Bombay High Court

Kedar Darshan Co-Operative ... vs Messrs Nooman Developers Thr. Its ... on 5 June, 2023

Bench: N. J. Jamadar

2023:BHC-AS:14630

                                                                             6- A.O. 234-23+.DOC



                                                                                Sayali Upasani



                    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                 CIVIL APPELLATE JURISDICTION


                           APPEAL FROM ORDER NO.- 234 OF 2023
                                                   WITH
                          INTERIM APPLICATION NO. 3262 OF 2023


              Kedar Darshan Co-Operative Housing                      ...Appellant/Org.
              Society Ltd                                                        Defendant

                               Vs.
              Messrs Nooman Developers                                    ...Respondent/
                                                                             Org. Plaintiff


             Mr. Karl Tamboly, a/w. Ms. Tanya Mehta, Ms. Vaibhavi
             Bhalerao and Ms. Sayali Diwadkar i/b DSK Legal, for
             Appellant.
             Mr. Vishal Kanade a/w Mr. S.P. Trivedi, Ms. Tanaya
             Tendulkar,         Mr.      Sandeep    Hirvadekar      i/b      Bharat         T.
             Mahubarwala, for the Respondent.


                                                          CORAM:- N. J. JAMADAR, J.

RESERVED ON:- 20th APRIL, 2023 PRONOUNCED ON:- 5th JUNE, 2023

6- A.O. 234-23+.DOC

ORDER:-

1) This Appeal is directed against an order dated 4 th

February, 2023, passed by the learned Judge, City Civil Court

in Notice of Motion No.1936 of 2022 in Suit No. 6889 of 2003,

whereby the Notice of Motion came to be partly allowed

restraining the defendants-appellants from creating third party

rights, title or interest or permitting any third party under any

Development Agreement, Assignment Agreement and Sale

Agreement under any rights doing any construction activity on

the suit plot and also from interfering with the plaintiffs rights

in the suit emanating from the agreement dated 7 th July, 1993,

supplemental agreement dated 3rd December, 1996 and the

consent terms dated 20th October, 2000 filed in Suit No.4262 of

2000.

2) For the sake of the convenience and clarity, the parties are

hereinafter referred to in the capacity in which they are arrayed

before the City Civil Court.

3) Though the litigation has chequered history peppered with

sporadic settlements, the background facts can be stated in

brief as under:-

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(a) A building consisting of 40 tenements was situated at a

plot of land bearing CTS No. 229 and 267, admeasuring 1392.12

sq. meters, Nehru Nagar Housing board colony, Kurla (E),

Bombay. It was allotted to the defendant's Society by MHADA.

On 7th July, 1993, the defendant society entered into a

development agreement with the plaintiff for redevelopment of

the suit property. A supplemental agreement dated 3 rd

December, 1996 came to be executed between the plaintiff and

defendant. It was the claim of the plaintiff that the defendant

society and its members committed breach in performance of

the obligations under the development and supplemental

agreement. Proceedings commenced.

(b) In Suit No. 4262 of 2000, instituted in this Court, the

plaintiff asserted that the defendant society failed to pay the

construction costs as agreed under the development agreement

and supplemental agreement and instead threatened to forcibly

take possession of the flats which were entrusted to the

plaintiff. In the said suit, pursuant to the settlement arrived at

between the plaintiff and defendant, a consent order was passed

on 20th October, 2000. In the consent order, the defendant

society confirmed to have executed the development agreement

6- A.O. 234-23+.DOC

dated 7th July, 1993 and supplemental agreement dated 3 rd

December, 1996 and agreed to allow the plaintiff to carry out

the construction work and also accept the prospective

purchasers of the flats sold by the plaintiffs as the members of

the defendant society.

October, 2000, in Suit No. 4262 of 2000 and having agreed to

pay a sum of Rs.2,00,000/-, per member towards construction

cost the defendant committed default in payment of the

construction cost. Defendant also threatened to dispossess the

plaintiff and obtain the possession of the flats forcibly. The

plaintiff was thus constrained to institute Suit No.5732 of 2001

before the City Civil Court.

(d) Again a settlement was arrived at between the plaintiff and

defendant. Consent terms were executed on 3 rd December, 2001.

