Bombay High Court
Shantilal J. Shah & Ors vs Jitendra Sanghavi And Others on 19 November, 2012
Bench: S. J. Kathawalla
KPP 1 nm-2055 of 2012
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 2055 OF 2012
IN
SUIT NO. 1963 OF 2012
Shantilal J. Shah & Ors. ... Plaintiffs/
Applicants
In the matter between:
Shantilal J. Shah & Ors. ... Plaintiffs
Versus
Jitendra Sanghavi and others ... Defendants
Mr. N.H. Seervai, Senior Advocate along with Mr. Shardul Singh, Mr. Tejas Shah and
Mr. Ashish Rao, instructed by M/s. M & M Legal Ventures, for the Plaintiffs.
Mr. A.V. Anturkar, instructed by Mr. S.B. Deshmukh, for Defendant Nos. 1 to 3.
Mr. Iqbal Chagla, Senior Advocate, along with Mr. Gaurav Mehta and Ms. Faiza A.
Dhanani, instructed by M/s. Dhruve Liladhar & Co., for Defendant No.4.
CORAM : S. J. KATHAWALLA, J.
NOVEMBER, 2012
th
ORAL ORDER
1. The above suit is filed by the Plaintiffs for, a declaration that the Development
Agreement dated 25th September 2007 (Exhibit-A to the Plaint) ("the said
Agreement") entered into between the Plaintiffs and Defendant Nos. 1 to 3 and the
Irrevocable Power of Attorney dated 25 th October 2007 (Exhibit-B to the Plaint) ("the
said POA") are valid, subsisting and binding on the Plaintiffs and Defendant Nos. 1
to 3 and also a declaration that the purported letter of termination dated 4 th
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October 2011 (Exhibit-E to the Plaint), terminating the said Agreement and the
said POA, is illegal, wrongful, null and void, for possession from Defendant Nos. 1
to 4 of the immovable property situated at Plot No. 270, Deodhar Road, Matunga,
bearing New Survey No. 885 and Cadastral Survey No. 205/10 of Dadar-Matunga
Division, Mumbai-400 019 along with the building known as "Padmavati Sadan"
thereon consisting of ground plus 3 floors comprising of 19 tenements ("the suit
property") and ordering and directing the Defendant Nos. 1 to 4 to do all such acts,
deeds and things and execute and sign all documents and papers as are necessary
for effectively acting upon, performing and implementing the said Agreement. The
Plaintiffs have also taken out the above Notice of Motion seeking interim reliefs, that
is, appointment of Court Receiver of the suit property and to restrain the Defendants
by an order and injunction from in any manner alienating, encumbering, selling,
transferring and/or creating any third party right, title and/or interest in respect of
the suit property or any part thereof.
2. The facts are briefly are set out hereunder:
3. The Defendant Nos. 1 to 3 are the owners of the the suit property. The
building on the suit property by the name "Padmavati Sadan" is a MHADA cessed
property which is an old and dilapidated structure constructed prior to 1940. Out of
19 tenements, 6 tenements being Nos. 4, 5, 7, 8, 9 and 11 are occupied by the family
members of Defendant Nos. 1 to 3 and 13 tenements are occupied by tenants.
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4. Pursuant to the negotiations between the Defendant Nos. 1 to 3 and the
Plaintiffs, the said Agreement came to be entered into between the Defendant Nos.
1 to 3 and the Plaintiffs, whereunder Defendant Nos. 1 to 3 granted development
rights in favour of the Plaintiffs on the terms and conditions more particularly set
out therein. The said Agreement has been duly registered with the Sub-Registrar of
Assurances under the provisions of the Indian Registration Act, 1908. Some of the
relevant recitals and the terms and conditions of the said Agreement are reproduced
hereunder for ready reference:
"B. The said Plot along with the said Old Building shall
hereinafter collectively be referred to as "the said Property".
G. The said property is a cessed building and is fully occupied by
the tenants/occupants. The said building is in a dilapidated
condition and requires heavy repairs and/or
reconstruction/redevelopment;
H. The Owners are at present using, occupying and residing in
Flat Nos. 7, 8 and 9 on the First Floor of the said building
"Padmavati Sadan" admeasuring approximately 572 sq.ft., 461
sq.ft. and 419 sq.ft. (carpet area)respectively and Flat No.11 on
the Second Floor of the said Building "Padmavati Sadan"
admeasuring approximately 572 sq.ft. (carpet area) (hereinafter
referred to as "the existing residential premises");
I. The Owners are at present using and in occupation of the
office/commercial premises bearing Nos. 4 and 5 on the Ground
Floor of the said building "Padmavati Sadan" admeasuring
approximately 419 sq.ft. and 389 sq.ft. (carpet area) respectively
(hereinafter referred to as "the existing office/commercial
premises");
J. The Owners have decided to demolish the said building and to
erect new building/s thereon by consuming FSI as well as floating
FSI of the outside properties in the form of TDR, if any, under the
redevelopment scheme as permitted by MHADA;
K. Due to lack of experience and shortage of funds, the Owners
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have decided to get the said proposed development done through
some experienced Developers having sound financial position and
who would be able to settle amicably with the tenants/occupants
occupying various premises in the said building;
1. The Owners hereby jointly and severally entrust, give and
grant all and full development rights to the Developers and hereby
allow the Developers to enter upon and develop full and in all
respect and in all manner their property on "as is where is basis"
being all these pieces or parcels of land or ground situate,
lying and being at Deodhar Road, Matunga, Mumbai-400 019
within the limits of Greater Mumbai in the district and
registration sub-district of Mumbai City and Mumbai
Suburban bearing Plot No. 270 of Dadar-Matunga Estate and
formerly bearing new S.No. 885 and C.S. No. 205/10 of
Dadar-Matunga Division admeasuring about 833 sq.yds. (i.e.
696.49 sq.mtrs.) with a building standing thereon of ground
and three upper floors then known as "Sanghavi Sadan" and
now known as "Padmavati Sadan" and assessed to municipal
taxes under 'F North' Ward No. 7365 (I), 7365 (ii) and Street
No. 11, Deodhar Road ("Old Building") and more
particularly described in the First Schedule hereunder written
and delineated on the plan thereof hereto annexed and
thereon shown surrounded by red colour boundary line,
hereinafter known as "the said property" by demolishing the
existing building/s and constructing thereon new building/s by
utilising the FSI as contemplated in this Agreement.
2 (a) In consideration of the owners entrusting the development
rights in respect of the said property to the Developers, the
Developers hereby agree to pay to the Owners as under:
(i) the Developers have paid the sum of Rs. 99,00,000/-
(Rupees Ninety Nine Lakhs only) to the Owners on or before the
execution of this Agreement, the payment and receipt whereof, the
Owners jointly and severally do hereby admit and acknowledge
and discharge the Developers for the same forever;
(ii) the balance amount of consideration of Rs. 12,00,000/-
(Rupees Twelve Lakhs only) shall be paid by the Developers to the
Owners on or before 13th October, 2007, time being the essence of
the contract;
(iii)
(b) shall provide to the Owners Permanent Alternate
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Residential Accommodation on ownership basis but free of costs of
2,000 sq.ft. (carpet area) on the same floor, on the North East side
of the Plot/Road facing, the Developers' Architect to give Certificate
as to the area to be allotted as Permanent Alternate Residential
Accommodation to the Owners herein in the proposed new
building along with two stilt parking area and one open car
parking space in the compound of the said building lieu of the
Owners vacating the existing residential premises presently
occupied by them in the said building "Padmavati Sadan"and
handing over vacant possession thereof to the Developers;
(c ) shall provide to the Owners as Permanent Alternate Office
Accommodation on ownership basis but free of costs to the extent
of 800 sq.ft. (carpet area) on the same floor, on the North East side
of the Plot/ Road facing, the Developers' Architect to give
Certificate as to the area to be allotted as Permanent Alternate
Office Accommodation to the Owners herein in the said proposed
new Building in lieu of the Owners vacating the existing
office/commercial premises presently occupied by them in the said
building Padmavati Sadan and handing over vacant and peaceful
possession thereof to the Developers;
(d) In addition to the amount as set out in sub-clause 2 (a)
above, the sum of Rs. 27,00,000/- (Rupees Twenty Seven Lakhs
only) is paid to the Owners as non-refundable amount towards
corpus and rent/license fee payable or to be incurred by them for
the temporary alternate accommodation which they would be
taking of their own during the period of construction and
development of the said property.
