Calcutta High Court
Abdul Rashid vs Bidhan De Sarkar And Anr on 7 March, 2025
IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
COMMERCIAL DIVISION
Present:
The Hon'ble Justice Krishna Rao
GA No. 1 of 2023
With
GA (COM) No. 2 of 2024
In
CS (COM) No. 553 of 2024
(Old No. CS 213 of 2023)
Abdul Rashid
Versus
Bidhan De Sarkar and Anr.
Mr. Aritra Basu
Mr. Souradeep Banerjee
Ms. Sanjana Sinha
Mr. Abhisek Ghosh
... For the plaintiff.
Mr. Ratul Das
Mr. Sarbajit Mukherjee
Md. Sayeed Khan
... For the defendant no.1.
2
Ms. Srijani Mukherjee
... For the state.
Hearing Concluded On : 17.02.2025
Judgment on : 07.03.2025
Krishna Rao, J.:
1. The plaintiff has filed an application being G.A. No. 1 of 2023 praying
for interim order. The defendants have filed an application being G.A.
(COM) No. 2 of 2024 praying for dismissal of the suit.
2. The plaintiff is engaged in the business of real estate developer. The
defendants are the owners of the Premises No. 42C and 42D,
Serpentine Lane, Post Office - Entally, Police Station - Muchipara,
Kolkata - 700 014. The said two premises are contiguous to each other.
Premises No. 42A and 42B are also contiguous to the premises nos.
42C and 42D and are owned by the relatives of the defendants.
3. In order to develop the said premises after negotiations between the
plaintiff and the defendants with respect to premises No. 42C and 42D,
two development agreements both dated 25th October, 2017 were
registered and singed between the parties. The defendants have also
executed two Powers of Attorney in favour of the plaintiff with respect to
the premises on 6th November, 2017 and 7th November, 2017.
4. Mr. Aritra Basu, Learned Advocate representing the plaintiff submits
that the defendants were required to co-operate with the plaintiff, in
order to develop the premises but the defendants have acted in breach
of the obligations recorded in the development agreements by not
making payment of arrear corporation taxes and rates, Kolkata
Municipal Corporation by an order dated 13th December, 2019 rejected
the prayer of amalgamation of the premises with the adjacent premises
as the defendants have not produced the partition deed and boundary
declaration. Inspite of receipt of Rs. 3,00,000/-, the defendants failed to
negotiate with the existing tenants occupying various portions of the
premises.
5. Mr. Basu submits that the plaintiff in terms of development agreements
has made payment of the Municipal rates and taxes for the year 2017-
2018, 2018-2019 and 2019-2020. He submits that the plaintiff has
also made payment of Rs. 40,000/- as security deposit and also made
payment of Rs. 3,00,000/- to the defendants to negotiate with the
tenants.
6. Mr. Basu submits that by a notice dated 1st September, 2020, the
defendants have terminated the development agreements on the
allegation upon the plaintiff that the plaintiff has delayed the
development work of the premises. He submits that there is no delay
on the part of the plaintiff. He submits that the defendants have acted
in breach of the obligations recorded in the development agreements by
not negotiating with the tenants, and have also failed to produce the
original boundary declaration and the partition deed due to which the
Kolkata Municipal Corporation rejected the request of amalgamation.
7. Mr. Basu submits that in one hand, the defendants have issued notice
of termination and on the other hand, the defendants have allowed the
plaintiff to perform the obligations of the development agreements. He
submits that on 22nd September, 2021, the plaintiff made further
payment of Rs. 2,50,000/- to the defendants for negotiation with the
tenants.
8. Mr. Basu submits that the development agreements were joint venture
transactions in terms whereof the parties agreed for development of the
premises. He submits that initially the plaintiff has filed the suit along
with prayer for dispensation of formalities under Section 12A of the
Commercial Courts Act, 2015 but the same was not granted and
directed the plaintiff to complete the process of pre-institution
mediation. He submits that the plaintiff has instituted a pre-institution
mediation process, but the "non-starter" report was issued, and then
the plaintiff has filed the present suit.