Defendant agreed not to disturb the possession of the plaintiff

over the flats, which were delivered on account of the failure on

the part of the defendant to make the payment, and to

surrender the rights of those members in favour of the plaintiff.

(e) Defendant again failed and neglected to perform the

contractual obligations and the undertakings given in the

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consent terms. Plaintiff was forced to institute suit No. 2498 of

2002. In the said suit Minutes of Order were passed on 16 th

May, 2002. The defendant conceded to an order that the

defendant No. 1 and its members be restrained form interfering

with the construction activity to be carried out by the plaintiff

at the suit property by purchasing F.S.I. from MHADA.

(g) Eventually, the plaintiff was constrained to institute the

instant suit with the allegations that the defendant and its

members were in arrears to the tune of Rs.10,30,000/-. The

plaintiff thus prayed for a decree of Specific Performance of the

consent terms dated 20th October, 2000, development agreement

dated 7th July, 1993 and supplemental agreement dated 3 rd

October, 1996 and, in the alternative, a money decree for the

sum of Rs.3,00,000/-, by way of damages and a sum of

Rs.10,30,000/-, towards the balance construction cost along

with interest at the rate of 18% p.a. from 21 st February, 2001 till

payment and/or realisation.

4) During the pendecny of the said suit, the plaintiff took out

the instant Notice of Motion, on 2nd May, 2022, with the

assertion that though the defendant failed to file a written

statement yet, during the pendency of the suit, the defendant

6- A.O. 234-23+.DOC

has entered into a development agreement with some

developers, who have demolished the suit building consisting of

40 flats. Upon being informed by the Secretary of the defendant,

the plaintiff claimed to have visited the suit property and found

that the building had been demolished and further development

was being carried out. The plaintiff claimed to have registered

the lis with Registrar of Assurances and yet instruments were

executed by the defendant and new developer.

5) Hence, to protect the subject matter of the suit till the

decision of the suit, the plaintiff took out the instant Notice of

Motion seeking interim reliefs in the nature of appointment of

the Court Receiver in respect of the suit property and temporary

injunction restraining the defendant from creating third party

interest therein of whatsoever nature.

6) The defendant resisted the Notice of Motion by filing an

affidavit-in-reply. Entitlement of the plaintiff to seek Specific

Performance of the development agreement dated 7 th July, 1993

and supplemental agreement dated 3 rd December, 1996 was put

in contest on the ground that those agreements were for

execution of construction contract only and did not create any

interest in the suit property. The delay in seeking the interim

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reliefs, in view of the subsequent developments, was stated to be

fatal to the tenability of the Notice of Motion. In any event,

according to the defendant, the suit represented a money claim

and the plaintiff was not entitled to seek the injunctive reliefs as

well as appointment of the Court Receiver.

7) By the impugned order, the learned Judge was persuaded

to allow the Notice of Motion holding inter alia, that the

development agreement dated 7th July, 1993 was not a works

contract simplicitor. The development agreement, coupled with

the supplemental agreement, incorporated a contract, which

could be specifically enforced and the plaintiff has been

consistently pursuing the relief of specific performance as well.

Therefore, the suit can not be said to be for recovery of money

simplicitor. Opining that, having entered into the consent terms

with the plaintiff, the defendant consciously entered into

development agreement with a third party and thereby infringed

the contractual obligations, the learned Judge considered it

necessary to restrain the defendant from creating third party

rights in the suit property. Resultantly, the Notice of Motion

came to be partly allowed whilst rejecting the prayer for

appointment of the Court Receiver and a direction for discovery.

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8) Being aggrieved the defendant is in Appeal.

9) I have heard Mr. Karl Tomboly, the learned Counsel for the

appellant-defendant and Mr. Vishal Kanade, the learned

Counsel for the respondent-plaintiff. With the assistance of the

learned Counsel for the parties, I have perused the pleadings,

orders passed in the proceedings hitherto and the material on

record.

10) Mr. Tamboly urged with a degree of vehemence that

impugned order singularly lacks consideration on the aspect of

the balance of convenience and irreparable loss. Though the

plaintiff failed to make out a prima facie case also, according to

Mr. Tamboly, even if it is assumed that the plaintiff succeeded

in making out a prima facie case, yet the defendant could not

have been restrained by order of temporary injunction without

determining the aspects of balance of convenience and

irreparable loss. On this count alone, Mr. Tamboly urged, the

impugned order deserves to be interfered with.

