Bombay High Court
Kapil Natwarlal Gor vs Nutan Realty on 6 May, 2024
Author: B. P. Colabawalla
Bench: B. P. Colabawalla
2024:BHC-OS:7580-DB
9.APPL.27933.2023.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPEAL (L) NO.27933 OF 2023
IN
ARBITRATION PETITION (L) NO.15173 OF 2023
WITH
INTERIM APPLICATION (L) NO.34406 OF 2023
IN
ARBITRATION APPEAL (L) NO.27993 OF 2023
Kapil Natwarlal Gor & Anr. ...Appellants
Versus
M/s. Nutan Realty & Ors. ...Respondents
Mr. Nitin Thakkar, Senior Counsel with Rubin Vakil, Sandip
Vimadalal, Heena T, Satchit Gor, Shyam Singh & Ankita
Kakakdhond i/b. Vimadalal & Co., Advocates for Appellants.
Mr. Sarosh Bharucha with Shrey Faterpekar & Jay Vakil i/b.
Jay Vakil, Advocates for Respondent No.1.
Ms Nupur Jalaan with Kinjal Kakkad i/b. Jayesh Vyas,
Advocates for Respondent No.2.
Ms Kejali Mastakar, Advocate for Respondent Nos.3 and 4.
Mr. Aseem Naphade with Sneha Vani i/b. Sneha Vani Marjadi,
Advocates for Respondent Nos.5 to 10.
Mrs. Prajakta Wadke, Respondent No.5 is present in Court.
Mr. Pravin Wadke, Respondent No.6 is present in Court.
Mr. Ramdas Keshari, Respondent No.7 is present in Court.
Mr. Krishna Keshari, Respondent No.10 is present in Court.
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9.APPL.27933.2023.doc
CORAM : B. P. COLABAWALLA &
SOMASEKHAR SUNDARESAN, JJ.
DATE : MAY 06, 2024
P. C.
1. By the present Appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 ("the Act"), the Appellants have challenged the
Judgment and Order dated 1st September, 2023, passed by the Ld.
Single Judge in Arbitration Petition (L) No.15173 of 2023 filed by the
Appellants under Section 9 of the Act.
2. Appellants are the members of Respondent No. 2 Society and
are the owners of Flat No.15 on the 4 th floor in the building known as
'Jogeshwari Yashodhan Bhavan', which existing flat was a terrace flat
admeasuring 505 sq. ft. carpet area along with terrace of 500 sq. ft.
carpet area attached thereto.
3. Respondent No.2 Society granted development rights in
respect of the Society's property to Respondent No.1-Developer
under the Development Agreement dated 4th November, 2018
("DA"), recording the terms and conditions. Annexure C of the DA
sets out the Appellants' entitlement to permanent alternate
accommodation in lieu of the existing flat - as a flat admeasuring 595
sq. ft. carpet area along with 500 sq. ft. terrace. There is no challenge
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to the said DA by any party. There is a Supplementary Development
Agreement dated 29th October 2020 ("SDA") executed by
Respondent No. 2 Society with Respondent No.1-Developer to alter
the percentage of additional area to be given to each member from
18% to 13%. The SDA provides that the rest of the terms of the DA
continue to prevail.
4. In furtherance of the DA, Respondent No.1-Developer
executed a Permanent Alternate Accommodation Agreement dated
29th October 2020 ("PAAA") with the Appellants. The PAAA records
the entitlement of the Appellants to a flat of 595 sq. ft. carpet area
along with terrace. The flat number allotted to the Appellants is Flat
No. 901 on 9th floor in the new building. However, there is some
dispute between the Appellants and Respondent No.1-Developer
with regard to the reference to the area of the terrace in PAAA. Those
disputes need not detain this Court in the present Appeal. It is,
however, undisputed that there is a reference to a terrace as being
part of the Appellants' entitlement even under the PAAA. The PAAA
also records that the terms and conditions of the DA are binding on
the parties.
5. There is a negative covenant in the DA and the PAAA
whereby Respondent No.1-Developer is not entitled to handover
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possession of any premises from its free sale component till
possession is handed over to all members of their respective
entitlements under the DA and PAAA.
