Neeru Jain vs Jasmine Buildmart Pvt. Ltd.
2019 Latest Caselaw 5048 Del

      s*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                   Reserved on:      26.09.2019
      %                                            Pronounced on:    21.10.2019

      +        O.M.P.(I) (COMM.) 280/2019
               NEERU JAIN                                            ..... Petitioner

      +        O.M.P.(I) (COMM.) 281/2019
               M.K. JAIN                                             ..... Petitioner

      +        O.M.P.(I) (COMM.) 282/2019
               M.K. JAIN                                             ..... Petitioner

      +        O.M.P.(I) (COMM.) 283/2019
               M.K.JAIN                                              ..... Petitioner

      +        O.M.P.(I) (COMM.) 284/2019
               RISHABH JAIN                                          ..... Petitioner

      +        O.M.P.(I) (COMM.) 285/2019
               M.K. JAIN (HUF) THROUGH
               MR. M.K. JAIN, KARTA                                  ..... Petitioner

      +        O.M.P.(I) (COMM.) 286/2019
               M.K. JAIN                                             ..... Petitioner
                                       Versus
               JASMINE BUILDMART PVT. LTD.                           ..... Respondent
               Counsel for the petitioner:
                                  Mr. Rajiv Nayar, Senior Advocate, Mr. Akhil sibal,
                                  Senior Advocate, with Mr. Kuber Dewan, Ms. Manjira,
                                  Ms. Deboshree, Mr. Vipul Wadhwa, Ms. Suvarna
                                  Kashyap, Advocates


O.M.P. (I) (COMM.) 280-286/2019                                              Page 1 of 44
                Counsel for the respondent:

                                  Mr. Sandeep Sethi, Senior Advocate with Ms. Bina
                                  Gupta, Ms. Sheena Taqui, Mr. Kshitij Vaibhav, Ms.
                                  Suvarna Dubey, Advocates
      CORAM:
      HON'BLE MS. JUSTICE JYOTI SINGH
                                             JUDGMENT

JYOTI SINGH, J

1. The present petitions have been filed under Section 9 of the Arbitration & Conciliation Act, 1996 ('Act') seeking stay of the operation of cancellation letters dated 29/30 th March, 2019 and/or 3rd April, 2019 issued by the respondent as well as an order restraining the respondent, its Directors, agents, officers, affiliates in any manner dealing with including selling, alienating, transferring, mortgaging or creating any third party rights, title or interest either directly or indirectly in the Apartments which are a subject matter of dispute between the parties.

2. Since similar questions/issues arise for adjudication in these petitions, they are being disposed of by a common judgment.

3. Some brief facts necessary to adjudicate these petitions are that the respondent is a part of the Krrish Group of Developers, engaged in promoting and developing Real Estate projects in Delhi-NCR. OMP(I) (Comm) 285/2019 has been filed on behalf of the HUF through its Karta, Shri M.K. Jain; OMP(I) (Comm) 280/2019 has been filed by Ms. Neeru Jain, wife of Shri M.K. Jain; OMP(I) (Comm) 281/2019, OMP(I) (Comm) 282/2019 and OMP(I) (Comm) 286/2019

are filed by Shri M.K. Jain in his personal capacity and OMP(I) (Comm) 284/2019 has been filed by Rishabh Jain, son of Shri M.K. Jain. Shri M.K. Jain is the General Power of Attorney holder of the other petitioners.

4. A detailed chart of the Apartment numbers, with dates and amounts of payments and other relevant details in respect of the seven petitions is scanned and placed hereunder:

5. The Apartments involved in the present petitions are a part of a project called Provence Estate, located at Gwal Pahari, District Sohna, Gurgaon (Haryana) (hereinafter referred to as 'the Project').

6. It is the case of the petitioners herein that one Mr. Amit Katyal, who is the Managing Director and a majority shareholder in the respondent Company approached the petitioners somewhere in May 2018 and informed Mr. M.K. Jain about an upcoming residential Project in Gurgaon. He also informed Mr. Jain that the respondent Company had a vast experience and expertise in developing Real Estate projects in Delhi-NCR. Mr. Katyal represented that the project had been duly registered under the Real Estate (Regulation & Development) Act, 2016 (hereinafter referred to as 'RERA') and that it was also compliant with all terms prescribed by the Haryana Real Estate Regulatory Authority under the Haryana Real Estate (Regulation and Development) Rules, 2017 (hereinafter referred to as 'Haryana Rules').

7. As per the petitioners, they were assured by Mr. Katyal that if the petitioners paid a lumpsum amount, upfront, then the respondent would offer the units at a discounted price of INR 2,850/- per sq. feet, inclusive of all taxes and charges, as opposed to the higher prevalent market price.

8. On these assurances, the petitioners decided to purchase the apartments. The respective areas of the apartments, with their per square feet price are given in the Chart scanned above.

9. The pleaded case of the petitioners is that while there was a Special Payment Plan appended to the Agreements, but the parties had orally

agreed to a different methodology of payment. The petitioners in fact made payments and also deposited TDS on the said amounts in accordance with the oral understanding and not as per the laid down Payment Plan. Allotment letters were issued in favour of the petitioners. The respondent also entered into an Apartment Buyer's Agreements ('Agreements') with the petitioners for the respective Apartments. It is the case of the petitioners that in most cases, respondent had collected 70% of the purchase price qua the subject Apartments except in case of Apartment No. C-1102 (OMP(I)(COMM)281/2019) & Apartment No. D-902 ((OMP(I)(COMM)286/2019) where payments made were 57% and 60% respectively. The laid down Schedule provided for payment of only 10% of the consideration amount at the time of booking and thereafter 60% was payable upto 31.10.2018 but the payments made did not match the written plan.

10. It is the case of the petitioners that the respondent having taken payment of about 70% of the total consideration amount have failed to honour their commitment and wrongfully issued cancellation letters on 29.03.2019 with the corrigendum dated 30.03.2019 (03.04.2019 in OMP(I)(COMM) 281/2019).

