Bombay High Court
Companies Act vs Mumbai International Airport on 28 November, 2013
Bench: S.C. Dharmadhikari, G.S. Patel
APP(L)365-13-F
agk
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL (L) NO. 365 OF 2013
IN
ARBITRATION PETITION (L) NO.902 OF 2013
Housing Development and
Infrastructure Limited,
a company incorporated under the
Companies Act, 1956, having its
registered office at 9-01, HDIL
Tower, Anant Kanekar Marg, Appellant
Bandra (East), Mumbai - 400 051 (Orig. Petitioner)
versus
1. Mumbai International Airport
Private Limited,
a private limited Company
incorporated under the
Companies Act, 1956, having its
registered office at Terminal 1B,
Chhatrapati Shivaji
International Airport, Santa
Cruz (East), Mumbai - 400 099
2. Airport Authority of India,
having its office at TS Complex,
Near Sahara Cargo, Sutar
Pakhadi Road, Andheri (East),
Mumbai - 400 099
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3. The State of Maharashtra,
through Urban Development
Department & Housing
Department, served through
Government Pleader, High
Court (Original Side), Bombay
4. The Collector, Mumbai
Suburban District, Bandra,
Mumbai
5. The MMRDA,
having its office at Bandra Kurla
Complex, Bandra (East),
Mumbai - 400 051ig
6. The Slum Rehabilitation
Authority, having its office at
Administrative Building, Anant
Kanekar Marg, Bandra (East), Respondents
Mumbai - 400 051 (Orig.Resps.Nos.1 to 6)
A PPEARANCES
FOR THE APPELLANTS Mr. Rohit Kapadia, Senior Advocate, a/w
Housing Development Mr. T. N. Subramaniam, Senior Advocate,
and Infrastructure Mr. Gaurav Joshi, Mr. Rajesh Shah,
Limited: "HDIL" Mr. Piyush Raheja and Mr. Chetan Yadav
i/b M/s Markand Gandhi & Co.
FOR RESP.NO.1 Mr. Janak Dwarkadas, Senior Advocate a/w
Mumbai International Mr. Virag V. Tulzapurkar, Senior Advocate,
Airport Private Dr. Birendra Saraf and Ms. Shoma Mitra
Limited: "MIAL" i/b M/s Wadia Ghandy & Co.
FOR RESP.NO.2 Mr. Satish Upadhyay
Airports Authority of i/b M/s. M. V. Kini & Co.
India: "AAI"
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FOR RESP.NOS.3 & 4 Mr. U. S. Upadhyay, AGP
State & Collector
FOR RESP.NO.6 Mr. Shailesh Shah, Senior Advocate a/w
The Slum Mr. G. D. Utangale and Mr. B. V. Phadnis
Rehabilitation i/b M/s. Utangale & Co.
Authority: "SRA"
CORAM : S. C. Dharmadhikari
& G.S.Patel, JJ.
ARGUMENTS HEARD : 26th September 2013, 3rd
ig October 2013 & 4th October
JUDGEMENT RESERVED : 4th October 2013
JUDGEMENT PRONOUNCED : 28th November 2013
JUDGMENT : (Per G.S. Patel, J.)
1. This appeal is directed against an order dated 23rd August
2013 passed by a learned Single Judge of this Court dismissing the
Appellants' petition under Section 9 of the Arbitration &
Conciliation Act, 1996 ("the Arbitration Act"). By consent, we
took up the matter for final disposal at the stage of admission. We
heard learned Counsel for the appearing parties at considerable
length.
I
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2. The Airports Authority of India ("AAI"), constituted under
the Airport Authority of India Act, 1994, is responsible for the
development, management, and maintenance of airports in India. It
owns or controls about 1,980 acres of land in Mumbai. This is the
land of Mumbai's Chhatrapati Shivaji International Airport
("CSIA"; "the Airport"). An estimated one-sixth of this land is
encroached and is unavailable for CSIA operations and use. Some of
the slums and shanties on this encroached land are in perilous
proximity to the CSIA. In the past decade or so, and particularly
with the entry of private airline operators, the demands on CSIA's
facilities have surged. These facilities are now over-stretched, and
the CSIA requires expansion, modernisation and upgrading. Any
such expansion necessarily involves a relocation and resettlement of
those who live in the slums on the airport land. This is not just a
matter of eviction and bulldozing structures: this is, after all, a
human problem, one of town planning and alternative housing.
Given the extent of encroachment, clearing this land for CSIA use is
possibly the single largest slum re-development and rehabilitation
project in the history of this country; certainly in the history of this
city.
3. The 2nd Respondent, Mumbai International Airport Pvt Ltd,
("MIAL") is a joint venture company. The AAI holds 26% of
MIAL's equity. The rest is divided between GVK Airport Holdings
Pvt Ltd, Bid Services Division (Mauritius) Ltd and ACSA Global
Ltd, and there is a shareholders' agreement of 4th April 2006
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between these entities. MIAL was incorporated specifically to take
over the operations, expansion and upgrading of CSIA. Also on 4th
April 2006, AAI and MIAL entered into another agreement by
which AAI granted MIAL exclusive rights for the operation,
management and development of CSIA. Under this agreement,
referred to as the "OMDA", MIAL was tasked with the "function
of operating, maintaining, developing, designing, constructing,
upgrading, modernising, financing and managing" CSIA; and
MIAL had exclusive rights and authority in respect of these
functions. Though wide, these are only some of AAI's functions;
others, such as customs, immigration, security, etc., remained with
AAI. The OMDA is essentially a public-private partnership, where a
public function (or set of public functions) to be performed by an
authority constituted under a statute, the AAI, was permitted to be
carried out by a private enterprise, MIAL.
4. To be effective, the OMDA required the execution of several
further documents and agreements. We are not concerned with all
of these. It is sufficient to note that among the other documents,
deeds and agreements executed pursuant to the OMDA were two
lease deeds, an agreement in respect of CNS/ATM facilities, a state
support agreement with the Union of India and an escrow
agreement. Other than a supplemental lease deed, which is dated
15th May 2009 and which added an additional 101,175 sq.mts. to
MIAL's lease, all the other agreements were executed between 26th
and 28th April 2006. The two agreements following the OMDA and
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material for our purposes are (i) A State Support Agreement dated
27th April 2006 between the State Government and MIAL for
providing MIAL with State Government support for the
modernization and upgrading of the Airport; and (ii) an Agreement
dated 12th December 2006 between MIAL and the 5th Respondent,
the Mumbai Metropolitan Regional Development Agreement
("MMRDA") for freeing some of the AAI land of encroachments.
5. Modernizing, upgrading and expanding the existing facilities
at CSIA demanded, most of all, the clearance of the slums and
shanties on the airport land. This, in turn, required slum dwellers
eligible under State Government policy to be relocated and resettled
elsewhere. A total of 267 acres of airport land was to be cleared in
this fashion. Though clearance of these slums and the deployment
of the land they occupied to airport operation purposes were
squarely within its mandate under the OMDA, MIAL sought an
agency with the expertise and skills to achieve this.
6. Therefore, on 18th April 2007, MIAL invited expressions of
interest from prospective bidders to undertake this slum clearance
work. MIAL's invitation said that the work involved clearance of
about 276 acres of land, on which there were some 60,000-70,000
tenements. On 25th June 2007/9th August 2007, AAI consented to
MIAL appointing another agency to meet MIAL's slum clearance
obligations under the OMDA. The Appellant (Original Petitioner),
Housing Development & Infrastructure Ltd ("HDIL"), was one of
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several parties who responded to MIAL's invitation. On 6th July
2007, HDIL issued a request for a proposal to bid.
7. HDIL's bid was accepted. It was awarded the Airport Slum
Rehabilitation Project ("Project"). On 15th October 2007, a formal
agreement was executed by MIAL and HDIL for this work ("the
Slum Rehabilitation Contract"). MIAL issued a Letter of Intent
("LOI") dated 15th October 2007. That LOI inter alia required
HDIL to submit a bank guarantee of Rs.25 crores and issue a
Promissory Note for Rs.275 crores in favour of MIAL. The Slum
Rehabilitation Contract and the LOI were followed, a year later, by a
Deed of Confirmation dated 14th October 2008.
8. On 6th February 2013, MIAL terminated the Slum
Rehabilitation Contract, claiming, inter alia, that in the intervening
six years, HDIL had committed several breaches of its obligations
under that contract. HDIL says this termination is wrongful. On
25th June 2013, HDIL invoked arbitration under the Slum
Rehabilitation Contract, and it is pursuant to that arbitration
invocation that HDIL sought, and, by the order under appeal, was
refused, interim relief under S.9 of the Arbitration Act. In the six
years between the execution of the Slum Rehabilitation Contract
and its termination there were, of course, several other events that
are material, and we will consider some of these presently; we have
telescoped the time frame here only to indicate the broad trajectory
of the Slum Rehabilitation Contract.
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II
9. Before the learned Single Judge, HDIL sought seven reliefs.
These are set out in the impugned order. None were granted. Before
us, Mr. Rohit Kapadia, learned Senior Counsel for the Appellants,
HDIL, submitted that the learned Single Judge was in error and that
HDIL was entitled to reliefs in terms of all seven prayers, though,
before us, the sixth prayer was not pressed. The first of these
prayers is for an injunction restraining MIAL from acting in
furtherance of its notices of termination and, specifically, from re-
tendering or re-awarding the slum clearance Project to anyone else.
The second seeks a restraint against MIAL from dealing with a
defined area of some 65.2 acres that forms part of the Slum
Rehabilitation Contract. The third prayer seeks an order of
maintenance of status quo against MIAL in respect of what is called
"non-transfer assets" and also an injunction restraining MIAL from
constructing "non-transferable assets" on the entire airport land.
The fourth relief sought is another order of status quo, this one
directed against all the Respondents in respect of the residential
colonies component of the Slum Rehabilitation Contract, including
the excess Floor Space Index ("FSI") thereon. The fifth relief seeks
a restraint order against the Respondents from taking possession of
the rehabilitation tenements constructed by HDIL and from
rehabilitating any slum dwellers in those tenements. The sixth relief,
in respect of the bank guarantee of Rs.25 crores, was not pressed.
The last, seventh, relief is for another injunction restraining the
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Respondents from revoking or cancelling the various permissions
and sanctions already granted to HDIL; and, further, for a direction
to the Respondents to grant such further permissions as may be
necessary to enable HDIL to complete the construction of
rehabilitation tenements.
10. Not unlike the airport land slums themselves, HDIL's slew of
reliefs sprawls well beyond the confines of its Slum Rehabilitation
Contract. They are not limited to the parties to the Slum
Rehabilitation Contract. Reliefs are sought against Respondents
other than MIAL, too, though these other Respondents are not
parties to the Slum Rehabilitation Contract. Nor are the reliefs
limited to the immediate property with which the Slum
Rehabilitation Contract is concerned. Mr. Kapadia maintains that,
though he does paint on a very wide canvas, this is both permissible
and necessary. For, in his submission, the Slum Rehabilitation
Contract, correctly read, is not a simple stand-alone agreement
between MIAL and HDIL severable from the various other
contracts and agreements that also deal with the encroached airport
land. The Slum Rehabilitation Contract is but a part of a much
larger and more complex web of inextricably intertwined contractual
relationships between HDIL and all the Respondents. That some of
these relationships are inferential is, he submits, as inevitable as it is
irrelevant. If HDIL's rights and entitlements under the Slum
Rehabilitation Contract are to have any meaning at all, and if its final
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reliefs in arbitration are to be anything but illusory, HDIL must, in
Mr. Kapadia's submission, receive the protection sought.