9. Mr. Ratul Das, Learned Advocate representing the defendants submits
that under Section 2(1)(c) of the Commercial Courts Act, 2015 does not
define a Development Agreement as a "Commercial Dispute". He
submits that unless the plaintiff proves that the Development
Agreement relied by the plaintiff dated 25th October, 2017 is a joint
venture agreement, it would not fall within the definition of commercial
dispute.
10. Mr. Das submits that for an agreement to be a joint venture, the
necessary elements are: (i) an express or implied agreement, (ii) a
common purpose that the group intends to carry out, (iii) share profits
and losses and (iv) each member's equal voice in controlling the project.
He submits that in the present case, the Development Agreement is an
express agreement between the parties but that apart none of the
necessary elements of a joint venture is met as regard there is no
common purpose of the group as the plaintiff intended to construct a
building for profits whereas the defendants would have used it for its
residential use.
11. Mr. Das submits that in the Development Agreement, the parties are
not having equal voice in controlling the project. Mr. Das relied upon
the Judgment in the case of Faqir Chand Gulati vs. Uppal Agencies
Private Limited and Another reported in (2008) 10 SCC 345.
12. Mr. Das submits that the plaintiff is not in possession of the suit
premises. He submits that all the correspondences and summons of
this case are also received by the defendants at 42C which is the suit
premises.
13. Mr. Das submits that the letter dated 24th September, 2021 relied by
the plaintiff is an afterthought as the defendants have terminated the
Agreement on 1st September, 2020. He further submits that the alleged
money receipt for Rs. 2,50,000/- dated 22nd September, 2021 is also a
manufactured document and the said receipt is an incomplete
document and the date appearing in the alleged receipt is not written
by the defendant.
14. Mr. Das submits that the plaintiff has suppressed the letter dated 8th
November, 2021, issued on behalf of defendants. He submits that the
entire records and the pleadings on payment by the plaintiff are
contrary to each other. He submits that the plaintiff has not made out
any prima facie case for grant of interim order. In support of his
submissions, Mr. Das relied upon the Judgment in the case of Kashi
Math Samsthan and Another vs. Shrimad Sudhindra Thirtha
Swamy and Another reported in (2010) 1 SCC 689.
15. The first issue raised by the defendants in the present proceeding is
that the Development Agreements both dated 25th October, 2017, are
not the joint venture agreements as per the provisions of Section
2(1)(c)(xi) of the Commercial Courts Act, 2015. Clauses 2, 6, 18, 20, 21,
25 & 30(L) of the Development Agreement reads as follows:
"2. The Owners hereby grants subject to what
has been provided herein the exclusive right to the
Developer to build construct, erect a new building
after demolishing the existing structure at the said
premises No. 42C, Serpintine Lane, P.S. Muchipara,
Kolkata - 700014 in accordance with the plan to be
sanctioned by the K.M.C. and other concerned
authorities and complete the construction, erection
and finishing work of the new building/s
comprising of several flats/rooms/car parking
space/s and to sell and transfer the
flats/rooms/car parking space/s to the intending
purchaser or purchasers in respect of the
Developer's allocation by entering into agreement
for sale and/or transfer and realize sale proceeds
in respect of the Developer's allocation.
6. The Developer has agreed to allocate the
Owners 50% (fifty percent) of the constructed area
in the new building. It is clarified that the Owners
are entitled to get their 50% (fifty percent) allocation
in the newly constructed building, which include
tenanted portion of the existing tenants within the
said Owners' allocation, that is to be allocated in
accordance with the terms and conditions under
these presents together with proportionate share in
all common areas, facilities and amenities. Besides
the said Owners' allotment, the Developer shall
make payment of the sum of Rs.20,000/- (Rupees
twenty thousand only) as refundable deposit
amount to the Owners. Save and except the above
allocation of the Owners, the remaining 50% (fifty
percent) of the constructed area in the newly
constructed building upon the said First Schedule
property together with proportionate share in all
common areas, facilities and amenities whatsoever
meant for common use including ultimate roof right
in common shall belong to the Developer. The
Developer has paid the said refundable deposit of
Rs.20,000/- (Rupees twenty thousand only) to the
Owners at the time of execution of this agreement.
