Rishabh Tandon And Bhawna Tandon vs Mantri Realty Limited
2017 Latest Caselaw 4187 Bom

    Vikash Sadangi v Shanta D Lakkana (Re: Mantri Realty Premero--Bengaluru)
                             @902-CAL269-17+.DOC




 Atul
        IN THE HIGH COURT OF JUDICATURE AT BOMBAY
           ORDINARY ORIGINAL CIVIL JURISDICTION
             COMPANY APPLICATION NO. 269 OF 2017
                                     IN
          COMPANY APPLICATION (L) NO. 424 OF 2016
                                     IN
                COMPANY PETITION NO. 949 OF 2014

 Vikash Sadangi & Anr                                           ...Applicants
       In the matter between
 Smt Shanta wife of Sri D Lakkanna                                 ...Applicant
       And
 Anil Bajranglal Agarwal                                           ...Petitioner
       Versus
 Mantri Realty Limited                                         ...Respondent

COMPANY APPLICATION NO. 270 OF 2017 IN COMPANY APPLICATION (L) NO. 424 OF 2016 IN COMPANY PETITION NO. 949 OF 2014

Rishabh Tandon ...Applicant In the matter between Smt Shanta wife of Sri D Lakkanna ...Applicant And Anil Bajranglal Agarwal ...Petitioner Versus Mantri Realty Limited ...Respondent

Mr Naushad Engineer, with Bhavin Gada, Urvi Tanna, i/b Pravin

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Mehta & Mithi & Co., for the Applicant in CA/615/2016. Mr Makrand Bakore, for the Applicant in CA/269/17 & CA/270/17 Mr Omkar Chandurkar, for Official Liquidator Ms Yogini Chauhan, Dy. Official Liquidator, is present.

                               CORAM:     G.S. PATEL, J
                               DATED:     7th July 2017
 PC:-


 1.       Heard.

2. These two applications are complete abuse of the process of this Court. They are not only thoroughly misconceived, as we shall see, but, in my view, are mischievous in their conceptualization and devious in the manner in which they are laid. I will come to the details presently, but the long and short of the case in each is this: a series of orders facilitated the completion of construction of a halted and nearly abandoned construction project in Bengaluru. There were very many stakeholders, including different flat purchasers and the land owners. The numbers of flat purchasers ran into the hundreds. In an effort to ensure that the project was completed, a scheme was evolved. The developer had thrown up his hands. A provisional liquidator had been earlier appointed of the developer company. The land owners and the flat purchasers came together and appointed a contractor and a project management consultant. The land owner contributed money. An assessment was done by which it was estimated that project completion would cost an additional Rs. 250/- per sq ft. Arrangements were made for contribution. For those who did not contribute, the land owner

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agreed to make payment and recover. Some purchasers bought flat from the developers' quota; others bought from the land owner's quota. Notices were issued to all purchasers. One could not be served. These two applicants, though given notice, stayed away and they did so, as we shall see, on thoroughly specious grounds. These two applicants have bought flats from the land owner's quota. They say they are not bound to pay these additional costs of construction. They say their agreement is with the land owner. It matters not to them what it costs her to complete the construction; they stand apart. They are unlike any other flat purchasers. They must receive a special treatment. They must be exempted from what every one else pays. It is of no moment that none of the previous orders have been challenged by anyone, and that, but for those orders, the project would not have progressed.

3. The project is in Bengaluru. It is one of two construction and development projects. Both were to be undertaken by Mantri Realty Limited ("Mantri"). That company is now in provisional liquidation. One project was called Mantri Royale. We are not concerned with that one. The other project was called Mantri Premero. The project envisaged the construction of 253 flats over four towers or wings labelled "A", "B", "C" and "D". The land owner was the Lakkanna family, represented by Ms Shanta Lakkanna. Her agreement with Mantri was that Mantri could sell 65% of the flats and retain the sale proceeds. She would be entitled to retain 35% of the flats. Obviously, this meant that Mantri was not paying her and she was not paying Mantri, but the consideration that passed between them was, first, in the contribution of the land

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and, second, in the division inter se of these flat quotas. Importantly, Mantri acquired no title to the land at any stage.