(e) It is further agreed that the aforesaid consideration amount
is non-refundable by the Owners to the Developers even if the
Developers does not complete the development of the said property
for whatever reason.
(f) It is further agreed that if the F.S.I. is available in excess of
2.5 in respect of the said property now or hereafter, the same shall
be divided between the Owners and the Developers equally;
(g) It is further agreed that the Developers shall not be entitled
for a refund of proportionate consideration in the event of
reduction in the F.S.I. of 2.5;
3. In addition to the consideration paid/payable to the Owners as
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set out in Clause 2 (a) above, the Developers shall allot to all the
existing tenants/occupants as set out in Annexure "A" hereto who
have been in possession and occupation of various tenements in the
said building and who shall handover their respective tenements to
the Developers and execute necessary/requisite agreements with the
Developers, residential premises free of costs and on ownership
basis;
4. Upon execution of this Agreement, the Developers shall proceed
with the development work on the said property, however, at their
own costs and risk, so also in accordance with the Development
Control Regulations.
5 (a) The Owners have made out free, clear and marketable title
to the said property free from all encumbrances subject to the lease
in respect of the Plot and subject to the existing tenants/occupants
and shall at their own costs get in all outstanding estates and clear
all defects in title, if any. The Owners shall also clear the claims, if
any, raised by any concerned parties at their own costs and
expenses;
(b) The Developers agree, declare and confirm that they have
already verified the Owners title to the said property as clear and
marketable. The Developers shall not raise any objection and make
any further requisition in respect to the Owners' title to the said
property.
6 (a) It is specifically agreed that the developers shall negotiate
with the tenants/occupants occupying various tenements in the
said building and join them in the proposed redevelopment scheme
either by offering Permanent Alternate Accommodation on
ownership basis or obtaining surrender from them of their
respective tenancy rights in respect of the premises in their
possession and occupation on such terms and conditions as will be
found fit and proper by the Developers.
(b) The Developers shall be entitled to effect transfer of tenancy
rights in respect of any of the premises occupied by the
tenants/occupants and shall intimate about such
transfer/surrender of tenancy to the Owners.
7. The Owners shave already paid and shall continue to pay
from time to time all the dues such as property taxes, N.A.
Assessment, cesses, water charges, electricity charges, etc. till the
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date they hand over vacant and peaceful possession of the said
property including building/structure standing thereon. If any
taxes, charges, dues are found due or in arrears, the same will be
to the account of the Owners and paid by the Owners exclusively
and the rent from the tenants shall be recovered by the Owners till
they hand over possession of the said property to the Developers.
10. The parties hereto specially agree and confirm that the
existing building known as 'Padmavati Sadan' standing on the
said property will be demolished by the Developers herein. The old
materials such as M.S/Beam Joys, Cuddapah, AC Sheets, Doors
and Windows, Mangalore Tiles and/or otherwise whatsoever
material from old building/structure/s on the said property will be
the property of the Developers and the Developers shall be entitled
to dispose it of as he may deem fit and appropriate sale proceeds
thereof without in any manner accountable or liable to the Owners
or any of the tenants/occupants.
11. The Developers shall immediately commence the development
work at their own costs and risk on the said property and make
best endeavour to obtain Commencement Certificate within 6
months from the date of obtaining vacant and peaceful possession
of the entire property, which may be extendable mutually and
complete the same within a period of 30 months from the date of
obtaining Commencement Certificate from the MCGM time being
the essence of the contract. The Developers shall endeavour to
obtain Occupation Certificate from the MCGM within a period of
30 months from the date of obtaining Commencement Certificate.
The Developers shall indemnify and keep indemnified the Owners
in respect of breach of any of the terms and conditions of the
sanctioned plans while commencing, continuing and completing
the construction work on the said property and/or any terms of
this Agreement.
12 (a) It is agreed and understood that the Owners shall not any
way obstruct the construction and/or development work to be
carried out by the Developers and shall not do or omit to any act,
matter or things whereby the Developers will be prevented from
carrying out the development work under this Agreement;
(b) It is further agreed that if the development of the said
property is not completed due to willful default on the part of the
Owners or any of them, then, the Developers shall be entitled to
specific performance of these presents by the Owners and in such
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event, the owners shall also remain liable and responsible for all
losses and damages which may be sustained and/or suffered by the
Developers due to the willful default by the Owners.
13. The Owners hereby state, represent and declare that:
(d) in the event, the Owners desire to deal with or dispose off
their existing and/or Permanent Alternate residential and/or
office/commercial premises in their possession/occupation, then
they shall first offer the same to the Developers at the price/rate as
mutually agreed by and between them. In the event, the
Developers decline to acquire the same, the Owners will be entitled
to dispose off the same to any third party and the Developers shall
issue a No Objection Certificate for such sale/transfer without
claiming any consideration;
(e) The Owner shall not transfer, agree to transfer, accept
surrender of any tenancy rights from any of the tenants/occupants
of the said building/property from the date of this Agreement and
the same shall be done by the Developers with the written
intimation in that behalf to the Owners or any of them;
(f) ..... ..... ..... ....
(g) they shall execute Conveyance/Deed of Transfer in
respect of the said property to and in favour of the proposed
Society/Condominium of holders of various units/premises.
15. It is agreed between the Parties that (i) the possession of the
entire property will be handed over to the Developers within 30
days upon receipt of IOD from MCGM to enable the Developers to
take charge of the same and to commence the development work;
(ii) the possession of the tenanted premises occupied by the
tenants shall be taken by the Developers directly from the tenants.
16. The Owners confirm that they have issued following
permissions and rights to the Developers herein:
(a) To commence and complete the development of the said
property as agreed herein by demolishing existing
building/structures as well as cutting of trees, if any, thereon with
their own sources and cost as per the plans approved and
permission that may be given by the Municipal Corporation of
Greater Mumbai and/or such other Local Authorities with
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amendments thereof, if any,
(b) To enter into and execute agreements with the
tenants/occupants in the said building/property and to give
permanent alternate accommodation in the new buildings to the
existing owners/tenants/occupants as per Annexure "A" hereto or
accept surrender/transfer of tenancies/rights from them;
(c ) To store building material and storage of other goods and
equipments required for development of the property as well as for
temporary sheds required to accommodate construction labourers;
(d) To deal with and/or dispose of on ownership basis or otherwise
the Units/Premises in the new Buildings to be constructed on the
said property at such price as the Developers may deem fit and
proper from time to time and at their risk and costs;
(e) To enter into Agreements for Sale in respect of the
flats/units/office/premises in the Buildings to be erected or any
such further or additional area constructed on the said property on
an ownership basis or otherwise with prospective buyer/s in their
own name.
17 (a) The Owners and each of them shall render all assistance,
co-operation and sign and execute or caused to be signed and
executed all applications, plans, authorities and other writings, as
may be necessary or required to enable the Developers to develop
and complete the development of the said property. The Developers
shall incur the necessary expenditure for the same.
(b) The Owners shall not interfere with the construction work,
elevation of the proposed new wing/building, colour scheme
amenities etc. proposed to be provided by the Developers.