6. Respondent No.1-Developer called upon the members to
vacate their existing premises in November 2020. However, as plans
for 9th floor were not got sanctioned by Respondent No.1-Developer
at that time, the Appellants addressed a letter dated 25 th November,
2020, requesting Respondent No.1-Developer to show the plan for
the flat with terrace as per DA, before submitting the same for
approval to MCGM. This letter was signed by Respondent No.1 and
the Appellants in confirmation.
7. The Appellants claim that in January 2022, Respondent
No.1-Developer, without the approval or consent of the Appellants,
got approved plans for 9th floor where there was no flat of 595 sq. ft.
carpet area with attached terrace of 500 sq. ft. The January 2022
plan only had a terrace of 230 sq. ft., which was not attached to any
flat and further that the area earmarked as the terrace for the
Appellants in the brochure issued by Respondent No.1-Developer
was approved as a flat bearing no. 901 admeasuring 436.40 sq. ft.
carpet area.
8. In these circumstances, the Appellants filed Suit No. 239 of
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2022 before this Court seeking specific performance of the DA, the
SDA and the PAAA. The disputes in the said Suit were referred to
arbitration, by an Order dated 10th October, 2022.
9. The Appellants claim that, in May 2023, they became aware
that on 17th November 2022, without consent or knowledge of the
Appellants, the January 2022 plans were further revised. The
November 2022 plans did not have any terrace on the 9 th floor. The
Appellants also claim that they became aware that Respondent No. 1-
Developer had sold - (i) Flat No. 901 to Respondent No. 7 to
Respondent No. 10 under an Agreement for Sale dated 5 th April,
2023; and (ii) Flat No. 903 was sold to Respondent Nos.5 and 6
under an Agreement for Sale dated 10th January, 2023.
10. In these circumstances, pending the arbitral proceedings, on
6th June 2023, the Appellants filed the said Arbitration Petition
under Section 9 of the Act claiming reliefs including the relief of
injunction restraining Respondent No.1-Developer from handing
over possession of Flat Nos.901 and 903 to Respondent Nos.5 to 10.
11. It is an admitted position between the parties that OC for the
said building was received only on 27th June 2023. Between 14th June
2023 and 26th June 2023, the said Arbitration Petition was heard on
various dates, and at that time, only Respondent No.1 entered
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appearance whereas Respondent Nos.5 to 10 did not enter
appearance, despite service. From 28th June, 2023, onwards
Respondent Nos.5 to 10 appeared in the matter. This is evident from
the Orders passed in the said Arbitration Petition which are annexed
to Interim Application (L) No. 34406 of 2023 filed by the Appellants
in this Appeal.
12. On 1st July, 2023, the said Arbitration Petition was heard and
reserved for Orders. During the course of hearing, Respondent Nos.
5 to 10 made a statement that they were put in possession of Flat
Nos. 901 and 903 simultaneously with the execution of their
respective Agreements for Sale i.e. 10th January 2023 for Flat No.
903 and 5th April 2023 for Flat No. 901. This is recorded in
paragraph 14 of the impugned Order. Thereafter, Respondent Nos. 5
to 10 filed two Affidavits in Reply, on 10 th July 2023, stating that they
are in possession of their respective flats.
13. By the impugned Order, the Ld. Single Judge dismissed the
said Arbitration Petition. From perusal of the impugned Order, it
becomes evident that the order of the Ld. Single Judge is premised
on the correctness of the statement recorded on behalf of
Respondent Nos. 5 to 10 that possession of the said Flat Nos. 901 and
903 was already handed over to them. Apart therefrom, the Ld.
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Single Judge has also returned a finding that Respondent Nos.5 to 10
are bonafide purchasers. Further, in the impugned Order, while
accepting the change in the legal position post the amendment to
Section 21 of the Specific Relief Act 1963, the Ld. Single Judge has
returned a finding that in the event the Appellants succeed in their
claim for specific performance, it would be open to the Arbitrator to
award damages in proportion for the area of the terrace.
