HONOURABLE SRI JUSTICE P.NAVEEN RAO
AND
HONOURABLE SRI JUSTICE J.SREENIVAS RAO
CIVIL MISCELLANEOUS APPEAL NO.216 OF 2022
DATE: 15.09.2022.
Between:
M/s. Landman Ventures LLP
(formerly Mantena Realty LLP),
A Limited Liability Partnership Act Firm,
Rep.by its Designated Partner Srujana Mantena,
Having its Regd.Office at Mantena House,
2-56-33/12A, Khanamet, Madhapur,
Hyderabad.
.... Appellant/petitioner
And
M/s.Jubilee Hills Co-operative House Building
Society Limited, a registered Society,
Rep.by its President, B.Ravindranath,
Road No.17-A, Jubilee Hills, Hyderabad,
Hyderabad.
..... respondent/respondent
The Court made the following :
PNR,J & JSR,J CMA No.216 of 2022 2 HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HONOURABLE SRI JUSTICE J.SREENIVAS RAO CIVIL MISCELLANEOUS APPEAL NO.216 OF 2022 JUDGMENT: (Per Hon'ble Sri Justice P.Naveen Rao) Heard learned senior counsel Sri Dammalapati Srinivas appearing for Sri P.Srinivas Rao, learned counsel for the appellant and learned senior counsel Sri D.V.Sitaram Murthy, appearing for Sri R.Sridhar learned counsel for respondent.
2. Appellant is a Limited Liability Partnership (LLP) firm involved in the business of real estate development. Respondent is a Co-operative Society, registered under the Telangana State Co-operative Societies Act, 1964. The respondent is owner of land admeasuring 6072 square yards in Sy.No.403/1 (old) / 120 (new), Shaikpet village and Sy.No.102/1 of Hakimpet village, (Road No.1, Jubilee Hills), Hyderabad (hereinafter referred to as schedule property). On 15.06.2020, appellant and respondent entered into Development Agreement-cum-General Power of Attorney (hereinafter called as 'agreement') to develop schedule property by constructing a building for commercial/retail use. It is the case of the appellant that as per the terms of agreement, appellant was put in possession. Immediately appellant initiated process to obtain necessary permissions and commissioned an architect to draw up floor plans.
PNR,J & JSR,J CMA No.216 of 2022 3 However, on 05.05.2022, notice was issued by respondent canceling the agreement. Alleging that respondent has been attempting to dispossess the appellant from schedule property and cancellation of agreement is illegal, appellant filed AOP No.4 of 2022 under Section 9 of Arbitration and Conciliation Act, 1996 in the Court of Vacation Civil Judge-cum-II Additional Chief Judge, City Civil Court, Hyderabad (trial Judge), praying to grant injunction restraining respondent/persons through it from interfering with appellant's possession of schedule property and to grant injunction restraining the respondent from undertaking further actions/steps against the appellant in pursuance to cancellation notice dated 05.05.2022, pending commencement of arbitral proceedings.
3. It is pleaded case of appellant that agreement do not envisage right to terminate the agreement by the owner of the schedule property and therefore pending arbitration proceedings appellant possession cannot be disturbed. Respondent opposed the prayer to grant injunction.
4. On assertions of appellant that he was put in possession of schedule property and his possession cannot be disturbed, the learned trial Judge held that possession granted to appellant is only permissive possession for the limited purpose of carrying out development work and after termination of agreement the appellant is no more entitled to claim possession. The trial Judge further held that validity of the agreement is PNR,J & JSR,J CMA No.216 of 2022 4 doubtful as before entering into the agreement by the President and Secretary on behalf of the Society they have not obtained permission from Registrar of Co-operative Societies as mandated by Rules 42 and 62 of the Telangana State Cooperative Societies Rules, 1964 (Rules). The trial Judge further noticed that the then Secretary was having personal interest in the appellant and, therefore, he was not acting bona fidely in the interests of the society. The trial Judge further observed that there cannot be a restraint on the owner of schedule land from termination of the agreement and clause 12.4 is contrary to Section 23 of the Indian Contract Act. The trial Judge also observed that no material was produced to show that appellant has commenced development activities in the schedule property. The trial Judge further noted that the respondent came forward to refund security deposit of Rs.2 crores. Having regard to above findings and observations, the trial Judge held that appellant has not satisfied three ingredients to grant injunction i.e., prima facie case, balance of convenience and irreparable injury and declined to grant injunction prayed by the appellant.