11) Laying emphasis on the fact that the suit came to be

instituted in the year 2003 and the Notice of Motion came to be

moved in the year 2022, Mr. Tamboly would urge this time lag

dis-entitles the plaintiff from claiming any equitable relief. The

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learned Judge, City Civil Court did not adequately consider

these aspects of the matter.

12) Mr. Tamboly further submitted that the learned Judge City

Civil Court recorded an erroneous finding that the suit was also

for specific performance of contract in the face of an order

passed by a learned Single Judge of this Court in Notice of

Motion No. 2159 of 2003 in Suit No. 2328 of 2003, wherein a

categorical statement was made on behalf of the plaintiff that

the claim was restricted to payment of money under the consent

terms dated 20th October, 2000, came to be recorded. Mr.

Tamboly strenuously submitted that the learned Judge, City

Civil Court was not at all justified in restraining the defendant

from creating third party rights, which has severe ramifications

not only qua the defendant but the third parties. It was

submitted that after demolition of the existing structure, the

new construction has reached an advanced stage. Grant of

injunction, at this stage, has the effect stalling the entire project

for recovery of a sum of Rs.10,30,000/- i.e. the Suit claim.

13) Mr. Kanade, the learned Counsel for the plaintiff joined

the issue by stoutly submitting that the learned Judge, City

Civil Court has recorded a justifiable finding that instant suit is

6- A.O. 234-23+.DOC

also for a decree for Specific Performance of contract. Taking the

Court through the recitals of the development agreement and

the supplemental agreement as well as the consent orders, Mr.

Kanade would submit that the agreement in question can not be

said to be a mere construction contract. On the contrary, those

agreements, coupled with the consent order, according to Mr.

Kanade, unmistakably indicate that interest had been created in

the suit land in favour of the plaintiff. The act of defendant

society in surreptitiously demolishing the building, which stood

over the suit property, and entering into a development

agreement with a new developer per se reflects the oblique

motive. In such circumstances, the learned Judge, City Civil

Court was justified in restraining the defendant from creating

further third party rights in the suit property, lest the plaintiff

would be left in the lurch, urged Mr. Kanade.

14) Mr. Kanade would further urge that having regard to the

history of litigation between the parties and the fact that the

suit is ripe for hearing, it may be appropriate to expedite the

hearing of the suit instead of interfering with a discretionary

order.

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15) To start with, it may be apposite to note the circumstances

in which the jural relationship between the plaintiff-defendant

emerged. The suit property was in a dilapidated condition.

Defendant floated tender. The bid of the plaintiff to construct

the building to house 40 members of the defendant society came

to be accepted, leading to execution of the development

agreement dated 7th July, 1993. The primary agreement was to

construct the building to be paid for by the defendant at the rate

of 375 per square. It was specifically agreed by and between the

parties that the plaintiff would construct the building for and on

behalf of the defendant after dismantling then existing old

dilapidated building as per the building plan prepared by the

Society's Architect M/s. Ranjit Naik and Associates. Certain

provisions for sale of the area, which might become available,

after accommodating 40 tenants/members were also made. In

the event of sale of such additional area, which might become

available, the society was to get credit at the specified rates. Yet,

the development agreement was predominantly a contract to

build.

16) Supplemental agreement dated 3rd December, 1996, came

to be executed between the parties whereby and whereunder the

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plaintiff was authorised to accept surrenders from those

members who had no money to pay to the developer for

construction of their tenement. The defendant also agreed to

accept the incoming members to whom the plaintiff would

transfer the surrendered tenement, as members of the

defendant society without charging transfer fees. The plaintiff

was granted right to sale balance un-utilised F.S.I. and sale

newly constructed flats to the prospective purchasers. The

defendant agreed to pay for the construction at the rate of

Rs.511/- per square feat instead of Rs.375/-as originally agreed.