11. HDIL's case turns on two principal factors: first, the nature of
Slum Rehabilitation Contract; and, second, an examination of how
the parties' conduct during the time when that Contract was being
operated. For both, we are required to make a prima-facie
determination, not the closer scrutiny that HDIL's claim in
arbitration, as and when it is made and assessed, will demand.
12.
At the broadest level, this is how we understood the frame of
Mr. Kapadia's submissions:
(a) The Slum Rehabilitation Contract is not a stand-alone,
independent contract severable from the other
contracts that related to the slum clearance Project.
Critical to the entire exercise of slum clearance was the
fixing with finality of a slum rehabilitation policy for
the occupants of the airport slum lands. Which of these
occupants were eligible, under what conditions and to
what rights were, Mr. Kapadia said, matters that could
be decided by, and only by, the State Government and
Respondents? This makes the State Support
Agreement with the State Government an intrinsic part
of Slum Rehabilitation Contract. So, too, the MIAL-
MMRDA agreement, for this set out the obligations of
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those parties in relation to the very same slum
clearance project. Indeed, all the various agreements
are inextricably interlinked and are not independent of
each other. The various agreements are all part of the
same, single slum clearance project. Therefore, HDIL
is entitled to seek reliefs that travel beyond the Slum
Rehabilitation Contract and are, too, directed at parties
with whom HDIL may not have had a direct
contractual relationship under that Contract.
(b)
This intertwining is also borne out by the conduct of
the parties from 2007 right up to the time of
termination.
(c) Given the unity of purpose of the various agreements
and contracts related to the slum clearance Project, and
the fact that all the players involved saw this as a single
project, it is, in Mr. Kapadia's submission, clear that
HDIL's claim under the Slum Rehabilitation Contract
is not in the nature of a development right so much as a
claim for land. That is established by a concatenation of
factors: that HDIL was chosen from a number of
competing bidders because it had what Mr. Kapadia
described as a "land bank", available real estate on
which rehabilitation tenements could be constructed,
and to which slum dwellers could be shifted. In return,
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HDIL was to get not direct monetary payment but,
instead, development rights also necessarily related to
land. The entire exercise was about freeing land for
Airport use and giving HDIL rights over land, each of
these being uniquely identified. In the larger universe
of AAI rights and dealings with the land of the airport,
MIAL acquired substantial rights on a long lease. Some
of those rights passed to HDIL.
(d) HDIL is therefore entitled to maintain its petition
against Respondents other than MIAL on account of
this intertwining of rights and obligations of several
entities and agencies in respect of the same land. It is,
therefore, not restricted to seeking reliefs only against
MIAL or only in respect of the subject matter of the
Slum Rehabilitation Contract.
(e) Once it is shown that the Slum Rehabilitation Contract
is a contract or agreement for land, several
consequences follow. The most important of these is
that time is not of the essence, and the contractual
stipulation that it is of the essence is inconsequential.
Time could only be of the essence if a specific notice to
that effect was given by MIAL; that was not done.
Therefore, any delays in performance or the
achievement of contractual obligations remain
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immaterial, and, consequently, the termination of the
Slum Rehabilitation Contract by MIAL for delay in
performance is prima-facie bad.
(f ) MIAL's termination is also vulnerable because of its
election to affirm the Slum Rehabilitation Contract at
the time of the alleged breach. There is, Mr. Kapadia
submits, an equitable estoppel against MIAL. Apart
from being incorrect, none of the alleged defaults by
HDIL are recent, and historicity robs them of all
relevance. MIAL cannot, at this stage, cite them as
cause for termination. There is not only a waiver on
MIAL's part but its specific representations made
during the contract and its election to reaffirm the
contract at the time of the alleged breaches and not to
exercise its right to terminate it although it could then
have done so entitle HDIL to invoke against MIAL the
equitable doctrine of estoppel in pais: MIAL was
prevented by its conduct from obtaining the
enforcement of rights to the detriment of HDIL, which
had relied and acted on that conduct.
(g) Further, the delays and defaults attributed to HDIL
were occasioned not by anything it did, but by defaults
on the part of the Respondents. A fixed slum
rehabilitation policy was the substratum of the entire
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exercise. Failing to evolve and fix with finality such a
policy, or making frequent changes to an existing policy
or policies, had the effect of undermining not only the
project but also jeopardizing HDIL's prospects of
fulfilling its contractual obligations. The record, Mr.
Kapadia submits, shows that this is not a case of
changes in any slum rehabilitation policy; no such
policy was ever framed; and, without that policy being
in place, the entire Slum Rehabilitation Contract was
stymied. It was not a matter of shifting goal posts so
much as not having a goal post at all. Alternatively, if a
slum rehabilitation policy could be said to have existed,
it was in constant flux, making performance impossible,
for the Slum Rehabilitation Contract's success
depended on a policy that was immutable.
(h) Viewed from any perspective, this was beyond HDIL's
control and it is sufficient cause for HDIL to rely on the
force majeure clauses of the Slum Rehabilitation
Contract. State support, as also support from other
agencies, was essential to the completion of the
Project. There was a complete failure to provide any
support. Indeed, the breaches are on the part of the
Respondents and not HDIL; and all the grounds cited
for termination are incorrect and wrongful. The so-
called contractual defaults on which MIAL based its
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termination of the Slum Rehabilitation Contract are, in
Mr. Kapadia's submission, a futile attempt to defend
the indefensible.
(i) Despite every obstacle and hindrance in its way, HDIL
has completed a substantial part of its work under the
Slum Rehabilitation Contract. It has spent enormous
amounts of money in doing so and has made valuable
assets over to agencies, free of cost. It cannot now be
deprived of its expected and contractually assured
returns. Equity and the balance of convenience favour
HDIL; and the reliefs it seeks, albeit against third
parties, are necessary if its arbitration is not to be
rendered infructuous.
13. This is an intricately constructed argument. But there is, in
this appeal, a more fundamental obstacle in HDIL's way. The
learned Single Judge has in exercise of his discretion taken a
particular view, and dismissed HDIL's claim for reliefs under
Section 9 of the Arbitration Act. Before us, it is not enough for
HDIL to show that some other view was possible. It must show that
the discretion exercised by the learned Single Judge was arbitrary,
capricious or perverse. We cannot, in appeal, substitute our view for
that of the court below if the latter view was possible, plausible or
permissible. Therefore, to succeed in appeal, HDIL must show that
the learned Single Judge could not ever have reached the conclusion
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he did. We must state straightaway that for all the assiduous
construction and elegance of Mr. Kapadia's submissions, we are
unable to conclude at this stage of a prima-facie assessment that the
view taken by the court below was so entirely implausible as to
warrant interference.
14. Mr. Dwarkadas, learned Senior Counsel for MIAL,
maintained that HDIL's case was wholly untenable. This is how he
placed his response:
(a)
HDIL's petition, as laid, is not maintainable under
Section 9 of the Arbitration Act. It seeks reliefs beyond
the Slum Rehabilitation Contract and against
Respondents who are not parties to that Contract.
HDIL's case rests on the supposition that the Slum
Rehabilitation Contract is not an independent contract.
This is incorrect. While it is true that other
Respondents also had a role to play in the Slum
Rehabilitation Project, that does not make the Slum
Rehabilitation Contract any wider than its express
terms.
(b) According to Mr. Dwarkadas, HDIL's submissions
proceed on a patent misreading and misconstruction of
the Slum Rehabilitation Contract. The Slum
Rehabilitation Contract sets out HDIL's various
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obligations. HDIL defaulted in performance of many of
these and there was an unconscionable delay in
performance. It is clear from the record, Mr.
Dwarkadas submits, that HDIL is not now and, at the
relevant time, was not either ready or willing to
perform its obligations under the Slum Rehabilitation
Contract. He points out that as far back as in June 2011
MIAL gave HDIL a cure notice calling upon it to
remedy its defaults. HDIL did not reply to this notice.
It did not dispute its contents. It was not till late 2012
that HDIL, for the first time, claimed that MIAL was
deemed to have waived its right to demand compliance
from HDIL. This defence and answer was raised only
when MIAL sought to invoke HDIL's bank guarantee.
(c) The Slum Rehabilitation Contract is not, Mr.
Dwarkadas says, in any sense a contract for land, nor
does it create any vested right in land in favour of
HDIL. That is clear from the contract itself, for
HDIL's entitlement to development rights is
contingent upon the timely fulfilment of its contractual
obligations. It is a contract that has two clearly defined
components, namely, the clearance of slums and the
construction of rehabilitation tenements for eligible
slum dwellers. The fact that HDIL is conditionally
entitled to certain reliefs in the nature of development
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rights does not alter this position. HDIL acquires those
development rights only if it fulfils contractually
defined obligations. Indeed, the contract says that
should HDIL fail to do so, it gets no rights at all.
Therefore, the Slum Rehabilitation Contract cannot be
said to be a contract for land.
(d) Time was always very much of the essence of the Slum
Rehabilitation Contract. It says so, in so many words. It
fixes various time-lines for the completion of specified
items of work. Indeed the very nature of the Project
itself suggests the timeliness was the sine-qua-non of
the Slum Rehabilitation Contract because the
expansion and modernisation of the Airport were not
matters that could proceed at a leisurely space. These
were urgent requirements in the general public interest
and had to be completed on schedule. There is,
therefore, in Mr. Dwarkadas's submission, no equity or
interest in land created in favour of HDIL.
(e) The contract itself expressly forbids any waiver or
modification except in the manner provided by the
contract. Mr. Dwarkadas points out that HDIL's
reliance on the force majeure clause is nothing but an
express admission by HDIL that it is in breach of its
contractual obligations.
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(f ) The mere fact that HDIL spent some money under the
contract is entirely irrelevant, particularly when one
considers the innumerable and flagrant breaches
committed by the HDIL. It not only failed to perform
its obligations on the required dates but it also failed to
perform those obligations that did not involve statutory
authorities or the fixation of any slum rehabilitation
eligibility policy.
(g) HDIL has made out no prima-facie case. The balance of
convenience is against HDIL, and settled principles
governing the grant of relief under Section 9 of the
Arbitration Act militate against the grant to HDIL of all
reliefs directed against third parties, and in respect of
matters beyond the arbitration agreement. The reliefs
sought by HDIL cannot be said to be in any way in aid
of a final relief in the arbitration.
(h) Mr. Dwarkadas submits that, in any event, the view
taken by the learned Single Judge is not an implausible,
impermissible or impossible view. It is not open to an
Appeal Court to substitute its discretion for that of the
Court below. There is also nothing to show that unless
reliefs are granted, HDIL will not be able to claim
effective final relief in arbitration; after all, HDIL can
always maintain a claim for damages. By granting the
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reliefs sought, the entire Slum Clearance Project would
be brought to a standstill for years to come. The larger
public interest must, Mr. Dwarkadas submits, be borne
in mind while addressing a claim under a contract of
this type.
