Bombay High Court
Swastik Developers vs Acme Metal Industries Pvt Ltd on 8 September, 2025
2025:BHC-OS:14666
11.CARBPL.33608.2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION (L) NO.33608 OF 2024
M/s Swastik Developers ....Petitioner
Versus
Acme Metal Industries Pvt. Ltd. ...Respondent
Mr. Gaurav Joshi, Senior Advocate a/w. Mr. Chirag Kamdar,
Ms. Shachi Udeshi & Ms. Juhi Shah i/b. Wadia Ghandy & Co.,
Advocates for Petitioner.
Mr. Pankaj Savant a/w. Aliabhas Delhiwala, Anirudh Bhalwal &
Sabir Merchant i/b. Vyas & Bhalwal, Advocates for Respondent.
CORAM: SOMASEKHAR SUNDARESAN, J.
DATE : SEPTEMBER 8, 2025
ORAL JUDGMENT :
Context and Factual Background:
1. This is a Petition filed under Section 37 of the Arbitration and
Conciliation Act, 1996 ("the Act") challenging an order dated
September 5, 2024 ("Impugned Order") passed by a Learned Arbitral
Tribunal under Section 17 of the Act denying interim reliefs sought by
the Petitioner, M/s Swastik Developers ("Swastik") against the
Respondent, Acme Metal Industries Pvt. Ltd. ("Acme").
2. The parties had executed a Memorandum of Understanding
("MoU") dated June 5, 2003 ("2003 MoU") by which the parties had
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engaged in a joint venture to develop property located in Goregaon,
more particularly described in the Impugned Order (" Subject
Property") on which Acme had been conducting manufacturing activity
earlier. In terms of the 2003 MoU, the risk and reward was to be
shared by the parties in the ratio of 70:30 between Acme and Swastik.
3. Acme had already obtained the requisite 'intimation of
disapproval' and even a commencement certificate (" CC") between
2002 and 2003. According to Acme, roping in Swastik was meant to
bring to bear Swastik's expertise as a developer with Acme being the
owner. The value of the land, agreed at Rs. ~2.86 crores was to be
Acme's initial contribution. Monies were to be deposited in a separate
account in the name of Acme to be jointly operated by the parties.
4. An agreement dated February 15, 2005 ("2005 Agreement") is on
record, which earmarks and demarcates five units to which Swastik
would be entitled - Units No. 101 to 104 on the first floor and Unit 203
on the second floor. No other terms in the 2003 MoU were changed by
this instrument. There is some controversy about when this instrument
was executed. The Learned Arbitral Tribunal has returned a prima facie
finding that the 2005 Agreement was executed in 2011 after a show
cause notice issued by the Income-tax Authorities on December 1, 2010
in relation to payment of tax by the joint venture. The prima facie
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character of the 2005 Agreement being a back-dated instrument has
weighed with the Learned Arbitral Tribunal, but for all purposes of
analysis, this instrument is not being wished away - in fact, this is one
of the core instruments relied upon by both parties.
5. A third instrument between the parties is an "understanding"
dated July 31, 2017 ("2017 Understanding"), which is claimed by
Swastik as a reiteration of the 2003 MoU. The execution of the 2017
Understanding is also controversial with Swastik initially having made
no disclosure of this instrument. This is essentially a joint affidavit
filed by the parties before the Maharashtra Real Estate Regulatory
Authority ("RERA").
6. The development project entailed two wings - Wing A and Wing
B. It appears that on April 27, 2006, a part occupation certificate
("OC") was obtained for occupation of the basement and ground floor
of Wing A, which is now completed. Work on Wing B, now a
residential project, is underway in full swing and Acme has asserted
that it is on course to completing it on schedule this year.
7. It is Acme's case that Swastik did not perform its obligations after
the project hit rough weather with the discovery that the Subject
Property fell in the Coastal Regulatory Zone (" CRZ"). The parties had
desired to part ways after 2017 and one Mr. Bharat Shah, a chartered
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accountant was engaged to examine the accounts, reconcile the
contributions and entitlements, and figure out an amicable manner of
parting of ways.
