Supreme Court of India

U.P. Rajkiya Nirman Nigam Ltd vs Indure Pvt. Ltd. & Ors on 9 February, 1996
[1996 SCC (2) 667]

Para 16

Page 9

Since the tenders - the source of the contract between the parties - had not transformed
into a contract, even if the proposal and counter proposal are assumed to be constituting
an agreement, it is a contingent contract and by operation of Section 32 of the Contract
Act, the counter proposal of the respondent cannot be enforced since the event of entering
into the contract with the Board had not taken place.

In Ramji Dayawala & sons [P] Ltd. v. Invest Import [AIR 1981 SC 2085], a two-Judge
Bench of this Court considered the existence of the contract and arbitration clause
thereunder. This Court had held that in the facts of a given case acceptance of a
suggestion may be sub silentio reinforced by the subsequent conduct. Where there is a
mistake as to terms of a document, amendment to the draft was suggested and a counter-
offer was made, the signatory to the original contract is not estopped by his signature
from denying that he intended to make an offer in the terms set out in the document.
Where the contract is in a number of parts it is essential to the validity of the contract that
the contracting party should either have assented to or taken to have assented to the same
thing in the same sense or as it is sometimes put, there should be consensus ad idem. In
that case a sub-contract was signed and executed by the Managing Director of the
appellant-Company but part of the contract was altered subsequently since counter-
proposal was given by the respondent. This Court had held that one such case is where a
part of the offer was disputed at the negotiation stage and the original offeree
communicated that fact to the offeror saying that he understood the offer in a particular
sense; this communication probably amounts to a counter-offer in which case it may be
that mere silence of the original offeror will constitute his acceptance. Where there is a
mistake as to the terms of the documents as in that case, amendment to the draft was
suggested and a counter-offer was made, the signatory to the original contract is not
estopped by his signature from denying that he intended to make an offer in the terms set
out in the document; to wit, the letter and the cable. It can, therefore, be stated that where
the contract is in a number of parts it is essential to the validity of the contract that the
contracting party should either have assented to or taken to have assented to the same
thing in the same senseor as it is sometimes put, there should be consensus ad idem. It
was held that there was no consensus ad idem to the original contract. It was open to the
party contending novatio to prove that he had not accepted a part of the original
agreement though it had signed the agreement containing that part.

As found earlier, there is no signed agreement by a duly competent officer on behalf of

In view of the fact that Section 2 [a] of the Act envisages a written agreement for
arbitration and that written agreement to submit the existing or future differences to
arbitration is a pre-condition and further in view of the fact that the original contract itself
was not a concluded contract, there existed no arbitration agreement for reference to the
arbitrators. The High Court, therefore, committed a gross error of law in concluding that
an agreement had emerged between the parties, from the correspondence and from
submission of the tenders to the Board. Accordingly it is declared that there existed no
arbitration agreement and that the reference to the arbitration, therefore, is clearly illegal.
Consequently arbitrators cannot proceed further to arbiter the dispute, if any. The
conclusion of the High Court is set aside.

The appeal is accordingly allowed with costs quantified at Rs.15,000/-.

Karnataka High court

Esteem v. Upkar Developers (India) Pvt. Ltd. [2013 SCC OnLine Kar 5069 ]
Page 4

Para 7

FACTUAL MATRIX:

7. Petitioner and respondent-company represented by its Managing Director entered into an agreement on 26-4-
2008 - Annexure-B whereunder it was agreed that respondent would pay to the petitioner a professional fee of
1.25% (exclusive of service tax) on the value of land agreed for joint development which was valued at Rs. 200
Crores. It was also agreed that 1% of the professional fee would be released on the same day in proportionate to
release of funds towards advance of Rs. 35 Crores by the developer - M/s Era Land Marks India Limited, New
Delhi, which was agreed to be released after getting such advance payment from the developer. It was further
agreed that respondent would pay the remaining 0.25% soon after the first building foundation of the project. In
other words, the total professional fee agreed to be paid by respondent to petitioner was Rs. 2.50 Crores. The
petitioner also agreed for the respondent making payment of Rs. 33,00,000 directly to M/s Sanjiv Bayana of
Delhi from out of the total professional fee of Rs. 2.5 Crores.

8. The basis for entering into such contract between the parties was on account of the land measuring 36 acres 4
guntas situated at Kengeri village, Bangalore South Taluk which had been converted for residential purposes
being available with the promoters/directors of the respondent-company and they were on the look out of a
developer with repute and who was capable of investing huge amount and was

approached by the petitioner who agreed to use their expertise in the field of real estate and secure a developer.
In this direction, the petitioner has introduced M/s Era Land Marks India Limited, New Delhi, to the respondent-
company and after negotiation and discussion, the offer made by the said developer to the respondent- company
which was the highest offer by any developer made during the said period came to be accepted by the
respondent-company and accordingly a joint development agreement came to be entered into between
respondent-company and M/s Era Land Marks India Limited, New Delhi on 5-7-2008 - Annexure-A which was
duly registered in the office of Sub Registrar, Kengeri. Prior to the execution of said joint development
agreement, agreement dated 26-4-2008 - Annexure-B referred to herein above came to be entered into between
the petitioner and the respondent-company.

9. It is not in dispute that pursuant to the agreement dated 26-4-2008 - Annexure- B entered into by the
respondent-company with the petitioner, the following amounts have been paid:

i) Rs. 33 lakhs paid to Sri. Sanjiv Bayanna ii) Rs. 28 lakhs paid to Sri. Jeevaraj iii) Rs. 23 lakhs paid to each of
the petitioners Thus, in all, Rs. 1,07,00,000 was paid by the respondent-company under the agreement dated 26-
4-2008 - Annexure-B. On these factual aspects, there is no dispute between the parties.

