Bombay High Court
Pant Nagar Ashwamegh Co-Operative ... vs Kavya Construction Company(Formerly ... on 21 November, 2025
2025:BHC-OS:21759
CARBP-224-2024.doc
PURTI
Digitally
signed by
PURTI
PRASAD
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
PRASAD PARAB
PARAB Date:
2025.11.21
12:40:27
+0530 ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO. 224 OF 2024
Pant Nagar Ashwamegh Co-operative
Housing Society Limited Petitioner
Versus
Kavya Construction Company
(formerly known as Akruti Constructions
Company) Respondent
Mr. Ranjeev Carvalho a/w Mr. Rishab Murali and Ms.Sakshi
Agarwal i/b Mr. Bipin Joshi for the Petitioner.
Mr. Chetan Kapadia, Senior Advocate a/w Ms. Kausar Banatwala
and Ms. Sneha Mahawar i/b Mr. Tushar Goradia for the
Respondent.
CORAM: SOMASEKHAR SUNDARESAN, J.
RESERVED ON: MARCH 6, 2025
FURTHER RESERVED ON: OCTOBER 15, 2025
PRONOUNCED ON: NOVEMBER 21, 2025
JUDGEMENT :
Context and Factual Background:
1. This Petition is filed under Section 9 of the Arbitration and
Conciliation Act, 1996 ("the Act") essentially seeking, pending execution
of an Arbitral Award dated August 2, 2021 ("Arbitral Award" ), payment
of a sum of Rs.1.68 Crores of which Rs.1.43 Crores is towards arrears in
rent and brokerage along with interest @ 18% per annum; and a
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direction that the original documentation surrounding the subject
redevelopment be handed over to the Petitioner.
2. The Petitioner, Pant Nagar Ashwamegh Co.operative Housing
Society Limited ("Society" ) is a Housing Society which had appointed
the Respondent, Kavya Construction Company a partnership firm
("Developer") for redevelopment of its premises by executing a
Development Agreement dated January 17, 2007. The Society
comprises 30 members and occupants and is entitled to land
admeasuring 6600 sq. ft bearing Survey No. 236-A corresponding to
CTS No. 5681 (Part) namely Building No. 16 at Pant Nagar, Ghatkopar
("Property").
3. The Development Agreement was accompanied by a Power of
Attorney of the same date, i.e., January 17, 2017. The Intimation of
Disapproval ("IOD") for the project had been received on September 1,
2010. A few months thereafter, the parties executed a first Supplemental
Agreement on April 4, 2011. A second Supplemental Agreement
followed on December 6, 2013. All the aforesaid documents are
collectively referred to as "Development Documentation".
4. The second Supplemental Agreement cancelled the first
Supplemental Agreement and it was agreed that each member of the
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Society would get certain entitlements set out in more detail therein
including Permanent Alternate Accommodation with a new building
comprising a ground floor, stilt and 16 upper floors being created by the
redevelopment. The members of the Society were entitled to transit
rent of Rs.17,000/- per month with an escalation of 10% every 11
months. So also brokerage in the sum of Rs.17,000/- per month
escalated by 10% every 11 months was contracted. Each member was
entitled to a corpus sum of Rs.3,50,000/- of which Rs.2,65,000/- was
payable at the time of vacation and balance of Rs.85,000/- was payable
against handing over of the possession of the redeveloped premises. In
the event of certain enhanced FSI being available, a further sum towards
corpus were also contracted. The new building was meant to be
constructed and handed over within a period of 24 months with a grace
period of six months from the issuance of the Commencement
Certificate. The Developer was to provide a bank guarantee of Rs. 2
Crores which was meant to be released in stages. Certain enhanced
payments were also to be made by way of further rent and compensation
in the event of the deadline with an aggregate period of 30 months for
the delivery of the new flats being missed by the Developer.
5. The members of the Society vacated their premises and the
building was demolished in June 2014. The Commencement Certificate
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was however issued only by June 24, 2016. The deadline of 30 months
would therefore be computed from June 24, 2016.