III
15. The foundation of Mr. Kapadia's submissions is that the Slum
Rehabilitation Contract is not independent of or separate from the
MIAL-MMRDA agreement and the contractual relationship
between HDIL and the Slum Rehabilitation Authority ("SRA"),
the 6th Respondent; therefore, HDIL's Petition for reliefs against
those Respondents is maintainable. Mr. Kapadia bases this
submission on (i) an analysis of the Slum Rehabilitation Contract
and (ii) contemporaneous documents reflecting the conduct of
parties. It seems not to be seriously disputed that HDIL was
selected for the project because, apart from its professed expertise,
skills and capabilities in large scale slum clearance projects, the key
factor that distinguished it from competing bidders was that it had,
or was in a position to acquire, a significant area as a "land bank".
This land bank was to be used in the construction of tenements for
the rehabilitation of eligible slum dwellers upon their relocation
from the Airport land. According to HDIL, the Slum Rehabilitation
Contract's terms govern the use of this land not only for the
construction of the rehabilitation tenements but also their utilisation
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by the Slum Rehabilitation Authority. The Slum Rehabilitation
Contract contains a description of this land bank (called "the
Developers' Land").1 This land was already available with HDIL. It
subsequently acquired seven plots of land closer to the airport at a
cost of some Rs.1700 crores. The land later acquired also formed
part of the 'Developers' Land'. The Slum Rehabilitation Contract
required HDIL to obtain permissions from the SRA (including
Letters of Intent) for construction of rehabilitation tenements on
this land; to construct the rehabilitation tenements; to form housing
societies; relocate protected slum dwellers to those tenements and
to transfer the lands in a stipulated manner. The Developers' Land
was to be used only for these purposes, and the Slum Rehabilitation
Contract imposed negative covenants on HDIL from encumbering
this land or creating any third party rights on it. The construction
work was to be monitored by MIAL through its Project
Management Consultant, and this is a provision of the agreement
between MIAL and MMRDA. Slum rehabilitation schemes for the
Developers' Land were approved by the SRA. A significant portion
of that land was conveyed to the SRA. Mr. Kapadia submits that this
makes it clear that the HDIL-acquired lands were always a part of
the Slum Rehabilitation Contract and HDIL is therefore entitled to
reliefs in respect of that land. He was at pains to point out that
contrary to the submissions made by the SRA, the rehabilitation
tenements on the Developers' Land could not be used for any
purpose than resettlement of the eligible slum dwellers on the
Annexure 3, read with Clause 1.1 (Definitions) of the Contract.
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airport land. This, according to him, was clear from the terms of the
Letters of Intent issued by the SRA as also the terms of the
conveyances executed by HDIL in favour of the SRA in respect of
these lands, and the conveyances themselves were in fulfilment of
HDIL's obligations under the Slum Rehabilitation Contract.
16. Similarly, MMRDA's agreement dated 12th December 2006
with MIAL is not, in Mr. Kapadia's submission, independent of the
Slum Rehabilitation Contract as the Respondents would have it. He
drew our attention to Clause 3.1(v)(q) of the Slum Rehabilitation
Contract. This provides that amounts due to MMRDA from MIAL
under their 12th December 2006 agreement were to be reimbursed
by HDIL, and that HDIL would assume all the obligations of MIAL
under the 12th December 2006 agreement. Further, Mr. Kapadia
submitted, even the statutory framework governing slum
rehabilitation, specifically Development Control Regulation 33(10),
brought about a direct relationship between HDIL and the SRA, and
the latter could not possibly have sanctioned the rehabilitation
scheme but for the Slum Rehabilitation Contract. Under that
Development Control Regulation, HDIL received Transferable
Development Rights ("TDR") in respect of the slum rehabilitation
scheme sanctioned on the Developers' Land. In addition, HDIL was
also entitled to receive rights in a portion of the airport land cleared
of slums. HDIL contends that the TDR it got was not its full
recompense, because that TDR's value was about Rs.2400 crores,
while HDIL had actually spent over Rs.4000 crores. That, he
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submits, is the only reason that HDIL was granted additional rights
in respect of a portion of the cleared airport land. HDIL therefore
has interests in the form of development entitlements arising from
the Developer's Land (i.e., the land bank used for rehabilitation
tenements) as also a contractually defined portion of the cleared
airport lands.
17. There is thus, in Mr. Kapadia's submission, such an
intertwining of agreements, obligations and rights that it is simply
not possible to segregate the Slum Rehabilitation Contract from the
other agreements. The Slum Rehabilitation Contract was the
"mother agreement": the conveyances of the developers' land to
SRA, the issuance of Letters of Intent by SRA and the MIAL-
MMRDA all flowed from, and only from, the Slum Rehabilitation
Contract. Therefore, according to Mr. Kapadia, it matters not that
Respondents Nos.2 to 6 are not signatories or parties to the Slum
Rehabilitation Contract. The object of all the agreements was one,
the clearance of slums on the airport lands. The other agreements
are ancillary or subsidiary, but to be brought to fruition, each
agreement depends on the performance of the others. There is a
direct relationship between the parties to the Slum Rehabilitation
Contract and others who are not signatories to it. The commonality
of the subject matter makes all the agreements parts of one
consolidated, composite transaction. HDIL is, therefore, not
confined to seeking reliefs only against MIAL or only in respect of
the subject matter of the Slum Rehabilitation Contract.
23 of 69
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18. In support of his submissions as to maintainability, Mr.
Kapadia relies on the decision of the Supreme Court in Chloro
Controls v Severn Trent Water Purification Inc & Ors,2 specifically to
stress that the Slum Rehabilitation Contract was the mother
agreement; that the project was a single composite one; and that the
performance of each agreement depended on the performance of
the others. In such a case, the Supreme Court held that the fact that
a party was not a signatory to one or the other of a raft of
agreements may not be of much significance. This, however, is an
approach to be used in exceptional cases, and with great caution. In
response, Mr. Dwarkadas points out that Chloro Controls is,
however, a decision under Section 45 in Part II of the Arbitration
Act, not one under Section 9. Mr. Kapadia contends that this is
irrelevant, for Chloro Controls, particularly in paras 82 and 87
through 89, elucidates a general principle to be applied where there
are multiple, overlapping agreements of the kind we see here. We
believe this to be an incorrect reading of those paragraphs. We
understand these paragraphs only to say that in a given factual
matrix it is sometimes possible to consolidate a number of arbitral
claims to avoid multiplicity and to ensure consistency of result. That
is very different from saying that a party is entitled, as a matter of
right, and in an action under Part I of the Arbitration Act, to drag
into arbitration another party with whom he has no contractual
privity. We do not read Chloro Controls as supporting any such view.
There is a material distinction in the wording of Section 8 and
(2013) 1 SCC 641, paras 73-76
24 of 69
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Section 45 of the Arbitration Act. Both sections deal with the power
of a judicial authority to refer parties before it to arbitration. Mr.
Kapadia's argument is that if, following Chloro Controls, strangers
can be brought to arbitration under Section 45, there is no logical
reason why this should not apply to Section 8, too; and once non-
signatories to the arbitration agreement are included in the
arbitration, then it must follow that as against those parties, a
petition for reliefs under Section 9 is maintainable. We believe this
argument to be fallacious. Not only are Sections 45 and 8 in different
parts of the Arbitration Act, but they also deal with different types
of arbitrations. Section 45 speaks of the request for reference to
arbitration emanating from one of the parties "or any person
claiming through or under him". Section 8 does not. Chloro Controls
read these words in Section 45 to have wide amplitude. We do not
believe that it sought to introduce these words into Section 8, which
does not have them. Mr. Kapadia's reliance on the Delhi High
Court decision in HLS Asia Ltd v Geopetrol,3 one that follows Chloro
Controls, is also, we believe, similarly misplaced. That was a case
where one party was authorised to act on behalf of a number of
others who together formed a consortium. The argument that these
others were not formally signatories to the arbitration agreement
was repelled by the Delhi High Court. This is of no assistance to
Mr. Kapadia as the other Respondents before us are not members of
a consortium or any form of contractual fraternity, but are
independent contracting agencies.
196 (2013) DLT 52, para 16
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19. Mr. Kapadia then submitted that, in any event, and without
prejudice to his previous submissions, it is permissible for a party to
seek reliefs under Section 9 of the Arbitration Act against third
parties even if there is no arbitral claim against them. In support of
this contention he relied on the decision of this Court in Girish
Mulchand Mehta V/s. Harish Mehta.4 Mr. Kapadia took us through
that decision as also the decisions in Mohd. Ishaq Bhatt V/s. Tarik
Ahmed Sofi,5 Arun Kapoor V/s. Vikram Kapoor,6 and Embassy
Properties Development Private Limited V/s. Jumbo World.7 In addition,
he submitted that the Bombay High Court (Original Side) Rules
under the Arbitration Act specifically contemplate that third parties
can be joined in proceedings under that Act, for Rule 803-E speaks
of a notice of the filing of an application being required to be given
to persons likely to be affected.
20. We cannot agree with Mr. Kapadia's submissions in this
regard. In Girish Mulchand Mehta, the Court said that the emphasis
of Section 9 is not so much the identity of the parties to a
proceeding under that section as the 'subject matter' of the
arbitration agreement. It is, in a given case, entirely possible that a
protective relief may be sought against a third party under Section 9
of the Arbitration Act, although no reliefs in arbitration may be
claimed against that party. The object of Section 9 is inter alia the
2010 (1) Bombay C.R. 31, at para 12
2010 (3) Arbitration Law Reporter 107 ( J & K), para 9
95 (2002) Delhi Law Times 42
Unreported decision of a Division Bench of the Madras High Court,
paras 54 to 57; Manupatra: MANU/TN/0920/2013
26 of 69
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preservation of the subject matter of dispute. Girish Mulchand
Mehta was a case where a relief was sought against a member of the
cooperative society, and the Court held that relief can be granted
against parties who are not signatories to the arbitration agreement
if it be found that these parties claimed through or under one of the
parties to the agreement. The question, therefore, is whether or not
the subject matter of the Slum Rehabilitation Contract includes the
lands conveyed to SRA. The SRA and MMRDA do not claim under
or through MIAL vis-à-vis HDIL. SRA certainly has an independent
contractual relationship with HDIL stemming from its conveyances
and Letters of Intent. SRA has distinct, separate and independent
rights in the Rehabilitation lands and tenements inter alia under
registered Deeds of Conveyances. Obviously there are no arbitration
clauses in these Conveyance Deeds.
21. Relying on Chloro Controls, Mr. Kapadia suggests that in any
situation where there are multiple, over-lapping agreements, a party
to what he calls the principal, mother or composite agreement may
seek reliefs against parties to the other agreements but who are not
signatories to his agreement, and also in respect of the property
which is not the subject matter of his agreement. We do not believe
that there is any such universal principle. It may often happen that
there may be several distinct agreements required to be separately
performed, yet all directed towards a common objective or purpose.