8. Acme issued a notice of termination dated March 15, 2021
("Termination Notice"). Swastik replied to this on March 20, 2021 and
April 16, 2021 with Acme writing back to Swastik on April 29, 2021.
9. Eventually, on September 9, 2021 and December 29, 2021, RERA
registered the Wing B project as a residential project. Acme has
invested in acquiring further transferable developments rights ("TDR")
to load them on to the project. Wing A has been completed and Wing
is actively underway.
10. The application under Section 17 Application of the Act was filed
by Swastik on February 26, 2022 (" Section 17 Application") nearly one
year after the Termination Notice was issued. The Section 17
Application made no disclosure of either the 2017 Understanding or the
Termination Notice and the attendant correspondence. The Section 17
Application sought interventions into both Wing A and Wing B - an
injunction against any development of the Subject Property other than
deduction of development potential towards setback for a road.
Appointment of a receiver over the entire Subject Property was sought
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and indeed as a sub-set, protection of the units referred to as falling in
Swastik's entitlement was also sought.
Impugned Order:
11. The Impugned Order extensively records the primary pleadings
by the parties, the flurry of affidavits supplementing and amending the
initial pleadings and their verbal submissions made by the respective
advocates for the parties before the Learned Arbitral Tribunal. The
Impugned Order reasons as to why it is not appropriate to grant any
interim relief, whether as claimed or otherwise. The Learned Arbitral
Tribunal has taken pains to explain that its findings on facts are
entirely prima facie in nature and it is always open to the Learned
Arbitral Tribunal to grant damages to Swastik after examining the
requisite evidence and adjudicating the multiple claims and counter-
claims of the parties.
12. The Impugned Order has essentially found that Swastik has
prima facie not been ready and willing to perform its obligations
throughout the life of the relationship. The Learned Arbitral Tribunal
has found that Swastik had not come with clean hands inasmuch as
neither the Termination Notice nor the 2017 Understanding was
disclosed in the Section 17 Application and indeed, Swastik has made
completely untenable contentions about Acme having violated the
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plans by changing plans to construct office premises into construction
of a banquet hall.
13. The Learned Arbitral Tribunal has considered the reply given by
Swastik to the Income-tax Authorities indicating that it had contributed
only about Rs. 9 lakhs, and has found that the transactions with third
parties indicated by Swastik as being investments towards acquisition
of TDR are transactions with related parties for their deployment in
other projects of Swastik. The Impugned Order has also found that
Swastik has launched its attack under Section 17 with delay that makes
it inappropriate and inconvenient to grant the interim reliefs sought.
14. An interim restraint on creating any third party rights on an area
of ~1,523.19 square feet on the second floor and on the multi-purpose
hall on the first floor of Wing A was vacated in the Impugned Order.
Analysis and Findings:
15. There are observations of the Learned Arbitral Tribunal made in
the process that Swastik makes a target of attack in its challenge. For
purposes of adjudicating this Petition, this being an appeal, bearing in
mind the same framework as was available to the Learned Arbitral
Tribunal, I have examined the matter from the perspective of whether
the conclusion by the Learned Arbitral Tribunal is a plausible one.
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Assuming that the attack on the Impugned Order on a few facets are
tenable, I have considered if that would alter the outcome pursuant to
the Impugned Order.