6. Various breaches were alleged against the Developer. The
Society filed a Arbitration Petition (L) No.1495 of 2019 under Section 9
of the Act ("First Section 9 Petition"). The parties arrived at Consent
Terms dated February 18, 2020 ("Consent Terms"). The arrears were
to be cleared by the Developer with further compensation while the
deadline for completion was reset to March 2022. The Supplemental
Agreements were meant to be registered and building plans were meant
to be amended with two wings one for the rehabilitation component and
the other for free sale component.
7. Further breaches of the Consent Terms took place leading to
filing of Arbitration Petition (L) No.1949 of 2021 under Section 9 of the
Act ("Second Section 9 Petition") and Contempt Petition (L) No. 1590
of 2021 for breach of the Consent Terms. An order dated February 9,
2021 ("Section 9 Order" ) was passed under the Second Section 9
Petition, disposing it of by converting it into an Application under
Section 17 of the Act and recording that all contentions would be left
open to the Arbitrator with the amounts accepted by the Society until
then being treated as without-prejudice acceptance of payments. A
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schedule of payments until 2023 was recorded and agreed by the
parties.
8. The Learned Arbitral Tribunal treated the Section 9 Order as
an Order under Section 17 of the Act and kept the Section 17 Application
pending to monitor compliance. The Developer was directed to file
affidavit of disclosure with an update of the status of various approvals,
permissions, timelines etc. One such disclosure led to the discovery that
the property had been encumbered in favour of a non-banking finance
company, ECL Finance Limited ("ECL").
9. Eventually, the Learned Arbitral Tribunal passed the Arbitral
Award on August 2, 2021. The Award essentially was a direction to
comply with the Consent Terms dated February 18, 2020, with a full
disclosure of the status of the project being directed. That apart, deficit
stamp duty on the Supplemental Agreements and registration was
directed. The other documentation such as Permanent Alternate
Accommodation were also to be executed and registered and the arbitral
proceedings came to be disposed of. The Society's counter claim was
also disposed of as withdrawn.
10. Essentially, this would substantially constitute second round
of consent terms and the Arbitral Award is a Consent Award between
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the parties. Thereafter, the disputes again arose between the parties
with the Consent Award not being complied with. This led to the
Society passing a resolution at a Special General Body Meeting
terminating the Development Documentation on September 18, 2021.
On October 2, 2021, the Society issued a notice communicating the
termination of the Development Documentation ( "Termination
Notice"). Thereafter, the captioned Petition was filed on March 31,
2022.
11. On September 1, 2023 a Learned Single Judge of this Court
passed an order recording the undertaking by the Developer to pay a
sum of Rs.1.40 Crores without prejudice to the rights and contentions of
the parties, only to demonstrate bona fides of the Developer. On
October 9, 2023, the Society confirmed receipt of the said sum of
Rs.1.40 Crores. On November 22, 2023 the Maha RERA issued a
Registration Certificate for the project valid until December 21, 2024
subject to renewal.
12. On August 6, 2024 the Municipal Corporation of Greater
Mumbai, ("MCGM") issued a warrant of attachment on the Property on
account of outstanding property taxes being in arrears. By December 3,
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2024 the MCGM issued further demand notice threatening to sell the
Property by auction in the event of a default.
13. Pursuant to an order dated February 25, 2025 an affidavit
cum indemnity dated March 3, 2025 was filed by the Developer
undertaking that the project would be completed and the flats will be
handed over by March 2027. The Developer also assured that out of
borrowings from ECL, only an amount of Rs.21.50 Crores related to the
project and the Court was assured that such dispute would be settled
within a period of four months and that the Society would be
indemnified from any claim made by ECL on the property and that
rehabilitation component of the building would be handed over to the
members of the Society. The Developer also assured that the
compensation due to the members of the Society as well as Municipal
dues would be paid within specific deadlines.