20. It is specifically agreed between the Parties hereto that, if for
any reason the building plan could not be sanctioned and/or
approved by the MCGM, then, in that event, this Agreement shall
not come to an end or terminated. The Owners shall be entitled to
retain the entire amount paid under this Agreement to them by the
Developers as also the possession of the premises in their
possession/occupation if not handed over to the Developers and the
Development rights granted under these presents shall vest with the
Developers herein forever.
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21. The Owners do hereby state that from the date hereof the
Owners shall not create any tenancy in respect of the said property
or any part thereof and shall deliver the possession of the requisite
tenements in their possession to the Developers upon sanction of
the plan on receipt of full and total Commencement Certificate
from the MCGM, whichever is earlier and also not to enter into any
Agreement or documents for sale and transfer of the said property
and/or accept any advance against the same nor create any third
party right of whatsoever nature in respect thereof.
22. Simultaneously with the execution of these presents, the
Owners herein shall also execute an Irrevocable General Power of
Attorney in favour of the Developers or their nominee/s as may be
desired by the Developers for the purpose of signing and/or
executing all the applications, proceedings, plans, etc., to obtain
necessary approval from various authorities, in connection with
the further development of the said property to be submitted by
the Developers on behalf of the Owners to the Competent Authority
under the Urban Land (Ceiling and Regulation) Act, 1976,
Mumbai Municipal Corporation, Town Planning Authority or any
other Government or Semi-government authorities and also for the
purpose of execution any other appropriate documents in respect of
the said property in favour of the MCGM, BES & T Undertakings or
Reliance Energy Limited/Government. The said Power of Attorney
shall, inter alia, include power to execute/enter into agreements
with tenants/occupants, seek surrender of their tenancies and/or
other rights, sign and execute the Transfer
Deed/Conveyance/Assignment to and in favour of the
Society/Condominium as well as Registration thereof. The Owners
hereby agree that the said Power of Attorney shall not under any
circumstances be revoked by them or any of them. However, upon
completion of the entire project and sale and allotment of last
flat/unit/tenement/office and execution of Conveyance in favour of
the proposed Society/Condominium namely 'Padmalaya Co-
operative Housing Society Limited, the said Power of Attorney shall
automatically come to an end."
28. It is agreed that all the disputes either by the Owners or of the
Developers shall be referred to the Arbitral Tribunal comprising of
three persons one each to the nominated by the Owners and the
Developers and the two Arbitrators shall appoint a third Presiding
Arbitrator and the decision taken by the Arbitral Tribunal so
nominated shall be final and binding upon the parties to the
dispute. The arbitration will be conducted as per the provisions of
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the Arbitration & Conciliation Act, 1996. All the costs and
expenses incidental to the Arbitration proceedings and other
charges to be paid in pursuance thereof shall be borne and paid by
both the parties equally. Each party will pay the fees of their
respective Solicitors/Advocates."
5. According to the Plaintiffs, though the Defendant Nos. 1 to 3 agreed to fully
co-operate and assist the Plaintiffs to commence the redevelopment of the suit
property and also compensate the Plaintiffs for any willful obstructions and
omissions on the part of Defendant Nos. 1 to 3 to commence and complete the
development work of the suit property, Defendant Nos. 1 to 3 have since signing of
the said Agreement only been disrupting and obstructing all the efforts of the
Plaintiffs to begin the redevelopment work and have not co-operated with the
Plaintiffs to get the necessary plans and documents approved from the Municipal
Corporation of Greater Mumbai ("MCGM"). According to the Plaintiffs, due to
instigations and wrongful representations by the Defendant Nos. 1 to 3 to the
tenants, various tenants of the building on the suit property have refrained from
entering into necessary agreements and/or are apprehensive in handing over the
vacant and peaceful possession of their respective tenements to the Plaintiffs and
therefore it has become exceedingly difficult for the Plaintiffs to obtain the necessary
permissions/IOD from the MCGM and carry out other activities pertaining to the
redevelopment of the suit property.
6. According to the Plaintiffs, despite the above conduct of the Defendant Nos. 1
to 3, the Plaintiffs took steps towards carrying out development activities and have
taken various steps towards commencement of the project with respect to the suit
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property, by appointing various professional agencies, carrying out geological survey
and testing of soil of the suit property. The Plaintiffs appointed Zed Geotechnios &
Const. to conduct Geo-technical investigation work at the suit property and also
appointed M/s. P.N. Bhobe & Associates as Architects and Ascent Structural
Engineers Pvt. Ltd. to act as Consulting Structural Engineers for the purpose of the
said redevelopment. According to the Plaintiffs, whenever the representatives of the
said agencies visited the suit property for the purpose of carrying out inspection or
survey or testing, Defendant Nos. 1 to 3 misbehaved and restrained the said agencies
and/or their representatives from carrying out the desired work. It is submitted that
the Plaintiffs were always ready and willing to perform their obligations under the
said Agreement, and are still ready and willing to undertake the redevelopment of
the said building.
7. According to the Plaintiffs, despite the hindrances created by Defendant Nos.
1 to 3, the Plaintiffs with a view to resolve the pending issues, made various efforts
including holding meetings with relevant authorities and also the tenants of the said
building. The relevant correspondence exchanged by the Plaintiffs in this regard is
annexed as Exhibits D-1 to D-4 to the Plaint. According to the Plaintiffs, since
Defendant Nos. 1 to 3 continued with their arbitrary and non-co-operative attitude
leading to inordinate delays in the Plaintiffs commencing and completing the
redevelopment works, the whole project came to a standstill. In the meanwhile, the
Plaintiffs incurred huge losses on account of several commissions and omissions on
the part of Defendant Nos. 1 to 3 for which Defendant Nos. 1 to 3 are liable to
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compensate the Plaintiffs in terms of the said Agreement.
8. According to the Plaintiffs, they were shocked and surprised to receive a letter
dated 4th October 2011, addressed by Defendant Nos. 1 to 3, inter alia contending
that the said Agreement executed between the Plaintiffs and Defendant Nos. 1 to 3
stands terminated on account of willful default of the terms and conditions of the
said Agreement by the Plaintiffs. Defendant Nos. 1 to 3 also issued public notice
dated 7th October 2011 in local newspapers i.e. Janmabhoomi dated 11 th October
2011 and Times of India dated 12th October 2011. In view thereof, the Plaintiffs
through their Advocates also issued public notice dated 12 th October 2011 in
Janmabhoomi and notice dated 14 th October 2011 in Times of India. The Plaintiffs
through their Advocate's letters dated 10 th October 2011 and 25 th October 2011
denied the allegations made by Defendant Nos. 1 to 3. The Plaintiffs also denied and
disputed the purported termination of the said Agreement and revocation of the said
irrevocable POA.
9. According to the Plaintiffs, in the circumstances the Plaintiffs issued notice to
the Defendant Nos. 1 to 3 and invoked the Arbitration clause (i.e. Clause 28 of the
said Agreement) and called upon Defendant Nos. 1 to 3 to nominate an Arbitrator
of their choice. Since the Defendant Nos. 1 to 3 failed and neglected to comply with
the said communication, the Plaintiffs filed Arbitration Application No. 149 of 2012
in this Court under Section 11 of the Arbitration and Conciliation Act, 1996 ("the
Act"), for appointment of an Arbitrator by this Court. The Plaintiffs also filed an
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application under Section 9 of the Act for interim protective reliefs against
Defendant Nos. 1 to 3. However, by an order dated 1st December, 2011, the learned
Single Judge of this Court (Coram: S.J. Vazifdar, J.) as an ad-interim measure
directed Defendant Nos. 1 to 3 to deposit in this Court a sum of Rs. 1.38 crores paid
by the Plaintiffs to the Defendant Nos. 1 to 3, prior to entering into any development
agreement with any third party. The Plaintiffs preferred an Appeal being Appeal No.