That is not either conceptually or legally the same thing as a
situation in which there is composite or mother agreement, the
27 of 69
APP(L)365-13-F
performance of which depends on some other subsidiary or ancillary
agreement. To illustrate, a contract between two parties for the
setting up and commissioning of a power plant may entail the
execution of a number of additional or ancillary agreements between
one or other of the principal parties and several sub-contractors or
other agencies. This would be a case of a single composite mother
agreement and it is this kind of situation that Chloro Controls
contemplates. We have already noted above the material distinction
between Sections 45 and 8 of the Arbitration Act and that Chloro
Controls was not, stricto sensu, concerned with an interpretation of
Section 8. In the present case, the situation is very different. To put
it briefly: HDIL was required to perform some of MIAL's
obligations under the OMDA. Among those obligations were the
clearance of the Airport slums and the rehabilitation of eligible slum
dwellers. The construction of rehabilitation tenements and HDIL's
contractual arrangements with SRA were referenced in the Slum
Rehabilitation Contract between MIAL and HDIL, but they could
hardly be said to be part of that single transaction. For, the
conveyances are clearly severable, and it is entirely conceivable that
HDIL could have obtained rehabilitation lands, constructed
rehabilitation tenements on them, conveyed those to SRA and
obtained TDR benefits without this in any way affecting the Slum
Rehabilitation Contract. To put it another way, it is perhaps a matter
of convenience or happenstance rather than contractual obligation
that HDIL acquired these lands and conveyed them to SRA. It
cannot be said that unless HDIL and HDIL alone acquired these
28 of 69
APP(L)365-13-F
lands and conveyed them to SRA, the entire project of slum
clearance would necessarily fail. SRA required rehabilitation
tenements to be made available. Where and from whom those were
obtained was immaterial. It is, therefore, not possible to hold that
the rehabilitation or SRA lands are part of the subject matter of the
Slum Rehabilitation Contract. This is the view taken by the learned
Single Judge, and we believe that this is indeed both plausible and
permissible.
22. As we understand it, the legal position that emerges from a
conjoint reading of all Chloro Controls and Girish Mehta as also the
other decisions cited by Mr. Kapadia is only this: that while a claim
under Section 9 can only be made by a party to the Arbitration
Agreement, it can be laid against third parties who claim under or
through one of the contracting parties, or who have a direct interest
in the property in question. The objective is the preservation and
protection of the subject matter in dispute. What matters is the
nature and identity of the subject matter in controversy and not the
identity of the parties. For instance, where property has passed into
the hands of third parties, it would be open to a party invoking
Section 9 to seek an injunction against these third parties for the
preservation of that property. This does not mean, however, that
reliefs can be sought against third parties in respect of some other
property which is not the subject matter of the dispute. We believe
that Mr. Kapadia's submissions strain at the boundaries of both fact
29 of 69
APP(L)365-13-F
and law in trying to corral together in one place a number of
independent entities and distinct subject matters.
IV
23. The next submission advanced by Mr. Kapadia is that,
correctly read, the Slum Rehabilitation Contract "provides valuable
rights to HDIL in respect of immovable property belonging to AAI
which has been leased to MIAL and also governs the manner in
which HDIL is to use the lands procured by it for the slum
rehabilitation project." It is, he submits, a contract for land, and
HDIL's claims are in the nature of a claim for land. Mr. Kapadia
bases this submission on a reading of the Slum Rehabilitation
Contract. Specifically, he points out that the Slum Rehabilitation
Contract provided for HDIL acquiring development rights in
respect of released land;8 that the purpose of agreement was to grant
to HDIL "developers' development rights with respect to
developers portion";9 and right to utilize the developers'
development potential including creating third party rights on it.
The "Developer's Portion" was defined in the Slum Rehabilitation
Contract.10 It meant 55% of the "Released Land", and the Released
Land, in turn, meant pockets of land included in Phase 2 of the
Slum Rehabilitation Contract, Clause 1.1, Definitions of Developer's
Land, Developer's Development Potential, Developer's Portion,
Developer's Right in Developer's Portion, MIAL Portion, Released
Land.
Clause 2.3
Clause 1.1
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Project, these lands being specifically identified in Annexure 4 to the
Contract. The Developer's Portion was to be jointly earmarked in
these identified pockets of Phase 2 land after rehabilitation of the
slum dwellers in Phase 1(i), Phase 1(ii) and a portion of Phase 1(iii)
for a minimum of 28,000 hutments. It was, subject to variation,
about 65.2 acres. HDIL's contractual entitlement to the Developer's
Portion is in addition to the TDR that accrued to HDIL in respect of
the rehabilitation lands (i.e., the "Developer's Land"). Therefore,
according to Mr. Kapadia, HDIL had a vested interest in land. That
land was the entirety of the encumbered land as also rehabilitation
land, and therefore, the Slum Rehabilitation Contract is an
agreement for land. If accepted, he submits, this has a consequence
vital to his case, viz., that time is not of the essence of the Slum
Rehabilitation Contract, the specific terms to the contrary in the
contract notwithstanding. If that be so, Mr. Kapadia says, then
MIAL's termination citing delays by HDIL is bad, for those delays
are irrelevant: time was never of the essence, and was never made of
the essence by giving any notice, and HDIL cannot, therefore, be
held to any scheduled date of completion, or pilloried for not
meeting any particular deadline.
24. However, on a careful scrutiny of the Slum Rehabilitation
Contract, we are not convinced that Mr. Kapadia is correct in his
submissions. We believe that Mr. Dwarkadas is justified in
contending that merely by virtue of a definition in the Slum
Rehabilitation Contract, no interest in land is created in favour of
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HDIL. The definition of "Developer's Portion" as also Clause 4 of
the Slum Rehabilitation Contract along with the termination clause 11
make it clear that HDIL's entitlement to a share in some of the lands
released from encroachment was contingent upon the successful
performance of its obligations under the Slum Rehabilitation
Contract and that these obligations had to be fulfilled within the
time frame stipulated. Indeed Clause 4.1 of the Slum Rehabilitation
Contract opens with the words "Upon completion of complete
Scope of Work for Phase 1(i), 1(ii) and a portion of Phase 1(iii) for a
minimum 28,000 hutments". This is also evident from the
definition of "Developer's Portion" itself, for the earmarking of
pockets of the Released Land necessary to constitute the
Developer's Portion could not be done till these three phases were
completed. In other words, HDIL's entitlement, if any, did not
crystallise upon the execution of the Slum Rehabilitation Contract.
If it did not fulfil its obligations it acquired no rights. This is quite
distinct from a contract for land, in which, usually, a vested right in
respect of identified land accrues or crystallised on execution of the
contract itself. In this case, HDIL's claim is that this is a contract for
two different tracts of land. One is the rehabilitation land
("Developer's Land") on which rehabilitation tenements were to be
constructed. We have found, as has the court below, that this land is
not the subject matter of the Slum Rehabilitation Contract. That
leaves only the second tract, the so-called "Developer's Portion", an
area of about 65.2 acres from part of the Phase 2 lands. HDIL had
Clause 25
32 of 69
APP(L)365-13-F
no rights in the Developer's Portion on the execution of the Slum
Rehabilitation Contract. Its acquisition of those rights depended on
its fulfilment, in a time-bound manner, of certain defined
contractual obligations. Unless those obligations were met, HDIL
acquired no rights in the Developer's Portion. Therefore, the
argument that the Slum Rehabilitation Contract is a contract for
land depends entirely on HDIL being able to show that it has fully
complied with those conditions precedent. At the cost of repetition,
these conditions precedent are HDIL's successful completion of its
Scope of Work for Phase 1(i), 1(ii) and a portion of Phase 1(iii) for a
minimum 28,000 hutments. HDIL has not met these conditions. It
has not fulfilled these obligations. HDIL's recompense is expressly
dependent on, and a factorial of, this completion schedule. Failing to
meet this requirement resulted in HDIL losing its entitlement.
HDIL cannot, therefore, be said to have any interest in the lands
comprised in the Developer's Portion either.
25. For this reason, Mr. Kapadia's reliance on the decision of this
court in Chheda Housing Development Corporation v Bibijan Shaikh
Farid & Ors.,12 is of little significance. The agreement in that case
was construed to be one that entailed development coupled with a
right to sell a constructed portion, and hence capable of specific
performance. It is difficult to see how this advances Mr. Kapadia's
cause, particularly when we consider that the only reason for
contending that the Slum Rehabilitation Contract is a contract of
2007 (3) All MR 780
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APP(L)365-13-F
land is to enable him to segue into the submission that time is never
of the essence in any such contract, and therefore, HDIL cannot be
said to be in default, despite its demonstrable delays. But to hold
that time is not of the essence, we must first come to a finding that
this is a contract for land.13 But once we have found that the Slum
Rehabilitation Contract is not in any sense a contract for land, the
sequitur that Mr. Kapadia invokes does not arise.
V
26.
In actuality, Mr. Kapadia's submission conflates two distinct
arguments. The first is that time is not of the essence because the
Slum Rehabilitation Contract is a contract for land. Once we have
rejected this argument, as we have done, and also held that it is
impermissible to seek reliefs in respect of property that is not
properly the subject matter of the arbitral dispute, it is, in our view,
unnecessary to consider the next submission made by Mr. Kapadia.
However, since this has been strenuously argued, and also occupies
much of HDIL's written submissions, we are compelled to address
it. This is the submission of an equitable estoppel. Here, Mr.
Kapadia contends that quite apart from breaches by MIAL itself,
wherever there was a delay on HDIL's part in meeting its scheduled
contractual obligations, MIAL, instead of rescinding the contract
chose to reaffirm it and required HDIL to continue performing the
Hence HDIL's reliance on Chand Rani v Kamal Rani, (1993) 1 SCC 519
and Hindustan Construction Contractors v State of Maharashtra (1977) 2
SCC 539
34 of 69
APP(L)365-13-F
contract. This, he says, raises an equitable estoppel or an estoppel in
pais against MIAL. He drew our attention to MIAL's termination
letter dated 6th February 2013 to point out that all the breaches
complained of in that letter were actually of many years prior, going
as far back as in the year 2008. Mr. Kapadia relied on several distinct
instances said to be breaches and said that in not one of these cases
did MIAL rescind the Slum Rehabilitation Contract although it was
entitled to do so, but, on the contrary till as late as 31st January
2013, continued to expect and even demand performance from
HDIL. MIAL cannot rely on HDIL's alleged breaches due to delay
to terminate the Slum Rehabilitation Contract. Indeed, the
contractual clause requiring a waiver to be in writing as it has been
waived.14 It is his submission that MIAL having elected to affirm the
contract at the point in time when the breaches were alleged to have
been committed, it cannot now use these breaches as grounds for
termination. In this context, he relies upon the decision of the Court
of Appeal, U.K. in its decision in Tele2 International Card Company
S.A. V/s. Post Office Limited.15 The Appeal Court held that where a
party has a right to terminate a contract and chooses or elects not to
terminate it, but rather to affirm it, then it will be held to that
decision. This is a question of fact: either there is a reaffirmation of
the contract, or there is not. In Tele2, the contract required the
appellants to provide something called a Parent Company Letter for
each year. This was to be done seven days prior to the
commencement of each calendar year. There was no dispute that
Clause 33
(2009) EWCA Civ 9
35 of 69
APP(L)365-13-F
the appellants had not provided this letter for 2004, though it
should have been done no later than by 24 December 2003. Despite
this material breach, the respondent permitted the appellant to
continue performing the contract. It did not insist on the letter being
provided. The Appeal Court affirmed the finding of the trial court
that this amounted to an election and that there was an estoppel in
pais against the respondent.
27. There is no disputing this well-established principle. Indeed,
such an election may be inferred even from conduct. But the
communication of that election must be clear and unequivocal. In
this case, we do not find any evidence of any such communication.
Nor do we see any unequivocal evidence of MIAL's election. There
is, for instance, the matter of HDIL's default in regard to what is
called "Performance Security" in the Slum Rehabilitation Contract.