18. The Developer shall be authorized in the
name of the Owners to apply for, if necessary and
obtain quotas, entitlement and other allotments for
cement, steel, brick and other building materials for
the construction of the building. The Developer shall
be entitled to apply and obtain temporary and
permanent connection of water, electricity power,
drainage, sewerage connection to the said property
and other inputs and facilities required for the
construction and enjoyment of the building in the
names of the Owners and for the said purpose the
Owners shall execute Power of Attorney in favour
of the Developer as shall be required by the
Developer.
20. The developer shall complete the said
construction of the proposed building within 24
months from the date of receiving vacant
possession of the said property from the Owners
and hand over the Owner's allocation to the
Owners in finished condition therein and the
Owners shall also co-operate with the Developer in
all manner for constructing and completing the said
building as aforesaid peacefully and
uninterruptedly.
21. The owner shall pay and clear-up all the
arrears on account of Municipal taxes and other
outgoing of the said premises till the handing over
the vacant possession of the said property. It is
further agreed by and between the parties that the
owners shall not pay any taxes as Municipal taxes
and other taxes in respect of the said property from
the date of handing over the vacant possession of
the said property till completion of the building or
handing over the possession of the Owners'
allocation. It is agreed that from the date of
completion and allocation of the floor area between
the owners and the Developer, all Municipal taxes
and other taxes payable in respect of the said
property shall be borne in proportionate of allocated
area of Developer or its nominee/transferee/s and
allocated area of owners of their
nominee/transferee/s respectively.
25. As and from the date of service of notice of
possession, the Owners or their nominees and the
Developer or its nominees shall be responsible to
pay and bear the proportionate share of the service
charges and all other outgoing for common facilities
and amenities in the building payable in respect of
the Owners' and Developer's allocation.
30(L). That the Owners and the Developer
jointly shall take the responsibility for successfully
negotiating with the existing tenants of the said
premises for obtaining "NO OBJECTION" and also
to settle with the tenants and occupiers in the said
property for shifting/vacating the said property
either by allotting floor area and/or constructed
space or in terms of money from the Owner's
allocation."
16. In the case of Faqir Chand Gulati (supra), the Hon'ble Supreme
Court has considered the definition of "Joint Venture" which reads as
follows"
"25. An illustration of joint venture may be of
some assistance. An agreement between the owner
of a land and a builder, for construction of
apartments and sale of those apartments so as to
share the profits in a particular ratio may be a joint
venture, if the agreement discloses an intent that
both parties shall exercise joint control over the
construction/development and be accountable to
each other for their respective acts with reference to
the project.
26. We may now notice the various terms in
the agreement between the appellant and the first
respondent which militate against the same being a
"joint venture". Firstly, there is a categorical
statement in Clause 24, that the agreement shall
not be deemed to constitute a partnership between
the owner and the builder. The landowner is
specifically excluded from management and is
barred from interfering with the construction in any
manner (vide Clause 15) and the builder has the
exclusive right to appoint the architects, contractors
and sub-contractors for the construction (vide
Clause 16). The builder is entitled to sell its share
of the building as it deemed fit, without reference to
the landowner (vide Clauses 7 and 13). The builder
undertakes to the landowner that it will construct
the building within 12 months from the date of
sanction of building plan and deliver the owner's
share to the landowner (vide Clauses 9 and 14).
The builder alone is responsible to pay penalties in
respect of deviations (vide Clause 12) and for
payment of compensation under the Workmen's
Compensation Act in case of accident (vide Clause
10). Secondly, there is no community of interest or
common/joint control in the management, nor
sharing of profits and losses. The landowner has
no control or participation in the management of the
venture. The requirement of each joint ventures
being the principal as well as agent of the other
party is also significantly absent. We are, therefore,
of the view that such an agreement is not a joint
venture, as understood in law.