25 of 2012 from the order passed by the learned Single Judge dated 1 st December
2011. The said Appeal was disposed of by the Hon'ble Division Bench of this Court
dated 16th April 2012. In the said order it was inter alia recorded that the learned
Single Judge had not granted ad-interim relief by giving cogent reasons in his order
dated 1st December 2011. However, it was clarified that the observations made by
the learned Single Judge while rejecting the ad-interim relief, are to be treated as
only tentative in nature and the Arbitration Petition be decided on its own merit and
in accordance with law.
10. By their affidavit dated 30th January, 2012, Defendant Nos. 1 to 3 averred that
they had entered into a Development Agreement with Defendant No.4, pursuant to
their depositing the said sum of Rs. 1.38 crores in this Court on 22 nd December 2011.
Since Defendant Nos. 1 to 3 had failed to forward a copy of the agreement entered
into by and between them and the Defendant no.4 to the Plaintiffs, the Plaintiffs
took out Chamber Summons No. 295 of 2012 in Arbitration Petition No. 968 of
2011, seeking directions against Defendant Nos. 1 to 3 to furnish and grant
inspection of the said Development Agreement-cum-Deed of Assignment of Lease
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dated 22nd December 2011, which Chamber Summons was allowed by an order
dated 19th April, 2012 passed by this Court. Though Defendant Nos. 1 to 3 had
preferred an appeal impugning the order dated 19 th April 2012, the said Appeal
before the Division Bench was withdrawn, and a copy of the said Agreement dated
22nd December 2011 was made available to the Plaintiffs.
11. In view of the Defendant Nos. 1 to 3 having created third party rights in
respect of the suit property, on the application of the Plaintiffs this Court by its order
dated 30th July 2012, allowed the Plaintiffs to withdraw the Arbitration Petition with
liberty to file a suit, to seek appropriate reliefs. By the said order, the amounts
deposited by Defendant Nos. 1 to 3 amounting to Rs. 1.38 crores along with interest
accrued thereon was also directed to be transferred to the suit account to be retained
therein until further orders. By the said order, this Court also clarified that the suit
as well as the interim applications made therein shall be heard by this Court on
merits without being influenced by any observations made in the orders passed in
the Arbitration proceedings.
12. The Plaintiffs thereafter filed the present suit against Defendant Nos. 1 to 3
and Defendant No.4 in whose favour Defendant Nos. 1 to 3 have executed a
Development Agreement-cum-Deed of Assignment of Lease dated 22 nd December,
2011 in respect of the suit property.
13. Mr. N.H. Seervai, the learned Senior Advocate appearing for the Plaintiffs has,
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after taking me through the various clauses of the said Agreement and the said POA,
submitted that pursuant to the said Agreement, the Plaintiffs have paid to the
Defendant Nos. 1 to 3 an aggregate amount of Rs. 1.38 crores. The Plaintiffs also
appointed Architects, Structural Engineers and Geo-technical Consultants in
compliance with their obligations under the said Agreement and started
negotiations with the tenants. However, from the very outset, the Defendant Nos. 1
to 3 repeatedly caused disturbance and obstruction thereby not allowing the
Plaintiffs to carry out their work. Defendant Nos. 1 to 3 have also instigated the
other tenants not to enter into any agreement with the Plaintiffs towards vacating
their respective tenaments in the said building, and within a span of around 22 days
after the passing of the Order dated 1 st December 2011, by the learned Single Judge
of this Court in the Arbitration proceedings, completed the negotiations and entered
into a development agreement with Defendant No.4, which agreement cannot be
said to have been entered into in a bona fide manner or without prior notice of the
claims of the Plaintiffs in respect of the suit property. It is submitted that the
development agreement with Defendant No.4 is ex-facie collusive as is evident from
a perusal thereof, inter alia, on counts of consideration and obligations of the
Assignee/Defendant No.4. It is submitted that no steps have been taken since 8
months by the Assignee/Defendant No.4 despite rights having been allegedly
created in favour of Defendant No.4, which clearly goes to show that the same is to
prejudice the rights of the Plaintiffs. Mr. Seervai has also submitted that the share
capital of Defendant No.4 is admittedly in the sum of Rs. One lakh and therefore it is
impossible for Defendant No.4 to carry out the re-development of the suit property
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involving crores of rupees. Mr. Seervai has also relied on the letter dated 9 th
September 2009 written by the Defendant Nos. 1 to 3 to the Plaintiffs, wherein the
Defendant Nos. 1 to 3 have referred to the G.R. issued by the Govt. of Maharashtra
through its Urban Development Department, and alleged that the FSI for the
development of old cessed buildings under Regulation 33 (7) of D.C. Regulation
1991 was increased from 2.5 to 3, and in view thereof as provided in clause 2 (f) of
the said Agreement, the increase in FSI has to be divided equally between the
Plaintiffs and the Defendant Nos. 1 to 3, and that the Defendant Nos. 1 to 3 would
be interested in having the said proportionate excess FSI added to their constructed
area in addition to the area already agreed to be given to them. Mr. Seervai has
submitted that the said demand made by the Defendant Nos. 1 to 3 was incorrect
and illegal because the G.R. referred to by the Defendant Nos. 1 to 3 in the letter
dated 9th September, 2009 was only a proposal to increase FSI and the same came
into effect and the FSI was actually increased only in May 2011. In the
circumstances, Mr. Seervai submitted that there is a concluded contract for
redevelopment of the suit property between the Plaintiffs and Defendant Nos. 1 to 3.
The said Agreement vested development rights in favour of the Plaintiffs in the suit
property and the Plaintiffs are ready and willing to perform their obligations under
the said Agreement at the earliest. The Plaintiffs have also taken various and active
steps in furtherance of the said Agreement and have paid the entire monetary
consideration thereunder to Defendant Nos. 1 to 3. The Defendant Nos. 1 to 3 with
ulterior motives and without any valid cause have sought to terminate the said
Agreement on grounds which are incorrect to their knowledge. The right of
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termination is absent in the said Agreement. The termination is therefore invalid and
bad in law. Even under clause 20 of the said Agreement, it is clearly stated that the
Development Agreement entered into between the parties shall not come to an end
or terminated if for any reason the building plan could not be sanctioned and/or
approved by the MCGM. It is submitted that Defendant Nos. 1 to 3 have terminated
the said Agreement for ulterior motives to deprive the Plaintiffs of their legitimate
rights and to derive certain benefits by creating third party rights. It is therefore
submitted that the Plaintiffs are entitled to the reliefs sought in the Plaint and is also
entitled to the interim reliefs as prayed for in the above Notice of Motion.
14. Mr. Anturkar, the learned Advocate appearing for Defendant Nos. 1 to 3 has
submitted that the said Agreement being an agreement which gives only the
development rights in respect of the suit property to the Plaintiffs and nothing more
cannot be specifically enforced. Without prejudice to this contention, he has
submitted that the Plaintiffs having taken out proceedings under Section 9 of the Act
against Defendant Nos. 1 to 3 seeking reliefs therein and having withdrawn the said
proceedings, are not entitled to seek any reliefs against Defendant Nos. 1 to 3 in the
present suit. Mr. Anturkar has submitted that even otherwise the Plaintiffs are not
entitled to any reliefs against Defendant Nos. 1 to 3 since Defendant Nos. 1 to 3
have already sold and transferred all their rights in the suit property in favour of
Defendant No. 4 and therefore the reliefs as prayed against Defendant Nos. 1 to 3
have become infructuous. Mr. Anturkar has submitted that the suit as framed is bad
in law since the Plaintiffs despite having knowledge of the fact that pursuant to the
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order passed by this Court dated 1 st December 2011, Defendant Nos. 1 to 3 have
deposited the amount of Rs. 1.38 crores in this Court and have thereafter entered
into an agreement with Defendant No.4 selling/transferring all their rights in respect
of the suit property in favour of Defendant No.4, have not impugned the said
transaction in the present suit. In the absence of impugning the said transaction in
the present suit, no reliefs can be granted in favour of the Plaintiffs at the interim
stage and/or at the final stage. Without prejudice to the aforesaid contention, Mr.