16. The position in law is succinctly stated by a Learned Division
Bench of this Court in the case of Union of India v. PLR-HC-RBR (JV)1
as follows:
17. 7. An appeal is a continuation of an original proceeding. It is equally well
settled in law that in absence of any statutory provision to the contrary, the power of
appellate Court is co-terminus with the power of a subordinate court. [See : JUTE
CORPN. OF INDIA LTD. VS. CIT2]. Thus, an appellate Court exercising the power
under Section 37 of the 1996 Act would interfere only if a ground under Section 34
of the Act is made out. [See : STATE OF CHHATISGARH AND ANOTHER VS. SAL
UDYOG PRIVATE LIMITED23]
[Emphasis Supplied]
18. The conduct of the commercial transactions by the parties brings
into question the nature and character of the instruments executed by
them. Some of the facets on record tend to have a propensity to conflict
with the manner of presentation of the import of these facets to the
Learned Arbitral Tribunal. It is against this backdrop that one has to
appreciate what the Learned Arbitral Tribunal has had to deal with,
recording as it has done copiously, the respective written and verbal
1 Judgement dated July 22, 2025 in Commercial Arbitration Appeal (L) No. 21577 of 2025
2 1991 Supp 2 SCC 744
3 (2020) 21 SCC OnLine 1027
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contentions of the parties, to return a set of prima facie findings in a
rather prolix 186-page interim order.
19. First, a party claiming specific performance of an agreement to
implement a project and thereby seeking an injunction against the
entire project must be seen ready and willing to perform the agreement.
It is quite clear that the parties had worked on disengaging rather than
proceeding further together. They are said to have had nearly 50
meetings and Mr. Bharat Shah had also drawn up data for reconciling
accounts and working out entitlements when parting ways. In this
light, when the parties have been actively engaged in working out what
their respective investments were and how they were to reconcile their
entitlements, they could well present data for adjudication of the
subject matter of the arbitration, but in order to preserve the subject
matter of arbitration (which is the prime consideration of measures
under Section 17 of the Act), it would be out of question to injunct the
project or any entitlements from it.
20. Facts have to be proven to establish the claims of each party -
each has claimed damages against the other. This can be done in the
course of the arbitration but that would not necessitate injuncting the
development as sought by Swastik. The view of the Learned Arbitral
Tribunal that Swastik can well be compensated in damages without the
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need for an injunction at this stage is a plausible view that does not
warrant interference.
21. It is also evident from the record that the project ran into rough
weather upon finding that its location would lead to serious restrictions
on development on account of environmental law governing
development in CRZ areas. This led to the project having been stalled
after the partial OC received for the basement and ground floor on
April 27, 2006. The impasse resolved upon formulation of the New
Coastal Zone Management Plan, 2011 ("CZMP"), effectively bringing
the Subject Property out of the zone of CRZ. It is Acme's contention
that Swastik did nothing to deal with getting the project going after the
CZMP removed the cloud over the project. Swastik denies this, but in
my opinion, at this interim stage, what is clear is that the parties
worked on disengagement and to settle accounts, which is a sharp and
clear pointer that rather than continue to perform their intent to
develop the project jointly (which could necessitate injunction in aid of
specific performance), Swastik has for long been on its way out of the
project. Moreover, the Termination Notice was issued on March 15,
2021, and Swastik sought interim relief by filing the Section 17
Application nearly a year later. This is also a plausible pointer to its
intent and approach towards the project. Far from engaging in the
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project, Swastik has been desirous of disengaging from it on terms
acceptable to it.
22. As stated earlier, the 2017 Understanding is controversial.
Swastik initially denied having executed it. This was a filing with
RERA, but it is plausible that in an environment that the parties sought
to disengage peacefully, they could have agreed to file the 2017
Understanding with RERA. This too is to be tried and adjudicated in
the arbitration eventually, but no case is made out for intervention at
this stage, when right after the 2017 Understanding, the parties worked
on the terms of their disengagement. Swastik may have a case for
damages but not for specific relief in the form of an injunction on the
project or Acme's enjoyment of the fruits of development of the project.