14. On June 18, 2025 Beacon Trusteeship Limited ( "Beacon")
claiming to be a debenture trustee acting on behalf of ECL issued a
possession notice purporting to take symbolic possession of the
Property purportedly in exercise with clause under Section 13(4) of the
Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 ("the SARFAESI Act"). The claim against
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the Developer and its related parties was in the sum of Rs.429.04
Crores. Securitisation Application No.404 of 2025 challenging a notice
of symbolic possession and other measures under the SARFAESI Act
have been filed by the Society before the Debt Recovery Tribunal, and is
pending.
Contentions of the Parties:
15. The core grievance by the Society is that the Developer has not
completed the construction of the project in terms of the bar chart
submitted to the Learned Arbitral Tribunal in the run up to the Arbitral
Award. So also, there is allegedly non-compliance with the directions to
provide full disclosure as well, leaving the Society in the dark. Neither
have arrears been paid in full nor have the Permanent Alternate
Accommodation Agreement and the Supplemental Agreement been
registered. Additional FSI of 0.5 had been availed of, which also leads to
an entitlement of the Society to be paid a further sum of Rs.55 Lakhs.
16. The Developer's contention is that the Petition under Section
9 of the Act is not the avenue available in law to the Society since the
Arbitration Award has already been passed. The Developer would
contend that the Arbitral Award ought to be executed instead of filing an
Application under Section 9 of the Act. It is further contended that
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having accepted a sum of Rs.1.40 Crores in the course of hearing of this
Petition, the Society has given a go-by to its Termination Notice and in
fact has taken further steps in line with the Arbitral Award to further
redevelop the property, rather than moving away from the Arbitral
Award to terminate it. Construction of six floors is said to have been
completed, with nine floors remaining and total payment of Rs.25.78
Crores is said to have been made towards the project. The disclosures
are defended as having been valid in compliance with the Arbitral
Award and indeed it is claimed that it was the Society that refused to
furnish the No Objection Certificate to MHADA even while expecting
the Developer to pay premium to MHADA.
17. The Developer contends that he is ready and willing to make
payment to MHADA subject to the Society confirming the withdrawal of
the Termination Notice. It is further contended that the Developer is in
the midst of arriving at a settlement with ECL and the Petitioner's
concerns in relation to enforcement of security interest by ECL would
stand addressed and indemnified by the Developer.
Analysis and Findings:
18. I have heard Learned Advocates for the parties Mr. Ranjeev
Carvalho, Learned Advocate on behalf of the Society and Mr. Chetan
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Kapadia, Learned Advocate on behalf of the Developer at length. With
the assistance of Learned Advocates, I have examined the material on
record. Initially, the matter had been heard and reserved on March 6,
2025. Thereafter, considering the further time having passed by, the
matter was listed afresh on October 15, 2025 to get an update of any
subsequent development in the matter and to factor in the same.
19. At the threshold, it must be noted that this Petition is filed for
protective measures to secure the Arbitral Award, i.e. after the award
was passed, which essentially would need to entail that the stance of the
Society would need to be in furtherance of the Arbitral Award.
However, the post-award Section 9 Petition unequivocally records facts
and contentions that move in a diametrically opposite direction. While
the Arbitral Award entails completion of the redevelopment by the
Developer within specific deadlines, the intention to terminate the
Agreement would flow in the opposite direction.
20. Therefore, the Termination Notice truly cannot be in aid of the
execution of the Arbitral Award, which is the prayer made by the
Society. It is another matter if the termination were to be treated as a
separate and new event, with a Section 9 Petition being filed without
any linkage to the execution of the Arbitral Award. This directional
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dichotomy in the position of the Petition is what needs to be dealt with
while considering the appropriate manner of disposal of this Petition.
What is noteworthy is that, in the course of hearing of this very Petition,
there has been a further movement towards the redevelopment rather
than termination.
