Bombay High Court
Nirmal Infrastructure Private ... vs Aanant Developers Private ... on 26 November, 2015
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 1932 OF 2015
Nirmal Infrastructure Private Limited, )
a company incorporated under the )
Companies Act, 1956 having its Registered)
Office at L.B.S.Marg, Mulund (West), )
Mumbai - 400 080 ) ..... Petitioner
Versus
Aanant Developers Private Limited,ig )
a company incorporated under the )
Companies Act, 1956 having its Registered)
Office at 14, Ground Floor, )
Bhaveshwar Complex, Vidyavihar (West) )
Mumbai - 400 086 and having its )
st
address 107-108, 1 Floor, Sai Infotech, )
Patel Chowk, Ghatkopar, )
Mumbai - 400 077 ) ..... Respondents
Mr.Pravin Samdhani, Senior Advocate, a/w. Mr.Simil Purohit, Mr.Ashok
Paranjape, Ms.Leena Desai-Padhye, Ms.Aparna Wagle, Ms.Radhika Dixit, i/b.
MDP & Partners for the Petitioner.
Mr.Virag Tulzapurkar, Senior Advocate, a/w. Mr.Cyrus Ardheshir, Mr. Rahul
Dwarkadas, Ms.Prachi Dhanani, i/b. Veritas Legal for the Respondents.
CORAM : R.D. DHANUKA, J.
RESERVED ON : 28th OCTOBER, 2015
PRONOUNCED ON : 26th NOVEMBER, 2015
JUDGMENT :
By this petition filed under section 37 (2) (b) of the Arbitration and
Conciliation Act, 1996 (for short the 'Arbitration Act'), the petitioner has impugned
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the order dated 5th October, 2015 passed by the arbitral tribunal rejecting the
application filed by the petitioner under section 17 of the Arbitration Act. By
consent of parties, the arbitration petition is heard finally at the admission stage.
Some of the relevant facts for the purpose of deciding this petition are as under :-
2. The respondent had acquired development rights in respect of 86 acres
of land and additional 34 acres both situated at Taluka Kalyan, District Thane and
was in process of acquiring development rights and/or conveyance in respect of
further 255 acres situated at Taluka Kalyan, District Thane.
3.
On 17th January, 2007, the petitioner and the respondent entered into a
Memorandum of Understanding whereunder the respondent agreed to acquire and
transfer and/or grant development rights to the petitioner in respect of the land
aggregating to 375 acres at an agreed consideration of Rs.20 lacs per acre. It is the
case of the petitioner that prior to the execution of the said MOU, the petitioner
paid to the respondent an amount of Rs.5.00 crores on 25 th November, 2006 and
Rs.10.00 crores on 17th January, 2007. It is the case of the petitioner that the
petitioner also made payment of more than Rs.17.00 crores calculated at the rate of
Rs.20 lacs per acre to the respondent for the additional lands.
4. On 31st March, 2008, the petitioner and the respondent executed the
development agreement duly stamped and registered in respect of the lands being
an aggregate area of 173.91 acres comprising of two plots admeasuring 86 acres
(Part I) and 87.91 acres (Part II) respectively. Part I was owned by Premier Ltd
(earlier known as Premier Automobiles Ltd.). Under a development agreement 9 th
July, 2004 between the said Premier Automobiles Ltd. and the respondent, the
respondent was granted development rights in respect of Part I lands. In clause (H)
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of the said development agreement, it was provided that the respondent had agreed
to grant and/or transfer the development rights in respect of the said two lands to
the petitioner and had handed over copies of all the documents relating to the said
two lands. In clause (I) of the said agreement, it was provided that the respondent
had delivered copies of the said agreement in respect of the said two lands. The
petitioner agreed to pay to the respondent as and by way of interest free deposit an
amount aggregating to a sum of Rs.49,78,20,000/-.
5. Out of the said amount of Rs.49,78,20,000/-, the petitioner had already
paid aggregate sum of Rs.30.00 crores as and by way of interest free deposit and
further agreed to pay interest free deposit of Rs.19,78,20,000/- towards assignment
of development rights of the said property. It is the case of the petitioner that the
petitioner has already paid aggregating to Rs.49,78,20,000/- to the respondent.
Clause 1(a) of the said agreement provided that the respondent thereby transferred
and/or assigned to the petitioner, the right, title, interest and benefit of the
respondent in respect of the development agreement dated 9th July, 2004 between
the respondent and the said Premier Automobiles Ltd. in respect of 86 acres i.e.
Part (I) plot and development agreement of various dates in respect of the land Part
(II).
6. In clause 3(m) of the said agreement, it was provided that there was
pending claim of unearned income, pertaining to an area of approximately 57
acres, out of the said 86 acres and the same had been brought to the attention of the
petitioner and would be resolved by the respondent in due course at the cost and
expenses of the respondent. However it was clarified that if any unearned income
was payable on any future sale done by the petitioner subsequent to the said sale,
the same shall be responsibility of the petitioner. The respondent agreed to
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indemnify and keep indemnified, save, defended and harmless the petitioner from
and against losses, damages, litigation, claims, demands and costs that may be
made and/or raised by any third party in respect of the said property for the period
prior to the execution of the said agreement.
7. Under clause 8 of the said development agreement, it was provided
that the obligations of the respondent in respect of the said agreement to provide
unencumbered development rights of the said property to the petitioner so as to
enable the petitioner to do the development of the rights of the said property and to
obtain title certificate from its advocates and/or solicitors certifying its title of
rights in respect of the said property.
8. Under clause 14(c) of the said agreement, it was provided that the
petitioner shall adhere to the schedule for development of the said property. It was
provided that in respect of the said 86 acres, i.e. Part (I) land, the development
shall start within two years from the date of signing of the said agreement. In
respect of 87.91 acres, i.e. Part (II) land, the development shall start within one
year from the date of passing of layout plans, obtaining all approvals, clearances,
orders including township approval/ULC/NA/Environment Clearance etc. The
respondent agreed to execute the power of attorney in favour of the petitioner. On
31st March, 2008, the respondent accordingly executed a power of attorney in
favour of Mr.Dharmesh S.Jain in respect to 173.91 acres which was duly
registered. The respondent also executed a deed of indemnity cum declaration in
favour of the petitioner on 31st March, 2008. According to the petitioner, the
respondent had executed a possession letter in favour of the petitioner through
Mr.Nitin Mansukhlal Sanghavi on 31st March, 2008. The respondent has disputed
the execution of the said alleged letter of possession dated 31st March, 2008.