17) In the wake of the controversy, noted above, the plaintiff

instituted Suit No. 4268 of 2000 and consent terms were

executed on 20th October, 2000. Under the consent terms, the

defendant acknowledged that the agreement for development

dated 7th July, 1993, supplemental agreement dated 3 rd

December, 1996 and the power of attorney dated 30 th June,

1997 executed by the defendant in favour of the plaintiff were

valid, subsisting and binding. Defendant agreed to allow the

plaintiff to carry out the reconstruction work as per the terms of

the said agreement. Defendant agreed to make payment of

balance consideration within a period of four months therefrom.

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On account of the non-compliance of the said consent terms,

two more suits came to be instituted.

18) In substance, what emerges from the material on record

is that, by the year 2000, the plaintiff completed the entire

construction work and claimed to have performed its part of

contract. On account of the failure on the part of the defendant

to comply with the obligations under the agreements and

consent terms, the plaintiff was constrained to institute instant

Suit No. 2328 of 2003, inter alia, seeking a sum of

Rs.10,30,000/-, towards balance construction cost and

Rs.3,00,000/- towards damages and interest thereon at the rate

of 18% p.a. Undoubtedly, the plaintiff also prayed for a direction

against the defendant to specifically perform the consent terms

dated 20th October, 2000, development agreement dated 7 th July,

1993 and supplemental agreement dated 3rd December, 1996.

19) The pivotal question that arose for consideration was

whether the suit still retained the character of a suit for the

specific performance of the contract contained in development

agreement dated 7th July, 1993 and supplemental agreement

dated 3rd December, 1996. The learned Judge, City Civil Court

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was of the view that the suit was also for Specific Performance

of the said contract.

20) The aforesaid question assumes significance. If the

contract is construed as a contract to build simplicitor,

ordinarily such a contract is not specifically enforceable. On the

contrary, if the contract envisages creation of interest in the

property to be developed, the Court would be justified in passing

a decree for specific performance, if certain conditions are

fulfilled.

21) A profitable reference, in this context, can be made to a

judgment of the Supreme Court in the case of Sushil Kumar

Agarwal Vs. Meenakshi Sadhu and Others1, wherein the

Supreme Court considered the question as to whether the

Section 14(3) (c) of the Specific Relief Act, 1963, constitutes a

bar to a suit by a developer for specific performance of a

development agreement between the developer and the owner of

the property. After adverting to the provisions contained in

Section 14 of the Act, 1963 and the judgments which dealt with

the enforceability of a development agreement, the Supreme

Court expounded the various facets of development agreement,

the conditions in which the development agreement may become

1 (2019) 2 SCC 241

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enforceable and the principles which govern the exercise of

discretion in granting the specific performance of development

agreement, as under:

18. When a pure construction contact is entered into, the contractor has no interest in either the land or the construction which is carried out. But in various other categories of development agreements, the developer may have acquired a valuable right either in the property or in the constructed area. The terms of the agreement are crucial in determining whether any interest has been created in the land or in respect of rights in the land in favour of the developer and if so, the nature and extent of the rights.

.............

24. Various High Courts have interpreted the requirements under Section 14(3)(c) of the Act and opined on the maintainability of a suit by the developer for Specific Performance against the owner of the property for a breach in the conditions of the development agreement. A common thread that runs through the analysis in decided cases is the following:

24.1. The courts do not normally order Specific Performance of a contract to build or repair. But this rule is subject to important exceptions, and a decree for Specific Performance of a contract to build will be made only upon meeting the requirements under law;

24.2. The discretion to grant Specific Performance is not arbitrary or capricious but judicious; it is to be exercised on settled principles; the conduct of the plaintiff, such as delay, acquiescence, breach or some other circumstances outside the contract, may render it inequitable to enforce it;

24.3. In order to determine the exact nature of the agreement signed between the parties, the intent of the parties has to be construed by reading the agreement as a whole in order to determine whether it is an

6- A.O. 234-23+.DOC

agreement simpliciter for construction or an agreement that also creates an interest for the builder in the property. Where under a development agreement, the developer has an interest in land, it would be difficult to hold that such an agreement is not capable of being specifically enforced; and

24.4. A decree for Specific Performance of a contract to build will be made if the following conditions are fulfilled:

24.4.1. the work of construction should be described in the contract in a sufficiently precise manner in order for the court to determine the exact nature of the building or work;

24.4.2. the plaintiff must have a substantial interest in the performance of the contract and the interest should be of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and

24.4.3. the defendant should have, by virtue of the agreement, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.......... "

(emphasis supplied)

22) Mr. Kanade would urge that in the case at hand not only

the agreements provide for the right of the plaintiff to construct

additional floors and sale the units but the defendant has

incurred a decretal obligation. Attention of the Court was invited

to consent order dated 16th May, 2002, passed in S.C. Suit No.