Anturkar has also submitted that after execution of the said Agreement and the said
POA by Defendant Nos. 1 to 3, the Plaintiffs have not taken any steps whatsoever, in
pursuance of the same. The responsibility of dealing with the tenants was solely that
of the Plaintiffs under the said Agreement. At no stage have the Plaintiffs
complained or made any grievance against Defendant Nos. 1 to 3 that they have
not co-operated with the Plaintiffs or have instigated the tenants, and for the first
time in their letter dated 25th October 2011 false and incorrect allegations are made
against Defendant Nos. 1 to 3. Mr. Anturkar has also drawn my attention to the
letters written by the Plaintiffs to the Income-tax Authorities from time to time
explaining the delay in commencing/carrying out the reconstruction work, where
again no allegations are made against Defendant Nos. 1 to 3 as alleged for the first
time on 25th October 2011. Mr. Anturkar has therefore submitted that the Plaintiffs
themselves have failed to perform their obligations under the said Agreement which
compelled Defendant Nos. 1 to 3 to terminate the said Agreement. The Plaintiffs
now cannot be heard to say that they were always ready and willing to perform
their part of the contract and that the termination is bad. Mr. Anturkar has
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submitted that the agreement entered into by Defendant Nos. 1 to 3 with Defendant
No.4 is a bona fide agreement and all allegations made by the Plaintiffs against
Defendant Nos. 1 to 3 qua the same are denied and disputed by Defendant Nos. 1 to
3.
15. Mr. Chagla, Learned Senior Advocate appearing for Defendant No.4, has
supported the submissions advanced on behalf of Defendant Nos. 1 to 3 by Mr.
Anturkar. He has laid stress on the fact that this Court by its order dated 1 st
December 2011, on an application made by the Plaintiffs under Section 9 of the Act,
allowed Defendant Nos. 1 to 3 to enter into a development agreement after
depositing an amount of Rs. 1.38 crores in Court. Pursuant thereto, the amount of
Rs. 1.38 crores has been deposited in Court and an Agreement dated 22 nd December
2011 transferring the development rights and assignment of leasehold rights is
executed by Defendant Nos. 1 to 3 in favour of Defendant No.4. Mr. Chagla
submitted that in view thereof, the Plaintiffs cannot question the bonafides of the
agreement dated 22nd December 2011 and further cannot be heard to say that the
agreement dated 22nd December 2011 entered into by and between the Defendant
Nos. 1 to 3 and Defendant No.4, is only a tool attempted to prejudice the rights of
the Plaintiffs. As regards the submission of Mr. Seervai on the share capital of
Defendant No.4 Company, Mr. Chagla has submitted that Defendant No.4 is
controlled and managed by Goshar Ventures Pvt. Ltd. which owns 81 per cent of the
total paid up and subscribed capital of Defendant No.4. The Promoters of the said
Goshar Ventures Pvt. Ltd. are experienced in real estate development and have
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completed various projects in the vicinity of Matunga, Mumbai. The Directors of
Defendant No.4 are also running a successful business in the name of K.T. Exports,
an Associate concern of Defendant No.4, having annual turnover of Rs. 30 crores
approx. and are capable of inducting further capital in the Defendant No.4 Company.
Mr. Chagla has also taken me through the affidavit filed by Mr. Nimesh Sanghrajka
dated 18th October 2012, wherein the deponent has set out the various steps taken
by Defendant No.4 qua the suit property after entering into the agreement dated
22nd December 2011 with Defendant Nos. 1 to 3. Mr. Chagla has therefore submitted
that the Plaintiffs are not entitled to any reliefs as prayed for or otherwise.
16. I have considered the submissions advanced on behalf of the Plaintiffs and the
Defendants. Before dealing with the main issues/defences raised by the Defendants
as aforestated, I would first deal with the submission of Mr. Anturkar that the
Plaintiffs are not entitled to seek any reliefs against Defendant Nos. 1 to 3 in the
present suit since the Plaintiffs had earlier taken out proceedings under Section 9 of
the Act and have withdrawn the said petition and further that the Plaintiffs despite
being aware of the fact that Defendant Nos. 1 to 3 have sold the suit property to
Defendant No.4 have not impugned the said transaction in the present suit because
of which no reliefs can be granted in favour of the Plaintiffs at the interim stage
and/or at the final stage.
17. It is true that the Plaintiffs had earlier issued notice to the Defendant Nos. 1
to 3 and invoked the arbitration clause (i.e. clause 28 of the said Agreement) and
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called upon Defendant Nos. 1 to 3 to nominate an Arbitrator of their choice. Since
Defendant Nos. 1 to 3 failed and neglected to comply with the said communication,
the Plaintiffs filed Arbitration Application No. 149 of 2012 in this Court and also
filed an application under Section 9 of the Act for interim protective reliefs against
Defendant Nos. 1 to 3. However, by an order dated 1 st December 2011, the Learned
Single Judge of this Court (Coram: S.J. Vazifdar, J.) as an ad-interim measure
directed Defendant Nos. 1 to 3 to deposit a sum of Rs. 1.38 crores in this Court,
prior to Defendant Nos. 1 to 3 entering into any Development Agreement with any
third party. The Defendant Nos. 1 to 3 thereafter deposited the said sum with the
Prothonotary and Senior Master of this Court and executed a Development
Agreement-cum-Deed of Assignment of Lease dated 22 nd December 2011 in respect
of the suit property in favour of Defendant No.4. Since Defendant No.4 was not a
party to the Arbitration Agreement, the Plaintiffs withdrew the Arbitration Petition
with liberty to file a suit against Defendant Nos. 1 to 4. This Court by its order dated
30th July, 2012 allowed the Plaintiffs to withdraw the Arbitration Petition with liberty
to file a suit against Defendant Nos. 1 to 4. Pursuant to the said liberty granted by
this Court to the Plaintiffs, the Plaintiffs filed the present suit against Defendant Nos.
1 to 4 seeking aforestated reliefs. I am therefore not inclined to accept the
submission advanced by Mr. Anturkar that since the Arbitration Petition was
withdrawn by the Plaintiffs, the present suit cannot be filed by the Plaintiffs and
interim/final reliefs cannot be granted in favour of the Plaintiffs. Hence the said
submission is rejected.
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18. The next submission of Mr. Anturkar is that the Plaintiffs are not entitled to
any interim and/or final relief on the ground that the Plaintiffs despite being aware
of the fact that a Development Agreement-cum-Deed of Assignment of Lease is
already executed by and between Defendant Nos. 1 to 3 and Defendant No.4, have
not impugned the said transaction in the present suit. This submission is sought to
be countered by Mr. Seervai by citing the decision of the Hon'ble Supreme Court in
Guruswamy Nadar vs. P. Lakshmi Ammal (D) by L.Rs and others 1. Mr. Seervai, relying
on paragraph 3 of the said decision, seems to suggest that the principle of Section 52
of the Transfer of Property Act applies in the instant case inasmuch as the
subsequent transaction with Defendant No.4 was entered into during the pendency
of a legal proceeding, namely, arbitration between the Plaintiffs and Defendant Nos.