21. The Petitioner would contend that an Application under
Section 9 may indeed be filed after an Arbitral Award and would cite
multiple judgments in support of this proposition. While one cannot
with the proposition, it cannot be forgotten that the Arbitral Award
entails completion of the redevelopment within the same relationship
whereas the Termination Notice entails parting of ways and the
cessation of the relationship. It is in this light, that the reliefs as sought
in terms of return of the Development Documentation and non-
interference in the project would not only run counter to the Arbitral
Award but also would present facts relating to a fresh cause of action
being pursued by the Society.
22. After this Petition was filed, the Developer has indeed paid a
sum of Rs.1.40 Crores to the Society, which has indeed been accepted by
the Society. Indeed such acceptance is without prejudice to the
Petitioner's rights and contentions. Whether such payment and
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acceptance is an action that recognizes that the Termination Notice is
given a go-by cannot be conclusively and finally ruled upon in a Section
9 Petition, but prima facie it would suggest that the direction is contrary
to the direction of the Termination Notice issued after the Arbitral
Award, while it is securing the Arbitral Award that would form the
subject matter of a post-award Section 9 Petition.
23. Therefore, de hors this Petition, if the Society were to initiate
fresh arbitration proceedings in view of the disputes and differences
between the parties, recourse to Section 9 of the Act would be differently
available. Indeed, receipt of Rs.1.40 Crores after this Petition was filed
may suggest a prima facie view of the intent to terminate having been
diluted, but equally, it can be stated that such receipt is without
prejudice to its rights and contentions which would indeed mean that
the Society is not estopped and precluded from terminating the
Development Documentation. After all, the redevelopment was
originally envisaged in 2007 and eventually commenced in June 2016
and is yet to be completed in 2025. It would be totally open to the
Society to give a redevelopment agreement a go-by and assert a fresh
bundle of enforcement rights by reason of the cause of action to issue
the Termination Notice now being available to the Society. However,
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that is not the framework in which the current Section 9 Petition has
been filed. This cannot be wished away.
24. Therefore, whatever is stated in this judgment is also without
prejudice to the rights that may be available in law to the Society to take
such fresh action as may be available to it in law, whether under Section
9 or otherwise.
25. It is equally seen that the Developer has not made payment of
the outstanding property taxes, which could jeopardize the interests of
the Society. So also, the security interest said to have been created over
the Society's property, with the indebtedness secured running into
several hundred crores, undermines the interest of the Society and that
too when the overall indebtedness is said to be much wider and larger
outside the ambit of the monies borrowed and deployed in the project
for redeveloping the Society's building. Therefore, the Section 9 Court
cannot be blind to the situation at hand, particularly in view of the
jurisdiction being an equitable jurisdiction.
26. In these circumstances, the question that arises is how the
Section 9 Court, regardless of the dichotomy between seeking protection
of the rights flowing under the Arbitral Award and the attempt to
terminate the relationship, can best balance the competing interests of
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the parties. Rather than taking a narrow technical view that the Section
9 Petition in the manner drafted cannot be considered at all, it is
considered appropriate to issue directions to the Developer, adopting
the Developer's own stand that the payment and receipt of Rs.1.40
Crores is an indication of moving forward with the redevelopment
rather than proceeding with the termination.
27. By merely stating so, the Developer cannot be said to be
absolved from the need to take specific measures under directions of
this Court to secure the interests of the Society. Therefore, bearing the
aforesaid stance of the Developer in mind, and indeed the position of
the Society that it had approached this Court to secure the fruits of the
Arbitral Award, it is felt necessary to issue specific directions to the
Developer so that the interests of the Society can be protected and the
competing interests of the parties can be balanced and adjusted.