5. Learned senior counsel for appellant has taken through various clauses of the agreement, particularly clauses 2.1, 3.2, 3.4, 4.3, 4.5, 5.7, 6.4, 10.13 and 12.4. According to the learned senior counsel notice of termination is ex facie illegal as no such power is vested on the owner to PNR,J & JSR,J CMA No.216 of 2022 5 terminate the agreement and it is only the appellant who can terminate the agreement.
5.1. He would further submit that as held by this Court in M.A.Jabbar and another v. Life Insurance Corporation House Building Employees Society, Hyderabad and others1, prior sanction of Registrar of Societies is not required to enter into any agreement by the society and, therefore, the agreement is not vitiated on this ground.
5.2. He would submit that trial Judge grossly erred in not granting injunction by referring to Rules 42 and 62 of the Rules. 5.3. He would submit that in terms of agreement clauses, absolute possession is vested in the appellant, he is in physical possession and it is not permissive possession and such possession cannot be disturbed by the society.
6. Per contra, learned senior counsel for respondent submits that the learned trial Judge considered all aspects and for the reasons recorded in the order he declined to exercise equity jurisdiction to grant injunction. He would submit that the order of trial Judge refusing injunction is not confined to application of Rules 42 and 62 of the Rules. 1 2000 (2) ALD 2 PNR,J & JSR,J CMA No.216 of 2022 6 6.1. He would submit that as per clause 4 of the agreement, possession granted to appellant was only permissive possession. Drawing attention to clauses 4.1 and 4.3 he would submit that to take up full-fledged development of the property supplementary agreement is required and no such agreement is entered into.
6.2. By pointing out to the clauses 11.1, 11.2, 12.2, 12.3 and 12.4 he would submit that they are very strange clauses sacrificing the interest of the owner. There cannot be a bilateral agreement which prohibits the owner the right to annul the agreement and vests exclusive right to annul in the developer. These clauses clearly point out the mala fide intention of their former President and the Secretary to collude with the appellant. As noticed by the trial Judge, former Secretary was acting on behalf of appellant. The issue was debated in the society and on review of the terms of contract, it was decided to terminate the agreement. The decision is in the best interests of the society. To grant equitable order, the trial Court can also assess the conduct of the parties. The terms of agreement and not obtaining prior consent from the Registrar of Co-op. Societies and former Secretary acting for the appellant clearly point out lack of bona fides. He would submit that the owner can take recourse to Section 203 of the Contract Act as there was no progress on construction. Issues were only at the preparatory stage. There was no PNR,J & JSR,J CMA No.216 of 2022 7 progress in the work. The society was not intending to cause any loss to appellant. Therefore, society offered to refund the deposit and also compensate any expenses incurred by the appellant. Contract clause envisages 18% interest. Thus, appellant is not subjected to any loss by cancellation of agreement.
6.3. He would submit that the scope of power of appellate Court against interlocutory order of trial Court refusing to exercise equity and discretionary jurisdiction is very limited. It does not sit in appeal like in a civil appeal. As long as the trial Court assigned cogent reasons in support of its decision, the appellate Court ought not to interfere. 6.4. He would submit that appellant has not shown irreparable loss and balance of convenience to secure injunction. Merely making out prima facie case is not sufficient.
6.5. Learned senior counsel relied on following decisions:
(i) Common judgment in CMA Nos.43 and 45 of 2021 of AP High Court dated 25.01.2022;
(ii) This Court judgment in CMA No.531 of 2021 dated 18.02.2022
7. We have carefully considered respective submissions and gone through the record of the appeal. Several contentions are raised by both senior counsel on various aspects of agreement. We are not dealing with PNR,J & JSR,J CMA No.216 of 2022 8 these submissions as they are required to be considered in the arbitral proceedings. Only issue for consideration is whether the trial Court erred in not granting injunction and whether appellant has made out a case for granting injunction.