2498 of 2002. In the said suit, on the basis of the Minutes of

Order it was recorded that the defendants have no objection if

6- A.O. 234-23+.DOC

prayer clause "a" of the said Suit was granted in favour of the

plaintiff. The suit thus came to be decreed in terms of the prayer

Clause "a". It was submitted that in view of the aforesaid

consent decree in Suit No. 2498 of 2002, it can not be disputed

that interest was created in the suit property.

23) Mr. Tamboly countered by submitting that under the said

consent decree, the defendant had agreed not to restrain the

plaintiff from utilising the F.S.I., at the suit property, which the

plaintiff may acquire. However, the plaintiff never acquired

additional F.S.I. nor performed the rest of the contractual

obligations, and, therefore, the defendant had terminated the

contract by notice dated 18th June, 2002.

24) Prayer Clause "a" in Suit No. 2498 of 2002, reads as

under:-

"a) For permanent injunction order restraining the defendants, their servants or agents or any one claiming through them from obstructing the plaintiff from using the F.S.I. on the suit property Viz. Building No. 45, situated on plot of land bearing S. No. 229 and 267, C.T.S. No. 12(part) at Nehru Nagar Housing Board Colony, Kurla (E) Mumbai-400 024 from the adjoining plot of land belonging to MHADA authorities on his complying with requisite conditions of the MHADA Authorities...."

25) Evidently, the suit was instituted to restrain the defendant

from causing obstruction to the plaintiff from using F.S.I. on the

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suit property from adjoining plot of land belonging to MHADA

Authorities. It clearly implied that the plaintiff had to first

acquire additional F.S.I./T.D.R. and then load the same on the

suit property.

26) At this juncture, the fact that by notice dated 18 th June,

2002, the defendant terminated the development agreement and

supplemental agreement assumes importance. Ordinarily, a suit

for Specific Performance without seeking a declaration that the

termination of the contract is illegal and bad in law, does not

deserve to be entertained. Since the contract can not be said to

subsist, in view of the termination, a declaration that contract is

still subsisting and binding on the parties is necessarily

required to be sought, if a prayer for Specific Performance is to

be sustained. In the instant suit, there is no prayer for a

declaration that the termination is illegal and bad in law and

the suit agreements still subsist.

27) What was the nature of the suit claim, in the

contemplation of the plaintiff himself, also assumes significance.

In Notice of Motion No. 2159 of 2003 in the instant Suit, while

the suit was still on the file of this Court on Original Side, the

plaintiff had purportedly moved for attachment before judgment.

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On 8th December, 2005, this Court was persuaded to dismiss

the said Motion. The order reads as under-

"1. The learned counsel for the plaintiff states that the only relief which the plaintiff claims is payment of money under the Consent Terms dated 20.10.2000. No case for attachment before judgement is made out. It is submitted that under the Consent Terms, the plaintiff is entitled to the same. That is a money claim which must be decided at the final hearing of the suit.

2. The Notice of Motion is, accordingly, dismissed. This order will not prejudice the plaintiff's rights to apply for execution of the Consent Terms, in accordance with law...."

28) It thus appears that, even in the contemplation of the

plaintiff, the suit was primarily for recovery of the amount

which under the terms of the contract and the consent terms

dated 20th October, 2002, the defendant and its members were

enjoined to pay to the plaintiff. The fact that there was a

stipulation in the contract that in future the plaintiff would

acquire additional development rights and construct additional

floors was clearly in the nature of an executory contract. Prima

facie such a stipulation can not operate in infinity.

29) At this stage, the time lag comes into play. The jural

relationship between the plaintiff and defendant started when

the original building was in a dilapidated state. After another 20

years of construction of the building by plaintiff, the building

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again warranted re-development (in the contemplation of the

defendant society). Admittedly, the building erected by the

plaintiff has since been demolished. A development agreement

with another developer has been executed. A multi-story

structure has already been erected.