28. The basic underlying purpose of the
agreement is the construction of a house or an
apartment (ground floor) in accordance with the
specifications, by the builder for the owner, the
consideration for such construction being the
transfer of undivided share in land to the builder
and grant of permission to the builder to construct
two floors. Such agreement whether called as a
"collaboration agreement" or a "joint venture
agreement", is not, however, a "joint venture".
There is a contract for construction of an apartment
or house for the appellant, in accordance with the
specifications and in terms of the contract. There is
a consideration for such construction, flowing from
the landowner to the builder (in the form of sale of
an undivided share in the land and permission to
construct and own the upper floors). To adjust the
value of the extent of land to be transferred, there
is also payment of cash consideration by the
builder. But the important aspect is the availment
of services of the builder by the landowner for a
house construction (construction of the owner's
share of the building) for a consideration. To that
extent, the landowner is a consumer, the builder is
a service provider and if there is deficiency in
service in regard to construction, the dispute raised
by the landowner will be a consumer dispute. We
may mention that it makes no difference for this
purpose whether the collaboration agreement is for
construction and delivery of one apartment or one
floor to the owner or whether it is for construction
and delivery of multiple apartments or more than
one floor to the owner. The principle would be the
same and the contract will be considered as one for
house construction for consideration. The deciding
factor is not the number of apartments deliverable
to the landowner, but whether the agreement is in
the nature of a joint venture or whether the
agreement is basically for construction of certain
area for the landowner.
29. It is, however, true that where the contract
is a true joint venture the scope of which has been
pointed out in paras 21 to 25 above, the position
will be different. In a true joint venture agreement
between the landowner and another (whether a
recognised builder or fund provider), the landowner
is a true partner or co-adventurer in the venture
where the landowner has a say or control in the
construction and participates in the business and
management of the joint venture, and has a share
in the profit/loss of the venture. In such a case, the
landowner is not a consumer nor is the other co-
adventurer in the joint venture, a service provider.
The landowner himself is responsible for the
construction as a co-adventurer in the venture. But
such true joint ventures are comparatively rare.
What is more prevalent are agreements of the
nature found in this case, which are a hybrid
agreement for construction for consideration and
sale and are pseudo joint ventures. Normally a
professional builder who develops properties of
others is not interested in sharing the control and
management of the business or the control over the
construction with the landowners. Except assuring
the landowner a certain constructed area and/or
certain cash consideration, the builder ensures
absolute control in himself, only assuring the
quality of construction and compliance with the
requirements of local and municipal laws, and
undertaking to deliver the owners' constructed area
of the building with all certificates, clearances and
approvals to the landowner.
30. Learned counsel for the respondent
contended that the agreement was titled as
"collaboration agreement" which shows an
intention to collaborate and, therefore, it is a joint
venture. It is now well settled that the title or
caption or the nomenclature of the
instrument/document is not determinative of the
nature and character of the instrument/document,
though the name may usually give some indication
of the nature of the document. The nature and true
purpose of a document has to be determined with
reference to the terms of the document, which
express the intention of the parties. Therefore, the
use of the words "joint venture" or "collaboration"
in the title of an agreement or even in the body of
the agreement will not make the transaction a joint
venture, if there are no provisions for shared control
of interest or enterprise and shared liability for
losses."
17. Development Agreement entered between the parties are the admitted
document. In paragraph 33 of the plaint, the plaintiff has specifically
made out a case that the suit is related to commercial disputes and the
plaintiff seeks specific performance of joint venture agreement for a
commercial project. From the said averment, it is clear that the plaintiff
has filed the suit before the Commercial Court by treating the
Development Agreement as joint venture.
18. The plaintiff tried to impress upon this Court that initially the plaintiff
has filed suit being C.S. No. 57 of 2023 along with leave for
dispensation of Section 12A of the Commercial Courts Act, 2015 but
this Court by an order dated 31st March, 2023 refused to grant
dispensation of Section 12A of the Commercial Courts Act, 2015.