11. The petitioners responded to the cancellation letter on 08.04.2019 (on 20.04.2019 in OMP(I)(COMM) 281/2019). The stand of the petitioners in the reply was that having accepted substantial part of sale consideration, respondent neither sent any demand notice nor a reminder seeking payment of the outstanding dues. Validity of the payment schedule appended to the agreement was also questioned.

The petitioners blamed the respondent for not having offered possession in time and also expressed their readiness and willingness to make payment of the balance price. A request was made to the respondent to withdraw the cancellation letter.

12. Replies sent by the petitioners were responded to by the respondent in which, the respondent allegedly admitted that the agreement is pre- dated as also the fact that no written reminder was sent. Respondent, however, refused to revoke the cancellation letter. Vide its email dated 27.05.2019, the respondent assured that the amounts received from the petitioners would be refunded within 60 days.

13. Legal notices challenging the cancellation were sent by the petitioners in May 2019. Subsequently vide letter dated 27.07.2019, respondent refunded the amounts received from the petitioners except for 10% which was forfeited as per the terms of agreement between the parties.

14. Apprehending that the respondent might allot the subject apartments to third parties, despite the petitioners being ready and willing to make balance payments, the petitioners filed the present petitions in this Court.

15. When the matter was listed for admission, the respondent entered appearance through counsels, as advance copies had been served. Submission was made on behalf of the respondent that the Apartments in question had been sold to third parties and time was sought to produce documents in support thereof. Thereafter the respondent filed an affidavit categorically stating that the Apartments had been sold to third parties and placed some Allotment Letters and one Apartment Buyer's Agreement, on record.

16. The contentions of learned Senior counsels on behalf of the petitioners can be summarized as under:

a. As per Section 13(1) of RERA, a promoter is disallowed from accepting a sum of more than 10% of the cost of an Apartment as an advance payment, without first entering into a written agreement for sale, as prescribed, with the allottee and registering the same. Clause 1.2(iii) and clause 2 of the 'Model Agreement' require the respondent to issue a written demand notice to the allottees which in this case are the petitioners, for making the payments as per the installments. As per clause 9.3(i) an allottee can be considered in default only if the allottee fails to make payment of 2 consecutive demands made by the promoter. Clause 2.18 and 2.19 of the agreement between the parties which entitles the respondent to terminate the agreement, without issue of a demand notice, is contrary to the clauses of the Model Agreement, mentioned above. Respondent has failed to adhere to the clauses of the Model Agreement and has not issued any demand notice for the outstanding payment and therefore the cancellation is illegal, being violative of RERA and the Haryana Rules.

b. Respondent has failed to offer possession by 31 st December, 2018 i.e. the outer limit fixed in their commitment to the RERA Authority and thus the petitioners were justified in not making further payments thereof. Clause 9.2 of the Model Agreement has been relied upon in support of this proposition.

c. The respondent received 70% of the total sale consideration in respect of 5 Apartments and 57% and 60% in two cases. In some cases money was received even before signing the Apartment Buyer's Agreement. In most cases, August, 2018 was the outer limit till which substantial payments had been made, although going by the payment Schedule, so heavily being relied upon by the respondent, this amount had to be paid till 31st October, 2018. This clearly shows that the payment schedule in the Agreement was only a standardized document, inapplicable to the present transactions. The respondent having waived and relinquished its right to receive payments under the Special Payment Plan, by accepting a different path, cannot blow hot and cold and terminate the Agreement on the basis of default in payment as per the laid down Schedule. d. The petitioners have performed their part of the Agreement and have been and still are ready and willing to pay the balance amount, which they had even stated in their reply to the cancellation letter.

e. Section 31 of RERA casts an obligation on the respondent to comply with the mandatory requirements of RERA and Rules thereunder. Section 18(3) makes the respondent liable to pay compensation to the petitioners since they have failed to discharge their obligations. Section 61 read with Section 69 of RERA stipulates for imposition of 'penalty' for violation of the provisions of RERA. The respondent has failed to deliver the apartments to the petitioners within the stipulated time frame

allowed by the Haryana Authority. As per the terms of the Registration granted to the respondent by the Haryana Authority under Rule 5(1) of the Haryana Rules, possession had to be delivered by 31.12.2018.

f. In the case of an immoveable property, there is a presumption that time is not of the essence of the contract. Reliance is placed on the judgments of the Apex Court in the matter of Chand Rani vs. Kamal Rani, reported as (1993) 1 SCC 519 and N. Srinivasa vs. Kuttukaran Machine Tools Ltd., reported as (2009) 5 SCC 182. Reliance is also placed on Swarnam Ramachandran & Ors. vs. Aravacode Chakungal Jayapalan, reported as (2004) 8 SCC 689. In the case of Vivek Garg vs. Y.C. Kurele, reported as 2013 VIII AD (Delhi) 297, in similar circumstances and similar facts, as in the present case, after noting the view of the Apex Court in Sardamani Kandappan vs. Mrs. S. Rajalakshmi & Ors., reported as AIR 2011 SC 3234, this Court held that time was not of the essence of the contract. Clause 2.18 of the Agreement entered into between the parties stipulates for extension of time on payment of interest. Since extension of time is contemplated, when installments are not paid in time, this renders ineffective even the express provisions of time being the essence of the contract. Reliance is placed on the judgment of the Apex Court in Hind Construction Contractors vs. State of Maharashtra, reported as (1979) 2 SCC 70 and Balasaheb Dayandeo Naik (Dead) vs. Appasaheb Dattatraya Pawar, reported as (2008) 4

SCC 464, as well as a judgment of this Court in Indian Potash Limited vs. M/s. Emmsons Gulf DMCC, reported as 2018 SCC OnLine Del 11556. In any case, the argument is that the question whether time was or was not the essence of the contract and thus whether petitioners are entitled to specific relief, is within the domain of the Arbitral Tribunal as and when the same is constituted.

g. The documents placed on record itself show that the transactions of alleged sale to third parties are sham. Buyers are none other than the Directors/Employees of the Respondent. Allotment letters are of the same dates as cancellation letters which is unheard of in the field of buying and selling properties. Mr. Katyal is shown to have been granted loan for buying one of the Apartment in one day. This is totally unbelievable as no Bank works with such efficiency. The documents are thus forged/fabricated to defeat the rights of the petitioners and have been fabricated overnight after the petitions were filed.

