Authority: Calcutta High Court, Civil Appellate Jurisdiction

Order Date: 10 September 2026

Case Overview

  • Parties: Vendors – Umadevi Agarwalla & others (owners of Bhoomi Minerals Ltd); Purchasers – Nirmal Kanodia & others.
  • Underlying Transaction: Memorandum of Understanding (MOU) dated 20 September 2010 for the sale of Bhoomi Minerals Ltd, a sponge‑iron plant (100 MT/day) in Dhanbad, Jharkhand, for Rs 28.01 crore. The company had a bank loan of approximately Rs 22 crore with Indian Overseas Bank, secured by a charge and personal guarantees.
  • Payment Details: Purchasers paid Rs 1 crore (including Rs 50 lakh on execution) before the MOU was formally executed, which was recorded in the MOU as discharge of part of the bank dues.
  • Key MOU Clauses:
  • Clause 3 – Board meeting to appoint purchasers’ nominees and vendor directors’ resignation.
  • Clause 6 – Rs 50 lakh payable on execution; balance payable by 30 Nov 2010, subject to transfer of at least 51 % of shareholding.
  • Clause 14 – Purchasers to assume the bank liability (≈Rs 22 crore) from 21 Sept 2010.
  • Clause 15 – Purchasers to obtain release of vendors’ guarantees and pledged collateral by 31 Mar 2011; if not, balance consideration payable pending share transfer.
  • Breach Events: Vendors never transferred any shares, did not convene the board, and did not resign. Purchasers sent an SMS on 24 Sept 2010 declaring the MOU cancelled and seeking refund of the amount paid.
  • Lower Court Decrees:
  • C.S. 124/2011: Decreed Rs 5.51 crore in favour of vendors for breach by purchasers.
  • C.S. 264/2012: Decreed refund of Rs 1 crore to purchasers.
  • Appeals:
  • APD No. 5/2026 (purchasers) challenged the Rs 5.51 crore decree.
  • OCOT No. 5/2026 (vendors) cross‑objected to findings.
  • APDT No. 18/2026 (vendors) sought dismissal of the refund decree and adjustment of Rs 1 crore against the damages decree.

Legal Reasoning

  • The Court affirmed the MOU’s validity and binding nature.
  • A harmonious construction of clauses 3, 6, 14 and 15 shows that share transfer and board reconstitution were to occur immediately upon execution and payment of Rs 50 lakh, enabling purchasers to assume the bank liability.
  • Vendors failed to perform these primary obligations; therefore, under Sections 51‑54 of the Indian Contract Act, 1872, they could not claim performance of the purchasers’ balance‑payment promise.
  • The purchasers’ termination on 24 Sept 2010 was a lawful avoidance under Section 53, as the vendors had already breached the contract.
  • The claim for Rs 5.51 crore relied on an alleged distress‑sale MOU dated 10 Feb 2011 (Exhibit F) for Rs 22.50 crore, but no evidence of any share transfer, receipt of consideration, or statutory filing exists. Consequently, the loss could not be quantified.
  • No forfeiture clause exists in the MOU; Section 65 requires restitution of any advantage received. Only Rs 50 lakh was an earnest payment; the remaining Rs 50 lakh was part payment of the purchase price used to discharge bank dues and is not forfeitable.
  • The Court therefore held the vendors’ damages claim unsubstantiated and set aside the decree.
  • The refund decree of Rs 1 crore to purchasers is upheld as restitution for the amount paid under a voidable contract.

Final Outcome

  • APD No. 5/2026: Allowed. Decree of Rs 5.51 crore (C.S. 124/2011) set aside; C.S. 124/2011 dismissed.
  • OCOT No. 5/2026: Dismissed; cross‑objection rejected.
  • APDT No. 18/2026: Dismissed; decree of Rs 1 crore (C.S. 264/2012) affirmed with interest.
  • All pending applications in the three matters disposed of; no order as to costs.

Topics: Contract Enforcement, Corporate Sale Dispute, Court Judgment