2012 (11) TMI 874 - HC - Companies Law

Sale of shares - performance of an oral agreement - concluded contract - plaintiff/ appellants had prepared four pay orders for an aggregate sum of Rs. 4.11 crores in favour of the respondent no. 3 - plaintiff/ appellant as made out in the application for injunction was that the respondents nos. 1 and 2 expressed their inability to complete the transaction on that date and the meeting was deferred to a future date Held that - In appeal the High Court after appreciating the entire evidence on record found that an oral agreement for sale had actually taken place. Here also the principle of law re-stated that an oral agreement is as much legal and valid as a written agreement for sale has to be understood in the context that the existence of an oral agreement was proved clearly. But in this case it cannot be said that the plaintiff could establish the existence of a concluded contract on the basis of the materials filed so far. In a suit based on an oral contract for sale the burden is on the plaintiff to prove by cogent evidence that such agreement took place between the parties. The stage of evidence had not yet arrived in the suit and it is for the plaintiff to thrash it by adducing evidence to establish the existence of a concluded contract. It cannot be held that the plaintiff has been able to prove the existence of an oral contract between the parties or to make out a prima facie case for the grant of an interim injunction - Trial Judge has rightly dismissed the application

Issues Involved:
1. Specific performance of an oral agreement.
2. Prima facie case for interim injunction.
3. Compliance with SEBI regulations.
4. Existence of a concluded contract.
5. Burden of proof in an oral contract for sale.

Detailed Analysis:

1. Specific Performance of an Oral Agreement:
The appellant argued that the Specific Relief Act, 1963 does not bar the specific performance of an oral agreement if it is legal and valid. The appellant cited case law to support the proposition that the value of an oral agreement is as good as a written agreement. However, the court noted that while an oral contract can be specifically enforced, the burden is on the plaintiff to prove its existence through cogent evidence. In this case, the plaintiff failed to establish the existence of a concluded contract based on the materials filed so far.

2. Prima Facie Case for Interim Injunction:
The appellant contended that they had made out a prima facie case for interim relief. They argued that the conduct of the parties demonstrated an agreement for the sale of shares and that they had taken reasonable steps towards its implementation. However, the court found that the plaintiff's own letters suggested that the transaction was yet to be completed, indicating that the parties were still at a negotiating stage. The lack of acceptance or confirmation from the respondents further weakened the appellant's case for interim relief.

3. Compliance with SEBI Regulations:
The respondents argued that the plaintiff company was required to comply with the SEBI (Substantial Acquisition of Shares and Take Over) Regulations, 1997 if it had indeed entered into a contract for acquiring 98% shares of the respondent no. 3 company. The appellant countered that these regulations were not applicable in the present case. The court did not delve deeply into this issue, as the primary focus was on the existence of a concluded contract and the prima facie case for interim relief.

4. Existence of a Concluded Contract:
The court held that there was no concluded contract between the parties. The learned Trial Judge had rightly observed that the parties were still at a negotiating stage. The letters written by the appellant indicated that the transaction was incomplete and that there was no acceptance or confirmation from the respondents. The court emphasized that the burden of proving the existence of a concluded contract was on the plaintiff, which they failed to do at this stage.

5. Burden of Proof in an Oral Contract for Sale:
In a suit based on an oral contract for sale, the burden is on the plaintiff to prove by cogent evidence that such an agreement took place between the parties. The court noted that the stage of evidence had not yet arrived in the suit, and it was for the plaintiff to establish the existence of a concluded contract through evidence. The court found that the plaintiff had not been able to make out a prima facie case for the grant of an interim injunction based on the pleadings and documents filed.

Conclusion:
The court upheld the learned Trial Judge's decision to dismiss the plaintiff/appellant's application for interim relief, finding no infirmity in the judgment. The appeal was dismissed, but the court clarified that this finding was merely for the purpose of considering the appellant's entitlement to interim relief. The appellant was given the liberty to adduce further evidence in support of their case during the trial, and the learned Trial Judge was instructed not to be influenced by the present finding while deciding the suit on merit. There was no order as to costs.

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