17. Before replying to the contentions of the petitioners on merits, Mr.Sethi, learned senior counsel for respondent, submits that the prayers in the petitions are twofold: (a) for staying the operation of the cancellation letters and (b) restraining the respondent from creating third party rights in the property in question. Learned senior counsel submits that prayer (a) cannot be granted in a petition under Section 9 of the Act and insofar as prayer (b) is concerned, the same is infructuous, since the apartments in question in all the 7 petitions have already been sold. Allotment letters have been issued in favour of the

purchasers and those have been annexed with the affidavit filed in this Court for bringing on record additional documents. In one case, even the Apartment Buyer's Agreement has been filed along with the affidavit as an illustration. It is thus vehemently contended that no purpose will be achieved by hearing the petitions.

18. Without prejudice to these contentions, Mr. Sethi has argued on the merits of the case and his submissions in a nut shell can be summarized, as under:

a. The agreement between the parties provided for a Special Payment Plan which is as under:

                       CONSTRUCTION STAGE                PAYMENT SCHEDULE
                       1. At the time of booking         10% of Consideration
                       2. On or before 31.08.2018        50% of Consideration
                       3. On or before 31.10.2018        10% of Consideration
                       4. On or before 30.11.2018        10% of Consideration
                       5. On or before 31.12.2018        15% of Consideration
                       6. On offer of possession         5% of Consideration + Stamp
                                                         Duty + Registration Charges

b. As per this agreed upon Schedule, the installments towards the sale consideration had to be paid in the prescribed percentage and by the date prescribed for the monthly installment. The payment schedule was itself an indicator to the petitioners as to the percentage and the time by which the installments were payable. This apart, there was no Clause in the Agreement between the parties which required any demand notice or

reminder notice to be sent to the petitioners, calling upon them to pay the installments.

c. Clause 12.2 of the Agreement entitled the respondent to terminate the agreement upon the default of the petitioner in making timely payments. Respondent rightly terminated the Agreement for default in making timely payments, as it is undisputed that the petitioners did not pay the installments as per the dates stipulated in the Agreement. Since the termination is for breach of the Agreement, the argument of forged documents and sale to third parties is irrelevant to the present controversy.

d. The petitioners have orally contended that Section 13 of RERA mandatorily requires the Agreements to Sell to be in the 'Form prescribed' as per the Rules, formulated under RERA. Haryana Rules in Rule 8 read with Annexure 'A', provide that an Agreement to sell between a developer and a home buyer shall be in the Form contained therein and no other Form. This argument of the petitioners is misconceived as (a) the subject Apartments relate to a project that was an on-going project when the RERA came into effect on 28th July, 2017; (b) the prescribed Form read with Section 13 RERA, itself postulates that the Agreement shall come into effect only upon the parties signing the Agreement, which has admittedly not happened in the present cases.

e. If the argument of the petitioners is that the Agreement between the parties is in violation of RERA, then in any case, the said

Agreement being contrary to law is void and cannot be enforced by the petitioners in a Court of Law. The argument of the petitioners that the model Form under the Rules provided for a thirty days' notice by the Developer, prior to the termination of the Agreement to sell is fallacious. The petitioners are seeking to re-write the terms of the Agreement between the parties which cannot be done. In fact, the Agreement between the parties herein has a contrary term which entitles the respondent to terminate forthwith on default of the payments. There is no clause providing for sending demand notice in the agreement governing the parties.

f. The contention that the parties would be governed by the prescribed Form of Agreement cannot be sustained for another reason. Clause 20 of the prescribed Form specifically states that the Agreement to sell will come into force only when the signed Agreement is Registered, which admittedly is not the case here. Assuming for the sake of arguments that the Rules and the prescribed Form do apply to the parties, then Clause 33 requires that all disputes arising out of the Agreement shall be settled through the Adjudicating Officer under RERA. This would disentitle the petitioners from approaching this Court under Section 9 of the Act. Additionally, Section 79 of RERA provides for a bar on the jurisdiction of the Civil Courts on matters concerning the rights under the said Enactment. g. The RERA Rules came into effect in 2017. The Agreement between the present parties was executed in 2018 and the

parties expressly chose to enter into an Agreement different from the one contemplated under RERA. The petitioners cannot therefore insist that the RERA Rules would govern the parties.

h. Time was indeed the essence of contract. Clause 12.1 specifically incorporated the intent of the parties that time shall be of essence in payment of consideration by the petitioners. The parties specifically agreed upon the cut off dates, by which the installments were to be paid and in case of delay, Clause 12.2 entitled the respondent to terminate the Agreement. Successful completion of the residential project of the respondent is premised on timely payments by the petitioners and delay in payments and consequent handing over of possession has a cascading effect on the cost overruns of the respondent, besides making it liable to penalties under RERA. i. It is no longer res integra that time is of essence even in transactions relating to immoveable properties, if the parties so intend as evidenced by express terms of their contract. Since the respondent was to undertake construction using monies paid by the petitioners, the intent of the parties was clear that time was of essence when installments were fixed, dates prescribed for payment and a clause for consequences of breach was incorporated. Reliance is placed on the judgment of the Supreme Court in Sardamani (supra) for the proposition that the principle that time is not of essence in immoveable properties contract, is out of sync with present economic

realities and time can be essence, if the parties so stipulate. Apex Court had rendered this judgment after considering its judgments in the cases of Chand Rani (supra) and N. Srinivasa (supra), which have been relied upon by the petitioners. Reliance is placed on the case of A.K. Laxmipathy vs. Rai Saheb Pannalal H. Lahoti Charitable Trust, reported as (2010) 1 SCC 287, where the Apex Court held that when the party breaches a stipulation of timeline of payment, it is not entitled to the specific performance, as the time was of essence. The judgment relied upon by the petitioners in the case of Balasaheb (supra) is distinguishable as in that case the question was of sale of agricultural land which is different from the realities of an Urban land. This very distinction has been recognized by the Apex Court in Sardamani (supra). Secondly, in Balasaheb (supra) no evidence was led to prove that time was of essence and there was no express stipulation, as is in the present case. The judgment of N. Srinivasa (supra) does not apply to the present case as no alienation had taken place in that case, a position that is unrebutted in the present case. In Ritu Mercantile Pvt. Ltd. vs. Leelawati, reported as 2013 SCC OnLine Del 2014, this Court has held that escalation of prices of the suit property is in itself determinative of whether time is of the essence of the transactions or not. The affidavit filed by the respondent which is unrebutted, reflects a substantial escalation in the prices of the subject apartments.