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9. On 17th June, 2008, the said Sub Divisional Officer, Kalyan passed an
order confirming order dated 3rd September, 2007 passed by the Tahsildar, Kalyan
confirming Mutation Entries entering the remarks "Occupancy Class II" in the 7/12
extract of 57 acres i.e. Part I lands. It is the case of the petitioner that in view of
the said order passed by the Sub Divisional Officer, the unearned income was
liable to be paid.
10. During the period between 2nd November, 2009 and 8th November,
2010, the petitioner exchanged various letters with the respondent seeking details
of the property including inter alia title certificate, possession receipts, etc. On 5 th
January, 2010, the petitioner addressed a letter to the respondent recording inter
alia the appointment of surveyor and the date of commencement of fencing of the
land. On 26th March, 2010, the Labour Commissioner to MIDC and Municipal
Corporation of Dombivli with respect to Part I lands i.e. 86 acres of land obtained
from Premier Automobiles Ltd. calling upon them not to grant any sanction with
respect to the reference land.
11. It is the case of the petitioner that since June, 2010 till date, the
petitioner had deployed the security 'Solaris Corporation Security Services' on the
said lands and has made substantial payments towards security.
12. On 15th October, 2010, the respondent and Premier Automobiles Ltd.
filed consent terms in the suit i.e. Special Case No. 200 of 2010 in the Kalyan City
Civil Court.
13. During the period between 24th February, 2011 and 23rd November,
2012, the petitioner sent various e-mails to the respondent following up for details
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and documents as also calling upon the respondent to comply with its outstanding
obligations regarding unearned income, labour NOC. It is the case of the petitioner
that the respondent however did not comply with that part of the obligation.
14. It is the case of the petitioner that during the period between 14 th
February, 2013 and 18th April, 2013, the petitioner and/or their advocates addressed
various letters to MSEDCL/ MSRDC with respect to illegal erection of electricity
Feeder Towers and illegal encroachments on the said lands in the possession of the
petitioner.
15.
On 3rd July, 2013, the petitioner sent another e-mail to the respondent
thereby seeking performance of obligations under the development agreement inter
alia including clear and marketable title, labour NOC, unearned income and for
approval under section 32(G) of the Bombay Tenancy Agricultural Act. On 30 th
January, 2014, the respondent forwarded a list of land pending approval under
sections 43 and 32(G) of the Bombay Tenancy Agricultural Act. It is the case of
the petitioner that during the period between 13 th November, 2009 and 6th May,
2014, the petitioner paid additional sum of Rs.17,97,79,010/- to the respondent.
16. On 10th May, 2014, the respondent sent an e-mail to the petitioner
attaching list of land to be conveyed and calling upon the petitioner to check 7/12
extracts and make conveyance deeds for all documents. On 22nd May, 2014, the
respondent sent an e-mail to the petitioner confirming receipt of Rs.67,09,99,010/-.
It is the case of the petitioner that in the month of August 2014, two group of
shareholders in the respondent company sold their 52% shares to Lodha Group
Company viz. M/s.Palava Dwellers Pvt. Ltd. and M/s.Lodha Properties
Development Pvt. Ltd. It is the case of the petitioner that the said M/s.Lodha
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Properties Development Pvt. Ltd. has subsequently purchased the balance 48%
shareholding of the respondent company.
17. On 2nd February, 2015, the petitioner through their advocates issued a
public notice in the newspaper informing the public at large of the rights created in
favour of the petitioner by the respondent. On 3 rd February, 2015, the respondent
issued a notice of termination of the development agreement, power of attorney,
MOU and claimed to be in possession of the said lands. On 6 th February, 2015, the
petitioner through their advocates issued a public notice informing the public at
large of the purported termination whilst requesting the general public not to deal
with the respondent with respect to the reference land.
18. On 12th February, 2015, the petitioner filed an arbitration petition (447
of 2015) under section 9 of the Arbitration Act against the respondent in this court.
On 16th February, 2015, the petitioner through their advocates addressed a letter to
the Senior Police Inspector, Dombivli seeking public protection from dispossession
by the respondent. On 17th February, 2015, the petitioner made an application for
ad-interim measures in the said Arbitration Petition No.447 of 2015. The
respondent through their advocates addressed a letter to the advocates representing
the petitioner stating that the respondent would not create third party interest on the
said lands. On 24th February, 2015, this court appointed a Court Commissioner to
ascertain status of the said land. On 24th February, 2015, the Court Commissioner
visited the said land and submitted a report to the court. On 24 th February, 2015
this court passed an order on the said Commissioner's report.
19. On 2nd May, 2015, the arbitral tribunal came to be constituted. On 30th
July, 2015, by consent of parties, the said arbitration petition which was filed under
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section 9 of the Arbitration Act was converted and treated as an application under
section 17 of the Arbitration Act and statement recorded in the order dated 24 th
February, 2015 of the respondent came to be continued to operate.
20. On 5th October, 2015, the arbitral tribunal dismissed the said
application under section 17 of the Arbitration Act which was filed by the
petitioner and directed the respondent to return the sum of Rs.68.00 crores or so
lying with it as interest free deposit within four weeks from the date of this order.
It was however made clear that such interim arrangement shall be without
prejudice to the rights of the parties in the main disputes which were yet to be
adjudicated upon. It was also clarified that any finding recorded in the said order
passed under section 17 was only a prima facie opinion which would have no
bearing whatsoever on consideration and final adjudication of the principal
disputes.
21. On 8th October, 2015, the arbitral tribunal passed an order on the
application of the petitioner for staying the operation of the said order dated 5 th
October, 2015 and for continuation of the order dated 24 th February, 2015 passed
by this court. The arbitral tribunal directed that the order dated 5 th October, 2015
passed by the arbitral tribunal shall not operate for a period of one month from the
date of the said order and till the order dated 24th February, 2015 passed by this
court to continue to remain in operation.