8. In CMA No.535 of 2021, a Division Bench of this court to which one of us (PNR,J) is a member on review of law on the scope of power of Court to grant injunction held as under:
"18. The settled principle is that while passing an interim order of injunction under Order XXXIX Rules 1 and 2 of CPC, the Court needs to note three basic principles, namely, a) prima facie case, b) balance of convenience/inconvenience, and c) irreparable loss and injury. Courts do not view consideration of applications for temporary injunctions as a matter of course or right, but one that requires serious pondering. Considering these principles is not mere rhetoric but have to be established beyond doubt in order to warrant interim relief. Along with these essential requirements interim relief is also viewed as an equitable and discretionary relief, where conduct of party will also be examined. It is also settled principle that making out prima facie case is not sufficient in the grant of interim relief. Court must also find that along with prima facie case, refusal to grant the relief will cause injury to the petitioner and in such a manner that it would be irreparable in future course.
19. At the stage of considering injunction application Court cannot hold that plaintiff is most likely to succeed in the suit. Court is only required to assess whether, prima facie case is made out on the dispute raised in the suit, and whether a triable issue is made out. Prima facie case is not to be confused with prima facie title which has to be established, on evidence at the trial. Only prima facie case is a substantial question raised, bona fide, which needs investigation and a PNR,J & JSR,J CMA No.216 of 2022 9 decision on merits (Paragraph-4, Dalpat Kumar vs. Prahlad Singh : (1992) 1 SCC
719). Once this exercise is undertaken, Court then proceeds to assess whether balance of convenience is in favour of plaintiff, whether not granting injunction would result in greater harm to plaintiff which cannot be remedied at the time of passing judgment and decree and to weigh whether mischief or inconvenience likely to cause to plaintiff if injunction is not granted is greater than granting the injunction."
9. It is not in dispute that activity relating to construction of proposed building has not commenced.
10. The relevant clauses to consider this appeal are, clauses 2.1, 4.1, 6.4, 11.1, 11.2, 12.2, 12.3 and 12.4.
11. Suffice to note, these clauses are heavily loaded in favour of appellant and against the owner of the land.
12. To secure an injunction appellant has to satisfy three ingredients, prima facie case, balance of convenience and irreparable injury. Further, even fulfilling these conditions may not be sufficient unless the Court is satisfied that petitioner is bona fidely prosecuting the litigation and it can extend equity jurisdiction to grant discretionary relief of injunction. As fairly submitted by the learned senior counsel for respondent though appellant has made out prima facie case, but that is not sufficient to secure injunction.
PNR,J & JSR,J CMA No.216 of 2022 10
13. As rightly held by the trial Judge, the possession vested in the appellant is for limited purpose of carrying out the development work, before the activity to construct can be taken up. Clause 4.3 envisages supplementary agreement to be entered into by the appellant and the respondent. On analyzing the evidence on record, the trial Court recorded that appellant has not started construction activity. No other material is placed on record to show said finding as erroneous. Thus, possession vested in the appellant is only a permissive possession to carry out initial activity for development of the schedule property. Since, agreement is terminated, unless appellant succeeds in the arbitral proceedings, he cannot undertake any activity. Therefore, balance of convenience to continue possession with appellant is not made out.
14. The respondent Society clearly indicated that it would refund the earnest deposit. It also undertakes to reimburse any expenditure incurred by the appellant and if warranted pay interest as envisaged by the agreement. All aspects of dispute have to be resolved in arbitral proceedings. Therefore, no irreparable injury would be caused to appellant if injunction is not granted.
15. In CMA Nos. 43 and 45 of 2021, a Division Bench of High Court of Andhra Pradesh considered law on the scope of appellate Court PNR,J & JSR,J CMA No.216 of 2022 11 jurisdiction in a appeal against grant/refusal of injunction by trial Court. It held, "31. With respect to the exercise of appellate powers in relation to the exercise of discretion by the trial court in deciding an application for temporary injunction, the Hon'ble Supreme Court in Wander Ltd. v. Antox India P.Ltd. [1990 (supp) SCC 727] held that in such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not re-assess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion.