1 to 3 and therefore, the property cannot be transferred or otherwise dealt with so
as to affect the Plaintiffs rights under a decree or order that may be made in the
present suit. It is doubtful whether Section 52 of the Transfer of Property Act can be
invoked in this case as suggested by Mr. Seervai. Firstly, Section 52 has been
amended by Bombay Act 4 of 1939 so as to require a notice of pendency of any suit
or proceeding to be registered under Section 18 of the Indian Registration Act, 1908
before the consequences provided for under Section 52 can apply in respect of
immovable properties situated in Greater Mumbai. Therefore, pendency of a suit or
legal proceedings simplicitor does not entail consequences under Section 52 in
respect of immovable properties in Greater Mumbai, but there must further be a
registered Lis pendens. Plaintiff has not made out any case of registration of such
1 AIR 2008 SC 2560
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Lis Pendens. Secondly, the principle of Section 52 applies qua a decree or order
that may be passed in a suit or proceeding during the pendency of which the
subsequent transfer takes place. The Plaintiff in this case seeks the benefit of Section
52 qua a decree or order that may be passed not in the pending arbitration but in a
suit subsequently filed by him after giving up the arbitration proceedings. Prima
facie, therefore, the submission of Mr. Seervai on the principle of Section 52 does not
appear to be correct. I am, however, not convinced with the argument of Mr.
Anturkar that the Plaintiffs had to impugn the Development Agreement-cum-Deed of
Assignment of Lease between Defendant Nos. 1 to 3 and Defendant No.4 before he
could claim any relief in this suit against Defendant No.4. Under Section 19 of the
Specific Relief Act, a Plaintiff promisee entitled to specific performance of his
agreement can claim the same against a transferee of the promisor and for that
purpose need not challenge the transfer between the promisor and his transferee.
Prima facie therefore the Plaintiffs are entitled to the relief of specific performance
against the Defendant No.4 transferee if they otherwise make out the case on merits.
In the present suit, presumably on that footing the relief for specific performance
including possession is claimed against all the Defendants including Defendant No.4.
19. I shall now deal with the main issues/defences raised by Mr. Anturkar
recorded hereinabove. The first main issue which needs to be determined is whether
the said Agreement entered into by and between Defendant Nos. 1 to 3 and the
Plaintiffs can be specifically enforced. The relevant clauses setting out the terms and
conditions of the said Agreement are already set out hereinabove. It is clear from
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the same that the Vendors (i.e. Defendant Nos. 1 to 3 herein) and the Developers
(the Plaintiffs herein) under the said Agreement agreed as follows:
20.1 Under Clause 1, the Vendors have jointly and severely entrusted, given and
granted full development rights to the Developers and have given them the right to
enter upon the suit property and develop the same in all respects and in all manner
by demolishing the existing building and constructing thereon new buildings by
utilizing the FSI as contemplated in the said Agreement;
20.2
Under Clause 2 (a), the Vendors and the Developers have agreed that in
consideration of the Vendors entrusting development rights in respect of the suit
property to the Developers, the Developers shall provide to the Vendors the
following:
(a) The Vendors have already been paid an amount of Rs. 99 lakhs by the
Developer on or before the execution of the said Agreement and the balance
consideration of Rs. 12 lakhs shall be paid by the Developers to the Vendors on or
before 13th October 2007.
(b) The Developers shall in lieu of the residential premises presently in
occupation of the Vendors provide free of costs to the Vendors, permanent alternate
residential accommodation on ownership basis free of cost admeasuring 2000 sq.ft.
(carpet area) in the proposed new building, along with two stilt parking areas and
one open area parking space in the compound of the said new building.
(c ) In lieu of the Vendors vacating the existing office/commercial premises
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presently occupied by them in the said building and handing over vacant and
peaceful possession of the same to the Developers, the Developers shall further
provide free of costs to the Vendors 800 sq.feet (carpet area) in the proposed new
building as permanent alternative office accommodation on ownership basis.
(d) The Developers shall also pay an amount of Rs. 27 lakhs to the Vendors as non-
refundable amount towards rent/license fee payable or to be incurred by the Vendors
for the temporary alternate accommodation which the Vendors would procure
during the period of construction and development of the suit property.
(e) In the event of additional FSI being made available i.e. in excess of 2.5 in
respect of the suit property, the same would be divided between the Vendors and the
Developers equally.
20.3 Under Clause 3, the Developers agreed with the Vendors that the Developers
shall allot residential premises free of cost and on ownership basis to all the existing
tenants/occupants who have been in possession and occupation of various
tenements in the said building and who shall hand over their respective tenements to
the Developers and execute necessary/requisite agreements with the Developers,.
20.4 Under Clause 4 it was agreed that the Developers shall proceed with the
development work on the suit property upon execution of the said Agreement.
20.5 Under Clause 5 it was provided that the Vendors have made out a free, clear
and marketable title to the suit property, free from all encumbrances, subject to the
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lease in respect of the plot and subject to the existing tenants/occupants and shall at
their own costs clear all defects in title, if any. The said clause further provides that
the Developers agree and confirm that they have already verified the Vendors title to
the suit property as clear and marketable.
20.6 Under Clause 6 (a) it was provided that the Developers shall negotiate with
the tenants/occupants occupying various tenements in the said building and join
them in the proposed re-development scheme either by offering permanent
alternate accommodation on ownership basis or obtaining surrender from them of
their respective tenancy rights in respect of the premises in their possession and
occupation, on such terms and conditions as found fit and proper by the Developers.
The Developers shall also be entitled to effect transfer of tenancy in respect of any of
the premises occupied by the tenants/occupants and only give intimation about
such transfers/surrender of tenancy to the Vendors.
20.7 Under Clause 7 of the said Agreement, it is agreed that the Vendors shall
continue to pay all the dues such as property taxes, N.A. assessment, cesses, water
charges, electricity charges, etc. till the date they hand over vacant and peaceful
possession of the suit property including buildings/structures standing thereon to the
Developers.
20.8 Under Clause 10 it is agreed that the present building on the suit property
shall be demolished by the Developers and the old materials such as M.S. Beam,
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Joys, Cuddapah,A.C. Sheets, Doors and Windows, Mangalore tiles and whatsoever
material from old building/structures on the suit property, will be the property of the
Developers and the Developers shall be entitled to dispose of the same as they may
deem fit and proper without in any manner being accountable or liable to the
Vendors or to the tenants/occupants.
20.9 Under Clause 12 (a) it is agreed that the Vendors shall not in any way
obstruct construction and/or development work to be carried out by the Developers
and shall not do or omit to do any act, matter or thing whereby the Developers will
be prevented from carrying out the development work under the Agreement.
20.10 Under Clause 13 (e), the Vendors have agreed that they shall not transfer,
agree to transfer accept surrender of any tenancy rights from any of the
tenants/occupants of the said building/property from the date of the said Agreement
and the same shall be done only by the Developers with written intimation in that
behalf to the Vendors or any of them.
20.11 Under Clause 13 (g), it is agreed that the Vendors shall execute
conveyance /Deed of Transfer in respect of the said property (i.e. the plot of land
with buildings thereon) to and in favour of the proposed Society/Condominium of
holders of various units/premises.
20.12 In Clause 15 it was agreed between the parties that the possession of
the suit property will be handed over to the Developers within 30 days upon receipt
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of IOD from MCGM to enable the Developers to take charge of the same and to
commence the development work and the possession of the tenanted premises
occupied by the tenants shall be taken by the Developers directly from the tenants.
20.13 Under Clause 16 (d) of the said Agreement, the Vendors have given the
right to the Developers to deal with and/or dispose of units/premises in the new
buildings to be constructed on the suit property on ownership basis or otherwise at
such price as the Developers may deem fit and proper from time to time at their risk
and costs.
20.14 Under Clause 17, the Vendors had agreed that they shall render all
assistance, co-operation and sign and execute or caused to be signed and executed
all applications, plans, authorities and other writings as may be necessary or
required to enable the Developers to develop and complete the development of the
suit property and that the Developer shall incur the necessary expenditure for the
same. The Vendors further agreed not to interfere with the construction work,
elevation of the proposed new wing/building, colour scheme, amenities etc.
proposed to be provided by the Developers in the new wing/building.