4. These quotas translated into 167 flats in the Mantri share and 86 flats in Mrs Lakkanna's share. Mrs Lakkanna sold 46 of the 86 flats from her share. The Applicants in these two Company Applications are two of those purchasers from Mrs Lakkana. The other 40 flats she has retained. The flat purchasers' expectations, and perhaps even dreams, turned sour when Mantri was taken to provisional liquidation. The directors of Mantri threw up their hands. They abandoned the project. All work stopped. In fact, the site was all but abandoned. It was soon a ruin, the site overrun with weeds and wild plants. The flat purchasers had no real prospect of completion of the project or of delivery of their flats. The land owner had capital, both in terms of money and land, locked up and very possibly jeopardised.

5. While Mantri and its directors were fighting their battles in this Court and elsewhere, this was the situation on the ground so far as the flat purchasers and the land owners were concerned in June 2016, just over an year ago. I had then before me a Liquidator's Report and several Company Applications. I noted that on 25th August 2014 this Court had admitted a winding up Petition against Mantri, ordered its advertisement and granted an injunction. Other Petitions also came to be admitted, some of them also advertised.

6. The question was, therefore, whether the completion of the projects could be segregated from the claims against Mantri. The

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unusual aspect of this matter was that Mantri had only a share in the profits or sale proceeds of flats but no interest or title in the land or the building itself. Therefore, as far as the Liquidator was concerned, he was certainly entitled to take charge of the funds and sale proceeds that Mantri had received, but could not possibly take charge of all the flats; especially those flats where there were registered agreements with third party purchasers, since these could not be said to be the assets of the company. The Provisional Liquidator also could not take charge of any of the flats in the Lakkanna family share, since these stood completely outside the asset base of the company.

7. But this raised another difficulty. While the Company Petitions wound their way through the legal system, could these projects in Bengaluru (and others like it in Gwalior, Solapur, Mumbai and elsewhere) be left abandoned like this? Even if flat purchasers filed Suits in Civil Court or brought complaints to the Consumer Dispute Tribunals, they had no real prospect of completion of these projects. Their dreams of having homes in these projects had all but evaporated. What stared them in the face was a bleak and dispiriting future of endless rounds of litigation, more money and time being spent in court battles, and no real hope or possibility of seen the buildings completed as originally planned. This is the problem that the flat purchasers placed before me, pleading for assistance and intervention.

8. I took up the matters and in paragraph 5 of my first order of 16th June 2016 expressly noted my concern about the frame of the

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action and the extent to which it was tenable within the company jurisdiction. In paragraph 5, I said this:

"5. Finally, I am acutely conscious of the frame of these actions and the limited scope of the Company jurisdiction in assessing them. What the flat purchasers seek may, strictly speaking, fall within the remit of a civil court. But in Company jurisdiction, especially when dealing with corporate behemoths with multiple projects or enterprises, the Court must not, I think, take too narrow or pedantic a view. The reason is plain: not only is there a Company against which there are claims, some admitted and some pending, but there are also several persons, all directly affected by the Company's past actions and activities. What confronts these hapless individuals today is a situation as grim as it is dire: to spend years in protracted civil litigation with an uncertain result seeking only to gain what they were once promised. I note that even today, as the following order shows, these flat purchasers make no monetary demands of Mantri. Instead, they offer to complete the projects themselves. They only seek the assistance of the Court in doing so. Mantri, too, represented before me today, is cooperative in this endeavour. The only opposition comes from other unsecured creditors, those unconnected with these projects. Once those claims are assessed and found not to be maintainable, i.e., once it is found that these projects and these flats are not the assets of the Company, then the only question is what, if anything, is to be done about the incomplete constructions. Should the flat purchasers and allottees be told to file civil suits? Or, given that there is a Provisional Liquidator in place, should the Company court exercise its equitable jurisdiction and ensure that those projects proceed to completion in an orderly manner? I believe that the latter is not only the salutary course for a

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Court to follow, it is the only one available. The reason is that in the course of this exercise, should it be found that any of the flats in question have been retained by Mantri itself then those flats will undoubtedly have to be brought into the asset pool. I do not see how it is possible therefore to completely segregate these applications by flat purchasers from the group or to drive them to independent civil actions to enforce their rights. That will probably create more conflict and confusion. Before me today, there are associations of flat purchasers from Bengaluru. The land owners are also represented. Mantri, too, is before this Court, its presence ensuring the necessary continuity. To take a view that what the flat purchasers seek lies beyond the remit of this Court seems to me to be simply unjust, given the circumstances and the stakes involved. Finally, the Liquidator will have to participate in this process. As the following orders show, there are some elements of handling these property-development projects that require payment from the funds in the Liquidator's hands. That is best done in this Court. Finally, as between Mantri on the one hand and the flat purchasers and land owners on the other, there is no opposition to the scheme that I now propose to direct, one that has been extensively debated in Court."