22. Mr.Samdhani, learned senior counsel for the petitioner invited my
attention to various provisions of the development agreement, various
correspondence more particularly annexed in the convenience compilation of
documents tendered across the bar and also to the impugned order passed by the
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arbitral tribunal. It is submitted by the learned senior counsel that the petitioner
has already paid a sum of Rs.49.78 crores to the respondent under the said
development agreement. He submits that under the said development agreement,
the respondent had already assigned their right, title and interest in the
development rights in respect of the said land which were derived by them from
Premier Automobiles Ltd. and other owners of Premier Automobiles Ltd. in respect
of Part I lands and other owners of Part II lands. He submits that the petitioner had
full unfettered rights to develop the said land and also to pay outgoings in respect
thereof under clause 8(c) of the said agreement. The petitioner was given right to
enter upon the said property and will have irrevocable right/authority to develop
the said lands. He submits that under clause 4(a), the petitioner had agreed to pay
to the respondent 21.6% of the gross receipts received, directly or indirectly, on
development of the sold property using available FSI/TDR as well as any
additional FSI/TDR or any other rights etc.in consideration of the respondent
conferring the petitioner development rights in respect of the said property.
23. It is submitted that the petitioner had addressed large number of letters
to comply with their part of the obligation. The respondent however did not sort
out the issue of unearned income and did not obtain any NOC from the Labour
Commissioner. The respondent did not clear the obstruction in carrying out the
development by the petitioner. He submits that only after controlling interest of
the respondent was transferred to Lodha Group Company, it immediately
terminated the development agreement without any basis and illegal. He submits
that there was a dispute between the Premier Automobiles Ltd.and the respondent
in respect of the marketable title. It is submitted that ownership in an immoveable
property comprises of a bundle of rights and each of such rights is an immoveable
property. Right to develop a property is a specie of right in an immoveable
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property. In respect of this submission, learned senior counsel placed reliance on
the judgment of Allahabad High Court reported in 1885 Vol.(VII) ILR 553 at pages
556 and 557.
24. Learned senior counsel submits that since the respondent had already
transferred the development rights in respect of the said land in favour of the
petitioner, it was no longer an executory contract. The transfer of development
right was complete. He invited my attention to an alleged letter of possession
dated 31st March, 2008 and submits that the petitioner has been in exclusive
possession of the said lands. In the alternate, it is submitted that the petitioner was
already given a right to enter upon the said lands for the purpose of development
and the security guards appointed by the petitioner are on the said lands and the
petitioner has been paying their charges since the date of the respondent handing
over the possession thereof to the petitioner. It is submitted that the Court
Commissioner appointed by this court also found security appointed by the
petitioner on the said land and such security guards are guarding the said property
from the encroachment. He submits that the power of attorney executed in favour
of the petitioner is an agency coupled with interest and for consideration and is
thus irrevocable. Insofar as other consideration payable to the respondent is
concerned, he submits that the same could be paid only after completion of the
development and sale of the structures which stage did not arise in this case.
25. It is submitted by the learned senior counsel that it was a pre-condition
for development of the said lands which were to be complied with by the
respondent inter-alia the resolution of the issue relating to unearned income and
NOC from the Labour Commissioner. He submits that unless to both these
conditions were satisfied by the respondent and its obligation were complied with
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the development of the property was admittedly not possible.
26. It is submitted by the learned senior counsel that on one hand the
arbitral tribunal has recorded the prima-facie finding that the petitioner has made
out a prima-facie case and have found an arguable bona-fide case against the
termination and on the other hand the arbitral tribunal has observed that the
petitioner was not entitled to relief of specific performance. He submits that the
arbitral tribunal has erroneously held that the relief sought by the petitioner is
unavailable to the petitioner and he placed reliance on the judgment of the
Supreme Court in case of Zenit Mataplast P.Ltd. vs. State of Maharashtra and
others 2009 (10) SCC 388 and in particular paragraphs 29 to 31.
27. It is submitted by the learned senior counsel that a prima-facie view
of the arbitral tribunal that development agreement was not capable of specific
performance under section 14 is contrary to the consistent view taken by this Court
and in particular in case of Shapoorji Paloonji & Co.Ltd. vs. Jignesh Shah &
Ors. reported in 2013 (6) BCR 575 and in case of Chheda Housing Development
Corporation vs. Bibijan Shaikh Farid, reported in 2007(3) Mh.L.J. 402.
28. It is submitted by learned senior counsel that the arbitral tribunal has
proceeded with mini trial and have converted claim of specific performance made
by the petitioner into a claim for damages. He submits that in case of specific
performance of an agreement with respect to an immovable property,
compensation in terms of money is not an adequate relief. There is a presumption
in law. He placed reliance on section 10 of Specific Relief Act and placed reliance
on the judgment of Supreme Court in case of M.L.Devender Singh vs. Syed Khaja
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AIR 1973 SC 2457 and in particular paragraphs 19 to 21 and the judgment of this
Court in case of Ambalal Kesharbhai vs. Ranchhodbhai Jerbhai & Ors. AIR
1956, Bombay 120 (paragraph 8). It is submitted by learned senior counsel for the
petitioner that the arbital tribunal has erroneously shifted the burden to the
petitioner to establish that the compensation would not be an adequate relief in
favour of the petitioner and has totally over looked the presumption in law in
favour of the petitioner without the respondent even given rebutting the
presumption.
29.
It is submitted that till the year 2015, the respondent had not even
disputed the rights of the petitioner to develop nor had even alleged any delay /
default on the part of the petitioner in commencing the development. He submits
that the respondent had on the contrary acknowledged that it was under an
obligation to clear several pre-conditions including the condition relating to
unearned income and obtaining labour NOC. Learned senior counsel for the
petitioner submits that the arbitral tribunal has also recorded erroneously prima-
facie finding on the issue of balance of convenience and irreparable loss.
30. It is submitted that the prima facie finding of the arbitral tribunal that
the specific performance of the development agreement cannot be granted under
section 14 and that compensation under money is an adequate relief is totally
erroneous and contrary to section 14 of the Specific Relief Act. He submits that the
arbitral tribunal having found that the petitioner having entered the property as a
licensee and which possession was further established by the report of the Court
Commissioner, the arbitral tribunal ought to have granted interim measures in
favour of the petitioner by protecting such possession as an assignee and / or even
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as an licensee. Reliance is placed on the judgment of the Supreme Court in support
of this submission in case of The Corporation of Calicut vs. K.Sreenivasam 2002
(5) SCC 361.