j. Time being the essence of the Agreement and the petitioners being in default of making payments, are not entitled to specific performance of the contract. Section 14(d) of the Specific Relied Act, 1963 provides that determinable contracts cannot be specifically enforced. Petitioners being in default of payments and the agreements having been terminated, no specific performance as prayed for can be granted.

k. The petitions suffer from delay and laches. The agreements were undisputedly terminated on 29/30th March, 2019 and 3rd April, 2019 respectively. The present petitions have been filed on 29th August, 2019 i.e. after 5 months. It is settled law that unexplained delay in approaching the Court will constitute 'sufficient reason' for the Court to decline interim protection. The petitions do not even contain any explanation much less sufficient cause for approaching the Court belatedly. l. The petitioners have not made out any prima facie case for grant of injunction. It is not shown how irreparable harm will be caused in case the injunction is refused. This Court in the case of Prakash Khattar vs. Shanta Jindal, reported as 2011 SCC OnLine Del 4578 has held that in the absence of any interim injunction, a claimant to an immoveable property is protected by section 52 of the Transfer of Property Act, which contemplates the doctrine of lis pendens.

19. In response to the contentions by the respondent, the petitioners, in rejoinder, have urged as under:

a. Another allottee of the same project had invoked the provisions of RERA, on not having been given possession of the apartment allotted to him by the respondent herein. The Apartment Buyers' Agreement in the said case was dated 14.09.2011, which was also prior to be coming into effect of RERA. The stand of the respondent before the Authority therein was that Rule 5 would apply and the time schedule for handing over the possession is 31st December 2018. The Authority has decided in favour of the allottee in the said case. Respondent, in the present case, has taken substantial payments and the case of the petitioners is on a better footing than the case of the allottee in that case. Reference is made to the said decision in the case of Promila Johnson vs. Jasmine Buidmart Pvt. Ltd., decided by NCDRC on 08.01.2018.

b. The petitioners are not pressing relief (a) as the same would be a subject matter of adjudication before the Arbitral Tribunal, as and when the Arbitration is invoked. However, they are entitled to an interim relief, as prayed for in prayer (b). c. The submission of the respondent that payments were to be made as per the Special Payment Plan, appended in the agreement, is completely misconceived. The amounts received by the respondent are not in accordance with the plan, as neither the amount nor the timeline matches upto the schedule made in the plan.

d. The argument that no notice was required is in the teeth of the cancellation notice itself. In the said notice, it is mentioned by

the respondent itself that many reminders were sent to the petitioners, allegedly by the respondent. Even assuming that there was no agreement requiring the notice of demand to be sent, it was only prudent and reasonable and in keeping with the principles of natural justice that having received major part of the considerations, respondent should have called upon the petitioners to pay the outstanding amount in the first instance, rather than cancelling the entire transaction. e. RERA and the Haryana Rules have been brought into effect for the benefit of the purchasers and to safeguard bonafide purchasers from the action of the builders and the developers who take advance money and then misappropriate the payments and delay handing over possession. Being a Welfare Legislation, there are certain clauses which have been specifically incorporated therein to safeguard the interests of bonafide allottees, against the builders. Explanation (iii) to Clause 1.2.2 in the Annexure 'A' of Rule 8 of the Haryana Rules provides that the promoter shall periodically intimate in writing to the allottee, the amount payable and in addition shall also provide the details of the taxes etc. payable under various Acts/Rules/Notifications. Clause 9.2 provides that in case of default by the promoter, the allottee is entitled to stop making further payments and only when the promoter corrects the situation by completing the construction or curing other defects, that the allottee will be required to make the next payment and that too without any interest for the said period under delay.

Clause 9.3 clearly stipulates that the allottee would be considered as a defaulter only when he fails to make payments for 2 consecutive demands made by the promoter, despite having been issued notice in that regard. Thus, the respondent has violated the said Rules inasmuch as even assuming that the payments were to be as per the time schedule under the Special Payment Plan, respondent should have given a prior notice, assuming there was default in making the balance payment. f. The argument that the apartments have been sold to third parties is only to prevent this Court from granting an interim injunction. After receipt of the advance copies of the petitions, the respondent has forged and fabricated documents to show third party transactions. The document at page 7 of the affidavit filed by the respondent would show that the allotment is made in favour of the promoter Director of the respondent itself i.e. Mr.Amit Katyal. The cancellation letter is 29.03.2019 and on the same day, an allotment letter is issued in favour of Mr. Katyal. What is significant is that on the same day even the Bank had sanctioned a loan to the said promoter. The ledger accounts at page 48 of the affidavit show that on 16.03.2019, the first entry is of Rs. 4 Lacs. On 29.03.2019, the second entry is of 4,89,27,060/- and on 30.03.2019, there is another entry of 3,25,00,000/-. There is no document showing the transfer from the company. The respondent has not placed on record any application by Mr. Katyal, seeking allotment of the apartment. The document at page 13 of the affidavit of respondent is dated

10.06.2019 and is with respect to the apartment bearing No. D- 1002. The petitions were filed on 30.08.2019 and the endorsement of receipt of this letter bears a date of 02.09.2019. g. Assuming for the sake of argument, though not admitting, that allotment letters or even the Apartment Buyers' Agreement, have been executed in favour of third parties, with respect to the apartments in the present petitions, interim relief can still be granted by this Court by restraining the respondent from executing the Sale Deeds, as the Agreement to sell does not confer title. This Court can further restrain the respondent from handing over possession of the apartments to any third parties, till the disputes between the parties are referred to arbitration and the petitioners take recourse to an application under Section 17 of the Act.