9. There were then discussions in regard to the completion of the projects. I found that Mantri and Mrs Lakkanna had entered into a Development Agreement of 20th March 2009 for the Premero project. At that time, an external shell of four wings was constructed. A considerable amount of work remained to be done in the form of brick work, plastering, electricals and so on. A total of 213 flats have been sold -- all 167 flats from Mantri's quota and 46 from the Lakkanna quota. By that time, there was already an

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association of 190 flat purchasers. There were 10 others who were separately represented. Therefore, 13 flat purchasers remained to be identified.

10. There was then presented a scheme or completion of the project, and this is important because it tells us that as far back as in June 2016 persons had already come together with a unified objective of completing this project. The scheme presented to me indicated that the flat purchasers from both the Lakkanna and Mantri share were in principle agreeable to pay an amount of Rs. 250/- per sq ft as project completion costs. They estimated the total outflow at Rs 7.58 crores. A valuer had been appointed to recommend contractors. Five contractors had been identified. Tentative decisions have been taken. They requested time to revert with details.

11. Even at that time Mr Engineer who appears for the Lakkanna family gave me a separate list of that agreements that Mantri had executed with various flat purchasers. I took that list on record. The remaining details are not important at this stage. I made some provisions for registration of the agreements.

12. Returning to the question of entitlement and tenability, paragraph 25 of that very order of 16th June 2016 reads thus:

"25. Mr. Madon for Mantri and Mr. Engineer for Mrs. Lakkanna point out that the Development Agreement contains a specific clause, one common in such transactions, where in consideration of doing the development, Mantri was allowed to sell some flats and

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retain the flat proceeds. The agreement has a specific provision that Mantri would not and could not claim any entitlement to the flats in specie. It seems to me clear that the nature of the agreement is one that must be respected. It is not possible at least in the Company jurisdiction to assume that a contractual provision should be bypassed when that was clearly the understanding between the parties. As part of its consideration for the development work Mantri may have been entitled to effect a sale and to retain sale proceeds, but that is in law not the same thing as acquiring ownership of the flat as an asset that it can carry on its books. Mr. Murarka insists that if Mantri was entitled to 'sell' a flat, then that flat was its asset. I disagree. These agreements are not uncommon. All that they provide is that instead of the land owner paying the developer and then recouping that payment from a flat sale, or, alternatively, selling a flat and passing on the proceeds to the developer, as part of the consideration for the development agreement, and for doing the development work, the developer gains an entitlement to the sale proceeds of a defined number of flats. The cash or proceeds that Mantri received from these sale proceeds are undoubtedly its assets and are undoubtedly part of the asset pool for the benefit of all creditors; but the flats themselves cannot be assets. There is a fatal logical fallacy or inconsistency to this argument from Mr. Murarka and Mr. Agarwal. For, it necessarily implies that the flat sale proceeds and the flats themselves are both assets of the Company and must be brought into the pool. That simply cannot be. Since it is not in dispute that Mantri sold the flats in question, it is the sale proceeds of those flats that are in the asset pool, not the flats themselves."

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13. This was the first of the series of orders. There then followed another order of 13th July 2016. In this, I noted that there had been substantial progress. Paragraph 7 of that order noted that by that date, on 29th June 2016 notice had been given to those who had till then been represented. The present Applicants represented by Mr Bakore are among those to whom such a notice was given. A copy of this notice is at page 46. Mr Bakore complains that it is unclear on whose behalf this notice is sent. I should have thought the answer was very simple: his clients could have replied, asked or picked up the phone and called the Advocate who sent the notice. The notice specifically referred to these matters and orders, and mentioned the next hearing date. This argument of insufficient notice is too little too late.