31. Insofar as prima-facie observation about delay on the part of the
petitioner recorded by the arbitral tribunal is concerned, it is submitted that the
finding is contrary to two other findings recorded by the arbitral tribunal i.e. that
the petitioner had been able to raise argument without payment of unearned
income of the respondent and the commencement of the development of the land
was not possible and that there was a bona-fide dispute raised by the petitioner in
respect of the termination of the development agreement. It is submitted that delay,
if any, was on the part of the respondent and not the petitioner. He submits that in
case of specific performance of an agreement relating to immovable property, time
is not essence of the contract. In support of this submission, learned senior counsel
for the petitioner placed reliance on judgment of this Court in case of Volition
Investments P.Ltd. vs.Madhuri J.Mashroo & another 2003 (5) BCR 262 and in
particular paragraphs 11(a), 12, 13 and 15.
32. It is submitted by the learned senior counsel that the other obligations
under the development agreement such as development of the property and sale of
the tenements was post transfer of the property. The respondent has not denied the
statement made by the petitioner in its e-mail sent on 3 rd July, 2013 alleging that
the petitioner was in possession of the property. It is submitted that the respondent
could not terminate the development agreement in view of the fact that assignment
of the rights of the respondent to develop the said property in favour of the
petitioner was already complete, such assignment could not be terminated by a
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letter. The petitioner had spent large amount on the plot under the said
development agreement.
33. Mr.Tulzapurkar, learned senior counsel appearing for the respondent
on the other hand submits that the petitioner had violated various terms and
conditions of the contract. The petitioner was not ready and willing to comply with
its part of obligation. He submits that though the development agreement was
executed as far back as on 31st March, 2008 and the petitioner was under an
obligation to commence the development within two years from the date of signing
of the agreement insofar as part-I land is concerned and within one year from the
date of passing of layout plans etc. insofar as part-II is concerned, till the date of
termination in the year 2015, the petitioner did not commence the development of
any of the plots. He submits that since the petitioner had not shown its readiness
and willingness to comply with its part of compliance and had committed these
breaches, the relief of specific performance would be barred under section 16(b) of
the Specific Relief Act.
34. Learned senior counsel for the respondent led emphasis on clause 12
of the development agreement and more particularly on the words
"Notwithstanding what is contained in this Agreement" and would submit that
irrespective of the alleged non-compliance of the condition regarding unearned
income and labour NOC, the petitioner was under an obligation to carry out the
entire development of the said property at its own costs and risks. He submits that
the petitioner thus could carry out development on the said property even without
the respondent resolving the issue of unearned income or without obtaining the
NOC from the Labour Commissioner. He submits that in any event from the date
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of execution of the development agreement, the respondent had admittedly
executed the power of attorney in favour of the petitioner for all purpose
mentioned therein, including the power to apply for various permissions and to
represent the petitioner before the authorities. The petitioner thus could have
exercised its powers under the power of attorney, which was in force from 31 st
March, 2008 till the date of termination. He submits that the arbitral tribunal has
rightly considered this crucial document in the impugned order and has rightly
rejected the application for interim measures filed under section 17 of the
Arbitration Act.
35.
Mr.Tulzapurkar also placed reliance on clause 12(ix) of the
development agreement and would submit that the petitioner had agreed to strictly
adhere to the development schedule specified in clause 14(c) subject to force
majeure conditions and the respondent assigning / transferring the development
rights to the petitioner. He submits that it is not the case of the petitioner that there
was any force majeure conditions due to which the petitioner could not strictly
adhere to the development schedule or that the respondent had not assigned and/or
transferred the development rights. It is the case of the petitioner itself that the
respondent had transferred the rights of development in favour of the petitioner. It
is submitted by learned senior counsel that under clause 14, commencement of the
development of part-II land was to be within one year from the date of condition.
He submits that there was no completion of assignment of rights in favour of the
petitioner as alleged by the petitioner. It is submitted that the respondent was
entitled to revenue of 21.86% which was to be paid by the petitioner after
completion of the entire development and sale of components. The petitioner did
not take any steps for last several years for commencement of the development and
thus the petitioner could not have waited for further indefinite period to enable the
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petitioner to commence the development. He submits that there was no provision
in the contract linking permission of the Labour Commissioner with
commencement of the development. For seven years the development did not
begin.
36. It is submitted by the learned senior counsel that in any event the issue
of unearned income was only for 57 acres of part-I land which was pending before
the authority and not the entire 86 acres of land. The petitioner did not take any
steps for development even in respect of 29 acres which were admittedly available
to the petitioner without any hindrance. The petitioner did not apply for any
permission for the development of 29 acres. It was not the case of the petitioner
that even 29 acres could not be developed.
37. Learned senior counsel for the respondent invited my attention to an
application dated 9th June, 2014 made by the petitioner to the authority for seeking
locational clearance for the proposed special township project. He submits that if
the petitioner could make such an application for locational clearance for the
proposed special township project, which was one of step for development of the
property, the petitioner could have taken such steps immediately upon execution of
the development agreement as far back as on 31st March, 2008. He submits that the
fact that the petitioner applied for such clearance from the authority on 9 th June,
2014 clearly indicates that the development of the property could be commenced
even without clearing issue of unearned income by the respondent or without
obtaining the NOC from the Labour Commissioner. He submits that in any event
the petitioner ought to have applied for clearing this issue by exercising powers
under the power of attorney given to the petitioner by the respondent since 2008.
He submits that this itself shows that the petitioner was not ready and willing to
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comply with its part of obligations and thus was not entitled to seek any interim
measures. He submits that under the development agreement, all the approvals
were to be obtained by the petitioner which were required before commencement
of the development. The respondent did not prevent the petitioner from applying
for permission before the Labour Commissioner or to clear the issue of unearned
income.
38. Insofar as the issue of the marketable title raised by the petitioner is
concerned, learned senior counsel for the respondent submits that the respondent
had already provided title certificate to the petitioner which was duly recorded in
the development agreement itself and more particularly in recital "F". The
respondent was not required to carry out any other obligation under the said
development agreement insofar as the title is concerned. He submits that even in
the application for seeking locational clearance made by the petitioner, the
petitioner had already annexed a copy of title certificate.
39. Insofar as the alleged possession letter is concerned, it is submitted by
learned senior counsel for the respondent that the alleged possession letter was
forged and was not signed by the respondent or its authorized representative.
