condition precedent to the existence of a binding bargain or whether it is merely a term of a binding bargain already arrived at, is essentially a question of fact to be determined in the facts and circumstances of each individual case. What is important is to gather the intention of the parties from the evidence on record. If the parties intend that the final mutual assent of the parties

7 (2006) 1 SCC 751

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would conclude the contract so that a formal document is merely ancillary to the bargain, reference to such formal contract notwithstanding, the contract is concluded upon such final mutual assent. If on the other hand, the parties intend that the contract would come into being only when they sign a formal contract and not at any time before, it is immaterial that the terms of the contract are finalized. There is no contract unless and until the document is signed. Every such contract is arrived at orally first and later finalized, but that is only a prelude to the contract, not to be confused with the contract itself.

23. As discussed above, in the present case, the intention of the parties was to be bound only when the MOU was actually signed between them. The purchaser was anxious that the same is signed even before the parties met in Mumbai for a more formal actual agreement. The vendor ensured that both the parties would be bound when the MOU was signed by the vendor, by satisfying himself that only the signed document ( signed by the purchaser) would be sent to him for signature. The MOU having not been finally signed between the parties, there is no concluded contract. Issue No.1 is, accordingly, answered in the negative.

24. Issue No. 2 If the Issue No. 1 is answered in the affirmative, whether the Plaintiffs prove that the contract entered into between the Plaintiffs and the Defendant is capable of specific performance?

Since the issue No. 1 is answered in the negative, the question of answering Issue No. 2 does not arise.

25. Issue No.3:

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Whether the Plaintiffs prove that they were and are ready and willing to perform their part of the contract for the purchase of the suit property?

Since Issue No. 1 is answered in the negative, the above Issue is not relevant and need not be answered.

26. Issue No. 3 (a):

Whether the Plaintiffs prove that they are entitled to a decree of specific performance?

Since Issue No. 1 is answered in the negative, consequently the above Issue is also answered in the negative.

27. Issue Nos. 3 (b), 3 (c ) and 3 (d):

3 (b) Whether the Defendant proves the hardship as alleged in paras 23A and 23B of her amended Written Statement?

3 (c ) Whether by reason of the alleged hardship, discretion to grant specific performance should not be exercised.

3 (d): In the event of the Court not granting specific performance in favour of the Plaintiffs, whether the Plaintiffs are entitled to compensation in lieu of specific performance?

Since Issue No. 1 is answered in the negative, the question of considering the above Issues does not arise.

28. In view of the above, the Suit is dismissed and is accordingly disposed of. However, there shall be no order as to costs.

(S.J. KATHAWALLA, J.)

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