14. Paragraphs 7 and 8 of the order dated 13th July 2017 reads thus:

"7. As noted in paragraph 15 of the previous order, there were then 13 flat purchasers who were unrepresented. Mr. Engineer for Mrs. Shanta Lakkanna says that his attorneys have given notice to all thirteen. One notice to one Mr. Dipak Chavan has been returned undelivered. Of the remaining 12, nine have joined the Flat Purchasers Association, the total membership strength of which stands at 199. Of the remaining three, two are purchasers from the Lakkanna family and they say that their interests will be addressed by that family. The third, one Mr. Vikas Ravat, has apparently filed some proceedings before the Consumer Forum in New Delhi and does not wish to join the Association. For Mr. Ravat, the result may be something that he has not intended, but that cannot helped. If this construction

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proceeds, and as we shall see, there is no reason why it should not, the flat that Mr. Ravat purchased will also benefit. But this cannot mean that Mr. Ravat can get possession of a flat without contributing anything at all for the completion of the construction of the building in which it is located. Obviously, this necessarily means that if Association or the landowner or both contribute to the completion of the building, Mr. Rawat's pro rata contribution will be continue to form a charge on the flat in favour of those who paid his share of the construction completion cost, and till such time as he makes payment of this pro rata share, he cannot be given possession.

8. This will indeed be true of any flat purchasers who choose to stand outside the present arrangement. All purchasers who have not joined the Association or are not within the land owners' quota, therefore, have a very simple choice. They can join the Association, make the pro rata payments and get a possession of flats on completion of construction, or they can chose to remain outside. If they choose the latter, they are put to notice that until they make payment of their pro rata contribution to the construction completion cost, they will not get possession of the flats that they have booked."

(Emphasis added)

15. Now Mr Bakore contends that since his clients are purchasers from Lakkana family and since this order says: "their interest will be addressed by that family", therefore, they need do nothing. They do not have to contribute. They, therefore, stand apart because they did

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not come before the Court and they are not covered by this order.

The argument overlooks paragraph 8.

16. There are two further orders. The next in sequence is the order dated 10th August 2016. For some reason, it seems to have been left out of the present Company Applications, but I will let that pass. Here again the question of a contribution from all members was taken up in Clause 5. Here again I revisited the question of what was to happen if any member did not pay. Paragraph 8 of that order reads thus:

"8. There is a question of what is to happen if any member of the association does not pay his or her pro- rata contribution or does not pay the balance consideration due against his or her flat. After some discussion in Court, Ms. Lakanna confirms that if there is such a default, it is the landowner's family that will make up the shortfall. The landowner's family will then be entitled to recover that amount from the person who booked the flat. The land owner will be entitled to retain possession of the flat and not to deliver the possession till payment of all arrears is made in full. If that payment is not made within a reasonable time (to be decided later) of the possession being ready, the land owner should be set at liberty if permissible in law to move against the flat for recovery of dues and to remit the initial amount paid to the person who had first booked the flat. This is of course subject to such course of action being found permissible in law."

(Emphasis added)

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17. The next order was of 22nd September 2016 and here I addressed the question of costs for additional works. The previous arrangements were left undisturbed.

18. What Mr Bakore says today is that his clients were not part of the Association and, therefore, what is said in paragraph 8 of the order of 10th August 2016 does not and cannot apply to them. He also says that his clients cannot be treated on par with the purchasers from the Mantri share. His clients have no concern with Mantri at all. Their agreements are with the Lakkanna family. they do not even mention the Mantri Group. If the Lakkannas had to spend more in completing the flat, then that is entirely to their account, to their risk and is their sole concern, and not any concern of these two Applicants. The argument overlooks the fact that the comparison between Mr Bakore's clients and purchasers from the Mantri quota is not only inaccurate but actually odious because it seeks to treat unequals equally. Mr Bakore's clients are equally treated with other purchasers from the Lakkanna family, and there is nothing to distinguish them from those who have registered agreements with Mrs Lakkanna and have in fact contributed the additional amount per square foot. Why should Mr Bakore's clients be entitled to any separate, preferential or different treatment? He submits that the answer is one of principle, but what principle I am unable to grasp. It seems to be more abundantly clear that what Mr Bakore's clients' case is not one based on any principle, however high-minded, but rather on the complete absence of it. The long and the short of this would be that Mr Bakore's clients would get a flat subsidized in its completion by other flat purchasers and the land owners. This project would not be complete but for the payment of

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Rs. 250/- per sq ft by all. If the land owner is to pay an additional Rs. 250/- per sq ft, Mr Bakore's client benefit. They do not suffer in any way. By asking them to pay the additional Rs. 250/- per sq ft, everybody is placed at the same equal level and none is preferred to any other.