HDIL had initially submitted a bank guarantee for Rs.25 crores and
a demand promissory note for Rs.275 crores. These were to be
replaced by an interest-free cash deposit of Rs.300 crores within one
year. HDIL sought a time extension of 45 days. It never made this
deposit. This failure is cited as one of the breaches entitling MIAL
to terminate, and HDIL contends that it is here that an estoppel in
pais arises against MIAL; and that this is so, too, for every other
alleged default attributed to HDIL in MIAL's termination. Does the
record show an unambiguous communication of that election? We
do not think so.
36 of 69
APP(L)365-13-F
28. The principle of estoppel that Mr. Kapadia invokes, also the
to be found in Section 115 of the Evidence Act, is fundamentally one
in equity. It is part of the larger class of equitable doctrines against
allowing a party to "approbate and reprobate", is very well-settled. 16
Is HDIL's invocation of that principle justified? That, surely, is a
matter best left to HDIL to urge and justify in the arbitral
proceedings it has invoked. This is equally true of Mr. Kapadia's
submissions on Section 39 of the Contract Act. That section sets out
the law relating to what is known as anticipatory breach of contract.
We understood the submission to mean that, faced with HDIL's
breaches at the time when they occurred, MIAL had the option of
putting an end to the contract unless it signified, by words or
conduct, its acquiescence in its continuance. Once MIAL so
acquiesced, it could not terminate the contract on the ground of
those breaches. In other words, once HDIL repudiated the contract,
MIAL could accept that repudiation and sue for damages for breach
of contract, irrespective of whether or not the time for performance
had come; or it could disregard the repudiation by breach, refuse to
accept it and then the contract would remain in full effect. Once
MIAL accepted the breach, HDIL would stand discharged. These
are questions of fact and must be proved. They should, for that
reason, be left to the determination of the arbitral tribunal and it
would, in our view, be imprudent to decide these at this prima-facie
stage. We only note them for completeness, since they were urged.
We expressly leave open all questions in this regard, including, in
Cauvery Coffee Traders, Mangalore v Hornor Resource (International) Co
Ltd., (2011) 10 SCC 420
37 of 69
APP(L)365-13-F
particular, whether the repudiation by HDIL was sufficiently
unequivocal and whether MIAL's alleged acceptance of that
repudiation was equally unambiguous, on the basis that "an
unaccepted repudiation is a thing writ in water." 17 In arbitration, this
submission on Section 39 may also have to be tested against HDIL's
further submission of MIAL itself being in breach of its contractual
obligations. Conceivably, that argument may be found to be self-
defeating. If MIAL was in breach, as HDIL alleges, then HDIL had
two choices: to accept MIAL's alleged wrongful repudiation as
determining the contract, or to affirm the contract's continuance. It
is to be decided whether, as a mixed question of facts and law, HDIL
could claim a third choice, a via media, of simultaneously affirming
the contract and yet claiming absolution from further performance
unless and until MIAL performed its obligations. 18 If, on facts, it is
established that HDIL accepted a breach by MIAL, two
consequences would follow: first, that MIAL, too, would stand
released from its obligations to perform; and, second, that HDIL's
only remedy would then be in damages and not for specific
performance. HDIL cannot have it both ways. If HDIL accepted
MIAL's alleged breaches, then, its only remedy being in damages,
no relief can be granted in an application under Section 9 of the
Arbitration Act. If it claims not to have accepted those breaches,
then it cannot cite them as reasons for discharge of its own
contractual obligations and, again, can therefore obtain no equitable
Howard v Pickford Tool Co., (1951) 1 KB 417 at 421
See: Forcometal SARL v Mediterranean Shipping Co. S.A. The Simona,
(1988) 2 All E. R. 742 (HL)
38 of 69
APP(L)365-13-F
relief under Section 9. At least as far as the present appeal is
concerned, this is a sort of self-goal by HDIL. We clarify that this is
only a prima-facie view on the material now before us.
29. We must note however, and with some dismay, that the
argument that MIAL made an election and thereby forfeited its right
to terminate was taken for the first time in appeal before us. The
court below did not have the advantage or privilege of Mr. Kapadia's
submission on an estoppel in pais and it seems to us somewhat
unjust that we be invited to overturn the learned Single Judge on an
argument never taken before him.
30. Before the court below, the only argument pleaded and
canvassed was that MIAL had waived certain rights, specifically
those in relation to the Performance Security and interest-free cash
deposit. Prima-facie this is not a submission that commends itself to
us. Clause 33 of the Slum Rehabilitation Contract contains a specific
provision that any waiver of the Contract would be effective only in
writing. The other provisions of the Slum Rehabilitation Contract
were to remain unaffected by any such waiver, and the fact of a
waiver was not to be deemed to be a waiver of any subsequent
action. Mr. Dwarkadas is justified in his submission that waiver, too,
is contractual and is nothing but an agreement to release or not to
assert a right.19
Mademsetty Satyanarayana v G Yelloji Rao, AIR 1965 SC 1404, para 11
39 of 69
APP(L)365-13-F
31. On 14th October 2008 HDIL and MIAL executed a Deed of
Confirmation. Clause 4 of this Deed of Confirmation reaffirms the
Slum Rehabilitation Agreement, except for an amendment in the
scheduled date for submission of cash deposits. Were HDIL's
arguments on waiver (or election) to have any force, they would be
equally true in 2008 as they are in 2013; yet HDIL does not claim
that there was any such waiver (or election) in 2008 at the time
when the Deed of Confirmation was executed. Moreover, when,
three years later, on 24th June 2011, MIAL issued a cure notice to
HDIL asking it to comply with its various obligations, including
furnishing of the cash deposit, there was simply no response from
HDIL. Now HDIL claims that there was some sort of oral
understanding that this cash deposit was to be made by HDIL only
when MIAL fulfilled its obligations to AAI under the OMDA; met
its obligations under other agreements; and caused the execution of
a Tripartite Agreement between HDIL, MIAL and MMRDA. This
is a remarkable argument. Even today HDIL does not say that it is
willing to furnish the entire cash deposit. It insists that it is not
required to furnish these deposits at all. In correspondence, HDIL
says that MIAL's demand for a cash deposit is barred by limitation,
i.e., that HDIL is forever exonerated from making this deposit, or, in
other words, that without making this deposit, HDIL is yet entitled
to all its rights under the Slum Rehabilitation Contract. How this
does not amount to an unwritten modification of the Agreement,
i.e., an impermissible modification, is beyond comprehension.
Clause 8.2 of the Slum Rehabilitation Contract allows MIAL to
40 of 69
APP(L)365-13-F
invoke the bank guarantee furnished by HDIL on the latter's failure
to replace the bank guarantee and demand promissory note with a
cash deposit. MIAL did invoke the bank guarantee by its letter of
24th June 2011. HDIL filed Arbitration Petition No.1317 of 2012
under Section 9. Even then, it did not argue that there was any
election or that it was absolved from making any cash deposit. By its
order dated 29th November 2012, this Court held that HDIL was
prima facie in breach of its obligations to make that cash deposit and
that MIAL's invocation of bank guarantee was justified. HDIL filed
an Appeal, but withdrew it. It therefore accepted the decision of the
learned Single Judge in that arbitration petition. It is far too late in
the day for HDIL to contend that it is not liable to make any such
payment or that there is any sort of election, waiver or abandonment
by MIAL of its contractual rights.
32. There is, too, as Mr. Dwarkadas points out, a very real
distinction between an election not to terminate and an election not
to insist on the performance of contractual obligations at the
particular time when the contract intended those obligations to be
performed. The two cannot be equated. The latter does not deprive
a party of its right to terminate the contract. At best, it may entitle
the other party to contend that it stands absolved from the
fulfilment of certain obligations by the contractually specified time
or that it is entitled to an extension of time for the performance of
those obligations. An election not to terminate, however, is
something else entirely and amounts to saying that the continued
41 of 69
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non-fulfilment of contractual obligations is irrelevant, or, in other
words, that certain obligations stand excised from the contract. We
find Mr. Dwarkadas's reliance on the decision of this court in
Phoenix Mills Ltd v M. H. Dinshaw & Co. 20 wholly apposite: a party
can only dispense with the performance of a promise by the other
contracting party by a voluntary, conscious act that is affirmative. A
mere omission to assert or insist on this or that contractual right is
no dispensation within the meaning of Section 63 of the Contract
Act.
33.
On 24th June 2011, some 18 months before the termination
on 6th February 2013, MIAL gave HDIL a cure notice under Clause
24 of the Slum Rehabilitation Contract. HDIL did not reply to this
notice. It did not dispute its contents. It was not till after MIAL
invoked the Bank Guarantee on 27th November 2012, i.e., almost 15
months after the cure notice, that HDIL for the first time raised the
plea of waiver against MIAL.21 In our view, Mr. Dwarkadas is
justified in contending that this entire plea of waiver is not only
contrary to the express terms of the Contract but is an after-thought.
VI
34. HDIL also contends that MIAL is itself in breach of its
obligations under the Slum Rehabilitation Contract, and these
AIR 1946 Bom 469
The force majeure clause was not, however, invoked at this time, but only
much later.
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breaches disentitle it from terminating the contract. According to
HDIL, MIAL was to "obtain" a tripartite agreement between
HDIL, MIAL and MMRDA or, at the very least, to get MMRDA to
perform its obligations under the MIAL-MMRDA agreement of
12th December 2006. This MIAL failed to do, and this was a
fundamental breach of a primary obligation. MMRDA's promised
performance was fundamental to HDIL's entering into the Slum
Rehabilitation Contract and MIAL ought, therefore, to have got
MMRDA to ratify the Slum Rehabilitation Contract and fulfil its
obligations under its agreement with MIAL. Mr. Kapadia drew
attention to a letter dated 7th May 2008 from MIAL to MMRDA in
this regard, and to the letter of 9th August 2012 from MMRDA to
the Urban Development Department of the Government of
Maharashtra. Mr. Kapadia says that this letter of 9th August 2012
shows MMRDA distancing itself from HDIL and refusing to honour
its obligations under the MMRDA-MIAL agreement. It does not. In
that letter, as Mr. Dwarkadas pointed out, MMRDA has only said
that neither MIAL, nor HDIL with whom it had no contractual
relationship, should demand of MMRDA actions and compliances
that fell within the domain of the SRA. MMRDA does not question
HDIL's appointment; it could not, for it had already granted its No
Objection Certificate to HDIL's appointment. It only questions the
demands being made of it. MMRDA's letter of 9th August 2012 is
to the Principal Secretary of the Urban Development Department of
the Government of Maharashtra. It references an earlier
communication of exactly two years earlier, 9th August 2010, from
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the Urban Development Department in which the latter asked the
MMRDA to function as the Nodal Agency and to assume
responsibilities that MMRDA later contended were beyond its
statutory remit. Moreover, we also cannot accept Mr. Kapadia's
submission that the Clause 3.1(q)(v) of the Slum Rehabilitation
Contract required MIAL to cause a tripartite agreement to be
executed between these three parties. That clause does reference
the MMRDA-MIAL agreement but only says that MIAL and HDIL
shall consult with MMRDA to decide the "future scope and role of
MMRDA in the Slum Rehabilitation Project". It is difficult to see
how this can at all be said to be a contractual breach by MIAL of its
obligations under the Slum Rehabilitation Contract.