14. During the course of hearings in the present Appeal, this
Court has passed several orders directing Respondent Nos. 7 to 10 to
disclose on oath their Bank Account Statements as well as their
Income Tax Returns for the last 3 years. This Court has further
directed DCB Bank, the mortgagee of Flat No. 901 (now renumbered
902), to place on record the details relating to the grant of loan in
favour of Respondent No. 7 to 10, pursuant to which DCB Bank has
also filed its Affidavit dated 28th March, 2024.
15. On account of creation of third-party rights in respect of Flat
No. 901 (now renumbered as 902) and Flat No. 903, the Appellants
have submitted that they will be required to challenge the same in
order to get effective relief of specific performance of the DA and the
PAAA. However, there is no arbitration agreement between the
Appellants and Respondent Nos.5 to 10. Upon a query from this
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Court, Respondent Nos.5 to 10 have refused to join in the present
arbitral proceedings between the Appellants, Respondent No.1-
Developer and Respondent No.2 Society. The Appellants, therefore,
submit and in our opinion rightly so, that the Appellants will now
have to file a substantive proceeding seeking reliefs against
Respondent No.1, Respondent No.2 Society as well as Respondent
Nos. 5 to 10. In light of the above position, the Appellants submit
that pending the filing of the said substantive proceedings, the
Appellants are entitled to protective measures from this Court,
particularly in the facts and circumstances of the present case, to
ensure that no further rights are created and that no further steps are
taken to render the claims of the Appellants infructuous.
16. In this background, we have heard the Ld. Senior Counsel for
the Appellants and the Ld. Counsel representing Respondent No.1-
Developer and Respondent Nos. 5 to 10.
17. After we heard Mr. Thakkar, the learned Senior Counsel
appearing on behalf of the Appellants, Mr. Bharucha, the learned
Counsel appearing on behalf of Respondent No.1, and Mr.Naphade,
the learned Counsel appearing on behalf of Respondent Nos.5 to 10,
the parties have agreed that the arbitration proceedings initiated by
the Appellants pursuant to an order dated 10th October, 2022 passed
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under Section 8 of the Arbitration & Conciliation Act, 1996 would
stand terminated as Respondent Nos.5 to 10, and in whose favour
certain rights have been created, are not parties to the arbitration
agreement and they have refused to join in the arbitration
proceedings initiated by the Appellants. The parties have also agreed
that in light of the fact that the arbitration is to be terminated, the
impugned order in the above Appeal will be set aside and as a pro-
tem arrangement, the following order be passed without prejudice to
each of the parties rights and contentions.
18. In these circumstances, the impugned Order is accordingly
set aside. Now, as to the reliefs to be granted for the period upto the
filing of the substantive proceedings by the Appellants as set out
hereinabove, the Appellants, Respondent No.1-Developer and
Respondent Nos.5 to 10 have agreed to the following pro-tem
arrangement, without prejudice to their rights and contentions on
merits -
(i) The Court Receiver, High Court, Bombay stands
appointed as Receiver in respect of Flat No.901 (now
renumbered as 902);
(ii) The Court Receiver shall take symbolic possession of the
said flat forthwith;
(iii) Respondent Nos.7 to 10 are appointed as agents of the
Court Receiver in respect of Flat No.901 (now renumbered as
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902) without payment of royalty or security but on discharging
all outgoings, municipal taxes, in respect of the said flat. It is
made clear that the possession of the licensee of Respondent
Nos. 7 to 10 shall not be disturbed by the appointment of the
Court Receiver till its present term. If the license is terminated
earlier, then Respondent Nos.7 to 10 shall occupy Flat No.901
(now numbered as 902) on the same terms mentioned herein.
The Court Receiver shall execute the necessary agency
agreement with Respondent Nos. 7 to 10.
(iv) Respondent Nos.5 to 10 shall not sell, alienate,
encumber, transfer, part with possession or create any third-
party rights or in any other manner deal with the said Flats Nos.
901 (now numbered as 902) and 903 and shall pay all the
outgoings and municipal taxes in respect of the said flats.