20. I have heard the learned Senior counsels for the parties and examined their rival contentions.

21. Some undisputed facts are that the petitioners had booked Apartments with the respondent Company. 70% of the money had been paid to the respondent in five out of seven cases before this Court. In remaining two cases 57% and 60% has been paid. Allotment letters were issued to the petitioners and subsequently Apartment Buyer's Agreements were also executed between the parties. Disputes arose between the parties, when the petitioners did not make payments towards balance sale consideration. Respondent did not issue any demand notice or a reminder calling upon the petitioners to pay the

balance consideration and cancelled the allotments on 29/30 th March, 2019 in most cases and in one case on 3rd April, 2019.

22. The pleadings and arguments of the parties, give rise to the following questions:

1. What is the sanctity of the Special Payment Plan appended to the agreement once the payments have been accepted by the respondent as per timelines which did not match the written schedule?

2. Whether the respondent was obliged to send a demand notice/reminder to clear outstanding dues?

3. Whether the parties were governed by the provisions of RERA and the terms of the Forms prescribed thereunder?

4. Whether time was of essence between the parties as the agreements were with respect to immovable property?

5. Whether the documents relating to sale transactions with third parties are forged/fabricated in light of the issues raised by the petitioners with respect to the date of their execution, the allottees being the promoter of respondent etc.?

6. Whether the time lag of five months in approaching the Court from March, 2019 disentitles the petitioners to relief of interlocutory injunction?

7. Whether the petitioners are entitled to mandatory injunction under Section 9 to preserve the property till the parties take recourse to Arbitration.

8. What is the effect of transactions in favour of the third parties.

23. Undoubtedly, the questions whether the agreements between the parties were validly terminated; whether the agreements are governed by RERA; whether the time was essence of the contract or not, whether demand notice was a mandate etc. as formulated above, cannot be determined in a petition under Section 9 of the Act. This has been clearly held by this Court in S.Raminder Singh vs. NCT of Delhi 2002 (8) AD (Del) 617. These questions are therefore, being left open for adjudication by the Arbitral Tribunal, as and when constituted. However, in order to decide whether the petitioner fulfils the parameters for grant of interim injunction, certain facts are necessary to be examined in order to form a prima facie view. It is important to note at this stage that the facts of the case as well as the disputes in controversy between the parties are being examined by this Court only with a view to determine whether the petitioners are entitled to a relief under Section 9 of the Act.

24. Law on the principles that have to be followed while deciding a petition under Section 9 of the Act is well settled. Although the provisions of CPC do not strictly apply to the Arbitration Act, but nevertheless the principles underlying Order XXXVIII Rule 5 CPC and Order XXXIX Rule 1 and 2 CPC are to be kept in mind while passing orders under Section 9 of the Act. This has been clearly held by the Apex Court in the case of Indian Telephone Industries vs. Siemens Public Communication, reported as (2002) 5 SCC 510.

25. This Court in the case of Modi Rubber Limited vs. Guardian International Corporation 2007 SCConline Del 502 has defined the scope of proceedings under Section 9 and amongst other guiding

principles has held that the party seeking an injunction must make out a prima facie case and the balance of convenience in its favour. The scope and object of Section 9 is to mitigate the risk or injustice during the period when the Dispute Resolution Mechanism is pending. The threshold of establishing a prima facie case is rigidly applied looking into the facts and circumstances of the case. This apart, the Court would also have to be mindful of the ultimate relief that a party would seek in the arbitration proceedings.

26. In Arvind Constructions vs. Kalinga Mining Corpoartion, reported as (2007) 6 SCC 798, the Apex Court held as under:

" ...The power under Section 9 is conferred on the District Court. No special procedure is prescribed by the Act in that behalf. It is also clarified that the court entertaining an application under Section 9 of the Act shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it. Prima facie, it appears that the general rules that governed the court while considering the grant of an interim injunction at the threshold are attracted even while dealing with an application under Section 9 of the Act. There is also the principle that when a power is conferred under a special statute and it is conferred on an ordinary court of the land, without laying down any special condition for exercise of that power, the general rules of procedure of that court would apply. The Act does not prima facie purport to keep out the provisions of the Specific Relief Act from consideration. No doubt, a view that exercise of power under Section 9 of the Act is not controlled by the Specific Relief Act has been taken by the Madhya Pradesh High Court. The power under Section 9 of the Act is not controlled by Order 18 Rule 5 of the Code of Civil Procedure is a view taken by the High Court of Bombay. But, how far these decisions are

correct, requires to be considered in an appropriate case. Suffice it to say that on the basis of the submissions made in this case, we are not inclined to answer that question finally. But, we may indicate that we are prima facie inclined to the view that exercise of power under Section 9 of the Act must be based on well-recognised principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a Receiver."

27. The High Court of Bombay in the case of Nimbus Communications Ltd. vs. BCCI, reported as (2013) 1 MHLJ 39, held as under:-

"22. ....The Division Bench noted that the power being of a drastic nature, a direction to secure the amount claimed in the arbitration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave injustice to the party seeking a protective order. The obstructive conduct of the party against whom such a direction is sought was regarded as being a material consideration. However, the view of the Division Bench of this Court that the exercise of power under section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in view of the decision of the Supreme Court in Adhunik Steels.

23. In a recent judgment of a learned Single Judge of the Delhi High Court in Steel Authority of India Ltd. v. AMCIPTY Ltd., O.M.P. 417/2011 decided on 1 September, 2011, the judgment of the Division Bench of this Court in National Shipping Company was relied upon. The Delhi High Court observed that the provisions of Order 38, Rule 5 would serve as a guiding principle for the exercise of the jurisdiction while dealing with a petition under section 9 requiring the respondent to furnish security and the basic consideration is that the Court should be satisfied that the furnishing of security is essential to safeguard the interest of the petitioner.