20.15 Under Clause 20 it is agreed between the parties that if for any reason
the building plan could not be sanctioned and/or approved by the MCGM, then in
that event the said Agreement shall not come to an end or terminated. The Vendors
shall be entitled to retain the entire amount paid under the said Agreement to them
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by the Developers as also the possession of the premises in their
possession/occupation, if not handed over to the Developers and the development
rights granted under the said Agreement shall vest with the Developers for ever.
20.16 Under Clause 21 it was provided that the Vendors shall not create any
tenancy in respect of the suit property or any part thereof, after execution of the said
Agreement.
20.17
Under Clause 22, it is agreed that simultaneously with the execution of
the said Agreement, the Vendors shall also execute an Irrevocable Power of Attorney
in favour of the Developers or their nominees as may be desired by the Developers
for the purpose of signing and/or executing all the applications, proceedings, plans,
etc. to obtain necessary approval from various authorities in connection with the
further development of the suit property, to be submitted by the Developers on
behalf of the Vendors to the Competent Authority under the Urban Land (Ceiling and
Regulations) Act, 1976, Mumbai Municipal Corporation, Town Planning Authority or
any other Government or semi-government authorities and that the POA shall inter
alia include power to execute/enter into agreements with tenants/occupants, seek
surrender of their tenancies and/or other rights, sign and execute the transfer
deed/conveyance/assignment to and in favour of the Society/Condominium as well
as registration thereof. It was agreed that the Vendors shall not under any
circumstances revoke the said POA. However, upon completion of the entire project
and sale and allotment of the last flat/unit/office and execution of conveyance in
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favour of the proposed Society/Condominium viz. Padmalaya Co-operative Housing
Society Ltd. the said POA shall automatically come to an end.
20.18 From the date of execution of the said Agreement, the Vendors have
simultaneously executed in favour of the Plaintiffs the said POA whereunder the
Plaintiffs-Developers are given all the rights as agreed under the said Agreement,
including the right to execute/enter into agreements with tenants/occupants, seek
surrender of the tenancies and/or other rights, the right to sell all the
flats/units/tenements/offices on ownership basis and keep the sale proceeds without
giving any accounts to the Vendors and to also sign and execute transfer deed,
conveyance or assignment to and in favour of the Society/Condominium as well as
its registration thereof.
21. From the aforesaid terms of the said Agreement and power given by the
Vendors to the Developers, I am prima facie of the view that though the said
Agreement is termed as a Development Agreement, it is an agreement whereunder
interest is created in favour of the Developers in respect of the suit property which
includes the structures thereon. As can be seen from the above, all the rights to
develop the property have been given by the Vendors to the Developers. The
Vendors have already received the monetary consideration as set out in the said
Agreement from the Developers. Except for the premises agreed to be given to the
Vendors by the Developers in lieu of the premises used and occupied by them in the
said building, the Vendors have given all the rights to the Developers to deal with the
tenants in the manner they desire and after providing them with alternate
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accommodation in the newly constructed building or elsewhere or giving them
monetary consideration in lieu of their tenements, the Developer is given full and
complete right to sell the flats/units/shops etc. on ownership basis without any
interference from the Vendors. The right to decide the elevation of the building, the
colour scheme, etc. is also given to the Developers by the Vendors. The Vendors have
also agreed that they shall execute the Conveyance Deed/Deed of Transfer in
respect of the said property (i.e. the plot of land with buildings thereon) to and in
favour of the proposed Society/Condominium of holders of various units/premises.
The Vendors have in the said Agreement itself provided that they will be
simultaneously executing a POA, inter alia, giving the right to the Developer to
construct a new building, accommodate the Vendors and the tenants as agreed and
most important to sign and execute the transfer deed/conveyance/assignment to
and in favour of the Society/Condominium as well as effect its registration. In the
circumstances I am prima facie satisfied that the said Development Agreement is
capable of being specifically enforced. I am fortified in my view by the decision of
the Hon'ble Division Bench of this Court in Chheda Housing Development Corporation
vs. Bibijan Shaikh Farid and others1.
22. Despite being of the prima facie view that the said Agreement is capable of
being specifically enforced, the next question that arises before this Court at the
interim stage is whether the conduct of the Plaintiffs entitles them to seek specific
performance of the said Agreement and interim reliefs in this regard. Under clause 6
1 2007 (3) Mh.L.J. 402
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(a) of the said Agreement, the Developers were required to negotiate with the
tenants/occupants occupying various tenements in the said building and to join
them in the proposed redevelopment, either by offering permanent alternate
accommodation on ownership basis or obtaining surrender from them of the
respective tenancy rights in respect of the premises in their possession and
occupation on such terms and conditions as may be found fit and proper by the
Developers. For this purpose, the Developers were to execute necessary
writings/agreements with the existing tenant/occupants at their own cost and
expense as provided in clause 9 of the said Agreement. Under clause 11 of the said
Agreement, the Developers had agreed to immediately commence the development
work at their own costs and risk on the said property and make best endeavour to
obtain commencement certificate within six months from the date of obtaining
vacant and peaceful possession of the entire property which could be mutually
extended and complete the same within a period of 30 months from the date of
obtaining commencement certificate from the MCGM, time being the essence of the
contract. The Developers also agreed to endeavour to obtain occupation certificate
from the MCGM within a period of 30 months from the date of obtaining the
commencement certificate. However, from the documents annexed to the Plaint by
the Plaintiffs-Developers, it is clear that though the Plaintiffs obtained a quotation
from Zed Geotechnics & Const., for geological investigation work on the suit
property and also appointed an Architect on 10 th August, 2007, they have not made
any progress thereafter. After approximately two years from the date of the
execution of the said Agreement, the Plaintiffs appointed a Consulting Structural
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Engineer for the proposed redevelopment of the suit property. The first letter
addressed by the Plaintiffs to the tenants and annexed to the Plaint is dated 2 nd
November 2008 i.e. after more than a year from the date of execution of the said
Agreement. The second letter addressed by the Plaintiffs to the tenants is dated 24 th
November 2008 wherein the Plaintiffs have recorded that the points raised by the
tenants need further discussion across the table. However, it was also recorded that
the Plaintiffs were not available upto 15 th December 2008 and will keep the tenants
informed about the future date for the said discussion to be held at a convenient
time and place. The Plaintiffs have suggested to the tenants that in the meantime
they should consider giving a NOC for MHADA formalities which is revocable at any
point of time till a final registered agreement is arrived at between the parties. A
copy of the draft consent letter to be issued by the tenants to the Chief Officer,
Mumbai Building, Repairs and Reconstruction Board (MBRRB) is annexed at page 75
of the plaint. The same is titled "Occupants irrevocable consent" . In paragraph 2 of
the said consent letter it is provided that the Developer shall construct self-contained
tenements in the new building proposed to be constructed by demolishing the
existing building and shall allot "the tenant carpet area of ____ sq.ft." in the new
building. Without any agreement entered into between the tenants/occupants with
the Plaintiffs-Developers, it would be impossible for the tenants to give their
irrevocable consent to the MBRRB as suggested by the Plaintiffs. Though a plan is
annexed at page 76 and at page 77 of the Plaint, certain general conditions have
been set out and the signatures of the occupants/tenants are obtained, there is no
further correspondence entered into by and between the Plaintiff and the
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occupants/tenants. The Plaintiffs have not produced a single letter addressed to the
occupants/tenants inter alia recording that the tenants are allegedly not co-
operating with the Plaintiffs. In one of the letters dated 17 th December 2010
addressed to the Income-tax Officer, the Plaintiffs have recorded that no progress is
made in the matter in the last three years i.e. 3 years after executing the
development agreement with Defendant Nos. 1 to 3 because of non-co-operation
from the "remaining tenants". In the subsequent letters dated 17 th December 2010
addressed to the Income Tax Officer 17 (2) (3) and 17 (2) (4), the Plaintiffs have
recorded the cause for the delay in taking any steps in the matter. The Plaintiffs have
not mentioned anything regarding non-co-operation by the Defendant Nos. 1 to 3
but have stated that as the agreement is towards the sale of development rights and
as the said property is tenanted, it shall be possible to redevelop once the following
conditions are complied with:
➢ Written consent from all the existing tenants towards re-development is
obtained;
➢ No Objection Certificate (NOC) from Maharashtra Housing & Area
Development Authority (MHADA) to be obtained subject to their conditions
being complied with.