Thereafter the plaintiff has initiated pre-institution mediation process
and on receipt of "non-starter" report form the Mediation and
Conciliation Committee, the plaintiff has filed the suit thus, the suit is
coming under the purview of Commercial Dispute. When the plaintiff
has filed the previous suit and prayed for leave for dispensation of
Section 12A of the Commercial Courts Act, 2015 at that point of time,
no notice was issued to the defendants. The issue of joint venture was
not before this Court. At that point of time, this Court did not find any
such situation which warrants leave under Section 12A of the
Commercial Courts Act, 2015 and dispensation was not granted.
19. It is also admitted that the premises in question are residential
premises. As per the Development Agreement, the plaintiff being the
developer has agreed to allocate the owners 50% of the constructed
area in the new building and the owners are entitled to get their 50%
share in the newly constructed building which include tenanted portion
of the existing tenants within the said owner's allocation.
20. The Development Agreement entered between the parties does not
provide with regard to share of any profits. The agreement also does not
disclose that both the parties have joint control over the construction/
development and accountable to each other for their respective acts
with regards to the construction of the new building. In the agreement,
it is also clarified that the Developer shall be entitled to receive, take,
realize and collect and retain all monies as development and
construction costs of the new building with profit thereof from the
persons or parties agreeing to acquire or purchase. It is also clarified
that the Developer shall not claim for payment or reimbursement of any
cost and expenses incurred towards construction of owner's allocation
and common facilities and amenities from the owners.
21. Mr. Basu relied upon the case of Rameshwar and Others vs. State of
Haryana and Others reported in (2022) 17 SCC 1 wherein the
Hon'ble Supreme Court relied upon the judgment in the case of Faqir
Chand Gulati (supra) and held that:
"36. The above judgment in Uppal Agencies
case, while clarifying the purpose of collaboration
agreements, falls short of delving into the legal
effects of the transfer of such development rights.
Parting with rights which are fundamental to
ownership, for valuable consideration (in cash or
by handing over constructed units), leaving only the
nominal "title" with the landowner, is a common
feature of such collaboration agreements. Given the
evolution in complexity of real estate contracts, and
the absence of the definition of collaboration
agreements in legislation, their interpretation by
various High Courts assumes significance."
22. The agreement between the parties is described as "Development
Agreement". The plaintiff in the suit at paragraph 33, described the
same as "Joint Venture". In the case of Sushil Kumar Agarwal Vs.
Meenakshi Sadhu and Others reported in (2019) 2 SCC 241, the
Hon'ble Supreme Court held that:
"17. The expression "development agreement"
has not been defined statutorily. In a sense, it is a
catch-all nomenclature which is used to be describe
a wide range of agreements which an owner of a
property may enter into for development of
immovable property. As real estate transactions
have grown in complexity, the nature of these
agreements has become increasingly intricate.
Broadly speaking, (without intending to be
exhaustive), development agreements may be of
various kinds:
17.1. An agreement may envisage that the
owner of the immovable property engages someone
to carry out the work of construction on the
property for monetary consideration. This is a pure
construction contract;
17.2. An agreement by which the owner or a
person holding other rights in an immovable
property grants rights to a third party to carry on
development for a monetary consideration payable
by the developer to the other. In such a situation,
the owner or right holder may in effect create an
interest in the property in favour of the developer
for a monetary consideration;
17.3. An agreement where the owner or a
person holding any other rights in an immovable
property grants rights to another person to carry
out development. In consideration, the developer
has to hand over a part of the constructed area to
the owner. The developer is entitled to deal with
the balance of the constructed area. In some
situations, a society or similar other association is
formed and the land is conveyed or leased to the
society or association;
17.4. A development agreement may be
entered into in a situation where the immovable
property is occupied by tenants or other right
holders. In some cases, the property may be
encroached upon. The developer may take on the
entire responsibility to settle with the occupants
and to thereafter carry out construction; and
17.5. An owner may negotiate with a
developer to develop a plot of land which is
occupied by slum dwellers and which has been
declared as a slum. Alternately, there may be old
and dilapidated buildings which are occupied by a
number of occupants or tenants. The developer
may undertake to rehabilitate the occupants or, as
the case may be, the slum dwellers and thereafter
share the saleable constructed area with the
owner.