Learned senior counsel for the respondent states that by a letter dated 23 rd October,
2010 and in other correspondence, in which the petitioner had requested the
respondent to resolve the issue of taking over possession and for erecting board of
the petitioner on the site.
40. Insofar as the submission of learned senior counsel for the petitioner
that the petitioner was granted license to entertain the land under clause 8(c) of the
development agreement is concerned, he submits that the said license was with a
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view to perform obligation under the said development agreement and cannot be
read in isolation. Similarly the power of attorney was also given to the petitioner in
connection with the development agreement. He submits that since the rights under
the development agreement did not subsist, the petitioner cannot rely upon the
license given under the agreement.
41. It is submitted by learned senior counsel that the plot of land is an
open land admeasuring 170 acres. The Commissioner's report showed the cabin of
security guards, where the security guards of both the parties were present in cabin,
which would not indicate possession of the petitioner on the entire land.
42. Insofar as the submission of learned senior counsel for the petitioner
that the assignment of the development rights was completely in favour of the
petitioner under the said development agreement is concerned, learned senior
counsel for the respondent submits that the petitioner did not raise any such plea
either in the petition filed in this Court under section 9 of the Arbitration Act and
even did not argue this issue before the arbitral tribunal or even did not raise in the
rejoinder filed by the petitioner. The petitioner has not even raised this issue in the
ground of appeal in the present proceedings. The arbitral tribunal therefore, rightly
did not consider this allegation not having been raised in the pleadings before the
arbitral tribunal and not having been argued. Learned senior counsel invited my
attention to the valuation of the property adjudicated upon by the stamp authority
on the said development agreement and would submit that the petitioner has paid
the stamp duty at the rate of 1% under clause 5(g)(a) of the schedule to the
Maharashtra Stamp Act and has not paid stamp duty on the basis of conveyance of
the immovable property which would have been at the rate of 5% under Article 25
of the schedule to the Maharashtra Stamp Act.
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43. Insofar as the issue as to whether termination of the development
agreement was valid or not is concerned, it is submitted by learned senior counsel
that there was no occasion for the arbitral tribunal to consider the defence of the
respondent in view of the present bar under section 16(b)(c) of the Specific Relief
Act. The petitioner did not fulfill the conditions under section 16 and thus no
specific performance of the development agreement can be granted in favour of the
petitioner. He submits that since the relief of specific performance cannot be
granted in favour of the petitioner, the arbitral tribunal rightly rejected the relief of
interim measures.
44. Learned senior counsel appearing for the respondent submits that the
arbitral tribunal has rightly rendered a prima-facie finding that the petitioner had
not made out prima-facie case or that the petitioner would suffer irreparable injury
if interim relief was disallowed or whether the balance of convenience was in
favour of the petitioner. The petitioner also did not satisfy mandatory requirement
of the readiness and willingness to comply with its part of obligation for seeking
the relief of specific performance. He submits that to the knowledge of the
petitioner, there was no demand for any unearned income from any authority on
the said land under part-I from 2008 till date. The petitioner had not shown any
refusal to the grant of development permission from the authority on the ground
that the permission to the development was refused on the ground of unearned
income. Learned senior counsel invited my attention to the letter dated 30 th June,
2014 from the Town Planning Department in response to the application of the for
locational clearance raising various queries however, no issue in respect of any
unearned income was raised therein.
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45. Learned senior counsel invited my attention to the claims made by the
petitioner in the statement of claim filed before the arbitral tribunal and more
particularly the claim for damages against the respondent in the sum of Rs.3042.00
crores. He submits that the remedy of the petitioner thus would be claim for
damages and not specific performance.
46. Mr.Samdani, learned senior counsel for the petitioner in rejoinder
submits that it was not the case of the respondent that there was no readiness and
willingness on the part of the petitioner and thus reliance placed on section 16(b)
(c) of the Specific Performance Act is totally misplaced. He submits that there was
lengthy correspondence addressed by the petitioner during the period 2008 and
2015 pointing out the breaches of various obligations of the respondent under the
development agreement. He submits that no time limit was provided under the
development agreement for resolution of the issue of unearned income and thus it
has to be within the reasonable time i.e. before the petitioner could begin with the
development of the lands. He submits that the respondent did not allege any delay
on the part of the petitioner from the year 2008 till 2015. He submits that though
the petitioner had applied for locational clearance on 9th June, 2014, the Collector
has not granted any permission till date.
47. It is submitted by the learned senior counsel for the petitioner that
after execution of the development agreement, the Labour Commissioner had
directed the authorities not to grant any development permission without
permission of the Labour Commissioner. The said order was not vacated till the
date of termination. The respondent did not take any steps to get the said order
vacated. He submits that the time was not an essence of the agreement and it was
not so specific in the agreement. Learned senior counsel placed reliance on the
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judgment of this Court in Volition Investment Pvt. Ltd. vs. Madhuri Jitendra
Mashroo & Anr., 2003(5) Bom. C.R. 262. He submits that the party who has
committed breaches cannot be allowed to take advantage of its own breach. Insofar
as the correspondence exchanged after 31st March, 2008 regarding possession is
concerned, it is submitted by learned senior counsel for the petitioner that the
parties were contemplating formalities of handing over / taking over possession for
getting the plot fenced etc. and that would not indicate that possession was not
given on 31st March, 2008. He submits that the letter of the petitioner regarding
possession of the petitioner was not denied by the respondent.
48. Insofar as
the issue of stamp duty raised by the respondent is
concerned, it is submitted by learned senior counsel for the petitioner that the
petitioner had paid the stamp duty as adjudicated upon by the authority. The
respondent cannot dispute the correctness of the stamp duty adjudicated upon by
the authority at this stage. The remedy of the respondent would be to challenge the
said order of the authority by filing an appeal under section 37 of the Maharashtra
Stamp Act.
49. Insofar as the submission of learned senior counsel for the respondent
that the petitioner could have developed at least 29 acres is concerned, it is
submitted that the said project was a township project and minimum size of plot
required was 100 acres and not 27 acres and thus the petitioner could not have
commenced any construction on 29 acres.
50. Insofar as the claim for damages made by the petitioner in the arbitral
proceedings is concerned, it is submitted that merely because the petitioner has
made claim for damages as and by way of alternate relief, no relief for specific
performance on that ground can be rejected.