23. That Acme had obtained an IOD and CC even before the 2003
MoU has weighed with the Learned Arbitral Tribunal. Swastik was
brought into the project as a developer unlike Acme which was a
manufacturing company. Against that backdrop, when the parties had
decided in principle to disengage and were negotiating terms on
parting of ways, what has weighed with the Learned Arbitral Tribunal is
that the IOD of June 17, 2021 and CC of August 19, 2021 were obtained
by the efforts of Acme. The RERA registration and recognition granted
on September 9, 2021 and December 29, 2021 were also by the efforts
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of Acme alone. As a matter of equity, the Learned Arbitral Tribunal has
taken a view that there was no scope for granting any protection of
interest to Swastik on developments in the project that had been
achieved by Acme on its own merit and steam without effort from
Swastik. There is nothing implausible in this view to warrant any
interference.
24. Second, the Learned Arbitral Tribunal has also taken a prima
facie view that Swastik did not come clean with the factual matrix
involved. Swastik made no mention of the 2017 Understanding or of
the Termination Notice, or indeed of the active negotiations to
disengage from the project after 2017. Swastik would contend in these
proceedings that not much should be made of it since these
developments became available to the Learned Arbitral Tribunal in the
course of the arbitration proceedings. This is not an acceptable
response. When it was Swastik that was seeking an injunction on the
premise of pursuing specific performance, it was for Swastik to come
clean upfront about these vital facets that are material to the pursuit of
an injunction. It was Acme that brought these developments on record.
The Learned Arbitral Tribunal cannot at all be faulted for taking this
accurate view of what is expected of the party seeking specific
performance to disclose upfront. The issue is not whether such
developments were available to the Learned Arbitral Tribunal but
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whether Swastik made them available upfront to the Learned Arbitral
Tribunal. To try and given an impression that the 2003 MoU and the
2005 Agreement were continuing without any cloud over their
continued validity is a material non-disclosure, which the Learned
Arbitral Tribunal is entitled to consider when adjudicating on what is
an appropriate decision on the Section 17 Application.
25. On an analysis of the contentions and documents presented by
Swastik to the Learned Arbitral Tribunal, it was found that the
purported purchases of the TDR by Swastik were not intended for
deployment in the joint venture project with Acme. The Learned
Arbitral Tribunal has also considered Swastik's own stance with the
Income-tax Authorities in its reply dated March 4, 2011 that it had
invested Rs. ~9 lakhs in the project. Essentially, income-tax payments
had been made by Acme and not by Swastik. It is contended on behalf
of Swastik that the 2005 Agreement was only to reduce to writing and
present to the Income-tax Authorities a notional picture of the
arrangement between the parties to mark up the entitlements that
would conform to how tax treatment had been effected by the parties.
26. This has led to some controversy about how much one can rely
on the 2005 Agreement. The Learned Arbitral Tribunal has taken a
position that there is a cloud over this instrument and its terms are not
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indicative of the true bargain between the parties. Be that as it may,
both the parties have executed the 2005 Agreement and any
inappropriateness in its execution is to be shared by both parties.
Therefore, even assuming the Learned Arbitral Tribunal were to take
into account the contents of the 2005 Agreement and not reject it as a
contrivance and device aimed at taking a stance with the tax
department, the contents are at variance with the factual reality on the
ground. The Learned Arbitral Tribunal has meticulously pointed out
that while the table of entitlements set out in that instrument
(extracted at Paragraph 258 of the Impugned Order) presents a picture
based on which Swastik claims the five units in Wing A, in reality there
were no units on the first floor and the plans always intended to have a
multi-purpose hall.
27. Swastik has attempted to paint Acme into a corner by stating that
Acme violated the 2005 Agreement by constructing a banquet hall
instead of the office units. This is in itself problematic. If Swastik was
the developer that was engaged in the project, Acme could not have
deviated from the agreed plan to build units. If Acme had done so and
was able to do it on its own, it would mean that Swastik was actually
disengaged and it was possible for Acme to go ahead and do whatever it
pleased on the ground with Swastik being none the wiser. Such a
proposition would support Acme's contention that Swastik was not at
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all playing its intended role on being roped in as the developer. More
importantly, the Learned Arbitral Tribunal has explained that Swastik's
contention of deviation is itself untenable - the plans finalised on May
12, 2005 entailed a banquet hall on the first floor and not office units.