35. HDIL then attributes several other breaches to MIAL. We
find no substance in these allegations either. However, one of these
allegations is worth noting, not only because of its curious framing
but because it has, conceivably, the effect of hoisting HDIL by its
own petard. HDIL claims that MIAL provided no support. It did
not invoke the State Support Agreement although aware that the
project was delayed because of the State Government's failure to
"finalize an eviction policy and to issue Annexure II". Now
Annexure "N" to the petition is a listing by HDIL of the various
changes in the slum eligibility policy from April 2008 to June 2012.
We must read this, as Mr. Dwarkadas says, with HDIL's reply dated
1st February 2013 to MIAL's demand dated 30th January 2013 for
liquidated damages. In its reply, HDIL says many things, two of
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which are of consequence: first, that "HDIL is not in a position to
carry out its obligations under clause 7 on account of circumstances
beyond their control"; and, second, that "the Government of
Maharashtra has till date not decided the eligible criteria for the
slum dwellers encroaching airport land". The only ground put
forward by HDIL in this letter for its inability to perform its
obligations is because the policy, though one existed, had not been
"finalized", i.e., there were changes to this policy. This can only
mean that this is not a matter of there being no policy at all, a sort of
policy vacuum in regard to the airport slums as Mr. Kapadia
contends, but rather a matter of policy shifts. It follows that a slum
rehabilitation policy was known and defined at the time when the
Slum Rehabilitation Contract was executed, but that there were
certain changes in that policy subsequently. This is not the same as
saying that there was no policy at all. HDIL's bid was accepted
because it represented itself as having some degree of past success,
borne out of specialised skills and expertise, in handling precisely
such situations. A look at Annexure "N", tabulated by HDIL,
immediately shows that the so-called policy changes of which HDIL
complains are not all limited or restricted to the airport project at
all, but are state-wide changes. Indeed, some are changes that are
ex-facie unrelated to eligibility.22 These changes would have an
impact on any slum rehabilitation project anywhere, and given its
representations as to it capabilities in such matters, HDIL could
hardly be heard to complain or to say that it could not perform its
Items 5 and 6, for instance, which relate to sand-mining.
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obligations under the Slum Rehabilitation Contract because of these
changes. Indeed, HDIL's express statement that it is unable to fulfil
its contractual obligations seems to us to very much put paid to any
case of externalities rendering performance impossible. Even more
telling is HDIL's unequivocal assertion that it is "not in a position to
carry out its obligations" under the Slum Rehabilitation Contract.
This seems to us to be the clearest possible statement by HDIL that
it was neither ready nor willing to fulfil its contractual obligations.
What HDIL really seems to be saying is that it is now, some six or
seven years on, willing to perform only some version of the Slum
Rehabilitation Contract that it finds suitable, not the Slum
Rehabilitation Contract as it stands. This is no evidence of readiness
and willingness at all; indeed, it is evidence to the contrary. Absent
both an averment and proof that it is ready and willing to perform
the contract as it exists, HDIL cannot claim specific performance; 23
and if it cannot claim specific performance, it is surely not entitled
to the equitable protective reliefs it now seeks under Section 9.
VII
36. Claiming breaches by MIAL and what it describes as a "total
failure of support" by the other agencies, HDIL then invokes the
force majeure clause of the Slum Rehabilitation Contract. 24 This is a
clause very much of the usual kind found in many contracts. It sets
Bharat Barrel & Drum Manufacturing Co Pvt Ltd v Hindustan Petroleum
Corporation Ltd & Ors., AIR 1989 Bom 170.
Clause 26
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out various circumstances, each of which may constitute a casus
fortuitus sufficient to free parties from the contract. Mr. Kapadia
relies on one of these: a change in law or policy of any government
that suspends or render performance impossible; 25 and it is his case
that the changes in the slum rehabilitation policy constitute just
such a change in law or policy. However, as we have seen, there is
insufficient evidence that the changes in the slum rehabilitation
policy, such as they were, rendered performance of the contract
impossible or suspended the contract. They might have made it
more onerous perhaps than HDIL had initially bargained for, but
that is all. Mr. Kapadia claims that the Government's decision not to
apply the existing policy till a new policy was framed was just such a
change and it suspended the contract. In other words, according to
Mr. Kapadia, HDIL was entitled to defer indefinitely performance
of all its obligations pending a final, written-in-stone, slum
rehabilitation policy by the government. This is clearly incorrect.
HDIL had other contractual obligations that were unaffected by any
such policy change; it could not avoid the performance of those on
such a ground.
37. Moreover, the Slum Rehabilitation Contract sets out a
procedure for invoking the force majeure clause.26 Notice must be
given of such an event no later than 15 days from its occurrence. It
must be described in detail. The dates of commencement of the
event and the estimated cessation of the event must be set out. The
Clause 26.1(v)
Clause 26.3
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manner in which the event affects the claiming party's obligations
must also be specified. Performance can only be suspended when
notice of the event is delivered. Only then is time extended, and
only for the duration of the event. HDIL did none of this. It claimed
force majeure for the first time only in its letter of 1st February 2013
in reply to MIAL's demand for liquidated damages on 30th January
2013, just a few days before termination, and it claims that this is
sufficient compliance with the contractual requirements, and that,
in any event, MIAL was not prejudiced by the want of such notice.
We disagree. HDIL claims that Annexure "N", its tabulation of
policy changes, shows a constant state of policy flux for a period of
four years. So when exactly, according to HDIL, did this force
majeure change-of-policy begin? We are not told. Which of the 10
"changes in policy" listed in Annexure "N" constitutes such a force
majeure event? Is each one such an occurrence? The first of these
"policy changes" listed is of 16th April 2008. The ninth is of 6th
January 2012. The Slum Rehabilitation Contract allows for a
termination of the contract if the force majeure event continues for
over 365 days.27 On HDIL's showing, it could have exercised this
right in April 2009, on 6th January 2013 and at several times in
between. It did not. That can only mean that HDIL itself never saw
these so-called changes in policy as force majeure events at the time
they occurred. The reason it did not do so is evident. Indeed, it is in
the very next sub-clause, 26.5(b). This says that if there is a
termination citing a force majeure event (lasting over 365 days) and
Clause 26.5(a)
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certain specified work is not completed by that time,28 then HDIL
loses all entitlement to development rights in the "Developer's
Portion", and "any other compensation or costs from MIAL"; and,
if the minimum works specified are completed, then HDIL gets only
development rights in those pockets of the Developers' Portion that
have been fully cleared and not elsewhere. It could not have served
HDIL's purpose to invoke the force majeure clause at any time
earlier.
38. What is the kind of policy change clause 26.1(v) contemplates,
in the context of the Slum Rehabilitation Contract? It might be, for
instance, one that does away with all eligibility and simply permits
the razing of all slums with no requirement of rehabilitation. Or it
may be to permit in-situ rehabilitation. Either would oust the Slum
Rehabilitation Contract completely and suspend it or render its
performance impossible. That is not the kind of policy change that
even HDIL describes. It is, in fact, common ground that the only
policy changes, if any, were not to reduce the numbers of those
eligible, but, if at all, to increase them, perhaps by, say, moving
forward the datum line or altering certain criteria. This would not in
any way suspend the Slum Rehabilitation Contract or render it
impossible of performance. It would not reduce HDIL's scope of
work. At best, HDIL would be required to do further work, for
which it could then lay a claim for additional recompense. What
HDIL seems to be saying is that unless the numbers of eligible
Namely, the successful completion of Phase 1(i), 1(ii) and 28,000
hutments in Phase (1)(iii) as specified in Clause 4.2(a).
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persons were absolutely frozen in 2007, it could do no work at all
even six years later, not even for those items that were independent
of any eligibility policy (and there were several such items, including
plane table surveys, construction of tenements, etc). That these
slum eligibility policies are always fluid and are constantly adjusted
to allow for changes over time is well known. HDIL claimed to be
able to deal with such complex slum rehabilitation projects; and the
Slum Rehabilitation Contract itself notes that it specifically
warranted that it had the requisite skills, experience and financial
ability to complete the project. 29 HDIL could hardly be heard to
complain about something that it knew, or at any rate must
reasonably be deemed to have known, would be subject to change.
Mr. Kapadia's reliance on the decision of a learned Single Judge of
the Calcutta High Court in Peerless Drive Insurance v Union of India
& Ors.30 seems to us clearly distinguishable on facts and of very little
assistance to HDIL. In that case, there was not the kind of situation
we see here, where HDIL has declined or perhaps even refused to
perform even those obligations that are, even on its own showing,
unrelatable to any force majeure events. HDIL's pecksniffian
invocation of the force majeure clause at such a late stage, only after
MIAL raised a demand for liquidated damages, is a singularly
uncompelling argument of desperation.
VIII
Clause 13(e)
(1994) CWN 769
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39. HDIL's scope of work under the Slum Rehabilitation
Contract is clearly defined.31 It was required to complete the ongoing
"plane table survey" and to complete it in a timely manner. 32 This is
a well-established graphical method of surveying using a plane table
and an alidade to map the topography of a site, including elevations
and distances. This exercise does not involve any statutory
permissions, and it is not even HDIL's case that it was in any way or
at any time prevented from conducting and completing this task. It
was only on completion of this survey and its submission to the
authorities could the process of assessing eligibility begin. Indeed,
Clause 3.1(c), which deals with eviction and rehabilitation of slum
dwellers, makes it clear that the total number of eligible slum
dwellers could be determined with finality only on the outcome of
the plane table survey read with the extant State Government policy
as to a cut-off date. HDIL admits that this survey is only partially
complete, covering only 25,000 slum dwellers on 157 acres out of
the contractual requirement of 276 acres. That is only a little over
50% of the work under this crucial item. On 20th October 2012, the
Collector of Mumbai wrote to MMRDA in regard to this survey.
This letter is relied on by HDIL inter alia to show that it was not
shirking its contractual responsibilities and that, despite all its
efforts, it was being thwarted by statutory authorities. Far from
showing HDIL's compliance, this letter indicates that till as late as
October 2012, some five years after the Slum Rehabilitation
Contract was signed, HDIL had started the survey only in respect of
Clause 3
Clause 3.1(a)
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about 50% of the area required to be surveyed. By this time, the
period for completion of the project (48 months) had passed, and,
prima-facie, it seems that even at this very late stage, HDIL had not
completed the preliminary or first steps of a Plane Table Survey for
about half the land in question. We believe it is far too late in the day
for HDIL to rely on this letter to show that the authorities were
being obstructive. If they were, this could not have been news to
HDIL. Yet it seems to have done nothing to compel those
authorities to act. It has not at any time initiated any proceedings to
this end.33 Similarly, it was HDIL's responsibility to: carry out
eviction and rehabilitation in accordance with the terms of the Slum
Rehabilitation Contract;34 demolish hutments;35 erect temporary
transit camps;36 obtain all approvals and sanctioned plans; 37
construct rehabilitation buildings38 and social infrastructure;39 and,
importantly, to bear all costs and expenses relating to the entirety of
the project.40
40. The project completion period was 48 months (by 14th
October 2011) with provision for a six month extension. 41 Clause 7
Significantly, not even after the cure notice of 24th June 2011 or the
invocation of the bank guarantee on 27th November 2011.
Clause 3.1(c)
Clause 3.1(d)
Clause 3.1(g)
Clause 3.1(h)
Clause 3.1(i)
Clause 3.1(j)
Clause 3.1(q)
Clause 7.1
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sets out the scheduled completion of the project's various phases.