30) It is in the context of the aforesaid developments, the

prayer for grant of interim reliefs deserves to be appreciated. The

parameters for grant of temporary injunction are well settled. In

the case of Seema Arshad Zaheer and Others Vs. Municipal

Corporation of Greater Mumbai and Others 2, the essential

requirements to be satisfied by the plaintiff for grant of

temporary injunction were postulated by the Supreme Court as

under:-

"(i) Existence of a prima facie case as pleaded, necessitating protection of plaintiff's rights by issue of a temporary injunction;

(ii) When the need for protection of plaintiff's rights is compared with or weighed against the need for protection of defendant's right or likely infringement of defendant's right, the balance of convenience tilting in favour of plaintiff; and

(iii) Clear possibility of irreparable injury being caused to plaintiff if the temporary injunction is not granted. In addition, temporary injunction being an equitable relief, the discretion to grant such relief will be exercised only when the plaintiff's conduct is free from blame and he approached the court with clean hands."

2 (2006) 5 SCC 282

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31) If the facts of the case are appraised on the aforesaid

touchstone, it would be difficult to draw an inference that the

plaintiff has succeeding in making out a prima facie case,

especially in the context of the nature of the suit claim. In any

event, the time of 20 years, which has elapsed, seems to have

taken a toll on the plaintiffs case.

32) A profitable reference in this context can be made to a

judgment of a learned Single Judge of this Court in the case of

Ambalal Maganlal Patel and Another Vs. Indumati Narayan

Mohile and Others3, wherein, in the facts of the case, the

learned Judge had observed as under:-

".... Interim reliefs such as those claimed in the present motion by the plaintiffs are basically in the discretion of the Court. Though discretion is expected to be exercised fairly and reasonably, this, in my judgment, is not a case for exercising the same in favour of the plaintiffs. Even assuming that the plaintiffs had initially, when the suit was filed, made out a case for interim relief, the same stood virtually destroyed by their utter silence all these long years. Third party rights have intervened. The old building has been demolished. A new construction has come up to third floor level....."

(emphasis supplied)

33) Reliance placed by Mr. Tamboly on a Division Bench

judgment of this Court in the case of Ferani Hotels Private

3 AIR 1990 Bombay 187

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Limited and Others Vs. Nusli Neville Wadia and Others 4 also

appears to be well founded. In the said case, the aspect of delay

in seeking the interim relief on the entitlement for interim relief

was adverted to by the Division Bench. It was observed that the

fact that the equities have intervened and third party rights

have been created and the work under the project was continue

must weigh with the Court in deciding to grant stay on

construction at the interim stage.

34) The aforesaid factor also bears upon the determination of

the balance of convenience. As noted above, the suit

predominantly represents a money claim. The building which

the plaintiff had constructed has already been demolished and

given way to a multi-storey structure housing far more units

than the tenements in the original building. Equities and third

party rights have incontrovertibly intervened. Restraint of the

nature ordered by the learned Judge City Civil Court, in the

circumstances of the case, would not balance the equities

between the parties.

35) I am, therefore, persuaded to hold that the learned Judge,

City Civil Court did not adequately advert to the parameters of

4 2013 (3) Bom.C.R.669

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balance of convenience and irreparable loss. The exercise of

discretion by the learned Judge thus deserves to be corrected.

36) Undoubtedly, the interest of the plaintiff also deserves to

be protected. Having regard to the nature of the suit claim, in

my view, restraining the defendant-appellant from alienating

and/or otherwise creating third party rights in three 2BHK flats

till the disposal of the suit would meet the exigency of the

situation and also equip the Court to work out the equities at

the stage of determination of the suit.

37) The Appeal thus deserves to be partly allowed.

38)     Hence, the following order.

                                        -:ORDER:-

                 (i)      The Appeal stands partly allowed.

                 (ii)     The Notice of Motion No. 1936 of 2022

stands dismissed, subject to the defendant and

the developer furnishing an undertaking, on an

affidavit, before the City Civil Court that they

would keep aside three 2BHK flats (to be

described with reference to number, area, floor

and wing, if any) and would not dispose of and/or

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alienate and otherwise create third party rights in

those three flats till the final decision of the suit.

(iii) The undertaking be filed within a period of

two weeks from today.

(iv) The impugned order shall continue to