19. In any case, the question of belonging or not belonging to an Association is taken care of by an order dated 17th September 2016, when I accepted draft minutes of order with some modifications and extended the payment in Clause 3 to all flat purchasers. There was no method to distinguish one flat purchaser from the other. Contrary to what Mr Bakore's clients say or believe, all were and always have been, treated exactly equally.

20. The next argument is that Mrs Lakkanna has 40 unsold flats, and that she will now sell these at market price and "profiteer". This is an argument that only needs to be stated to be rejected. For, the fact of the matter is that the Lakkanna family will not get completion of their 40 flats to be able to put them to sale unless they too pay Rs 250/- per sq ft. In short, of the 213 flats in the building, 210 are paying at Rs. 250/- per sq ft. One is a person who has not responded at all. The other two are Mr Bakore's clients. What this means is that the other 210 persons must pro rata bear the costs of completion of these two Applicants' flats.

21. I can think of nothing more inequitable or unfair than this.

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22. There is then an argument that this demand is being "foisted" on the Applicants. They did not consent to this arrangement. They cannot expected to be bound by these orders of the Court. The submission is misconceived and misleading. These two Applicants had notice. I am not prepared to accept that the notice was inadequate. The notice made its purpose clear and plain. At no point did these Applicants write back to the Advocates who sent the notice to ask for a clarification on whose behalf it was sent. They did not attend Court though they knew that the proceedings involved this project and orders passed being passed and arrangements made in respect of this project. The Applicants sat by and waited. They waited for others to spend, including on the common areas of the building, and for completion of the very flats they had booked. But for the contribution of the others they would even now not be in a position to obtain possession of these two flats. It is only now that as the project nears completion, and as the arrangement arrived with enormous difficulty and the quite unusual cooperation between various stakeholders, sees fruition that these Applicants come forward and raise these grievances.

23. And what all this about really? The flat in question in Company Application No. 269 of 2017 is Flat No. 404 in "A" Wing. This is almost ready for occupation. The purchase price of the flat is Rs. 51,27,256/-. The area is 1,164.16 square feet. The demand notice asks for a contribution at Rs. 250/- per sq ft and this comes out to about Rs. 2,91,000/-. The same is substantially true of the flat in the other Company Application. In the context of the value of the flats, and in the context of the cost of litigation, this is surely too insignificant an amount, and this is, perhaps, leaving aside even

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other questions of equity and fairness, all of which are against the Applicants, is a trifle, and an inequitable trifle.

24. But though the amount involved is small, the consequences of accepting the arguments by the Applicants are possibly catastrophic. Every flat purchaser would back out. The project, so close to the finish line, would be stuck, and stuck virtually in perpetuity. None would benefit. All would come to harm. The balance of convenience and the balancing of equities does not favour these Applicants. This is why I see the Applications are mischievous and devious. They are self-serving, narrow-minded and unfair. They are in their conception inequitable. They imperil every other flat purchasers' interest, and they do so in the pursuit of a wholly untenable and baseless 'principle'. So far all have strived, and spent, for a shared, common good. That entire endeavour -- one that I can only describe as heroic from the other flat purchasers and the land owners, being of a stripe one is not often privileged to see in Court

-- today stands threatened by these two Applicants.

25. One of the consequences of this application is being felt on the project even now. There are a large number of flat purchasers who have decided to wait for the outcome of these Company applications. I will leave it to the Respondents to communicate a copy of this order to all those persons, making it abundantly clear that these arguments of not being required to contribute are not going to be accepted.

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26. Mr Engineer has put a proposal to Mr Bakore. It is for Mr Bakore to decide whether his clients' interests are better served by considering that proposal and negotiating it or continuing this completely fruitless and expensive battle, one in which I do not believe that his clients have anything resembling a vestige of a case.

27. The Company Applications are dismissed. In the facts of the case, and resisting all temptations, there will be no order as to costs.

28. Mr Bakore asks for stay of this order. The Company Applications are dismissed. There is nothing to stay. He asks that the demand notice be 'stayed'. That cannot be done, for obvious reasons. The request is denied.

(G. S. PATEL, J.)

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