18. When a pure construction contract 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.
19. In a construction contract, the contractor
has no interest in either the land or the construction
carried out on the land. But, in other species of
development agreements, the developer may have
acquired a valuable right either in the property or
the constructed area. There are various incidents of
ownership in respect of an immovable property.
Primarily, ownership imports the right of exclusive
possession and the enjoyment of the thing owned.
The owner in possession of the thing has the right
to exclude all others from its possession and
enjoyment. The right to ownership of a property
carries with it the right to its enjoyment, right to its
access and to other beneficial enjoyments
incidental to it. (B. Gangadhar v. B.G. Rajalingam).
Ownership denotes the relationship between a
person and an object forming the subject-matter of
the ownership. It consists of a complex of rights, all
of which are rights in rem, being good against the
world and not merely against specific persons.
There are various rights or incidents of ownership
all of which need not necessarily be present in
every case. They may include a right to possess,
use and enjoy the thing owned; and a right to
consume, destroy or alienate it. (Swadesh Ranjan
Sinha v. Haradeb Banerjee). An essential incident
of ownership of land is the right to exploit the
development, potential to construct and to deal
with the constructed area. In some situations,
under a development agreement, an owner may
part with such rights to a developer. This in
essence is a parting of some of the incidents of
ownership of the immovable property. There could
be situations where pursuant to the grant of such
rights, the developer has incurred a substantial
investment, altered the state of the property and
even created third-party rights in the property or
the construction to be carried out. There could be
situations where it is the developer who by his
efforts has rendered a property developable by
taking steps in law. In development agreements of
this nature, where an interest is created in the land
or in the development in favour of the developer, it
may be difficult to hold that the agreement is not
capable of being specifically performed. For
example, the developer may have evicted or settled
with occupants, got land which was agricultural
converted into non-agricultural use, carried out a
partial development of the property and pursuant
to the rights conferred under the agreement,
created third-party rights in favour of flat
purchasers in the proposed building. In such a
situation, if for no fault of the developer, the owner
seeks to resile from the agreement and terminates
the development agreement, it may be difficult to
hold that the developer is not entitled to enforce his
rights. This of course is dependent on the terms of
the agreement in each case. There cannot be a
uniform formula for determining whether an
agreement granting development rights can be
specifically enforced and it would depend on the
nature of the agreement in each case and the rights
created under it."
23. In the present suit as per the Development Agreement entered between
the plaintiff and the defendants being the owners of the property
allowed the Developer to build, construct and erect a new building after
demolishing the existing structure with the liberty to sell and transfer
the flats/rooms/car parking space to the intending purchasers with
respect to the developer's allocation only. There is no condition with
respect to distribution of shares of profit. It is the simple agreement
between the parties that the plaintiff being the developer will construct
a new building and 50% of the new building is allocated to the
developer with the right to sell and 50% will remain with the owners.
24. Considering the above, this Court finds that the Development
Agreements entered between the developer and the owners cannot be a
Joint Venture agreement and thus the case of the plaintiff is not
coming under the purview of any of the clauses of Section 2(1)(c) of the
Commercial Courts Act, 2015.
25. In view of the above, the department is directed to return the plaint
along with all documents to the plaintiff by keeping the copies of the
same for the purpose of record. The plaintiff is at liberty to file a fresh
suit before the appropriate Court.
26. G.A. (COM) No. 2 of 2024 is allowed. G.A. No. 1 of 2023 is
dismissed. Consequently, C.S. (Com) No. 553 of 2024 (Old C.S. No.
213 of 2023) is dismissed.
(Krishna Rao, J.)