Phase 1 covered about 158 acres and was itself divided into three
sub-phases. Each had specified dates for commencement and
completion, computed in relation to the defined contractual
"Commencement Date". Every sub-phase of Phase 1 and the
entirety of Phase 2 specifically made time the essence of this
contract. When, on 30th January 2013, MIAL demanded liquidated
damages from HDIL, there was already a delay in completion of
every phase of the Project. Phase 1(i) was to be completed by 15th
April 2009; it was delayed by 44 months. Phase 1(ii), scheduled for
completion on 15th October 2009, was delayed by 38 months. Phase
1(iii) was late by 26 months, and ought to have been completed by
15th October 2010. Phase 2 was delayed by 14 months beyond its
completion date of 15th October 2011. Cumulatively, this amounted
to a delay of 122 months. HDIL's only answer to this, on 1st
February 2013, was, as we have seen, to invoke for the first time the
force majeure clause and to then claim that it was not able to carry out
its obligations under the Slum Rehabilitation Contract. In our view,
this wholly defeats any semblance of a prima-facie case in HDIL's
favour. It rather seems to us that apart from the sound of aircraft
landing and taking off, the only other significant noise at the CSIA
was of HDIL's deadlines rumbling past.
IX
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41. One of the most important clauses in the Slum Rehabilitation
Contract relates to "Performance Security". On 15th October 2007,
HDIL submitted an unconditional Bank Guarantee for Rs.25 Crores
and a Demand Promissory Note of the same date for Rs.275 Crores
Only. These were to serve initially as security for the performance of
the HDIL's obligations under the Contract. The Contract required
the Bank Guarantee and the Demand Promissory Note to be
replaced by an interest-free cash deposit in the aggregate amount of
Rs.300 Crores.42 This was the Performance Security under the
Contract and was refundable to HDIL subject to permissible set offs
and deductions. Clause 8.2 provided that MIAL could invoke, draw
down, appropriate or adjust this Performance Security at its sole
discretion for non-performance by HDIL. That non-performance
was stated to include (i) breach or failure by HCIL to comply with
the obligations under Slum Rehabilitation Contract and amounting
to material breach, and (ii) a failure by HDIL to replace the Bank
Guarantee and the Demand Promissory Note with a cash deposit.
Clause 8.3 said that if the Performance Security was at any time
invoked, drawn down, appropriated or adjusted, HDIL would
ensure that it was topped up so that its value was always maintained
at Rs.300 crores. Any such invocation, drawing down, appropriation
or adjustment was not to absolve HDIL of its contractual
obligations. At HDIL's request, time for replacement of the Bank
Guarantee and the Promissory Note was extended by 45 days to
30th November 2008. This deposit has never been made. It is
Clause 8.1
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difficult to see how this obligation of HDIL, like the obligation to
complete the plane table survey is in any way related to a change in
policy, or, indeed, a force majeure event. HDIL's only defence to this
is of waiver and equitable estoppel. We have already considered
these submissions and found no substance in them. It is not possible
to accept that HDIL, although in breach of this obligation, is still
entitled to claim reliefs in equity. By its letter dated 24th June 2011,
MIAL invoked the Bank Guarantee. HDIL challenged this
invocation by filing a petition in this Court under Section 9 of the
Arbitration Act. That petition was dismissed on 29th November
2012, and the issuing Bank was directed to release the amount of the
Bank Guarantee in favour of MIAL. The learned Single Judge
hearing that Petition came to a prima facie conclusion that HDIL
was in breach of its obligations. HDIL filed an Appeal. That Appeal
was dismissed as not pressed on 10th December 2012. It is not open,
in our view, for HCIL to re-agitate substantially the same issue once
again in this roundabout fashion.
42. The Slum Rehabilitation Contract also contained a provision
for liquidated damages.43 In the event of any delay in any of other
vacant and peaceful occupation of any pocket of land, HDIL was to
pay liquidated damages computed at Rs.15 lakhs per acre per month
within 15 days of a demand being made, this liability being capped at
Rs. 1 crore per acre. Delay in payment of liquidated damages for
more than 180 days entitled MIAL to terminate the Agreement. The
Clause 17
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Slum Rehabilitation Contract also listed several distinct events said
to constitute an event of default.44 This included, inter alia, a failure
by HDIL to replace the bank guarantee and demand promissory
note with the interest free cash deposit of Rs.300 crores; delay
beyond six months in completion in accordance with Clause 7 of any
phase; and a failure by HDIL to pay liquidated damages in
accordance with Clause 17. These were in addition to the usual
events of default such as HDIL's failure to comply with the terms of
the Slum Rehabilitation Contract, misrepresentation or fraud, or
HDIL being barred, disqualified or prevented from undertaking the
Slum Rehabilitation Project. The termination clause required MIAL
to give to HDIL a cure notice upon occurrence of a defined event of
default complained of was not cured. HDIL had 30 days to cure the
breach, failure which MIAL had a right to terminate. 45 We have
already noted that if HDIL did not complete the minimum work
under various phase set out in Clauses 22.2, it would lose its
entitlement to the rights in the Developer's Portion.
43. HDIL's obligations under the Slum Rehabilitation Contract
were, thus, many. MIAL claims that it was compelled to terminate
the Contract on account of HDIL's several breaches. Apart from
those already noted (its failure to complete the Plain Table Survey;
its non non-adherence to the specified time-lines; its failure to
furnish the interest free cash deposit as a Performance Security;
among others) there are also other significant defaults by HDIL. For
Clause 24
Clause 25
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APP(L)365-13-F
instance, HDIL was required to provide copies of approvals,
sanctions and letters of intent from SRA to MIAL within 15 days of
HDIL receiving these. SRA issued letters of intent dated 26th May
2008 and 27th September 2010. HDIL never supplied copies of
these to MIAL. Similarly, although HDIL's entitlement to create
third party rights in the Developer's Portion was conditional upon
its completion of specified works,46 it nonetheless purported to
hypothecate the receivables in respect of this project in favour of a
Bank. Further, despite a valid demand, HDIL never paid MIAL's
claim for liquidated damages. Clause 42.2 gave MIAL a right of first
refusal to purchase any TDR accrued to HDIL under the Slum
Rehabilitation Contract. HDIL sold or otherwise utilized TDR of a
value of Rs.2,442 crores but never offered this to MIAL.
44. On 6th February 2013, MIAL sent two letters to HDIL. The
first of these was in response to HDIL's letter of 1st February
2013.47 The second was MIAL's letter of termination. In this second
letter, MIAL tabulated what, according to MIAL, were HDIL's
defaults. Seven such defaults were listed. HDIL's answer to this
today is, first, its argument of an estoppel in pais against MIAL or, at
any rate, of waiver; and, second, of force majeure. We have already
considered and rejected all these submissions. What remains is
simply this: that HDIL has no answer at all to any of these listed
defaults. Items 1, 2, 5, 6 and 7 of MIAL's letter, i.e., five of the seven
cited defaults, are wholly unrelated to any policy change or force
Clause 4.4.1; Clause 4.2(a);
In this, HDIL, for the first time, invoked the force majeure clause.
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majeure event. They are entirely about financial matters, HDIL
being required to make various payments and failing to do so. The
upshot of HDIL's argument on waiver can only be that it is, for that
reason, completely and for all time exonerated from making these
payments; or, at any rate, it is contractually entitled now to make
these payments whenever HDIL deems it convenient, perhaps
never. Mr. Dwarkadas is correct when he says that this not only
amounts to an invitation to the court to rewrite the terms of the
contract but is so untenable an argument that it only needs to be
stated to be rejected.
X
45. Mr. Kapadia quarrels with the finding of the learned Single
Judge on his interpretation of Section 9 of the Arbitration Act. In
paragraph 18 of his order, the learned Single Judge analysed that
section and, in particular, sub-sections (ii)(c), (ii)(d) and (ii)(e). He
concluded that Sections 9(ii)(d) and (e) would have to be read
ejusdem generis with the first part of Section 9(ii)(c). It would not, in
our view, have been necessary to discuss this at all, and, ordinarily,
we would have much preferred not to express any view on the
matter, but for the fact that the submission was energetically
pursued in appeal both in oral and written submissions. We are,
therefore, compelled to take up the issue and record our
observations.
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46. Section 9 of the Arbitration Act reads thus:
9. Interim measures etc. by Court.
A party may, before, or during arbitral proceedings or at
any time after the making of the arbitral award but before
it is enforced in accordance with section 36, apply to a
court--
(i) for the appointment of a guardian for a minor or
person of unsound mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of protection in respect of
any of the following matters, namely:-
(a) the preservation, interim custody or sale of
any goods which are the subject-matter of
the arbitration agreement;
(b) securing the amount in dispute in the
arbitration;
(c) the detention, preservation or inspection
of any property or thing which is the
subject-matter of the dispute in
arbitration, or as to which any question
may arise therein and authorising for any of
the aforesaid purposes any person to enter
upon any land or building in the possession
of any party or authorising any samples to
be taken or any observation to be made, or
experiment to be tried, which may be
necessary or expedient for the purpose of
obtaining full information or evidence;
(d) interim injunction or the appointment of a
receiver;
(e) such other interim measure of protection as
may appear to the Court to be just and
convenient,
and the Court shall have the same power for making
orders as it has for the purpose of, and in relation to, any
proceedings before it.
(emphasis supplied)
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47. We are concerned here with the first part of Section 9(ii)(c),
emphasized above. In our view, the focus of this part of Section 9(ii)
(c) is on, and only on, the subject matter of the dispute in arbitration.
The words "as to which" also refer to this, viz., the subject matter
of dispute. They do not confine themselves to property in the
possession of any particular signatory to an arbitration agreement.
But the property must be the subject matter of the arbitral dispute,
and none other. Though the words "in the possession of any party"
cover a wide spectrum and would include non-signatories as well,
these words, in a distinct phrase, are in relation to immovable
property. An order permitting a person to enter upon the land or
building in the possession of any party must be for one or more of
the purposes specified, viz., the detention, preservation or
inspection of any property or for obtaining full information or
evidence. On a plain reading of the section, it is impossible to accept
the argument that the section is elastic enough to include properties
or things that are not the subject matter of the arbitral dispute. Such
an argument would be illogical. After all, reliefs under Section 9 are
in aid of final reliefs, and if there can be no arbitration in respect of a
particular property, then no protective reliefs can be granted in
respect of that property either.
48. Mr. Kapadia's complaint, however, is that clause (ii)(d),
which provides for an interim injunction or the appointment of a
receiver, and the residuary clause (ii)(e) cannot possibly be read
ejusdem generis. This would suggest that the first part of clause (ii)(c)
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is the genus, of which clauses (ii)(d) and (ii)(e) are the species.