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REASONS AND CONCLUSIONS :
51. There is no dispute that under the development agreement entered into
between the parties and more particularly under clause 14(c), it was provided that
the developer shall start construction within two years from the date of signing of
the said agreement insofar as 86 acres of the land is concerned and within one year
from the date of passing of the lay out plans etc insofar as the land admeasuring
87.91 acres is concerned. The said development agreement was entered into on 31st
March, 2008. There is no dispute that the petitioner applied for locational
clearance which was one of the step for the purpose of development of the said
plot only on 9th June, 2014 i.e. after more than six years of the execution of the
development agreement. Learned senior counsel for the respondent invited my
attention to a letter addressed by the authority in response to the said application
for locational clearance raising various queries which indicates that there was no
requisition made by the authority for payment of any unearned income.
52. It is also not the case of the petitioner that at any point of time after
execution of the development agreement with the respondent, there was any
demand made by any authority for the said alleged arrears of unearned income.
Even according to the petitioner, the said application for locational clearance is
still pending and there was no further progress in the matter. Except writing few
letters in last more than six years by the petitioner to the respondent, no further
steps were taken by the petitioner for the purpose of carrying out development on
the said plots.
53. The question that arose before the arbitral tribunal was whether in
absence of the respondent solving the issue of unearned income whether the
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petitioner could have proceeded with the development of the lands in question or
not and whether the development was stalled in view of the respondent not having
obtained the NOC from the Labour Commissioner.
54. It is not in dispute that the respondent had already executed a power
of attorney in favour of the representative of the petitioner by which the said
constituted attorney was given a right to represent the respondent before all the
authorities in respect of the said plots which were subject matter of the
development agreement and to do various acts required to be initiated for the
purpose of carrying out development on the said plots. Though the said power of
attorney was executed by the respondent simultaneously with execution of the
development agreement, the petitioner never exercised that power of attorney and
did not apply for resolving the alleged issue of the unearned income or for
obtaining any NOC from the Labour Commissioner. If according to the petitioner,
the respondent was not complying with its part of obligation i.e. resolving
unearned income issue and by obtaining NOC from the Labour Commissioner, in
my prima-facie view the petitioner could have exercised that right by exercising
the powers under the said power of attorney and ought to have taken such steps. A
perusal of the record prima-facie indicates that the authority has not refused to
grant permission in favour of the petitioner on the ground that unearned income
was not paid by the respondent. There is no dispute that except the said issue of
unearned income, all other obligations for carrying out development on the suit
plots were that of the petitioner. In my view, the arbitral tribunal has thus rightly
rejected this contention urged by the petitioner.
55. Insofar as the submission of the learned senior counsel for the
petitioner that there is some inconsistency in the impugned order i.e. on one hand
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the arbitral tribunal has prima-facie observed that the petitioner had made out a
case in respect of termination effected by the respondent that that without resolving
the issue of unearned income, development could not be commenced by the
petitioner and on the other hand the arbitral tribunal has rejected the application
under section 17 of the said Arbitration Act on the ground that no case was made
out by the petitioner is concerned, in my view, the Court has to read the entire
order passed by the arbitral tribunal in right prospective and cannot consider any
isolated paragraph of the impugned order.
56. Insofar as the submission of the learned senior counsel that the arbitral
tribunal has while rejecting the application under section 17 filed by the petitioner
has committed mini trial without any oral evidence and has rendered various
conclusions is concerned, a perusal of the order passed by the arbitral tribunal does
not indicate any such mini trial alleged to have been conducted by the arbitral
tribunal. In my view, even while considering the interim measure by the arbitral
tribunal whether under section 17 or by the Court under section 9, the arbitral
tribunal or by the Court as the case may be, the arbitral tribunal or Court has to
take a prima-facie view in the matter before granting or refusing to grant any relief
of interim measures under section 17 or section 9 respectively. The arbitral tribunal
under section 17 or the Court under section 9 cannot draw any final conclusion
while dealing with the issue of interim measures. The judgment of the Supreme
Court in case of Zenit Mataplast Private Limited vs. State of Maharashtra & Ors.
(supra) relied upon by learned senior counsel for the petitioner thus does not assist
the case of the petitioner.
57. Insofar as the issue as to whether the power of attorney granted by the
respondent in favour of the petitioner is coupled with interest and whether could be
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revoked or not is concerned, the said issue can be considered by the arbitral
tribunal at the hearing of the arbitral proceedings on interpretation of the said
document and this Court need not decide this issue at this stage. The petitioner
does not appear to have raised such issue before the arbitral tribunal at the time of
hearing of the said application filed under section 17.
58. Insofar as the issue as to whether the said development agreement is
executory contract or not raised by learned senior counsel for the petitioner or that
whether under the said development agreement the respondent had already
assigned its rights of development to the petitioner or not is concerned,
Mr.Samdani, learned senior counsel for the petitioner could not point out any such
plea raised by the petitioner before the arbitral tribunal in pleadings or as to
whether the same was at all raised at the time of hearing of the application under
section 17 before the arbitral tribunal. There is no such ground raised in the
petition to contend that such plea was raised by the petitioner in the pleadings filed
before the arbitral tribunal or that the same was though urged across the bar but
was not considered by the arbitral tribunal.
59. Mr.Tulzapurkar, learned senior counsel invited my attention to the
development agreement which was stamped and registered in support of the
submission that the stamp duty paid by the petitioner was under Article 5(g)(a) of
the Maharashtra Stamp Act and not under Article 25 of the Schedule to the
Maharashtra Stamp Act and would submit that the same would itself indicate that
there was no assignment of development rights under the said development
agreement itself. Since the said issue was not raised before the arbitral tribunal or
urged before the arbitral tribunal, this Court need not deal with the said issue raised
across the bar for the first time in the present proceedings.