This is contemporaneous with the 2005 Agreement, which therefore
lends credence to the Learned Arbitral Tribunal's view that the 2005
Agreement was not reliable. Even the CC obtained on June 20, 2003
showed no demarcation of units. Even in 2008 documentary evidence
points to no trace of offices. Likewise, in 2008-09, the parties
envisaged constructing a star hotel, which would then be consistent
with the plan to have a banquet hall. The plan of November 16, 2021
also envisaged a banquet hall. Taking a holistic view of the matter, it
would follow that the Learned Arbitral Tribunal cannot be faulted for
disbelieving the 2005 Agreement at least on a prima facie basis at the
interim stage as not holding material significance. Therefore, even if
one were to ignore allusions to judgements of tax law made by the
Learned Arbitral Tribunal, the fact remains that the contention by
Swastik that it was purportedly taken by surprise about the change of
plans from constructing office premises to constructing a banquet or
multi-purpose hall is not tenable. On the contrary, it does lend
credence to the scepticism with which the Learned Arbitral Tribunal
has considered the 2005 Agreement.
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28. Swastik also initially denied the 2017 Understanding but then,
later took the stance that it merely is reiterative of the 2003 MoU.
Swastik would contend before me that not much should be read into it
since nothing purportedly turns on the 2017 Understanding, which was
indeed uploaded on the RERA website. The fact remains that when a
party blows hot and cold about multiple positions of fact that the
Learned Arbitral Tribunal has to consider when adjudicating an
appropriate measure under Section 17, the credibility of the party
equivocating on issues does undermine its case. The Learned Arbitral
Tribunal's approach to such equivocation is a reasonable and plausible
response and that cannot be faulted. The inconsistencies in the stance
of a party cannot be brushed away as being of no consequence. All in
all, the allegation of Acme having deviated from the plan; the claims
based on the 2005 Agreement; the equivocation on the 2017
Understanding; the non-disclosure of the Termination Notice of 2021;
the non-disclosure of the disengagement negotiations, altogether lead
to an inexorable conclusion that the Section 17 Application was not
worthy of intervention and that the Learned Arbitral Tribunal has
taken a reasonable, plausible and eminently defensible prima facie view
of the matters presented to it.
29. I am not inclined to dwell upon the Learned Arbitral Tribunal's
prima facie view that the decision to construct a star hotel meant giving
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the 2003 MoU and the 2005 Agreement a go-by - simply because
nothing turns on it for determining if Swastik has made out a case for a
protective measure under Section 17 of the Act. The aforesaid analysis
is adequate to support the outcome in the Impugned Order. Even if the
Learned Arbitral Tribunal were to change the prima facie view during
final adjudication, Swastik's case would be one of damages, which the
Learned Arbitral Tribunal had itself articulated. Same is the case with
whether Swastik initially took some efforts to deal with the CRZ issue -
it would fall within the realm of apportioning blame and assessing
damages and the outcome in terms of specific protection would not be
altered at this stage.
30. There are also facets of what precisely has been invested by
Swastik and whether its payments to its related parties towards TDR
was meant for loading the TDR on the development of the Subject
Property or elsewhere in its other projects. This can be dealt with as a
matter of damages and keeping of accounts. What is also clear is that
Acme has indeed invested in TDR and loaded it on the project and has
developed it to a significant extent after the Termination Notice. If
Swastik makes out a case for being compensated for any of its
purported interests in the project, it can well be a matter of final
adjudication, for which a protective measure at this stage need not take
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the form of an injunction as sought by Swastik or with any moulding.
The Impugned Order cannot be faulted.
31. For all the aforesaid reasons, I am not convinced that any
interference with the Impugned Order is justifiable or necessary. The
Petition is dismissed without any interference.
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.]
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