➢ Approvals & NOC's from various government offices to be obtained subject to
their conditions being fulfilled for the purpose of re-development.
In fact, the main reason attributed by the Plaintiffs for the non-commencement of
the development work is as under:
"Since this Development Agreement was entered into three years ago,
after which there has been an extremely slow or no progress mainly
due to the global melt down in 2008 and also non-clarity from the
government on the redevelopment of the Cess Category Building
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followed by the negotiation with the tenants & ambiguity on the
grounds of extra area being offered by way of increase in the Floor
Space Index (FSI.)'
23. From the aforesaid facts it is clear that the Plaintiffs except for exchanging
some correspondence in the year 2009 with the occupants/tenants, have not taken
up the matter with the tenants/occupants any further. The Plaintiffs have not taken
any steps whatsoever under the said Agreement. In view thereof, the Defendant Nos.
1 to 3 by their letter dated 4 th October 2011, after recording the failure on the part
of the Plaintiffs to take any steps whatsoever upon execution of the said Agreement,
terminated the said Agreement. In response, the Plaintiffs by their letter dated 25 th
October 2011 i.e. 4 years after the execution of the said Agreement for the first time
alleged as follows:
"However, since the signing of the Agreement till date, you have
only been disrupting and obstructing all efforts of our clients to
proceed with the redevelopment work and have not co-operated
with our clients to get the necessary plans and documents approved
from the MCGM to commence the said re-development work. Thus,
there is failure on your part to perform a promise which is
required to be performed prior to seeking performance of any
reciprocal promises by you from our clients. Therefore, you are
liable to our clients to compensate them for all the financial losses
and damages incurred by them due to the delay and obstructions
so caused by you and failure/breach to perform your prior
obligations. Moreover, due to your direct and indirect instigations
and wrongful representations, various tenants of the building have
been caused by you not to enter into necessary agreements and/or
are apprehensive in handing over the vacant and peaceful
possession of their respective tenements to our clients. This has
further hampered the efforts in our clients to obtain the necessary
permissions/IOD from the MCGM for the said redevelopment of the
said property."
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The above allegations against Defendant Nos. 1 to 3 by the Plaintiffs are clearly an
afterthought. The Plaintiffs have not written a single letter to Defendant Nos. 1 to 3
making any such allegations during the period of 4 years i.e. between the date of the
said Agreement dated 25 th September 2007 and 25 th October 2011. Even in the
letters addressed to the Income tax Authorities the Plaintiffs have never alleged that
they are unable to proceed with the development work since Defendant Nos. 1 to 3
are disrupting or obstructing their efforts to proceed with the redevelopment work.
In view thereof, I am prima facie satisfied that the allegations made by the Plaintiffs
against Defendant Nos. 1 to 3 in the letter dated 25 th October 2011 and in the plaint
to the effect that Defendant Nos. 1 to 3 are instigating the tenants and are disrupting
and obstructing the efforts of the Plaintiffs to proceed with the redevelopment work
is false and incorrect to the knowledge of the Plaintiffs.
24. The grievance made by Mr. Seervai qua the letter dated 9 th September, 2009
written by Defendant Nos. 1 to 3 to the Plaintiffs informing them that the Urban
Development Department has issued G.R. whereby the FSI for redevelopment of old
cessed building under D.C. Regulation 33 (7) of D.C. Regulation, 1991 is increased
from 2.5 to 3 and therefore they would be interested in having the excess FSI
proportionately added to their constructed area in addition to the area agreed to be
given to Defendant Nos. 1 to 3, does not assist the Plaintiffs in any way since by the
said letter the Defendant Nos. 1 to 3 have only expressed their interest in the excess
FSI and have not placed any conditions in their said letter. In fact, the Plaintiffs
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have ignored the letter and not responded to the same, after which the Defendants
have also not pursued the matter any further.
25. The submission of Mr. Seervai on behalf of the Plaintiffs that the agreement
executed by and between Defendant Nos. 1 to 3 and Defendant No.4 dated 25 th
September 2007 is not bona fide and strong reliance placed on the fact that the
share capital of Defendant No.4 is only Rs. One lakh, also renders no assistance to
the Plaintiffs. The Defendant Nos. 1 to 3 were allowed by an order of this Court
dated 1st December, 2011 to enter into any development agreement in respect of the
suit property with any third party after depositing a sum of Rs. 1.38 crores in Court.
Pursuant thereto, Defendant Nos. 1 to 3 have deposited an amount of Rs. 1.38
crores in Court and have entered into a Development Agreement-cum-Deed of
Assignment of Lease dated 22nd December 2011 with Defendant No.4. In view
thereof, the question of the agreement dated 22 nd December 2011 not being a bona
fide agreement for the reasons alleged is baseless and untenable. As regards the
share capital of Rs. One lakh, Defendant No.4 have in their affidavit explained that
Defendant No. 4 is controlled and managed by Goshar Ventures Pvt. Ltd. which
owns 81 per cent of the total paid up and subscribed share capital of the Defendant
No.4. The Promoters of the said Goshar Ventures Pvt. Ltd. are experienced in real
estate development and have completed various projects in the vicinity of Matunga,
Mumbai. It is further explained that Directors of Defendant No.4 are also running a
successful business in the name of K.T. Exports, an associate concern of Defendant
No. 4, having an annual turnover of Rs. 30 crores approximately and are capable of
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inducting further capital in the Defendant No.4 Company. As set out in the affidavit
of Defendant No.4, Defendant No.4 by its letter dated 13 th March, 2012, applied to
the MBRRB inter alia seeking permission to approach the MCGM for taking further
steps to develop the suit property and that MBRRB by its Letter of Intent dated 10 th
April 2012 inter alia permitted Defendant No.4 to approach MCGM for development
of the property. Defendant No.4 is in the process of submitting plans to MCGM and
is also negotiating with the tenants/occupants. Defendant No.4 has also in its
affidavit stated that since August 2012 the Defendant No.4 has also started taking
bookings for flats that will be available for sale, after making the necessary
provisions for permanent alternative accommodation for the existing
tenants/occupants in the proposed new building to be constructed on the suit
property.
26. From the aforesaid facts it is clear that the Plaintiffs after entering into the
said Agreement have not taken any steps for more than 4 years which the Plaintiffs
were required to take under the said Agreement. The Plaintiffs failed to work out an
agreement with any of the tenants/occupants of the said building as agreed in the
said Agreement and as set out hereinabove. After 4 years, for the first time the
Plaintiffs have tried to blame the Defendant Nos. 1 to 3 for the same. The Plaintiffs
are not entitled to rely on para 20 of the said Agreement which if at all is applicable
in law, would be only if the building plans are not sanctioned and/or approved by
MCGM. In the instant case, the Plaintiffs have not even submitted any plans to
MCGM. In view thereof, the Plaintiffs have failed and neglected to carry out their
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obligations under the said Agreement and are therefore not entitled to seek reliefs
under the Specific Relief Act qua the suit property. The balance of convenience is
also in favour of the Defendants. In view thereof, the question of granting any
reliefs in favour of the Plaintiffs and against the Defendants does not arise. The
Notice of Motion is therefore dismissed.
(S. J. KATHAWALLA, J.)
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