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60. Insofar as the issue of possession raised by Mr.Samdani, learned
senior counsel for the petitioner relying on the alleged letter of possession issued
by he respondent and on a provision of the development agreement granting
permission to the petitioner to enter upon the suit lands is concerned, the
respondent has seriously disputed the execution of any such alleged letter of
possession relied upon by the petitioner and has alleged forgery. Mr.Tulzapurkar,
also placed reliance upon some of the subsequent correspondence exchanged by
the petitioner with the respondent requesting the respondent to resolve the issue of
possession. He submits that subsequent correspondence would clearly indicate that
the said alleged letter of possession relied upon by the petitioner was forged and
possession was not handed over to the petitioner. In my view, this Court cannot
draw any conclusion on the allegation of forgery made by the respondent of the
said alleged letter of possession at this stage. A perusal of the subsequent
correspondence relied upon by Mr.Tulzapurkar, learned senior counsel for the
respondent however would prima-facie indicate that at least on the date of the said
alleged writing i.e. letter of possession, the petitioner was not placed in possession
of the suit property. Even if the permission referred in the development agreement
to enter upon the suit lands is considered, the said permission was for the purpose
of carrying out development on the suit lands and did not create any right.
61. Insofar as reliance on the Commissioner's report by learned senior
counsel for the petitioner is concerned, there is no dispute that the lands which
were subject matter of the development agreement were open land admeasuring
170 acres. Both parties had contended before the arbitral tribunal and also before
this Court that they have deployed their respective security guards to protect the
lands. A perusal of the Commissioner's report only indicates that the learned
Commissioner found some of the security guards of both the parties in the cabin
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put up on the portion of the said big plot of land. In my prima-facie view merely
because few security guards which were found in the cabin and that also security
guards of both the parties during the visit of the Court Commissioner, that would
not be a conclusive proof of the possession alleged to have been handed over to
the petitioner by the respondent. A perusal of the order passed by the arbitral
tribunal on the issue of possession indicates that the arbitral tribunal has taken a
view that whether the document of possession was forged or not should be decided
only after evidence is led by the parties but under the said development agreement,
the petitioner was given right to enter upon the said land only as a licensee of the
respondent.
62. As far as the issue as to whether the petitioner could have commenced
the development at least on 27 acres in respect of which there was no issue of
unearned income raised by the respondent is concerned, or whether the petitioner
could not have carried out construction only on 27 acres is concerned or not, this
Court need not go into this issue at this stage and the same can be decided by the
arbitral tribunal.
63. Insofar as the issue raised by learned senior counsel for the petitioner
that there was no delay on the part of the petitioner in carrying out development
and no such allegation of delay made by the respondent till 2015 is concerned, a
perusal of the record prima-facie indicates that except writing few letters by the
petitioner to the respondent, the petitioner did not take any steps for the purpose of
carrying out development on the said plots. Even if the respondent had not alleged
any breaches as canvassed by the petitioner is accepted, the petitioner could have
complied with its part of obligation under the development agreement and could
not have waited for more than six years to commence construction on the land in
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question.
64. Insofar as the issue as to whether the time was an essence of contract
or not in this case is concerned, admittedly the construction was to be commenced
within two years and one year respectively in respect of two lands under clause 12
of the development agreement. Even if the argument of the petitioner is accepted
that the time was not the essence of the contract, the time to commence the
construction could not have been postponed indefinitely. The petitioner had
admittedly not commenced the construction till the date of termination of the
development agreement. There is thus no merits in this submission of learned
senior counsel for the petitioner. The judgment of this Court in case of Volition
Investment Pvt. Ltd. Madhuri Jitendra Mashroo & Anr. relied upon by the
learned senior counsel for the petitioner does not assist the case of the petitioner.
Even in the said judgment, this Court has held that the period for the purpose of
implementing the contract has to be a reasonable period.
65. The next question that arises for consideration is whether the
petitioner had made out a case for grant of interim measures on the basis that the
petitioner has good chances of succeeding in obtaining the relief of specific
performance of the development agreement before the arbitral tribunal. This Court
also has to consider whether balance of convenience was in favour of the petitioner
or the respondent and whether any irreparable loss would be suffered by the
petitioner if the interim measures as prayed were not granted.
66. A perusal of the order passed by the arbitral tribunal indicates that the
arbitral tribunal has held that though there is a bona-fide and triable issue raised by
the petitioner in respect of the termination of the development agreement, however,
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that is not enough. The petitioner is required to show at thresh-hold that the
damages will not give adequate relief to the petitioner. The arbitral tribunal has
considered the fact that the development agreement entered into between the
parties was of commercial nature and thus even if any breach is committed by the
respondent , the petitioner can be compensated in terms of money for non-
performance of the contract. The arbitral tribunal has also considered section 14 of
the Specific Relief Act.
67. Insofar as the issue as to whether the petitioner has made out a prima-
facie case in respect of specific performance claimed by it is concerned, the
arbitral tribunal has prima-facie come to the conclusion that the petitioner had not
been able to made out a prima-facie case in respect of the specific performance
claimed by it. Insofar as the issue of irreparable loss is concerned, it is held by the
arbitral tribunal that if the petitioner could have made an application before the
State Government on 9th June, 2014 for locational clearance, such application
could have been made much earlier also rather within two years of the execution of
the development agreement as nothing had changed in the meanwhile. The arbitral
tribunal has also considered the fact that along with the said application for
development permission, the petitioner had annexed all necessary documents,
including document of title which would indicate that the plea of lack of
verification of title of the subject lands raised by the petitioner had no substance.
The arbitral tribunal also held that there was nothing on record to indicate that the
petitioner could not take any steps for preparing lay out plan, getting ready the
building plans, obtaining required development permission until 9 th June, 2014.
Considering all these facts, the arbitral tribunal was of the view that no irreparable
loss would be caused to the petitioner if the prayer for interim relief was refused.
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68. Insofar as the issue of balance of convenience is concerned, a perusal
of the impugned order indicates that after considering all the relevant aspects,
including the nature of contract, commercial transaction between two developers to
make profits, it is held that the petitioner had failed to prima-facie satisfy any
adequacy test, inaction for years together by the petitioner to act upon the power
of attorney by taking steps for commencement of the work. The arbitral tribunal
was of the opinion that the balance of convenience tilted in favour of the
respondent. The arbitral tribunal also considered the fact that the petitioner had not
commenced the development work within two years and did not take any steps for
commencement of the work for more than six years. The said land was estimated
to be of two thousand crores, whereas the petitioner has only deposited Rs.68.00
crores by way of interest free deposit with the respondent. It is held that it would
not be in the interest of justice if such vast track of land remains frozen
indefinitely when on establishing breaches by the respondent, the petitioner could
be adequately compensated by way of damages. It is also held that if ultimately it
is found that the termination was bad in law or contrary to the terms of the
agreement or for any other reason, the petitioner can be compensated for wrongful
termination and accordingly held that balance of convenience was in favour of the
respondent and not the petitioner.