19. The Appellants, Respondent No.1-Developer and Respondent
Nos.5 to 10 agree that the aforesaid arrangement shall be in force for
a period of 12 weeks from today. The Appellants shall be at liberty to
file such proceedings as may be advised and shall be at liberty to seek
such relief including extension of the aforesaid arrangement before
the appropriate Court. All rights and contentions of all parties are
specifically kept open.
20. Respondent No.1-Developer has further agreed and
undertaken that it shall not sell, transfer, encumber, create third
party rights, part with possession of or create any third-party interest
in relation to Flat No.901 and which is to be allotted to the
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Appellants along with Car Parking Space No.7. Respondent No.1-
Developer has further agreed and undertaken that it shall take all
steps to make an appropriate rectification of the mortgage
documents with DCB Bank to ensure that Flat No.901, and which is
to be allotted to the Appellants, is released from the mortgage, within
a period of four weeks from today. The said undertakings are
accepted by the Court.
21. Mr.Thakkar also pointed out that Respondent No.1-
Developer has not cleared the arrears owed to Respondent No.2
Society as well as the municipal taxes in respect of Flat No.901 and
Car Parking Space No.7 which was to be allotted to the Appellants.
22. Over and above this, Mr. Thakkar pointed out that in the
arbitration proceedings, Respondent No.1-Developer has agreed to
pay the arrears of rent atleast to the extent of Rs.27,775/- per month.
This has not been paid from 1 st January, 2023. He submitted that
Respondent No.1-Developer also be directed to pay these arrears as
expeditiously as possible. The payment of arrears of rent
@ Rs.27,775/- is passed on the basis of the admission made by
Respondent No.1-Developer in the arbitration proceedings. He
submitted that this will not disentitle the Appellants to claim further
rent on the basis that they are also entitled to rent for the terrace
portion.
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23. Mr. Bharucha, the learned Counsel appearing on behalf of
Respondent No.1-Developer submitted that he will handover vacant
and peaceful possession of Flat No.901 along with Car Parking Space
No.7 to the Appellants as soon as the rectification of the mortgage
documents with DCB Bank is effected. He submitted that thereafter
if the Appellants refuse to take possession, no further rental
compensation or Society's dues ought to be foisted on Respondent
No.1-Developer.
24. Considering the submissions made by Mr. Bharucha, we
direct that the arrears of rental compensation to be calculated
@ Rs.27,775/- outstanding from 1st January, 2023 till the handing
over of possession after rectification of the mortgage documents with
DCB Bank, shall be paid within a period of four weeks from today.
Similarly, all arrears in respect of Flat No.901 (along with Car
Parking Space No.7) owed to Respondent No.2 Society as well as
municipal taxes, if any, in respect of the said flat, shall be cleared by
Respondent No.1-Developer within a period of four weeks from
today. This liability also shall continue till possession is given to the
Appellants after rectification of the mortgage documents with DCB
Bank. Respondent No.1-Developer has agreed that he shall give
inspection of Flat No.901 to the Appellants within a period of one
week from today. The same is accepted.
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25. It is needless to add that possession will be taken by the
Appellants of Flat No.901 without prejudice to their rights and
contentions as it is their specific case under the DA, that they are not
only entitled to the flat admeasuring 595 sq. ft., but also an attached
terrace of 500 sq. ft.
26. It is also needless to clarify that the criminal proceedings
initiated by the Appellants against Respondent No.1-Developer as
well as Respondent No.2-Society and Respondent Nos.5 to 10 shall
be decided on its own merits and in accordance with law
uninfluenced by the present order.
27. The above Appeal is disposed of in the aforesaid terms.
However, there shall be no order as to costs.
28. In view of disposal of the above Appeal, nothing survives in
the Interim Applications pending therein and the same are also
disposed of accordingly.
29. This order will be digitally signed by the Private
Secretary/Personal Assistant of this Court. All concerned will act on
production by fax or email of a digitally signed copy of this order.
[SOMASEKHAR SUNDARESAN, J.] [B.P. COLABAWALLA, J.]
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