24. A close reading of the judgment of the Supreme Court in Adhunik Steels would indicate that while the Court held that the basic principles governing the grant of interim injunction would stand attracted to a petition under section 9, the Court was of the view that the power under section 9 is not totally independent of those principles. In other words, the power which is exercised by the Court under section 9 is guided by the underlying principles which govern the exercise of an analogous power in the Code of Civil Procedure 1908. The exercise of the power under section 9 cannot be totally independent of those principles. At the same time, the Court when it decides a petition under section 9 must have due regard to the underlying purpose of the conferment of the power upon the Court which is to promote the efficacy of arbitration as a form of dispute resolution. Just as on the one hand the exercise of the power under section 9 cannot be carried out in an uncharted territory ignoring the basic principles of procedural law contained in the Code of Civil Procedure 1908, the rigors of every procedural provision in the Code of Civil Procedure 1908 cannot be put into place to defeat the grant of relief which would subserve the paramount interests of justice. A balance has to be drawn between the two considerations in the facts of each case. The principles laid down in the Code of Civil Procedure 1908 for the grant of interlocutory remedies must furnish a guide to the Court when it determines an application under section 9 of the Arbitration and Conciliation Act, 1996. The underlying basis of Order 38, Rule 5 therefore has to be borne in mind while deciding an application under section 9(ii)(b)."

28. This Court in S. Harinder Singh vs. S. Nirmal Singh 7 Ors., reported as (2009) 113 DRJ 784 (DB) held as under:

"29. Section 9 of the Act (which could be invoked on 12.01.2009 as the appeal was even then pending) not only

entitles a party to apply to the Court "for an interim measure of protection in respect of ... preservation, interim custody... of', the subject matter of the arbitration agreement" and to secure "the amount in dispute in arbitration", but also goes on to say "and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it." The power of the Court to suo moto pass orders in terms of Section 9 of the Act is therefore, preserved. Section 94 read with Section 151 C.P.C. also invests the Court with inherent power to pass interlocutory orders as may appear to the Court to be just and convenient to prevent the ends of justice from being defeated. (See Vareed Jacob v. Sosamma Geevarghese, AIR 2004 SC 3992.) In the interest of justice, and to bring the parties to an even keel, as we were seized of the appeal. We had the jurisdiction to pass the order dated 12.01.2009 as jurisdiction to pass the order dated 12.01.2009 as corrected on 6.2.2009. We, therefore, reject this submission as well."

29. Having traversed through some of the judgments, the guiding principle that emerges for exercise of power under Section 9, is that when the parties are governed by an Arbitration Agreement and intend to resort to Arbitration proceedings to resolve their disputes, Court can pass necessary orders to preserve the property involved in the dispute applying the principle underlying Order XXXVIII Rule 5 CPC and Order XXXIX Rules 1 and 2 CPC. In fact, provisions of Section 9 of the Arbitration Act itself enable the Court to adopt following measures by way of interim relief to the parties:

"9. Interim measures, etc. by Court.--A party may, before or during arbitral proceedings or at any time after

the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court--

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:--

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) xxx xxx

(c) the detention, preservation or inspection of any property or thing which is the subject-

matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) xxx xxx

(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."

30. Very often, the Court may be faced with the dilemma about the grant of interlocutory injunctions, there being a risk that it could be a wrong decision. This could be on account of granting an injunction to a party who fails to establish its right during the final proceedings or may be in refusing to grant injunction to a party who may ultimately succeed, but as has been put by Lord Hoffman in the case of Films rover International Ltd. vs. Cannon Film Sales Ltd., reported as (1986) All ER 772, the path that the Court should tread on should be one where there is lower risk of injustice. The relevant part of the judgment is reproduced hereinunder:

"The question of substance is whether the granting of the injunction would carry that higher risk of injustice which is normally associated with the grant of a mandatory injunction. The second point is that in cases in which there can be no dispute about the use of the term 'mandatory' to describe the injunction, the same question of substance will determine whether the case is 'normal' and therefore within the guideline or 'exceptional' and therefore requiring special treatment. If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a 'high degree of assurance' about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction."

31. The Apex Court in Dorab Cawasji Warden Vs. Coomi Sorab Warden and Ors. (1990) 2 SCC 117, while dealing with power to grant interlocutory mandatory injunction has observed as under:-

"The relief of interlocutory mandatory injunctions are thus granted generally to preserve or restore the status

quo of the last non-contested status which preceded the pending controversy until the final hearing when full relief may be granted or to compel the undoing of those acts that have been illegally done or the restoration of that which was wrongfully taken from the party complaining. But since the granting of such an injunction to a party who fails or would fail to establish his right at the trial may cause great injustice or irreparable harm to the party against whom it was granted or alternatively not granting of it to a party who succeeds or would succeed may equally cause great injustice or irreparable harm, courts have evolved certain guidelines. Generally stated these guidelines are:

(1) The plaintiff has a strong case for trial. That is, it shall be of a higher standard than a prima facie case that is normally required for a prohibitory injunction.

(2) It is necessary to prevent irreparable or serious injury which normally cannot be compensated in terms of money.

(3) The balance of convenience is in favour of the one seeking such relief."

32. The main plank of the argument of the petitioners is that although a Special Payment Plan was appended to the Apartment Buyer's Agreement, but neither of the parties adhered to the same. The pattern in which the payments have been made and received evidences an oral understanding between the parties qua a payment plan, different in many ways from the written plan. The contention is that the respondent had adhered to the plan then it should have scrupulously followed the same and accepted only 10% of the sale consideration at the time of booking. 50% of the consideration should have been

accepted on or before 31.8.2018 and likewise the next 10% became payable only on or before 31.8.2018. Having followed a plan different from the Special Payment Plan, the respondent can hardly contend that the time lines of the payment were known to the petitioner and there was no need to notify by a notice or a reminder before cancelling the agreements.