CONTENTIOUS ISSUE:

10. The claim of the petitioner is: under agreement dated 26-4-2008 - Annexure-B the respondent-company was
required to pay to the petitioner the balance amount of Rs. 1,43,00,000 immediately after laying of the first
building foundation of the project to be constructed by the developer as per the joint development agreement
and despite laying of the foundation to the first building of the project having been completed as per the
permission granted by the Bangalore Mysore Infrastructure Corridor Local Planning Authority and said amount
has not been paid which was due to them despite demand made by petitioner. Thereafter petitioner issued
statutory notice demanding payment of the balance amount and due to non compliance of said demand by the
respondent-company, present petition seeking winding up of the respondent-company has been filed contending
that respondent is unable to pay its admitted debt.

11. Respondent has contended that joint development agreement entered into between respondent and M/s Era
Land Marks Limited on 5-7-2008 came to be modified and an addendum (supplementary) agreement came to be
executed between the parties on 28-10-2009 and the amount agreed to be paid by the said developer to HUDCO
towards the outstanding loan amount of the respondent, having not been complied with by the said developer
there was improper fulfillment of the condition stipulated and in view of the same the petitioners would not be
entitled to contend that all the conditions stipulated in the agreement entered into with them on 26-4- 2008 -
Annexure-B by respondent is to be complied and as such respondent-company contended that it is not liable to
pay the professional fee of 1.25%. It was also contended that under the joint development agreement, developer
was to get 37% undivided interest and on account of subsequent development, the said percentage got reduced
to 29.5% and so also the security deposit to be paid by developer to respondent came to be reduced from Rs. 35
Crores to Rs. 25 crores and hence it is contended that payments made to the petitioner is itself a excess payment
and as such, they are not entitled to any further payment.

Para 25
Page 10

25. It is not in dispute that petitioner was successful in ensuring that respondent - company enters into a joint
development agreement with M/s Era Land Marks India Limited on 5-7-2008 which is at Annexure-A. The said
agreement stipulates the conditions required to be performed by each of the parties. All such reciprocal promises
required to be performed as stipulated in the agreement is not required to be delved upon by this Court.
However, some of the essential terms of the said contract which would have a bearing on the claim of
petitioners are extracted hereinbelow:

(1) The developer was required to pay a security deposit of Rs. 35 Crores to the respondent.

(2) The undivided share to which the respondent-company was entitled determined at 37%.

(3) Existing HUDCO loan raised by the respondent and its stake holders was agreed to be cleared by the said
developer M/s Era Land Marks India Limited within 90 days from the date of Joint-Development agreement.

Undisputedly, petitioner had participated, negotiated and mediated for the parties to enter into joint development
agreement. In fact, petitioners themselves agree in the present petition that they used their long standing
expertise in the real estate field and their good offices to persuade M/s Era Land Marks India Limited enter into
a joint development with the respondent-company which ultimately resulted in Joint- Development Agreement
dated 5-7-2008 coming into existence on account of the negotiation and discussion made by the petitioner. It is
because of this precise reason the agreement dated 26-4-2008 between respondent and petitioner came into
existence whereunder respondent agreed to pay to the petitioners a professional fee of Rs. 2.50 crores. The said
contract is a contemporaneous contract entered into between respondent and petitioner. In other words, the
performance of obligations under the said agreement was dependent on the performance of the obligations by
the parties to the Joint Development agreement dated 5-7-2008 - Annexure-A.

26. On account of various reasons, the parties namely, the respondent and the developer could not implement
the dated 5-7-2008 in its entirety and as such they entered into an Addendum on 28-10-2009 - Annexure-R2
under which it was agreed to between the parties that:

(1) Undivided share/interest of the respondent company would be reduced from 37% to 29.5%.

(2) Security deposit payable by developer to the respondent was reduced from Rs. 35 Crores to Rs. 25 Crores.

(3) The loan amount agreed to be paid to HUDCO is not agreed to be paid by the developer from out of the
security deposit payable to the respondent.

These conditions agreed to between the parties would indicate that there was substantial modification amongst
other conditions to the original agreement dated 5-7 -2008. This would also indicate that claim of the petitioner
which was based on the Joint-Development dated 5-7-2008 got eclipsed by virtue of the Addendum dated 28-
10-2009 and thereby benefits which would have accrued to the respondent got substantially reduced. It is
because of these subsequent developments, the respondent has attempted to stave of the claim made by
petitioner contending that debt is not admitted and such a plea cannot be brushed aside as a false defence. It is to
be further noticed that respondent - company and the developer are now at logger heads and they have ignited
the arbitration proceedings and same is pending before the Arbitral Tribunal as admitted to by the learned
Advocates appearing for the parties. In this background, it cannot be held or construed that the defence set up by
the respondent-company to be either moon shine or a frivolous one to discard it or to construe the said defence
raised by the respondent without any basis. In that view of the matter, I am of the considered view that the
dispute raised by the respondent to deny the claim of petitioner is bonafide and one of substance and such
dispute cannot be construed as frivolous or brushed aside as a cloak to hide its inability to pay the debt and
prima facie respondent has established that plea putforward by way of defence in the statement of objections is a
bonafide plea. In that view of the matter, point No. (2) formulated herein has to be answered in favour of
respondent and against petitioner.

27. In view of the fact that arbitration proceedings are pending between respondent -company and the developer
M/s Era Land Marks India Private Limited, New Delhi, petitioner would be at liberty to work out its remedies
after conclusion of arbitration proceedings and liberty is reserved to the petitioner in this regard.

28. For the reasons aforestated, Company petition is hereby dismissed. Parties are directed to bear their
respective costs.