32. In Esha Ekta Appartments Chs Ltd. v. Municipal Corpn.of Mumbai [(2012) 4 SCC 689] the Hon'ble Supreme Court again considered the scope of appellate court power to interfere in an interim order passed by the court at the first instance and held in paragraphs Nos.19, 20 and 21, which are re-produced, as under:
"19. We have considered the respective submissions and carefully scrutinised the record. The scope of the appellate court's power to interfere with an interim order passed by the court of first instance has been considered by this Court in several cases. In Wander Ltd. v. Antox India (P) Ltd.1, the Court was called upon to consider the correctness of an order of injunction passed by the Division Bench of the High Court which had reversed the order of the learned Single Judge declining the respondent's prayer for interim relief. This Court set aside the order of the Division Bench and made the following observations: (SCC p. 733, para 14) "14. ... In such appeals, the appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by that court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a PNR,J & JSR,J CMA No.216 of 2022 12 different view may not justify interference with the trial court's exercise of discretion."
20. In Skyline Education Institute (India) (P) Ltd. v. S.L. Vaswani, the three- Judge Bench considered a somewhat similar question in the context of the refusal of the trial court and the High Court to pass an order of temporary injunction, referred to the judgments in Wander Ltd. v. Antox India (P) Ltd.1, N.R. Dongre v. Whirlpool Corpn.3 and observed: (S.L. Vaswani case2, SCC p. 153, para 22) "22. The ratio of the abovenoted judgments is that once the court of first instance exercises its discretion to grant or refuse to grant relief of temporary injunction and the said exercise of discretion is based upon objective consideration of the material placed before the court and is supported by cogent reasons, the appellate court will be loath to interfere simply because on a de novo consideration of the matter it is possible for the appellate court to form a different opinion on the issues of prima facie case, balance of convenience, irreparable injury and equity."
21. In these cases, the trial court and the High Court have, after threadbare analysis of the pleadings of the parties and the documents filed by them concurrently held that the buildings in question were constructed in violation of the sanctioned plans and that the flat buyers do not have the locus to complain against the action taken by the Corporation under Section 351 of the 1888 Act. Both the trial court and the High Court have assigned detailed reasons for declining the petitioners' prayer for temporary injunction and we do not find any valid ground or justification to take a different view in the matter."
33. The Wander Ltd. v. Antox India P.Ltd. (supra) fell for consideration in Gujarat Bottling Co.Ltd. v. Coca Cola Co. (1995) 5 SCC 545) wherein the Hon'ble Supreme Court observed that under Order 39 CPC the jurisdiction of the court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against 10 (1995) 5 SCC 545 CPK,J & RNT,J CMA.Nos.43 & 45 of 2021 23 whom he was seeking relief. It is relevant to reproduce paragraph No.47 as under:
"47. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in PNR,J & JSR,J CMA No.216 of 2022 13 respect of the person who seeks an order of injunction under Order 39 Rule 1 or Rule 2 of the Code of Civil Procedure, but also in respect of the party approaching the Court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings".
16. We are in respectful agreement with the view expressed by the Hon'ble A.P.High Court. In the instant case also, the trial Judge looked into the background facts and conduct of the then President and the Secretary in incorporating certain clauses prejudicial to the interest of the society and the fact of the Secretary acting on behalf of appellant and declined to grant equitable and discretionary relief.
17. The trial Court has considered all aspects and by assigning reasons in support of the decision declined to exercise equity jurisdiction. We are of the considered opinion that trial Court has not erred in declining to exercise equity and discretionary jurisdiction to grant injunction prayed by the appellant. There is no merit in the appeal.
18. Appeal is accordingly dismissed. Pending miscellaneous petitions if any shall stand closed.
____________________ P.NAVEEN RAO, J ____________________ J.SREENIVAS RAO, J Date: 15.09.2022 Kkm PNR,J & JSR,J CMA No.216 of 2022 14 HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HONOURABLE SRI JUSTICE J.SREENIVAS RAO CIVIL MISCELLANEOUS APPEAL NO.216 OF 2022 DATE: 15.09.2022 Kkm