Directions and Order:
28. With the aforesaid analysis in mind the following order is
passed:
(a) The Developer is directed to clear all dues payable in
respect of the property taxes payable to MCGM in respect of
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the Society's property within a period of four weeks from this
order;
(b) The proposed schedule of computation contained in
the affidavit of the Developer tendered by the Learned Senior
Advocate on behalf of the Developer shall be adhered to, and
the amounts payable to the Society shall be cleared in the
following manner:
(i) The outstanding compensation payable as of
December 31, 2024, then computed in the sum of
Rs.3,07,19,160/- shall be paid in three equal
instalments between the date of this Order and
January 31, 2026, in the terms set out below;
(ii) It is noteworthy that in the affidavit dated
March 3, 2025, the entire amount had been promised
to be cleared by the Developer by August 16, 2025.
The Developer was expecting execution of fresh
Consent Terms for this commitment to commence.
However, without the need for signing fresh consent
terms, it is directed that such amount shall be cleared
by extended deadline granted hereby. Should the
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Society write to the Developer indicating that it
intends to pursue the redevelopment and not effect
the termination (such indication may be made by a
written notice to be issued by Advocates on record for
the Society to Advocates on record to the Developer),
the aforesaid direction to pay this entire amount in
three equal instalments shall be complied with;
(iii) Should the Society indicate in writing to the
Developer that it is not interested in continuing with
the redevelopment (the Society shall be entitled to
confirm that it stands by the Termination Notice) the
parties shall effect adjustment of the sum of Rs.1.40
Crores towards the dues owed by the Developer to the
Society in respect of the period preceding the
Termination Notice. The amounts due and owed
from the Developer to the Society and its members
would stand adjusted against the said sum of Rs.1.40
Crores. Should there be any residual amount, the
same would be held by the Society subject to
adjustment in any new arbitration proceedings that
may be initiated and conducted including a claim for
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damages, for the disputes going forward. Should
there be a shortfall in the amount owed by the
Developer to the Society, the Society shall be at liberty
to pursue the same including by way of a fresh
Section 9 Petition to secure its interests after an
unequivocal stance on the Termination Notice; and
(iv) Should the Society opt for continuing with the
redevelopment, all amounts payable after December
31, 2024 until December 31, 2025 shall be paid by the
Developer to the Society (over and above the three
equated instalments referred to above) no later than
January 31, 2026. In such event, the monthly
compensation starting from January 1, 2026 shall be
paid before 15th day of each and every calendar month
without any delay, and any delay shall attract interest
in the first instance at 18% per annum, subject to such
orders as an Arbitral Tribunal may deem fit after
hearing the parties;
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(c) The No Objection Certificate to be secured from
MHADA shall also be secured no later than December 31,
2025;
(d) Should the Society agree to continue with the
redevelopment, the bar chart set out in Exhibit 1 to the
affidavit dated March 3, 2025 shall be acted upon and further
steps to be taken by the Developer in respect of the
redevelopment shall be implemented, with the only
adjustment that the commencement of such activity would be
from January 1, 2026 whereas the commencement of the
activity indicated in the bar chart is from April 2025; and
(e) Nothing contained in this judgement shall preclude
the Society from making a claim for continued payment of
transit rent and compensation even after the date of the
Termination Notice until free and vacant possession of the
Society's property is handed back to the Society either in the
form of redeveloped premises or without the premises being
redeveloped as it stands.
29. With the aforesaid directions, the Petition is finally disposed
of.
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30. It is noteworthy that the Arbitral Award itself was a consent
award and not a product of adjudication of issues. Needless to reiterate,
it would be completely open to the Society to take a decision that it does
not desire to act further on the Arbitral Award by entrusting the
redevelopment to the Developer, and initiate arbitration proceedings.
In such event it shall be completely open to the Society to file fresh
arbitration proceedings including proceedings under Section 9 of the
Act to protect its interests pending such newly initiated arbitration.
31. With the aforesaid directions, the caption Section 9 Petition is
finally disposed of.
32. All actions required to be taken pursuant to this order shall be
taken upon receipt of a downloaded copy as available on this Court's
website.
[SOMASEKHAR SUNDARESAN, J.]
November 21, 2025
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