33. Having considered these submissions, I am of the prima facie view that there is merit in this contention of the petitioners. A bare perusal of the Special Payment Plan indicates that 31st October, 2018 was the cut off date by which 70% of the consideration ought to have been paid. However, as the undisputed facts emerge, the respondent had received 70% or 57% or 60% of the sale consideration respectively in different cases and significantly on dates, different from those in the Schedule. Thus, it prima facie appears that the parties had orally entered into a different understanding, giving a go-bye to the Special Payment Plan. Neither party adhered to the 10% advance payment at the time of booking and nor were the subsequent two installments paid as per the Special Payment Plan. Seen in this light, respondent is not right in its contention that the petitioners knew the Schedule as per which the payments were to be made and there was thus no necessity to notify the petitioners for balance payments. The respondent, in my view, cannot even contend that there was a breach or a default in the installments payable by 30th November, 2018 and 31st December, 2018. Once the parties have, by their conduct, adopted a methodology different from the one in the special payment plan, respondent cannot

be heard to say that the Schedule of the installment plan should have been adhered to.

34. Prima facie, I also find merit in the contention of the petitioners that notice ought to have been given by the respondent before cancelling the allotment. Respondent is no doubt right in its contention that the Apartment Buyer's Agreement between the parties does not expressly stipulate the giving of a demand notice. However, once the laid down time lines were not being followed and the respondent had admittedly received substantial sale consideration, the respondent ought to have sent a demand notice or at least a reminder, calling upon the petitioners to clear the outstanding dues. In fact, it may be noted that the respondent itself envisaged and understood that a notice or reminder ought to be given and this is evident from a reading of the cancellation letter itself, where the respondent had mentioned that reminders were sent to the petitioners. Relevant part of the letter dated 29.03.2019 is extracted hereinunder:

"As per your payment plan in Apartment Buyer Agreement dated 30-07-2018 an amount of Rs.1,75,54,860/- was due since 31-12-2018.

Out of which we have received Rs. 1,12,33,035/- till date. An amount of Rs.63,21,825/- is still pending to be received from you.

The unit was given to your good self at a very discounted rate and despite many reminders sent to you through various communications, we have still not received the above said amount so due.

We are hence cancelling your unit. You are requested to collect the balance amount from our office on any weekday from (10:00 hours tb 18:00 hours)."

35. Though, the petitioners, have disputed the receipt of any such reminders, but the respondent in view of its own stand in the cancellation letter, can hardly argue that reminders were not necessary. Once the parties had entered into the Apartment Buyer's Agreement and the respondent had invested a substantial amount received from the petitioners in its project, in my prima facie view, it was a dishonest act to have cancelled the allotment, without putting the petitioners to notice.

36. The petitioners have raised another significant issue regarding the transactions relating to the selling of the apartments to third parties. It is contended that the manner in which the transactions have been entered into, leaves much to be desired, as the documents shown to this Court by the respondent are apparently forged and fabricated. Once the advance copy of the present petitions was received by the respondents, the allotment letters have been fabricated only to defeat the grant of interlocutory injunction in favour of the petitioners. It is pointed out that a bare look at some of the documents would show that these are not genuine transactions. Attention of the Court has been drawn to the allotment letter dated 29.03.2019, which is at page 7 of the affidavit filed. The allotment is in the name of Mr. Amit Katyal, who is the Managing Director of the respondent itself. Likewise, the other allotment letters also give an impression that the allottees are none other than the sister concerns of the respondent.

37. I have carefully gone through the documents annexed to the affidavit.

Prima facie, it does appear that the transactions are not genuine. It is a little strange that the allotment of the petitioners is cancelled on 29.03.2019 and on the same day, one allotment is made in favour of Mr. Amit Katyal. In fact, Mr. Amit Katyal is none other than the Managing Director and a major shareholder of the respondent Company itself. The loan in favour of Mr. Katyal is also sanctioned on 29.03.2019 itself. The ledger entries in the account of Mr. Katyal with respect to the same Apartment are also suspicious. The first credit entry in the account is dated 16.03.2019 on which day, even the allotment in favour of the petitioners had not been cancelled. Significantly even the application for allotment of the apartment is not on record. Copy of the ledger entry and the allotment letter as well as the document evidencing the sanction of loan are scanned and placed below:

38. I may also take note of another relevant fact that the respondent had cancelled the allotment of the petitioners by a letter dated 29/30.03.2019 and in one case on 03.04.2019. Subsequently also, the respondent had written an e-mail to the petitioners. In none of the correspondence prior to the filing of the petition, the respondent had ever taken a stand that the flats have been re-allotted. If the stand of the respondent was genuine that the re-allotments had been done in March or any date prior to the affidavit being filed in this Court, this stand would have been reflected in the letters written to the petitioners. The facts and circumstances, in my view, surrounding the alleged transactions of allotment to third parties, prima facie, do create a doubt on the genuineness of such allotments. In this background, the contention of the respondent that only because the apartments have been sold to third parties, the petitioners are not entitled to relief under Section 9 of the Act cannot be sustained.

39. Learned senior counsel for the respondent has vehemently opposed the grant of relief also on the ground that there is no imminent threat to the petitioners. The petitioners have waited from March 2019 till August 2019 and can wait for the matter to be finally adjudicated by the Arbitral Tribunal. Having filed the petitions belatedly, the petitioners are disentitled to seek a relief under Section 9 of the Act, which is meant for urgent relief.

40. There is no quarrel with the proposition that Section 9 has been enacted to give urgent interlocutory reliefs to the parties and delay is a significant factor in considering the grant of such a relief. However, the telling facts of the present cases are such that the petitioners cannot

be ousted only on the ground of delay and laches, if any. The respondent had received substantial part of the sale consideration from the petitioners at a time when they needed the money for their huge investments and have without putting them to even a demand notice or a reminder, cancelled the allotments. The affidavit filed by the respondent itself shows from the allotment letters appended thereto, that the Apartments have been resold at a much higher price and, prima facie, the impression is that the cancellation was done only with the purpose to sell the Apartments at higher prices. It does seem a little strange that when parties have entered into a sale purchase agreement and have exchanged substantial amount of sale consideration, the other party would cancel the allotment without even giving an opportunity to the purchaser to make good, the balance outstanding payment.