Perhaps Mr. Kapadia is right, and this finding may not be entirely
correct. But the alternative is not, as Mr. Kapadia suggests, that
clauses (ii)(d) and (ii)(e) open the field even wider to allow Section 9
an all-encompassing embrace. That would perhaps militate against
the very foundation and purpose of Section 9. Conceivably, it might
be more accurate to say that in reading clauses (ii)(d) and (ii)(e) we
must adopt the principle of noscitur a sociis; those clauses are not
species of a genus, but are certainly known by the company they
keep, and are to be understood in a cognate sense, the latter, more
general clauses (ii)(d) and (ii)(e) taking their colour from the former,
less general, first part of clause (ii)(c). The noscitur a sociis principle
demands that the general be restricted in sense analogous to the less
general.48 Of course, it is equally well-settled that in interpreting a
statute, a court invokes one or other of several permissible
principles only where there is some uncertainty or ambiguity in the
plain language of the statute.49 The ambiguity here is one introduced
by Mr. Kapadia's own submission in that it attempts to stretch the
contours of Section 9 well beyond the self-evident, for if his
argument is to be accepted, then a party is entitled to get interim
reliefs under Section 9 that are not in aid of any final arbitral relief,
M. K. Ranganathan v Government of Madras, (1955) 2 SCR 374; Leelabai
Gajanan Pansare v Oriental Insurance Co Ltd, (2008) 9 SCC 720;
Ahmedabad (P) Primary Teachers Association v Administrative Officer,
(2004) 1 SCC 755; The State of Bombay and Others v. The Hospital
Mazdoor Sabha and Others; AIR 1960 SC 610, (1960) 2 SCR 866
Kehar Singh and Others v. State (Delhi Admn.) AIR 1988 SC 1883; State
of H.P. v. Pawan Kumar (2005) 4 SCC 350; State of Rajasthan v. Babu
Ram (2007) 6 SCC 55.
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claim or subject matter. Prima-facie we do not believe that clauses
(ii)(d) and (ii)(e) cannot be robbed of all context in this manner. The
noscitur a sociis principle is but one of contextual interpretation. In
Prabhudas Damodar Kotecha v Manharbala Jeram Damodar & Anr.,50
the Supreme Court restated the law in this regard, citing the UK
Court of Appeals opinion that "a word or phrase in an enactment
must always be construed in the light of the surrounding text. ...
words and particularly general words, cannot be read in isolation;
their colour and their content are derived from their context." 51 In
Prabhudas Kotecha, the Supreme Court held that although the rule
has been widely applied, it is still a mere rule of construction; where
wider words have intentionally been used by the legislature "in order
to make the scope of the defined word correspondingly wider", the rule of
noscitur a sociis cannot prevail. It is, in the present case, difficult to
see how the legislative intent could have been to broaden the scope
of clauses (ii)(d) and (ii)(e) in the manner Mr. Kapadia suggests --
to cover a property or thing that is not the subject-matter of arbitral
proceedings -- for that would surely imperil the very purpose of
Section 9. After all, as Mr. Dwarkadas points out, in a dispute
between two parties to an arbitration agreement, no relief can be
sought against properties that fall outside the arbitral dispute: that
which cannot be done in a final arbitral award certainly cannot be
done in an interim order of court under Section 9. The latter is
Civil Appeals Nos.6726-6727 of 2013, decided on 13th August 2013
Attorney-General v Prince Ernest Augustus of Hanover, [1957] AC 436, per
Viscount Simonds
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always only in aid of the former.52 There seems to us no manner of
doubt that this is what the court below intended. The most that
might be said of this particular finding is that it is, perhaps,
infelicitous. For, although the two concepts of ejusdem generis and
noscitur a sociis are distinct, in this case, unfortunately for HDIL, the
result is much the same: not quite cavilling, but still a distinction
without a material difference. We rest our discussion here, making it
clear that these observations are not to be seen as binding precedent,
and we have entered them in this judgment only at HDIL's instance,
and on its insistence.
XI
49. In the judgment under Appeal, the Court below has
specifically dealt with each of these contentions, except, of course,
the submission as regards election by MIAL and an equitable
estoppel or estoppel in pais, this not having been argued or pleaded
before the learned Single Judge. The other submissions advanced by
HDIL were carefully and exhaustively considered by the learned
Hemant D. Shah & Ors v Chittranjan D. Shah & Ors., unreported
decision dated 5th September 2006 of this Court in Appeal No.658 of
2006. We do not see how the decision of the Supreme Court in Firm
Ashok Traders v Gurumukh Das Saluja, (2004) 3 SCC 155, is of any
assistance to Mr. Kapadia in this regard. This decision only says that a
court has the same powers under Section 9 to make specified orders as it
has for the purpose of and in relation to any proceedings before it. All
that this says is that a court is not bound to stay its hands because
interim reliefs can as well be sought before the arbitral tribunal. The
decision does not say that a court can, under Section 9, pass orders in
respect of property that lie outside the arbitral disputes.
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Single Judge, who has, inter alia, noted the defaults by HDIL and
rejected HDIL's contentions on waiver, force majeure and defaults by
MIAL. We do not find that the view taken by the learned Single
Judge to be so thoroughly implausible as might warrant interference
in appeal. It is, in our view, impossible to hold, viewed from any
perspective, that HDIL has made out a prima facie case.
50. There remains the question of balance of convenience. We
cannot blind ourselves to the true focus of this contract: a public
utility project of enormous consequence to the entire city of
Mumbai. HDIL's claims seem to us to be little more than monetary,
or, at any rate ones that can be monetized. It is not possible to hold
that the public interest demands that the entire Slum Rehabilitation
Project and clearance of slums on airport lands, and,
consequentially, the modernization and expansion of CSIA should
be held up almost indefinitely while HDIL pursues its claim in
arbitration. Let us consider, for a moment, what this is likely to
entail. There will first be the issue of appointment of an Arbitral
Tribunal. Once constituted, HDIL will need sufficient time, very
likely several weeks, if not months, to file and submit its statement
of claim. We will assume for the present purposes that only MIAL is
made a party-respondent. MIAL will undoubtedly require equally
sufficient time to respond to the claim statement. If HDIL seeks to
join other entities or agencies to its claim, then there may well be
preliminary objections to be decided and certainly further time
required for filing responses. Documents will need to be filed. There
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will be the process of discovery and inspection. Perhaps there might
even be a trial and, if there is, it is likely to be an extremely long-
drawn affair indeed. HDIL would have us believe that it serves the
public interest to put on hold the entire Slum Rehabilitation Project
and modernization and expansion of the CSIA for the next several
years while this arbitration runs its course. We cannot see how this
could conceivably be said to subserve any public interest at all.
Addressing the question of balance of convenience HDIL says that
it has not made any profit. It claims that it has spent Rs.4,000 crores
but recovered only Rs.2,442 crores, leaving it out of pocket by about
Rs.1,500 crores. This surely cannot tilt the balance of convenience
in HDIL's favour. Even more peculiar is HDIL's claim that a refusal
to grant relief would cause irretrievable harm and grave injury to the
HDIL which cannot be compensated in monetary terms. Au
contraire: we do not see why not. Indeed, it seems to us eminently
likely that HDIL's only claim can be for damages. An award in
damages, should HDIL succeed, serves its purposes entirely -- it is,
after all, in this contract solely in order to make a profit. We are not
prepared to accept the proposition that the financial interests of a
private party should be permitted to block almost indefinitely a
public utility project that is in the interest of the entire city. Yet that
is what HDIL submits we must do. The balance of convenience
principle requires us to weigh the likely loss to HDIL if reliefs are
refused against the likely loss or damage not only to the
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Respondents53 but also others who may be affected.54 In our view, in
the case of a public utility project such as this one, the larger public
interest is a determinative factor in assessing the balance of
convenience.
51. An application under Section 9 of the Arbitration Act requires
the Applicant-Petitioner to make out a strong prima-facie case and
also to show that the balance of convenience is in its favour, and that
it would suffer irreparable loss and injury if the reliefs it seeks were
to be refused.55 The same principles that govern courts in the matter
of grant of interim relief apply proprio vigore to petitions under
Section 9 of the Arbitration Act.56 The reliefs that HDIL seeks
cannot in any way said to be in aid of its final reliefs. HDIL has not
been able to show even prima-facie that it was not in breach of its
obligations under the Slum Rehabilitation Contract or that it was at
all times ready and willing to perform those obligations.
Hindustan Embroidery Mills Pvt Ltd v K. Ravindra & Co, (1974) 76 BLR
146, para 6; followed in Lupin Ltd v Johnson & Johnson, (2012) 114 6
BLR 3816
See: Margaret Almeida v Bombay Catholic Co-operative Housing Society
Limited, (2013) 6 SCC 538, where the Supreme Court held that an
injunction was likely to affect a large number of persons including those
not before the court.
Kashimath Samsthan & Anr. v Srimad Sudhindra Thirta Swamy, AIR
2010 SC 296, para 13.
Adhunik Steels Ltd v Orissa Manganese & Minerals Pvt Ltd, (2007) 7 SCC
125; Nimbus Communications Ltd v Board of Control for Cricket in India &
Anr., 2012 (5) Bom CR 114
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52. In this appeal, as in the court below, both HDIL and MIAL
have filed written submissions. HDIL's written submissions run into
over 50 pages. The arguments took several days, as they did, too,
before the learned Single Judge. We were compelled to address each
of the submissions advanced on account of this although we believe
that the issue at hand is actually very narrow: simply whether,
prima-facie, HDIL is entitled to seek reliefs not only as against non-
contracting parties but also in respect of properties that are not the
subject matter of arbitral disputes. We clarify, therefore, that our
views expressed in this judgment are on a prima-facie assessment of
the record. We do not intend to foreclose the decision of the arbitral
panel, either on facts or on law, and we leave open all contentions of
all parties in arbitration. What effect, if any, these observations have
is for the arbitral panel to decide.
53. We see no reason to interfere with the decision of the learned
Single Judge. Being entirely without merit, the appeal fails and is
accordingly dismissed.
XII
54. We would not ordinarily be of a mind to impose costs in such
a case. However, it seems to us apparent that a project of manifest
public importance has not only been delayed but is now sought to be
indefinitely postponed thanks only to the pursuit by a private party
of its narrow monetary and profit motives. HDIL's petition and its
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appeal have come at a very high public cost. Far too much time and
money, and time equating to money, has already been squandered. It
is in that view of the matter that we believe that we must award costs
against HDIL. We do so not only to emphasize how little merit we
find in HDIL's claim, albeit on a prima-facie evaluation, but also to
make it plain that at least in matters like these the era of the
avuncular indulgence that litigants have come to expect, and even
demand, of courts has now passed. We are acutely aware of the
considerable litigation costs incurred both here and in the court
below. Some of these costs have been paid out of public funds. We
believe that corporations and industry must realize that when they
undertake projects of public utility, they carry a responsibility that
travels beyond the limited confines of their corporate structures,
balance sheets and bottom-lines. These corporate entities engaged
in public projects have an obligation to the public. While they are
not expected to perform acts of charity or to function at a loss, they
are also not to expect that we will permit the sacrifice of the larger
public good at the altar of private gain. It seems to us obvious that,
given the material on record, in both the petition and in this appeal,
HDIL was merely trying its luck at litigation, fully expecting that it
might, at the very worst, incur some legal fees, but little else; a
matter of, in the language of the corporate world, "very little
downside". That thinking must be extirpated. When a litigation of
this stripe fails, it must be visited with consequences. Therefore:
HDIL is directed to pay to MIAL costs of Rs.5 lakhs; and to
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MMRDA and SRA costs quantified at Rs.2.5 lakhs each. These
costs shall be paid within a period of four weeks from today.
55. At this stage, counsel for HDIL asks that MIAL's statement,
made through its counsel, that it will not act further on its
termination, be continued for some time to enable HDIL to
approach the Supreme Court. MIAL's counsel states that MIAL
will stay its hands for another four weeks. This statement is
accepted as an undertaking to this court. We make it clear that we
have not granted any stay of our order imposing costs.
56. The appeal is disposed of in these terms.
(G.S. Patel, J.) (S.C. Dharmadhikari, J.)
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