2012 (4) TMI 717 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the plaint discloses a cause of action.
2. Whether the Memorandum of Understanding (MOU) constitutes a legally enforceable agreement to sell.
3. Whether the MOU was void due to non-compliance with its terms.
4. Applicability of Section 7 of the Indian Contract Act, 1872.

Summary:

Issue 1: Whether the plaint discloses a cause of action.

The appellants filed an application u/s Order 7 Rule 11 read with Section 151 of the Code of Civil Procedure, 1908, seeking rejection of the plaint on the ground that it lacked cause of action. The court held that while adjudicating an application under Order 7 Rule 11, the court must treat the averments made in the plaint as correct and true. The court is required to ascertain whether the allegations throw up a cause of action. The plaint disclosed a cause of action as it raised questions of fact and law, thus the suit ought not to be dismissed.

Issue 2: Whether the Memorandum of Understanding (MOU) constitutes a legally enforceable agreement to sell.

The appellants contended that the MOU was merely an agreement to enter into an agreement to sell and not an agreement to sell itself. The court examined the terms of the MOU and found that the fundamental terms of the transaction, such as particulars of the property, total sale consideration, and the manner of payment, were agreed upon and provided for in the MOU. The court held that the MOU constituted a legally enforceable agreement as the fundamental terms were in writing and the respondent adhered to these terms by making payments, which were accepted by the appellants.

Issue 3: Whether the MOU was void due to non-compliance with its terms.

The appellants argued that the MOU stood dissolved as the payments referred to in the MOU were not made before the stipulated date. The court noted that the sum of Rs. 25 lakhs was paid in two tranches, with the latter payment being made beyond the stipulated date. The court found that the appellants did not offer to return the money or recall the offer to sell the property. Thus, the MOU was not voided due to non-compliance with its terms.

Issue 4: Applicability of Section 7 of the Indian Contract Act, 1872.

The appellants contended that the MOU was merely a proposal and its acceptance should be absolute and unqualified for it to be a legally enforceable agreement, relying on Section 7 of the Indian Contract Act, 1872. The court held that Section 7 had no application as the acceptance of the terms was reflected in the MOU, which was not in dispute. The court emphasized that specific performance can be sought of an oral agreement, and there is no necessity for an agreement to be in writing and bear the signatures of both parties.

Conclusion:

The court concluded that the plaint disclosed a triable cause of action, the MOU constituted a legally enforceable agreement, and the MOU was not void due to non-compliance with its terms. The appeal was dismissed with costs of Rs. 25,000/- to be paid by the appellant to the respondent. The observations made would have no impact on the final adjudication of the case.