41. In any case, in my view this contention of respondent is even factually not correct. Parties were exchanging letters till May, 2019 and the money received by respondent was sought to be refunded by the respondent in July, 2019. The petitions were filed in August, 2019 and in my view are not barred by delay and laches.

42. Learned counsel for the petitioner has rightly relied upon the judgment of the Apex Court in N. Srinivasa (supra) where the Apex Court was considering an order by the High Court whereby it had vacated a status quo order granted by the Trial Court under Section 9 of the Act to secure the property from being alienated/transferred to third parties. The Apex Court held that in case the Award comes in favour of the party seeking interim relief then vacating the status quo order

would make the proceedings before the Arbitrator infructuous and the Award nugatory. Thus, the High Court had no justification to vacate the status quo order.

43. In so far as the other judgments relied upon by the petitioner are concerned on the proposition of, whether time was essence of the contract, the same do not require to be dealt with by this Court since this question has been left open to be decided by the Arbitral Tribunal.

44. Learned senior counsel for the respondent has relied upon the judgments of the Apex Court in the case of A.K. Laxmipathy (supra), Sardamani (supra) as well as the judgments of this Court in the cases titled as Prakash Khattar (supra), Sarabjeet Singh Vs. Anup Sharma and Ors. (2015) SCC OnLine Del 3140 and Ritu Mercantile Pvt. Ltd. (supra) on the issue of time being the essence of contract between the parties. As it has been noted above, this Court is not adjudicating the said issue and therefore it is open to the respondent to raise and argue the said issue before the Arbitral Tribunal.

45. Learned senior counsel for the respondent has relied upon Manna Lal Khetan and Ors. Vs. Kedarnath Khetan and Ors. (1977) 2 SCC 424 for the proposition that a contract which is against the law is void and cannot be enforced in law. This Court need not delve into dealing with the said judgment as this issue can only be decided during the arbitration proceedings. Under Section 9 of the Act this Court would not decide whether the contract between the parties is void or otherwise and hence enforceable or not.

46. Under Section 9 of the Act, this Court would examine whether the subject property needs to be preserved, so that as and when the

arbitration proceedings conclude, the successful party should not be faced with a fait accompli and is able to reap the fruits of its litigation.

47. In my view, the petitioners have made out a prima facie case for grant of interim injunction. The subject Apartments need to be preserved till the arbitration proceedings between the parties conclude. The Apartment Buyer's Agreement between the parties is governed by an Arbitration Clause. Relevant clause 35 is as under:

"35. Dispute Resolution by Arbitration All or any disputes arising out of or in relation to the terms of this Agreement including the interpretation and validity of the terms thereof and the respective rights and obligations of the Parties shall be settled amicably by mutual discussion failing which the same shall be settled through arbitration. The arbitration shall be governed by the Arbitration and Conciliation Act, 1996 or any statutory amendments/ modifications thereto for the time being in force. The arbitration proceedings shall be held at an appropriate location in New Delhi by a Sole Arbitrator who shall be appointed by the Managing Director of the Seller and whose decision shall be final and binding upon the Parties. The Purchaser(s) hereby confirms that he shall have no objection to this appointment of the Sole Arbitrator by the Managing Director of the Seller, even if the person so appointed, as a Sole Arbitrator, is an employee or advocate of the Seller or is otherwise connected to the Seller and the Purchaser{s) confirms that notwithstanding such relationship/ connection, the Purchaser{s) shall have no doubts as to the independence or impartiality of the said Sole Arbitrator. The Courts at Delhi alone shall have the jurisdiction."

48. During the course of hearing, on being queried by the Court, the parties had indicated that they were ready and willing to invoke arbitration in the near future.

49. Since the parties would be resorting to arbitration for the final adjudication of their inter se disputes, I am not expressing any opinion on the merits of the case or on the legal questions raised by the parties, which are left open, lest it prejudices either side.

50. Having heard the parties, this Court is of the view that if the subject Apartments are not preserved, irreparable prejudice will be caused to the petitioners who have been able to set up a, prima facie, case in their favour for grant of an interlocutory injunction.

51. The respondent is hereby restrained from executing Sale Deeds in respect of the Apartments, which are the subject matter of the present petitions as well as from parting with the possession, in any manner. I am fortified in grant of this injunction by the judgment of Apex Court in Dorab Cawasji Warden (supra) that power to grant injunction would include undoing acts illegally done or restoration of what is wrongfully taken from the complaining party.

52. Petitioners must take steps for constitution of the Arbitral Tribunal as the present interim order shall remain in operation only for the period as prescribed in Section 9(2) of the Act. The parties are at liberty to move an application under Section 17 of the Act before the Arbitral Tribunal and the Tribunal will be free to pass such other and further orders on such an application being made.

53. It is made clear that this Court has not expressed any view on the merits of the case and the Arbitral Tribunal shall adjudicate all

disputes raised by the parties without being influenced by any observations made in the present order.

54. Since the respondent is being injuncted from executing the title deeds as well as parting with possession, the interest of justice demands that the petitioners are also restrained from encashing the post dated cheques received by them as refund from the respondent. Needless to say that if the said cheques have been encashed by the petitioners, they will deposit the entire money refunded to them by the respondent in this Court within a period of two weeks from the date of this order. The petitioners have undertaken orally as well as in the written submissions filed by them that they are ready and willing to deposit the balance sale consideration in Court. In view of this, let the balance sale consideration also be deposited with the Registrar General of this Court within two weeks from today. The money as and when deposited by the petitioners would be invested by the Registrar General of this Court in an interest bearing Fixed Deposit with a Nationalised Bank, till further orders in the Arbitration proceedings.

55. The learned senior counsels for the petitioners had categorically stated that they would not press prayer (a) in the petitions. In view of the above, prayer (b) is allowed in the above terms.

56. The petitions are hereby allowed, with no orders as to costs.

(JYOTI SINGH) JUDGE OCTOBER 21st, 2019/rd/