69. There is no dispute that the suit contract was determinable. The
respondent, in my view, could not have waited indefinitely for the petitioner to
commence the development in the suit lands. The petitioner did not take any steps
for more than six years for commencing the development on the suit lands. In my
view, the arbitral tribunal is right in holding that the plots worth rupees two
thousand crores could not be frozen merely on advance payment of Rs.86=00
crores made by the petitioner when the petitioner itself was responsible for delay
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and breaches. I do not find any infirmity in the impugned order passed by the
arbitral tribunal.
70. Before seeking any interim measures under section 17 read with order
39, the applicant has to make out a prima-facie case and to show that the balance
of convenience is in favour of the applicant and not the respondent. The petitioner
also has to prove that irreparable loss suffered by the petitioner, if any, cannot be
compensated in terms of money. A perusal of the impugned order passed by the
arbitral tribunal indicates that all these issues have been dealt with in detail by the
arbitral tribunal and having found that the petitioner having failed to satisfy all the
three tests for grant of interim measures, has rightly rejected the application filed
under section 17.
71. The arbitral tribunal,in my view, is also right in rejecting the
application under section 17 in view of the fact that the petitioner did not show its
readiness and willingness to comply with its part of obligation by commencing
construction within two years and one year respectively as observed by the arbitral
tribunal. If the petitioner was not ready and willing to perform its part of obligation
which is a mandatory condition for considering prayer for specific performance of
the contract under section 16, the arbitral tribunal, in my view, has rightly rejected
the application for interim measures.
72. Insofar as the issue raised by learned senior counsel for the petitioner
that the arbitral tribunal has rejected interim measures on the ground that the
development agreement was not being capable of specific performance and
reliance on the judgment of this Court in case of Shapoorji Pollonji & Co. Ltd. vs.
Jignesh Shah & Ors. (supra) and in case of Chheda Housing Development
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Corporation vs. Bibijan Shaikh Farid & Ors. (supra) is concerned, a perusal of
the impugned order does not indicate that the arbitral tribunal has taken any such
view that the development agreement is incapable of specific performance. Be that
as it may, whether it is capable of specific performance or not the same has to be
conclusively decided at the time of hearing of the arbitral proceedings. There is no
dispute about the proposition laid down in the said two judgments referred to and
relied upon by learned senior counsel for the petitioner.
73. The next submission urged by learned senior counsel for the petitioner
is that there is presumption in law that compensation is not an adequate relief. In
support of this submission, learned senior counsel placed reliance on the judgment
of the Supreme Court in case of M.L. Devender Singh & Ors. vs. Syed Khaja. It is
held by the Supreme Court in the said judgment that the jurisdiction of the Court to
decree for specific performance is discretionary and must be exercised on sound
and reasonable grounds "guided by judicial principles and capable of correction by
a Court of appeal". It is held that merely because in the contract the parties had
fixed a sum as liquidated damages, the same would not curtail the jurisdiction of
the Court to grant specific performance. In this case, there is no such provision of
liquidated damages. In the said judgment the issue was whether specific relief can
be granted if there was already a provision for liquidated damages in the agreement
entered into between the parties. The Supreme Court considered the explanation to
section 12 of the old Act and also the provisions of section 21 of the old Act and
held that the effect of presumption is that the party coming to Court for the specific
performance of a contract for sale of immovable property need not prove anything
until the other side has removed the presumption. In my view, the said judgment
does not assist the petitioner in any manner whatsoever. Similar was the view
taken by this Court in case of Ambalal vs. Ranchhodbhai (supra) relied upon by
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learned senior counsel for the petitioner. In my view, even the said judgment does
not assist the petitioner and is clearly distinguishable in the facts of this case.
74. In my view, Mr.Tulzapurkar, learned senior counsel for the respondent
is right in his submission that the respondent would have received consideration
out of the sale proceeds of the structures only after construction thereof by the
petitioner within the time prescribed in the development agreement at the rate of
21.86%. Since the petitioner even did not commence any construction for more
than six years, the respondent was not able to receive any consideration in the sale
proceeds of the structure. The respondent thus could not have waited indefinitely
to enable the petitioner to commence the construction and after completion of the
construction to sell such tenements and thereafter to pay consideration to the
respondent to the extent agreed under the development agreement.
75. This Court in Chaurangi Builders & Developers Pvt. Ltd. Vs.
Maharashtra Airport Development Co. Ltd. in its judgment dated 29th November,
2013 in Arbitration Petition (Lodging) No.1999 of 2013 after adverting to the
judgment of the Supreme Court in case of Cox & Kings India Limited Vs. Indian
Railways Catering & Tourism Corporation Limited, (2012) 7 SCC 587 and the
judgment of this Court in Maytas Infra Limited Vs. Utility Energytech &
Engineers Pvt. Ltd. & Ors. 2009(4) Bom. C.R. 143 and several other judgments
has held that though a party had invested a large sum of money in the project, but
that cannot entitle it to pray for a mandatory order to operate the contract once it is
noted that the remedy of the petitioner would be if any in action for damages
against the respondent for breach of any of the terms and conditions of the
contract. This Court in that judgment refused to grant stay of termination of the
agreement. Special Leave Petition filed by the petitioner against the said order is
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dismissed. This Court has also considered the judgment of the Supreme Court in
case of Indian Oil Corporation Vs. Amritsar Gas Services, 1991(1) SCC 533. In
my view, the principles laid down by this Court in the said judgment squarely
applies to the facts of this case.
76. In my view, if the petitioner succeeds in the arbitral proceedings and
even if it is proved that the respondent had failed to comply with its part of
obligation under the development agreement or that the termination of the
development agreement by the respondent was bad and illegal, the petitioner
would be compensated in terms of money. In my view, there is thus no merit in the
arbitration petition. The observations made by the arbitral tribunal in the
impugned order are prima-facie. I therefore, pass the following order :-
a). Arbitration Petition (Lodging) No.1932 of 2015 is
dismissed. Interim order passed by this Court on 24 th
February, 2015 which is continued by the arbitral tribunal and
continued by this court to continue for a period of eight weeks
from today.
b). No order as to costs.
(R.D. DHANUKA, J.)
